Or should we call them bail-outs? (see details on Rio Grande LNG's Tax Abatement)
What are tax abatements?
Tax abatements are reductions on taxes issued by a government entity. Tax abatements are often given to a business that has alternative locations thereby attracting the business to a particular city, county, or state that would otherwise locate elsewhere. In the case of the LNG companies, they are requesting not to pay property taxes to Cameron County and not to pay property taxes to Point Isabel School District (Chapter 313).
Are tax abatements beneficial to local economies?
Multiple studies show that only 10-15% of new jobs companies create can be attributed to tax abatements. Furthermore, many economists state that tax abatements do little to alter the location decisions of companies. In the case of LNG, tax abatements are counter productive because the companies have no alternative locations and tax dollars are needed to support their construction and operation. Tax dollars from LNG companies could go towards helping local business, building parks, property tax relief on citizens, downtown Brownsville revitalization, and countless other ways to benefit our communities.
Pubic tax dollars will be used to support LNG construction and operation.
From public services to providing security, tax dollars will be used to support LNG. We combed through FERC resource reports and discovered many ways in which our tax dollars will go to support construction and operation of the LNG facilities. That's why they should pay their fair share! Read our findings in Economic Burdens of LNG to Cameron County.
Economics 101: There's no free lunch!
The incentives have to be paid for, along with services and support LNG construction and operation will require. The money has to come from somewhere! Cost-shifting is required to cover for the taxes that the companies who have their taxes abated by definition do not pay. In these types of scenarios, the lowest income group often tends to bear more than its share through higher sales taxes and property taxes. Some residents in Brownsville have already witnessed a hike in property taxes.
Have the LNG companies received tax abatements?
Texas LNG has not applied for a tax abatement with Point Isabel or Cameron County.
Annova LNG applied for tax abatements with Cameron County in April 2015. The application was tabled by Cameron County and could possibly be approved at a later date. Annova applied for a tax break from the Point Isabel School District in September 2016. The Point Isabel School Board denied the tax abatement application.
Rio Grande applied for a tax abatement with the Point Isabel School District and Cameron County. Point Isabel denied their Chapter 313 tax abatement on 9/22/2016. The company has stated that they will approach the school district again to request a tax break.
Cameron County approved a 100% tax abatement of $373,100,000 for Rio Grande LNG on 10/03/2017. The details of the Rio Grande LNG tax abatement are below.
Sep. 22, 2016: Point Isabel ISD School Board Meeting to approve a Chapter 313 tax abatement application for Rio Grande LNG. It was denied.
Details of Rio Grande LNG's Tax Abatement
The tax abatement is actually a bail-out before Rio Grande LNG opens for business!
Tax abatement application p7
The tax abatement is actually 4 abatements, one for each phase of construction, each lasting for 10 years. If the project is built fully initially, the abatements would last 16 years due to overlap. However, it was only about a week after the abatement was awarded that Rio Grande LNG announced they would only build 1/3rd the size (trains 1 and 2), and later expand when the market supports it. In essence, Cameron County tax payers would then be subsidizing Rio Grande LNG to expand, further making the tax abatement unjustifiable for the reasons that they were requested.
The tax abatement is a 100% tax abatement. Rio Grande LNG will make Payments In Lieu of Taxes (PILOTS) that will equate to only 23% of what they would be paying in taxes.
Rio Grande LNG, as a part of the tax abatement agreement, is only required to hire 35% locally (referred to as "regional residents" in the documents). Local employees are defined as those who live within 100 miles of the worksite for 6 months or longer. Cameron County taxes will inevitably will go to support residents in Hidalgo County!