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Board Recommends State Negotiate Tax Breaks

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Piles of tax forms are seen. (credit: Getty Images/Mario Tama)

Piles of tax forms are seen. (credit: Getty Images/Mario Tama)

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AUSTIN (AP) – Texas lawmakers this month face a report by the Legislative Budget Board that has recommended a policy swap to put the state’s comptroller, not local school districts, in charge of negotiating school property tax breaks for businesses to attract major investments.

“School districts should not be made responsible for economic development,” according to the report cited in Tuesday’s editions of the Austin American-Statesman.

Examples of large-scale investments include manufacturing plants and wind farms.

Lawmakers who open the legislative session next Tuesday must tackle a projected budget shortfall of as much as $20 billion.

Currently, Texas school boards negotiate and approve the deals, which the state then reviews. The recommendation would reverse that process, putting the state in charge of making the deals and then giving school districts the opportunity to nix the proposal.

“As with any legislative matter, we would work fully with the Legislature in helping them with any information they need or implementing any provision that they want,” R.J. De Silva, a spokesman for Comptroller Susan Combs, told The Associated Press.

The report also raised the prospect of creating a separate incentive program for renewable energy projects because they create fewer jobs than manufacturing or research projects do.

The 2001 Legislature passed the Texas Economic Development Act because the state’s heavy reliance on property taxes was making it difficult to attract large industrial projects, for which property taxes are a major expense.

The budget board, a powerful arm of the Legislature that is overseen by a panel of legislative leaders, also questioned whether school officials are verifying that companies meet the job and wage standards required under the law.

To protect districts, the report said the comptroller should not be able to negotiate a business relocation without agreement of local school officials.

Dick Lavine, senior fiscal analyst with the Center for Public Policy Priorities, said the report is a step toward ensuring that tax breaks go only to projects that wouldn’t reach Texas without the incentives.

“In the past, the school district decided, and the state paid,” said Lavine.

Under the law, the state reimburses the districts for lost revenue attributed to the tax breaks, which last eight years. After that point, the facility goes on the tax rolls at full value.

“We’re leery of the big-government idea that the comptroller is going to know better than local officials,” said Dominic Giarratani, assistant director of government relations for the Texas Association of School Boards. “Local officials are in the best position to decide what the community needs.”

Paul Sadler, executive director of the Wind Coalition, argued that the state constitution doesn’t give the comptroller the authority contemplated in the report.

“In essence, it sets the comptroller up to approve or disapprove local tax decisions,” Sadler said. The current system already protects the state from bad deals, according to Sadler.

The report focused on the cost of the tax breaks.

The state reimbursed school districts $158 million from 2003 to 2009 for tax breaks they gave to companies. But the state is responsible for $1.9 billion over the next two decades. The report said the state’s liabilities could be “limitless” under the current system.

Dale Craymer, president of the Texas Taxpayers and Research Association, which includes the state’s largest manufacturers, said the program only delays the point at which projects must pay full property taxes.

“The state of Texas and the school district are better off with the investment,” said Craymer. “It’s not like anyone loses money.”

(© Copyright 2010 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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