HB 5 Passes out of Senate with 8 amendments

The Senate took up HB 5 and passed it out as amended with 27 ayes and 4 nays. The bill will now move back over to the House where the Senate can either concur or go to conference to work on the difference.

This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer.

HB 5 (Shine) Relating to agreements authorizing a limitation on taxable value of certain property to provide for the creation of jobs and the generation of state and local tax revenue; authorizing a fee; authorizing penalties

• West – Intention to put the amendments we have discussed on this bill?
  • Schwertner – Yes
• Hinojosa – Discusses under 313s companies did not meet promises made; what does this bill to address this?
  • Schwertner – Were abuses under 313s; addresses new school tax abatement program; gets rid of guaranteed payments; job requirement is enhanced; more teeth in enforcement; audits of 10% of various projects; governor can resend an agreement at any time; wage penalty is doubled in one of the amendments
• Hinojosa – Provisions to resend, terminate, clawback funding provided when they did not comply with terms?
  • Governor can terminate at any time; are clawback provisions
• Hinojosa – Asks about amendments that will be added to this bill
  • Schwertner – Amendments: better define and broaden eligible projects, cut in half overall abatement amount M&O to 50% – opportunity zones could have 75%
  • Schwertner – Amendment by Zaffirini concerns these being good wage jobs and benefits
• Johnson – Amendments you and I discussed will be added?
  • Schwertner – Reiterates amendment; broadens eligibility to include manufacturing, utilities (dispatchable), natural resources, exclusions for battery/wind/solar, among others, refinement of the ESG and second amendment language, requirement concerning rural representation on the oversight committee, performance bond
  • Schwertner – Your determining factor language will be added
• Johnson – This bill is in good shape; will be voting to suspend
  • Schwertner – Thanks members for their work; have been both on the left/right who were against this altogether
• Eckhardt and Schwertner discuss the eligible projects as defined under “natural resources”
  • Schwertner – Did not want to eligibility of projects to code so it could be more broad; aim is for the list to be dynamic
  • Schwertner – Eligible projects will likely be further worked on in conference
  • Schwertner – Will remove fortune 500 company portion from the bill as a compromise
• Eckhardt discusses agreements entered into by Travis County; asks about contract labor under the bill
  • Schwertner – Doubles job requirement related to the House version; bill removes temporary/construction jobs
• Eckhardt – Question the inclusion of contract labor; as there is no employer control over their wages/benefits/working conditions
• Eckhardt and Schwertner discuss how the bill limits dispatchable generation to thermal; and assessment of property taxes on the fair market value
• Eckhardt – In my experience, incentive period did not start running until there was a substantial amount invested or substantial amount of employees hired; does bill contemplates this?
  • Schwertner – Did not change that portion of the bill from the House
• Zaffirini – School districts issue concerning them being made whole be addressed?
  • Schwertner – Yes in the second amendment; bill has criteria that will change eligibility from “a” determining factor to “the” determining factor
• Zaffirini – How will this bill create new wealth as stated in the bill?
  • Schwertner – Bill will help increase overall economic activity
• Zaffirini – Had objection to the oversight committee, will be changed in an amendment?
  • Schwertner – No; committee will approve/disapprove of projects and suggest new industries to add/remove from eligible projects
  • Schwertner – Plan on trying to pass with what I have authored; will continue to look into this
• Zaffirini – Thought we agreed it will include a rural member?
  • Schwertner – Yes; will be addressed in the second amendment
• Zaffirini – Committee has essentially veto power over projects?
  • Schwertner – Is approval/veto power; might have to change
• Zaffirini – What would you say to those who registered for/against this bill? Would this be acceptable?
  • Schwertner – Removed some unlawful aspects
• Zaffirini – Excluding renewables; know you would not budge on this; majority of projects in my district were renewables
  • Schwertner – Believe renewables were an abuse of the 313 program; excludes battery storage and renewables
• Zaffirini and Schwertner discuss the difference between this program and corporate welfare
• Zaffirini – Voted PNV out of committee, will be voting yes on this bill after all the work on it
• Menendez and Schwertner discuss the guardrails under the bill as opposed to the House version and how the bill will go to conference
• Menendez – Asks about Johnson’s amendment
  • Schwertner – Wording is – but for this program, the company would not come here; may be ways to refine that
  • Schwertner – Know Kolkhorst has been
• Menendez – Amendment language says Comptroller has to do vigorous analysis related to other potential sites – then what happens?
  • Schwertner – Comptroller has a recommended projects list; legislature should have some input as we are the appropriators and the executive branch is not

