Accountable USA - Texas

If Texas is known for being bigger, the state’s subsidy practices are no exception.  Three of the state’s major programs – the Texas Economic Development Act, the Emerging Technologies Fund, and the Enterprise Fund – each cost the state tens of millions of dollars per year. The latter two programs, long controversial in the state have, thanks to the decision of Gov. Rick Perry to enter the 2012 Presidential race, been receiving national attention as well.

Subsidies have been showered on high-tech companies, including a cluster of semiconductor plants in the state capital, Austin. For example, the city and state provided about $20 million to Samsung Electronics in the 1990s and upped that elevenfold to around $240 million in the mid-2000s when the Korean company committed to a major expansion of its chip fabrication operations (see below).

Professional sports team owners have also played the subsidy game to the detriment of taxpayers in the Lone Star State. Arlington, a suburb between Dallas and Fort Worth, heavily subsidized a stadium for the Texas Rangers baseball team in the 1990s (while George W. Bush was a co-owner) and then committed hundreds of millions more in tax revenue a decade later when the Dallas Cowboys insisted on a new football stadium (see below). Other large deals have gone to companies such as Radio Shack, Caterpillar, the oil refiner Motiva and Toyota (see below).

Texas’s subsidy programs have generated recurring controversies. The Texas Enterprise Fund and the Emerging Technology Fund have both been widely accused of scamming taxpayers. Critics such as Texans for Public Justice point out that these funds, controlled by the governor (now Rick Perry), often benefit companies which are major campaign contributors. They have also said Gov. Perry has relaxed agreement terms to let companies off the hook for failed job creation. The Texas Comptroller has criticized weaknesses in both programs, while the State Auditor in 2011 called on the Office of the Governor to fix serious gaps in transparency and accountability. A Wall Street Journal editorial singled out the Emerging Technology Fund as a prime example of “Rick Perry’s Crony Capitalism Problem.”

Four out of five programs we looked at in our 2010 Show Us the Subsidies report had online recipient disclosure. That said, the quality of transparency varies greatly among programs. While the Texas Economic Development Act meets some of our highest standards of disclosure by posting agreement documents, applications, projected and actual jobs, and wages in an online database, other programs fall short. The Emerging Technology Fund provides no information on employment outcomes, and the Enterprise Fund and the School Property Tax Refund lack adequate wage and jobs data. In 2011, the state discontinued the School Property Tax Refund, prompting us to exclude it from our Money for Something study. In 2010 the film subsidy program had no online disclosure, but in 2011 the Comptroller published a list of recipients. 

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Skills Development Fund

customized job training at local community and technical colleges for businesses and unions

$48 million (FY 2013 - 2014)
0/100
not included
not included

Texas Economic Development Act (Ch. 313)

a controversial and very expensive property tax reduction program primarily benefiting clean-energy and manufacturing companies

$195.8 million (FY 2013)
86/100
100/100
83/100

Texas Emerging Technology Fund (ETF)

a controversial and expensive cash-grant program that helps companies commercialize the results of research and development; criticized for reporting misleading job creation figures, being used for an apparent pay-to-play scheme and allowing corporate executives to award subsidies to companies they had worked for or invested in

$61.5 million (2010)
61/100
20/100
33/100

Texas Enterprise Fund (TEF)

an expensive “deal-closing” cash-grant program for companies locating or expanding in the state; charged with promoting political patronage and making exaggerated job-creation claims; a Wall Street Journal op-ed called the program akin to reverse Robin Hood: "taking from the average taxpayer and giving to someone [with connections]"

$48.6 million (FY 2012 – 2013)
53/100
35/100
60/100

Texas Moving Image Industry Incentive Program

reimbursements for up to 15 percent of film & TV production expenses, more in “underutilized areas” of the state (disclosure site created after our report was published)

Not Available
0/100
13/100
42/100

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

Samsung Electronics (1996 and 2005)

When Samsung indicated in 1995 that Austin was one of two finalists for the South Korean company’s first foreign chip plant, Texas officials rolled out the red carpet. Samsung apparently liked what it saw, and in January 1996 it announced that Austin would get the $1.3 billion facility. The Austin City Council and Travis County approved a 40-percent property tax abatement worth an estimated $20 million, plus a provision allowing the tax break to increase to 55 percent if the company hired a targeted number of local low-income workers. Austin Interfaith criticized the company for trying to qualify for that subsidy by hiring entry-level workers at only $7.50 an hour.

