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Home My WebLink About93-IDA-0793-IDA-07 BATTLEGROUND WATER SUPPLY (DID NOT FINALIZE INTO AN IDA) '�_ - X L U /- M TEXAg July 24, 1997 Mr. Jeffery S. Moore Arthur Anderson LLP 711 Louisiana Street, Suite 1300 Houston, TX 77002-2786 Dear Mr. Moore: 1] City of La Porte Established 1892 In response to your inquiry regarding the proposed polypropylene expansion at the Aristech Chemical Corporation plant located in the Battleground Industrial District, I offer the following. The City welcomes the expansion and believes you will find it a good fit with the existing multitude of corporations that have chosen La Porte as one of their principal sites. Because of its geographic location, our area has always been a leader in the chemical industry. We believe the tax abatement agreements, delivered through the Industrial District Agreement concept, have been a contributing factor to this growth. The City of La Porte created its first Industrial Zone in 1958 and, since that time, has continuously offered Industrial District Agreements. In response to your specific questions, The City currently has a tax abatement agreement with Aristech and will support Aristech in its attempt to secure any tax incentives available from other taxing entities. The end of the current contract period (December 31, 2000) will mark 42 consecutive years that abatement has been offered in the Industrial Zone. At this time, the City has no plans to terminate this arrangement and fully expects to enter into a new series of agreements. Regarding the terms of the agreement, we do not foresee any drastic change being made to future contracts. Further, while we do not understand your concern regarding the "annexed "value versus the "non -annexed" value, we will state that we do not anticipate a change in the current methodology. P.O. 13t)x 1115 • La Po rte. Texas 7757Z-11 l5 0 (713) 471-5020 Mr. Moore July 24, 1997 Page 2 of 3 The underlying concept of the contract is simply to calculate the total payment to the City at 53% of the current City tax rate for existing improvements and at 30% of the current tax rate for improvements completed during the contract period. The distinction between annexed and non -annexed only effects the distribution of the payment in the City's financial records. A calculation of the estimated in -lieu -of -tax payments for a $150 million investment to be complete in late 1999, based on current contract terms and the assumption that a similar contract will be entered into in future years, is shown below: Taxes Abatement In Lieu Year At Full Value Percent Amount Amount 2000 $ 1,065,000 70 $ 745,500 $ 319,500 2001 1,065,000 47 500,550 564,450 2002 1,065,000 47 500,550 564,450 2003 1,065,000 47 500,550 564,450 2004 1,065,000 47 500,550 564,450 2005 1,065,000 47 500,550 564,450 2006 1,065,000 47 500,550 564,450 2007 1,065,000 47 500,550 564,450 2008 1,065,000 47 500,550 564,450 Total 9,585,000 4,749,900 4,835,100 You will notice that there is no payment for 1999. Per our contract, construction in progress is not assessed an in -lieu -of -tax payment. The total value of abatement over the period is $4,749,900 and the average payment is $537,233, which is equivalent to a 35.8% tax rate. In providing an answer to our willingness to consider changes to the Industrial District Agreement during the next renewal, I feel compelled to provide a brief description of the renewal process. Traditionally, the City has gathered Industry representatives together approximately eighteen months prior to the end of the current contract. From this group, the City asks that a committee be formed in which to negotiate the renewal. We ask that this group include industry from both Industrial Zones and include companies of all sizes, in other words, we want representation from a cross section of the companies. The only guideline we offer is that any changes to the contract not impact the net amount of payments to the City. Mr. Moore July 24, 1997 Page 3 of 3 A final point for you to consider is our stability. During the last contract renewal period, the rate of payment to the City for existing improvements was increased from 50% to 53%. Since the current City Tax Rate of 71 cents is the same as it was in 1986, this represents a total increase of six percent over the previous ten- year contract period. Long range planning provides us the ability to match our inflows and outflows to achieve a stable financial base. In closing, we gladly welcome the expansion at the Aristech plant and trust our taxing arrangement, which is effectively equivalent to a tax rate of 37.63 cents per 100 dollar valuation (.71 cents times 53%), is competitive with other entities. Sincerely, QT- 4zA-� Robert T. Herrera City Manager c Jeff Litchfield � 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 � ARTHUR � ANDERSEN Mr. Robert T. Herrera Page 2 June 16, 1997 intent not to increase the current "annexed value' during the next contract period, even if the proposed expansion takes place, thereby significantly increasing the "non -annexed value." • A calculation by the City of the estimated payment -in -lieu -of -tax for the period 1999-2008, given the project assumptions outlined above, so Aristech may confirm their estimated payment liability for the Industrial District. . • The willingness of the City to consider changes in the Industrial District Agreement renewal relating to the treatment of new construction as discussed above. Currently, there is a wide disparity in the estimated property tax liability between La Porte and the competing site in Neal, West Virginia. Any commitment by the City on these issues would enable us to include these incentives as part of our financial analysis in support of the La Porte site. We appreciate your support of Aristech and any assistance you can give to help make this expansion a reality in La Porte. If you have any questions, please call me at 713/237-2180. Very truly yours, ARTHUR ANDERSEN LLP By J4 Jeffrey S. Moore Copy to: Jim Lavorini, Aristech Chemical Corp. Helen Lemmon, Arthur Andersen LLP 21 80\ clients\ sristeeh\citymgr � ARTHUR 0 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:Gro\ P sc- 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'io 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 Y 4f + ARTHUR � ANDERSEN Mr. Robert T. Herrera Page 2 June 16, 1997 intent not to increase the current "annexed value' during the next contract period, even if the proposed expansion takes place, thereby significantly increasing the "non -annexed value." • A calculation by the City of the estimated payment -in -lieu -of -tax for the period 1999-2008, given the project assumptions outlined above, so Aristech may confirm their estimated payment liability for the Industrial District. . • The willingness of the City to consider changes in the Industrial District Agreement renewal relating to the treatment of new construction as discussed above. Currently, there is a wide disparity in the estimated property tax liability between La Porte and the competing site in Neal, West Virginia. Any commitment by the City on these issues would enable us to include these incentives as part of our financial analysis in support of the La Porte site. We appreciate your support of Aristech and any assistance you can give to help make this expansion a reality in La Porte. If you have any questions, please call me at 713/237-2180. Very truly yours, ARTHUR ANDERSEN LLP By Jeffrey S. Moore Copy to: Jim Lavorini, Aristech Chemical Corp. Helen Lemmon, Arthur Andersen LLP 2180\clients\ aristech\citprngr