The Greater San Marcos Partnership could be on the verge of convincing a medical device manufacturing company to relocate to Central Texas, and that move could bring with it about 700 jobs with an average annual wage of $51,000, according to a GSMP presentation. Economic development incentive offers have already been approved by San Marcos City Council and Hays County. But the sticking point in the deal might come down to a taxing mechanism known as "freeport exemption." Freeport exemption refers to a constitutional provision approved by the Texas Legislature in 1989 that granted an automatic exemption from taxation on particular types of inventory—mainly those materials intended to be manufactured, fabricated or assembled in the state and shipped outside the state within 175 days. Taxing entities such as cities, counties and school districts were given the option to opt-in to the agreement, thereby exempting Freeport inventory from taxation, or opting out, which would mean the entities could continue collecting taxes on those materials. San Marcos CISD and Hays County chose to continue taxing freeport goods. In 2014, SMCISD stands to collect about $464,533 by taxing freeport goods. Approval of a freeport exemption would mean the district no longer collects that money, and once an entity opts in, it can never opt out. But Greater San Marcos Partnership President Adriana Cruz argues it will make San Marcos and the rest of Hays County a more attractive place for companies interested in relocating here. "[The current freeport taxation] reduces our ability to be competitive in economic development and for the types of target industries that we're going after, mainly in advanced manufacturing," Cruz said. "All things being equal, prospects and companies will look at the tax environment and those that have a high amount of inventory will actually specifically put on the request for proposal, 'It has to be a triple freeport community.'" Most cities surrounding Hays County are at least double freeport cities, meaning that two of the three major taxing entities have opted in to the freeport exemption. Cities like Cedar Park, Hutto, Jarrell, Leander, Lockhart, Manor, New Braunfels, Pflugerville, Schertz and Seguin are all triple freeport cities, meaning all three taxing entities have opted in. Representatives from the GSMP have had discussions with Hays County on the topic of freeport exemptions recently. Cruz said the city of San Marcos has received four requests for proposals from companies interested in locating in the city, which requested only responses from triple freeport cities. San Marcos was immediately eliminated from those lists because of its status as a single freeport city. Kyle and Buda are also single freeport cities. Thermon Manufacturing Company, a manufacturer of heat-tracing products, and Genlyte Thomas Group, a subsidiary of Philips Lumec that manufactures outdoor lighting products, account for about 90 percent of San Marcos' freeport exempt goods, according to a presentation from the Austin-based consulting firm Moak, Casey & Associates. Bob Popinski, associate at Moak, Casey & Associates, said school districts usually see a decline in tax collections the first year after opting into freeport exemption. To combat that decline in tax revenue, districts often come to contractual agreements with companies already doing business in the area whereby the company reimburses the district for lost tax revenue over a certain period of time. For the school district, the benefit to opting in could come under the assumption that increased prosperity within San Marcos and surrounding communities would generate more tax revenue in the city. Increased residential development to support an influx of new residents moving to the area to fill new jobs could also mean higher enrollment numbers at the district's schools. "The carrot is very attractive," board member Lupe Costilla said. "There's no doubt the carrot is attractive. But I have concerns. Keep in mind we're already struggling with what is coming in. The community in this town has had to carry the burden for paying for the school district because there is so much land off the tax rolls already here. So I would have to look at it very carefully." The board is set to revisit the issue at a later meeting.