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Why tax abatements?
Part two of two
Last week I addressed the tax abatement process and the ability of local taxing entities to use these abatements as economic development tools. The taxing entities that I left out of that equation are Pecos County's three school districts. School districts are not allowed to enter into tax abatement agreements. The state legislature has provided a means for them to generate economic development through the Chapter 313 Property Value Limitation Program.
This program allows for school districts to negotiate a Payment In Lieu of Taxes (PILOT) agreement with an entity that is seeking tax relief. The program is subject to state Comptroller rules, and as of January 1, 2008 the Comptrollers office will conduct an economic analysis for each project submitting an application. Like abatements, a PILOT is designed to be a ten year tax relief program.
Each school district is assigned a value by the comptroller. The FSISD has been assigned a value of twenty million dollars. This requires any company that is seeking tax relief to pay taxes on twenty million for the duration of the agreement. Any value over that is subject to the agreement. The district and the company seeking tax relief then negotiate a rate for the payment on the value of the project above the twenty million. The is a great deal for Pecos County Schools because the negotiated payments are not subject to "Robin Hood," and they do not affect the amount of money the state supplies our districts.
In wealthy school districts, like Pecos Counties, the benefits are potentially huge. Roughly 50% of the money collected by the FSISD are recaptured by the state and redistributed to poorer districts. The negotiated payments will not be subject to this recapture. The Iraan/Sheffield ISD has entered into two of these agreements with British Petroleum as a result of the Sherbino Wind Farm Development. It is anticipated that the benefits to the district will be between fifteen to twenty million dollars if both projects locate in the county. The benefits to the FSISD from the Century Plant and the Pikes Peak/Grey Ranch proposed projects could reach 45 million. This is money that would stay in the Fort Stockton Independent School District for the benefit our community's youth.
The Texas Legislature has provided local taxing entities tools to expand their economies. They have given local elected officials the ability to negotiate on behalf of their constituents to use these tools to secure capital and jobs to ensure long term growth and stability. Our school districts have an opportunity to obtain additional funds for the education of our youth, if and only if, these large capital projects locate here. As elected officials act to bring these large projects to Fort Stockton and Pecos County, it is important that we understand they are acting to secure the future of our communities and their residents.
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