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HomeMy WebLinkAbout2006-05-08 Regular Meeting Public Hearing and Workshop Meeting REQUEST FOR CITY COUNCIL AGENDA ITEM Agenda Date Requested: Mal'> 22. 2006 Requested By: Mayor Alton orter Appropriation Source of Funds: Department: City Council Account Number: Report: Resolution: Ordinance:X Amount Budgeted: Exhibits: Ordinance Amount Requested: Exhibits: Budgeted Item: YES NO Exhibits: SUMMARY & RECOMMENDATION City Council to approve an ordinance declaring results of the Special Election City of La Porte Election held on May 13,2006 Action Required bv Council: Approve ordinance 2006-2886 anager ,5-);6"/0 t: Date' I ORDINANCE NO. 2006-~3~~ AN ORDINANCE DECLARING THE RESULTS OF A SPECIAL ELECTION HELD IN THE CITY OF LA PORTE ON MAY 13, 2006, TO PERMIT VOTING FOR OR AGAINST THE PROPOSITION: nTHE ADOPTION OF A LOCAL SALES AND USE TAX IN THE CITY OF LA PORTE AT THE RATE OF ONE - FOURTH OF ONE PERCENT TO PROVIDE REVENUE FOR MAINTENANCE AND REPAIR OF MUNICIPAL STREETsn, FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW, AND PROVIDING AN EFFECTIVE DATE HEREOF. WHEREAS, there was held in the city of La Porte on the 13th day of May, 2006, a special election to permit voting for or against the proposition: "THE ADOPTION OF A LOCAL SALES AND USE TAX IN THE CITY OF LA PORTE AT THE RATE OF ONE-FOURTH OF ONE PERCENT TO PROVIDE REVENUE FOR MAINTENANCE AND REPAIR OF MUNICIPAL STREETS"; and there were cast at said election on said proposition, the following number of votes: FOR THE PROPOSITION "ADOPTION OF A LOCAL SALES AND USE TAX IN THE CITY OF LA PORTE AT THE RATE OF ONE-FOURTH OF ONE PERCENT TO PROVIDE REVENUE FOR MAINTENANCE AND REPAIR OF MUNICIPAL STREETS": 226 AGAINST THE PROPOSITION "ADOPTION OF A LOCAL SALES AND USE TAX IN THE CITY OF LA PORTE AT THE RATE OF ONE-FOURTH OF ONE PERCENT TO PROVIDE REVENUE FOR MAINTENANCE AND REPAIR OF MUNICIPAL STREETSIl: 85 as shown in the official election returns heretofore delivered by the Election Manager and officials to the Mayor and City Council of the City of La Porte and submitted to the City Council. NOW THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE: Section 1. That said election was duly called and notice thereof given in accordance with law; that said election was held in the manner required by law; that due returns of said election have been made by the proper officers; that said returns have been canvassed by the City Council of the City of La Porte; that said election has resulted in the adoption of the following proposition, to-wit: "THE ADOPTION OF A LOCAL SALES AND USE TAX IN THE CITY OF LA PORTE AT THE RATE OF ONE - FOURTH OF ONE PERCENT TO PROVIDE REVENUE FOR MAINTENANCE AND REPAIR OF MUNICIPAL STREETS" . section 2. The sales and use tax effective date shall be October I, 2006, the first day of the first calendar quarter occurring after the expiration of the first complete calendar quarter occurring after the date on which the Comptroller of Public Accounts receives notice of the results of the election. Section 3. The City Council officially finds, determines, recites and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place convenient to the public at the City Hall of the City for the time required by law preceding this meeting, as required by Chapter 551, Texas Government Code; and that this meeting has been open to the public as required by law at all times during which this ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 4. This Ordinance shall be effective from and after its passage and approval, and it is so ordered. PASSED AND APPROVED, this 22nd day of May, 2006. By: CITY OF LA PORTE Cbx-~LCYM-~ Alton E. Porter Mayor 2 ATTEST: ~nt"-Jf#!/4J t.IJ1 ar ha A. G lett City Secretary APPR~ &) Knox W. Askins City Attorney 3 6 REQUEST FOR CITY COUNCIL AGENDA ITEM Agenda Date Requested: Mal> 22. 2006 Requested By: Mayor Alton orter Appropriation Source of Funds: Department: City Council Account Number: Report: Resolution: Ordinance:X Amount Budgeted: Exhibits: Ordinance Amount Requested: Exhibits: Budgeted Item: YES NO Exhibits: SUMMARY & RECOMMENDATION City Council to approve an ordinance declaring results of the City of La Porte Election held on May 13,2006 Action Required bv Council: Approve ordinance 2006-2887 A p/;6fot Date ORDINANCE NO. 2006-~o~1 AN ORDINANCE DECLARING THE RESULTS OF THE ELECTION HELD IN THE CITY OF LA PORTE ON MAY 13 , 2006 , FOR THE ELECTION OF A MAYOR, COUNCILPERSON DISTRICT 2, AND COUNCILPERSON DISTRICT 3, FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW, AND PROVIDING AN EFFECTIVE DATE HEREOF. WHEREAS, there was held in the City of La Porte on the 13th day of May, 2006, an election for the purpose of electing a Mayor; Councilperson District 2; and Councilperson District 3; all in accordance with section 8.10 of the Home Rule Charter of the City of La Porte; and WHEREAS, there were cast at said election for the following listed persons the number of votes opposite their respective names: MAYOR Alton E. Porter 261 COUNCILPERSON -- DISTRICT 2 Chuck Engelken, Jr. 15 COUNCILPERSON -- DISTRICT 3 Howard R. Ebow 33 as shown in the official election returns heretofore delivered by the Election Manager and officials to the Mayor and City Council of the city of La Porte and submitted to the City Council. NOW THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE: Section 1. That said election was duly called and notice thereof given in accordance with law; that said election was held in the manner required by law; that due returns of said election have been made by the proper officers; that said returns have been canvassed by the City Council of the City of La Porte; that said election has resulted in the election of the following named persons, to-wit: MAYOR Alton E. Porte COUNCILPERSON -- DISTRICT 2 Chuck Engelken, Jr. COUNCILPERSON -- DISTRICT 3 Howard R. Ebow Section 2. The City Council officially finds, determines, recites and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place convenient to the public at the City Hall of the City for the time required by law preceding this meeting, as required by Chapter 551, Texas Government Code i and that this meeting has been open to the public as required by law at all times during which this ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 3. This Ordinance shall be effective from and after its passage and approval, and it is so ordered. PASSED AND APPROVED, this 22nd day of May, 2006. ~~ OF LA ~E ~~~-'.V~ Alton E. Porter Mayor By: ATTEST: ~~~~~MJ City Secretary APPR~u/ ~ Knox W. Askins City Attorney 2 8 REQUEST FOR CITY COUNCIL AGENDA ITEM Agenda Date Requested: Mal> 22. 2006 Requested By: Mayor Alton orter Appropriation Source of Funds: Department: City Council Account Number: Report: Resolution: Ordinance:X Amount Budgeted: Exhibits: Ordinance Amount Requested: Exhibits: Budgeted Item: YES NO Exhibits: SUMMARY & RECOMMENDATION City Council to approve an ordinance appointing a Mayor Pro-Tern of the City of La Porte, for the term expiring May 31, 2007. Action ReQuired by Council: Approve ordinance 2006-2888 r );,j!)6 Date / I ORDINANCE NO. 2006 - J{<6~r AN ORDINANCE APPOINTING A MEMBER OF THE CITY COUNCIL TO SERVE AS MAYOR PRO-TEM OF THE CITY OF LA PORTE, FOR THE TERM COMMENCING JUNE 1, 2006, AND EXPIRING MAY 31, 2007; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; PROVIDING AN EFFECTIVE DATE HEREOF. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE: Section 1. The City Council of the City of La Porte hereby appoints Tommy Moser to serve as Mayor Pro-Tern of the City of La Porte, for the term commencing June 1, 2006, and expiring May 31, 2007, or until his successor shall have been duly appointed and qualified. Section 2. The Mayor Pro-Tern shall serve in such office during said term, during the absence or incapacity of the Mayor and shall do all things, perform all duties, and in fact have all the powers and duties of the Mayor of the City of La Porte during such absence or incapacity of the Mayor. Section 3. The City Council officially finds, determines, recites, and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place convenient to the public at the City Hall of the City for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code i and that this meeting has been open to the public as required by law at all times during which this ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 4. This Ordinance shall be effective from and after ORDINANCE NO. 2006-~O8'8' PASSED AND APPROVED, this~ By: ATTEST: APP~;J d Knox W. Askins City Attorney PAGE 2 day of May, 2006. CITY OF LA PORTE ~G~~ Alton E. Porter Mayor / / A MINUTES OF REGULAR MEETING, PUBLIC HEARING AND WORKSHOP MEETING OF THE LA PORTE CITY COUNCIL May 8, 2006 1. CALL TO ORDER The meeting was called to order by Mayor Alton Porter at 6:01 p.m. Members of City Council Present: Mayor Alton Porter, Council members Tommy Moser, Mike Clausen, Louis Rigby, Howard Ebow, Barry Beasley, Peter Griffiths and Chuck Engelken. Members of Council Absent: Mike Mosteit Members of City Executive Staff and City Employees Present: Assistant City Manager John Joerns, Assistant City Attorney Clark Askins, Public Works Director Steve Gillett, Planning Director Wayne Saba, Fire Chief Mike Boaze, EMS Chief Ray Nolen, Assistant City Secretary Sharon Harris, , City Secretary Martha Gillett, Assistant Fire Chief John Dunham, Fire Marshal Cliff Meekins, Assistant Fire Marshal Eric Cadden, Assistant Police Chief Aaron Corrales, Purchasing Manager Susan Kelley and Assistant Finance Director Michael Dolby. Others Present: Sue Gail Kooken, Carol Christian of Houston Chronicle, Betty Waters, Leon Waters, Michael Davis, Colleen Hicks, Ted Powell, Lanny Connell, Kelsey Kalen, Krissy Bailey, Anthony Lopez and other citizens. 2. Michael Davis First Assembly of God of La Porte delivered the Invocation. 3. Mayor Porter led the Pledge of Allegiance. 4. PRESENT A nONS / PROCLAMA nONS Mayor Porter presented a proclamation to Ray Nolen, Brian Dean, Scott Griffin, Jake Evans, Darrel Fales and Rachel Ashley in honor of Emergency Medical Services Week. 5. Consent Agenda A. Consider approving Minutes of the Regular Meeting, Public Hearing and Workshop Meeting of City Council held on April 24, 2006. B. Council to consider approval or other action regarding awarding a bid for concrete . . . pavmg raIsmg. C. Council to consider approval or other action regarding an ordinance to vacate, abandon, and close the alley of block 242, Town of La Porte. D. Council to consider approval or other action regarding an ordinance to vacate, abandon, and close the South "R" Street right-of-way, Town of La Porte. E. Council to consider approval or other action regarding an ordinance to vacate, abandon, and close the Park A venue right-of-way, Town of La Porte. City Council Regular Meeting, Public Hearing and Workshop Meeting -May 8, 2006 Page 2 F. Council to consider approval or other action regarding an ordinance authorizing the City Manager to execute an annual contract for sewer rehabilitation to Horseshoe Construction, for sanitary sewer rehabilitation; appropriating $170,520.00 plus a contingency of$3,473.00. G. Council to consider approval or other action regarding a resolution on Texas Tax Reform. Councilmember Rigby had questions on item F. Motion was made bv Council member Beasley to approve the consent agenda as presented. Second by Council member Rigby. Motion carried. Ayes: Beasley, Moser, Engelken, Rigby, Ebow, Clausen, Griffiths and Mayor Porter. Nays: None Abstain: None. 6. PETITIONS, REMONSTRANCES, COMMUNICATIONS, AND CITIZENS AND TAX PAYERS WISHING TO ADDRESS COUNCIL ON ANY ITEM POSTED ON THE AGENDA. La Porte High School student Krissy provided Mayor and Council with an overview of the T.R.D.T.H. Organization. The organization randomly drug tests students and provides counseling to those who test positive. The program is very similar to D.A.R.E. 7. Public Hearing - Council to consider taking action on an ordinance designating a 19.607 Ac tract as La Porte Reinvestment Zone "B" "Packwell, Inc." Open Public Hearing - Mayor Porter opened the Public Hearing at 6: 16 p.m. Review by Staff -Assistant City Manager John Joerns provided an overview on designating a 19.607 Ac tract as La Porte Reinvestment Zone "B" Packwell, Inc." Public Input: None Recommendation of Staff- Staff recommended City Council consider approval of an ordinance designating a 19.607 Ac tract as La Porte Reinvestment Zone "B" "Packwell, Inc." The Public Hearing was closed at 6:20 p.m. 8. Council to consider approval or other action regarding Ordinance 2855. Assistant City Attorney Clark Askins read: ORDINANCE 2855-AN ORDINANCE AUTHORIZING THE DESIGNATION OF CITY OF LA PORTE REINVESTMENT ZONE "B" - "P ACKWELL, INC."; MAKING VARIOUS FINDINGS OF FACT; City Council Regular Meeting, Public Hearing and Workshop Meeting -May 8, 2006 Page 3 FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; AND PROVIDING AN EFFECTIVE DATE HEREOF. Motion was made by Council member Beasley to approve Ordinance 2855 as recommended by Staff. Second by Council member Clausen. The motion carried. Ayes: Beasley, Moser, Engelken, Rigby, Ebow, Clausen, Griffiths and Mayor Porter. Nays: None Abstain: None 9. Council to consider approval or other action regarding a variance to allow construction of improvements for a proposed manufacturing and plastics packaging and distribution facility to be located at 10016 Porter Road, La Porte, Texas, to commence prior to the execution and delivery of a Tax Abatement Agreement with Packwell, Inc. The variance is "at risk" and does not commit or bind the City to approval of a Tax Abatement Agreement with Packwell, Inc. Motion was made by Council member Griffiths to approve the variance to allow construction of improvements for a proposed manufacturing and plastics packaging and distribution facility to be located at 10016 Porter Road, La Porte, Texas, to commence prior to the execution and delivery of a Tax Abatement Agreement with Packwell, Inc. as presented by Mr. Joerns. Second by Councilmember Ebow. The motion carried. Ayes: Beasley, Moser, Engelken, Rigby, Ebow, Clausen, Griffiths and Mayor Porter. Nays: None Abstain: None 10. Public Hearing - Council to consider taking action on an ordinance amending Chapter 106 (Zoning) to amend section 106-268 of the Code of Ordinances. Open Public Hearing - Mayor Porter opened the Public Hearing at 6:26 p.m. Review by Staff -Planning Director Wayne Sabo provided an overview on amendments to the Code of Ordinances. Public Input: None Recommendation of Planning & Zoning Commission- Unanimously, the Planning and Zoning Commission recommended City Council consider approval of an ordinance amending Chapter 106 (Zoning) to amend section 106-268 of the Code of Ordinances. The Public Hearing was closed at 6:31 p.m. 11. Council to consider approval or other action regarding an ordinance amending Chapter 106 (Zoning) to amend Section 106-268 of the Code of Ordinances. Assistant City Attorney Clark Askins read: ORDINANCE 150l-A5- AN ORDINANCE AMENDING THE CODE OF ORDINANCES OF THE CITY OF LA PORTE, CHAPTER 106, ARTICLE II "ADMINISTRATION" DIVISION 9 "NONCONFORMING BUILDINGS, STRUCTURES, AND USES" SECTION 106-268; NONCONFORMING LOTS OF RECORD" BY MODIFYING SECTION 106-268(a) TO INCLUDE A CHANGE City Council Regular Meeting, Public Hearing and Workshop Meeting -May 8, 2006 Page 4 IN TENANT AND/OR OCCUPANT TO INITIATE A REVIEW OF NONCONFORMING LOTS OF RECORD WITHIN THE ZONING DISTRICTS OF THE CITY OF LA PORTE, BY CITY STAFF; MAKING CERTAIN FINDINGS OF FACT RELATED TO THE SUBJECT; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; AND PROVIDING AN EFFECTIVE DATE THEREOF. Motion was made by Council member Moser to approve Ordinance 1501-A5 as presented by Mr. Sabo. Second by Council member Griffiths. The motion carried Ayes: Beasley, Moser, Engelken, Rigby, Ebow, Clausen, Griffiths and Mayor Porter. Nays: None Abstain: None 12. Public Hearing - Council to consider taking action on an ordinance amending Chapter 106 (Zoning) to delete Section 106-741 (h) of the Code of Ordinances. Open Public Hearing - Mayor Porter opened the Public Hearing at 6:33 p.m. Planning Director Wayne Sabo provided an overview on amendments to the Code of Ordinances. Public Input: Lou Large - 231 Falk Ct., La Porte, Texas 77571 - Ms. Large informed Mayor and Council she was in favor of the changes to the ordinance. Sue Gail Kooken - 410 S. 1 S\ La Porte, Texas 77571 - Ms. Kooken informed Council she thinks this ordinance needs reworking and is not in favor of 18 wheelers being parked in residential yards. Recommendation of Planning & Zoning Commission- Unanimously, the Planning and Zoning Commission recommended City Council consider approval of an ordinance amending Chapter 106 (Zoning) to delete Section 106-741 (h) of the Code of Ordinances. The Public Hearing was closed at 6:44 p.rn. 13. Council to consider approval or other action regarding Ordinance 1501-B5. Assistant City Attorney Clark Askins read: ORDINANCE 1501 B5-AN ORDINANCE AMENDING THE CODE OF ORDINANCES OF THE CITY OF LA PORTE, CHAPTER 106, ATRICLE V "SUPPLEMENTAL DISTRICT REGULATIONS", DIVISION 2."ACCESSORY BUILDING, USES AND EQUIPMENT", SECTION 106-741, "GENERAL PROVISIONS", BY DELETING SECTION 106-741(h), PERTAINING TO THE PARKING OF BOATS AND RECREATIONAL VEHICLES WITHIN RESIDENTIAL ZONING DISTRICTS OF THE CITY OF LA PORTE; MAKING CERTAIN FINDINGS OF FACT RELATED TO THE SUBJECT; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; AND PROVIDING AN EFFECTIVE DATE HEREOF. Motion was made by Council member Engelken to approve Ordinance 1501 B5 as recommended by Planning & Zoning. Second by Council member Ebow. The motion carried. City Council Regular Meeting, Public Hearing and Workshop Meeting -May 8, 2006 Page 5 Ayes: Beasley, Moser, Engelken, Rigby, Ebow, Clausen, Griffiths and Porter Nays: None Abstain: None 14. Close Regular Meeting and Open Workshop at 6:47 p.m. A. Planning Director Wayne Sabo discussed final draft of 2020 Comprehensive Plan 5 - Five Year Update. In addition, Chairperson Betty Waters informed the Council the committee met on numerous occasions to review progress and interview city departments. She was pleased to report the City is following the plan and making progress toward goals. B. Assistant Finance Director Micheal Dolby provided six month financial update (information used for budget forecasting). He reported revenues and expenditures are favorable. C. Mayor Alton Porter discussed Boards & Commissions appointments. Mayor requested Council review members with terms expiring and advised at a future meeting of any changes they would like to make. There were discussions of how members and the Chairman are appointed/elected to the Board of Adjustments. Tommy Moser requested the Council consider making a change appointing Chester Pool as Chairman on the Board of Adjustments. Council noted they would discuss making changes to the Board of Adjustments appointment ordinance at a future meeting. D. Planning Director Wayne Sabo provided a report regarding an ordinance amending section 2 ordinance 2003-2665 -A- regarding waiver of construction fees imposed by the City of La Porte on improvements to real property conveyed to certain non-profit corporations and/or for city initiated programs which provide housing for low income families; by including wavier of additional fees and requested council to provide staff with direction. A consensus of council directed Wayne Sabo to bring back as written for formal approval at next City Council meeting. 