Skip Navigation

• Report TOC
• Introduction
• Texas Incentive Grid
• Overview Map
• Cost (select programs)
• Incentive Programs
  • Texas Economic Development Act: Chapter 313
  • Texas Enterprise Fund
  • Economic Development Refund
  • Texas Enterprise Zone Program
  • Texas Moving Image Industry Incentive Program
  • Texas Emerging Technology Fund
  • The Certified Capital Company Program (CAPCO)
  • Freeport Exemption
  • Texas Workforce Commission (TWC) Skills Development Fund
• Endnotes

Incentive Programs

4 – Texas Enterprise Zone Program

4.1 Program Summary

YEAR ENACTED:

• 1987 (Agency Rule)
• 1993 (Program Codification)
• 2003 (Program amended to current format)

LEGISLATIVE APPROPRIATION:

No specific appropriation

HISTORY:

The Texas Legislature codified the Texas Enterprise Zone Act in the Government Code in 1993 and amended the Act in 2003.⁴⁴ This legislation established a process whereby areas characterized by acute distress are identified and are provided with state and local inducements to encourage private investments through the removal of unnecessary governmental regulatory barriers to economic growth and to provide tax incentives and economic development program benefits.

In essence, the enterprise zone program has served as an economic development tool for local communities to partner with the State of Texas to promote job creation, job retention and capital investment in economically distressed areas of the state.

MEASUREMENT:

To receive designation and the benefits associated with the enterprise zone program, the following steps/phases need to be put into place:⁴⁵

• Communities nominate projects for a designation period up to five years, excluding a 90-day window prior to the application deadline. Employment and capital investment commitments must be met within this timeframe.
• Projects may be physically located in or outside of an Enterprise Zone.
• If located within a zone, the company commits that at least 25 percent of their new employees will meet economically disadvantaged or enterprise zone residence requirements.
• If located outside of a zone, the company commits that at least 35 percent of their new employees will meet economically disadvantaged or enterprise zone residency requirements.
• Under limited statutory provisions, an enterprise project designation may be granted for job retention.

Designated projects are eligible to apply for state sales and use tax refunds on purchases made for use at the qualified business site. The level and amount of refund is related to the capital investment and jobs created at the qualified business site. The taxpayer (designated project) submits a detailed schedule of expenditures and employment information to the Office of the Comptroller – Audit Division. Field auditors are then sent out to verify expenditures and employment information.

The maximum refund(s) associated with the corresponding job and investment levels are illustrated in Table 10.

PROGRAM COSTS/OUTLAYS/ALLOCATIONS

The state is allocated 105 enterprise project designations per state biennium. However, for the current biennium, the Governor’s Office expects all designations to be allocated by the second quarter of fiscal 2011.

Based on information obtained from the Governor’s Office and the Texas Comptroller of Public Accounts for Fiscal 2008 and 2009, the program allocations and costs are shown in Table 11.

From the information contained in Table 11, the program generated the following between fiscal 2008 and fiscal 2009:

• 89 designations
• 51,761 jobs associated with the program
  • 13,068 new jobs were committed
  • 38,693 jobs retained
• $5.77 Billion in capital investment

Given the estimated total gross tax benefit to designees through state tax refunds ($33.6 Million) as the basis of cost, the amount of state tax refund per-unit measurement of the program are as follows:

• $377,739.85 of state tax refund per designation
• $649 of state tax refund per job (committed and retained)
• $5.82 of state tax credit per $1,000 of estimated capital investment

In terms of capital investments, Enterprise Project companies have increased their total investments in Texas communities from $1.58 Billion in 2003 to over $11.64 Billion in 2009. See Figure 6.

In terms of the number of companies operating in the zone, Figure 7 shows the growth trends between 2003 and 2009⁴⁷ Over the seven-year period, the number of companies receiving TX Enterprise Zone program benefits has increased from 37 in calendar year 2003 to 57 in calendar year 2009.

Figure 8 shows the number of jobs that have been created and/or retained by Enterprise Project companies in Texas communities between 2003 and 2009. In 2003, companies involved in the Texas Enterprise Zone created or retained 9,258 jobs. In 2009, 29,436 jobs were created or retained.

PROGRAM STRENGTHS

• The program was created in statute.
• The program has limitations on the following:
  • time period for designation (five years maximum)
  • maximum refund amounts based on job creation/retention and capital investment levels (information in Table 10)
  • number of designations (105 per biennium)
• The program encourages state and local partnership in job and investment creation in distressed communities in the state.
• It is the only state incentive program geared towards job retention.
• In terms of compliance, program utilizes CPA field audits to verify refund claims on expenditures and employment.

PROGRAM WEAKNESSES:

• Performance is reported in the aggregate. It is impossible to determine individual performance.
• The program has a limited number of designations which may be awarded disproportionately in the biennium, causing worthy projects to not be eligible due to timing.
• In determining the cost of state refunds per job, it is difficult to differentiate between cost attributed to new/committed jobs and cost attributed to retained jobs.