• Menendez – School board veto?
  • Schwertner – Have one shot; have to be a signator to the agreement; have to have a public vote
• Menendez – Have an amendment that would double penalties for the wage violations?
  • Schwertner – Yes
• Menendez and Schwertner discuss the auditing process in the bill
  • Schwertner – Performance bond is also being added in an amendment
• Menendez – Would prefer this was limited to only opportunity zones, appreciate they are given preference
• Miles – Think the bill is in good shape; agree with Menendez’ point about opportunity zones
• Miles – Bill shows this body can work together to have a product we can be proud of
• Springer – Fully support this; dispatchables in this bill?
  • Schwertner – Electric generation facility, geothermal, electric energy storage facility, etc.
• Springer – Thoughts about the 6-month period; consideration for fast tracking the process?
  • Schwertner – Has been discussion about that; most major industries have long-term planning and should know
  • Springer – Agree majority do, but would apply to a very small percentage who would
• Bettencourt – Dow Chemical went to Louisiana instead of Texas because of the tax rate; if we do not have a program like this, companies will go someone else
• Bettencourt – Glad you will continue to work with this through conference
• Miles – Can we count on you that the bill will retain the opportunity zone changes?
  • Schwertner – Yes; 100%
• FA 1 Schwertner & Blanco – Refines eligible projects, broadens by using super sector terminology; removes headquarters aspect previously in the bill (possibly in the second amendment)
  • Blanco – Adds manufacturing? Which includes cross-border manufacturing facilities?
    • Schwertner – Yes
  • Blanco – Adds a facility engaged in research, high-tech equipment; includes aerospace?
    • Schwertner – Yes, is a vast list that falls under that definition
  • Blanco – Includes research/manufacturing of EV parts/batteries?
    • Schwertner – Yes
  • Blanco – Includes reverse technology transfer?
    • Schwertner – Believe so, not fully advised
  • Eckhardt – Natural resources and mining separated out under DOL cluster definition; both sectors are applicable?
    • Schwertner – Yes
  • Eckhardt – Oil & gas needs to be incentivized?
    • Schwertner – Yes
  • Menendez – Just because you are on this list does not mean you automatically qualify
    • Schwertner – Correct
  • Menendez – Do not think we should be making a list of what projects do/do not qualify
  • West – Tell people who do not support this how it will not affect school funding
    • Schwertner – Made whole in Tier I funding; would directly benefit from increased property values related to the project
  • West – That would happen down the road; what about after the agreement is signed?
    • Schwertner – Any finding flows out is backstopped and funded by the state; 313 allowed for supplemental payments which led to increased inequity
  • West – Need to look at the issue about the impact of funding the schools so we can have a clear message on how this will affect it
  • Johnson – Could be whole industries that take advantage of an abatement who are already here, but if we tighten the “but for” language, the abatement will have to be the deciding factor
  • FA 1 adopted
• FA 2 Schwertner – Adds the language that first cuts overall abatement to 50% and adds for qualified opportunity zones and extra 25% enhanced abatement; speaker and lt. governor must each appoint a rural member to the committee with a population less than 1k
  • FA 3 to FA 2 Birdwell – Amends page 3 of the amendment; provides similar provisions to 312 notices; requires notice of meetings not less than 15 days before the meeting, include name of project, general description, etc.
    • Eckhardt – Appreciate the amendment; often the public has no information on what is discussed
    • FA 3 adopted
  • Menendez – Can guarantee this amendment and the others will stay on?
    • Schwertner – Cannot guarantee, goal is to give as much notice as possible; may be a will to have alignment to 72-hour notice
  • Menendez – Confident we will not have the votes without this transparency measure
  • FA 2 adopted
• FA 4 Johnson – Still may need refining as discussion continues with Schwertner; before comptroller can approve application, has to be a finding “but for” this abatement, the company would not be here
  • Schwertner – Support the amendment
  • FA 4 adopted
• FA 5 Schwertner – Requires performance bond in an amount to be determined by the comptroller
  • FA 5 adopted
• FA 6 Schwertner – 100% of average annual wage, applicant to offer and contribute to health benefit plan, doubling of penalties to meet annual wage requirements
  • FA 6 adopted
• FA 7 Perry – Requires one member from each chamber must be appointed to the oversight committee from a rural area with a population of 100k or less
  • FA 7 adopted
• FA 8 West – Applicant must state if they have considered a location in an opportunity zone
  • FA 8 adopted
• Finally passed (27-4)