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The Senate Committee on Natural Resources and Economic Development met on April 1 to hear invited testimony on the following Interim Charges:

  • Interim Charge 3 – Economic Development: Evaluate the effectiveness and necessity of programs and resources currently used to support economic development in Texas.  Make recommendations regarding continuation of effective strategies, modification of existing administrative or regulatory barriers, and the reduction or elimination of ineffective programs.
  • Interim Charge 4 – Expedited Permitting: Evaluate the permitting process in Texas and neighboring states and make recommendations for eliminating unnecessary barriers and expediting the process to ensure that the regulatory process is consistent and predictable.
  • Interim Charge 7 pt 1&2 – Monitoring Charge: Monitor the implementation of legislation addressed by the Senate Committee on Natural Resources and Economic Development during the 84th Legislature, Regular Session, and make recommendations for any legislation needed to improve, enhance, and/or complete implementation.  Specifically, monitor the following: 1) Legislation relating to Texas aerospace incentives; 2) Expedited permitting.

AR Babe Schwartz

  • Texas Coast is the greatest economic generator there is from industry to tourism
  • Provided history on coastal public rights
  • Law provides protection on coastal public rights – government has right and duty to protect rights of public lands, public waters and public air (witness will provide book called Public Trust Doctrine to the chair for reference)
  • Trinity River is watershed for Galveston Bay one of the most important bays in the state, bay system and every bay is essential part of what brings life to the gulf and what brings economic development to Texas
  • Necessity of fresh water inflow to those bays is as necessary as the air we breathe
  • During his time passed the original windstorm insurance

Buster Brown

  • Favorable business climate – transportation and water infrastructure funding (signals providing for future), and no income tax but there are a few things to think about
  • Don’t want to forget about those businesses that have been in Texas for a long period of time, protect those businesses that have been good for the state
  • In regards to TERP, example of Texas industry and legislature found a way to address emissions reductions without having federal government come in with draconian rules – this is an example of what we could do to address emission reductions before the federal government steps in with new rules
  • Fracking process is being criticized by people, Texas has a large amount of natural gas and production does significantly affect our economy
  • Inexpensive energy is component for those businesses here and those coming
  • Slow permitting may be determining factor is business chooses to move to a different state
  • Widening of Panama Canal – our ports need to be in the position to welcome that trade
    • Port of Houston is preparing and trying to be ready to compete for that trade
  • Hinojosa – worked on shortening permitting process last session and looking forward to feedback on how that is working
  • Estes – those large ships will be coming through in a few weeks and Texas is already behind the curve
  • Lucio – provided handouts to the committee (TEX21 – transportation Excellence for the 21st Century), has been pushing the third coast initiative  and would like commitment from members to travel to Panama Canal if have not done so

Ken Armbrister

  • Provided a bit of history on chairs of Natural Resources, only 9 committees when he was in the Senate
  • Points out diversity (large) of Texas on issues of Natural Resources  
  • Economic Development in his day had two issues but have grown over time
  • The unknowns of regulatory structure is what can cause angst for businesses
  • HB 72 (1984) was passed when he was a member – bill did away with abatements
  • Gave background on how average wage impacted business decision
  • Points out there is an assault by various federal agencies against what Texas does – refers to attainment 

Kip Averitt, Texas Clean Air Coalition

  • Fuel sources are competitive and it’s a good thing because it means the industry is booming in our state
  • Initiative to allow private property owners to reinvest and program has huge potential to retrofit old building with water savings technology using free market
    • Might consider to help make it an efficient program – have a program office in the comptroller’s office
    • No government required but a pass through function

