Montgomery County Judge Alan Sadler has tasked Tax Assessor-Collector J.R. Moore with heading a commission that will review and update the county's tax abatement policy before his term as judge expires at the end of the year.

"One thing I want to do before I leave office is reassemble the committee to basically update the basic numbers on the tax abatement agreements," Sadler said. "Our tax abatement agreements are anywhere from five years to 10 years and anywhere from 50 percent to 100 percent abated based on jobs and added value. We need to update those to bring them to 2013-14 numbers."

A tax abatement is an exemption of property taxes on improvements to a parcel of land, Sadler said. For instance, if a business buys property in Montgomery County and applies for a tax abatement, the abatement will only be used for any improvements made to that land and not on the land itself. The company would still pay property taxes based on the assessed valuation of the land, but if it were to build a structure on the land, that would be abated, meaning the company would not pay taxes on the improvements for a set amount of time, or only pay a percentage of property taxes on it for that amount of time.

The tax abatement policy in Montgomery County was renewed last year, however, no changes to the policy were made, Moore said. The county has not adjusted or updated the criteria to the tax abatement policy since 2008, and the numbers no longer reflect the times, he said. Moore is in the process of researching to determine how the criteria should be updated and what recommendations to make to the county court.

"I am looking at five other counties who we consider competitors to see if they have updated their [criteria]," Moore said. "I have looked at three of those so far and it does not look like they have updated their [criteria]."

Tax abatement policy

The tax abatement policy in Montgomery County is used as an incentive to promote quality growth in the county by attracting new and larger companies to the area. Tax abatements are also offered to existing businesses looking to expand, Sadler said.

Montgomery County established its tax abatement policy in May 1988, and in that time, it has granted 93 tax abatements. The county has 27 active abatements, which have created 6,974 new jobs with a total estimated annual salary of $592.4 million. Since 1988, the county has added or retained a total of 15,989 jobs and added a total of $53,899,197 in tax revenue, Moore said. Many of the jobs and revenues added were a result of companies that were given abatements.

The tax revenue for the county prior to the 27 abatements being counted was $875,597, Moore said. The tax revenue for 2013's tax levy is $2,362,135 and the tax revenue once the abatements expire will jump to $4,223,098.

"Bringing corporate relocations to Montgomery County does three things for us," said Craig Doyal, Montgomery County Precinct 2 Commissioner. "It broadens the tax base to lessen the burden on residential taxpayers, it provides quality job opportunities to the people that live here and it works as a traffic mitigation tool. When people can work here in the county, they don't have to use the freeways to get into Houston, which lessens the need for mobility that is already congested."

Abatement criteria

The county's tax abatement policy starts at more than $1 million, meaning any new and eligible improvements to the property must add more than $1 million to the value of the land, Moore said. The percentages and length of the abatements are based on the number of jobs that will be created and the value of the improvements to the property. For most abatements awarded by the county, the percentages decrease over the life of the abatement, which does not exceed 10 years, and the county will receive all property tax revenue on the property once the abatement agreement expires, he said.

If a corporation or business wants to relocate or expand in Montgomery County and wants to apply for a tax abatement, it must meet certain criteria regarding number of jobs added and how much value it will add to the county, Doyal said. If the relocation or expansion does not meet all of the criteria necessary, then an abatement will not be awarded.

"If a business comes into the county and is going to compete against an existing business, then no abatement will be given," Doyal said. "The investment to the county has to be a certain amount, and it must produce a certain number of jobs."

Since 1988, the county has denied 21 applications for abatements for various reasons and has also canceled 17 abatement agreements as a result of withdrawal or default, Moore said.

Mark Bosma, candidate for Montgomery County judge and the county's director of infrastructure, does not oppose tax abatements but said they should not be awarded automatically to companies that meet the necessary criteria. Bosma said every application should be researched thoroughly to make sure it is the right fit for the county. He also said abatements often are used to attract larger businesses to the area, but that small business is the driving force of the economy and the county should look at ways to further incentivize small business.

Julie Turner, president of the Texas Patriots PAC, said she agreed that tax abatements should not be given automatically to companies that meet the set criteria. The Greater Houston area is a competitive market and a number of counties are trying to lure in businesses, and tax abatements are a powerful incentive to bring them in, she said. However, no rules or guidelines are in place to determine what businesses the abatements should apply outside of the number of jobs and added value they will bring to the county. She said the county should also investigate other forms of incentives to attract companies.

"There needs to be more robust debate on the court to determine what these guidelines should be," she said. "The county gives very favorable deals to large companies who are willing to take them, but the government should not have total control of what is coming here. There needs to be more discussion and a more thoughtful approach to who receives tax abatements."

West Montgomery County

A majority of the abatements given by Montgomery County have been to businesses looking to relocate to areas such as The Woodlands and Conroe. The west side of the county, in areas such as Magnolia, there have yet to be any major relocations that were incentivized by a tax abatement.

"The west side of the county is ripe with business opportunity," said Rob Harmon, candidate for Montgomery County Precinct 2 commissioner. "What we need is vision for maximizing the Magnolia area's business potential. Will Magnolia be the place where people will want to come and visit, live and do business, or the place you just drive through toward your destination?"

Harmon said tax abatements are good to use in areas looking to attract businesses and stimulate growth and the Magnolia area is such a place. He did caution that the county be sure that businesses and developers who are offered abatements are sharing in the responsibility of improving the county's infrastructure.