Lorena Economic Development Incentive Tools
The following incentive tools are offered to implement the projects and programs of the Lorena Economic Development Corporation and to encourage new investment in Lorena.
- 4B Sales Tax Grants and Loans
- Chapter 380 City Grants and Loans
- Tax Abatement
- House Bill 1200 Value Limitation and Tax Credit from School District
More information is provided below on these incentives. See also the Tax Abatement Guidelines below.
4B Sales Tax Grants & Loans
The revenues of a 4B economic development corporation may be used to provide incentive grants and loans for a wide variety of projects. These projects may create or retain primary jobs ( as defined by the Development Corporation Act), encompass land, building, equipment, facilities and improvements for projects from manufacturing to corporate headquarters and additionally for public safety facilities, streets and roads, drainage improvements, demolition and certain municipally owned improvements. Additionally 4B project may include job training, career centers, athletic facilities, convention facilities, public park improvements, affordable housing, water supply facilities and airport facilities. For a full list of the projects allowed see the Texas Development Corporation Act of 1979 as amended. To provide the incentive grants and loans a written agreement will be prepared and within that agreement provisions will be included to recapture the funds if the project is not completed as required. Prior to the agreement being finalized there needs to be a public hearing on the project and a 60 day waiting period provided.
Chapter 380, City Grants and Loans
The City Council, through Chapter 380 of the Local Government Code, has the authority to provide an incentive, grant or loan for economic development. Cities need to have a legal basis to authorize an economic development incentive and they generally cite this Chapter 380 of the Local Government Code for the authorization. The Chapter 380 state law is short and provides few restrictions. Any expenditure in the form of a grant or loan or provision of city services involves the donation of public property. The State Constitution requires that the economic development serve a public purpose. The agreement to outline the use of the incentive, grant and or loan will outline and justify the provision of public funding and public purpose of job creation, expansion of the tax base or enhancements of public facilities. A recapture provision will be recommended to insure that if the project is not completed as per the agreement that the public funds are returned.
City and County Tax Abatement
The City of Lorena and McLennan County offer tax abatement as an economic development incentive. To consider tax abatement the city has adopted tax abatement guidelines and criteria. McLennan County has adopted tax abatement guidelines and criteria. The guidelines are updated and re-adopted every two years. There is a required public hearing and notice by the city that it is considering a tax abatement agreement and designation of a reinvestment zone. Seven days prior to granting tax abatement the city must deliver a notice of its intent to enter into the agreement to the presiding officer of each of the other taxing units in which the property is located. The notice is to include a copy of the proposed agreement. The county and other taxing units (except the school district) may enter into an abatement agreement or choose not to provide the abatement.
House Bill 1200 Value Limitation and Tax Credit for School Districts
This incentive may be a useful tool by the Lorena School District for large projects. With Lorena’s School District total tax base at under $500,000,000 they are classified as a Category IV school district. This allows the School District to offer an incentive of limiting certain ad valorum taxes (maintenance and operations only) over a 10 year period on projects over $40,000,000. The $40,000,000 project must be built within the first two years of a 10 year period. Any value over $40,000,000 will be tax abated for the remaining 8 years.
To qualify, the project must be in a city designated reinvestment zone, must contribute to the primary employment in the zone or attract major investment in the zone that would benefit property in the zone and contribute to the economic development of the region. To qualify the property must be devoted to manufacturing, research and development, or a clean coal project or a gasification project for coal or renewable energy generation. An application must be filed with the Texas Comptroller on a prescribed application form of the School District. The School District may choose not to consider the application. The School District must retain the services of a third party to perform an economic impact analysis. The Texas Comptroller must make a non-binding recommendation to the school district on the application. A tax credit is available for any taxes paid in the first two years on improvements over the base $40,000,000 limit.
Lorena Tax Abatement Guidelines