Samsung supplier seeking $11 million in tax breaks for possible Taylor plant

statesman.com

Linde Inc., a subsidiary of a top industrial gas supplier, is seeking an estimated $11 million in tax breaks to build a plant in Taylor that would serve one of its customers — the $17 billion Samsung semiconductor factory under construction in the small town northeast of Austin.

Connecticut-based Linde has applied for the tax breaks from the Taylor Independent School District under the state's Chapter 313 incentives program, according to documents posted to the state comptroller's website. Linde, formerly known as Praxair, is the U.S. subsidiary of Linde PLC, which is based in the United Kingdom.

If it goes through with the project in Taylor, Linde would "build, install and operate the necessary industrial gases to support the proposed Samsung facility," it said in its Chapter 313 application. It also would locate its industrial gas plant on Samsung's Taylor property.

More:Samsung's Austin-area expansion would need millions of gallons of water. Where would that come from?

According to the application, Linde would invest $271 million on the project. Once complete, however, the company is seeking a waiver to allow it to create only 10 permanent jobs — compared with the minimum requirement of 25 for Chapter 313 agreements involving nonrural school districts — because "the jobs creation requirement exceeds the industry standard for the number of employees reasonably necessary for the operation of the facility."

The company also said it might build the facility outside of Texas if the tax breaks aren't granted. Linde didn't say precisely how it would supply the Samsung plant if that happens — except to note that its "pipeline complex allows it to have options for our investments" — and company representatives didn't return messages from the American-Statesman seeking comment.

The state comptroller's office still must sign off on Linde's Chapter 313 application before it goes back to the Taylor school board for final consideration.

Without the tax break, "the impact of comparatively high Texas property taxes on the cost of the project does not allow the project to compete for global customers against similar projects operated by competitors of Linde Inc. in the U.S. and around the world," the company said in its application.

The company said it "would have to strongly consider making this investment at another site outside of Texas" if the Chapter 313 agreement isn't approved.

More:Incentive package to lure Samsung to Taylor is biggest in Texas history

'The classic problem'

Nathan Jensen, a University of Texas government professor who studies publicly funded corporate incentives, called the Linde application a good example of what he and other critics of Chapter 313 consider a major weakness of the program, which has been controversial and is set to expire at the end of the year.

One of the goals of the 21-year-old program was to help Texas win economic development competitions against other states, but Jensen said it often rewards companies for projects they were going to build here anyway. The Chapter 313 program is named for the section of the tax code in which it appears.

“This is the classic problem with (Chapter) 313 — all a company has to say is that they could locate elsewhere, even though we know in many cases they can’t," Jensen said. “Every company can basically write a paragraph (in its application) and say they could go elsewhere.”

As for Linde, “It seems very implausible that they would locate elsewhere without (Chapter) 313" since the aim of the project is to supply the Samsung plant in Taylor, Jensen said. "But given the rules of the program, all you have to do is say you are a global company and (the application) can pass" the requirements.

According to a Statesman analysis of Linde's application, the company could receive $11.1 million in tax breaks from the Taylor school district from 2028 through 2037 if the agreement is approved. The analysis assumes no change in the district's tax rate over the 10-year life of the deal, however, meaning the amount of the tax breaks could rise if the property tax rate goes up.

Samsung's $17 billion factory under construction in Taylor is set to receive more than $1.2 billion in publicly funded incentives, counting tax breaks from the school district, the city of Taylor and Williamson County, as well as various infrastructure improvements and a state grant. Samsung's Chapter 313 agreement with the school district accounts for an estimated $314 million of that sum.

More:‘Golden age’ or 'kind of scary'? Taylor residents grapple with idea of huge Samsung expansion

Bigger expansion possible

Meanwhile, South Korea-based Samsung recently floated the potential for an even bigger investment in the region — a massive $192 billion initiative over the next two decades to build 11 more semiconductor fabrication plants here, two of which would be in Austin and nine of which would be in Taylor.

If Samsung went through with all of those projects, the plants would become operational on a staggered basis from 2034 to 2042, according to Chapter 313 applications it has filed for tax breaks from the Manor and Taylor school districts. While the company's possible investment would be huge, so would its tax breaks from the school districts — totaling $4.8 billion over the life of the agreements if all 11 plants are completed as described in the applications, a Statesman analysis indicates.

Still, Samsung has said it is merely considering those projects as part of its long-range strategizing for how and where to grow worldwide.

“We currently do not have specific plans to build at this time, however, the Chapter 313 applications to the state of Texas are part of a long-term planning process of Samsung to evaluate the viability of potentially building additional fabrication plants in the United States," Samsung spokesperson Michele Glaze said last month.

Even though the Chapter 313 program is set to expire at the end of this year, incentive deals reached before then will be allowed to proceed. That has prompted a flood of applications from companies trying to get in under the wire, many with projects such as those outlined by Samsung that are tentative and might not take place until 10 or 20 years in the future.

The state comptroller's office had received 404 applications for Chapter 313 incentive deals through last week, according to the agency, almost three times the previous full-year high of about 150.