Bryan Daniel, EDT Governor’s Office  

  • Major initiatives ensuring collaboration, worked to bring greater coordination among agency offices
  • Feels has been successful of addressing issues related to the Texas Enterprise Fund
  • Emerging Technology fund was eliminated and remainder transferred to Comptroller office, feels like there has been a good handoff made
  • Continues to work with a couple of grants that remained in the Governor’s office
  • Other funds came from Comptroller to Governor’s office and they have implemented several refinements to the programs
  • SAO has audited Major Events Trust Fund program and have made great progress on addressing those particular findings
  • Governor’s University Research Initiative has also been put in place, rules implemented and begun accepting applications and now have 9 pending applications with decisions on them starting next week
  • Earlier in January named members to aerospace advisory which is important to consider how to strengthen the aerospace industry
  • Modifications also made inside their office – made adjustments and selected a small business advocate and small business forums throughout the state and working on small business workshops on more rural areas throughout the state
  • Wants to ensure regulatory process remains as streamlined as possible and have permit office to help businesses with the process – does not want any particular barrier for new companies coming to state, still need to comply and fill out paperwork but provides a coach to help them along in the process
  • Since FY 2015 have worked with 306 business prospects, 14,400 jobs and $28 billion in direct capital investment
  • Pointed out that two of many achievements this year – Texas lead nation in job creation and our workforce attracts businesses to Texas (Tri-agency initiative will continue to look at ways to enhance this)
  • Estes – in regards to HB 26 (84th R) would like an update
    • Committee would review economic development programs across state government
    • At this point not all members have been appointed yet waiting on 4 more
    • Initial job is to produce a report and will establish a matrix for review on an ongoing basis  

Korry Castillo, Data analysis and transparency for Texas State Comptroller

  • Have an administrative and reporting role
  • Chapter 313 overview given
  • Estes – how many things do we have going in the state
    • 400 in various phases, 259 active 2 years ago
  • Estes – mainly urban or rural
    • Mainly rural but not really central
  • Hinojosa – what amount of money is provided where state has to make up difference
    • Reported in biennial report and it does estimate the projections for the out year
    • Will give the committee the details from the last report
  • Hinojosa – main concern is that there is not proper oversight, to point that larger businesses were going to smaller school districts and taking advantage of the situation, moved some of that oversight to Comptroller office?
    • Correct – annual report now required for qualified jobs and only applies to those contracts after bill became effective
  • Birdwell – mentioned about 300- 400 applicants, how many involved in lawsuit against the state? Would like to know if there is a correlation between those schools who have 313’s and pursued school funding lawsuit against the state
    • Will get that detail to committee
  • Nichols – asked why is job requirement being waived, concerned 2/3 waive agreement
    • Company can request a waiver and district can approve
    • Number is being reduced but not waived entirely
  • Hinojosa – can add dollar amount to tax benefit for business?
    • Anywhere from $10 million – 100 million project so it depends on size, larger sizes get bigger benefits
    • Report will have dollar figure and amount of taxes forgone
  • Estes – audit how many per year
    • At least 3 per year done by risk assessment
  • Hinojosa – hear different numbers on how much taxes are being provided on abatement, wants an up to date number and what is needed to make up the difference
    • All updated numbers will be available in May and June
  • Estes – by number of questions being asked it shows not sure if this is a good thing or bad thing and hoping from data from comptroller to help figure it out
  • Comptroller has additional reports on other tax programs (311, etc)  

Rick Rhodes, Texas Department of Agriculture

  • Gave an overview of several programs
    • CDBG program was reviewed
    • Jobs for Texas Fund – invested over $30 million across the state
    • Will use some of federal funding to create funding for smaller businesses and investments into rural communities
    • Works to raise awareness on international sales, increase exports increase economy in Texas
    • Go Texan program
  • Because of federal funds used for programs they are subject to very strict restrictions on how to apply funds
  • Would like to legislature to consider investing funds to help Texas Rural Investment Fund – to enhance development efforts in rural Texas  
  • Lucio – would like to know programs that have worked on before that maybe didn’t get to finish line
    • Sure
  • Nichols – Go Texan program, asked about qualifications for companies to use the label and asked agency to go back and review criteria so that some amount of the product be originated in Texas
  • Nichols – would like to see total dollar of fee increases in total agency
  • Nichols – knows there is a desire to increase broadband, also continue to work on cell coverage 

