Why Texas Cities Should Offer Tax Incentives

Incentives deals like one San Marcos is offering Amazon leave some wondering if they’re really necessary to lure business to town. One Texas economist says they do pay off – at least in the best scenarios.

By Laura Rice and Alexandra HartJuly 24, 2015 11:35 am|

San Marcos is located 30 miles south of the Texas Capitol, and about 50 miles north of San Antonio. It’s been the fastest growing city in the nation for the past three years. The city council wants to continue that growth — so it approved a plan to offer an incentives deal to the online retail giant Amazon. If the company locates a new retail fulfillment to the city, San Marcos is willing to offer a 40 percent city property tax rebate and an 85 percent rebate of personal property tax for the next 10 years. In exchange, the city would get the economic benefits of a big construction project and somewhere between 350 and 1,000 jobs.

Angelos Angelou is the founder of Angelou Economics — a Texas-based group that has consulted parties on both sides of this equation.

 

On the necessity of incentives:

“Incentives are part of a permanent landscape of economic development for the last 20 years. No community wants to give them up, no community wants to disarm itself. It’s kind of a necessary evil. Nobody likes incentives from a public perspective, but everyone gives them. Also, corporations have to fulfill their fiduciary responsibility to their shareholders… And if their competitors are getting incentives, then definitely they would want to have those incentives provided to them as well.”

 

On the merits of the San Marcos deal:

“I think it’s an excellent deal. Companies like Amazon invest significant sums of money; they employ a lot of people. They are the sought after project by many communities, so they have plenty of choices of where they need to place facilities.”

 

On the practicality of the San Marcos plan:

“[The incentives] are very reasonable. I have actually seen incentives at 100 percent tax abatement for not just 10 ten years, but 20 years. I’m not in favor of giving incentives to every single company. They have to provide some justification, and that justification is this brand name company that provides a lot of other tertiary benefits through our economic development program… For the next five years San Marcos will be leveraging Amazon.”

 

On the future growth of San Marcos:

“Everyone is thankful, I’m sure, that Amazon is locating in the city, but a few months later people are gonna say ‘What’s the next deal?’”