Economic Incentives

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06/28/2011 — admin

Business Assistance/Incentives

Midland’s superb business climate has evolved over the past century as the community grew to be the regional headquarters for the West Texas oil and gas industry. The result is that companies in all industries can benefit from the business climate and natural advantages the Midland region offers. Midland has an array of local and state incentives available to qualified companies. These include tax abatements and refunds, job training grants, and several project financing options.

LOCAL INCENTIVES

Midland has a Type A sales tax to fund industrial development projects, such as business infrastructure, manufacturing, research and development and job training classes.  Incentives are based on project investment, the number of new basic jobs and payroll.  Any request for incentives must be approved by the Board of Directors of the Midland Development Corporation "MDC" and the Midland City Council. 
 
The main requirement is that the businesses bring new money into the community by providing primary jobs.  A primary job is one at a company that exports a majority of its products or services to markets outside the local region, infusing new dollars into the local economy.  Primary jobs are further limited to specific industry sectors such as agriculture, mining, manufacturing and scientific research and development.  Those industry limitations can be found in Local Government Code, Chapter 501.
 
The Midland Development Corporation must enter into a written performance agreement with any business enterprise that it funds directly or makes expenditures that benefit an eligible project.  At a minimum, the performance agreement must contain:
  • a schedule of additional payroll or jobs to be created or retained;
  • the capital investment to be made by the business enterprise; and
  • the terms for repayment of the MDC's investment if the business fails to meet the performance requirements specified in the agreement
Assistance may be in the form of:
  • Leasehold improvements, construction, real estate purchase, training, personal property or equipment, and infrastructure needs. 
Other local incentives may include:
  • Tax Abatements
  • Foreign-Trade Zone
  • Freeport Tax Exemption
  • Enterprise Zone Projects
  • Tax Increment Reinvestment Zone
  • Chapter 380 & 381 of the Texas Tax Code

Property Tax Abatements within the Reinvestment Zone

The MDC will assist in the coordination with the City and County for tax abatements.  Qualified businesses located within the designated Reinvestment Zone are eligible to apply for abatement of the property tax for the value added to real or personal property by construction, renovations, additions, or personal equipment as allowed by law and approved by the participating taxing entities.  Tax abatement on real and personal property improvements may be granted by all taxing entities except the Midland Independent School District.

Foreign Trade Zone

Midland's Foreign Trade Zone #165, located at Midland International Airport, gives companies the opportunity to defer and possibly reduce duty paid on goods traded across national borders. Goods may be assembled, packaged, or warehoused at a Foreign Trade Zone. Midland International is a designated Port of Entry and has a U.S. Customs Office.

Freeport Tax Exemption

Freeport Tax Exemption is offer by the Midland County, City of Midland, and the Hospital District.  The freeport exemption exempts certain types of tangible personal property (i.e., inventory) from ad valorem (property) taxation provided the property is:

  • Acquired in or imported into Texas to be forwarded out of state
  • Detained in Texas for assembling, storing, manufacturing, processing, or fabricating purposes by the person who acquired or imported it; and
  • Transported out of state within 175 days after the date the person acquired or imported it into Texas

Because oil, natural gas, and other petroleum products are not considered freeport goods, they are not eligible for the exemption, and, therefore remain taxable.  Even when goods are sold to an in-state purchaser rather than shipped out of the state, they may qualify for the Freeport exemption - however, the property must qualify under the above requirements as Freeport property and must be transported out of the state within 175 days after it was first acquired in or imported into the state.

Enterprise Zone Program

The Texas Enterprise Zone Program is an economic development tool for local communities to partner with the State of Texas to promote job creation and capital investment in economically distressed areas of the state.  Local communities must nominate a company as an Enterprise Project to be eligible to participate in the program.  Legislation limits allocations to the state and local communities per biennium.  The state accepts applications quarterly with deadlines on the first working day of March, June, September and December.  Designated projects are eligible to apply for state sales and use tax refunds on qualified expenditures.  The level and amount of refund is related to the capital investment and jobs created or retained at the qualified business.

Chapter 380/381 Economic Development Agreements


Municipality Agreements

Chapter 380 of the Local Government Code authorizes municipalities to offer incentives designed to promote economic development such as commercial and retail projects.  Specifically, it provides for offering loans and grants of city funds or services at little or no cost to promote state and local economic development and to stimulate business and commercial activity.

County Agreements

Chapter 381 of the Local Government Code allows counties to provide incentives encouraging developers to build in their jurisdictions.  A county may administer and develop a program to make loans and grants of public money to promote state or local economic development and to stimulate, encourage, and develop business location and commercial activity in the county.

SBA Loans

Small Business Administration CDC/504 Loans The CDC/504 loan program is a long-term financing tool for economic development within a community. The 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A Certified Development Company is a non-profit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and private-sector lenders to provide financing to small businesses.
Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped. Caprock Business Finance Corporation, Inc. in Lubbock is the CDC that serves Midland and Ector Counties. The CDC can be reached at (806) 762-8721 or www.caprock504.org STATE PROGRAMS www.governor.state.tx.us

Bond Financing Options

Bonds may be issued by non-profit development corporations or authorities for eligible projects in order to promote new and existing businesses, encourage employment in the state, and increase the tax base of the community where the project is located. Several types of bonds are available. Tax-Exempt Industrial Revenue Bonds for Manufacturing Projects are issued to finance land and depreciable property for industrial and manufacturing facilities. Taxable Industrial Revenue Bonds typically have higher interest rates than tax-exempt issues, but these issues do not have restrictions on the use or amount. Sales Tax Bonds are available only for those cities that have passed the economic development sales tax. These taxable or tax-exempt bonds, depending on the type of project and business, are primarily for manufacturing or industrial projects, but can also be issued for commercial, recreational, infrastructure, and other types of projects. The Governor's Office Economic Development Division has more information on bond financing options.
 

State Incentives

Innovative and competitive legislation continue to fuel investment and job growth in the Lone Star State.  Incentives such as the Texas Enterprise Fund and the Texas Emerging Technology Fund were created to attract new business, new technology and new jobs to Texas.  For more information visit the www.governor.state.tx.us.

 
Every good business deserves a place where it can thrive in an optimistic, visionary environment.  Launch your business in the Midland environment and you can expect success.