Incentives to Draw Commercial Business to Your Municipality

What are the key incentives to draw commercial business to municipalities in Texas? At the state level here in Texas, there are multiple incentives, not the least of which is no state income tax for businesses that relocate their employees to our state. The following are a few of the common incentive offerings that are administered by the Texas Department of Economic Development Finance, within the Office of the Governor:

• Texas Enterprise Fund (TEF), the largest fund of its kind in the United States. TEF awards “deal-closing” cash grants to companies whose projects would bring significant capital investment and new jobs to the economy of Texas. An eligible company is one who is considering a single location in Texas for its new project, and that Texas site is competing with at least one out-of-state location.  There are minimum capital investment, new jobs, and average wage requirements.

• Texas Enterprise Zone Program (TEZ), a state sales and use tax refund program to encourage development in economically distressed areas of Texas. TEZ is a tool by which a municipality may partner with the state to promote private investment and employment in those distressed areas.  The municipality may nominate a business within its jurisdiction to be awarded Enterprise Zone designation by the State of Texas.  There are minimum requirements regarding capital investment, creation/retention of jobs, and percentage of employees who are residents of the zone, veterans, or economically disadvantaged individuals. For several other state level incentives, see the Texas Economic Development page.

At the local level, incentives are available to assist municipalities to accomplish their plans for livable centers. The Houston-Galveston Area Council of Governments initiated a program in 2008 based on this definition: “Livable centers are places where people can live, work, and play with less reliance on their cars.  They encourage a complementary mix of land uses that are designed to be walkable, connected, and accessible by multiple modes of transportation, including bus, bike, foot, or vehicle (multi-modal).” Comprehensive information is available from the H-GAC.  Here are some of the “flexible incentive tools for local governments” to accomplish livable centers:

• Tax Code Chapter 312 ad valorem tax abatement agreements between the municipal and a developer provide a partial exemption from property taxes in exchange for improvements to the property.
• Local Government Code Chapter 380 agreements between the municipality and a developer provide a grant or loan to reimburse the developer for infrastructure improvements to stimulate desired development.
• Tax Code Chapter 351 hotel occupancy taxes may be used to provide funding for projects that promote tourism or create event venues.
• Tax Code Chapter 311 Tax Increment Reinvestment Zone (TIRZ) or Tax Increment Finance Districts (TIF) allow establishment of a new political subdivision to encourage development and improve quality of life. The new property taxes within the TIRZ or TIF may only be utilized to fund infrastructure or public improvements.

Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our commercial and business litigation practice can be found here.