Less tax, more business? Cameron County looks for new edge in creating jobs

HARLINGEN — Cameron County officials are discussing ending the freeport tax on businesses.

Their problem? How to replace the $1.6 million in annual freeport tax revenue if they grant an exemption.

The freeport tax option was given to counties, cities and school districts by Texas voters who in 1989 passed a constitutional amendment incorporating it into law.

Most counties, cities and school districts, wary of the negative effect an additional tax on businesses might have on economic development, decided to forego additional tax revenues and grant freeport tax exemptions instead.

Cameron County wasn’t one of them.

The impetus for Cameron County’s discussion of whether to grant an exemption on freeport taxes appears to be related to a new study by University of Texas Rio Grande Valley’s Data and Information Systems Center.

UTRGV’s Sai Mullapudi and Michael Uhrbrock conducted the study, which used computer models to process different job loss or gain scenarios and their economic impact on the county.

The work, made public in April, concluded Cameron County has been placed at a competitive disadvantage with counties such as Willacy County because Cameron imposes freeport taxes on businesses and Willacy does not.

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Texas taxes: A primer

Property in Texas is taxed on two bases, the value of real property and buildings and the value of personal property. Personal property is aimed at businesses.

On the business side, taxes must be paid not just on the building and the land the building sits on, but anything that helps produce income. That includes furniture, fixtures, equipment and inventory.

In 1989, Texas voters approved a constitutional amendment to allow local jurisdictions the option of taxing so-called freeport goods. Generally speaking, these consist of inventory, raw materials, goods in process or warehoused goods in transit. At the time most cities, counties and school districts granted an exemption to businesses in their areas and went without the additional tax revenues.

Oil, gas, petroleum products and aircraft or repair parts used by a certificated air carrier are exempt from all freeport taxes.

Like most taxing entities in the county, Harlingen, Brownsville and San Benito granted freeport exemptions.

Cameron County, Laguna Vista, Port Isabel, South Padre Island, Los Fresnos, Rio Hondo, Santa Rosa ISD, South Texas ISD and Southmost Union Junior College did not grant freeport exemptions.

Top taxpayers in Cameron County

 (real and personal property, 2015)

1. AEP Texas Central Co., $165 million

2. Panasonic Automotive Electronics, $111 million

3. VHS Harlingen Hospital Co. LLC (Valley Baptist), $75 million

4. Los Vientos Windpower LLC, $53 million

5. Union Pacific Railroad Co., $47 million

6. Wal-Mart Stores Inc., $43 million

7. GLH LP c/o Marshall Hosel (Cardone Industries), $42 million

8. CBL SM Brownsville LLC (Sunrise Mall), 41 million

9. Trico Products Corp., $35 million

10. Stripes LLC, $33 million