15. Closed Workshop meeting and reconvened Regular Meeting at 7:47 p.m. 16. Administrative Reports Assistant City Manager John Joems gave a report on Sylvan Beach Day, 50th anniversary, April 29, 2006, reminded council Early Voting May 1, through May 9,2006, Election Day, Saturday May 13, 2006, Plan Manager's Appreciation Breakfast, May 17, 2006, 7: 15 a.m. at Sylvan Beach Pavilion, City Employee/Family Appreciation Picnic and City Offices Closing, Monday, May 29th, 2006 observance of Memorial Day. 17. Council Comments Ebow, Engelken, Clausen, Rigby, Moser, Beasley, Griffiths and Mayor Porter had comments. 18. EXECUTIVE SESSION - PURSUANT TO PROVISION OF THE OPEN MEETINGS LAW, CHAPTER 551.071 THROUGH 551.076, 551-087, TEXAS GOVERNMENT CODE (CONSULTATION WITH ATTORNEY, DELIBERATION REGARDING REAL City Council Regular Meeting, Public Hearing and Workshop Meeting -May 8, 2006 Page 6 PROPERTY, DELIBERATION REGARDING PROSPECTIVE GIFT OR DONATION, PERSONNEL MATTERS, DELIBERATION REGARDING SECURITY DEVICES, OR EXCLUDING A WITNESS DURING EXAMINATION OF ANOTHER WITNESS IN AN INVESTIGATION, DELIBERATION REGARDING ECONOMIC DEVELOPMENT NEGOTIATIONS) A. 551.081 (PENDING OR CONTEMPLATED LITIGATION) MEET WITH CITY ATTORNEY AND CITY MANAGER REGARDING CITY OF LA PORTE VS. 200 GARFIELD, LLC Council retired to Executive Session at 8:00 p.m. 19. There was no action taken during Executive Session. Council returned to the table at 8:26 p.m. 20. There being no further business to come before Council, the Regular Meeting was duly adjourned at 8:27 p.m. . ~~~ Martha Gillett, TRMC, CMC City Secretary Passed and approved on this 22nd day of May 2006 OJ~~v_L~~ Mayor Alton E.Porter B ASKINS & ARMSTRONG. P. C. ATTORNEYS AT LAW 702 W. FAIR MONT PARKWAY P.O. BOX 1218 LA PORTE, TEXAS 77572-1218 CLARK T. ASKINS TELEPHONE 281.471.1886 TELECOPIER 281.471.2047 KASKINS@HOUSTON.RR.COM JOHN-A@SWaE.LL.NET CTASKINS@SWBELL.NET KNOX W. ASKINS JOHN D. ARMSTRONG May 8, 2006 Hon. Mayor & City Council city of La Porte city Hall La Porte, Texas Re: Ordinance Ratifying and Confirming the Selection of Clark T. Askins as Assistant City Attorney and Prosecutor in Municipal Court. Gentlemen: It has come to my attention that, although there are ordinances in place appointing Knox W. Askins as City Attorney, and John D. Armstrong as Assistant City Attorney, there is not an ordinance in place ratifying and confirming City Council approval of the selection by the city Attorney of Clark T. Askins, as Assistant city Attorney and Prosecutor in the Municipal Court. I have prepared an ordinance, which I request be placed on the agenda for the May 22, 2006, City Council meeting. Clark T. Askins did take his oath of office as a Assistant City Attorney, and his actions thereunder are valid. YffCda Knox W. Askins City Attorney City of La Porte KWA: sw Enclosure ORDINANCE NO. 2006 - J.ts9 AN ORDINANCE RATIFYING AND CONFIRMING THE CITY ATTORNEY'S SELECTION OF AN ASSISTANT CITY ATTORNEY, FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW, PROVIDING AN EFFECTIVE DATE HEREOF. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE: Section 1. The city Council of the City of La Porte hereby ratifies and confirms its approval of the selection by Knox W. Askins, City Attorney, of Clark T. Askins, as Assistant City Attorney and Prosecutor in the Municipal Court. Section 2. The City Council officially finds, determines, recites, and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place convenient to the public at the City Hall of the City for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code; and that this meeting has been open to the public as required by law at all times during which this ordinance and the sUbject matter thereof has been discussed, considered and formally acted upon. The city Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 3. This Ordinance shall be effective from and after its passage and approval, and it is so ordered. PASSED AND APPROVED, this ~ day of Jj,ay , 2006. ~Y OF LAPORTE By: ~~~~ Alton E. Porter, Mayor ATTEST: ~nlJ..~ VJV <;t ha A. Gillett C1ty Secretary AP~2v!~ Knox W. Askins City Attorney RE UEST FOR CITY COUNCIL AGENDA ITEM Agenda Date Requeste . Appropriation Requested By: Source of Funds: N/A Account Number: Department: Plannine Amount Budgeted: Report: _ Resolution: Ordinance: ....x Amount Requested: N/A Exhibits: Ordinance #2003-2665-A Budgeted Item: SUMMARY & RECOMMENDATION In October 2003 City Council passed Ordinance #2003-2665 to waive construction fees for certain non-profit corporations and/or City initiated programs which provided housing for low income families. Since passage, the ordinance language has required clarification and additional construction related fees have been implemented. Ordinance #2003-2665-A has been drafted to address those matters and to clarify application is for "single family dwellings" only. This item was reviewed during a Council workshop on May 8, 2006. Council requested additional information regarding whether a "for profit" developer and/or projects of other governmental agencies merit fee waivers under this ordinance. In coordination with the City Attorney, the intent of the waiving of fees is not based upon whether the builder is a "non-profit" or "for-profit" builder, but rather that the end product was classified as affordable housing, that the builder received some sort of HUD subsidy and that the buyer qualified under the parameters of HUD. The current 2003 ordinance 2665 states in section 2: "The City Council of the City of La Porte authorizes the waiver of water and sewer "front foot fees", and building permit and inspection fees, in the case of construction of housing for low income families, by non-profit corporations and/or programs initiated by the City." For those completed projects which already have fees waived (each requested by separate letter), we maintain the HUD-I settlement documents on file to ensure that the HUD parameters for the owners have been met. In the 'spirit' of the law governing this program, the builder can either be a non-profit or for-profit entity as long as the final product is affordable housing as described above and fees may be waived. Staff requests that Council consider the following proposed amendments to the fees being waived by this ordinance: FEES CURRENTL Y WAIVED Development Fees (Front Foot Fees) Building Permit Fees Inspection Fees FEES RECOMMENDED FOR ADD Plan Permit Review Fee Field Re-inspection Fee Parkland Cash in Lieu of Land Fee Parkland Development Fee FEES NOT RECOMMENDED Water and Sewer Tap Fees Residential Driveway Tie-in Staffalso recommends that the fee waivers be applicable to an application from other governmental agencies (e.g. Harris County) whose projects are being constructed in the City of La Porte. Action Required bv Council: Consider approval of Ordinance #2003-2665-A to clarify intent and add waived fees. 1)6 lot Dati ORDINANCE NO. 2003-2665-A fA fif]) 5"/),)./ot AN ORDINANCE AMENDING ORDINANCE NO. 2003-2665 REGARDING WAIVER OF CONSTRUCTION FEES IMPOSED BY THE CITY OF LA PORTE ON IMPROVEMENTS TO REAL PROPERTY, BY INCLUDING WAIVER OF ADDITIONAL PERMIT, INSPECTION, AND PARKLAND DEVELOPMENT FEES FOR HOUSING FOR LOW INCOME FAMILIES BY CERTAIN NON-PROFIT CORPORATIONS AND/OR CITY OF LA PORTE OR OTHER GOVERNMENTAL AGENCY INITIATED PROGRAMS; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; CONTAINING A SEVERABILITY CLAUSE; CONTAINING A REPEALING CLAUSE; AND PROVIDING AN EFFECTIVE DATE HEREOF. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE, TEXAS: Sectionl. Section 2 of Ordinance No. 2003-2665 is hereby amended and shall hereafter read as follows, to-wit. Section 2. The City Council of the City of La Porte authorizes the waiver of water and sewer development fees, residential home construction (building, plumbing, electrical, mechanical) permit fees, permit plan review fees, field re-inspection fees, parkland cash payment in lieu of land fees and parkland development fees, in the case of construction of single-family housing for low income families by non-profit corporations and/or for low-income housing programs initiated by the City of La Porte or other governmental agencies. Section 2. All ordinances or parts of ordinances inconsistent with the terms of this ordinance are hereby repealed; provided, however, that such repeal shall be only to the extent of such inconsistency and in all other respects this ordinance shall be cumulative of other ordinances regulating and governing the subject matter covered by this ordinance. Section 3. If any section, sentence, phrase, clause, or any part of any section, sentence, phrase, or clause, of this Ordinance shall, for any reason, be held invalid, such invalidity shall not affect the remaining portions of this Ordinance, and it is hereby declared to the intention of this City Council to have passed each section, sentence, phrase, or clause, or part thereof, irrespective of the fact that any other section, sentence, phrase, or clause, or part thereof, may be declared invalid. Ordinance No. 2003-2665-A Page 2 Section 4. The City Council officially finds, determines, recites and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council is posted at a place convenient to the public at the City Hall of the city for the time required by law preceding this meeting, as required by the Chapter 551, Tx. Gov't Code; and that this meeting has been open to the public as required by law at all times during which this ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 5. This Ordinance shall be effective from and after its passage and approval, and it is so ordered. PASSED AND APPROVED this the day of ,2006. CITY OF LA PORTE By: Mayor ATTEST: City Secretary APP~ -r: ~ City Attorney 2 ASKINS & ARMSTRONG, P.C. ATTORNEYS AT LAW 702 W. FAIRMONT PARKWAY P. O. BOX 1218 LA PORTE, TEXAS 77572-1218 CLARK T. ASKINS TELEPHONE 281 471-1886 TELECOPIER 281 471-2047 E-MAIL: kwaskins@aol.com iohn-a@swbell.net ctaskins@swbell.net KNOX W. ASKINS JOHN D. ARMSTRONG May 16, 2006 Mayor and City Council City Hall City of La Porte RE: Fee waiver ordinance Dear Mayor and Council: I have been asked to render an opinion on the proposed expansion of Ordinance 2003-2665, to include waiver of permitting, inspection, and parkland fees for low- income housing developments in the city. Specifically, it has been asked if it would be permissible for the city to waive fees in the case of developments for low income housing construction where the construction is handled by for-profit companies. Our office has reviewed the matter and is satisfied that so long as the ultimate purchaser under a low-income housing development program is a qualifying buyer under applicable HUD regulations, then there shouldn't be an issue under the law if the builder is a for-profit company. That is, HUD regulations do not disqualify for-profit companies from participating in development of HUD subsidized projects, and on this basis, city council may as a policy matter decide to waive fees towards such projects, to lower the end cost to the buyer. In this regard I believe that Knox Askins has advised the Planning Department that as a part of the fee waiver process that it continue to require, and maintain in its records, documentation evidencing that a particular development and home purchase has been certified under HUD, in the case of low-income housing. Thank you, and should you have any questions please do not hesitate to contact me at my office. Sincerely, ~7:~ Clark T. Askins Assist. City Attorney Cc: City Manager Debra Feazelle Cc: Assistant City Manager John Joerns Cc: Assistant City Manager Cynthia Alexander Cc: Planning Director Wayne Sabo MEETING HANDOUTS -------------.-- ,- c o -- ..., CO U -- - C 0..0 0....., <(cnv C ::J 00 o 0 - -- I 0 cn,+-Z c 0 ~t ~ >< 0 0 WQ.N What is an FTZ? . An area inside the United States that is designated as being outside Customs Territory. D Where items are brought into the Zone duty free. o Where Customs duty is determined when the merchandise leaves the Zone. '-- 0 t 0 0- CO Q) ",........ -0 Q) . ..... c CJ) 0 C N - ('-- --+- .0 C ~ Q) Q) (/) ... ~ E ........", .- en 0- . ~ 0 . ..... Q) - - . Q) . ..... ~ u C '-- > co co Q) 0 U- 0- 0 N CJ) - - ... co co co ~ . ..... . ..... c '-- '-- --+- --+- co (/) CJ) CJ) =' =' . 0- .- -0 -ot E , --- c c 0 0 co - - 0- () .c. c c .: $ <C <C<C <C . . . What Can I Do in an FTZ? . Distribute . Store . Test and Inspect . Repack . Assemble . Repair . Manufacture FTZ Tax Issues . FTZ Act D Includes an Ad Valorem Tax Exemption o Impacts Imported Merchandise and Domestic Merchandise held for export . Public Benefit D Each Taxing Entity can comment D Port of Houston will not Process without approvals FTZ Tax Issues . Full Exemptions D Chambers County o Montgomery County D Liberty County D Walker County D City of Bay town D City of Dayton D City of Conroe D City of Liberty en Q) :J en en >< co r- N r- U- c o .- ........ E-g Q) - >< ~ UJ 0 coo.. t co co ~ 0.. 0 . co c Q) -0 co en co 0.. '+- o 0 0 ~~Cf) .- .- - OO:I: 000 c C ~ B o c en ~ =' :J a. 0 0 EO= Q) .~ >< '- UJ CO o :c Z 0 . FTZ Tax Issues . What the City of La Porte Needs: o Set a policy for FTZ sites within the City o Offer an economically beneficial Exemption Agreement o Approve the Agreement for the sites within the City · Application to be processed through the Port of Houston June 19, 2006 FTZ Tax Issues . Scenarios o No Exemption or an Exemption Waiver . Lacks economic incentive . Restricts competitiveness with other local areas o Partial Exemption . Allows for some benefit . Limits competitiveness with other local areas o Full Exemption . Allows for full economic incentive . Increases competitiveness with other local areas c o -- CJ) :J <..) C o () "'t- o ...... (/) '- .- u.. ~ .D ~ Q) .- > Q) '- .9 (/) ...... c Q) E Q) Q) '- ~ -OQ) Q) . Q) C z~ . ~ .D (/) ...... c Q) E Q) Q) '- ~ Q) .c. ...... "'t- o - eo > o '- 0- 0- eo - eo Q) .~ C "'t- ::3 -0-' 0>-(, Q) .- zE . ----------~-_.. -- - REQUEST FOR CITY COUNCIL AGENDA ITEM Agenda Date Requested June 7. 2006 Requested By: R. Swanagan 't?- l.. ~ Appropriation Source of Funds: Department: Report: X Resolution: HR Ordinance: Account Number: Exhibits: Letter from Neal Welch Amount Budgeted: Exhibits: Health Plan topics for 2006-2007 Bud2et Amount Requested: Exhibits: Budgeted Item: YES NO SUMMARY & RECOMMENDATION Receive presentation from Neal Welch on Employee Health Insurance. Action Required bv Council: Receive above presentation. s- _S{)-V(o Date -HRH 4t h i l b r 0 gal & hob b s' 1155 Dairy Ashford, Suite 350 Houston, TX 77079 Phone: 281-584-1616 Fax: 281-249-8016 Date May 11, 2006 To: Robert Swanagan From: Neal W. Welch cc: Debra Feazelle Cynthia Alexander Subject: 172 Board First, let me thank you for assembling the Board to discuss the important topic of the future of the Health plan. Their insight and opinions are valuable, and I believe they represent their constituency well. As a result of the past two meetings, and the Board reviewing numerous financial alternatives and projections, it appears that they are in consensus on the topic of employee/retiree contributions. As you know we illustrated to the Board the disparity between over 65, under 65, and active employee claim cost. We then discussed the future of the plan, and how these three classes of premium would be affected if we separated the groups. Their final opinion was that all plan participants should share the same premium level, understanding of course that there is a vesting schedule for retiree/City contribution based on service with the City. For the purpose of the upcoming Council Workshop, I see a few topics that should be discussed. 1. Employee and retiree contribution levels (relationship discussed above) 2. Disposition of "Fund Subsidy" (to City 100%, to employee/retiree 100%, or a combination of both) 3. Future City versus employee/retiree percent of premium balance. (Le., 90/10, 80/20, 70/30, etc.) Part of the goal of this exercise is to somewhat simplify the annual renewal process for the City and all plan participants. For example: 1. All employee/retirees (over and under age 65) pay the same gross contribution to the plan (currently four plans). 2. Each year the City works through the budget process to determine the financial needs to operate the plan (10/1 budget set for 1/1 renewal). 3. Administration and Council determine the appropriate percentage split between the City and employee/retiree (as needed). 4. By 10/1 of each year, administration can quote active/retiree premium levels starting 1/1 of the following year (Retiree vesting schedule applies). c:\documents and settingslswanaganr\local settings\temporary internet files\olkI48\robert memo 5-2 172 board meeting.doc I hope this description does not oversimplify a solution. The Board spent a lot of time and energy evaluating the options. I believe the first obstacle that Council must address is the disposition of the "Fund Subsidy". This decision will affect the balance of premium responsibility for the future. With that item resolved, you can move forward with any future projections of cost and the proper apportionment. If you feel that Council should review the workbook used by the Board, please feel free to include it. I apologize for not being able to join you next Monday night. If Council would like to hold an additional workshop on the topic, I will make every effort to comply with their schedule. Thank you again for involving us with this process. We look forward to working with you on an equitable resolution to this issue, and future opportunities facing the health plan. c:\documents and settingslswanaganr\1ocal settings\temporary internet files\olk148\robert memo 5-2 172 board meeting.doc City of LaPorte Health Plan Topics 200612007 Bude:et This projection is based on stop loss attachment factors, trend on existing claims, plus a one-time TML run-out factor. Cost estimates for plan for 10/1/2006 to 10/1/2007 are as follows: 100% 112.5% 125% Expected Midpoint Maximum Liability Claims (Medical + Rx) $2,874,240 $3,193,600 $3,592,800 Plan Expenses (Admin + Stop Loss $135,000 + $ 348,000 $ 348.000 $ 348,000 $213,000) $3,222,240 $3,541,600 $3,940,800 Notes: . Based on stop loss renewal for 2006 - 2007 (4/1) . Based on actual $2,540,047 paid claims from 3/05 to 2/06 (trended plus TML run out factor) . Total plan liability (active + retirees) The population is growing in number of employees carrying dependents and total members. These numbers are included in the above forecast but we must carefully watch the member count as it will add cost if this trend continues. Increased dependent membership does not necessarily increase revenues to the plan. (Example) Date 112005 3/2006 # Emp. Only 127 122 # Emp. + Dependent 237 252 # Members 894 944 Currently plan contributions are: . City standard contribution at $500 PEPMl374 employee . Employee/retiree contribution at last years grandfather rates . Special City assessment . Total Contributions , $2,244,000 556,007 433,695 $3,233,702 Discussion & Notes Page 1 ;~ City of LaPorte Health Plan Topics Enrollment Impact Since the inception of the Humana program with their multiple plan offerings (new for City employees), there has been a dramatic migration toward the lesser cost plans (premium). While cost sharing with the employee increases (good), premium/revenue volume may decrease to the overall plan (bad). For 2006, this cycle continues. Coverage 1st - $1,500 Ded. Coverage 1 Sl_ $1,000 Ded PPO - $500 Ded. PPO - $300 Ded. 2005 65 82 127 ..