By Hector L. Rivero, President & CEO Texas Chemical Council and Association of Chemical Industry of Texas
The Texas Economic Development Act of 2001 (found in Chapter 313 of the Tax Code) is a provision that allows school districts to attract new business investment by providing a temporary freeze on school property tax valuations for new business investment.
The act allows new business investment to become established and mature before having to pay taxes on the full valuation of the new business property. The Chapter 313 provision will expire at the end of 2014 unless lawmakers act to extend it during the 2013 Texas Legislature.
This tax incentive is absolutely crucial to the chemical industry when considering new investment in Texas, and the Texas Chemical Council and Associated Chemical Industry of Texas are urging the Legislature to extend or make permanent this important tax incentive.
Under Chapter 313, a local school district may defer for 8 years the time before a new investment project goes onto the tax rolls at full value. The limitation on the taxable value of a project does not take effect until the third year of the project. A taxpayer may also make a separate application to the school district for a credit for taxes paid during the first two years on the value of the property.
The law was passed in 2001 as HB 1200. The legislation was in response to Texas losing a number of major new industrial projects to other states – events largely attributable to the state’s high property tax burden, and in particular, local school property taxes.
School districts had previously been able to offer tax abatements similar to those of cities and counties, but this authority was repealed in the mid 1990s. With the loss of school tax abatement authority, Texas fell from the nation’s top industrial location in 1996, as ranked by Site Selection Magazine, to 37th in 2000. Over those years, Texas lost 12 major facilities to other states – four to Oklahoma alone.
To become eligible for a Chapter 313, companies must make new investments in connection with manufacturing, research and development, or electricity generation using certain low emission technologies, and nuclear energy.
The investment must create 25 at least new jobs, or 10 jobs if the project is to be in a rural or economically disadvantaged school district. And at least 80 percent of these jobs must pay 110 percent of the county’s average manufacturing wage and provide health coverage.
Other states across the United States continue to look to Texas as the example of business-friendly: relatively low tax rates, abundant natural resources, fair and predictable regulations.
The Chapter 313 economic development incentive has proven to be an effective and critical tool for luring new investment and jobs to Texas. A number of major industrial projects have benefited from Chapter 313, and have stated that they would not be in Texas otherwise.
If Chapter 313 is not extended, companies will have an expensive reason to look elsewhere for their new capital investments.
By Hector L. Rivero, President & CEO Texas Chemical Council and Association of Chemical Industry of Texas
More than 96% of all manufactured goods are directly touched by the business of chemistry, making our industry an essential part of every facet of our nation’s economy! The chemical industry provides significant economic benefits in every state, especially Texas.
Chemical companies in Texas directly employ nearly 73,000 people, and indirectly contribute more than 600,000 jobs to the economy. For every industry job in Texas, an additional 6.3 jobs are created within the state’s economy. And these jobs are very high paying: the average wage of a chemical industry employee in Texas is over $86,000, which is 43% higher than the average manufacturing wage. Every year, these jobs generate $6.3 billion in earnings and $3.6 billion in federal, state and local taxes on personal income and $4.1 billion in Social Security and Medicare contributions.
Workers in our industry provide solutions that point the way toward responsible stewardship of our planet through sustainable energy, cleaner air and safe, clean water. The business of Chemistry translates into new products, new materials and innovation for the future.
Access to vast, new supplies of natural gas from shale deposits is one of the most dramatic domestic energy developments in the last 50 years. The economics of shale gas not only create a competitive advantage for U.S. and Texas petrochemical manufacturers, but also lead to greater domestic investment and industry growth.
An $8.5 billion investment in new and existing ethylene production infrastructure in Texas could generate a total of $37 billion in additional chemical industry output, bringing our state’s industry revenues to more than $182 billion, maintaining it as the country’s largest chemical producing state. These findings come in a recent American Chemistry Council report, “Shale Gas and New Petrochemicals Investment: Benefits for the Economy, Jobs and U.S. Manufacturing”.
In Texas, more than 81,000 permanent jobs could be created in the chemical industry and throughout the supply chain, from trade and craft jobs to highly skilled jobs.
More than $5.5 billion in wages would go into the pockets of Texas workers, generating $779 million in state tax revenue and more than $1 billion in federal revenue.
The American chemical industry relies on abundant, affordable natural gas as a source of energy and as a raw material, or “feedstock,” for countless chemical products. Lower natural gas prices give U.S. manufacturers an advantage over competitors in other parts of the world that rely on a more expensive oil-based feedstock.
Growth in domestic natural gas production reduces prices and creates a more stable supply. It is estimated that U.S. shale deposits contain 100 years of natural gas supply. This shale gas is a “game changer” that could rejuvenate America’s chemistry industry, strengthen U.S. manufacturing, boost exports, create jobs – and significantly improve America’s energy security.
The process of extracting natural gas from shale deposits includes hydraulic fracturing, where fluids and solids are pumped into the well. Proper government oversight and product stewardship is needed to protect the surrounding environment.
A comprehensive energy strategy must increase the production of domestic energy supplies while implementing balanced regulatory policies that protect our environment.
To maximize the national benefits of shale gas, our state and federal energy policy must avoid undue restrictions on natural gas supplies from shale deposits. State oversight of hydraulic fracturing is appropriate since state governments have the knowledge to oversee the process in their jurisdictions. But government policies should not undermine the availability of domestic natural gas.
The business of chemistry is at the heart of manufacturing – access to shale gas has the potential to dramatically boost Texas’ and America’s competitiveness and help meet our nation’s goals for increased job growth and global exports.
