1998-09-28 Regular Meeting and Public Hearing

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"EQUE~T FOR CITY COUNCIL AGENIITEM AGENDA DATE Seotember 28. 1998 REQUESTED BY Jeff Litchfield. Finance Director/ACM _ REPORT; _ RESOLUTION; .lQL ORDINANCE; , Attachments The City of La Porte has been approached by PPG regarding the creation of a reinvestment zone on land near the comer of Fairmont Parkway and Sixteenth Street, utilizing a portion of PPG's existing plant site. The creation of the zone is necessary for them to enter into a tax abatement agreement with Harris County. The City has created zones such as this in the past. In conjunction with their request for the reinvestment zone, PPG also asked the City to consider providing tax abatement to their project. City staff reviewed this request very closely because we normally do not provide abatement for projects within our City limits. Because of the magnitude of the project, we believe abatement might be warranted and have proceeded in that direction. The project as proposed by PPG, is for a pharmaceutical unit. to be built in three stages, which, when completed, is estimated to add $55 million in taxable value to the tax roll. The project will also add 57 permanent full time jobs. After reviewing several alternatives, and taking into consideration the City and County have to work together in providing abatement in a reinvestment zone, we have arrived at a concept where the City would provide abatement of 50% of the value of the project for a specific seven year period. In addition, to assist the County in their abatement, we have further limited the abatement amount to $750,000 per job created. Since this concept is intended to apply to major improvements, we have also added a floor of $21 million. So in other words, we are proposing the City offer PPG a tax abatement on their project, for a seven year period (from January 2000 to December 2006) for the value of the additions to their property, as long as the additions exceed $21,000,000, and are further limited to a maximum of $42,750,000. A projection of the amount of the improvements, the total City taxes and the amount of those taxes abated is shown in an attachment labeled "Potential Abatement Ramifications for PPG Project". There have been questions as to how this abatement compares to the abatement we offer industry located in our Industrial Districts. The agreement we are offering PPG is 0% abatement on their current facility. 0% abatement on Construction in Progress and 50% abatement on new construction. The abatement we offer industry in our Industrial District is 47% on the current facility, 100% abatement on Construction in Progress and 70% on new construction. A look at the impact of these different types of abatement is found in an attachment labeled "Comparison of Abatement Types". Staff is recommending the City COl,Jncil approve the offer of a reinvestment zone to PPG and that the City participate with certain constraints, including no abatement for the first year, 50% abatement for the next seven years, and a minimum and maximum eligible value of $21 million and $42,750,000. If Council is in agreement with this approach, the first step they need to take is to approve this ordinance establishing guidelines and criteria governing tax abatement agreements. ACTION REQUIRED BY COUNCIL: Approve ordinance establishing Guidelines and Criteria Governing Tax Abatement Agreements. FUND N/A ACCT NUM: FUNDS AVAILABLE: COUNCIL AGENDA "Il. ERA, CITY MANAGER 't1Z,f/q B DATE