Business Incentives - Sales Tax Grants
San Angelo Development Corporation (SADC)
In November of 2010, the citizens of San Angelo, Texas approved
the extension of the 1⁄2 cent sales tax for community and
economic development projects. The
portion of the tax approved for job creation or retention projects
is approximately 1⁄4 of the total revenue collected. Below
are the guidelines used to determine eligibility for assistance
from the 1⁄2 cent sales tax.
A. Company projects must first fall within the approved NAICS codes established by the 2003 Texas Legislature and may be amended in future legislative sessions. In general, these companies will typically be manufacturing, warehousing/distribution, data processing, telecommunications services, home/regional office operations, certain financial services, research and development, information services, correctional institutions, water supply development, and other codes that result from subsequent amendments to the original House Bill 2912. Also included were projects in the mining, forestry, and agricultural occupations (see NAICS Codes in Section VIII). San Angelo Development Corporation (SADC) members may prioritize their job creation category preferences.
B. The 2003 Texas Legislature created a second threshold used to determine eligibility for 1⁄2 cent sales tax funding - the jobs must be “primary” in nature. The definition given was the following: “Primary Job means a job that is available at a company for which a majority of the products or services of that company are ultimately exported to regional, statewide, national, or international markets infusing new dollars into the local economy.” For the most part, this definition eliminates retail trade and services from funding under the 1⁄2 cent sales tax program for economic development. (However, COSADC board members may consider a project that combines an approved NAICS code with some retail activity when more than 85% of the sales are outside of the Concho Valley retail trade area.)
C. Both new and existing companies are eligible for funding under this program.
D. Projects in San Angelo, in the extra-territorial jurisdiction, and within Tom Green County are eligible. However, projects located outside the city limits must have the approval of the Tom Green County Commissioner’s Court. As allowed by state law, SADC may participate in multiple jurisdictional projects of a significant size and nature.
E. COSADC board members may provide funding for projects that support the overall economic development business climate. These projects may include, but not be limited to: marketing, educational support/training, business incubation, or special studies related to economic development initiatives. However, the funds expended for the projects above must be to attract or retain primary employers that meet the NAICS designated codes.
F. Under special circumstances, job retention
projects may be funded in order to assure the continuation of
an existing business. A very compelling case must be made by the
company that without assistance, they would cease operations in
Wage Rates & Benefits
A. COSADC will give priority consideration for projects that provide above-average wages for trained employees. For the purpose of defining “above average wages”, COSADC will use the Texas Workforce Commission’s Labor Market Information figures for the most recent annual average county wage. SADC will use 75% of the average county wage to determine their targeted threshold. (The most recent average county wage for Tom Green County was $13.13 for 2003 - 75% of which would be $9.85/hour.) Eligible projects creating or retaining existing jobs paying less than the average county wage may be funded, but at a lower rate of reimbursement per job. (As an example, a company introducing a new employment sector may be given special consideration for a lower “trained” wage level to help advance this new economic sector.)
B.CO SADC will give priority to funding projects
when the company provides a benefit package – particularly
health insurance for employees.
Eligibile Uses for the 1⁄2 Cent Sales Tax Dollars
The allocation of the dollars for business development projects
may be for grants or loans. Most commonly, the assistance may
be in the form of a direct cash grant for performance-based job
creation, equipment or personnel moving expenses, lease subsidies,
building remodeling, building purchase/lease-back, new construction
for a client, site improvements, the establishment of a training
program, or any other form of assistance that makes San Angelo
more competitive for job creation or retention.
Level of Job Creation or Retention Assistance
Grants from COSADC have typically been in a range of $2,000
to $5,000 per new job created or retained. COSADC has provided
grants up to $10,000/job in circumstances when companies move
headquarter operations to San Angelo, offer highly paid positions
for skilled employees, or introduce a new skill-set opportunity
with high pay/benefits to our labor market. As a general rule,
the amount of incentive dollars should not exceed 50% of the total
project cost. There is no set limit on the incentive level provided
by COSADC, but as the dollar amount under consideration rises,
an economic impact analysis may be required.
