Chapter 380 of the Texas Local Government Code authorizes municipalities to offer economic development incentives to businesses through negotiated agreements. These agreements, commonly called Chapter 380 agreements, allow cities to provide grants, loans, tax rebates, fee waivers, and other financial incentives to promote economic development, stimulate business activity, and create jobs within their jurisdictions.
Chapter 380 agreements are among the most flexible economic development tools available to Texas cities. This guide explains how they work, what businesses can receive, and how the negotiation process typically operates.
How Chapter 380 Agreements Work
Under Chapter 380, a Texas city council can approve agreements that provide direct financial incentives to a business in exchange for commitments related to job creation, capital investment, or other economic development goals. The terms are negotiated on a case-by-case basis, making each agreement unique to the specific project and city.
Common incentive structures include:
- Property tax rebates: The city refunds a percentage of property taxes paid by the business over a defined period, often tied to the value of new construction or improvements.
- Sales tax rebates: The city shares a portion of the local sales tax revenue generated by the business back to the company.
- Infrastructure support: The city funds road improvements, utility extensions, or other infrastructure needed for the business project.
- Fee waivers: The city waives permitting fees, impact fees, or other development-related charges.
- Direct grants or loans: The city provides cash grants or below-market loans from its economic development funds.
Who Can Get a Chapter 380 Agreement
Chapter 380 agreements are available to both existing businesses expanding in a city and new businesses relocating to it. Cities typically evaluate proposals based on:
- Number of jobs created or retained
- Amount of capital investment
- Industry sector and wage levels
- Tax revenue generated for the city
- Alignment with the city's economic development priorities
Not every business qualifies for a Chapter 380 agreement. Cities generally reserve these agreements for projects that generate significant economic impact relative to the incentive provided. Small retail operations typically do not receive Chapter 380 agreements, while manufacturing facilities, corporate headquarters, distribution centers, and large employers are more likely candidates.
Chapter 380 vs. Chapter 381
Chapter 380 applies to cities and municipalities. Chapter 381 of the Texas Local Government Code provides similar authority to counties. The two programs serve the same purpose but operate at different levels of local government. A business locating in an unincorporated area would work with the county under Chapter 381, while a business within city limits would use Chapter 380.
How to Pursue a Chapter 380 Agreement
- Contact the city's economic development office: Most Texas cities with active economic development programs have a dedicated office or corporation that handles incentive negotiations.
- Present your project: Provide details about your planned investment, job creation, timeline, and site requirements.
- Negotiate terms: The city will evaluate the economic impact and propose incentive terms. Both parties negotiate performance requirements and clawback provisions.
- City council approval: Chapter 380 agreements must be approved by the city council in a public meeting.
- Performance and compliance: After execution, the business must meet the agreed-upon milestones to receive the incentive payments.
Important Considerations
- Chapter 380 agreements typically include clawback provisions that require repayment if the business fails to meet its commitments.
- Terms are negotiable, which means the incentive value depends on the strength of the business case and the city's priorities.
- These agreements are public records and require city council approval, providing transparency to taxpayers.
- Legal counsel experienced in economic development agreements is advisable for both the city and the business.
Find Programs That May Fit Your Business
Chapter 380 agreements are one of many economic development tools available to Texas businesses. Depending on your project size, location, and industry, you may also qualify for state grants, tax credits, workforce training programs, and federal incentives.
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