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� ARTHUR � ANDERSEN June 16,1997 Mr. Robert T. Herrera City Manager City of La Porte Post Office Box 1115 La Porte, Texas 77572-1115 Dear Mr. Herrera: C:.Grv� Arthur Andersen LLP Suite 1300 711 Louisiana Street Houston TX 77002-2786 713 237 2323 As we work with Aristech Chemical Corporation in continuing to examine alternative sites for the proposed polypropylene expansion, we ask for your assistance. If this expansion were to take place in La Porte, current estimates of the economic impact include the following: $150 million capital investment approximately 60 new jobs, including contract employees over 400 temporary construction jobs The Industrial District benefit offered by the City of La Porte, including the 30% rate applying to new construction, is an important consideration in Aristech's decision on site selection. However, the anticipated completion of the project in late 1999 would only allow Aristech to benefit from the 30% rate applicable to the increased investment for one year before the current Industrial District Agreement expires. Upon renewal of the Agreement, it is our understanding that the new construction would then be taxed at the higher rate of 53% (assuming that the 53% rate is the level which would apply to existing plant in the renewed Agreement). We understand that the current Agreement will be renegotiated with industry representatives as a group and not with individual companies. Jeff Litchfield has indicated the City's willingness to consider changes in the structure of the Industrial District Agreement at that time, including a change that may allow for new construction to be taxed at the 30% rate for a fixed period of time, regardless of the point in the contract term when the new construction begins to qualify for the 30% rate. The City's consideration of this change during contract renegotiations is very important to Aristech. We ask for your assistance by providing us a letter which addresses the following points: • The intent of the City of La Porte to work with Aristech to help secure the tax incentives necessary for the financial viability of the proposed expansion. • The intent of the City to renew the existing Industrial District Agreements, including Aristech's, by at least one more seven-year period, with terms that are essentially equal to, or more favorable to industry than the current Agreement. Also, please indicate the City's