Local Tax Abatements for Private Equity Backed Projects

The City of San Angelo officially renewed its tax abatement program at its last meeting.  Tom Green County has been active in that arena as well.  There are three recipients of such abatements, Apex Clean Energy, Peregrine Energy and Doral LLC.  All are owned by private equity underwriters (PEU).

Chamber Vice President Michael Looney informed the San Angelo Development Corporation Board that more private equity projects are interested in coming to the area.  He cited four data centers, the Skybox/Emergent effort in the city and three more in the county, with Beacon being the one identified to date.  

Skybox has been backed by Blue Owl Capital, which has had a difficult run of late as investors have fled its private credit offerings.  

Private equity affiliates pursue projects with the intent of increasing the future sale price of that company.  Their financial structure often is heavily debt funded which can cause a heavy interest burden in times of rising interest rates (as the rate tends to be variable) and difficult economic conditions (potentially with less revenue/higher costs).  

It is not unusual for a PEU affiliate to simply hand over the keys to the organization to lenders.  That is a consideration, as the timing for actual benefit to San Angelo citizens may coincide with the entity's stressed sale or closure. 

Promises of greater local taxes three to five years down the road may or may not materialize.  The State of Texas already ensured sales taxes on the billions ($) in expensive servers will not be paid.  Think about that the next time you have to replace your computer, phone or laptop.  

Politicians Red & Blue love PEU and increasingly, more are one.  The national trend has become local.  It's a sad day to see.