HARLINGEN — Contrary to what you might assume from the political class, Harlingen leaders are celebrating the elimination of a tax.
The Cameron County Commissioner’s Court this week voted to grant a “freeport tax” exemption on warehoused inventory, a decision long sought by elected officials, economic development officers and businesses in the county.
“I really applaud the County Commissioners Court for taking the action they took on Tuesday,” said Mayor Chris Boswell. “I think we will look back on this week and see it as a real watershed moment for Cameron County, because it levels the playing field between Cameron and Hidalgo counties for manufacturing and warehouse development.”
The freeport tax is paid by about 110 companies with inventory in Cameron County, and generates approximately $1.6 million a year in taxes for the county. County commissioners will have to find a way to replace a good portion of those funds in their budget when the freeport exemption goes into effect in 2018.
“The court decided it was time to do away with it and work towards finding a way to make up the revenues that come from that tax over the next two years,” County Administrator David Garcia told the Brownsville Herald.
Boswell said Harlingen is working on “a couple of ideas” to help the county weather the loss of the freeport tax revenue.
“We plan to try to help offset some of that, to help with some of that for a period of time until the adjustment is made,” Boswell said.
– Mayor Chris Boswell
“I think we will look back on this week and see it as a real watershed moment for Cameron County, because it levels the playing field between Cameron and Hidalgo counties for manufacturing and warehouse development.”
But the mere fact the freeport tax is going to be eliminated already is setting economic development wheels turning, since attracting new industry often requires a years-long effort.
“I couldn’t be happier that the County Commissioner’s Court took the lead on this,” said Raudel Garza, chief executive of the Harlingen Economic Development Corp.
Garza said county commissioners have been supportive of municipal efforts to bring new business and industry into the county. But due to political uncertainty surrounding the county judge position following then-Judge Carlos Casco’s appointment as Texas Secretary of State last year, granting the freeport tax exemption wasn’t a top priority.
“Judge (Eddie) Trevino said before he took office that economic development is going to be a cornerstone of his administration, and he’s proving it,” Garza added.
Harlingen officials, as well as their counterparts in Brownsville, San Benito, Los Indios and other cities in the county, have long been frustrated by the freeport tax, which they regard as an unnecessary burden to overcome when trying to attract new business and industry.
Many of them point to Hidalgo County’s remarkable success in growing its warehouse sector over the past 20 years. Hidalgo County has what is known as a triple freeport exemption, which means none of the three taxing entities which could impose a tax on warehoused inventory — the county, cities or schools — implemented the tax.
Cameron County now will be able to market itself as a triple freeport exemption location as well.
Both Boswell and Garza say the decision by the County Commissioner’s Court to grant a freeport tax exemption doesn’t just make Cameron County level when it comes to attracting new business — it puts Cameron ahead.
Hidalgo County’s property tax rate is $0.59 per $100 of assessed valuation, while Cameron County’s rate is $0.4077 per $100 valuation.
“If you have a $10 million building with $100 million worth of inventory in there that you can’t exempt, then the tax on your $10 million building is insignificant compared to the tax on $100 million worth of inventory,” Boswell said.
“But when you have both — a lower property tax on the building and a freeport exemption — it puts us in a real competitive position and one that’s better than Hidalgo County, which has a significantly higher county tax rate,” he added.
Boswell said granting the freeport exemption is likely to increase the amount of inventory held in existing warehouses, as well as spur construction of new warehouses. Both of those would necessitate the hiring of additional workers.
“Huge” is what Garza calls it.
“With Cameron County’s lower tax rate, we’re better off than they are,” Garza said of Hidalgo County. “The cost of doing business in Cameron County is less, and people are going to notice that.”
When a community can claim a triple freeport exemption (which means a county, city and schools have declined the freeport tax on warehouse inventory), that city gains a competitive edge in attracting new business and industry. Hidalgo County has benefited greatly by being a triple freeport exemption venue since the 1990s. Now Cameron County will have it, too.
