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San Marcos City CouncilPosted February 7, 2007, 3:30 p.m.
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SAN MARCOS – The city council in San Marcos took another step towards instituting the Freeport exemption Tuesday night in a dramatic meeting that filled the chambers with concerned citizens, impassioned speeches and conjecture about the city's economic future.
The council paved the way to accepting the exemption on a second reading with a 4-3 vote against tabling the proposal so city staff could research alternatives.
The Freeport exemption forgives property taxes on goods that have been detained in the state for 175 days or less for the purpose of assembly, storage, manufacturing, processing, or fabricating. The exemption reportedly would cost the city at least $200,000 in annual ad valorem taxes from existing companies.
Officials in favor of the exemption say it would incentivize businesses to locate in San Marcos, thereby producing economic benefits well in excess of the lost tax revenue. Those in opposition believe the tax break is a corporate gift, which, by state law, can never be revoked by a taxing entity once it is granted.
San Marcos and Kyle are the only cities on the IH-35 corridor from Austin to San Antonio that don't exempt Freeport property from taxation. The exemptions cost New Braunfels $16.2 million in taxable property value for 2005, while costing Buda $2.7 million, according to figures from the Texas Comptroller's office. For those in favor of granting the exemption, it's a matter of making the city competitive for businesses considering relocation.
Following extensive public comment on the matter, Councilmember John Thomaides motioned to table the second reading until April so the city staff can research alternatives. In Gregg County, to give one example, incoming manufacturers have agreed to take grants from taxing entities in the amounts of their Freeport taxes, relieving jurisdictions of irrevocable legislation while giving new businesses benefits equivalent to the tax break. That way, existing businesses still pay their full property tax.
However, a round of comments by councilmembers clearly indicated that the motion to table would barely fail.
Councilmember Gaylord Bose said he didn't like the idea of saddling future councils with legislation that couldn't be reversed. Bose voted to table, as did Councilmember Betsy Robertson.
Councilmember Chris Jones said the city needs to incentivize businesses to locate in San Marcos so citizens can earn industrial wages, buy homes and root themselves in the community. Giving himself as an example, Jones said he tried finding work in San Marcos when he graduated from Texas State last year, only to end up taking a job in Austin that requires him to leave home at 5:30 a.m.
Mayor Susan Narvaiz spoke last on the subject, after Councilmembers Daniel Guerrero and Pam Couch also voiced their support for the exemption. Narvaiz argued that the city has made various moves through the years to keep property taxes down by as much as 25 cents for every $100 through the years, adding, "We all got a tax abatement. We're all being subsidized."
Furthermore, Narvaiz said, the city needs to stimulate industrial employment for its citizens. The median income in San Marcos is about $22,000.
"If we don't start doing something to address our future, we're all going to fall further behind," Narvaiz said. "...Our average salary is the lowest on the corridor. I'm not proud of that."
Even if the city passes the exemption, the full force would be in effect only if Hays County and the school districts follow suit, in which case the city could promote the so-called "Triple Freeport."
But such exemptions reportedly would cost Hays County and the San Marcos CISD both about $200,000 in annual tax revenue, while the Hays CISD would lose around $600,000 just on San Marcos businesses within its boundaries. None of those entities are considering the exemption.
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