Experts say potential Austin Samsung plant could be biggest in state history — why some are concerned

Austin

AUSTIN (KXAN) — A massive investment may soon be coming to Austin: Samsung Austin Semiconductor is considering building a multi-billion dollar chipmaking plant at its campus in north Austin.

Documents with the Texas comptroller show the company filed an application for Chapter 313 property tax breaks from the Manor Independent School District in January. Those documents recently became public.

In its application, Samsung indicates the manufacturing plant would be a $17 billion project.

“Which, you know, would be mammoth for any state, but, you know, biggest one for this area and biggest one in Texas,” said Nathan Jensen, government professor at the University of Texas at Austin.

“Nothing else comes close,” said Dale Craymer, president of the Texas Taxpayers and Research Association.

According to the application filed with the comptroller, the company said it will create at least 1,800 new jobs, but Jensen points out in another part of the same application Samsung said it’s only committed to bringing a total of 45 jobs.

“1,800 is what people have cited, but they are not obligated to create anywhere near that in this program,” Jensen said.

Craymer said it’s common for companies to use small numbers in their Chapter 313 applications, but he said they usually deliver more.

“The commitment is what is legally required but above that, projects typically bring an awful lot more,” he said.

This map from Samsung Austin Semiconductor’s Chapter 313 application shows where the company’s campus is located. The company already owns the land on which it is proposing to build its new plant.

In its application, Samsung asks Manor ISD for a tax break for the next 10 years. Craymer said it’ll add up to a $285 million discount.

“But what is often not said is the fact that even after that discount, they’re going to be paying over half a billion dollars in property taxes over the life of the project,” he said.

Jensen said Manor ISD’s tax break could end up saving the firm even more.

“In the front part of their application they outline the invested and taxable value of their plant. This value would be around $285 in incentives. But later in the application their own consultants value this incentive at $900 million,” Jensen explained. “That is because they are using the actual amount of dollars invested, and I think the first part of the application uses a different value. I know this gets into the weeds, but the honest point is that according to their own application, this is somewhere between $280 million and $900 million in incentives just from Chapter 313.”

Samsung’s Chapter 313 application also indicates they plan to seek tax breaks from the City of Austin for the first five years of the project and from Travis County for 20 years. Those would total more than $800 million in abatements for the company.

Craymer said even with tax breaks, the deal would be a net gain for the area, since it will be bringing in revenue that isn’t coming in now from the company’s vacant land. And, he adds, those revenues will only increase when the tax deals end.

“Once an abatement expires, then it’s fully taxed. And quite honestly, you have a huge dollar investment in the ground, and that’s a permanent part of our community, a permanent part of our tax base, current permanent part of our employer base,” Craymer said.

Craymer also said there would be ripple effects to the local economy, like workers who dine at local restaurants or Samsung buying construction supplies from local companies.

That’s something reflected in Samsung’s application, citing the construction project would bring in more than $4 million in revenue for local businesses.

This chart from Samsung’s Chapter 313 filing shows its estimated economic impact during construction of the plant.

Jensen said the cost-benefit equation may not be so simple.

“When you give a lot of tax abatements that means local property taxes have to go up to compensate for it or taxes and other business or services by cities and states have to decline,” he said.

He said even though Samsung is a good employer, perhaps the incentives could be better used elsewhere.

“Move away from what we call ‘buffalo hunting,’ to go after these big, massive companies that seem to be coming anyways to Austin and maybe we should pivot to small business or the arts,” Jensen said.

Samsung indicates it’s also eyeing Arizona, New York and South Korea for this project, and tax incentives will be a major deciding factor.

Manor ISD is expected to approve the tax breaks in June. Travis County said it hasn’t received an application yet from ‘Project Silicon Silver,’ which is what Samsung is calling this project, according to the Chapter 313 application.

The City of Austin told KXAN they “do not comment on economic development prospects.”

Other recent projects in Austin

While the Austin metro has been known for tech and innovation for a while, big-name tech companies are investing more in manufacturing here.

Apple is set to open its second headquarters next year in northwest Austin. It was announced two years ago.

At the same time, Apple announced the Mac Pro computer will be assembled in Austin.

Last year, Tesla announced Del Valle would be home to its new plant. The brand new Cybertruck is the feature of the Gigafactory, and it is set to open later this year.

Craymer said Samsung’s project would be 15 times greater than the size of Tesla’s project. He said Tesla expects to create about 5,000 new jobs whereas Samsung said it’s expecting about 1,800.

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