--2Q 364 2006 86 120 73 ~ 374 The previously sighted contributions reflect the 3/2006 participation. Please see the attached Premium and Contribution Worksheet (Exhibit 1). Essentially, the total current contribution ($3,233,702) is sufficient to fund total expected claims plus expenses ($3,222,240). However, this contribution level includes the "one- time assessment" that the City absorbed in 2005. The midpoint and maximum liability reflect a 112.5% and a 125% increase respectively. Therefore, if all plan participants (active + retiree) pay the same premium amount per coverage type and the City retains its annual contribution of$6,000, the employee/retiree rates would be as shown in Exhibit 2,3, and 4 (expected, midpoint, and maximum liability) . Discussion & Notes Page 2 .....---... City of La Porte Current Premium and Contribution Worksheet Effective January 1, 2006 Subs Coverage 1st. $1,500 Deductible Employee Only 24 Employee & Spouse 13 Employee and Children 17 Employee and Family 24 Coverage 1st. $1,000 Deductible Employee Only 50 Employee & Spouse 23 Employee and Children 20 Employee and Family 35 PPo . $500 Deductible Employee Only 26 Employee & Spouse 19 Employee and Children 10 Employee and Family 21 PPo . $300 Deductible Employee Only 22 Employee & Spouse 14 Employee and Children 4 Employee and Family 52 Total Monthly Funding Total Annual Funding Employee/Employer % 374 Proposed Premium and Contributions Employer Employee Contribution Contributions $500.00 $14.65 $500.00 $105.00 $500.00 $95.24 $500.00 $120.69 $500.00 $22.70 $500.00 $130.34 $500.00 $120.07 $500.00 $155.60 $500.00 $50.23 $500.00 $165.74 $500.00 $155.15 $500.00 $185.32 $500.00 $79.14 $500.00 $225.79 $500.00 $215.99 $500.00. $239.56 $187,000 $46,334 $2,244,000 $556,007 69% 17% Fund Subsidy $11.43 $81.90 $74.29 $94.14 $17.71 $101.67 $93.65 $121.37 $39.18 $129.28 $121.02 $144.55 $61.73 $176.12 $168.47 $186.86 $36,141 $433,695 13% Exhibit 1 Total Premium w/ Contributions & Subsidy $526.08 $686.90 $669.53 $714.83 $540.41 $732.01 $713.72 $776.97 $589.41 $795.02 $776.17 $829.87 $640.87 $901.91 $884.46 $926.42 $269,475 $3,233,702 100% City of La Porte Proposed Premium and Contribution Worksheet Effective October 1, 2006 Expected Claims Subs Coverage 1st - $1,500 Deductible Employee Only 24 Employee & Spouse 13 Employee and Children 17 Employee and Family 24 Coverage 1st - $1,000 Deductible Employee Only 50 Employee & Spouse 23 Employee and Children 20 Employee and Family 35 PPo - $500 Deductible Employee Only 26 Employee & Spouse 19 Employee and Children 10 Employee and Family 21 PPo - $300 Deductible Employee Only 22 Employee & Spouse 14 Employee and Children 4 Employee and Family 52 374 Total Monthly Funding Total Annual Funding Employee/Employer % * Employee contributions plus subsidy Proposed Premium and Contributions Employer Employee Contribution Contributions* $500.00 $25.78 $500.00 $184.74 $500.00 $167.57 $500.00 $212.34 $500.00 $39.94 $500.00 $229.32 $500.00 $211.24 $500.00 $273.76 $500.00 $88.37 $500.00 $291.60 $500.00 $272.97 $500.00 $326.05 $500.00 $139.24 $500.00 $397.26 $500.00 $380.01 $500.00 $421.48 $187,000 $81,520 $2,244,000 $978,240 70% 30% Exhibit 2 Total Premium w/ Contributions & Subsidy $525.78 $684.74 $667.57 $712.34 $539.94 $729.32 $711.24 $773.76 $588.37 $791.60 $772.97 $826.05 $639.24 $897.26 $880.01 $921.48 $268,520 $3,222,240 100% City of La Porte Proposed Premium and Contribution Worksheet Effective October 1 , 2006 Midpoint Claims I Subs Coverage 1st - $1,500 Deductible Employee Only 24 Employee & Spouse 13 Employee and Children 17 Employee and Family 24 Coverage 1st - $1,000 Deductible Employee Only 50 Employee & Spouse 23 Employee and Children 20 Employee and Family 35 PPo - $500 Deductible Employee Only 26 Employee & Spouse 19 Employee and Children 10 Employee and Family 21 PPo - $300 Deductible Employee Only Employee & Spouse Employee and Children Employee and Family Total Monthly Funding Total Annual Funding Employee/Employer % * Employee contributions plus subsidy 22 14 4 52 374 Proposed Premium and Contributions Employer Employee Contribution Contributions * $500.00 $34.19 $500.00 $245.04 $500.00 $222.27 $500.00 $281.66 $500.00 $52.98 $500.00 $304.19 $500.00 $280.21 $500.00 $363.14 $500.00 $117.23 $500.00 $386.80 $500.00 $362.09 $500.00 $432.49 $500.00 $184.69 $500.00 $526.94 $500.00 $504.07 $500.00 $559.0~ $187,000 $108,133 $2,244,000 $1,297,600 63% 37% Exhibit 3 Total Premium w/ Contributions & Subsidy $534.19 $745.04 $722.27 $781.66 $552.98 $804.19 $780.21 $863.14 $617.23 $886.80 $862.09 $932.49 $684.69 $1,026.94 $1,004.07 $1,059.08 $295,133 $3,541,600 100% // Exhibit 4 City of La Porte Proposed Premium and Contribution Worksheet Effective October 1 , 2006 Maximum Claims Subs Coverage 1st ~ $1,500 Deductible Employee Only 24 Employee & Spouse 13 Employee and Children 17 Employee and Family 24 Coverage 1st - $1,000 Deductible Employee Only 50 Employee & Spouse 23 Employee and Children 20 Employee and Family 35 PPo ~ $500 Deductible Employee Only 26 Employee & Spouse 19 Employee and Children 10 Employee and Family 21 PPO ~ $300 Deductible Employee Only 22 Employee & Spouse 14 Employee and Children 4 Employee and Family 52 374 Total Monthly Funding Total Annual Funding Employee/Employer % * Employee contributions plus subsidy Proposed Premium and Contributions Employer . Employee Contribution Contributions* $500.00 $44.71 $500.00 $320.43 $500.00 $290.65 $500.00 $368.32 $500.00 $69.28 $500.00 $397.77 $500.00 $366.41 $500.00 $474.85 $500.00 $153.29 $500.00 $505.80 $500.00 $473.48 $500.00 $565.55 $500.00 $241.52 $500.00 $689.06 $500.00 $659.14 $500.00 $731.08 $187,000 $141,400 $2,244,000 $1,696,800 57% 43% Total Premium w/ Contributions & Subsidy $544.71 $820.43 $790.65 $868.32 $569.28 $897.77 $866.41 $974.85 $653.29 $1,005.80 $973.48 $1,065.55 $741.52 $1,189.06 $1,159.14 $1,231.08 $328,400 $3,940,800 100% City of LaPorte Health Plan Topics Retiree Cost To further refine plan contributions by capturing active versus retiree healthcare costs, Humana was asked to retrospectively abstract plan participants into three classifications (actives, retirees over 65 and retirees under 65). This report was made available last week and includes retrospective capture of claims by these three groups. "What we have learned is as follows for the experience period 3/2005 to 312006. Units Members Claims $ Cost PMPM Active 326 849 $2,414,610: $237.0G. Retiree under 65 30 62 286,709 385.36 Retiree over 65 18 33 79,004 199.5<1 374 944 $2,780,323 $245.43* *Keep in mind that the membership has increased during the year. Actual cost PMPM as shown here reflects the entire year. (Members include employees and individual dependents; these are actual persons in the plan). This exercise leads to a discussion of bow retiree versus active rates should be calculated. In the past, the claims experience for the entire group was the basis for calculation. With one years data now captured, it is feasible to set separate rates for each category. We can project rates based on the cost PMPM using a simple multiple or load factor. The more difficult task is to project what the effect of that type ofprernium change would have on participation. With the advent of GASB-45 it is reasonable to assume that the actuarial study will focus on the actual health cost of the retiree population and how that cost is projected on a downstream (future) basis. (GASB-45 actuarial services proposal will be provided to Cynthia in the first week of April). If we are to review the above PMPM cost and project premiums for retirees in an exact multiple of active cost the factors would be: Active = X Retiree under 65 = X + 63% Retiree over 65 = X-16% Since the City can utilize actual retiree cost as a basis for calculating retiree rates, it is therefore reasonable to propose the following illustrations (Exhibit 5). A fixed expense load for administration and stop loss of $30.72 will be added to each rate. Exhibit 6 is the retiree claims and participation data from Humana. Discussion & Notes Page 3 Coverage 1st - $1,500 Deductible Employee Only Employee & Spouse Employee and Children Employee and Family Coverage 1st - $1,000 Deductible Employee Only Employee & Spouse Employee and Children Employee and Family PPo - $500 Deductible Employee Only Employee & Spouse Employee and Children Employee and Family PPo - $300 Deductible Employee Only Employee & Spouse Employee and Children Employee and Family Total Monthly Funding Total Annual Funding Employee/Employer % · Employee contributions plus subsidy '--- City of La Porte Proposed Retiree Premium and Contribution Worksheet Effective October 1 , 2006 Subs 24 13 17 24 50 23 20 35 26 19 10 21 22 14 4 52 374 Proposed Premium and Contributions Employer Employee Contribution Contributions. $500.00 $25.78 $500.00 $184.74 $500.00 $167.57 $500.00 $212.34 $500.00 $39.94 $500.00 $229.32 $500.00 $211.24 $500.00 $273.76 $500.00 $88.37 $500.00 $291.60 $500.00 $272.97 $500.00 $326.05 $500.00 $139.24 $500.00 $397.26 $500.00 $380.01 $500.00 $421 .48 $187,000 $81,520 $2,244,,000 $978,236 70% 30% Total Premium w/ Contributions & SubsidY $525.78 $684.74 $667.57 $712.34 $539.94 $729.32 $711.24 $773.76 $588.37 $791.60 $772.97 $826.05 $639.24 $897.26 $880.01 $921.48 $268,520 $3,222,236 100% Under 65 Premium Exhibit 5 Illustration Only at Expected Claims. Over 65 Premium $857.02 $441.66 $1,116.13 $575.18 $1,088.14 $560.76 $1,161.11 $598.37 $880.10 $453.55 $1,188.79 $612.63 $1,159.32 $597.44 $1,261.23 $649.96 $959.04 $494.23 $1,290.31 $664.94 $1,259.94 $649.29 $1,346.46 $693.88 $1,041.96 $536.96 $1,462.53 $753.70 $1,434.42 $739.21 $1,502.01 $774.04 Exhibit 6 Under65 65 and Over Total Month EEs Members Medical RX Total Claims EEs Members Medical RX Total Claims EEs Members Medical RX Total Claims Jan-05 26 56 1,091 2,265 3,355 15 22 76 1,752 1,829 41 78 1,167 4,017 5,184 Feb-05 26 53 7,990 3,336 11,326 16 27 3,691 2,633 6,324 42 80 11,681 5,969 17,650 Mar-05 26 53 22,744 4,983 27,727 16 27 1,850 2,300 4,151 42 80 24,594 7,284 31,878 Apr-05 26 53 12,735 2,973 15,708 16 27 348 1,582 1,930 42 80 13,082 4,555 17,637 May-05 26 53 21,656 6,206 27,862 16 27 1,078 4,179 5,257 42 80 22,734 10,385 33,120 Jun-05 27 56 21,702 5,064 26,767 16 27 9,417 2,932 12,348 43 83 31,119 7,996 39,115 Jul-05 27 56 8,399 5,048 13,447 16 27 2,339 2,803 5,142 43 83 10,738 7,851 18,589 Aug-05 27 57 14,472 5,316 19,788 17 29 8,652 3,491 12,143 44 86 23,124 8,808 31,931 Sep-05 26 54 2,784 4,974 7,759 18 32 4,257 2,931 7,188 44 86 7,042 7,905 14,947 Oct-05 29 61 2,593 4,683 7,277 18 32 4,292 3,280 7,573 47 93 6,886 7,964 14,849 Nov-05 29 61 5,979 6,834 12,813 18 32 2,566 4,261 6,828 47 93 8,545 11,095 19,640 Dec-05 29 61 69,613 4,295 73,908 18 32 487 3,483 3,970 47 93 70,100 7,778 77,878 J a n-06 30 62 37321 5006 42 327 18 33 2282 3,868 6,150 48 95 39,603 8,874 48,477 Grand Total 354 736 229,080 60,984 290,064 218 374 41,337 39,496 80,833 . 572 1,110 270,416 100,480 370,896 The City of LaPorte Division 03 Membership and Costs by Pre and Post 65 Based on Age of EE Percentages 61.9% 66.3% 84.7% 60.7% 78.2% 38.1% 33.7% 15.3% 39.3% 21.8% / ./ ./ / ./ City of LaPorte Health Plan Topics Past Projections You had requested a review of prior health plan financial projections to determine why the plan experienced a shortfall in 2005. In June of2004, David Strickler and I put together some expected contribution projections using TML participation data. (Exhibit 7) The City's contribution was set at $5,000 per year. The attached illustration showed total premium funding at $2,812,842 at the expected level and $3,234,768 at the expected plus reserve level. These levels would have been acceptable if: 1. Participation stayed at 403 employees/retirees 2. TML run out would have met expectation 3. Plan participation remained in the PPO options As with any projection, hindsight now shows that: 1. Membership was overstated by TML or it actually dropped from 403 to 374, <$218,544> 2. Budgeted run out $400,000, actual $526,000 <$126,000> 3. Membership migrated to lower premium plans <$100,000> This shortfall amount of $444,544 affected both revenues and expenses. The expense component (run out) was a one-time event. The lower contribution totals are ongoing, and are included in our earlier illustrated calculations. I have attached a 2006 forecast (made in late 2005) and our meeting notes from January 31, 2006 to help explain the 2005 shortfall. (Exhibits 8a and 8b). Discussion & Notes ./ ,/ / / / ./ / ~/1 , , // / Subs Coverage 1st - $1,500 Deductible Employee Only 25 Employee & Spouse 10 Employee and Children 10 Employee and Family 24 Coverage 1st - $1,000 Deductible Employee Only 58 . Employee & Spouse 8 Employee and Children 8 Employee and Family 19 PPO - $500 Deductible Employee Only 24 Employee & Spouse 26 Employee and Children 26 Employee and Family 60 PPo - $300 Deductible Employee Only 37 Employee & Spouse 16 Employee and Children 16 Employee and Family 36 Total Monthly Funding Total Annual Funding Employee/Employer % 403 City of La Porte Premium and Contribution Projection Effective January 1, 2005 Exhibit 7 Premiums and Contributions set for Expected Costs Plus Reserves Current Total Employer Employee Employee Premium Contribution Contributions Contribution Change $452.20 $416.66 $35.54 $25.00 $10.54 $581.64 $416.66 $164.98 $140.00 $24.98 $530.40 $416.66 $113.74 $100.33 $13.41 $632.86 $416.66 $216.20 $200.00 $16.20 $487.88 $416.66 $71.22 $25.00 $46.22 $627.51 $416.66 $210.85 $140.00 $70.85 $572.24 $416.66 $155.58 $100.33 $55.25 $682.77 $416.66 $266.11 $200.00 $66.11 $508.39 $416.66 $91.73 $25.00 $66.73 $653.91 . $416.66 $237.25 $140.00 $97.25 $596.31 $416.66 $179.65 $100.33 $79.32 $711.49 $416.66 $294.83 $200.00 $94.83 $554.31 $416.66 $137.65 $25.00 $112.65 $712.95 $416.66 $296.29 $140.00 $156.29 $650.16 $416.66 $233.50 $100.33 $133.17 $775.73 $416.66 $359.07 $200.00 $159.07 $246,124 $167,914 $78,210 $45,820 $32,390 $2,953,484 $2,014,968 $938,516 $549,838 $388,679 100% 68% 32% I Premiums and Contributions set for Expected Costs Current Total Employer Employee Employee Premium Contribution Contributions Contribution Chanoe $430.67 $416.66 $14.01 $25.00 -$10.99 $553.94 $416.66 $137.28 $140.00 -$2.72 $505.15 $416.66 $88.49 $100.33 -$11.84 $602.72 $416.66 $186.06 $200.00 -$13.94 $464.64 $416.66 $47.98 $25.00 $22.98 $597.62 $416.66 $180.96 $140.00 $40.96 $544.99 $416.66 $128.33 $100.33 $28.00 $650.26 $416.66 $233.60 $200.00 $33.60 $484.19 $416.66 $67.53 $25.00 $42.53 $622.77 $416.66 $206.11 $140.00 $66.11 $567.92 $416.66 $151.26 $100.33 $50.93 $677.61 $416.66 $260.95 $200.00 $60.95 $527.91 $416.66 $111.25 $25.00 $86.25 $679.00 $416.66 $262.34 $140.00 $122.34 $619.20 $416.66 $202.54 $100.33 $102.21 $738.79 $416.66 $322.13 $200.00 $122.13 $234,404 $167,914 $66,490 $45,820 $20,670 $2,812,842 $2,014,968 $797,874 $549,838 $248,037 100% 72% 28% I Assumotions: 1. Humana Smart Suite plan design. 2. Rate differentials based on Humana book of business. 3. Enrollment assumptions based on Humana plan experience. 4. Employee and total premiums are based on previously stated projections of expected costs and expected costs plus reserves (5%). Exhibit 8b MEMORANDUM The Welch Company January 31, 2006 From: Robert Swanagan Neal W. Welch ~ Two Memorial City Plaza 820 Gessner, Suite 1470 Houston, Texas 77024 T: 713.827.8755 F: 713.461.5788 www.thewelchco.com To: Cc: Cynthia Alexander Debra Feazelle Jose Castro - Humana Subject: City of La Porte Backaround In 2004 customer service and medical claims cost were issues with the TML administered plan. TML began to see their ASO business fail as Fort Bend ISO and other large self-funded clients began to leave primarily due to under performing network contracts and service issues. Since then TML has merged with TASB and they provide pooled medical plans for Cities. With growing pressure to seek greater efficiency in its health plan operation, the City went to the commercial insurance marketplace to review alternatives. Humana was chosen as the ASO vendor in the fall of 2004. TML paid their own run out claims. Based on the records through 12/31/05 the financial performance from both years is as follows: Medical Claims Rx Claims Run in Claims 2004 (TML) $3,081,595 (inc!. ) (N/A) $3,081,595 $ 120,000 $ 190,000 (N/A) $3.391.595 2005 (Humana) Admin Stop-Loss Misc* Total $2,160,000 306,000 526,000 (TML) $2,992,000 $ 130,000 200,000 14.000 * Run Out Admin (TML) $3.336.000 At mid year 2005 our estimate of plan cost for 2005/2006 budget purposes was as follows: Annualized I j I ! Paid Claims (Humana) 10 mos. $1,954,564 Run in from TML (Est) Expenses (Admin + S / L) $2,345,476 400,000 330,000 $3,075,476 ] ] J ] j ] . J j Also at mid-year we proposed an initial 2006 projection. Paid Claims w 1 8% Trend Run In (N/A) Expenses (Admin + S/L) wi 5% Trend $2,965,144 o 345.500 $3,310,614 $ 562,804 Projected full funding including IBNR @ 17% Actual full funding (14% + fixed cost at 12/31/06) With the 2005 plan year completed we can now revise the 2006 plan year projection as follows: Paid claims wi 8% Trend $2,992,000 x 1.08% Fixed Cost w 1 5% Trend Projected Plan Cost for 2006 $3,231,360 346.500 $3.577.860 In hindsight I believe everyone's projections of plan cost were close to budget. The anomaly that was realized in the transition from TML to Humana was the movement by actives and retirees to lower contribution plans. Keep in mind we moved from a single option to a four option plan. This fact is further aggravated in 2006 as people move further into the Coverage First plans. Plan Name 2005 2006 Coverage First $1500 61 78 Coverage First $1000 82 127 PPO $500 127 72 PPO $300 -1liL ~ 360 372 Even with the increased participation overall, the rating by plan level must keep pace with the overall contribution budget of the plan. Based on current participation (2006) we provided a special contribution projection late last year that anticipated the financial needs of the plan. (see attached Premium + Contribution Projection). This funding would take the plan to $3,200,000. Future Contribution Calculations Since we now know what the anticipated cost of plan operations should be, plus the actual plan participation by actives and retirees, it should be easier to arrive at future employee I retiree contribution levels each year. Keep in mind that in the past this task was much easier with only one plan alternative. I have asked Humana to look at their projections for 2006, independent of my illustrations, using the aggregate stop loss quotation for guidance. I asked them to project employee 1 retiree rates based on the City's $500 per month contribution for a breakeven, midpoint and plan maximum level. Essentially, this projection allows the City to look at options relating to reserve building. We anticipate having these projections for our meeting. If they are not available we will schedule an additional meeting to go over the projections. Employee Benefits Consulting 2 I I I I I I I J I I I j j I ] j J J Retiree Health CoveraQe Based on your recent experience relating to retiree health insurance and its ultimate cost (premium) for the future I offer some information for your consideration. From an underwriting perspective consider these factors regardless of plan option chosen, vesting schedule etc. 1) Retiree without Medicare is more expensive than active employee: a. Age b. Lack of supervision c. Adverse selection (not working for someone else) d. Occupational illness (even though prohibited) 2) Retiree with Medicare is less expensive than active employee: a. Part A+B primary b. Part 0 subsidy Therefore, I would suggest that each year an overall targeted health care cost be established for the plan. That target should include all claims, operational expenses and reserves. With that target cost, calculate an increment for retirees under age 65 and a decrement for those over 65. I believe 25% load or discount would be appropriate. Then set individual plan rates as with Humana's guidance. This same overall calculation can be used to set COBRA premiums as well. We look forward to working with you on these rates once we agree on the factors to be included. HealthCare SavinQs Accounts In the absence of a long explanation relating to this new concept in plan design, we have enclosed some Power Point slides and a detailed comparison of how the HSA, HRA, and FSA operate. With a discussion on the cost I benefit relationship completed, we can project plan impact with the introduction of an HSA. In the City's situation the HSA concept may be more understandable since the current Coverage First plans resemble an HSA. There will be many decisions that must be made with this type of plan offering, weighting the needs of the population to be covered. This concept may also make an interesting topic for 172 training and I or a council workshop. Employee Benefits Consulting 3 Exhibit Sa City of La Porte 2006 Health Plan Forecast 2005 Ten months Medical claims @ 10 months $ 1,954,564 $ 2,345,476 $ 400,000 $ 330,000 $ 3,075,476 Annualized w/o trend Run in from TML (est.) Expenses: Admin ($130,000), SL ($200,000) 2006 Trend @ 8% on claims ($2,745,476 x 1.08) Trend @ 5% on expenses ($330,000 x 1.05) $ 2,965,114 $ 345.500 $ 3,310,614 $ 562.804 $ 3,873,418 Run out (IBNR) @ 17% J ] 1 J Annual Plan contribution @ current $500.00 PEPM (City) for 2006 $ 2,775,032 (a) Participation (372 total) - Waivers (42 total) (a) Lower than expected employee/retiree contributions due to dramatic migration to Coverage 1 st plans from 2005 to 2006. I I J 2005 2006 - Coverage 1 st $1500 ded. 61 78 - Coverage 1 st $1000 ded. 82 127 - PPO $500 ded. 127 72 - PPO $300 ded. --2.Q 99 360 372 2006 should be slowed with enrollment in Coverage 1 st plans. 