USA - TEXAS Trends and Developments Contributed by: Brad Holdbrook, Mary Mendoza, Michael Coleman and James Barnett, Haynes and Boone, LLP
The use of these incentive agreements has become a preferred economic development tool across Texas, with over 4,500 executed deals aiming to boost local economies as of 1 April 2024. This approach by local governments is not free of its critics who observe that many of these agreements lack governmental oversight and there are no caps on each deal’s value, rais - ing concerns about accountability and the bur - den on taxpayers. Notably, these laws do not mandate job creation or penalties for non-com - pliance, and before recent legislation requiring reporting to the state comptroller’s office, there was no central repository of information on these agreements, making comprehensive analysis challenging. Local officials defend the use of agreements under Chapter 380 and 381 as vital for attracting and retaining employers, illustrating their impor - tance with significant agreements like Round Rock’s multi-year deal with Dell Technologies. Local governments wield substantial authority in drafting these agreements and will usually prem - ise any grant or tax waiver on completion of a project or creation of a certain number of jobs by a business, which will often provide a sub - stantial windfall to a locality’s tax revenue both before and after the term of the given agreement expires. Any agreement under either Chapter 380 or 381 executed since 1 September 2021, must be filed with the Texas Comptroller, whose office operates a website making each agree - ment freely accessible to any member of the public, boosting transparency and accountabil - ity. Without statutory requirements mandating either creation of a set number of jobs or institut - ing penalties for non-compliance (beyond losing any grant or tax abatement under an agreement), local governments have a freedom to contract with businesses, which has managed so far to balance economic growth with fiscal responsibil -
ity and is one of several factors behind Texas’s recent success. As Texas moves forward, the conversation around tax incentive agreements and their role in economic development is likely to continue, with residents new and old expressing the need for a programme that balances competitiveness with fiscal responsibility and transparency. This evolving dialogue underscores the importance of creating policies that not only attract businesses and stimulate economic growth but also ensure equitable benefits for the communities involved and sustainably use public resources. The economic policies and business climate in Texas over the past 12 months have set the stage for continued growth and prosperity. The state’s approach to fostering a business-friendly environment, coupled with strategic investments in infrastructure and workforce development, positions Texas cities as leading destinations for businesses looking to expand or relocate. As Texas continues to attract talent and invest - ment, it will likely maintain its role as a bright star in the national economy, driving innovation and economic development well into the future. Rising to the Occasion Positive changes in Texas’s overall economic outlook have been a boon to real estate own- ers and developers, particularly in booming metropolitan areas like Austin, which has expe - rienced significant appreciation and expansion of its housing supply in recent years. Balanc - ing growth with affordability remains a critical issue for policymakers and residents across the state. Moreover, the evolving dynamics of remote work, demographic shifts, and economic policies will continue to influence Texas’s real estate landscape, presenting both opportunities
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