The state later gave the company a $1.4 million Smart Jobs training grant. In 2003 Samsung announced a $500 million expansion in Austin, and the following year the company hinted that Austin could benefit from its plan to dramatically increase production capacity worldwide. City and state officials lobbied hard to be chosen for what turned out to be a $3.5 billion project. Samsung proved to be receptive, but made it clear that it expected much bigger subsidies than it got before. That wish was granted. The package that emerged in 2005 (but not accepted until 2006) was worth some $233 million, mostly from local property tax abatements; the state kicked in a $10.8 million grant from the Texas Enterprise Fund.

A 2007 report by Texans for Public Justice claimed that the city was losing money on the Samsung deal and other large subsidized projects. In 2009 Samsung eliminated more than 500 jobs in Austin but is expected to bring its workforce back to about 1,500 after additional expansions are complete. In August 2011 Samsung sued Travis County over what it claimed was an inflated property tax appraisal of the plant. (Key sources)

Toyota Motor (2003)

In February 2003 Toyota Motor defied conventional wisdom and chose San Antonio as the location for its new U.S. assembly plant even though the Alamo City’s $133 million subsidy offer was lower—in some cases far lower—than competing bids from four other states. San Antonio was reported to have prevailed because of its proximity to Mexican suppliers and Texans’ fondness for the pickup trucks that the plant was designed to produce. The state contributed $60 million of the total: $27 million for training, $15 million for utility infrastructure, and $18 million in in-kind employment services from a workforce development agency and a community college district.

A separate grant of $15 million came from the state’s Smart Jobs Fund for Bexar County to build an eight-mile rail line to the plant, giving the plant two competing rail shippers, said to be crucial for Toyota. County and city tax breaks, including a ten-year county property tax abatement, were worth an estimated $47 million. Toyota agreed to make payments to the school district, but it later disputed the assessed value set by the district. A year after the plant opened in 2007, production was shut down for three months due to slack demand, but the company later increased production and expanded the workforce. Bexar County offered an abatement on the additional equipment brought into the plant. (Key sources)

Dallas Cowboys (2004)

Jerry Jones, oil tycoon and longtime owner of the Dallas Cowboys, wanted a state-of-the-art new stadium for his National Football League team, and in 2004 the voters of Arlington – a suburb midway between Dallas and Fort Worth – gave him his wish. They voted to finance half of what was then expected to be a $650 million arena through sales tax, hotel tax, and car-rental tax increases. The location was to be right next to the Texas Rangers ballpark, whose construction Arlington voters had agreed to subsidize during the 1990s while George W. Bush was a co-owner of the team. The cost of the 100,000-seat Cowboys stadium later rose to about $1.2 billion. Jones helped finance his portion of the cost through the controversial practice of selling “personal seat licenses” – fees for the privilege of buying expensive season tickets.

The first regular season game was played in the new stadium in September 2009. The opening was filled with great fanfare, but there were sharply divided opinions about the huge video screen – the largest high-definition display in the world – especially after it was hit by a punt during a pre-season game. In 2010 members of the Arlington City Council faced criticism of their free use of a lavish suite at the stadium during both sports events and concerts. (Key sources)

Walmart in Texas

  • At least 29 Wal-Mart locations have received subsidies worth about $90.8 million in Texas.
  • At least 130 Wal-Mart locations in Texas have challenged their property tax assessment, recouping about $7.6 million.
  • Wal-Mart was found to have more workers than any other employer in the state relying on publicly-funded health insurance. This shows how taxpayers end up subsidizing Wal-Mart’s policy of providing low wages and inadequate benefits.
  • Wal-Mart receives about $7 million a year from a state policy that allows retailers to keep a portion of the sales tax they collect from customers.

For more information, see the Texas page of Wal-Mart Subsidy Watch.