By Sherry Koonce

The News staff writer

The city of Port Arthur and officials from Port Arthur’s Valero plant are close to reaching an in lieu of tax agreement that shows promise of being beneficial to both parties.

The five-year financial agreement will likely keep the city from moving forward with annexation proceedings while providing job opportunities for Port Arthur residents, said Mayor Bobbie Prince.

“The proposed agreement is in the city’s best interest, and there will be provisions there to ensure Port Arthur people and Port Arthur subcontractors get jobs,” Prince said.

Following a three hour executive session Tuesday, the City Council came back with a five-year financial proposal. The proposal features four agreements, one with the company’s refinery, and the remaining three with Valero’s Houp, Tier II and Hydrotreater expansion projects.

Port Arthur City Manager Steve Fitzgibbons said representatives from the city and Valero began negotiations during the summer months.

Terms of the proposed financial agreement would require Valero to pay in lieu of property taxes, 65 percent of the company’s appraised taxable value times the city’s effective tax rate of 57 cents per $100 valuation.

Valero would also be required to pay $6 million upfront, and to pay 65 percent of the taxable value times the tax rate for the company’s Tier II and Hydrotreater expansion projects when abatement agreements expire in 2010 and 2011.

The company would be credited on $6 million up front at 6 percent interest; and be guaranteed no more than a plus or minus 10 percent change in payments per year based on value.

Language will also be included in the agreement requiring Valero to make every effort to hire Port Arthur residents, and to do business with Port Arthur subcontractors.

The upfront payment, Fitzgibbons said, would provide city coffers with an infusion of cash at a time when Hurricane Ike-related expenses are straining an already bare-bones budget.

“We’ve probably already spent $6 million or so on Ike, and are still waiting on the remaining couple of million reimbursement from Hurricane Rita,” Fitzgibbons said.

The city has asked for $4 million in federal funds to reimburse recovery expenditures, but was notified to expect a $1.8 million advance, Fitzgibbons said.