Andres Alcantar, Chairman Of Texas Workforce Commission

  • Gave overview of commission
  • Tri-agency Initiative – assessing regional economic issues and analyze opportunities and develop some innovative solutions
    • Will go around the state and hold regional round tables where commissioners sit down with various stakeholders
    • As examine career and tech and STEM programs and building capacity that pathways are there for colleges – need good articulation agreements and maintain a priority on veterans
    • Charged to understand and further analyze on transition for veterans into the workforce
    • Help communities grow economy
  • Noted several programs the commission oversees
  • Hinojosa – Hear from companies they have openings but a shortage of skills in the workforce and it seems these opening have been going on for years and years – can yall have a raid response type of program to try to build up those needed skill sets?
    • Key part is understanding what is happening in regions – looking for integrated solutions
    • Agrees we want to “grow our own”
    • Work with students to help them understand career pathways – access to demand data, link up to industries
    • Have real advantage of age of population and equip them with certificates that are in demand
    • The question proposed by Hinojosa is main focus of the initiative
    • Part of rapid response will include long term focus and modified shortened solutions, working on effective just in time response to need
  • Hall – In regards to addressing CWD, draconian process of requiring breeders to kill dear but has since evolved to do live testing; it does take skill to do a biopsy but have seen a lack of skilled veterinarians
    • Have dual partnerships and happy to reach out institutions where this is there space and see what can be done to support on this issue 
    • Has not been contacted on this    
    • Under marketable skills – looking at all occupations and better aligning, this fits within that
    • Will follow up with Hall’s office to get briefed on details

Hector Rivero, Texas Chemical Council

  • Spoke to charges 3 &4
  • Permitting is critical for companies trying to decide where to locate and appreciates legislation addressing
  • Streamline in public participation in hearing process provided some regulatory certainty – critically important
  • Listed numerous key factors companies use when making decision of where to invest in
  • Provided a few pages out of HB 1200 from a few sessions back – efforts made such as ad valorem taxes are higher than in other states, etc
  • Provided Ray Perryman article outlining Ch 313 and why it is important to maintain it
  • Initiative legislature have put in place are working – ch 313 are not corporate welfare but in fact a cost generator for the state beginning on day one
  • Provided chart of key cities where sales tax revenue grew 3% every year higher than rest of state because of Ch 313 agreements
  • Believes ch 313 is a critical factor and do exactly what they are meant to do
  • Estes – stated sometimes employment may not be direct, example of construction workers  

Tony Bennet, Texas Association of Manufacturers

  • TAM top 10 issues – continuous improvement to keep state addressed
  • 2nd highest property tax state in the nation which is why 313 is absolutely critical to keep in tool chest
  • Texas businesses pay 63% of tax burden – don’t want it to go any higher
  • Franchise tax is only business tax but don’t piecemeal businesses out before get rid of it – would like parity among the business, instead of exemptions a direct cut
  • Business inventory tax – one of only handful of states that still tax business inventory and it is inconvenient (gave airplane parts example)
    • Economic activity would increase if the tax was phased away
    • Fiscal note causes concern since do not do a dynamic fiscal note
  • Hancock – any idea of amount spent on the inventory tax, % of property taxes being paid on inventory
    • Will get that detail back to committee
  • Water is biggest economic development issues, thinks policy that aims at conservation is vital
    • Property tax, sales tax, etc that would encourage water conservation or reuse
  • Need to look at opportunity in Aerospace
    • Estes – at competitive disadvantage in that industry 
  • All for getting expedited permitting perfected

Richard Walsh, Valero

  • Largest refiner in Texas and most likely largest permit holder
  • Have complex permits – notes not all permits are alike
  • TCEQ issues more permits than any other governmental agency
  • Wants effective permits but process needs to be fast and expedient for business purposes
  • Thinks expedited permitting has been a great success – have seen a 20% reduction in time of permits since started expediting
  • Would encourage legislature to look at over time incentives and if they are sufficient and look broadly at what other infrastructure available that would further complement the process
  • Not seen TCEQ use contractors or external resources and wanted to remind that is an option under the legislation
  • Feels may be more value than just time savings in streamlining the process
  • Hancock – wanted to quantify expedited, what does 20% reduction mean
    • Instead of 9 months, getting it two months earlier
  • Nichols – Lower Neches Valley River Authority reached a point where they were not giving enough water and something has to give, a lot of what industry is using the water for is cooling. Thinks maybe incentivizing water conservation could be fruitful conversation.
    • Panel will get him details back
    • Rivero – many companies have senior water rights but as they look towards expansion, they have taken it upon themselves to reduce and maximize the water and thinks if there were incentives to increase R&D for new technologies or purchase more equipment to reduce and reuse water  