1 j J C:\Documents and SettingsIKOarkIMy Documents\City ofLaPorte\Reports\City of La Porte 2006 Health Plan Forecast.doc '" .D .D ~~ Q) .-- .-- lJl '::> lJl \.- :) Q) L> '::> lJl 0.0 <e-o co c uco -s --- co Q) J: ~~ ~ ~ ~~ . .s:;. - You're Not Alone "'._~"'..___....._~_'''''_......___''__.'''__,,_........~,o_,_._._~ 2006/2007 Budget Retiree Projections 2004/2005 Information Notes Retiree Healthcare Offer retiree health coverage, 1993-2005 Large employers (500 employees) 500~ 450/0 40% 35O~ U) 30% '- ~ 25O~ 0 Q. E w 200/0 - 0 - c Q) 15% 0 '- Q) 0.. 100~ 50/0 Oo~ 1993 1995 1997 1999 2001 2003 2005 Offer retirees coverage -+- Pre Medicare -*- Current Medicare . f:;lf(~7;>< ' fiJI":' ~ ~~t~, Mercer National Survey of Employer-Sponsored Health Plans 2005 ii:" ,<,,:;Jt ! : ,':' ;~~~f~" - ~ ~,,~l,; , Retiree Healthcare Average health benefit cost per retiree Large employers (500 employees) 10 8.178 8 fn ... ~ 0 Eligible Retirees " 6 - 0 fn o 2004* " c: as . 2005 fn 4 :J 0 J: - c: - 2 o Pre Medicare Current Medicare * As reported by respondents to the 2005 survey . ;""ijjf1!4~Wf! ~ Wtfj;,iJs ~ t N t , 1lfli,'P;;;:Jlfllft, Mercer National Survey of Employer-Sponsored Health Plans 2005 Q?Jff!j:fiP7jliicifi 1 ~; {H ifJ/'IfJ;1J; ; ~^>)> ,~~~~Yl I Retiree Healthcare Contribution strategies* for retirees Large employers (500 employees) Pre-Medicare eligible retirees Medicare eligible retirees * For retiree-only coverage D Cost is shared . Reti ree pays all Il.EmpIeyee pays all tj1)pltyer D Cost is shared . Reti ree pays all . EmpIeyee pays all employ~( . :*,J:-.t';ff, f : ' IJ/j;JfIj, . I I 0 ~. !w/tJfi/t, !!ftJlJ Mercer National Survey of Employer-Sponsored Hea th Pans 2 OS ; ":;f!i!;.'~it . ~' ff~~/: ,~~~~Ii&~ Retiree Healthcare A few basics about GASB Statement 45 · Requires all US public sector employers to account for and report their annual cost of non-pension post employment benefits (OPES) and related outstanding obligations and commitments, rather than accounting for these benefits on a pay-as- you-go basis . ~ {F~{f!Si/k . :~~~,,~ Mercer National Survey of Employer-Sponsored Health Plans 200S ' :,::i:~:" ~~"~ ~ffl, j J iE" ~ 1 ~ ... , Retiree Healthcare · Effective dates for the new requirements are for the fiscal year beginning after: - December 15, 2006, for Phase 1 governments (total revenues of $100 million or more) - December 15, 2007, for Phase 2 governments (total revenues of less than $10 million or more) - December 15, 2008, for Phase 3 governments (total revenues of less than $10 million) . ~':~:'''1Ji~ ~ JkJt,i-tll1rl/;" , Mercer National Survey of Employer-Sponsored Health Plans 2005 h~ff{;,~,,~~~" r~{~,~~ ~:~ IF Retiree Healthcare · Affects accounting and financial reporting only; does not require funding of OPEB, but the method encourages funding · Results will be reported or disclosed in the entities' financial statements · These requirements parallel the requirements of FAS 106 for the private sector, but there are substantial differences in the overall approach · Unfunded liabilities may affect governmental bond ratings . :~!=if,~~J; f~;'1~~!f!' " ~,""",,,::t"*"";:~H:< Mercer National Survey of Employer-Sponsored Health Plans 2005 :,: : " ; I;: ~ . :~~ ~!~'~H~~~" ,Ii , 'H i -f ~,: .............. City of LaPorte Health Plan Topics 2006/2007 Budl!:et This projection is based on stop loss attachment factors, trend on existing claims, plus a one-time TML run-out factor. Cost estimates for plan for 10/1/2006 to 10/1/2007 are as follows: · Based on stop loss renewal for 2006 - 2007 (4/1) · Based on actual $2,540,047 paid claims from 3/05 to 2/06 (trended plus TML run out factor) . Total plan liability (active + retirees) The population is growing in number of employees carrying dependents and total members. These numbers are included in the above forecast but we must carefully watch the member count as it will add cost if this trend continues. Increased dependent membership does not necessarily increase revenues to the plan. (Example) Date 1/2005 3/2006 # Emp. Only 127 122 # Emp. + Dependent 237 252 # Members 894 944 Currently plan contributions are: · City standard contribution at $500 PEPMl374 employee · Employee/retiree contribution at last years grandfather rates · Special City assessment . Total Contributions $2,244,000 556,007 433,695 $3,233,702 Discussion & Notes Page 1 City of LaPorte Health Plan Topics Enrollment ImDact Since the inception of the Humana program with their multiple plan offerings (new for City employees), there has been a dramatic migration toward the lesser cost plans (premium). While cost sharing with the employee increases (good), premiwn/revenue volume may decrease to the overall plan (bad). For 2006, this cycle continues. Coverage 1 st - $1,500 Ded. Coverage 1 st - $1,000 Ded PPO - $500 Ded. PPO - $300 Ded. 2005 65 82 127 --2.Q 364 2006 86 120 73 ~ 374 The previously sighted contributions reflect the 3/2006 participation. Please see the attached Ptemium and Contribution Worksheet (Exhibit 1). Essentially, the total current contribution ($3,233,702) is sufficient to fund total expected claims plus expenses ($3,222,240). However, this contribution level includes the "one- time assessment" that the City absorbed in 2005. The midpoint and maximum liability reflect a 112.5% and a 125% increase respectively. Therefore, if all plan participants (active + retiree) pay the same premium amount per coverage type and the City retains its annual contribution of $6,000, the employee/retiree rates would be as shown in Exhibit 2,3, and 4 (expected, midpoint, and maximum liability). Discussion & Notes Page 2 City of La Porte Current Premium and Contribution Worksheet Effective January 1, 2006 Subs Coverage 1st - $1,500 Deductible Employee Only 24 Employee & Spouse 13 Employee and Children 17 Employee and Family 24 Coverage 1st - $1,000 Deductible Employee Only 50 Employee & Spouse 23 Employee and Children 20 Employee and Family 35 PPo - $500 Deductible Employee Only 26 Employee & Spouse 19 Employee and Children 10 Employee and Family 21 PPo - $300 Deductible Employee Only 22 Employee & Spouse 14 Employee and Children 4 Employee and Family 52 Total Monthly Funding Total Annual Funding Employee/Employer % 374 (}} ru rr li .-PtvIJused Premium and Contributions Employer Employee Contribution Contributions $500.00 $14.65 $500.00 $105.00 $500.00 $95.24 $500.00 $120.69 $500.00 $22.70 $500.00 $130.34 $500.00 $120.07 $500.00 $155.60 $500.00 $50.23 $500.00 $165.74 $500.00 $155.15 $500.00 $185.32 $500.00 $79.14 $500.00 $225.79 $500.00 $215.99 $500.00 $239.56 $187,000 $46,334 $2,244,000 $556,007 69% 17% Fund Subsidy $11.43 $81.90 $74.29 $94.14 $17.71 $101.67 $93.65 $121.37 $39.18 $129.28 $121.02 $144.55 $61.73 $176.12 $168.47 $186.86 $36,141 $433,695 13% Exhibit 1 Total Premium w/ Contributions & Subsidy $526.08 $686.90 $669.53 $714.83 $540.41 $732.01 $713.72 $776.97 $589.41 $795.02 $776.17 $829.87 $640.87 $901.91 $884.46 $926.42 $269,475 $3,233,702 100% City of La Porte Proposed Premium and Contribution Worksheet Effective October 1, 2006 Expected Claims Subs Coverage 1st - $1,500 Deductible Employee Only 24 Employee & Spouse 13 Employee and Children 17 Employee and Family 24 Coverage 1st - $1,000 Deductible Employee Only 50 Employee & Spouse 23 Employee and Children 20 Employee and Family 35 PPO - $500 Deductible Employee Only 26 Employee & Spouse 19 Employee and Children 10 Employee and Family 21 PPO - $300 Deductible Employee Only 22 Employee & Spouse 14 Employee and Children 4 Employee and Family 52 374 Total Monthly Funding Total Annual Funding Employee/Employer % * Employee contributions plus subsidy Proposed Premium and Contributions Employer Employee Contribution Contributions* $500.00 $25.78 $500.00 $184.74 $500.00 $167.57 $500.00 $212.34 $500.00 $39.94 $500.00 $229.32 $500.00 $211.24 $500.00 $273.76 $500.00 $88.37 $500.00 $291.60 $500.00 $272.97 $500.00 $326.05 $500.00 $139.24 $500.00 $397.26 $500.00 $380.01 $500.00 $421.48 $187,000 $81,520 $2,244,000 $978,240 70% 30% Exhibit 2 Total Premium w/ Contributions & Subsidy $525.78 $684.74 $667.57 $712.34 $539.94 $729.32 $711.24 $773.76 $588.37 $791.60 $772.97 $826.05 $639.24 $897.26 $880.01 $921.48 $268,520 $3,222,240 100% Exhibit 3 City of La Porte Proposed Premium and Contribution Worksheet Effective October 1 , 2006 Midpoint Claims Subs Coverage 1st. $1,500 Deductible Employee Only 24 Employee & Spouse 13 Employee and Children 17 Employee and Family 24 Coverage 1st - $1,000 Deductible Employee Only 50 Employee & Spouse 23 Employee and Children 20 Employee and Family 35 PPo - $500 Deductible Employee Only 26 Employee & Spouse 19 Employee and Children 10 Employee and Family 21 PPo - $300 Deductible Employee Only 22 Employee & Spouse 14 Employee and Children 4 Employee and Family 52 374 Total Monthly Funding Total Annual Funding Employee/Employer % * Employee contributions plus subsidy Proposed Premium and Contributions Employer Employee Contribution Contributions* $500.00 $34.19 $500.00 $245.04 $500.00 $222.27 $500.00 $281.66 $500.00 $52.98 $500.00 $304.19 $500.00 $280.21 $500.00 $363.14 $500.00 $117.23 $500.00 $386.80 $500.00 $362.09 $500.00 $432.49 $500.00 $184.69 $500.00 $526.94 $500.00 $504.07 $500.00 $559.08 $187,000 $108,133 $2,244,000 $1,297,600 63% 37% Total Premium wI Contributions & Subsidy $534.19 $745.04 $722.27 $781.66 $552.98 $804.19 $780.21 $863.14 $617.23 $886.80 $862.09 $932.49 $684.69 $1,026.94 $1,004.07 $1,059.08 $295,133 $3,541,600 100% Exhibit 4 City of La Porte Proposed Premium and Contribution Worksheet Effective October 1 , 2006 Maximum Claims Subs Coverage 1st - $1,500 Deductible Employee Only 24 Employee & Spouse 13 Employee and Children 17 Employee and Family 24 Coverage 1st - $1,000 Deductible Employee Only 50 Employee & Spouse 23 Employee and Children 20 Employee and Family 35 PPo - $500 Deductible Employee Only 26 Employee & Spouse 19 Employee and Children 10 Employee and Family 21 PPo - $300 Deductible Employee Only 22 Employee & Spouse ,14 Employee and Children 4 Employee and Family 52 374 Total Monthly Funding Total Annual Funding Employee/Employer % * Employee contributions plus subsidy Proposed Premium and Contributions Employer Employee Contribution Contributions* $500.00 $44.71 $500.00 $320.43 $500.00 $290.65 $500.00 $368.32 $500.00 $69.28 $500.00 $397.77 $500.00 $366.41 $500.00 $474.85 $500.00 $153.29 $500.00 $505.80 $500.00 $473.48 $500.00 $565.55 $500.00 $241.52 $500.00 $689.06 $500.00 $659.14 $500.00 $731.08 $187,000 $141,400 $2,244,000 $1,696,800 57% 43% Total Premium w/ Contributions & Subsidy $544.71 $820.43 $790.65 $868.32 $569.28 $897.77 $866.41 $974.85 $653.29 $1,005.80 $973.48 $1,065.55 $741.52 $1,189.06 $1,159.14 $1,231.08 $328,400 $3,940,800 100% -, 3 -- City of LaPorte Health Plan Topics Retiree Cost To further refme plan contributions by capturing active versus retiree healthcare costs, Humana was asked to retrospectively abstract plan participants into three classifications (actives, retirees over 65 and retirees under 65). This report was made available last week and includes retrospective capture of claims by these three groups. What we have learned is as follows for the experience period 3/2005 to 3/2006. Units Members Claims $ Cost PMPM Active 326 849 $2,414;610 $237.00 Retiree under 65 30 62 286,709 385.36 Retiree over 65 18 33 79,004 199.50 374 944 $2,780,323 $245.43* *Keep in mind that the membership has increased during the year. Actual cost PMPM as shown here reflects the entire year. (Members include employees and individual dependents; these are actual persons in the plan). This exercise leads to a discussion of how retiree versus active rates should be calculated. In the past, the claims experience for the entire group was the basis for calculation: . With one years data now captured, it is feasible to set separate rates for each category. We can project rates based on the cost PMPM using a simple multiple or load factor. The more difficult task is to project what the effect of that type of premium change would i have on participation. With the advent of GASB-45 it is reasonable to assume that the actuarial study will focus on the actual health cost of the retiree population and how that cost is projected on a downstream (future) basis. (GASB-45 actuarial services proposal will be provided to Cynthia in the first week of April). If we are to review the above PMPM cost and project premiums for retirees in an exact multiple of active cost the factors would be: Active = X Retiree under 65 = X + 63% Retiree over 65 = X - 16% Since the City can utilize actual retiree cost as a basis for calculating retiree rates, it is therefore reasonable to propose the following illustrations (Exhibit 5). A fixed expense load for administration and stop loss of $30.72 will be added to each rate. Exhibit 6 is the retiree claims and participation data from Humana. Discussion & Notes Page 3 City of La Porte Proposed Retiree Premium and Contribution Worksheet Effective October 1,2006 Subs Coverage 1st - $1,500 Deductible Employee Only 24 Employee & Spouse 13 Employee and Children 17 Employee and Family 24 Coverage 1st - $1,000 Deductible Employee Only 50 Employee & Spouse 23 Employee and Children 20 Employee and Family 35 PPo - $500 Deductible Employee Only 26 Employee & Spouse 19 Employee and Children 10 Employee and Family 21 PPo - $300 Deductible Employee Only 22 Employee & Spouse 14 Employee and Children 4 Employee and Family 52 Total Monthly Funding Total Annual Funding Employee/Employer % · Employee contributions plus subsidy 374 Proposed Premium and Contributions Employer Employee Contribution Contributions. $500.00 $25.78 $500.00 $184.74 $500.00 $167.57 $500.00 $212.34 $500.00 $39.94 $500.00 $229.32 $500.00 $211.24 $500.00 $273.76 $500.00 $88.37 $500.00 $291.60 $500.00 $272.97 $500.00 $326.05 $500.00 $139.24 $500.00 $397.26 $500.00 $380.01 $500.00 $421.48 $187,000 $81,520 $2,244,000 $978,236 70% 30% Total Premium w/ Contributions & Subsidy $525.78 $684.74 $667.57 $712.34 $539.94 $729.32 $711.24 $773.76 $588.37 $791.60 $772.97 $826.05 $639.24 $897.26 $880.01 $921.48 $268,520 $3,222,236 100% Exhibit 5 Illustration Only at Expected Claims Over 65 Premium Under 65 Premium $857.02 $441.66 $1,116.13 $575.18 $1,088.14 $560.76 $1,161.11 $598.37 $880.10 $453.55 $1,188.79 $612.63 $1,159.32 $597.44 $1,261.23 $649.96 $959.04 $494.23 $1,290.31 $664.94 $1,259.94 $649.29 $1,346.46 $693.88 $1,041.96 $536.96 $1,462.53 $753.70 $1,434.42 $739.21 $1,502.01 $774.04 Exhibit 6 Under 65 65 and Over Total Month EEs Members Medical RX Total Claims EEs Members Medical RX Total Claims EEs Members Medical RX Total Claims Jan-05 26 56 1,091 2,265 3,355 15 22 76 1,752 1,829 41 78 1,167 4,017 5,184 Feb-05 26 53 7,990 3,336 11,326 16 27 3,691 2,633 6,324 42 80 11,681 5,969 17,650 Mar-05 26 53 22,744 4,983 27,727 16 27 1,850 2,300 4,151 42 80 24,594 7,284 31,878 Apr-05 26 53 12,735 2,973 15,708 16 27 348 1,582 1,930 42 80 13,082 4,555 17,637 May-05 26 53 21,656 6,206 27,862 16 27 1,078 4,179 5,257 42 80 22,734 10,385 33,120 Jun-05 27 56 21,702 5,064 26,767 16 27 9,417 2,932 12,348 43 83 31,119 7,996 39,115 Jul-05 27 56 8,399 5,048 13,447 16 27 2,339 2,803 5,142 43 83 10,738 7,851 18,589 Aug-05 27 57 14,472 5,316 19,788 17 29 8,652 3,491 12,143 44 86 23,124 8,808 31,931 Sep-05 26 54 2,784 4,974 7,759 18 32 4,257 2,931 7,188 44 86 7,042 7,905 14,947 Oct-05 29 61 2,593 4,683 7,277 18 32 4,292 3,280 7,573 47 93 6,886 7,964 14,849 Nov-05 29 61 5,979 6,834 12,813 18 32 2,566 4,261 6,828 47 93 8,545 11,095 19,640 Dec-05 29 61 69,613 4,295 73,908 18 32 487 3,483 3,970 47 93 70,100 7,778 77,878 Jan-06 30 62 37,321 5,006 42,327 18 33 2,282 3,868 6,150 48 95 39,603 8,874 48,477 Grand Total 354 736 229,080 60,984 290,064 . 