Job Creation Thresholds
Projects that meet the NAICS codes and provide “primary” jobs, should also meet the minimum job creation and investment thresholds established by COSADC. They are the creation of 5 new full-time jobs and new investment of at least $125,000. COSADC members may waive one or both of these thresholds when designing a “performance-based” incentive that is expected to be paid out at some future date when the thresholds are met. COSADC may also waive these thresholds in the case of job retention projects, or when the assistance of COSADC would help fund a new equipment purchase for a company that would increase their productivity and their competitiveness in the marketplace.
COSADC and the City of San Angelo require that a written contract agreement be signed with the company receiving 1⁄2 cent sales tax assistance/incentives. The company will agree to refund any incentives that were accepted for jobs that were not created or conditions of the incentive offer that were not met as outlined in the written agreement. Repayment of incentives under the above circumstances is required by the State of Texas.
Financial Due Diligence
COSADC may require a business plan for any proposed grant or assistance. Whenever possible, COSADC will work closely with the ASU Small Business Development Center to assure that the company has the best chance to succeed or may refer the company to incubate in the Concho Valley Center for Entrepreneurial Development (CVCED).
NAICS Codes Governing Eligibility for 1⁄2 Cent Sales Tax Funding
111: Crop production
112: Animal production
113: Forestry and logging
11411: Commercial fishing
115: Support activities for agriculture and forestry
211 through 213: Mining
311 through 339: Manufacturing
42: Wholesale trade
48 through 49: Transportation and warehousing
51: Information (Excluding 51213 and 512132 – movie theaters and drive in theaters)
523 through 525: Securities, commodity contracts and other financial investments and related activities, insurance carriers and related activities, funds, trusts and other financial vehicles.
5417 and 5419 and 551: Management of companies and enterprises
56142: Telephone call centers
Procedures for the 1⁄2 Cent Sales Tax Assistance Application
- The company can make direct application to the board of COSADC
in their regular meeting dates (2nd & 4th Wednesday).
A more common approach is to allow a staff representative of the COSADC or Chamber of Commerce to gather the information necessary for the application and present it on the company’s behalf. This approach will save some time for the company making application.
- If the company wants COSADC to discuss a level of incentives, that session can be legally closed to the public and conducted in “executive session”. However, COSADC members cannot vote or make any incentive decisions in a closed session. If the company is ready at that time to reveal their plans, COSADC members can come out of the executive session and discuss the project and propose an incentive level. In this case, this fulfills the legal obligation as a public meeting and the proposal can be approved at the next regular meeting. Most often, however, the members of COSADC will request additional information before they make a decision, and another meeting will be required
- The alternative approach is to make the presentation in open session and get a decision during the meeting. If that is done, a public hearing must be held during the next meeting. Final approval can be given at the next meeting. In this case, the process takes just takes two meetings and one month.
- Once approved by COSADC and a public hearing conducted, the proposal goes to the City Council. They meet every 1st and 2nd Tuesday of each month. Their approval can be obtained in one meeting.
- Once approved by the City Council, there is a 60-day “comment
period” that allows citizens the opportunity to initiate
a process to stop the action through a referendum if there is
wide opposition to the funding. This action has never occurred
in San Angelo.
This process can be expedited by joint sessions of the SADC and City Council, but the company should plan on a 3-4 month process. It is important that the company start the process well before an expansion is undertaken. There may be other incentives that can be accessed for the benefit of the company and it’s best to start the discussion early. Please keep in mind the primary purpose of the 1⁄2 cent sales tax program is to provide an incentive for a company to expand (locally) or locate in San Angelo. A company already under construction is not a good candidate for an incentive, but may be helped with training costs.
- All incentive and performance agreements will be outlined in a contract between the company and the COSADC. The company receiving an offer of assistance must sign a contract with COSADC and initiate expansion and/or relocation within one year from the date of final approval by the City Council.