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Public Sense

Category: Growth & Development

  • What Is a 380 Agreement and How Might It Benefit Taxpayers?

    THE SHORT ANSWER

    A 380 agreement is a deal a Texas city makes to support economic development. Its name comes from Chapter 380 of the Texas Local Government Code, which allows cities to provide grants, loans, or city services to encourage business activity. Local rules can limit how that authority is used.

    Some agreements return part of the city’s tax revenue to a business if it meets agreed conditions. The intended public benefit might be new jobs, private investment, or additional tax revenue. Whether taxpayers benefit depends on what the city gives, what it receives, and whether the business delivers.

    WHY SHOULD I CARE?

    Because public money is part of the deal.

    Money paid to a business, or returned through a tax rebate, is money the city cannot use elsewhere. A worthwhile agreement should explain why that trade serves the community.

    A project could bring jobs closer to home or produce revenue that helps pay for city services. But a business opening its doors does not automatically mean your property tax bill will fall.

    The question is: After accounting for the public costs, are residents better off?

    MAKE IT MAKE SENSE

    Think of a 380 agreement as an investment the city makes on the public’s behalf.

    Here is a simplified example, not an actual Pflugerville agreement:

    A new business generates $100,000 in annual city tax revenue. The city agrees to return $40,000 to the business if it meets its commitments. The city keeps $60,000.

    That sounds like a gain. But the calculation is unfinished.

    What will the city spend on roads or other services for the project? Does the incentive help bring genuinely new business, or move spending from existing local businesses? Would the company have opened here without public help?

    Those questions help distinguish new revenue from a real public return.

    Before supporting a deal, taxpayers should be able to understand:

    • The full public cost. How much support will the business receive, from all public sources, and for how long?
    • The promised benefit. What investment or jobs must it deliver? What wages will those jobs pay?
    • The protections. Are payments tied to verified results? Can payments stop, or money be recovered, if commitments are missed?
    • The follow-through. Who checks performance, and where can residents see the results?

    Cities can include repayment provisions, often called “clawbacks,” to recover incentives when specified conditions are not met. Residents should check the actual agreement for those protections.

    Supporting economic development can be a responsible use of public resources. The agreement should make the public benefit clear enough to measure.

    THE RECEIPTS

    City of Rowlett: Economic Development — Explains performance monitoring and possible clawback provisions.`

    Texas Local Government Code, Chapter 380 — The law authorizing city economic development programs.

    Texas Comptroller: Chapter 380 and 381 Programs — Plain-language explanation and reporting requirements.

    Search the Local Development Agreement Database — Look up agreements by city or business name.

  • WHAT IS THE PURPOSE OF IMPACT FEES, AND HOW DID PFLUGERVILLE’S GET SO HIGH?

    THE SHORT ANSWER

    An impact fee is a one-time charge on new development. Its purpose is to make growth pay a proportionate share of the additional roads, water facilities and wastewater systems needed to serve it.

    Pflugerville’s fees became high because the City identified expensive infrastructure projects, estimated how much future development would use them, and divided the eligible costs among the new service units expected to arrive. Construction and financing costs also increased.

    In 2023, the City Council adopted the maximum calculated water and wastewater fees. Depending on location, those utility fees could total nearly $30,000 for one standard service unit before roadway and other development costs were added.

    WHY SHOULD I CARE?

    Impact fees affect more than developers.

    Builders generally include development costs in the price of a home, apartment, store or office. High fees can therefore contribute to higher home prices, rents and commercial costs. They may also cause a project to be reduced, delayed or built in another community.

    But lowering an impact fee does not make the infrastructure cost disappear. If growth pays less, utility customers, taxpayers or another public funding source may have to pay more.

    The real question is not simply whether impact fees should be high or low. It is whether the fee fairly balances growth, affordability and protection for existing residents.

    MAKE IT MAKE SENSE

    Pflugerville does not have one impact fee. It has separate charges for water, wastewater and roadways.

    Texas law requires impact fees to be based on projected growth, a capital-improvements plan and the portion of eligible infrastructure costs attributable to new development. Existing taxpayers must receive appropriate credits, and developers may receive credits for qualifying infrastructure they construct or finance.

    The calculation produces a maximum allowable fee. The City Council may collect that amount or adopt a lower rate.

    In 2020, Pflugerville’s combined water and wastewater fees for one standard service unit were approximately:

    • $9,796 in Service Area 1
    • $16,082 in Service Area 2

    In 2023, the adopted maximums became:

    • Water: $14,713
    • Wastewater Area 1: $1,316
    • Wastewater Area 2: $15,136

    That produced combined utility fees of:

    • $16,029 in Wastewater Area 1
    • $29,849 in Wastewater Area 2

    Roadway impact fees are additional. They are calculated according to the development’s location and the traffic demand associated with its proposed use.

    Why did the utility amounts rise so sharply?

    Pflugerville is expanding major parts of its water and wastewater systems while the city is still growing. The plans include treatment capacity, transmission and collection lines, engineering, land and financing. When the projected cost rises, or fewer new service units are expected to divide that cost, the calculated fee per unit increases.

    A 2026 recalculation illustrates how much the assumptions matter. The published proposal would reduce the water fee from $14,713 to $7,198, while increasing the two wastewater fees to $1,800 and $16,565. That does not necessarily mean the earlier calculation was improper. It means impact fees are estimates that can change when projects, costs, growth forecasts and system demands change.

    Pflugerville’s fees are high even by Texas standards. Municipal studies prepared for San Marcos, Schertz and Horseshoe Bay placed Pflugerville’s $29,849 combined fee above every other utility in their comparison groups. Those studies do not rank every utility in Texas, but they provide strong evidence that Pflugerville’s fee was among the state’s highest.

    High impact fees protect existing residents from carrying the entire cost of growth. But if the fees discourage development or make housing unaffordable, the City may receive fewer new residents, businesses and taxpayers to share its long-term costs.

    That is the balance Council must examine whenever the fees are updated.

    THE RECEIPTS

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