As speculation surrounds the Dallas Stars eyeing a move to the site of a Plano shopping mall, there are few details available on the NHL team’s potential new $1 billion arena — or the incentives cities may offer to attract the team in a competitive market.

From grants to tax breaks, there are several tools Texas cities can use for economic development. Some go to the ballot, but other incentives can go through without a vote as cities vie for the prestige, potential economic boost and tax revenue that comes with hosting a major sports team and its stadium.

After discussions with Frisco, The Colony, Arlington and Fort Worth, the Dallas Stars are considering relocating from the American Airlines Center in Dallas to The Shops at Willow Bend, two people with knowledge of the team’s efforts told The Dallas Morning News this fall, potentially following the lead of many major U.S. sports teams’ exodus to the suburbs.

Nola Agha, professor at the University of San Francisco, researches the economic impact of teams and stadiums. While a team’s move might not generate much new economic activity at the regional level, a move within North Texas can make things competitive, she said.

“When you live in a suburb, and you care about your own tax base … you see this competition between municipalities for shifting that activity,” Agha said.

City officials will not comment on the Stars or a potential arena, but Plano has historically used incentives to attract companies like Toyota, Capital One and JPMorgan Chase to anchor regional headquarters in the city.

Ted Benavides, former Dallas city manager and a professor of social sciences at the University of Texas at Dallas, said Plano is well-positioned to pursue a deal with the Stars, as cities like Arlington and Frisco have done with major North Texas teams.

“They have money,” Benavides said. “They’re very active on the economic development front, so there’s a lot of things they could do.”

Grants and loans

Texas law allows cities to use money to promote economic development. In addition to tax breaks, a city can award companies grants and loans to incentivize them to stay in, move to or invest in a city.

In 2006, the Plano City Council approved a property tax increase of two cents per $100 property valuation for an economic development incentive fund. The city caps annual contributions to the fund at $8.5 million, city documents show, and uses the money to offer loans and grants that promote economic development.

Benavides said Plano was likely motivated to compete with cities like McKinney, Frisco and Allen that use the sales tax they are not contributing to public transportation to fund economic development corporations.

Plano contributes a one-cent sales tax to Dallas Area Rapid Transit — $116 million in the 2023 fiscal year, according to DART documents. The city plans to hold an election to withdraw from the agency next May and, if voters choose to exit, eventually regain that penny of revenue.

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Cities can award grants for a number of reasons, including to promote redevelopment and revitalization of retail centers or cover a company’s fees to the city.

“It has to make financial sense for us,” said Doug McDonald, Plano’s economic development director and the city’s next deputy city manager.

McDonald would not comment on specific economic development projects not yet brought to the City Council, but gave insight into how Plano’s incentives generally work.

Economic development agreements involving grants typically last 6-10 years, he said, and factor in the tax revenue a project might generate and what service costs it might create.

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Redevelopment tools

Agha has found municipalities compete for sports teams to shift economic activity from one area to another, with cities traditionally using sales tax to finance sports development projects.

For example, in 2004, Arlington voters approved a half-cent sales tax increase and other increases to hotel and rental car taxes to help pay for the city’s $325 million contribution to AT&T Stadium, where the Dallas Cowboys play. The Cowboys paid the remaining cost of the $1.2 billion venue, according to the city.

“That’s fallen out of favor … because people don’t like to be taxed,” Agha said. “It usually has to go up to a vote, and it very commonly gets voted down. Because of that, the most popular financing technique, especially for smaller cities, is tax increment financing.”

This tool captures the growth in a property’s tax revenue created by new development within a defined area. When businesses and property owners invest in improvements in the area and those improvements increase tax revenue, that increase can be used to reimburse project costs or fund additional improvements that spur continued growth in the area.

Frisco and its school district have used this economic development tool to fund several projects, such as Toyota Stadium, PGA golf courses, the Ford Center and more.

“It’s popular because it’s relatively hidden, meaning the taxpayers don’t have to know that a city is using property tax and giving it back to a developer,” Agha said. “They don’t have to vote on it, and it can incentivize a developer to build something.”

But when economic development projects happen without voter approval, there may be fewer opportunities for residents to weigh in.

Plano currently has four such reinvestment zones, which are historically in “blighted or underdeveloped areas,” according to the city’s website. The existing zones are in East Plano, at Silver Line stations, at Collin Creek Mall and in Plano’s Legacy district.

“The intent of these districts is to help encourage areas that are in need of redevelopment and reinvestment,” McDonald said.

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Bond funding on the ballot

Cities can also ask voters to approve issuing bonds to fund projects and borrow money.

“Every once in a while, there are different things that come up in the community that are important enough that the bond committee of citizens puts something on the ballot,” McDonald said.

Some cities have funded large sports projects with bond funding. In 2016, Arlington voters approved $500 million in bonds to partially fund Globe Life Field.

Tax breaks

Another economic development tool is a break from certain taxes. Cities can offer companies tax abatements, reducing taxes for businesses on improvements to property. These can apply to things like commercial construction or facility expansions.

Tax abatements are an option if a company is adding significant value to a site, McDonald said.

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“We don’t typically use tax rebates or abatements when the building is already there unless there’s going to be a significant or complete demolition and rebuild,” McDonald said.

Agha said for large projects, tax breaks are a drop in the bucket.

“Arenas and stadiums are running close to a billion dollars,” Agha said. “Property tax abatement is probably a very small piece of what the total cost would be.”

What’s at stake

Economic development projects are meant to add value to the community in the form of high-paying jobs, sales tax, property tax and more. Their incentives often have expiration dates.

“Our hope is that the company stays here and continues to invest in the community,” McDonald said.

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Suburbs with more land flexibility can add development around the stadium to “sweeten the pot,” Benavides said, and add different streams of income. For example, the Texas Live! entertainment and hotel complex in Arlington near its ballpark received tax and grant incentives.

But new developments can disrupt traffic and the regular patterns of economic activity. They are not always popular. McDonald said city officials listen to concerns and will try to mitigate them.

“There’s potential for gain,” Agha said, if economic activity shifts from Dallas to Plano.

“The important caveat to that is, will the city enter into some sort of financial agreement where they essentially give back all that new economic activity to the team?” Agha asked. “The devil can be in the details.”

Email tips on all things Collin County to lilly.kersh@dallasnews.com.