Facing revenue caps, majority of Austin City Council members support re-evaluating active corporate tax breaks worth millions

Samsung Semiconductor is located off Parmer Lane east of I-35 on a 300-acre manufacturing campus.

Samsung Semiconductor is located off Parmer Lane east of I-35 on a 300-acre manufacturing campus.

As the revenue caps handed down by the Texas Legislature shape the future reality of Austin, City Council is weighing its options for backing out of active multimillion-dollar tax breaks given to developers and companies in economic development deals.

A bill recently signed into law by Gov. Greg Abbott mandates that in each new fiscal year starting in 2020-21, Austin can only collect 3.5% more in property tax revenue from the properties on its tax roll the previous fiscal year. If the city wants more, a majority of voters will have to give their blessing.

The 3.5% election trigger, known as the “rollback rate,” is a significant decrease from the 8% rate Texas cities such as Austin have operated on for years. Between the new cap and another bill that will limit the city’s ability to collect franchise fees on telecommunication companies, Ed Van Eenoo, Austin's deputy chief financial officer, predicts a general fund budget shortfall of $18.5 million in 2021 and $58.2 million by 2024.

Preparing for budget austerity in the coming years, City Council has started discussing ways to free up tax dollars, and a growing majority support examining the possibility of backing out of the city’s active tax break deals with corporations that cost millions of tax dollars each year in exchange for investments into the local economy.

“We definitely need to look at them to see if there is any cost savings, especially before we consider cutting programs that help our most vulnerable population,” Mayor Pro Tem Delia Garza said. “I think corporate incentives should be the very first thing we look at.”

Garza and Council Members Jimmy Flannigan, Greg Casar, Sabino "Pio" Renteria, Leslie Pool, Kathie Tovo and Alison Alter have all said they support, in some way, taking a look at potentially backing out of the deals.

The city has eight active agreements with companies—such as Apple, Samsung Semiconductor, The Domain, Visa and Merck & Co.—that have invested about $4.5 billion into the local economy and created 7,594 jobs. In 2017, the most recent data immediately available, the city paid $13.4 million in tax incentives through these eight deals; as of 2017, Austin still owed $33.1 million in tax breaks to the companies over the life of the agreements.

The tax incentive agreements are led by Samsung Semiconductor, whose $4 billion investment since the agreement was inked in 2005 has resulted in 700 jobs and $77 million in tax breaks from the city. Austin paid Samsung $11.2 million in tax breaks in 2017, and the agreement is set to last through 2025.

The deal for The Domain, however, has earned the most scrutiny from elected officials. In exchange for the $130 million Northwest Austin investment, 1,100 new jobs and some income-restricted housing, the city in 2003 agreed to property tax breaks totaling $37.5 million over the 20-year life of the agreement. The deal sent $1.9 million to Simon Property Group in 2017 and as of 2017 cost the city a total of $14.8 million.

Pool and Renteria have been vocal in their support of exiting The Domain deal. Tovo said she wants to look at all the deals but said The Domain agreement has “raised the most questions” since it dealt with subsidizing retail use.

“As we look for different sources of funding to cover our gap, that’s one of the first places I’m going to go,” Tovo said.

Alter said she supported re-evaluating the agreements but emphasized not every agreement was made equal. She said exiting economic incentive deals is not something the city should take lightly.

“There are always consequences when the city backs out of a commitment, but at the same time we write into every contract the ability to do that,” Alter said. “Yes, we should consider it, but that doesn’t mean I definitely support [ending the agreements].”

Tovo said City Council reauthorizes the agreements each budget session. She said she hopes City Council decides on the agreements before voting on the FY 2019-20 budget in September.

Community Impact Newspaper reached out to Samsung Semiconductor and a representative of Simon Property Group but neither were immediately available for comment.

For more background on each of the city's eight active corporate tax incentive deals, read our coverage from 2018.
SHARE THIS STORY
By Christopher Neely

Christopher Neely is Community Impact's Austin City Hall reporter. A New Jersey native, Christopher moved to Austin in 2016 following two years of community reporting along the Jersey Shore. His bylines have appeared in the Los Angeles Times, Baltimore Su


MOST RECENT

(Brian Perdue/Community Impact Newspaper)
Thousands of construction workers this week returned to work in Austin. What are developers doing to ensure safe work sites?

After most residential construction briefly shut down across the city of Austin, home building crews now have the opportunity to return the work.

(Graphic illustration courtesy Jay Jones/Community Impact Newspaper)
‘We’ve got this’: Central Texas librarians step up to help their communities amid coronavirus pandemic

The example in Bee Cave appears to be just one of many stories relating how, amid the COVID-19 crisis, librarians are helping their communities throughout the Greater Austin area.

Emilia Shively draws a rainbow to inspire those who walk on her street. (Courtesy Tina Shively)
Southwest Austin neighbors decorate yards, create art walks for locals to enjoy on social distancing-friendly walks

Austin residents have been decorating their homes or sidewalks to give those walking in the neighborhood something to enjoy during the stay-at-home order.

Economic relief options for small business owners include the Small Business Administration's Economic Injury Disaster Loan. (Community Impact Newspaper Staff)
Has your Austin-area small business been affected by the coronavirus? Here are resources you can access.

The U.S. Small Business Administration is offering a short-term loan program intended to help cover payroll and a separate, long-term loan program intended to help business owners stay afloat.

A recent string of incidents where Zoom meetings have been “hacked” has put the future viability of teleconferencing security in doubt. (Courtesy Pixabay)
String of racist attacks via videoconferencing software leads to heightened security concerns

A recent string of incidents where Zoom meetings have been “hacked” has put the future viability of teleconferencing security in doubt.

Austin and Travis County's orders went into place March 25 and require residents to stay home for everything but essential travel. (Christopher Neely/Community Impact Newspaper)
5 recent coronavirus stories from the Austin area readers should know

Read local updates on the coronavirus pandemic.

Austin FC and Upper Ninety on March 30 released a guide of resources for local families. (Iain Oldman/Community Impact Newspaper)
Austin FC, Upper Ninety compile bilingual resource guide for Austin families

Austin FC and Upper Ninety on March 30 released a guide of resources for local families.

Friday's digital telethon will help Austin metro residents through nonprofits during the coronavirus pandemic.
Donations to All Together ATX will help local residents through grants to nonprofits

Friday's digital telethon seeks donations to help the community

A graphic overlaid on a photo of a Dripping Springs business, reading "14.5% fear closure, 41.6% anticipate serious impact, 25% have conficdence in recovery"
Dripping Springs Chamber survey shows more than half of local businesses expect significant financial impact from COVID-19

About 14.5% of respondents said they were worried about the possibility of a permanent closure.

Power lines
DATA: Austin’s residential electricity usage up more than 30% since beginning of March

The total residential electricity usage has increased by more than 31.88% across Austin Energy’s service area since the last week of February, the new numbers show.

Matt Silk, left, delivers food from Modern Market Eatery to a St. Davids Medical Center health care worker. (Courtesy Matt Silk)
Rollingwood resident creates program to help businesses and feed health care workers

Matt Silk said www.atxhospitalmeals.com serves two purposes: It helps struggling restaurants by purchasing food in bulk, and feeds dozens of health care workers with each purchase.