218 374 41,337 39,496 80,833 572 1,110 270 416 100,480 370,896 The City of LaPorte Division 03 Membership and Costs by Pre and Post 65 Based on Age of EE Percentages 61.9% 66.3% 84.7% 60.7% 78.2% 38.1% 33.7% 15.3% 39.3% 21.8% 4 City of LaPorte Health Plan Topics Past Proiections You had requested a review of prior health plan financial projections to determine why the plan experienced a shortfall in 2005. In June of2004, David Strickler and I put together some expected contribution projections using TML participation data. (Exhibit 7) The City's contribution was set at $5,000 per year. The attached illustration showed total premium funding at $2,812,842 at the expected level and $3,234,768 at the expected plus reserve level. These levels would have been acceptable if: I. Participation stayed at 403 employees/retirees 2. TML run out would have met expectation 3. Plan participation remained in the PPO options As with any projection, hindsight now shows that: 1. Membership was overstated by TML or it actually dropped from 403 to 374, <$218,544> 2. Budgeted run out $400,000, actual $526,000 <$126,000> 3. Membership migrated to lower premium plans <$100,000> This shortfall amount of $444,544 affected both revenues and expenses. The expense component (run out) was a one-time event. The lower contribution totals are ongoing, and are included in our earlier illustrated calculations. I have attached a 2006 forecast (made in late 2005) and our meeting notes from January 31, 2006 to help explain the 2005 shortfall. (Exhibits 8a and 8b). Discussion & Notes Page 4 Coverage 1st. $1,500 Deductible Employee Only 25 Employee & Spouse 10 Employee and Children 10 Employee and Family 24 Coverage 1st. $1,000 Deductible Employee Only 58 Employee & Spouse 8 Employee and Children 8 Employee and Family 19 PPo . $500 Deductible Employee Only 24 Employee & Spouse 26 Employee and Children 26 Employee and Family 60 PPo . $300 Deductible Employee Only 37 Employee & Spouse 16 Employee and Children 16 Employee and Family 36 Total Monthly Funding Total Annual Funding Employee/Employer % City of La Porte Premium and Contribution Projection Effective January 1, 2005 Subs Premiums and Contributions set for Expected Costs Current Total Employer Employee Employee Premium Contribution Contributions Contribution Change $430.67 $416.66 $14.01 $25.00 -$10.99 $553.94 $416.66 $137.28 $140.00 -$2.72 $505.15 $416.66 $88.49 $100.33 -$11.84 $602.72 $416.66 $186.06 $200.00 -$13.94 $464.64 $416.66 $47.98 $25.00 $22.98 $597.62 $416.66 $180.96 $140.00 $40.96 $544.99 $416.66 $128.33 $100.33 $28.00 $650.26 $416.66 $233.60 $200.00 $33.60 $484.19 $416.66 $67.53 $25.00 $42.53 $622.77 $416.66 $206.11 $140.00 $66.11 $567.92 $416.66 $151.26 $100.33 $50.93 $677.61 $416.66 $260.95 $200.00 $60.95 $527.91 $416.66 $111.25 $25.00 $86.25 $679.00 $416.66 $262.34 $140.00 $122.34 $619.20 $416.66 $202.54 $100.33 $102.21 $738.79 $416.66 $322.13 $200.00 $122.13 $234,404 $167,914 $66,490 $45,820 $20,670 $2,812,842 $2,014,968 $797,874 $549,838 $248,037 100% 72% 28% I Exhibit 7 Premiums and Contributions set for Expected Costs Plus Reserves Current Total Employer Employee Employee Premium Contribution Contributions Contribution Chal1se $452.20 $416.66 $35.54 $25.00 $10.54 $581.64 $416.66 $164.98 $140.00 $24.98 $530.40 $416.66 $113.74 $100.33 $13.41 $632.86 $416.66 $216.20 $200.00 $16.20 $487.88 $416.66 $71.22 $25.00 $46.22 $627.51 $416.66 $210.85 $140.00 $70.85 $572.24 $416.66 $155.58 $100.33 $55.25 $682.77 $416.66 $266.11 $200.00 $66.11 $508.39 $416.66 $91.73 $25.00 $66.73 $653.91 $416.66 $237.25 $140.00 $97.25 $596.31 $416.66 $179.65 $100.33 $79.32 $711.49 $416.66 $294.83 $200.00 $94.83 $554.31 $416.66 $137.65 $25.00 $112.65 $712.95 $416.66 $296.29 $140.00 $156.29 $650.16 $416.66 $233.50 $100.33 $133.17 $775.73 $416.66 $359.07 $200.00 $159.07 $246,124 $167,914 $78,210 $45,820 $32,390 $2,953,484 $2,014,968 $938,516 $549,838 $388,679 100% 68% 32% I Assumptions: 1. Humana Smart Suite plan design. 2. Rate differentials based on Humana book of business. 3. Enrollment assumptions based on Humana plan experience. 4. Employee and total premiums are based on previously stated projections of expected costs and expected costs plus reserves (5%). 403 Exhibit 8a City of La Porte 2006 Health Plan Forecast 2005 Ten months Medical claims @ 10 months $ 1,954,564 $ 2,345,476 $ 400,000 $ 330,000 $ 3,075,476 Annualized w/o trend Run in from TML (est.) Expenses: Admin ($130,000), SL ($200,000) 2006 Trend @ 8% on claims ($2,745,476 x 1.08) Trend @ 5% on expenses ($330,000 x 1.05) $ 2,965,114 $ 345,500 $ 3,310,614 $ 562,804 $ 3,873,418 Run out (IBNR) @ 17% Annual Plan contribution @ current $500.00 PEPM (City) for 2006 - Participation (372 total) - Waivers (42 total) $ 2,775,032 (a) (a) Lower than expected employee/retiree contributions due to dramatic migration to Coverage 1 st plans from 2005 to 2006. 2005 2006 - Coverage 1 st $1500 ded. 61 78 - Coverage 1 st $1000 ded. 82 127 - PPO $500 ded. 127 72 - PPO $300 ded. -2Q 99 360 372 2006 should be slowed with enrollment in Coverage 1 st plans. C:\Documents and Settings\KClarklMy DocumentslCity ofLaPortelReportslCity of La Porte 2006 Health Plan Forecast.doc Exhibit 8b MEMORANDUM The Welch Company From: Robert Swanagan Neal W. Welch ~ Two Memorial City Plaza 820 Gessner, Suite 1470 Houston, Texas 77024 T: 713.827.8755 F: 713.461.5788 www.thewelchco.com January 31, 2006 To: Cc: Cynthia Alexander Debra Feazelle Jose Castro - Humana Subject: City of La Porte Backaround In 2004 customer service and medical claims cost were issues with the TML administered plan. TML began to see their ASO business fail as Fort Send ISO and other large self-funded clients began to leave primarily due to under performing network contracts and service issues. Since then TML has merged with TASS and they provide pooled medical plans for Cities. With growing pressure to seek greater efficiency in its health plan operation, the City went to the commercial insurance marketplace to review alternatives. Humana was chosen as the ASO vendor in the fall of 2004. TML paid their own run out claims. Based on the records through 12/31/05 the financial performance from both years is as follows: Medical Claims Rx Claims Run in Claims 2004 (TML) $3,081,595 (incl. ) (N/A) $3,081,595 $ 120,000 $ 190,000 (N/A) $3,391,595 2005 (Humana) $2,160,000 306,000 526,000 (TML) $2,992,000 $ 130,000 200,000 14,000 * Run Out Admin (TML) $3,336,000 Admin Stop-Loss Misc * Total At mid year 2005 our estimate of plan cost for 2005 / 2006 budget purposes was as follows: Annualized Paid Claims (Humana) 10 mos. $1,954,564 Run in from TML (Est) Expenses (Admin + S / L) $2,345,476 400,000 330.000 $3,075,476 Also at mid-year we proposed an initial 2006 projection. Paid Claims w 1 8% Trend Run In (N/A) Expenses (Admin + S/L) w 1 5% Trend $2,965,144 o 345.500 $3,310,614 $ 562,804 Projected full funding including IBNR @ 17% Actual full funding (14% + fixed cost at 12/31/06) With the 2005 plan year completed we can now revise the 2006 plan year projection as follows: Paid claims wI 8% Trend $2,992,000 x 1.08% Fixed Cost w 1 5% Trend Projected Plan Cost for 2006 $3,231,360 346.500 $3.577,860 In hindsight I believe everyone's projections of plan cost were close to budget. The anomaly that was realized in the transition from TML to Humana was the movement by actives and retirees to lower contribution plans. Keep in mind we moved from a single option to a four option plan. This fact is further aggravated in 2006 as people move further into the Coverage First plans. Plan Name 2005 2006 Coverage First $1500 61 78 Coverage First $1000 82 127 PPO $500 127 72 PPO $300 --.lliL ~ 360 372 Even with the increased participation overall, the rating by plan level must keep pace with the overall contribution budget of the plan. Based on current participation (2006) we provided a special contribution projection late last year that anticipated the financial needs of the plan. (see attached Premium + Contribution Projection). This funding would take the plan to $3,200,000. Future Contribution Calculations Since we now know what the anticipated cost of plan operations should be, plus the actual plan participation by actives and retirees, it should be easier to arrive at future employee 1 retiree contribution levels each year. Keep in mind that in the past this task was much easier with only one plan alternative. I have asked Humana to look at their projections for 2006, independent of my illustrations, using the aggregate stop loss quotation for guidance. I asked them to project employee 1 retiree rates based on the City's $500 per month contribution for a breakeven, midpoint and plan maximum level. Essentially, this projection allows the City to look at options relating to reserve building. We anticipate having these projections for our meeting. If they are not available we will schedule an additional meeting to go over the projections. Employee Benefits Consulting 2 Retiree Health Coveraae Based on your recent experience relating to retiree health insurance and its ultimate cost (premium) for the future I offer some information for your consideration. From an underwriting perspective consider these factors regardless of plan option chosen, vesting schedule etc. 1) Retiree without Medicare is more expensive than active employee: a. Age b. Lack of supervision c. Adverse selection (not working for someone else) d. Occupational illness (even though prohibited) 2) Retiree with Medicare is less expensive than active employee: a. Part A+B primary b. Part D subsidy Therefore, I would suggest that each year an overall targeted health care cost be established for the plan. That target should include all claims, operational expenses and reserves. With that target cost, calculate an increment for retirees under age 65 and a decrement for those over 65. I believe 25% load or discount would be appropriate. Then set individual plan rates as with Humana's guidance. This same overall calculation can be used to set COBRA premiums as well. We look forward to working with you on these rates once we agree on the factors to be included. HealthCare Savings Accounts In the absence of a long explanation relating to this new concept in plan design, we have enclosed some Power Point slides and a detailed comparison of how the HSA, HRA, and FSA operate. With a discussion on the cost I benefit relationship completed, we can project plan impact with the introduction of an HSA. In the City's situation the HSA concept may be more understandable since the current Coverage First plans resemble an HSA. There will be many decisions that must be made with this type of plan offering, weighting the needs of the population to be covered. This concept may also make an interesting topic for 172 training and I or a council workshop. Employee Benefits Consulting 3 ,- - ------------ Notes: ~otes~ A REQUEST FOR CITY COUNCIL AGENDA ITEM Agenda Date Requested May 22 2006 Requested By: Mayor Alton E. Porter Department: MJlygr'll Office Report: X Resolution: Appropriation Source of Funds: nla Account Number: nla Ordinance: Amount Budgeted: nla Exhibits: Amount Requested: Exhibits: Budgeted Item: YES NO SUMMARY & RECOMMENDATION City Council to discuss replacing or renewing positions on various Boards and Commissions, and also discuss one vacant slot on the Chapter 172 Employee, Retirement Insurance & Benefits Board. Airport Advisory Board Hector Villarreal Tucker Grant 8/31/06 8/31/06 Tax Increment Reinvestment Zone Number One Dave Turnquist, Position 1 8/31/06 Horace Leopard, Position 4 8/31/06 JJ Meza, Position 6 8/31/06 Chester Pool, Position 8 8/31/06 Chapter 172 Employee. Retirement Insurance & Benefits Board Vacant 9/30106 Civil Service Commission Keith Trainer, Chairman Fire Code Review Committee Jeff Brown, District 2 Woodrow Sebasta, District 3 Floyd Craft, District 4 Jim Bridge, District 5 Bryan Moore, At-LargeA Lynn Green, Mayor La Porte Area Water Authority Chester Pool Paul Berner 8/31/06 8/31/06 8/31/06 8/31/06 8/31/06 8/31/06 8/31/06 8/31/06 8/31/06 La Porte Development Corporation Board Mike Clausen 8/31/06 Bill~~ 8Dlffi6 Pat Muston 8/31/06 La Porte Redevelopment Authoritv Dave Turnquist 8/31/06 Horace Leopard 8/31/06 JJ Meza 8/31/06 Chester Pool 8/31/06 Main Street Advisorv Board Bill Manning, Position 4 Jeffery Carpenter, Position 5 Gerald Metcalf, Position 6 Paul Pieri, Position 7 8/31/06 8/31/06 8/31/06 8/31/06 Plannin1!: and Zonin1!: Commission Pat Muston, Chairperson Nick Barrera, District 2 Kirby Linscomb Jr., District 3 8/31/06 8/31/06 8/31/06 Southeast Texas Housin1!: Finance Corporation Board Pat Muston 8/31/06 Zonin1!: Board of Adiustment Lawrence Mc Neal, Alternate I Gilbert Montemayor, Alternate 2 8/31/06 8/31/06 There are not any applications on file from citizens. Action ReQuired bv Council: Discuss replacing or renewing positions on various Boards and Commissions, and also the discussion of one vacant slot on the Chapter 172 Employee, Retirement Insurance & Benefits Board. Approved for City Council Aeenda Debra Feaz Date -0ro~ Harris, Sharon Cc: Subject: Gillett, Martha Tuesday, May 16, 2006 3:21 PM Alton Porter; Barry Beasley (barry.beasley@sbc.com); engelken@aol.com; Feazelle, Debra; harriss@ci.la-porte.tx.us; Howard Ebow (hebow@houston.rr.com); Louis & Marlene Rigby (Louis.Rigby@halliburton.com); Mike Clausen; Mike Mosteit; mosteit66@aol.com; Peter Griffiths; Tommy Moser (moser_electric@sbcglobal.net); Bonnie Garrison (GarrisonY@ci.la- porte.tx.us); Susan Felty Harris, Sharon Boards and Commissions From: '-'nt: .J: You requested I let you know which members do not have an application on file: They are as follows: Airport Advisory Board Tucker Grant William Gray Dan Myhaver Fire Code Review Floyd Craft Brian Moore Fire Pension Board Bruce Compton Johnny Jones La Porte Area Water Authority Chester Pool Steve Valerius Planning and Zoning Dottie Kaminski Hal Lawler These are people who have been on prior to the requirement to have an application on file was implemented. Let me know if you have any additional questions. Thanks Martha A. Gillett, TRMG,CMC City Secretary/Public Information Officer City of La Porte 604 West Fairmont Parkway La Porte, Texas 77571 281-471-5020 ext. 5019 1 B/C City of La Porte Zoning "lrd of Adjustment Attendanc. hart Sidney Grant !;lI ~ !;lI r; III b!1 ~ IiZI Ii] !;lI !;l] Bob Capen ~ ~ bZJ ~ b2l I!lI 1lI blI ~ V1 Rod Rothermel ~ !ill ~ III ~ IiZI !ill b2l WIllie Walker !;lI ~ !ill ~ III b!1 bZI III Ii] !ill !;l] Ruben Salinas !;lI ~ !ill ~ bZI III hi) Charles Schoppe (Alt. 1) !;lI QI ~ III ~ bZI IiZI bZJ b2l George Maltsberger (Alt. 2) ~ III b!1 Ii] !;lI b2l 1/27/00 2/24/00 6/1/00 10/12/00 3/22/01 5/24/01 7/12/01 1/24/02 6/27/02 10/24/02 11/20/02 Sidney Grant (Chairperson) !ill ~ IilI 121 III b2I bZI I2J Ii] b2l Bob Capen IilI ~ !ill 121 I2J !;I'I bZI I2J Ii] !;lI b2l Rod Rothermel !ill ~ ~ III b2I Ii] IilI !;l] Willie Walker ~ ~ IiZI Replaced Ruben Salinas bZJ bZJ [71 Replaced Charles Schoppe IilI ~ blI I2J b2I bZI III Ii] bZJ b2l George Maltsberger !ill ~ !ill III III b2I III Ii] Barbara Norwlne (Alt. 1) b2I bZI Ii] bZJ b2I Bernard Legrand (Alt. 2) b2I III Ii] !ill b2l 3/27/03 4/24/03 5/22/03 7/24/03 8/28/03 12/4/03 1/22/04 4/22/04 5/27/04 6/24/04 7/22/04 Sidney Grant (Chairperson) !ill ~ !ill Zl .i21 Q'l III !ill !;l] George Maltsberger (Vice) !ill III !ill Zl b2I ~ I2J iii !;l] Bob Capen IilI IilI 12I 121 b2I bZI 121 iii !;lI Rod Rothermel !ill III 121 Ii] !;lI !;l] Charles Schoppe !;lI 12I iii 121 121 b2I 6Zl Ii] iii 0 Barbara Norwlne (Alt. 1) ~ ~ -Q1 ResIgned Bernard Legrand (Alt. 2) !ill IilI Replaced Lawrence McNeal (Alf. 1) 121 I2J b2I 6Zl 121 iii IilI Gilbert Montemayor (Alt. 2) 121 121 b2I 6Zl 121 bZJ !;lI b2l 7/27/04 8/26/04 9/23/04 11/23/04 2/24/05 3/24/05 5/26/05 7/28/05 10/27/05 2/23/06 3/23/06 City of La Porte Planning and z~ -;,g Commission Attendance Ct, ) Dottie Kaminski I;Zj iii bZl iii III III ~ III 0 ~ !;ZI bZI Nick Barrera I;Zj iii bZl blJ 0 !;lI ~ III 0 iii [;2] bZI Paul Berner III I!l1 fll I!l1 171 ~ III I!l1 b2l bZI Doretta Finch I;Zj iii blJ 0 III ~ III III iii bZI Kirby Linscomb, Jr. iii l;z] iii III !;2J III III iii !;ZI Hal Lawler (Alt. 1) !;2l blJ III III iii b2l Pat Muston I;Zj iii bZl iii III III !;2J 0 iii b2l bZI Claude Meharg !;2l iii bZl blJ !;2J blJ bZI Les Bird (Alt. 2) I!l1 III ~ ~ III I!l1 b2l 4/21/05 5/19/05 6/16/05 7/21/05 8/18/05 9/15/05 10/20/05 11/17/05 12/15/05 1/19/06 2/2/06 2/16/06 Dottie Kaminski ~ iii Nick Barrera ~ iii I Paul Berner ~ iii Doretta Finch III I!l1 Kirby Linscomb, Jr. bZl Hal Lawler (Alt. 1) Pat Muston bZl iii Claude Meharg Les Bird (Alt. 2) 3/16/06 4/20/06 Chairperson: $15 per meeting Members: $10 per meeting Betty Waters blI ~ blI blI III ~ IiZI III blI bZJ bZI Dottie Kaminski I;{J ~ III bZI ~ bZI III blJ [l2J bZI MeRon Wolters III Resigned Hal Lawler Ii:J blI ~ QI [;l ~ III blI QI bZJ bZI Ross Morris blJ I;z] QI III [i III III bZJ bZI Ralph Dorsett IZI [;l 121 blJ b2l bZI Pamela Baldwin I;{J IZI blJ III Doretta Finch III bZI b2l bZI City of La Porte Planning and 1~ "'\rIg Commission Attendance C~. .' (no quorum) (no quorum) 3/21/02 4/18/02 5/16/02 5/30/02 6/20/02 7/18/02 8/1/02 8/15/02 9/19/02 10/17/02 11/21/02 12/19/02 Betty Waters III IlIi IZI III ~ Ii2l III blJ bZI Dottie Kaminski III IlIi III III ~ Ii2l III bZI Hal Lawler III IlIi IZI III ~ Re-appolnted as [l2J bZI Ross Morris III III ill III Alternate Members !;21 I!ZJ Ralph Dorsett blI IZI blJ 121 Ii2l bZJ bZI Pamela Baldwin III Resigned. actual date unknown Doretta Finch blJ Ii:J Il.I ~ Il.I III bZI [l2J Kirby Linscomb, Jr. Il.I III bZl bZJ bZI Nick Barrera Il.I III bZI b2l bZI Paul Berner Ii] Ii) iii !;21 1/30/03 2/20/03 3/20/03 4/17/03 5/15/03 6/19/03 8/27/03 9/18/03 10/16/03 11/20/03 1/15/04 2/19/04 Betty Waters III IZI III Resigned Dottie Kaminski III IZI bZI 121 Ii2l bZI [l2J bZI Nick Barrera III III ill 121 Ii] III !;21 I!ZJ Paul Berner I I;z] bZl III III III Ii2l III blJ bZJ bZI Ralph Dorsett I Resigned Doretta Finch III I I;z] bZl ~ III b2J Kirby Linscomb, Jr. bZI bZI ~ IiZI bZI Hal Lawler (Alt. 1) III blI IiZl ~ III bZI bZJ Ross Morris (AR 2) III 121 Resigned Pat Muston ~ Ql h2) J;7I Claude Meharg Ql I;z! Les Bird CAR. 2) bZJ I;z! 3/29/04 4/15/04 5/20/04 6/17/04 7/15/04 8/19/04 9/16/04 10/21/04 11 /18/04 1/20/05 2/17/05 3/17/05 Chairperson: $15 per meeting Members: $10 per meeting T FOR CITY COUNCIL AGENDA ITEM Appropriation Requested By: Source of Funds: Department: Account Number: Report: X Resolution: Ordinance: Amount Budgeted: Exhibits: Memorandum with Exhibits Amount Requested: Exhibits: Draft Development A~reement Budgeted Item: YES NO Exhibits: Draft Utility Rxtension Aereement SUMMARY & RECOMMENDATION Prior correspondence to Council and the TlRZ/Redevelopment Authority noted that the developer of Lakes at Fairmont Greens could not secure financing for the development because of significant up front costs associated with the trunk sewer and lift station, even though the TlRZ/Authority could eventually reimburse the developer. With this cost center removed, the developer was able to secure financing. During 05-06 budget preparation, Council approved $645,000 for the construction of the trunk sewer and lift station based on the understanding that the TlRZ/ Authority would reimburse the City from future increment. The first agreement, between the City and TlRZ/ Authority provides for the City to advance the funds ($645,000) for the trunk sewer and lift station and act as construction manager for the TlRZ/ Authority. The agreement further provides for the TlRZ/ Authority to reimburse the City in the future. The second agreement is a Utility Extension Agreement (UEA) that establishes the City's oversight and control over the design and construction of the trunk sewer and lift station. The design and construction contracts would be let/owned by the developer with the City issuing joint checks to the developer/designer or engineer and developer/contractor as certain approvals and milestones are met. New cost estimates are being prepared by the developer's engineers. The agreements provide for the possibility that the bids mav exceed budgeted funds (see Section 8 of the UEA). These agreements have been circulated for comment by the party's and by the City's attorneys. It is anticipated that the TlRZlAuthority will consider approval at the May 24 meeting and