Tax Abatements
Or should we call them bail-outs?
Rio Grande LNG's Tax Abatement
Texas LNG 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 did not cite alternative locations. However, they applied for tax abatements with Cameron County. The basis for their justification for receiving tax abatements in their application that they would not be competitive in the market place without a tax break. Payments in lieu of taxes (PILOT) will payed to Cameron County at a fraction of what they would be paying in taxes.
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?
Rio Grande LNG received a tax abatement from Cameron County in 2017.
Amendments were made and approved on June 6, 2024
Texas LNG received a tax abatement from Cameron County on June 6, 2024.
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.
Texas ended the 313 tax abatement program at the end of 2022. In June of 2023, a new tax abatement program was signed into law under Chapter 403 of the Tax Code. Read Texas Tribune's article for the details.
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 Documents:
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Train 6 Amendments have not been approved by Cameron County and were not included in amendments made available to the public and approved on June 4, 2024 Commissioner meeting)
The Facts:
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The tax abatement is actually a bail-out before Rio Grande LNG.
Tax abatement application p7
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The tax abatement is actually seperate abatements, 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.
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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.
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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!
Details of Texas LNG Tax Abatement
Texas LNG Tax Abatement Application
Texas LNG Tax Abatement Agreement
Texas LNG received a 100% tax abatement from Cameron County on June 4, 2024. Texas LNG will make payments in lieu of taxes (PILOT) equating to 40% in what they would pay in taxes.