Property tax abatements for economic growth are not a cut-and-dry solution

Though people are generally aware that I am an attorney, but very few realize I’m also trained in economics. As such, I know there is more the county can do to enhance and promote the economic vitality of our community. One issue I’d like to address is how we attract business.

To start off, the small business community is the backbone of every economy. As the county moves forward and discusses economic development, I believe it is imperative that we form our policy directives with the sustainability of existing small businesses in mind. That said, a brief narrative into my economic-growth philosophy follows.

The Denton County Commissioners mainly use property tax abatements to attract business. Tax abatements are reductions in the amount of taxes an entity pays to the government. While tax abatements are not necessarily bad, attracting new business theoretically produces new jobs and economic growth, the problem arises when such policy is not well thought out.

First, transparency should be present in both the requirements of those abatements, but also in the actual list of requests and awards. Such transparency would provide data that could be used to determine if the abatements are actually effective over a long time period. In some cases, tax abatements could be provided to businesses that might close before the county can recover the benefits. The ability to quickly ascertain that data can be useful to governments, universities, and other researchers in establishing an effective long-term policy.

Second, as a rule before abatements are awarded, the county commissioners should conduct an assessment of local business competition. For example, we do not need a national chain like Starbucks competing in the Old Town District when we have The Perc Coffeehouse. On the contrary though businesses which distribute to national and international markets can complement existing businesses and further enhance economic growth. As an example, a coffee bean manufacturer or supplier would complement a local business-like Perc and both entities could receive mutual benefits.

Finally, Denton County Commissioners should involve tax administrators and other stakeholders in decisions to grant incentives like tax abatements. Among the many benefits of doing so is that such a process would eliminate the ability of grantors to politicize such incentives and call in political favors, thereby ensuring that community interests are prioritized.