Stephen Minick, Texas Association of Business

  • TAB is in support of economic development of the programs
  • Permit is a non-starter, essential for business but contested case review is also a part of the process
  • Perhaps one area of improvement –public participation process up front of applications
  • Dedicated general revenue – still sitting on $4 plus billion and many of those dollars go to TCEQ and could be used to help, solve appropriations and budget issue could supplement efforts at TCEQ on expedited permitting

Jason Hiltz, Brownsville Economic Development Council

  • Space industry in Texas overview, SpaceX overview
  • Advancements would not have happened without legislation
  • Texas can be a leader in this industry – need to get some type of funding mechanism for space port fund
  • Incentives are key
  • Type A or Type B funds – is there something that can be done to carve out for space industry
  • Will need whole new set of skill sets in workforce, continue TWC and be flexible to provide training that is needed
  • Estes – number of economic impact?
    • 12 launches a year
    • Does not have number yet, but expecting 15k visitors for a space lunch and SpaceX team will come in 45 days earlier so tourism and visitors the benefit will be immense (also noted jobs)
  • Lucio – what does Texas need to do to win space race for Texas?
    • Commercial space industry is something he sees Texas taking the lead on
    • Continue strong leadership from legislators and be able to pass key legislation as need comes up

Carol Burch, Public Citizen

  • SB 709 will result in less oversight, less due process, and less public participation
  • The balance needs to be restored
  • Provided a myth document to committee and noted the premise behind the bill is not supported by the facts
  • Agrees need with Chemical Council that we need to monitor what happens, does not think dust has settled on this issue
  • Contested case hearing process has been gutted
  • Any more changes to the permitting process at this point would be premature

Cyrus Reed, Sierra Club

  • Policy and purpose of clean air act is to protect the public
  • Reviewed programs that have worked (TERP, adopted new building code, etc)
  • TCEQ Sunset bill did set certain time limits on applications but recent legislation went too far
  • Some groups have asked EPA to withdraw our delegation authority
  • Applicants should be under oath during case hearing, make effected person consistent with other definitions, look at injection well permits and notice provisions including groundwater districts
  • How to improve people’s ability to participate
  • Thinks if legislature look at evident that companies go to other states for more reasons than permitting and not jump to conclusions why plants don’t come to Texas
  • Estes  – could be multiple reasons why plants move to Texas or not but looking if they are putting best foot forward while looking at environmental measures as well

Ricky Clifton, Gulf Coast Water Authority

  • Created prior to Clean Water Act
  • Have had significant impact on waters of the bay
  • Authority has had a relationship with public private partnerships and it has been successful
  • Working with industries to control air emissions and have made significant efforts in reducing air emissions
  • They are a publicly owned treatment works and some industries are not aware of the option they provide 

Dale Craymer, Texas Taxpayers and Research Association

  • Speaking on interim charge 3, Texas Economic Development Programs
  • Texas has strongly outperformed nation as whole which is result of right to work state, economic environment, etc
  • Business tax does not help bring business to Texas
  • Property tax – we tax inventory and personal property
  • Rely on number of incentive programs for Texas to compete (referred to booklet they published)
  • Provided handout which included data on incentives vs not incentives for a project being completed in Texas – if company can take advantage of ALL property tax incentives it just brings us back in line with other states
  • Business make decisions on the taxes they pay – not on the taxes they do not
    • Estes – that makes sense
  • In regards to statement that incentives or programs cost money such as Ch 313 – they bring money to Texas in other ways
  • School district sees reduction in state aid as result in CH 313 and sees even greater reduction off agreement but offset by company on tax rolls
  • School taxes temporarily forgiven but question is what is cost is government going to incur and that should be balanced against how much taxes will project pay – many new projects so capital intensive they are paying far more in taxes that cost for government to incur
  • Recommendations – simplify tax incentive programs, defused group of incentive programs that are located in several state agencies  
  • Estes – Tell us advantages of a one stop shop? Is that where other states are beating us out?
    • Gave example of Louisiana and fill out ONE application in Governor’s office and they can tell business based on application what all they are eligible for
  • Hinojosa – Evaluating cost of incentives discussions, would like more background and detail that includes  projects that fail
    • More than willing to get more details to the committee
    • There are clawback provisions
    • There are two incentives – abatement (temp tax reduction) and grants (write a check for other people’s money) he sees second one as more susceptible for abuse  
  • Seliger – Waivers are faulty because the award on incentive was for creating jobs, clawback provisions are very important

