economy Economic Development

Chapter 380/381 Economic Development Agreements

Municipality Agreements

Chapter 380 of the Local Government Code authorizes municipalities to offer incentives designed to promote economic development such as commercial and retail projects. Specifically, it provides for offering loans and grants of city funds or services at little or no cost to promote state and local economic development and to stimulate business and commercial activity.

In order to provide a grant or loan, a city must establish a program to implement the incentives. Before proceeding, cities must review their city charters or local policies that may restrict a city's ability provide a loan or grant.

County Agreements

Chapter 381 of the Local Government Code allows counties to provide incentives encouraging developers to build in their jurisdictions. A county may administer and develop a program to make loans and grants of public money to promote state or local economic development and to stimulate, encourage and develop business location and commercial activity in the county.

The county also may develop and administer a program for entering into a tax abatement agreement. This tool allows counties to negotiate directly with developers and businesses.

Local Development Agreement Database

In May 2021, the 87th Texas Legislature passed House Bill 2404, which went into effect Sept. 1, 2021, and required the Texas Comptroller of Public Accounts to create and make accessible an online database for local governments to report their economic development agreements authorized by either Chapter 380 or Chapter 381 of the Local Government Code.

All agreements must be submitted to the Chapter 380-381 economic development database using eSystems. The statute also required the Comptroller to make the database available to the public. Local governments are required to post a link to their agreements on the Comptroller’s webpage to their website.

All active agreements, meaning agreements that were in effect as of Jan. 1, 2022, were required to be reported by May 1, 2022. Any agreements entered into, amended or renewed after Jan. 1, 2022, must be reported in the database within 14 days of entering into, amending or renewing the agreement. If your local government does not have any Ch. 380-381 agreements, there is no reporting requirement. Failure to comply with the new law could result in a $1,000 penalty.

Need Help?

For additional information, contact the Data Analysis and Transparency Division via email or at 844-519-5672, ext. 6-9231.