Round Rock ISD trustees voted June 18 to exempt a tax that local officials said gave Round Rock a competitive disadvantage when it comes to drawing manufacturing businesses.

Before the exemption, RRISD applied the Freeport Tax to companies with inventory that was brought into Texas for manufacturing and exported out of the state within 175 days.

“It’s a pretty substantial tax in the manufacturing process,” said Mike Odom, president and CEO of the Round Rock Chamber of Commerce.

Odom said more districts and taxing entities around Round Rock have been granting the exemption, which made it tougher for the chamber to attract manufacturing businesses.

Board President Charles Chadwell said at the June meeting he was hesitant to support the exemption and place more of a tax burden on homeowners, but he ultimately voted in favor of it.

“There’s been a lot of push for it,” he said. “I know that it means a lot to a lot of people here.”

At an April meeting, RRISD Chief Financial Officer Randy Staats said the exemption will likely result in a $1 monthly increase in residential property taxes.

Other trustees, such as Terri Romere and Board Secretary Paul Tisch said the exemption would benefit homeowners, businesses and the school district.

The Freeport Tax exemption will take effect in the 2015-16 school year. Though the exemption will remove an estimated $6 million from the tax roll in its first year, the Greater Austin and Round Rock chambers helped the school district break even by setting up payments in lieu of taxes, or PILOTs, with the top 26 manufacturers in the district.

Odom said under the PILOT agreements, the businesses will pay the same amount they would have owed in Freeport taxes in the first year of the exemption, which the chamber estimates will be $6 million. The state will then allocate more funds for Round Rock ISD in subsequent years because its revenue will go down slightly because of the Freeport exemption.

But state funds can be used only for school maintenance and operation, not for bond debt, Odom said. In the subsequent four years of the Freeport exemption, the PILOT agreements require manufacturers to pay a portion of the school district’s debt service, an estimated $1.5 million each year, he said.

Odom said the chamber is confident it can recruit new manufacturing companies to the district that will surpass the exempted amounts in the years after the PILOT agreement concludes.

The city of Round Rock and Williamson County both exempt the tax. The school district’s vote makes Round Rock a triple Freeport Tax-exempt city and allows it to compete with neighboring communities such as Hutto, Pflugerville and Cedar Park, all of which exempt the tax.

“We are on equal footing for our competitive region,” Odom said.