AUSTIN, Texas (KBTX) – The Texas Comptroller’s Office has issued formal recommendations to approve all eight tax incentive applications tied to the proposed TeraFab semiconductor manufacturing facility near Gibbons Creek Reservoir in Grimes County, clearing a major hurdle for what could be the largest industrial investment in Texas history.
The recommendations, signed by Deputy Comptroller Lisa Craven and dated June 15, cover applications filed by TeraFab AI, LLC — a special-purpose entity linked to SpaceX — with both Iola ISD and Anderson-Shiro CISD.
But the Comptroller’s approval is not the end of the road.
The Comptroller reviewed each application under the state’s Jobs, Energy, Technology, and Innovation (JETI) program and found all eight passed every required legal test:
The recommendation does not mean the deal is done. It’s a prerequisite, one of three approvals required before any agreement takes effect. Board members in both school districts and the Governor still have to say yes.
Both Iola and Anderson-Shiro CISD received four applications for TeraFab, each with four phases. Each phase covers a separate piece of land with its own 10-year tax incentive period.
Anderson-Shiro total: ~$73.5 billion in proposed investment
Iola ISD total: ~$45.7 billion in proposed investment
The combined proposed investments could be as high as $119 billion, among the highest manufacturing investments in U.S. history. But it’s important to note that phases 2, 3, and 4 aren’t guaranteed.
SpaceX’s own filings state that after completing each phase, the company will “determine whether to proceed with constructing the future phases.” The $119 billion figure — and the full job and tax projections — only materialize if all four phases are built in both districts.
School property taxes are split into two buckets: maintenance and operations (M&O) and interest and sinking (I&S).
M&O covers day-to-day costs like teacher salaries and utility bills. I&S covers repayments on voter-approved bonds used for things like new buildings and school buses.
Under the JETI program, SpaceX would only pay M&O taxes on half of TeraFab’s appraised value for 10 years per phase — a significant discount on what would otherwise be one of the largest property tax bills in Texas history.
The school district doesn’t simply absorb that loss: Texas’s school finance system is designed so the state sends additional funding to districts when their local tax base is reduced by incentive deals like this. In theory, the district gets made whole.
But critics of JETI deals note that state backfill flows through a complex formula and isn’t a guaranteed dollar-for-dollar replacement.
On the I&S portion, SpaceX would pay at full value — meaning the district gains real new bond capacity it didn’t have before.
SpaceX’s own filings say the M&O limitation reduces its effective school tax burden by about 48%, and that without it, the project’s internal rate of return would fall below its minimum investment threshold.
“Competing jurisdictions, such as Arizona, would present a more favorable after-tax return, in which case the project would likely be relocated outside Texas,” according to the TeraFab AI, LLC application filing
The Comptroller’s recommendation triggers what Anderson-Shiro CISD has described as the “orange zone” — the second of three stages that encompass the JETI process.
The orange zone is a 30-day window where the governor and districts review the comptroller’s recommendation, hold a public hearing, and take board action. The public hearings require a 15-day notice posted on the district’s website. After action is taken, the governor issues a decision, and the parties are notified within seven days.
For the project to move forward, the governor and the district must agree. One “no” can kill the deal.
If both agree, all three parties — the applicant, the school district, and the Governor — sign the final agreement.
Anderson-Shiro plans a single meeting on July 13 for the public hearing and a vote on whether to enter the agreement.
Iola hearings are tentatively scheduled for July 6 and July 7, with a vote expected around July 13 or July 14.
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