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After debate, Woodlands board keeps corporate tax abatement policy

January 21, 2019 GMT

The Woodlands Township board voted to keep its current corporate tax abatement policy last week in a 6-1 vote, but only after director John McMullan argued to end the policy and also questioned the reasoning and financial impact of corporate relocation abatements.

McMullan had asked to have an item placed on the meeting agenda to discuss corporate abatements, something he said doesn’t seem to make sense financially for the township. In a prior meeting, McMullan had asked township staff to make an analysis of rental rates for office space in the township compared to the tax abatements being offered.

The fact sheet McMullan had asked for was not made public, although it was included in the township director’s packets, which McMullan questioned. He also said he thinks office rental rates are higher in The Woodlands than other areas of Houston.

“Part of the goal was to have this document made public and published with the rest of the agenda, rather than just the seven of us having it,” McMullan said. “Tax breaks for big business or for wealthy people..those get passed all the time, that doesn’t make them right. There are ways we can replicate the exact same economics without tax abatements. The largest cost is for leasing office space, not the property tax rate of The Woodlands, the largest thing by far is the office rental rate.”

McMullan said if office rental rates are the real issue, he wanted to know why is the township giving abatements and also why is incorporation — which he claims would raise the tax rate — being explored.

“When we are competing with other municipalities to attract businesses, if there is concern that the tax rate in The Woodlands township is too high to attract businesses, then we need to address the elephant in the room, and that incorporation,” McMullan said. “If our tax rate is too high, the last thing we need to do is incorporate and raise the taxes further. I do not believe for a minute the tax rate in The Woodlands Township is too high to attract businesses. I believe the rental rates here are higher than other areas.”

Monique Sharp, the township’s assistant general manager for finance and administration, prepared a report for the township directors about the rental rates and abatements. The savings, she explained, were less than one cent per square foot based on her analysis.

“Think about that, it is an astonishing figure,” McMullan said. “What these numbers show is that the resulting per square foot reduction from this one abatement would only increase the rent by one cent. What is the broader framework for this?”

Most of the other board members disagreed with McMullan’s comments, saying that the township has not given that many corporate tax abatements and also that the decision was done on a case-by-case basis, which means the board can reject to offer an abatement if they don’t see value in giving it to a corporation.

Township board chairman Gordy Bunch said in reality, not many tax abatements have been OK’d and of the current seven-member board, only himself and McMullan had ever even voted on approving an abatement — stating that neither Brian Boniface, Bruce Rieser, Ann Snyder, John Anthony Brown or Carol Stromatt had ever participated in voting on granting a specific abatement.

“There is not a plethora of tax abatement requests that have come before this board,” Bunch said. “I understand where you’re coming from, but it is not a zero-sum game. We have to evaluate every request that comes to us and see if it is good for the community.”

Stromatt voiced her opposition to McMullan’s argument, stating that she sees tax abatements as one of many tools that the board can use to entice businesses to the community.

“I’d rather preserve (abatements) for future negotiations. What I do not want to do is just throw it out. I would like to have it for future negotiations that bring value,” Stromatt said.

Snyder also disagreed with McMullan’s position and said offering tax abatements works well for The Woodlands.

“I strongly think we should offer abatements and reserve that right if the situation dictates it,” Snyder said. “Just because we have them, doesn’t mean the board has to decide (to grant them).”

After the robust discussion, the board voted 6-1 to retain the same tax abatement policy as the township has had in previous years.