Today our Texas is the fastest growing and most economically prosperous state in the union. We offer affordable land, a trainable workforce and no state income tax. To outsiders, Texas is definitely the land of opportunity as more than 1,200 new people move to the Lone Star State each day.
In order to support new, expanding and relocating companies, Texas counties and cities offer abatement incentives that exempt qualifying investors from taxation on all or part of the increased value they add to real and personal property. The maximum allowable tax abatement is 100 percent per year and cannot exceed 10 years in length. Terms of the abatement agreement, including the minimum required investments and job creation, vary among the taxing jurisdictions.
Do million dollar companies really need economic incentives?
Make no mistake, all new and existing developers are searching for the best business deal. An out-of-state investor recently shared that it takes $6 million a year to operate their $125 million gas-fired electric plant: $2.4 million debt repayment, $1.8 million for manpower and operations, and $1.8 million taxes.
If Wharton County grants a 90 percent tax abatement on the $125 million plant, the electricity developer will save $534,375 in first year operating costs.
This 9 percent savings helps the investor lock in a more favorable lending rate throughout the plant’s early start-up years.
Don’t give away the farm: It’s hard to give away something you really never had. In many cases, these new start-up investments are being constructed on tax-exempt farmland.
And even though the county forgoes some upfront tax dollars, the developer is still paying $1.27 million in new tax revenues to the local school district, hospital district, junior college, groundwater, fire and EMS.
Now that the new expansion has taken over paying thousands of new tax dollars to the schools and EMS, you and I should see significant reductions in our individual property taxes.
Breaking it down: the recent Exelon Power Plant expansion in Wharton generated approximately $700 million in new county-wide property tax value (Exelon accounts for 20 percent of Wharton County’s total $3.5 billion tax base.)
The smaller $125 million Halyard gas-fired Peaker plant (north of El Campo) will generate another 3.5 percent and the proposed El Campo rail yard is tabbed to add 10 percent of total county-wide tax value.
When completed, these three new local expansions will combine for more than one-third (33.5 percent) of Wharton County’s total property tax base.
Yes, not only will they provide much-needed competitive new jobs, these three companies alone will pay thousands of new tax dollars to the junior college, hospital and groundwater district, fire departments, EMS and potentially millions of dollars to local school districts.
Will new economic development destroy wharton county’s unique farming heritage: No, commissioner’s court will do everything possible to ensure that agricultural heritage is protected both today and for future generations. We will never agree to development that violates state and federal laws and brings definitive harm to local families.
Likewise, elected officials must protect and promote the economic future of our children and grandchildren by seeking out new and more diverse job opportunities than those currently available throughout Wharton and surrounding counties.
If we desire for our children and future grandchildren to return and raise their families along the Gulf Coast, then local leaders must actively recruit business investors and expanding companies that produce computer software, medical research, engineering and general plant operations.
Yes, banking, farming, the sale of implements and fertilizers will always be the backbone of Wharton County, but fewer and fewer of the younger generations are pursuing ag-related vocations.
The bottom line is there are times county leaders need to consider foregoing up-front tax collections in exchange for the assurance of much needed new job opportunities and sizeable reductions in individual property taxes.
My fellow citizens, commissioners court will continue to carefully review every new and existing business that is requesting economic support for expansion.
If needed, we will hire engineers, architects and related specialists to ensure that local residents remain safe and that we always preserve Wharton County’s uniquely special agricultural heritage and small town way of life.