Like Dracula in countless movies, a Texas program that provided massive tax breaks for companies at the expense of school districts could rise from the grave.
Texas House Speaker Dade Phelan (R-Jefferson County) continues to say he will work to revive the Chapter 313 tax abatement program, which was allowed to expire at the end of 2022. Chapter 313, created in 2001 in an effort to encourage manufacturing investment in the Lone Star State, allowed public school districts to offer tax breaks for businesses that invest in their communities.
The incentive was designed to attract new businesses by offering them a 10-year limitation on their appraised property value for a portion of the school district property tax. As a tradeoff the new business agrees to build or install new property and create jobs in its new home district.
Doug Greco of Central Texas Interfaith.
| LinkedIn
Critics say it has not worked as designed. Instead, they say, Chapter 313 has provided taxpayer-funded subsidies for major corporations at the expense of school districts, students, staff and local residents, and companies have ignored the mandated requirements attached to the tax break.
A coalition of local faith and community-based organizations, including Central Texas Interfaith of Austin, helped persuade Texas legislators not to reauthorize Chapter 313 during the 2021 legislative session. Now they plan to oppose its return during the current session under way in Austin.
Rev. Miles Brandon, pastor of St. Julian of Norwich Episcopal Church in far northwest Austin and a clergy leader in Central Texas Interfaith, said a coalition of faith and community groups have vowed to keep 313 dead and buried.
“Our plan is to fight to defeat any reauthorization of Chapter 313,” Brandon told Austin Journal. “We think it should not in any form be reauthorized.”
CTI says its research shows firms such as Cheniere (Corpus Christi Liquefaction) and Freeport LNG both receive over $55 million a year in taxpayer-funded subsidies through the tax abatement program.
Major “losers” were large school districts like the Houston Independent School District, which lost over $28 million per year in potential funding, and the Cy-Fair Independent School District, which lost more than $15 million annually in potential funding.
The fight against Chapter 313 has been waged on the local and state level. In 2022, Valley Interfaith of the Texas IAF and local environmental allies opposed a Chapter 313 plan offered by Texas LNG in the Point Isabel ISD. On July 26, the Point Isabel school board unanimously voted it down.
On Oct. 25, the Elgin ISD school board voted unanimously to reject a 313 proposal from Solar Proponents, a new company owned by an oil and gas hedge fund that planned to build an industrial solar farm. Its plan included cutting down thousands of trees on 2,100 acres bisected by Little Sandy Creek.
Opponents, led by Bastrop Interfaith, a project of Austin Interfaith, and Friends of the Land, which describes itself as an “all-volunteer effort organized to address local food security and farmland preservation through land-use reform,” led the fight against the tax break.
On Dec. 15, the Austin ISD school board rejected a Chapter 313 proposal from the semiconductor company NXP by a 5-4 vote.
The filing came as NXP looks to add a multibillion dollar expansion on Ed Bluestein Boulevard in East Austin. Other school districts have turned down 313 offerings as companies, trying to beat the Dec. 31 deadline, flooded the state with more than 450 tax abatement proposals.
“This vote signals a new day for AISD, which turned a new page in their commitment to partner with the community in building a stronger district and a stronger school funding system in Texas,” Central Texas Interfaith said in a news release regarding the Dec. 15 vote.
The debate over Chapter 313 has moved from school board meetings to the state capitol.
Phelan, a real estate developer from Beaumont in his fourth term representing House District 21, said allowing Chapter 313 to expire was “a little shortsighted” and will cost Texas business, as adjacent states will offer tax incentives to lure them. That’s why he plans to revive 313 during this legislative session.
“This session we can have a new program,” Phelan said during a Jan. 12 media briefing after being re-elected to a second term as speaker. “We can have all that oversight and transparency and accountability and, hopefully, move forward, just so we can compete with other states.”
Central Texas Interfaith includes about 50 member institutions, mainly congregations, but also clinics and labor organizations and public schools in 10 counties in central Texas. It’s part of the Network of Texas Industrial Areas Foundation Organizations (Texas IAF) and is made up of non-partisan, institutionally based community organizations whose purpose is to train leaders to organize families around areas that affect quality of life.