the Council at June 12 meeting. Attached are 3 approaches being looked at for this project. They each have advantages/disadvantages and of course there is a wide cost differential and opinion on the appropriate final design approach. While the base proposal is the lowest, there is some concern over long term maintenance trade-offs and some unanswered questions on the depth of line segments near and along McCabe Road. For these reasons we are still working with the developer and design engineers on a final design approach. In fact we may consider bidding alternates. Therefore, certain terms of the UEA may change to cover these options. The key issue is to reinforce what was noted in the February 27 presentation to Council. These costs upon final approach and bid opening may exceed the original estimate that was provided and budgeted last year. Action Required bv Council: A ~1-6 Date _~i,,"', (]t\' of La POl1e 1:\t..JI)Ji....17ed 189:.! FnMII: John Joem~ Nt Wayne J8fM -/ Steve Gillett ~ll'ltD' c.0 _ e'1{t-jP t/1-(~vlPV~ 4 t o~ Memo To: cc: Date: 5-16-06 Re= Southeast Sanitary Sewer Trunk Main and Uft Station F adlities Altemate Cost Estimates John: As per your request. I have instructed Rodney to modify the submitted oost estimates to the reflect the total engineering oosts as well as deleting the sanitary sewer run along McCabe Road east of Taylor Bayou, terminating at Uft Station No. 12. In addition, well pointing oosts have been induded in the various oost estimates to account for any dewatering. The following are some of the key points for the various altematives: Base Desion . Total Cost of $585,393.00 (for a more ooncise oomparison an additional $100,000 should be added to this design to account for the extra sanitary sewer trunk main required for the service areas north of Wharton Weems Boulevard in order to oonvey its sewage to the City's existing infrastructure along the far northem reach of the project area, bringing the total oost to $685.393.00). . Of the three designs, this one maximizes the amount of 8" force main which allows the overall oosts to be lower. . Requires a deep gravity sanitary sewer along the west bank of Taylor Bayou from McCabe Road to the proposed lift station south of Lakes at Fairmont Green Section 1. If wet sand oonditions are enoountered and the contrador is unable to dewater the proposed alignment, the 12" gravity line can be raised and a siphon designed under Taylor Bayou to extend sanitary sewer service along McCabe Road to areas east of Taylor Bayou. Altemate One . Total Cost of $841,525.00 . Provides a gravity trunk line to the areas north of Wharton Weems Boulevard. . Requires the same deep gravity sewer along Taylor Bayou as the Base Design. Alternate Two . Total Cost of $976,689.00 . Moves the lift station to McCabe Road, thereby eliminating the need for the deep gravity sewer along the west bank of Taylor Bayou. . Is the most expensive of the alternatives due to it having the most large diameter gravity sewer. . Page 2 2702.00 LAKES AT FAIRMONT GREENS SEC 1 SS TRUNK MAIN: BASE DESIGN 100% Quantity Takeoff & Construction Cost Projection Off-5ite Construction j' "."-,=LU~L,_ ilJL ,8"', II =1 ~~"/-- i~tet~ ~~7- ~J ..~'-tr'. rrt-- f-:~"-~~l_L~C'!- ! I L:IJIIIL j I · ,t i I ,Ii ill II JLL__ !' ~ :r /o!!1 ~: I,-~~-~-a-=-:~-:---I-- -->---;T --, --I""" 1 L L1.1_1~.II - L- ~" -~- -- ---~ ~ ---- /0~~)~_~\~lJ1IIllJ di~it:. liL-''''~-. II 'f-f~"1<-- I /,"'.."\.1.) ,,,I t- l i~:~7Z!rE- ~ BAY FOREST Ga.F OOURSE /AlS~t ,-=::::::'~-::'=:=Jji'~~~:':~ - General Conditions Sanitary Sewer 12" PVC San Sewer Pipe 24" PVC San Sewer Pipe 8" PVC San Sewer Force Main Street Auger for 12" Sewer Pipe Street Auger for 24" Sewer Pipe Street Auger for 8" Force Main Manholes Inspection & Miscellaneous Sanitary Sewer Lift Station Trench Safety Trench Dewatering System Contingencies Engineering Services Total ION DESIGN GROUP, lLC 05.16.2006 de ieted $40,782.00 $11,550.00 $182,754.00 $13,720.00 $0.00 $5,n5.00 $17,200.00 $14,644.00 $175,000.00 $13,238.00 $32,430.00 $23,700.00 $10,500.00 $530,793.00 $44,100.00 $585,393.00 Page 1 of 3 2702.00 LAKES AT FAIRMONT GREENS SEC 1 SS TRUNK MAIN: ALTERNATE 1 65% Quantity Takeoff & Construction Cost Projection Off-Site Construction 2+- GR-'V: q) -l ~ -.-t ._ ,__'_, . :::::1 " I ! i !J ' ! ,i " ~ 'iHJaj.tj(r~iJ ~i ~,~!~ \ \ LL~~r:1 ~l! ~-j CHlffiI d 1=1!EBfB2 1::~TIf~rt~j ~;~ rimT, ,', TITlJImTTO- p f'-,,:..-.LL.J.....l-LLLLLLL.L) ~_.L.l-.-:-:'_)~_~ l}L-.-J;~ .'-;' .'-'f~Tl-rTTT i-rU-ITTf \ I'. : /.,1, "V' . J J f',__ 1 J r ' ,. L.l.. ~ _J__LJ._-+.-~._"..l.-: ,i,," il",~.: 1-," f .. ,l~lF ... /;'~j7!!/ 8. r~'~"~- 'M~__'_~____~'___ //~'f///-: F.~ l6'J ~~ o/~~~~// ~ ~/: / ~.'. i\'/~' ~.(____</l _ '~:4.l~:/',..~~'~:,~~ O/~~.(~~~~~'<~\_ =if ,~=::-:=----==:M;'~:~ clele+ed General Conditions Sanitary Sewer 1 Z' PVC San Sewer Pipe 24" PVC San Sewer Pipe 8" PVC San Sewer Force Main Street Auger for 12" Sewer Pipe Street Auger for 24" Sewer Pipe Street Auger for 8" Force Main Manholes Inspection & Miscellaneous Sanitary Sewer Uft Station Trench Safety Trench Dewatering System Contingencies $40,782.00 $244,230.00 $109,626.00 $13,720.00 $0.00 $5,n5.00 $29,200.00 $14,644.00 $175,000.00 $13,238.00 $98,910.00 $32,300.00 Engineering Services Total ION DESIGN GROUP, LLC 05.16.2006 $10,500.00 $n7,425.00 $53,600.00 $841,525.00 Page 2 of 3 2702.00 LAKES AT FAIRMONT GREENS SEC 1 S$ TRUNK MAIN: ALTERNATE 2 36% Quantity Takeoff & Construction Cost Projection Off-$ite Construction r[==~-~=~==~i--- J 1 ii, ] t, :::::;:::-~~L- _"__~_~__'____m_.____l BA.Y FOREST GOLF COURSE r------ I I General Conditions Sanitary Sewer 12" PVC San Sewer Pipe 24" PVC San Sewer Pipe 8" PVC San Sewer Force Main Street Auger for 12" Sewer Pipe Street Auger for 24" Sewer Pipe Street Auger for 8" Force Main Manholes Inspection & Miscellaneous Sanitary Sewer Lift Station Trench Safety Trench Dewatering System Contingencies $0.00 $392,175.00 $95,172.00 $0.00 $14,850.00 $10,290.00 $20,370.00 $14,644.00 $175,000.00 $13,238.00 $112,050_00 $36,800.00 Engineering Services Total ION DESIGN GROUP, LLC 05_16_2006 $10,500.00 $884,589.00 $81,600.00 $976,689.00 Page 3 of 3 DEVELOPMENT AGREEMENT This Development Agreement (this "Agreement") is made as of ,2006, by and between the REINVESTMENT ZONE NUMBER ONE, CITY OF LA PORTE, TEXAS (the "Zone "), a tax increment reinvestment zone created by the City pursuant to Chapter 311 of the Texas Tax Code, as amended, acting by and through its governing board of directors (the "Zone Board"), LA PORTE REDEVELOPMENT AUTHORITY, a nonprofit local government corporation formed by and on behalf of the City of La Porte, Texas (the "A uthority "), and CITY OF LA PORTE, TEXAS a home-rule city (the "City "). RECITALS WHEREAS, pursuant to Chapter 311 of the Texas Tax Code, the City Council of the City created the Zone in the City; and WHEREAS, the Zone Board adopted a Project and Financing Plan (as defined below in Section 1.1), as amended, that provides that the Zone will undertake to make certain acquisitions and improvements in the Zone, and was approved by the City Council; and WHEREAS, the Texas Tax Code provides that the Zone may enter into agreements as the Zone Board considers necessary or convenient to implement the Project and Financing Plan and achieve its purposes; and c,..-. WHEREAS, the City and the Zone have contracted with the Authority as a nonprofit, Texas local government corporation pursuant to the provisions of Chapter 431, Subchapter D, TEX. TRANS. CODE, to carry out the purposes of the Zone, including administration, supervision, construction, financing and other duties, and committed the revenues of the Zone to the Authority for such purposes, all as more particularly set forth in the Agreement Between the City, the Zone and the Authority, dated (the "Tri-Party Agreement"); and WHEREAS, the City wishes to make certain improvements to its sanitary sewer system within the Zone, to further development within the Zone and to carry out the purposes of the Zone as described in the Project and Financing Plan, and for the reimbursement of the City for such improvements in accordance with such Plans; now, therefore, AGREEMENT For and in consideration of the mutual promises, covenants, obligations, and benefits of this Agreement, the Zone, the Authority and the City contract and agree as follows: ARTICLE 1 GENERAL TERMS 1.1 Definitions. The terms "Agreement," "Authority, " "City," "Zone," "Zone Board," and "Tri-Party Agreement" have the meanings set forth in the preamble hereof, and the following capitalized terms shall have the meanings provided below, unless otherwise defined or the context clearly requires otherwise. For purposes of this Agreement the words "shall" and "will" are mandatory, and the word "may" is permissive. Act shall mean the Increment Financing Act, Chapter 311, Texas Tax Code, as amended. Authority Bonds shall mean any bond, note or other obligation issued or incurred in one or more series pursuant to Article V, secured by Tax Increment or funds deposited in the Revenue Fund, including refunding bonds. City Advances shall mean any funds advanced by the City pursuant to Section 5.1, and shall include any interest payable thereon. City Improvements shall mean the improvements described in Article 3 hereof. County shall mean Harris County, Texas. LPISD shall mean the La Porte Independent School District. Net Tax Increment shall mean the annual collections of the Tax Increment, less (i) any amounts required to be disbursed to LPISD for the payment of project costs related to educational facilities incurred directly by LPISD, and (ii) amounts reasonably required or anticipated to be required for the administration and operation of the Zone, including a reasonable operating reserve. Parties or Party shall mean the Zone, the Authority and the City as parties to this Agreement. Plan shall mean the final project plan and reinvestment zone financing plan for the Zone, as amended, as approved by City Council. Revenue Fund shall mean the special fund established by the Authority and funded with Tax Increment payments made by the City pursuant to the Tri-Party Agreement (which payments are attributable to incremental ad valorem property taxes paid on the Project and other properties in the Zone). Tax Increment shall mean funds deposited in the Revenue Fund by the City pursuant to the Tri- Party Agreement, comprised of funds received pursuant to those certain Interloca1 Agreements or similar agreements between the City, the County and the Zone; the City, and the Zone and; between the City, LPISD and the Zone. Taxing Unit shall mean individually and collectively the City, the County, and LPISD. 1.2 Singular and plural; gender. Words used herein in the singular, where the context so permits, also include the plural and vice versa. The definitions of words in the singular herein also apply to such words when used in the plural where the context so permits and vice versa. Likewise, any masculine references shall include the feminine, and vice versa. ARTICLE 2 REPRESENT A TIONS 2.1 Representations of the Authority. The Authority hereby represents that: (A) It is duly authorized, created and existing in good standing under the laws of the State and is duly qualified and authorized to carry on the governmental functions and operations as contemplated by this Agreement. (B) It has the power, authority and legal right to enter into and perform this Agreement and the execution, delivery and performance hereof (i) have been duly authorized, (ii) will not, to the best of its knowledge, violate any applicable judgment, order, law or regulation, and (iii) does not constitute a default under, or result in the creation of, any lien, charge, encumbrance or security interest upon any assets of the Authority under any agreement or instrument to which the Authority is a party or by which the Authority or its assets may be bound or affected. (C) This Agreement has been duly authorized, executed and delivered by the Authority and, constitutes a legal, valid and binding obligation of the Authority, enforceable in accordance with its terms. (D) The execution, delivery and performance of this Agreement by the Authority does not require the consent or approval of any person which has not been obtained. 2.2 Representations of the City. The City hereby represents that: (A) It is duly authorized, created and existing in good standing under the laws of the State and is duly qualified and authorized to carry on the governmental functions and operations as contemplated by this Agreement. (B) It has the power, authority and legal right to enter into and perform this Agreement and the execution, delivery and performance hereof (i) have been duly authorized, (ii) will not, to the best of its knowledge, violate any applicable judgment, order, law or regulation, and (iii) does not constitute a default under, or result in the creation of, any lien, charge, encumbrance or security interest upon any assets of the City under any agreement or instrument to which the City is a party or by which the City or its assets may be bound or affected. (C) This Agreement has been duly authorized, executed and delivered by the City and, constitutes a legal, valid and binding obligation of the City, enforceable in accordance with its terms. (D) The execution, delivery and performance of this Agreement by the City does not require the consent or approval of any person which has not been obtained. 2.3 Representation of the Zone. The Zone hereby represents that: (A) The Zone is duly authorized, created and existing under the laws of the State and is duly qualified and authorized to carry on the governmental functions and operations as contemplated by this Agreement. (B) The Zone has the power, authority and legal right to enter into and perform this Agreement and the execution, delivery and performance hereof (i) have been duly authorized, (ii) will not, to the best of its knowledge, violate any applicable judgment, order, law or regulation, and (iii) does not constitute a default under, or result in the creation of, any lien, charge, encumbrance or security interest upon any assets of the Zone under any agreement or instrument to which the Zone is a party or by which the Zone or its assets may be bound or affected. (C) This Agreement has been duly authorized, executed and delivered by the Zone and, constitutes a legal, valid and binding obligation of the Zone, enforceable in accordance with its terms. (D) The execution, delivery and performance of this Agreement by the Zone does not require the consent or approval of any person which has not been obtained. ARTICLE 3 THE PROJECT 3.1 The City Improvements. The City Improvements are intended to enhance the proposed implementation of a development within the Zone as a whole, as more fully described in the Plan. 3.2 City Improvements description. The City Improvements consist of improvements to (working on description) The City Improvements shall include all engineering, legal and other consultant fees and expenses related to such City Improvements. 3.3 Additional Prolects. This Agreement does not apply to any projects not specifically defined herein unless this Agreement is amended to provide for the design and construction of such additional projects. ..- ARTICLE 4 DUTIES AND RESPONSIBILITIES OF THE CITY 4.1 Construction manager. The City agrees to act as construction manager for any contracts entered into with respect to the City Improvements including all materials and services as and when required in connection with the construction of the City Improvements. The City will obtain all necessary permits and approvals from governmental officials and agencies having jurisdiction, and provide supervision of all phases of construction of the City Improvements so as to cause the construction to be performed in accordance with the Plan. 4.2 Design of the City Improvements. The City shall prepare or cause to be prepared the plans and specifications for the City Improvements. City Improvements shall be designed in accordance with City standards applicable to similar public improvements within the City. 4.3 Construction contracts. The Authority shall negotiate and award all contracts for the City Improvements from among contractors qualified and approved by the City and shall be the owner of the facilities until completion ofthe contract, subject to the duty of the City to act as construction manager in accordance with Section 4.1, above, and to guarantee all payments to the contractor, in accordance with Section 5.1, below. 4.4 Com{lletion. Upon completion of a contract for the construction of the City Improvements, the City shall provide the Authority with a final cost summary of all costs associated with such contract, and show that all amounts owing to contractors and subcontractors have been paid in full evidenced by customary affidavits executed by such contractors. The Authority shall immediately upon certification of the completion of any City Improvements convey them to the City for incorporation into the City public works system for all purposes. ARTICLE 5 PROJECT FINANCING AND FUNDING 5.1 The City Advances. (a) In connection with the construction of the City Improvements, the City agrees to provide sufficient funds as such become due for all costs thereof (the "City Advances"), constituting "project costs," as defined in the Act, including costs of design, engineering, materials, labor, construction, and inspection fees arising in connection with the City Improvements, all payments arising under any contracts entered into pursuant to this Agreement, all costs incurred in connection with obtaining governmental approvals, certificates or permits required as a part of any contracts entered into in accordance with this Agreement, and all related legal fees and out-of-pocket expenses incurred on behalf of the Authority in connection therewith. City Advances shall further include any amounts advanced by the City in connection with the administration of the Authority and the Zone and the design and construction of the City Improvements. (b) Interest on each City Advance shall accrue at a rate equal to the prime commercial lending rate of Chase Manhattan Bank, National Association, or any successor to its commercial banking activities, plus one percent per annum, compounded semiannually, whether such costs, fees, or expenses are paid or incurred before or after the effective date of this Agreement. Interest shall be calculated on the basis of a year of 360 days and the actual days elapsed (including the first day but excluding the last day) occurring in the period for which such interest is payable, unless such calculation would result in a usurious rate, in which case interest shall be calculated on the per annum basis of a year of 365 or 366 days, as applicable, and the actual days elapsed (including the first day but excluding the last day). ( c) The City shall act as guarantor of the obligations of the Authority with respect to any contracts awarded in the name of the Authority as provided in Section 4.3, above, and any such contract shall provide that the contractor may look for payment only to the City, or to funds provided to the Authority by the City specifically for the purpose of making payments to such contractor. The City agrees to timely make such payments to allow for payment in accordance with the terms of the applicable construction contract. 