Bill Peacock, Texas Public Policy Foundation

  • Corporate welfare – otherwise known as economic development programs turns profit seekers into rent seekers and takes market focus to government focus as they try to get benefits
  • Went over 4 categories of incentives and says it can’t compete with Texas Model
  • Texas Model – lower taxes and spending, have less regulation and increase private property rights
  • Recommendations – Ch 313 coming up for Sunset in 2019, suggests a committee to look at this and others; make system more transparent; eliminate and reduce some of programs and aim program at margins tax; aim at regulatory regimes; keep conservative budget, etc  
  • Estes – would you do away with every economic incentives
    • Would eliminate margin tax and then find economic development programs to eliminate to pay for eliminating margin tax
  • Seliger – are you saying economic incentives are playing no positive roles in growing Texas
    • Looks good on paper but negatively impacts
    • Not efficient
    • If it takes money to reduce taxes instead of incentives then it is negative
  • Hancock – “I am with you more than against you”, in theory with you but many of the incentives are part of Texas miracle. Does not think they have all worked but cannot promote growth in Texas and then criticize choices getting there – it would help to have a clearer picture of what liked and what was a mistake rather than saying all incentives are a failure
    • Lead with tax cuts and reduce spending and says that is the big difference between us and others
    • Then go back and look at the programs and reduce incrementally like the Enterprise Fund and Ch 313 – Enterprise Fund could go away quickly
    • TERP would be an excellent program to go away quickly, it is not doing anything
      • Hancock – part of our SIP
    • Would set something up over interim to target which ones to impact a
  • Estes – thinking testimony is that witness philosophically doesn’t like any of them
  • Birdwell – almost like states are in silent auction and being leveraged against each other – any reports on how this leveraging is occurring?
    • Put out paper a couple years ago that looked at economic development spending across the United States and what it determined is that states that had lower eco devo spending at state level had higher eco growth
    • States that spend more on economic development generally spent more overall in the budget
  • Estes – dust off that report and send it

Jeff Chapman, Pew Charitable Trust

  • Helps develop better evidence on what works and what doesn’t on economic development incentives
  • HB 26 (84th R) gave foundation to evaluation of incentives
  • When putting together schedule for evaluations – need to look at incentives every 3-5 years and groups them and make sure as new incentives pass they become part of the process
  • Gave more detail on types of evaluations they would recommend in handouts (then provided example results from other evaluations conducted)
  • Estes – asked for more details about the charity , basically a think tank
    • Public charity 501 (c) 3, work on variety of issues
    • Yes

Annie Spilman, NFIB  

  • Invited to testify to give insight on regulatory barriers they face
  • Almost every month survey to small business owners which rank regulations as a high priority
  • Asking before any regulation added to take one off the books
  • What is a minor inconvenience for larger businesses have a larger impact to smaller business – 30% more in compliance cost to deal with regulations
  • Read response from NFIB in Harris County – difficulty in building facility and have had costs added due to additional regulations
  • Request not to add to load of small businesses, before adding a new law would like to see consideration of costs for small business owner, reduce job killing fines, resources for regulatory compliance

 
Greg Neal, Republic Water Company of Texas

  • Results of court cases mean GCD’s may not interfere with transporting their water out of districts but they often interfere with public private water projects (permits to transport water can be cumbersome)
  • GCD’s process can mean long unending permit process, discriminatory decisions, and provide speculative DFCs to put in further barriers
  • GCD’s have skewed regional planning process
  • GCD’s need to be under time limits when reviewing applications
  • GCD’s must adopt uniform aquifer wide rules applicable to groundwater only
  • Legislature should create regional aquifer oversight
  • Nichols – witness is talking about tackling a difficult problem, agrees water belongs to property owner and they should be treated fairly but still may not get vote on it because of urbanization, has this similar issue in his district
  • Estes – reminds Nichols they could never figure out how to take funds out of RDF for transportation and Nichols responds they still don’t take it out of the RDF, – yes we took it before it got in it responded Estes
  • Nichols – Texas is way ahead of many other states on some on water issue, but this is a difficult issue
  • Estes – recommended Nichols to think about it   

