Chapter 380 agreements are one of the most flexible economic development tools available to Texas cities. Under Chapter 380 of the Texas Local Government Code, cities can offer grants, loans, and other incentives to promote economic development. Counties have similar authority under Chapter 381. These agreements are widely used across Texas and can provide significant financial benefits to qualifying businesses.
This guide explains what Chapter 380 agreements are, how they work, what incentives they can include, and how Texas businesses can pursue them.
What Is a Chapter 380 Agreement?
Chapter 380 of the Texas Local Government Code authorizes cities to offer economic development incentives to promote state or local economic development. The law gives cities broad discretion to structure incentives, making Chapter 380 agreements highly flexible compared to other incentive tools.
Chapter 381 provides similar authority for counties. While the legal basis is different, the practical effect is similar — counties can offer economic development incentives to businesses creating jobs and making investments.
What Incentives Can Be Included
Chapter 380 agreements can include a wide range of incentives:
- Property tax rebates: The city refunds a percentage of property taxes paid by the business back to the business. Unlike abatements (which reduce the assessed value), rebates are paid after the business pays its full tax bill.
- Sales tax rebates: Cities can share a portion of sales tax revenue generated by the business.
- Direct grants: Cash payments tied to performance milestones like job creation or capital investment.
- Fee waivers: Reduction or waiver of building permits, impact fees, inspection fees, or utility connection charges.
- Infrastructure improvements: City-funded road, water, sewer, or utility improvements that support the business project.
- Land discounts: Below-market sale or lease of city-owned property.
- Loans: Low-interest or no-interest loans for business development.
Chapter 380 vs Property Tax Abatements
Both tools reduce tax burden, but they work differently:
- Tax abatements (Chapter 312): Reduce the assessed value of property for tax purposes. Must follow specific statutory requirements including reinvestment zone designation and maximum 10-year terms. Property tax abatement guide.
- Chapter 380 rebates: The business pays full taxes, then the city rebates a portion. More flexible — no reinvestment zone requirement, and can include non-tax incentives like grants and fee waivers.
Many cities use both tools together. A business might receive a property tax abatement (Chapter 312) plus a Chapter 380 agreement that adds sales tax rebates, fee waivers, and infrastructure support.
How Chapter 380 Agreements Are Structured
Chapter 380 agreements are performance-based contracts between the city and the business. Typical elements include:
- Performance milestones: Job creation targets, capital investment thresholds, wage requirements, and construction timelines.
- Incentive schedule: The specific incentives provided each year, often tied to performance verification.
- Clawback provisions: If the business fails to meet agreed-upon milestones, the city can recoup some or all of the incentives provided.
- Reporting requirements: Annual reporting to verify that performance milestones have been met.
- Term: The duration of the agreement, which can vary from a few years to 15 years or more depending on the project scope.
Which Cities Use Chapter 380
Nearly every Texas city with an economic development program uses Chapter 380 agreements. Some of the most active include:
- Houston, Dallas, San Antonio, Austin, Fort Worth, El Paso
- Plano, Frisco, McKinney, Round Rock, Sugar Land
- Arlington, Irving, Grand Prairie, Garland
- Smaller cities actively recruiting businesses
Each city has its own policies, thresholds, and negotiating approach. What one city offers for a given project may differ significantly from what another city offers.
How to Pursue a Chapter 380 Agreement
Step 1: Contact the Economic Development Office
Reach out to the economic development department or EDC of the city where you plan to invest. Explain your project scope, investment level, and job creation plans.
Step 2: Submit a Project Proposal
Most cities have a formal application or proposal process. Your proposal should include the project description, investment amounts, number and type of jobs, wage levels, construction timeline, and the incentives you are requesting.
Step 3: Negotiation
City staff evaluate your proposal and negotiate terms. This is where the performance milestones, incentive amounts, and clawback provisions are defined.
Step 4: City Council Approval
Chapter 380 agreements must be approved by the city council (or county commissioners court for Chapter 381). This typically involves a public hearing.
Tips for Businesses
- Engage early: Contact the city before making final location or investment decisions. Incentives are most effective during the decision-making process.
- Be realistic: Propose milestones you can actually meet. Clawback provisions are real.
- Consider multiple jurisdictions: If your project can locate in more than one city, consider engaging multiple economic development offices.
- Layer incentives: Chapter 380 agreements work well when combined with property tax abatements, state programs like the Texas Enterprise Fund, and federal resources.
Find Programs That May Fit Your Business
Chapter 380 agreements are one tool in a large Texas incentive toolkit. Grants, tax credits, workforce training funds, SBA loans, and other programs may also apply to your business.
Not sure which programs may fit your business? Our free screening report checks your business against 150+ verified programs — grants, tax credits, loans, and incentives — and shows you which ones may match. Start your free screening →