Annual update: Round Rock’s thriving economic development program powers local jobs, low property taxes
The well-being of our community is fundamentally linked to the health of our local economy. That’s why the City of Round Rock has a long history of striking economic development agreements aimed at attracting quality jobs and generating consistent revenue to power the City’s core services while maintaining an affordable property tax rate.
At a Jan. 23 presentation to the Round Rock City Council, Round Rock’s Chief Financial Officer Susan Morgan provided an annual update on the City’s economic development program.
The City of Round Rock’s economic development strategy, according to Morgan, is designed to foster sustainable growth through a series of performance-based agreements that substantially contribute to the local economy in terms of job creation and tax revenue.
First, a little history. In the period leading up to the 1990s, Round Rock faced the prospect of becoming a bedroom community, which would have meant dependence on neighboring Austin for employment and economic activity. Recognizing the disadvantages such as increased traffic, limited amenities and potentially higher tax rates due to a lack of commercial development, City leaders envisioned a different future for Round Rock. Their goal was to create a self-sustaining city that could offer not just small-town comforts but also economic opportunities within its own boundaries.
This vision for economic self-sufficiency took a significant leap forward with the recruitment of Dell Technologies in 1993. Dell’s relocation marked the beginning of a new era for Round Rock, attracting a wave of residential and commercial growth as the City adapted to accommodate and support thousands of Dell employees. The direct economic impact of Dell has been clear over the years—it is the City’s largest sales tax generator, funding critical public services such as public safety, transportation, parks and libraries.
Subsequent economic development wins would follow over the next three decades. The City has attracted major projects and companies through economic development agreements, including Round Rock Premium Outlets, IKEA, Emerson Process Management, Bass Pro Shops and Kalahari Resorts and Conventions.
The program today consists of 26 approved economic development agreements, with 11 new approvals in the past three years, according to Morgan. The City secures a return on investment by incentivizing businesses to either increase the taxable value of their properties or create high-quality jobs in targeted sectors. The agreements vary among property tax incentives, sales tax incentives, hotel occupancy tax incentives and direct economic incentive payments.
All agreements have a mechanism for performance requirements, such as capital investment and new employee hiring above certain salary thresholds, along with other project-specific benchmarks. The City performs compliance monitoring on an annual basis to ensure the agreed terms are met.
The agreements have been instrumental in bringing jobs to Round Rock. While the City’s agreements required the businesses to create a combined total of 3,108 jobs, the actual number of jobs created reached 6,881, excluding Dell, which employs 12,000. Excluding Dell, the employment from these agreements accounts for nearly 10% of Round Rock’s total workforce of 78,000 jobs.
Economic development is also one reason the City of Round Rock can claim one of the lowest property tax rates in Central Texas and among similar cities across the state. The property tax values generated from these agreements, totaling $1.3 billion without Dell, generates considerable property tax revenues to help support core services such as public safety and parks. When Dell’s contributions are included, that value increases to $1.921 billion — that’s almost 20% of the City’s total commercial property value. More commercial value on the tax rolls means less tax burden on single-family homeowners, whose property taxes covered only $31.9 million, or 20%, of the City’s total General Fund revenues in Fiscal Year 2023-2024 — the rest was covered by other revenues, including commercial development.
Since its agreement with Dell, the City has received $147 million in total property and sales taxes from other economic development agreements, provided $40 million in incentives, and realized a net benefit of $107 million, equating to a 264% return on investment. With Dell included, the net tax benefit stands at $550 million.
If you’re wondering why Dell is being excluded from several of these figures, that’s because City Council’s fiscal strategy in recent years has been to avoid an over-reliance on Dell’s sales tax contributions, capping them at 20 percent of the budgeted general fund sales tax revenues. Any surplus is allocated to the general self-finance construction fund, earmarked for one-time capital projects that serve the broader community.
The City of Round Rock places a strong emphasis on transparency with all of its economic development agreements accessible to the public. Check out the City’s Public Information Request page at roundrocktexas.gov/openrecords and follow the link for “Economic Development” to learn more.
Round Rock’s economic development efforts play a vital role in the local economy by growing local enterprises, expanding and diversifying the existing economic base, broadening the tax base, and attracting and retaining sustainable, well-paying jobs. It’s no wonder Round Rock continues to be recognized for strong management and fiscal planning.
Source: City of Round Rock