From time to time, you may hear the Town of Flower Mound or another municipality has granted an incentive to attract or retain a certain business or development. Such incentives are provided based on a municipality’s adopted incentive policy and in accordance with State tax laws. As the Town of Flower Mound is dedicated to achieving the highest quality of development, infrastructure, and quality of life for its citizens, it is essential to support positive expansion of the Town’s economy; and sometimes, incentives play a critical role in these efforts.
Furthermore, the competitive nature of other communities on the local, state, and international level can necessitate incentives to attract quality investment and the right business to the community. When such efforts are necessary, Town staff and Council work diligently to negotiate win/win incentive agreements, and only after conducting an in-depth cost-benefit analysis, that ensures a fair and reasonable return on investment for our taxpayers. It is the intent of the Town to utilize incentives only when necessary, and when it results in a positive return.
It takes a significant financial investment to open a business, especially if a community has exceptional development standards in place, as Flower Mound does. Incentives can be used to relieve some of this cost and help motivate a company to select Flower Mound, ensuring those additional tax dollars and property values are invested in our economy and not another community.
Common incentives include:
|· Special district financing
o Tax Increment Reinvestment Zone (TIRZ)
o Public Improvement District (PID)
|· Loans & bonds
o Industrial revenue bonds
o Enterprise loans
o Short-term local financing loans
|· Tax abatements
o Real property valuation
o Business personal property valuation
o Sales & Hotel Occupancy tax payments
o Agricultural rollback tax payments
|· Grant payments
o Relocation assistance
o Lump sum performance payments
o Cash grant
o Workforce training grants
o Façade & landscaping grant programs
o Water, wastewater, roadway impact fees
|· Other incentives
o Providing land or property
o Providing roadway and/or utility infrastructure improvements
o Special tax exemptions
o Exemption for local or state regulations
o Building Permit Fee Waiver
Careful consideration is taken on each project seeking an incentive to determine how it fits with the vision of the community, how it aligns with the Town’s design standards, and how it will impact the health of the environment and resources in the community. Incentives are always considered on a case-by-case basis and are dependent on a number of factors, including the kind of assistance requested, the amount of investment the business will provide the community, the number and type of jobs the business supports, etc. Many of these factors are then incorporated into the agreement, becoming the required deliverables of the company. Without achieving those deliverables (i.e. minimum number of jobs, minimum tax value, etc.), the company does not receive the incentive and any funds provided to the company are subject to be recaptured by the Town.
In the case of new construction and site development, incentives often assist in offsetting the cost of extraordinary infrastructure or other obstacles that may be hindering a site from being developed. Just last year, a moderate incentive, which provided fee reductions and tax abatement (discount on property taxes), was provided to a company in exchange for the construction of a 200,000 sq. ft. facility on a topographically-challenged site within the Town’s business district. Without the incentive, this site, which now contains a multi-million dollar facility, may have never been developed. This incentive allowed the company to overcome the additional site development costs.
Flower Mound and cities like Arlington and Allen, fund their incentive programs very differently than cities like Plano, Frisco, Grapevine, Allen, and McKinney, who have set aside Type A or B sales tax dollars to be used for economic development purposes. When you hear about cash grants provided to a relocating or expanding company, it is typically done through the use of these Type A or B sales tax dollars. For example, the City of Plano provided a $6.75 million grant to Toyota, along with other long-term tax reductions. The Town of Flower Mound is not structured to provide large cash payments, as we do not dedicate sales tax for such economic development efforts, but rather, for our police and fire districts, parks, street maintenance, and other general fund operations.
While there are many types of incentives, as noted above, it is the Town’s practice when possible, to encourage new investment and business attraction through the utilization of Tax Abatement or Tax Rebate. These types of incentives act like a discount on taxes that would otherwise be charged to a business by the local government, which secures the added investment in the community while negotiating only with a portion of the profit that is created by the project.
For example, a 50% Real Property Abatement is provided to XYZ Incorporated:
Real Property – Structure & Improvement Market Value $ 8,500,000.00
Real Property – Land Value $ 1,500,000.00
Bus. Pers. Property – Personal Property Market Value $ 7,800,000.00
Total Value $17,800,000.00
|Taxing Unit||Value||Tax Rate||Taxes Due||Savings to Company|
|Structure & Improvement||Town of Flower Mound||$8,500,000.00||0.004365||$18,551.25||$18,551.25|
|Land||Town of Flower Mound||$1,500,000.00||0.004365||$3,273.75|
|Business Personal Property||Town of Flower Mound||$7,800,000.00||0.004365||$17,023.50|
As you can see, the discount is provided only to the improvement, as the land is never discounted or incentivized. While a portion of the structure/improvement has been abated/discounted, the business personal property values were not incentivized, providing 100 percent benefit to the Town and the other taxing entities. By law, School Districts may not provide tax breaks. The County may participate in a manner similar to the Town, but they offer such incentives in accordance with their own incentive policies and procedures.
So, the next time you hear or see an incentive was provided to a company, please know that the Town Staff and Council diligently negotiated the terms and fully analyzed the cost and benefits to ensure the best return on investment.
Some Town of Flower Mound incentive facts:
- Since January 1, 2010, the Flower Mound Town Council has approved 30 incentives
- Currently, the Town is administering 18 active incentive agreements
- The Town Council approves every incentive agreement-no incentives are provided at a staff level
- Every incentive brought before Council includes a detailed cost-benefit analysis
- The benefit of an incentive agreement must outweigh the cost in order to be considered
- The Town primarily uses fee waivers, tax abatements, tax rebates, or sales tax rebates as incentives
- Tax abatements are ONLY for the portion of taxes that are assessed by the Town of Flower Mound
- Sales tax rebates do not include dedicated sales tax dollars for local parks, police, or emergency funds, only a portion of the 1 percent for the Town’s general fund.
- The vast majority of incentives do not provide 100 percent discounts, but partial discounts
- All incentives are negotiated on a case-by-case basis
- Per the Town’s recently published Annual Incentive Report (https://www.flower-mound.com/1552/Incentives), for every $1 spent on incentives, the Town receives approximately $2.50 in return