John Tintera, Texas Alliance

  • Aprox ¾ of wells are small producers and have small operators running them
  • When small wells are abandon they do not ever come back into production
  • Other opportunities for efficiency in regulatory arena – need strong state regulators
  • RRC is suffering through serious budget issues and it will need some type of help
  • Many in oil and gas do need see ability to fund RRC with permit fees because they are not asking for many permits
  • See EPA as a runaway train – setting regulatory agenda on political cycle, perhaps new methane rule is a good example and it will impact small wells – other ones include navigable waters, hydrofracturing
  • Emissions is very complication – getting calls that TCEQ is going on site but RRC is already out there maybe MOU needs to explain who has role

Richard Hyde, Texas Commission on Environmental Quality

  • Began expedited permitting program in Nov of 2014, it’s about efficiencies  
  • Across board has seen about 30% of time reduced within the agency in permitting process
  • Program seems to be functioning properly
  • If they wanted to expand the program, it’s about resources would be TCEQ response
  • Fairly early to talk about changes to contested case hearing impacting program since have not had one yet but expect one this summer
  • There have been petitions with the EPA as referred to earlier but EPA came out to say publicity that they are not aware of any issues but it is a formal process they must go through and it is a high priority issue for them to resolve

Brandon Harris, Railroad Commission of Texas

  • Talk about some of technology processes that have improved processes, modernization efforts
  • Estes – are you getting ready to run out funding
    • Will get back those details to the committee
  • Stabilizing system and streamlining electronic filing of reports and permits have been some of recent technology improvements
  • Average under 3 days to issue drilling permits
  • Improvements include: Permitting efficiencies for horizontal wells, online application related to permits to operate a pipeline in Texas and expect 50% reduction of paper based filings, etc 
  • Estes – what was amount appropriated last session?
    • It was the session before that and it was $24 million
  • Nichols – not generating revenue like before, Sunset will be a good opportunity to look at that; also in regard to issue of common carrier, an individual company to determine, didn’t legislature do something?
    • Not aware of common carrier application process but will get details back to committee

John Young, State Auditor’s Office

  • Audits can be done statutorily or ones they select like Major Events Trust Fund that was recently conducted
  • HB 26 (84th R) is another mechanism to do an audit of an economic development program
  • If problems are identified they will make recommendations to the agency and may make legislative recommendations
  • Nichols – earlier there was discussion on Ch 313 but 67% waived job requirement – is that fair?
    • SAO Verma Elliot – have not looked at all agreements but a significant number do waive the job requirement and a lot have to do with being wind farms
    • Comptroller report will provide detail on jobs – 67% of applications had a job waived
  • Legislation said they should audit no less than 3
    • They have audited about 10

 
PUBLIC TESTIMONY
Charles Vallhonrat, Texas Craft Brewers’ Guild

  • Biggest regulatory challenge has been dealing with consistency and timeliness of label approval at TABC
  • Estes – how long is getting label supposed to take?
    • 15 business days and it is taking 10 weeks
  • Estes – what is hold up?
    • Manpower issue
    • Everything gets seen and process gets backed up
  • Estes – glad to work with them and figure out how to get it expedited, realize there are manpower shortages
  • Engaged and working with TABC
  • Estes – probably a problem we can solve without legislation
    • Yes, engaged in rule making
  • Nichols – have you run across any antiquated rules on the books, can you make list of statutes and get to him but that may be B&C
    • Yes, addressing with TABC and other stakeholders
    • Yes will get him list
  • Hall – son is in microbrewery business, what is value added at process for labeling at state level, would also like to see the statute list
    • Can’t answer but if properly funded maybe would see it expedited

Carey North, Historic Texas Ranches

  • Working on several issues and appreciates committee
  • Common carrier is big issue

Next meeting will be called in September or October