The network includes Communities Organized for Public Service and The Metro Alliance and ICAN in San Antonio, The Border Organization, Valley Interfaith in the Rio Grande Valley, TMO in Houston, EPISO and Border Interfaith In El Paso, Austin Interfaith, ACT in Fort Worth, Dallas Area Interfaith, AMOS - Arlington, The West Texas Organizing Strategy, and Beaumont, Port Arthur and Orange.
Doug Greco, lead organizer of Central Texas Interfaith, the Rev. Michael Floyd of East Austin, a retired Episcopal minister and a member of All Saints Church, and Brandon spoke to Austin Journal about their efforts to stop Chapter 313 from returning.
“Fundamentally, we oppose using school funding to pad the bottom lines of major manufacturing, petrochemical and energy companies that have billion-dollar profit margins,” Brandon said. “Economic development is not bad, but economic development should never be funded on the backs of our children’s education."
Floyd said Chapter 313 has been “a horrible failure as far as in terms of economic development.”
He said while it was intended to bring businesses to Texas, many already were in the state when they applied for it.
“Some of them have already started the projects that they’re applying for funding for, which shows they already had the financing before they even asked for this so-called incentive,” he said.
Brandon and Floyd said there is a long list of unfulfilled promises, including job creation.
“There are few means to hold companies who get 313 accountable to the job creation that they say they’re going to create in their applications,” Brandon said. “The school boards who actually approved them have zero power to hold them accountable. The comptroller has weak power. But what you have to understand, too, is that even companies receiving hundred-million-dollar tax abatements are only required to create 25 jobs.
“The Houston Chronicle did an exposé on this in the last legislative session, and the Texas taxpayers are paying homeowners like us and small businesses are paying over $1 million for every one job created by Chapter 313,” he said. “The people that get those jobs will never pay those dollars over the lifetime of their working life."
Floyd noted that Chapter 313 was shut down because of a broad-based effort that united people and organizations from across the political spectrum.
“There were people from both parties involved against it. There was a coalition of labor groups, AFL-CIO, teachers’ unions, Workers’ Defense Fund, and people from both sides,” he said. “Texas Public Policy Foundation, not known for liberal crusading, was part of the group against it, and they are still against it, as I understand.”
Brandon said community organizations led the opposition to Chapter 313.
“A lot of folks expected it to be kind of rubber-stamped for another decade,” he said. “But it got stopped.”
The Network of Texas Industrial Areas Foundation Organizations and CTI do not employ lobbyists. Instead, its members inform legislators, school board members and other public officials and ask them to reject proposals that the organizations feel are against the public good.
“We are volunteers, concerned citizens who organize to represent our values and the needs and desires of our community,” Brandon said.
Floyd said that was the case in taking down Chapter 313 two years ago.
“One of the major factors in that was the law itself. We discovered in canvassing the legislators that a lot of them didn't really know how it worked,” he said. “When they found out how it worked, they were outraged at such a boondoggle, and signed up in the opposition.”
Brandon, Floyd and Greco said their organization and other groups already have built “substantive relationships with legislators in the House and in the Senate.” The Texas AIF is made up of nonpartisan organizations that do not endorse candidates, although they do seek to inform them on issues during their campaigns.
Representatives of the organizations will meet with lawmakers, including newly elected legislators, and explain why Chapter 313 should not be revived and how it impacts their constituents. They will testify in committee hearings and hold a statewide advocacy day on March 21, that will bring Chapter 313 opponents from across the state to Austin.
Greco said it’s likely most of the Chapter 313 bills will emanate on the House side. Hearings won’t be held until late February or early March. If successful, a bill or bills will cross over to the Senate, where there is more opposition.
Brandon said Chapter 313 opponents will ask to meet with Phelan to explain their reasons for wanting it to remain dormant.
“We absolutely, absolutely will reach out to the speaker. I don't know what his response to be,” he said. “My guess is that there’s a chance that he will speak to us. There’s a very good chance that we’ll get to speak to his staff.”