By Jeffrey Clark: Wind Energy and Economic Development — A Proper Accounting
Special to the Austin American Statesman
The Texas Economic Development Act, also known as Chapter 313, is Texas’ signature program for attracting new investment to our state. Because we compete for investment on an international basis, Chapter 313 is an essential tool to attract wind energy projects and other capital-intensive businesses, including oil and gas, technology, manufacturing, refining, and petrochemicals. Each of these grows our economy.
In the case of wind energy, the program has helped to attract more than $30 billion of investment to rural areas, bringing an expanded tax base to support schools and providing cheaper electricity that benefits all Texans.
I appreciate the Austin American-Statesman’s efforts to increase public understanding of the Chapter 313 program. Yet some of the information presented in your article, “Controversy in the Air,” might leave readers with a less than complete understanding of the costs and benefits involved.
The article’s presentation of the program’s “costs” creates the misimpression that the state is sending billions in new dollars to school districts as a result of Chapter 313 agreements. In fact, state aid to a district is reduced as of the first year of an agreement.
Under its Chapter 313 agreement, the Logan’s Gap Wind facility covered extensively in the article pays maintenance and operations (“M&O”) taxes on the full value of the project for the first two years of the agreement and on $10 million of its investment for the next eight years of the project. The result is an increase in the district’s property wealth, and a modest reduction in state school aid, assuming all other factors remain constant. State aid to the district will be reduced even further when the project goes on the tax rolls at its full value at the end of the limitation period.
It turns out that critics’ complaint is not that the program increases state aid to the school district, but that it fails to reduce the amount of state aid faster. The “cost” to the state associated with the program is that, had the district collected the additional $1.5 million in local taxes, the state would have paid even less in state aid to the district. Note, however, that had the project not located in Texas the state would still have paid these dollars and more. Why? Because the taxable value of $0 — check my math on this — is $0.
Now, let’s look at the benefits of this development. In exchange for an investment of $15 million in foregone taxes, the state and the local district secured a more than $200 million investment that will generate $80 million for the county and local school districts over 25 years — a net benefit of $65 million. In fact, under state law, the Comptroller cannot approve a project that does not show a net benefit.
The article notes that the project created only four jobs but does not explain the artificial definition of what qualifies as a job under the program. The program only counts full-time employees located on the site every day. In a technology-driven business such as wind, this does not count the engineers who remotely control the project’s energy output, the asset managers, the turbine manufacturers’ technicians who routinely service the turbines, or the many construction and service jobs in the local community.
According to the Texas Comptroller’s analysis, the four jobs mentioned in the article pay a minimum of $41,735 annually, totaling $2.5 million over 15 years. Include construction jobs and this total rises to more than $8.1 million 2013 to 2025. Including broader personal income impacts, the analysis finds nearly $31 million generated over the same period. In Comanche County, with a county average annual wage of $29,588, this is meaningful economic growth.
And, in addition to jobs, let’s not forget the substantial revenue that flows into wind communities as private landowners — farmers and ranchers — are compensated for the use of their land hosting wind turbines.
As with all things, context is critical in evaluating economic development programs. When viewed in context, the Chapter 313 program has been very beneficial to our Texas economy and our Texas schools.
Clark is the Executive Director of the Wind Coalition.