Chapter 313 Agreements

In 2001, the 77th Texas Legislature passed House Bill 1200, which created Chapter 313 of the tax code. The program allows businesses to build or expand their facilities in exchange for a 10-year limitation on their taxable property value. The agreements are intended to attract businesses, create jobs and benefit local economies. The Austin ISD Board of Trustees is currently considering entering into a Chapter 313 agreement. Learn more about the agreement and process below. 

Chapter 313 FAQs

Chapter 313 and Austin ISD

Austin ISD is currently considering a proposal from NXP Semiconductors that would allow us to keep about $75 million we would otherwise lose to recapture over a 10-year period.

The decision on how to use the money will be informed by community input. We would like the funds to support some of the district’s strategic priorities, such as raising teacher and staff pay, potentially developing teacher housing, and increasing access to high-quality academic programming.

As part of the agreement, the district can also negotiate additional incentives provided by the business such as student internships or STEM summer camps.

No. If one school district sends less to the state in recapture, the law requires the state to make up the difference by increasing its share of funding so other school districts aren’t negatively impacted. 

Some opponents criticize the program for giving handouts to corporations with no plan for how the state will make up for the revenue difference. The law is set to expire at the end of this year because state lawmakers declined to renew it during the last legislative session.

The board of trustees is anticipated to discuss and potentially take action on the NXP proposal at their November voting meeting. If the board votes to move forward with the agreement, the district would begin planning around the use of the funds.

Background

In 2001, The 77th Texas Legislature passed HB 1200 enacting the Texas Economic Development Act. Established under Ch. 313 of the Texas Tax Code, the program has become more commonly referred to as Ch. 313. This program enables school districts to limit the maintenance and operations (M&O) taxable value of qualified economic development projects for a ten-year period. In exchange for substantial company tax savings, the program outlines financial protections and benefits that make Ch. 313 agreements attractive to school districts.

The Ch. 313 program allows school districts to share in the benefit of large-scale economic development within their taxing jurisdiction. While growth in a school district’s tax base does not result in additional M&O revenue for a school district, through a Ch. 313 agreement, a school district is able to negotiate that a percentage of the tax savings be paid to the school district and ensure it is protected against any financial harm. These payments are called supplemental and revenue protection payments, respectively, and may be used by the school district to enhance the funding of its program and staff.

No. The level of funding that a school district receives is set by the State Legislature. This funding for the day-to-day maintenance and operations of the school district which pays teacher salaries and curriculum is not determined by the overall tax base of a school district. While the level of funding is set by the Legislature, it is fulfilled through a combination of local M&O tax collections and state aid. As local taxable values increase, the State reduces its level of funding. As taxable values decrease, the burden shifts more to the State. In either scenario, the level of funding is held constant, the funding source is not. In limiting the taxable value of the qualified project, the State is maintaining a higher share of the school district’s funding.

There are two possible outcomes. One, the company decides not to build the project and as a result there are no financial benefits to the school district or local tax payer. Two, the project is built, but without the Ch. 313 Agreement. In this scenario, the company pays M&O taxes on the full taxable value of the project resulting in the same level of funding for the students of the school district. Additionally, the school district loses out on receiving any revenue protection and supplemental payments that would have been a part of a Ch. 313 agreement.

When submitting a Ch. 313 application to the school district, the Applicant pays the school district an application fee. This application fee goes to cover the cost of both the financial consulting services and the separate legal services provided by the district’s legal representation. This ensures the school district is out none of its own revenue to entertain the Ch. 313 application.

Per the terms of the agreement, the company must maintain a “viable presence” for five years after the tax limitation period is complete. After which time the project becomes fully taxable for M&O purposes.

As stated above, the company must stay in place and operational while upholding the terms of the Ch. 313 agreement for five years after the 10-year tax limitation period expires. If they do not, they will be subject to pay back taxes with interest for all benefits received over the ten years.

If the company decides to not build for whatever reason and terminates their Ch. 313 agreement, then all projected benefits under the agreement are null and void.

Although extremely rare in the history of the Ch. 313 program, under a signed Ch. 313 agreement, the school district has protections in place to ensure their financial interests are represented.

The complexities of how school districts are funded often result in confusion as to how this program is a benefit to both the school district and the company, but it really is a “win-win” situation. The school district generates additional revenue they otherwise would not have access to while incentivizing economic development to locate in the area. Meanwhile, the company is saving on their M&O tax bill.

Yes. Many school districts in Travis, Lockhart and Williamson Counties have entered into or are considering Ch. 313 Agreements. Overall, in 2022, nearly 400 Ch. 313 applications have been submitted to school districts across the state.

Source: Thomspon & Horton LLP

Events

Event

Date/Time

Location

Resources

Special Board Information Session

Tuesday, May 10, 6–8 p.m.

Austin ISD Board Room

Project Gateway 

Regular Board Voting Meeting

Thursday, May 19, 6–11 p.m.

Austin ISD Board Room

Project Gateway OHT Application

Project Gateway ATMC Application

Community Input Session: Explaining Chapter 313 Agreements

Wednesday, Oct. 12, 6–7:30 p.m.

Register via Zoom: bit.ly/AISD313

Meeting Recording

NXP Bilingual Presentation

Community Input Session: Explaining Chapter 313 Agreements

Tuesday, Oct. 18, 6–7:30 p.m.

Eastside ECHS, 900 Thompson St, Austin, TX 7870

NXP Bilingual Presentation

Board Information Session

Thursday, Nov. 10, 6:00 p.m.

AISD Board Room 

 

Regular Board Voting Meeting

Thursday, Nov. 17, 6:00 p.m. 

AISD Board Room 

 

If you have any questions please use the Let's Talk application (Chapter 313), Dr. Jacob Reach.