Remember our news that Elon Musk’s new Terafab semiconductor plant was going to be located in Grimes County, Texas? Well, two school districts just approved the tax abatements for the project.
Iola Independent School District (ISD) and Anderson-Shiro Consolidated Independent School District (CISD) both voted to pass a partial tax abatement deal for SpaceX’s “Terafab” project in Grimes County.
Each phase of the four-phase Jobs, Energy, Technology, and Innovation (JETI) application was approved by a vote of 5 to 2 in both Iola ISD and Anderson-Shiro CISD on Tuesday.
SpaceX is a space exploration company founded by tech magnate Elon Musk, who serves as its CEO and chairman. The company is collaborating with computer company Intel and electric vehicle company Tesla, of which Musk is also the CEO, on the Terafab project.
My previous assumption is that Musk will pay Intel to build and run the fab, while SpaceX, Tesla and xAI purchase its entire output at set prices.
Terafab is a proposed semiconductor megafacility that intends to produce chips for AI computing both on earth and in space. SpaceX calls the project “the most epic chip-building effort ever,” and aims to produce up to one terawatt — one million megawatts — of AI compute capacity annually. The project is projected to cover 100 million square feet of the Brazos Valley, with a projected investment of $119 billion.
The project will supposedly create thousands of temporary and permanent jobs in the area.
Grimes County, an agricultural county within the Brazos Valley, has a population of about 30,000. The proposed Terafab project’s reinvestment zone — the area of land proposed by SpaceX to qualify for tax abatement — would cover areas under the jurisdiction of Iola ISD and Anderson-Shiro CISD.
Last month, the Grimes County Commissioners Court agreed to a 35-year tax abatement over the proposed build, which will provide the county with $20 million per year for its 35-year duration. The abatement will be accomplished through a payment in lieu of taxes or “PILOT” program.
A multi-phased project, SpaceX’s phase one investment in Iola ISD would amount to over $6 billion, and for Anderson-Shiro ISD, phase one would bring in over $10 billion to the district.
While I’m philosophically opposed to special tax breaks for large corporations, this is a far cry from some of the old “we pay nothing forever for the privilege of placing our factory in your Podunk town” deals of the past. When you’re talking billions, that’s a considerable amount of cheddar for a rural school district. And a cutting-edge semiconductor fab is the sort of thing that’s going to be generating jobs and taxes for a long, long time, and nobody is ever going to close the fab and move those jobs to China.
Through Texas’ JETI program — created by the 88th Legislature in 2023 — Terafab is able to apply for a tax abatement deal with school districts; the company, relevant school districts, and the governor’s office enter into a 10-year agreement. If the company meets investment and job creation requirements, the agreement serves to limit the taxable value of the project for school district maintenance and operations taxes.
“The point of the JETI is the tax revenue, bringing in the investment to the local community,” stated Alec Pointer, president of Iola ISD’s school board, during a public hearing last week.
Pointer added that SpaceX will pay 92 percent of the bond debt in Iola ISD.
While there are some additional regulatory clearances, I have to assume at this point that the fab is all but a done deal.
