Economic Development Series
The Municipal Toolbox
The Citizen
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Tool
What It Does
Key Tradeoff
Type A / Type B EDC
Direct Incentive
What It Does
Nonprofit corporation funded by up to ½-cent sales tax. Type A targets industrial and primary employers. Type B is broader — parks, sports facilities, quality-of-life projects.
Key Tradeoff
Governed by appointed boards, not elected councils. Moves fast, but limited public visibility into decisions.
Legal Authority
Texas Local Government Code Chapters 504 (Type A) and 505 (Type B)
Common Uses
Land acquisition, building construction, infrastructure, workforce training, small business loan programs (Type B)
Watch For
EDC budgets and contracts may not surface in regular council meetings. Residents should request annual EDC financial reports directly.
Chapter 380 Agreement
Direct Incentive
What It Does
City grants, loans, or tax rebates directly to a business or developer in exchange for investment commitments — jobs, capital, timeline.
Key Tradeoff
Defers general fund revenue — sometimes for a decade or more — while services to the site still run at full cost.
Legal Authority
Texas Local Government Code Chapter 380
Common Uses
Retail recruitment, corporate headquarters, medical facilities, mixed-use development. Often structured as a percentage rebate of new tax revenue generated.
Watch For
Ask for the net revenue figure, not just projected investment. And always ask: would this project have come without the incentive?
TIRZ
Zone-Based
What It Does
Freezes a zone's tax base at current value. Future increases — the "increment" — fund public improvements inside the zone rather than flowing to the general fund.
Key Tradeoff
Can run for decades. Schools and counties don't see the increment during that time. In 2023, Texas TIRZs carried $21B in debt.
Legal Authority
Texas Tax Code Chapter 311
Eligible Expenditures
Roads, drainage, utilities, demolition, facade programs, affordable housing, transit facilities, public buildings
Watch For
TIRZs require annual reporting to the Texas Comptroller. These reports are public. Check fund balance, debt outstanding, and whether increment projections are being met.
Chapter 312 Abatement
Abatement
What It Does
Reduces or eliminates city property taxes on improvements — buildings and equipment — for up to 10 years. Requires minimum investment and job creation commitments.
Key Tradeoff
City gives back only its slice. The school district — often the largest share of a tax bill — still collects at full rate and bears the full service load.
Legal Authority
Texas Tax Code Chapter 312
Common Uses
Manufacturing facilities, distribution centers, data centers, large capital-intensive employers. Must be approved by council after public hearing.
Watch For
Abatements apply to improvements only, not land value. Always ask what happens if the company leaves before the 10-year term ends — clawback provisions vary widely.
?
The hardest question in any incentive deal: Would they have come without us? Cities rarely have a clean answer — but they should always have asked it.