08-26-13 Regular Meeting of La Porte City Council

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REQUEST FOR THE CITY COUNCILAGENDA ITEM Budget Agenda Date Requested:26 August2013 Source of Funds: Requested By:Scott D. Livingston Account Number: Department: Administration/Economic Development Amount Budgeted: Report: Resolution:Ordinance: Amount Requested: Exhibits:Draft Resolution Budgeted Item:YESNO Exhibits: Exhibits SUMMARY & RECOMMENDATION Equistar Chemicals, LP (Equistar), a subsidiary of Lyondell Chemical Company, is requesting that the City Council nominate the company as a triple jumbo Texas Enterprise Project (EP) for the company’s investment and activity related to its plant in La Porte. Equistar plans to expand its La Porte plant located at 1515 Miller Cut-Off by de-bottlenecking the ethane cracker. Three new cracking furnaces will be added to supply the de-bottlenecked facility with increased volumes of cracked gas. The project objective is to produce 850 million lbs/year of incremental ethylene from ethane. The Texas Enterprise Zone (EZ) program is a state incentive program that offers a state sales/use tax refund to companies that retain and/or create jobs and make capital investment at a qualified business site(no City taxes are forfeited by the City). Applicants must be nominated by the local jurisdiction, make application to the Governor’s Office for EZ Project (EP) designation and make annual refund applications to the Texas Comptroller. Council has previouslyestablished an EZ ordinance (#2010-3248), as well as nominated companies such as INEOS as an EP. Having established the EZ ordinance, Council is now allowed to nominate subsequent EPs simply by passing a resolution (see attached). If nominated by the City and approved by the state as a triple jumbo EP, and in exchange for making capital investment of at least $250 million and retaining and/or creating jobs, Equistar is state eligible forsales/use tax refunds of $7,500 per retained job. Equistar will make application to the Texas Comptroller each year to receive this annual refundfor five (5) years. Companies approved as EPs must also annually certify to the Texas Comptroller thenumber of jobs it has retained and/or created. The company has estimated it will spend up to $350 million for the project, retain approximately 374 current jobs, and add approximately 32 new jobs. The project rd is anticipated to start in the 3quarter of 2013 and should be completed by the third or fourth quarter of 2014. The capital investment will result in a significant increase in olefin production capacity at the plant and will help ensure long-term success for the company by helping it take advantage of the increased demand for various ethane derivatives in the marketplace such as ethylene and olefins.