City of La Porte Comprehensive Annual Financial Report 1997

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I I I I I I I I I I I I I I I I I This report also contains the activities of its component unit, the La Porte Area Water Authority. A component unit is a legally separate entity for which the City (the primary government) is financially accountable. The Water Authority is a blended component unit and although legally separate from the City, it is in substance part of the City's primary operations, providing surface water for the primary benefit of the City's water and wastewater activities. Accordingly, the Authority is reported as an enterprise fund of the City. ECONOMIC CONDITION AND OUTLOOK The City is located in the southeast quadrant of Harris County and is bounded on the north by the Houston ship channel, on the east by Galveston Bay, and the south by the Bayport channel. The City is flanked on the north and south sides by the nation's largest concentration of petrochemical plants. In 1958 the City created an Industrial Zone adjacent to the City which presently encompasses approximately 5,500 acres of land between the City and the Houston ship channel. In 1970, another zone was created which presently encompasses approximately 2,500 acres. The City's Industrial Zones are protected from annexation by other municipalities in that they are encompassed by annexed land, which completely encircles the zones. The City enters into formal contracts with the industries in the zones whereby a certain portion of each plant's value is annexed by the City. The remaining plant's value constitutes the protected Industrial District area on which the industries make payments to the City each year in lieu of taxes. These annual in lieu payments are in an amount which, when added to the full City taxes on the annexed portion, equal 53% of what the City's taxes on the industry would be if 100% of the industry were annexed by the City. The contracts also contain a new construction incentive clause that allows new construction in the industrial area to be assessed in lieu of taxes at a 30% rate, instead of the 53% rate. These in lieu of tax payments are reported as industrial payments in the financial section of this report, Under the City Charter and State Statutes, the City has the authority to annex additional areas. The worldwide decline in oil prices benefited the petrochemical industry, which uses petroleum and petroleum byproducts as raw materials in their operation. Since January 1, 1993, these plants have added physical improvements in excess of 317 million dollars. An eight (8) lane suspension bridge, completed in September of 1995, replaced a two lane tunnel that linked the City of La Porte with the City of Baytown. The bridge is a component of the Greater Houston Outer Belt project and has had a positive impact on the area, and has sparked developer interest in the area. To compliment growth, the City has taken steps to prepare for the future as evidenced by the expansion of its water and wastewater facilities to allow for future growth. - . 3 -