Best planning and implementation toolbox

380/381 Economic Development Agreements

Purpose of Tool:
Chapter 380 and 381 Economic Development Agreements are similar tools used to encourage economic development throughout the State of Texas. Named for their places in the Texas Government Code, these agreements enable cities and counties to provide incentives encouraging developers to build in their jurisdictions. Chapter 380 is targeted specifically for use by cities and Chapter 381 is specifically for use by county governments. These agreements can be used in tandem for the same project.

These development incentives typically take the form of property tax abatements, loans or grants, commitments for infrastructure, or payments of portions of the sales tax generated by the project. Negotiations on these incentives between the local jurisdiction and the developer occur on a case by case basis. The provision of development incentives is not unique to Texas and many other states also provide various incentives for economic development.

Benefits of Using Tool:
Communities benefit from 380 and 381 Agreements through:

  • Promotion of economic development activity;
  • Job creation;
  • Increased tax revenues;
  • Increased opportunity for input into new developments;
  • Expediting construction of city/county projects;
  • Creation of new businesses;
  • Infrastructure commitments; and
  • Streamlining implementation.

    Steps Involved to Use Tool:
    The process for using Chapter 380 / 381 Agreements includes:
  • The city or county predetermines what types of projects it wants to encourage through the use of the Agreements.
  • Businesses that wish to request incentives submit an application to the city or county.
  • The city or county reviews the application.
  • Negotiations between the developer and the city or county take place to determine what incentives are best-suited for the project and that best meet the goals of both the developer and the local government.
  • When an agreement on the development is reached between the local jurisdiction and the developer, the application is approved.

    Special Requirements to Use Tool:
    The framework for utilizing both Chapter 380 and 381 Agreements is in place through the Texas Local Government Code. There are no additional requirements.

    Specials Resources Needed to Use Tool:
    It is beneficial for local governments to have a qualified staff member or to establish a committee for application review and negotiation for these agreements. The staff member is typically part of an economic development department and committees generally include members focused on economic development within the community. In addition to staff and committee review, conducting a simple economic impact analysis is also beneficial in communicating the short-term and long-term benefits of the project and can help local governments determine the appropriate level of investment to offer for any given project. Economic impact analyses provide estimates of job creation for specific types of businesses. Job creation is presented in direct jobs, indirect and induced. Economic impact analyses can also provide estimates additional tax revenue generated by the above-referenced jobs.

    Communities / Agencies that Have Used Tool:
    Chapter 380 and 381 Agreements have been used successfully by the following governments in the State of Texas:

  • City of Bee Cave: Through the use of a 380 Agreement, The City of Bee Cave, located west of Austin, developed the Hill Country Galleria, a town center retail and residential project. It is expected to generate about $4 million per year in sales tax and 2,500 jobs. The developer agreed to transportation improvements, land donations for open space, and the inclusion of trails. For more information contact:

    Lauren Doss - Deputy City Secretary
    512-767-6613 4000 Galleria Parkway
    Bee Cave, Texas, 78738
    ldoss@beecavetexas.com

    Bastrop County: A 381 Agreement was the impetus for the development of the 60-acre Burleson Crossing project located in Bastrop County and in the city Bastrop, Texas, near Austin. Burleson Crossing was completed in late 2008, and with 500,000 square feet of retail space, it employs 490 workers and is expected to generate an additional $120 million in annual sales for the local economy.
    For more information, contact:

    Stacy Snell - Planning and Development Director
    512-321-0457300 Water Street
    Bastrop, Texas, 78602
    ssnell@cityofbastrop.com

    Metrics to Use to Monitor Tool Effectiveness:
    A study by The University of North Carolina at Chapel Hill states that in quantifying the success of incentives for economic development, the most effective measures are quality job creation, the benefits created for distressed areas, and the level of economic competitiveness brought to the state or region. Job creation is deemed “quality” if the jobs are created not only in the initial stages of the development, but are long-term and sustainable. Distressed areas can benefit primarily through increased employment opportunities. A state can see its competitiveness increase particularly through the diversification of the businesses brought through incentives and the value that they bring to the community.

    List of Resources to Obtain Additional Info:
    For more information, please see:
  • Texas Local Government Code Chapters 380 and 381: http://law.justia.com/texas/codes/lg/012.00.000380.00.html  and http://law.justia.com/texas/codes/lg/012.00.000381.00.html
  • Procedures for Friendswood, Texas 380 Agreements: http://www.ci.friendswood.tx.us/agendas/cc070618%20Regular/CMO%2006-18-07%20Regular/CHAPTER%20380%20GRANT/Chapter%20380%20ED%20Program%20Guidelines.pdf
  • Press Release: Groundbreaking of Bee Cave City Hall, with details on the 380 Agreement used for the development
  • “Economic Development and Infrastructure Financing Tools for Counties,” McDonald & Sechrist LLP.
  • “UNC Economic Incentives Analysis,” Joint Select Committee on Economic Development Incentives, January 13, 2009. http://www.ncleg.net/documentsites/committees/JSCEDI/1-13-2009%20Meeting/C3E%20presentation.pdf