By Sherry Koonce
The Port Arthur News
December 02, 2008 07:11 pm
—
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.
In addition to the hurricane-related expenditures, Port Arthur’s tax base is lower than other city’s with comparable populations because of the city’s make-up: an elderly population with homestead exemptions, and a significant number of people receiving some type of government subsidy.
“These negotiations started last summer because we knew we would be very strapped to maintain areas we need to maintain because of financial issues,” he said.
Mike Eaves, Valero’s outside council, said the company hopes to avoid the annexation issue, and will look at the proposed financial agreement once it is formerly presented with details of hiring practices added.
“Based on what we’ve seen today, we are hopeful and cautiously optimistic that an agreement can be reached before the current agreement expires on Dec. 31,” Eaves said.
Valero is one of 11 companies with industrial or in lieu of tax payment agreements expiring Dec. 31. They are, Atofina, BASF/Fina, Chevron Phillips, Chevron USA, Clark, Premcor, Valero, Equilon, Great Lakes Carbon, Oxbow Calcinaing, LLC., Huntsman, Flint Hills, Flint Hills Resources, and Praxair.
Fitzgibbons said city officials are in negotiations with those companies for one-year agreements. Both parties have until Dec. 31 to reach an agreement before the current agreements expire.
skoonce@panews.com
Copyright © 1999-2008 cnhi, inc.