In Waco, tax abatements are not just for industries anymore.
For years, Waco and other local governments have used tax deals to lure new factories, warehouses and call centers. The premise was that tax abatements are an investment: Forego some tax revenue for a few years in exchange for increasing tax base in the long term.
But this week, Waco City Council opened the door, if only a little, for giving tax abatements to a spectrum of businesses, including restaurants, shops, grocery stores and hotels.
The revised tax abatement policy allows limited abatements for nonindustrial businesses in certain inner-city areas.
Councilman Malcolm Duncan Jr. said he hopes the tax abatements will spur commercial development in the “Greater Downtown” area between Cameron Park and Baylor.
He said he pushed to expand the tax abatement policy beyond its traditional industrial role.
“We’ve found (the tax abatements) we’ve granted in the past have been great investments for the city,” Duncan said. “I want small and existing businesses to have an opportunity to apply.”
The “target area” includes areas such as LaSalle Avenue in South Waco, Clifton Street in East Waco and Colcord Avenue in North Waco.
Also included are the Franklin and Mary avenue areas west of downtown, plus the North 17th-18th Street corridor and 25th-26th Street corridor.
Large areas around the new Baylor Research and Innovation Collaborative research park on South Loop Drive and around Floyd Casey Stadium also are in the target area.
The target area excludes downtown and most of the Elm Avenue corridor, where businesses already can get incentives through the Tax Increment Finance Zone.
At minimum, qualifying businesses must create two full-time jobs and invest $100,000 in capital improvements. Such a business could get its city property taxes reduced 40 percent for two years.
At the upper end, a business could get a five-year, 90 percent city tax abatement if it did any of the following: built or added 100,000 square feet of space, hired 200 people full-time, or added $10 million to the tax base.
Types of business
Melett Harrison, a city economic development official who worked on the policy, acknowledged that the abatements could be used for almost any kind of business, even a gas station or an apartment complex. But she said the council would have the final say on whether to grant the abatement, based on the project’s potential economic impact.
“There are places where a convenience store can be a really big help for a neighborhood,” she said.
Harrison said the tax abatements wouldn’t reduce the city’s tax base, but will merely delay the addition of some new property to the tax base.
“We’re not losing tax revenue,” she said.
Greater Waco Chamber of Commerce urban development director Chris McGowan said the abatement policy is a positive step in revitalizing the inner city.
The city’s Imagine Waco Plan, which the chamber has championed, calls for repopulating greater downtown with much denser residential and commercial development.
McGowan said he would like to see additional business incentives in targeted neighborhoods. Those could include sales tax rebate grants, for example.
One recently opened business in the target area is Honey’s Home+Style, a decor shop at 1706 Austin Ave.
Owner Honey Rader moved there from the RiverSquare Center in 2007 and has seen her sales tax receipts increase 80 percent since then. She and her husband, Jeff Rader, also plan to renovate the old Marlow Furniture Store a block away.
But after reviewing the new policy Friday, Rader said it appears she wouldn’t have qualified for the abatements because she wouldn’t have met the capital investment requirements and creation of full-time jobs.
And she noted that the cost of the application for the abatement is $500, which could wipe out the advantage of the tax abatement. Overall, she said the policy is too complicated for many small-business owners to easily grasp.
Still, she said she is glad to see the city giving incentives to nonindustrial businesses.
“I am thrilled to see the city actually attempt to do something for small business,” she said. “It would have been nice for them to come talk to small businesses before they passed it.”
Impact of incentives
Councilman Wilbert Austin said he thinks the incentives will have an impact on target areas, including parts of East Waco.
“Right now our tax roll is really down in East Waco because we don’t have that many businesses,” he said.
The new tax abatement policy also adjusts abatement criteria for larger industries outside the targeted area. It gives an additional 10 percent abatement bonus to companies that hire at least 50 people, with at least two-thirds of those employees living in the city of Waco.