5.2 Repayment of City Advances. (a) In consideration of the construction of the City Improvements, the Authority shall begin repaying the City Advances, and shall continue such repayment until repaid in full, on the earliest date that funds are available from any of the following sources, and solely from such sources: (i) proceeds from the sale of the Authority Bonds, as set forth in subsection (b), and (ii) the Net Tax Increment, subject to the limitations set forth in subsection (c). (b) As provided herein, the Authority shall issue one or more series of Authority Bonds at the earliest feasible date, which Authority Bonds will be secured by a pledge of the Revenue Fund. The net proceeds of the Authority Bonds shall be deposited to a special fund of the Authority, and shall be used by the Authority to reimburse the City for the full amount (or such portion thereof as is deemed by the Authority as supportable by available Tax Increment as provided below) eligible City Advances, plus interest. Such Authority Bonds shall be sold within 120 days (or such other period as may be agreed by the Parties) of a written request therefor from the City; provided that the City's Net Tax Increment (based upon the tax valuation of the Zone as certified or estimated by the Fort Bend County Appraisal District, or its successor) expected to be generated with respect to available Tax Increment is sufficient to support the applicable Authority Bonds bearing interest at the then-current rate of interest as determined by the Authority's financial advisor for comparable issues, after taking into account the portion of the City's Net Tax Increment required to pay any outstanding Authority Bond issued for any purpose, including Authority Bonds issued to refund outstanding Authority Bonds. The City's Net Tax Increment is determined as the total Net Tax Increment, less any amounts that are used or to be used to determine eligibility of developers within the Zone for reimbursement of advances to the Authority for construction or anticipated construction of public improvements under the Plan pursuant to reimbursement agreements approved by the Authority, either now or during the life of the Zone. (c) In addition to the City's right to reimbursement from Authority Bond proceeds, upon request from the City, the Authority shall reimburse the City for City Advances, plus interest, from the City's Net Tax Increment (computed as above) accumulated in the Revenue Fund and available in accordance with the priorities described in Section 5.3, below. (d) At such time as funds are available to pay all or any portion of the City Advances made hereunder, the Authority shall hire a certified public accountant to calculate the amount due the City and prepare and submit a report to the Authority certifying (1) the amount due the City for the City Advances being repaid with interest calculated thereon, and (2) that funds are available to make such payment. Such report shall be approved at the earliest practicable time, but not later than 90 days after submission by the City of the records required therefor. The Authority shall make payment to the City within 30 days of approval of the auditor's report. (e) The Authority shall provide to the City, upon the written request of the City, and on the earliest date such information is available after the date of such request, certified copies of all statements of revenue and the sources of such revenue of the Zone and Authority the intended use of which is to verify the availability of funds for repayment of the City Advances, if applicable, under this section. 5.3. Priorities. Amounts deposited in the Revenue Fund shall be applied in the following order of priority (i) disbursement to LPISD, if applicable, for educational facilities in accordance with the Interlocal Agreement with LPISD, the City and the Zone; (ii) administrative costs of the Zone and the Authority; (iii) amounts pledged or required for the payment of outstanding Authority Bonds, including Authority Bonds in the process of issuance and refunding Authority Bonds, and (iv) payments to the City pursuant to Section 5.2(c), above. 5.4. Multiple developers and the City. The Authority has entered into other agreements with developers of land within the Zone for the financing of Zone Improvements, and may enter into others. It is the intention of the parties that each developer shall be responsible for the creation of Tax Increment required for its own reimbursement. In such case, the Tax Increment generated within a developer's project as defined in the applicable reimbursement agreement shall not be considered in determining whether sufficient Net Tax Increment exists for the issuance of Authority Bonds, or direct payment of available Net Tax Increment, for reimbursement of City Advances unless the applicable developer shall give its written consent thereto. The net proceeds of Authority Bonds issued to reimburse multiple developers and the City shall be allocated based upon the proportion of Tax Increment generated by each developer, or such other method as the developers may agree upon, and any unallocated Tax Increment shall be used for calculation of the City's Net Tax Increment and reimbursement of City Advances. ARTICLE 6 DEFAULT 6.1 Default (a) If any Party does not perform its obligations hereunder in substantial compliance with this Agreement, in addition to the other rights given the other Parties under this Agreement, such non-defaulting Parties may enforce specific performance of this Agreement or seek actual damages incurred by the City for any such default. (b) The Party alleging default shall provide written notice to the other party of such default, and the defaulting party shall have 60 days to remedy the default prior to the declaration of any default hereunder. ARTICLE 7 GENERAL 7.1 Inspections. audits. The City agrees to keep such records with respect to the City Improvements and all costs associated therewith as may be required by the Authority, the Zone, or by State and federal law or regulation. The City shall allow the Zone access to, and the Zone shall have a right at all reasonable times to audit, all documents and records in the City's possession, custody or control relating to the City Improvements that the Authority deems necessary to assist the Authority in determining the City's compliance with this Agreement. 7.2 City operations and employees. All personnel supplied or used by the City in the performance of this Agreement shall be deemed employees, contractors or subcontractors of the City and will not be considered employees, agents, contractors or subcontractors of the Zone or the Authority for any purpose whatsoever. The City shall be solely responsible for the compensation of all such contractors and subcontractors. 7.3 Personal liability of public officials. legal relations. To the extent permitted by State law, no director, officer, employee or agent of the Zone or the Authority shall be personally responsible for any liability arising under or growing out of the Agreement. THE PARTIES SHALL INDEMNIFY AND SAVE HARMLESS EACH OTHER AND THEIR RESPECTIVE OFFICERS. REPRESENT A TIVES. AND AGENTS FROM ALL SUITS. ACTIONS. OR CLAIMS OF ANY CHARACTER BROUGHT FOR OR ON ACCOUNT OF ANY INJURIES OR DAMAGES RECEIVED BY ANY PERSON. PERSONS. OR PROPERTY RESULTING FROM THE NEGLIGENT ACTS OF SUCH PARTY. OR ANY OF ITS AGENTS. OFFICERS. OR REPRESENTATIVES IN PERFORMING ANY OF THE SERVICES AND ACTIVITIES UNDER THIS AGREEMENT. The expenses of the Zone or the Authority with respect to this section or Section 7.15, below, shall be satisfied from uncommitted City Net Tax Increment. 7.4 Notices. Any notice sent under this Agreement (except as otherwise expressly required) shall be written and mailed, or sent by electronic or facsimile transmission confirmed by mailing written confirmation at substantially the same time as such electronic or facsimile transmission, or personally delivered to an officer of the receiving party at the following addresses: La Porte Redevelopment Authority 604 W. Fairmont Parkway La Porte, Texas 77571 Attn: John Joems Reinvestment Zone Number One 604 W. Fairmont Parkway La Porte, Texas 77571 Attn: John Joems City of La Porte 604 W. Fairmont Parkway La Porte, Texas 77571 Attn: City Manager Each party may change its address by written notice in accordance with this section. Any communication addressed and mailed in accordance with this section shall be deemed to be given when so mailed, any notice so sent by electronic or facsimile transmission shall be deemed to be given when receipt of such transmission is acknowledged, and any communication so delivered in person shall be deemed to be given when receipted for by, or actually received by, the Authority, the Zone, or the City, as the case may be. 7.5 Amendments and waivers. Any provision of this Agreement may be amended or waived if such amendment or waiver is in writing and is signed by the Zone, the Authority and the City. No course of dealing on the part of the Parties, nor any failure or delay by one or more of the Parties, with respect to exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, except as otherwise provided in this section. 7.6 Invalidity. In the event that any of the provisions contained in this Agreement shall be held unenforceable in any respect, such unenforceability shall not affect any other provision of this Agreement. 7.7 Successors and assigns. All covenants and agreements contained by or on behalf of a Party in this Agreement shall bind its successors and assigns and shall inure to the benefit of the other Parties, their successors and assigns. 7.8 Exhibits~ titles of articles. sections and subsections. The exhibits attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail. All titles or headings are only for the convenience of the Parties and shall not be construed to have any effect or meaning as to the agreement between the Parties. Any reference herein to a section or subsection shall be considered a reference to such section or subsection of this Agreement unless otherwise stated. Any reference herein to an exhibit shall be considered a reference to the applicable exhibit attached hereto unless otherwise stated. 7.9 Construction. This Agreement is a contract made under and shall be construed in accordance with and governed by the laws of the United States of America and the State of Texas, as such laws are now in effect. 7.10 Entire Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR. CONTEMPORANEOUS. OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 7.11 Term. This Agreement shall be in force and effect from the date of execution hereof for a term expiring on the date that the City Advances have been repaid in full, or January 1 of the year following the expiration of the Zone. 7.12 Time of the essence. Time is of the essence with respect to the obligations of the Parties to this Agreement. 7.13 Approval by the Parties. Whenever this Agreement requires or permits approval or consent to be hereafter given by any of the parties, the parties agree that such approval or consent shall not be unreasonably conditioned, withheld or delayed. 7.14 Counterparts. This Agreement may be executed in multiple counterparts, each of which when so executed and delivered shall be deemed an original, but such counterparts together shall constitute but one and the same instrument. 7.15 Legal costs. If any Party hereto is the prevailing party in any legal proceedings against another Party brought under or with relation to this Agreement, such prevailing Party shall additionally be entitled to recover court costs and reasonable attorneys= fees from the non- prevailing Party to such proceedings. 7.16 Further assurances. Each Party hereby agrees that it will take all actions and execute all documents necessary to fully carry out the purposes and intent of this Agreement. 7.17 Effect of Tri-Party Agreement. The obligations of the Parties hereunder are specifically conditioned upon the approval, execution, and effectiveness of the Tri-Party Agreement. [EXECUTION PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of , 2006. REINVESTMENT ZONE NUMBER ONE, CITY OF LA PORTE, TEXAS CITY OF LA PORTE, TEXAS By: Name: Title: By: Mayor Attest: City Secretary LA PORTE REDEVELOPMENT AUTHORITY By: Name: Title: DRAFT #5 UTILITY EXTENSION AGREEMENT THE STATE OF TEXAS: COUNTY OF HARRIS: This Development Agreement (this "Agreement '') is made as of , 2006 by and between the REINVESTMENT ZONE NUMBER ONE, CITY OF LA PORTE, TEXAS (the "La Porte Zone''), a tax increment reinvestment zone created by the City pursuant to Chapter 311 ofthe Texas Tax Code, as amended, acting by and through its governing board of directors (the "Zone Board''), LA PORTE REDEVELOPMENT AUTHORITY, a nonprofit local government corporation formed by and on behalf of the City of La Porte, Texas (the "La Porte Authority ''), and CITY OF LA PORTE, TEXAS, a home-rule city (the "City '') and 65 LA PORTE, LTD., a Texas limited liability partnership (the "Developer''). AGREEMENT 1. All references to The Project hereunder shall, for the purposes of this agreement, refer to the Southeast Sanitary Sewer Trunk Main and Lift Station Facilities anticipated by the Preliminary Design Report, T.C. & B. Job No. 13-14501-00l/Dated October 1997 together with any modifications or phased construction approved, in writing, by the City acting as construction manager for the, Zone Board, and La Porte Authority. The Project Engineer shall be the Professional Engineering firm authorized by the City to design the Project. 2. Developer is the owner of certain property in the City of La Porte, Harris County, Texas, identified as Lakes at Fairmont Greens; a Subdivision of 135.4 acres ofland Located in the W.P. Harris Survey A-30 and the J. Hunt Survey A-35, City of La Porte, Harris County, Texas. The property is further defined by "Exhibit A" attached hereto and incorporated herein by reference. City's utility main(s) presently do not extend to Developer's said property. Developer has requested the extension of City's utility main(s) identified as the Project to serve Developer's said property. 3. City hereby agrees to the design, construction and installation of the Project to said property commencing at the nearest existing utility main(s) of sufficient size and capacity. Thence along/through public rights-of-way and/or easements to and through said Developer's property. Provided, however, that should City not possess all necessary rights-of-way and/or easements to complete the Project, Developer shall be solely responsible for obtaining said additional rights-of-way and/or easements at no cost to City on City approved forms. 4. City agrees to advance funds to the La Porte Zone and La Porte Authority to pay all costs related to the design, construction and installation of said Project including necessary appurtenances in conformance with City's standards and specifications for said utility main(s). Costs shall include all engineering fees for survey, design, contract documents, bidding, construction staking, construction inspection, and preparation and submittal of DRAFT #5 2 final record drawings upon completion of construction. The La Porte Zone and La Porte Authority agree to reimburse the City for said costs according to terms and provisions of a separate agreement. 5. The Developer recognizes that the Zone and Authority have authorized the City to act on their behalf as the construction manager of the project. 6. It is recognized that the developer has retained the services of a Professional Engineering firm to design the infrastructure for the development identified as the Lakes at Fairmont Greens (Exhibit A). Furthermore, it is recognized that certain efficiencies exist in utilizing the same Professional Engineering firm to design the Project and all parties agree to utilize the same firm as the Project Engineer with the following stipulations. a.) Developer has provided to the City a copy of the Professional Engineering Services Agreement, scope of services and fee for services which have been approved by the City in a letter dated b.) Progress payments shall be made by the Authority jointly to the Developer and Engineer according to the fee schedule supplied pending successful completion of each milestone. c.) The City shall have final authority regarding any design decisions relating to the Project and any progress payments to the Developer and Project Engineer. 7. Upon final approval of the Design Drawings for the Project, the Developer shall have the Project Engineer furnish for the Project Contracting and Construction and Project Closeout Services as defined in Exhibit B to this agreement. Additionally, the City may require special conditions to be included in the project manual. The Developer agrees that the City shall have reVIew and approval authority during the bidding and construction phase services provided by the Developer's Engineer. 8. Subject to the provisions of this agreement, City hereby agrees to the design, construction and installation of the Project according to the plans and specifications to be prepared by the Project Engineer and approved by the City. Upon final approval of plans and specifications, Developer will solicit no less than three (3) competitive bids for construction of the project each from a contractor with demonstrated experience in construction of public utility mains, lift stations and related infrastructure. When received, the Project Engineer shall tabulate the bids and a copy of said tabulation shall be provided to City. The Developer shall recommend and City shall approve the selection of a contractor based on the competitive bids and City shall authorize construction of said Project. City, in its approval of the contractor, may take into account the overall costs for installation of other public infrastructure to serve Section 1 of the Lakes at Fairmont Greens. 9. The City has available $645,000 for the Project. In the event the Project costs, after bid opening, are estimated to be greater than the amount available, the parties shall have the following options: DRAFT #5 3 a) The City, the Zone Board, the La Porte Authority or the Developer may elect to pay the additional costs of the Project or any Combination of City, Zone Board, La Porte Authority or Developer may provide funding for additional costs for the Project. b) City may withhold approval and elect not to proceed with the letting of the contract and terminate this agreement as provided below. c) City may withhold approval and request Developer to re-advertise for bids for construction of the Project in accordance with the approved drawings and specifications in the same manner as before and under the same conditions. d) City may negotiate a reduced Scope of Work to be agreed upon by all parties prior to re-bid or acceptance of alternate bids for the Project. 10. Upon receipt of a "notice to proceed" the Developer shall authorize the contractor to construct the "Project." Progress payments shall be made based on monthly submittal of work performed less 10% retainage. Said monthly submittal shall be reviewed and approved by City and Project Engineer. a.) Progress payments shall be made by the Authority jointly to the Developer and the Contractor. b.) The City shall have final authority regarding any progress payments to the Developer and Contractor. 