by: Julie Chang/ Austin American-Statesman
ROUND ROCK, Texas – The Round Rock school district is poised to give nearby corporations a $5.9 million tax break on exports to spur economic development.
Trustees signaled their support this week for a freeport tax exemption, allowing the businesses to stop paying school property taxes on property valued at up to $420 million a year.
The Chamber of Commerce, which has been lobbying the school board for the exemption, says the district will not take a budget hit since the proposal calls for the companies to continue to chip in for five years. After that, the chamber says, new businesses attracted by the tax break will make up for the lost revenue.
“Great schools promotes great business growth. I also believe that great economic growth promotes great schools,” Trustee Paul Tisch said during Thursday’s school board meeting.
Freeport goods are shipped in and out of the state within 175 days. Once a freeport tax exemption is granted, the school district can’t revoke it. Such exemptions have been granted by cities, counties and school districts across the state since 1990 to benefit manufacturers and stimulate economic development.
Very few school districts granted the exemption when it was first offered, but about 10 percent do so now. If Round Rock signs off on the tax break, it would be the largest school district in Central Texas to do so; Leander, Pflugerville, Del Valle, Manor and Hutto already offer the exemption.
If approved, the exemption would also make the area within the Round Rock district a “triple freeport zone” because the city of Round Rock and Williamson County already grant the exemptions.
Mike Odom, the Round Rock chamber’s president, says that if the freeport exemption is granted, companies have already said they could bring three projects to Round Rock. Those projects could generate $3 million in new property taxes within the next six years and create about 1,400 jobs, according to the chamber.
Freeport tax exemptions are a big factor when companies decide where to build or expand facilities, chambers of commerce say.
“We had a company that was in the district who wanted to expand their manufacturing operations. Due to the freeport tax, it made more sense for them to move to a triple freeport zone. So they moved their headquarters out,” said Odom, who declined to name the firm that left.
The school board indicated last week that it wants the district to draft a resolution to grant the exemption, which would be voted on as soon as late May.
School board members have expressed during meetings that their biggest concern with granting the exemption is that it’s irrevocable. The district’s chief financial officer, Randy Staats, said it’s difficult to predict whether the district will reap long-term benefits from the exemption.
Pflugerville, which has granted the exemption for about 15 years, has 67 companies with freeport-eligible goods, more than a dozen fewer than in 2010-11, Staats said. Leander, however, has seen four new companies with freeport-eligible goods over the past five years.
School board President Chad Chadwell said he would like to see more information because he hasn’t seen districts such as Manor, Leander and Hutto benefit a great deal from the exemption. All three districts have a higher tax rate than Round Rock’s $1.34 per $100 of property valuation.
“It’s something that I want to make sure that we don’t ever get in a position where we’re subsidizing” the exemption, Chadwell said.
Last year, 40 companies in the Round Rock school district generated $420 million in property tax revenue from exports — about 1.7 percent of the district’s $25.2 billion in total taxable property value, according to a study by school finance firm Moak, Casey & Associates. The exports generated $5.9 million in tax revenue, and Northwest Austin’s Flextronics, which was charged in 2013 with building Apple’s new Mac Pro computers, was the biggest contributor.
The chamber says that in the first year, the estimated 40 companies would have to pay the $5.9 million, and in subsequent years the state would pay $4.4 million and the companies would pay the rest through the fifth year of the exemption. After that, the chamber says the district should break even because of new companies coming into the area and generating other kinds of tax revenue. If that doesn’t happen, the tax exemption would be a money loser for the district.
In 2013, 182 school districts granted the exemption. The Austin school district, which has fewer freeport-eligible goods than Round Rock, is not among them. Drew Scheberle of the Austin Chamber of Commerce, which recently lobbied successfully for the exemption with the Del Valle school district, said that companies tend to choose suburbs because of cheaper and more available land.
The Georgetown school district is also considering granting the exemption.
State lawmakers are also looking to decrease the tax burden on manufacturers. Senate Bill 516 and House Bill 1675 would extend the time that freeport goods may stay within the state to 365 days.
Value of freeport goods exempted from school property taxes in Central Texas, by district.
Round Rock, if granted this year: $420 million
Leander: $28.1 million
Pflugerville: $312 million