Are There Still Economic Incentives Out There?

As Austin continues to generate sustained interest from companies looking to move here, both big and small, this correlates directly to higher rents and purchase prices for all type of commercial property. 

The result is many companies are packing up their bags and moving to neighboring cities like Buda, Kyle, San Marcos, Taylor, Hutto, Georgetown, Cedar Park, Liberty Hill, Pflugerville, and Round Rock according to Freddy Cantu, Senior Business Relationship Manager with Chase Bank. Freddy is seeing brisk activity originating land and construction loans. It’s not only the lower cost of commercial real estate that is attracting businesses to these areas, but also the healthy economic incentives that continue to be offered.

Economic incentives can come from the state, county or local level. At the state level, any business can apply for three types of incentives: financial aid assistance (low interest loans); grants (like cancer prevention research, skilled development, Texas Enterprise Funds, Etc.); and Tax incentives (ad valorum, etc). Some companies have benefited greatly from state incentives. It just depends on the type of business you have and if you meet necessary criteria.

The more aggressive incentives, in my opinion, come at the local municipality level. Cities like Kyle, San Marcos, and Hutto have very pro-active economic development programs in place. For example, if you locate to Hutto, they will give you land to build your facility if you meet specific criteria like job creation, sales revenue, and capital investment goals.

You can work directly with a particular city’s economic development department or go thru one of the area’s non-profit public/private regional partnerships, much like one of my clients did recently. Since they were focused on cities south of Austin, we got the Greater San Marcos Partnership (GSMP) involved to help guide them thru the process. They explained that cities have specific economic incentive authority thru Chapter 380 of the Local Government Code. We could couple that with the county incentives (Chapter 381). By working thru the GSMP, my client only had to provide one entity, GSMP, with their company information. GSMP then sent that information to several competing cities and Hays County. An important aspect of the process we learned from GSMP was not to tip our hand on which city we were favoring. If you do that too early in the process, that city loses the need to “incentivize” you to go there! Makes perfect sense. In this particular case, my client chose to relocate from south Austin to Kyle in a new flex manufacturing building and received a decent inventive package from both the City of Kyle and Hays County.

If you have any questions about this month’s topic or have any questions about commercial real estate, do not hesitate to contact me at 512-736-5933 or oddo@toweratx.com.