Texas Direct Financial Incentives 2011
Texas' economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include Industrial Revenue Bonds, the Skills Development Fund, and Texas Enterprise Zones.
Area Development Research Desk (March 2011)
Industrial Revenue Bonds:
The Industrial Revenue Bond Program is designed to provide tax-exempt and taxable financing to eligible projects as defined in the Development Corporation Act of 1979. The projects must be in the public interest and serve a public purpose of the state in promoting economic development by securing and retaining business enterprises resulting in a higher level of employment, economic activity and stability. Bond proceeds may be used to finance land, depreciable property, inventory, raw materials, research-and-development costs and job training. The Act gives cities, counties, conservation and reclamation districts the authority to form Industrial Development Corporations (IDC) that can issue bonds on their behalf for eligible businesses. The IDC acts as a conduit through which monies are channeled. The money from the sale of the bonds flows to the business and the debt service of the bonds are paid by the business under the terms of a lease, sale or loan agreement. The bonds do not constitute a debt or obligation of the governmental unit, the IDC or the state of Texas.
Skills Development Fund:
The Skills Development Fund is an innovative program created to assist Texas public community and technical colleges to finance customized job training for their local businesses. The fund was established in 1995 and is administered by the Texas Workforce Commission.
Grants are provided to help companies and labor unions form partnerships with local community colleges and technical schools to provide custom job training. Average training costs are $1,200 per trainee; however, the benefit may vary depending on the proposal.
Texas Enterprise Zones:
Texas Enterprise Zones are designated by the state using poverty criteria based upon the U.S. Department of Commerce, Bureau of the Census decennial information. A census tract, block group that has a poverty level of 20 percent or greater is an enterprise zone, as is any area designated by the federal government as a renewal community, a federal empowerment zone, or a federal enterprise community, including any developable area approved by the federal agency responsible for making that decision.
State incentives include a refund of state sales and use taxes paid at the qualified business site during the designation period.
Depending upon capital investment, Texas will refund $2,500 for each allocated permanent or retained job - up to 500 jobs created and/or retained - during the five-year designation period, and up to $1.25 million in state sales tax for each enterprise project. For projects with eligible capital investment levels between $150 million and businesses may receive up to $2.50 million in state sales tax refunds ($5,000 per job with a maximum of 500 jobs created and/or retained). For projects with a capital investment of $250 million or more, qualified businesses may receive up to $3.75 million in state sales and use tax refunds ($7,500 per job for no less than 500 jobs created and/or retained).
Additional incentives may be offered by localities; examples include real and personal property tax abatement, certain local sales tax refunds, reduced utilities, and development participation.
Defense Economic Readjustment Zone Program:
The Defense Economic Readjustment Zone Program assists areas impacted by defense base closure, downsizing, or realignment and provides local and state regulatory and tax incentives to encourage businesses to locate or expand in these areas. Cities and counties, separately or together, can identify and nominate areas for designation as defense economic readjustment zones.
State incentives include a refund of state sales and use taxes paid on qualified expenditures, examples of which are building materials, machinery and equipment, and labor costs for rehabilitating an existing building. Texas will refund $2,500 for each allocated permanent or retained job during the five-year designation period and up to $1.25 million in state sales tax for each defense economic readjustment project.
Additional incentives may be offered by localities. Examples include real and personal property tax abatement, certain local sales tax refunds, reduced utilities, and development participation.
Texas Enterprise Fund
At Gov. Rick Perry's request, the 78th Texas Legislature established the Texas Enterprise Fund (TEF) in 2003 to provide financial resources to help strengthen the state's economy. Funds for the TEF were re-appropriated in 2005, 2007, and 2009, making more than $200 million available for the job creation fund in the 2010-2011 biennium.
To date, the state has allocated more than $425 million from the Texas Enterprise Fund, bringing over 54,000 new jobs generating more than $14 billion in capital investment. Projects that are considered for TEF support must demonstrate a project's worthiness, maximize the benefits to the State of Texas and realize a significant rate of return of the public dollars being used for the economic development of Texas. Capital investment, job creation, wages generated, financial strength of the applicant, applicant's business history, analysis of the relevant business sector, federal and local government and private sector financial support of a project are all significant factors in approving the use of the Enterprise Fund.
The Governor's Office works closely with local leaders to tailor incentive packages that best meet the needs of local communities and businesses. Recruiting new business and helping to expand existing business is a dynamic process. If you have a project that can benefit from the Texas Enterprise Fund, an application must be submitted to the Office of the Governor, Economic Development & Tourism division, which provides information on how funds are to be utilized and how the proposed project meets the criteria of the program. The Texas Enterprise Fund application is available at www.governor.state.tx.us/ecodev/financial_resources/texas_enterprise_fund/.
Emerging Technology Fund
The Emerging Technology Fund (ETF), created by the Texas Legislature in 2005 at the urging of Gov. Perry, provides Texas with an unparalleled advantage by expediting the development and commercialization of new technologies, and by recruiting the best research talent in the world. Matching and commercialization funds coupled with additional federal and outside investments mean new technology is emerging in Texas.
The program works through partnerships between the state, institutions of higher education and private industry to focus greater attention on the research, development, and commercialization of emerging technology. There are seven Regional Centers of Innovation and Commercialization (RCIC) and one Texas Life Science Center to serve stakeholders throughout the state in:
• Top Talent Acquisition: For acquisition of "research superiority" for Texas higher education institutions, e.g., attracting additional, established, "high profile" researchers as faculty;
• Commercialization Awards: Provides selected, early-stage investments in new, technology-based, private entrepreneurial entities that collaborate with public or private institutions of higher education in Texas, and which, if successful, may provide significant economic benefit to the state.
Key components of the ETF
The ETF brings new ideas and products to the marketplace today. This innovation and the commercialization will have a long-term profound impact on Texas. Priority is given to emerging technology projects that will enhance Texas' global competitiveness - that are collaborative and leverage both critical expertise and financial resources. Not only will these ETF investments demonstrate economic benefits, they will also result in significant medical and or scientific breakthroughs which will improve people's lives. Recipients commit to work in a collaborative environment and support Texas economic development by growing their business in Texas and providing a return on the State of Texas' investment.
Texas Product/Business Fund
The Texas Product/Business Fund provides financing to existing companies that manufacture products or do business within the state. Financing is done in the form of direct, asset-based loans with a variable interest rate tied to LIBOR. Loans can be amortized up to the life of the asset.
Texas companies or out-of-state/international companies doing business in the state are eligible to apply. Applicants can submit a free, brief pre-assessment in order to check eligibility.
Attributes of the Texas Product/Business Fund:
Competitive Loan-To-Value (LTV)
Positive EBITDA not required
Secure Loans with Property Plant & Equipment (PP&E)
Competitive variable interest rates
Communities or individuals can assist as Guarantors
The Office of the Governor, Texas Economic Development Bank administers the Texas Product/Business Fund at the direction of the Governor's appointed nine-member board. Preference for funding is given to the states' defined industry clusters including, but not limited to: nanotechnology, biotechnology, biomedicine, renewable energy, agriculture and aerospace. Job creation and retention within Texas will be considered as part of funding priorities.
Texas State Contact:
Office of the Governor
Economic Development & Tourism
P.O. Box 12428
Austin, TX 78711
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.