11. During construction the City shall have the right to inspect the contractor's work for compliance with the plans and specifications. Work not in compliance shall not be approved for payment. It is agreed and understood that the Developer shall be responsible for maintenance of the Project until final acceptance of the construction and installation of the Project and other public infrastructure installed by Developer to serve Section 1 of the Lakes at Fairmont Greens by City, at which time maintenance responsibilities of the Project shall be transferred to City. 12. Upon execution of this agreement and compliance with terms herein, Developer agrees to begin construction thereof as soon as the same may be let for contract as herein provided. Developer shall require the contractor under such contract to diligently pursue the construction ofthe project to completion. IN WITNESS WHEREOF, the Parties to these presents have executed this agreement in several counterparts, each of which shall be deemed an original, in the year and day first mentioned above. DRAFT #5 ATTEST: BY: NAME: TITLE: ATTEST: BY: NAME: TITLE: ATTEST: BY: NAME: TITLE: 4 65 LA PORTE, LTD DEVELOPER BY: NAME: TITLE: REINVESTMENT ZONE NUMBER ONE, CITY OF LA PORTE BY: NAME: TITLE: REDEVELOPMENT AUTHORITY, CITY OF LA PORTE BY: NAME: TITLE: ATTEST: BY: NAME: TITLE: City Secretary APPROVED AS TO FORM: City Attorney DRAFT #5 CITY OF LA PORTE, TEXAS BY: NAME: Alton Porter TITLE: Mayor 5 ~._-~~,/- D Foreign Trade Zone (FTZ) Request L \\1 ~h by IMS Worldwide on behalf of -,; Underwood Business Park 200+/- Ac and Port Crossing (formally Texas Import/Export) 300+/- Ac Note to City Council: These notes are meant to supplement previous information supplied on FTZ's. They can serve as an outline for discussion and questions during the May 22nd Workshop. Back2.round Council has been provided information in previous workshops regarding a request to establish a General Purpose FTZ for Underwood Business Park. Since then, Port Crossing has also requested a FTZ. o There are two types ofFTZ's - we will be discussing a General Purpose Zone o General Purpose Zone covers a specified area o Sub Zone - by contract with a specific company/dies when company leaves o If a company qualifies, remember there are several "Federal level" benefits The basic decision is to determine the following: o Does the City of La Porte wish to offer no objection to the creation of a FTZ? o Does the City of La Porte wish to participate in the local (qualified) exemptions offered in Foreign Trade Zones? If so, at what level_% Once a decision is made it is essentially final (unless the zone is abandoned at the Federal level for other reasons). Plus, there is the issue of future requests from other groups that suggests La Porte should adopt one policy for equity purposes. La Porte Internal Concerns/Relationships o Industrial District Agreements o Inventory assessed at 53% (remember negotiations coming up - and this is subject to change) o From a relationship perspective we have existing Foreign Trade Zones in the Industrial District and have offered no objection to creation based on fact that "no effect" on the IDA's. Therefore, there is no further local inventory exemption City is currently offering Tax Abatements o Current published guidelines in place (expire every two years) o Taxes on structures, land equipment, etc. are abated (above base value) by declining %-age over 10 years o Inventory is not abated o If City decision is to offer no objection and participate in FTZ by offering local exemptions o Then we could have a situation where there is both tax abatement (for 10 years) and the inventory in the FTZ being abated by L %) o Give incentives to attract what we want Last, the TIRZ area: o Collection of Taxes (Increment above base value) within the TIRZ is what fuels the TIRZ o Mr. Boring has indicated that he now represents the developer of Port Crossing Area approaches on FTZ's o The closest area cities that may be competing for Economic Development opportunities have reported the following: (No formal action to date by Deer Park or La Porte ISD) o Deer Park - no objections/no local inventory exemptions o Deer Park ISD no objections/no local inventory exemptions o Pasadena - encourages the industrial district as location for FTZ requests o Pasadena ISD (unknown) o LPISD already offers · Freeport Exemption and anticipates participating in the FTZ by offering 75% FTZ abatement increment. o Miscellaneous o Harris County - no objections/no local inventory exemptions o Chambers County (Cedar Crossing) · 65/205 Ac in FTZ - 100% participation (does not include Wal-Mart) o Goose Creek ISD (unknown) Timing Concerns (need confirmation) o June 12 - Regular City Council Meeting o Also, deadline for submission of items to the Port of Houston Authority Agenda o June 19 - Port of Houston Commission Meeting Date o Last date to consider approval of application by the Port of Houston to the Federal Government o July (?) - Applications due to the Federal Government If these schedules are not met, then it could be 6 months to 1 year before next submittal. Agenda Date Requested: F ST FOR CITY COUNCIL AGENDA ITEM Appropriation Requested By: Source of Funds: Department: Account Number: Report: X Resolution: Ordinance: Amount Budgeted: Exhibits: Tax Impact Analysis for Clay Development (prepared by Consultant for Clay Development) Amount Requested: Budgeted Item: YES NO Exhibits: General Information - Forei2n Trade Zones * Policy Statement for Foreign Trade Zone No. 171 * Pearland Economic Development Corp. * The Port of Houston Authority * Port Freeport * List of Foreign Trade ZoneslTexas Exhibits: Recent Articles: * Houston Chronicle: Deer Park International Trade Zone Proposed County Challenges Shell Oil's Tax Break Lawsuit Deer Park Council Holds on Trade Zone Plan ~/11/0b :r);;!p r~t SUMMARY & RECOMMENDATION A consultant representing Clay Development has asked to speak to Council regarding the possibility of establishing a Foreign Trade Zone. We have provided some general information for Council regarding Foreign Trade Zones. Note that the City has, in the past, issued a letter of support regarding foreign trade zones in our ETJ. They were issued based on the premise that there was no affect on local ad-valorem taxes and on our Industrial District Agreement. If Council wishes to consider establishing Foreign Trade Zones we would need to understand the effect of such declaration on other Economic Development Incentives, i.e. o The Industrial District Agreements o The Tax Abatement Guidelines o The Tax Increment Reinvestment Zone Included in that review Council may wish to consider the level oflocal participation (from 0-100%) which I understand can be set by a separate agreement. This would still allow companies to benefit from exemption or deferral from Federal duty. Action Required bv Council: Approved for City Council A1!enda Debra B. Feazelle, City Manager Date Tax Impact Analysis for Clay Development & Consulting, Inc. Underwood Business Park, Phase III (UBP) in Eastern Harris County The attached tax impact analysis is based upon job growth and real property investment generated by the location of the Clay Development & Consulting, Inc., (Clay Development) Underwood Business Park, Phase III (UBP) in the site located in Eastern Harris County. The inventory numbers and total investment are estimates based upon current plans for the facilities if the current companies interested in the project can be attracted to the project. The first assumption used in the analysis is that the project decision is made and construction begins by early 2006. The second assumption is that the taxing authority is in agreement on the Foreign-Trade Zone (FTZ or Zone) issue with Clay Development. The City of La Porte Park (the City) will see significant benefit with this project. It will increase the value of the land and will put a significant amount of investment into the land in terms of real property enhancement, buildings and equipment that will add to the tax roles of the City. The Federal exemptions on inventory tax collection at the facility will not negatively impact the City, since the inventory is not currently on the City's tax roles. Furthermore, an estimated 60% of the inventory is currently estimated to qualifY for the exemption. Clay Development is seeking a letter of support or a letter of "no contest" from the City in conjunction with the FTZ Expansion Application that will be required to establish the Zone Site for the facility. The overall net benefit to the City is anticipated to be an annual tax revenue stream of no less than $700,000 after the FTZ exemption is granted. Clay Development has identified that Zone status is a key factor for the marketing of these sites. If the letter of support is garnered from the City, then the development will locate in Eastern Harris County. A failure to realize a satisfactory FTZ status in Deer Park will make the marketing of the sites to companies versus neighboring Counties more difficult. This analysis does not include any of the indirect economic benefits of having this project, and the estimated 275 jobs it would create. I:\PROJ\Clay Development\Clay tax narrative City of La Porte.doc Tax Analysis Direct Effects of Underwood Business Park - No FTZ Exemption La Porte ISO and City of La Porte 2005 2006 2007 2008 2009 2010 Taxable Total Inventory $0 $7,500,000 $20,000,000 $20,000,000 $20,000,000 $20,000,000 Total Investment in Building and Equipment $0 $120,000,000 $120,000,000 $120,000,000 $120,000,000 $120,000,000 Total Value of Property - F1 (Real Com.) $2,042,700 $2,042,700 $2,042,700 $2,042,700 $2,042,700 $2,042,700 Real Property Tax Rate - City of La Porte 0.710% Total Impact on City of La Porte $14,503 $919,753 $1,008,503 $1,008,503 $1,008,503 $1,008,503 l:projlClay DevelopmenlfTax Impact (2) Tax Analysis Direct Effects of Underwood Business Park - With FTZ Exemption La Porte ISO and City of La Porte 2005 2006 2007 2008 2009 2010 Taxable Domestic Inventory $0 $3,000,000 $4,500,000 $4,500,000 $4,500,000 $4,500,000 Total Investment in Building and Equipment $0 $120,000,000 $120,000,000 $120,000,000 $120,000,000 $120,000,000 Total Value of Property - F1 $2,042,700 $2,042,700 $2,042,700 $2,042,700 $2,042,700 $2,042,700 Real Property Tax Rate - City of La Porte 0.710% Total Impact on City of La Porte $14,503 $887,803 $898,453 $898,453 $898,453 $898,453 l:proVClay DevelopmenUTax Impact (2) } I - Ir Tax Impact on City of La Porte - Underwood ~ 1500000rl-- ] 10000001 x 500000, III I- -~- o Years N ----- . Current Revenue . Revenue with FTZ Exemption o Revenue no FTZ Exemption ------ --- LIBERTY COUNTY ECONOMIC DEVELOPMENT CORPORATION P.O. Box 857 Liberty, TX 77575 PH (936) 336-7311 FAX (936) 336-9282 Issuance of Official Inventory Tax Policy for Foreign-Trade Zone No. 171 November 14, 2003 By this policy statement the Grantee of Foreign-Trade Zone (FTZ or Zone) No. 171 is outlining the definitions of the Inventory Tax Policy as outlined by the Foreign-Trade Zones Board (FTZ Board) Regulations 15 CFR 400.1(c). "...Foreign merchandise (tangible personal property) admitted to a Zone and domestic merchandise held in a Zone for exportation are exempt from certain state and local ad valorem taxes (19 U.S.c. 810(e))." By this definition, the regulations and the Grantee require a Zone Operator to be activated with The Bureau of Customs and Border Protection (Customs) inside an approved FTZ site. The Zone Operator must "admit" the merchandise into a Zone under Zone procedures outlined in 19 CFR 146, in order to access the Inventory Tax benefit allowed under the federa11aw. The inventory that qualifies for the Inventory Tax benefit is defined as those items that are foreign in their origin and domestic merchandise held for export within an activated Zone site. 1. Definition of foreign merchandise is any merchandise that is manufactured outside the United States. The evidence required for qualification under this definition is any one of the following: An original invoice identifying the country of origin of the merchandise or a copy of a Customs document that identifies the country of origin of the merchandise. The Customs document can be a Customs entry into the United States (CF3461), a Zone Admission form (CF214), Customs In-Bond Transportation Form (7512) or any other official Customs document that carries a statement of the merchandise's country of origin. 2. Definition of domestic merchandise held for exportation is any merchandise manufactured within the United States that is held in the Zone specifically for exportation outside the Untied States and its related territories. The evidence required for qualification under this definition is anyone of the following: A purchase order for a customer outside the United States or its related territories, a sales agreement showing the commitment to purchase the merchandise by a foreign customer, or any definable determination showing the merchandise is destined for exportation. It is the intention of the Zone Grantee to outline the processes and requirements for accessing the Inventory Tax benefit in order to eliminate any confusion with the Zone Operators and the local taxing authorities. The definitions and requirements enclosed in this document are taken from the FTZ Board Regulations as outlined above. This policy is subject to all Federal Regulations at all times. I:\PROJ\LBRTY\lssuanee of Official Inventory Tax Policy for FfZ .doe . Pearl and Eco!1omic Development Corporation - Foreign Trade Zones Page 1 of2 ...'--r -- /,----1 ., ......>:-- i ""'~h""'."": II I \; t" 'I ;, , . / J'i' - I City of Pearland POltegn TUM Zolvs lq~Dd _ fOTegn ~i!C:" Jure D Cly limits D ETJ ,e, ... .... (;) ,_..,.;:,~I,~_.... In August 2001, three business sites were designated in Pearland as part of a Foreign Trade Zone (FTZ): the Northern Industrial Complex, the Southern Industrial Complex, and the Bybee-Sterling Complex. The three sites, totaling nearly 1,500 acres, are part of FTZ No. 149 administered by Port Freeport. FTZ's are specially designated areas either adjacent or within the U.S. Customs port of entry in which merchandise is considered to be outside the Customs territory of the U.S. Importers may bring foreign merchandise into FTZ's and defer payment of duties until the items are shipped out to other destinations within the U.s. or avoid the duties entirely if the item is ultimately exported to another country. FTZ's allow companies to enhance their cost competitiveness with other foreign manufacturers. Cost saving benefits of being in a Foreign Trade Zone . Duty Exemption on Re-Exports - If merchandise is exported after being placed in a FTZ or shipped to another FTZ and then re-exported, no duty is ever paid. . Relief from Inverted Tariffs - If foreign merchandise is brought into a FTZ or sub-zone and manufactured into a product that carries a lower duty rate, the lower rate applies. . Duty Elimination on Waste and Scrap - No duty is charged on most waste and scrap from production in a FTZ. . No Duty on Rejected or Defective Parts - Merchandise found to be - defective or faulty may be returned to the country of origin for repair or to be destroyed. Whichever choice is taken, no duty is paid. . Duty Deferral - No duty is ever charged on merchandise while it is in a FTZ and there is no limit on the length of time merchandise may be kept in the FTZ. By deferring the duty, the FTZ user frees its capital for hi-+...-"\.- / /nTHTur np~rl ~nr1pr1{" r"r\rn/l-l nrnplRllC'lnpC'C' D pCAl1rt"PCl/~r\:rp'; rr-n'rrr:lrla7 rvnDI'Mt..,.....;ntt1..,,~Cl nco-. 1 1 11 t:;. I") (\(\ t;; Pearl and Economic Development Corporation - Foreign Trade Zones Page 2 of2 ,....-.. more important needs. · No Duty on Domestic Content or Value Added - The "value added" to a product in a FTZ (including the manufacturer using domestic parts and cost of labor, overhead, and profit) is not included in its dutiable value when the final product leaves the Zone. Final duties are assessed on foreign content only. · Relief from State and Local Ad Valorem Taxes - Foreign merchandise stored in a FTZ or merchandise held in a zone for export is not subject to any state or local ad valorem taxes. · Duty Savings on Sales to the U.S. Military, NASA, or other Governmental Agencies - Generally, no duty is assessed when Zone merchandise is sold to the U.S. Military, NASA, or other governmental agencies. To learn more about Foreign Trade Zones and Port Freeport, CliCk here. Copyright @ 2002 -2005, pearland Economic Development Corporation. All rights reserved. ,- l,thv I Imu"" np~rl ~nrlprl(' ('om/H om~/Rll~ine~~R e~ources/F ore; !mTr::lcieZon~/nrintthi~ ~'m 11 11 h/")()()'::; POHA I Foreign Trade Zone .- !r" I. '" ~ ~- t ,_, ~, r", ~ f r'i Tl 8ar; is Cl Tern PHA G2 -erminc,1 Pu' E!e\/3'" ;' !'JOOC' -'Sf'n\na\ \";vr:,,;~f 32 Jacin;-~,~ enTuna Care Te 8u,;~ f\/-' Foreign - rc;('v ZO:18 Bayport indusi(,-:1 Camp;"'- Terminal Project Adrnln\str?:tlon Economic impact Frequently As'~>;~j Questions Bid and ProDosal '~otices Glossary ""UI.llltl':. _.Jl,.1"1'111~1.:. ,--,- Page 1 of2 HE PORT or HOt ST()]'.; AU 11()HJTY f'<.'l t'M '.~ t \ FACI L1TI ES FOREIGN TRADE ZONE What is a Foreign Trade Zone? A foreign trade zone is a designated area in which foreign and domestic merchandise is generally considered by the U.S. government as being outside U.S. Customs territory. Merchandise may be brought into an FTZ without a formal customs entry, import quotas and most other import restrictions. Duties and excise taxes are not assessed until the merchandise enters U.S. commerce. P ',' The Port of Houston Authority is manager of a foreign trade zone which includes many privately owned and port-owned sites located throughout Houston and Harris County, Texas. The Houston Zone offers users special benefits. For example, customs duties on imported goods entering the FTZ can be delayed until the cargo is removed from the zone. No duty is paid if the merchandise is exported directly from the zone. Benefits of Using a Foreign Trade Zone Storage: Foreign and domestic merchandise may be stored within the zone for an unlimited period of time, thereby avoiding all duties and excise taxes. Product Handling: Merchandise may be opened, examined, assembled, mixed, cleaned, labeled or repackaged within a zone. Manufacturing: Products may be manufactured within a zone and may even include the combining of foreign and domestic merchandise. Exhibiting: Merchandise may be displayed, sampled or examined within the zone. Disposal: Waste materials and damaged or valueless merchandise may be destroyed within the zone to avoid duties. Advantages Offered at the Houston Foreign Trade Zone Houston offers a strategic link to interior U.S. markets. Its location makes Houston an ideal distribution point for shippers sending goods to the U.S. West and Midwest. Shipping overland to these areas is easy because of direct access to a vast network of interstate highways and railroads, plus the fact that Houston is served by numerous airlines, railroads and motor freight companies. If _ __ _ ..-L_.LL ____.L___ _.....~ 1___....._~_+.......I+r....-.~l~+~.......n/+...........o.~,..,........ "h+-..-..l 11 '1 flf""\^^~ FOli FreepOli Page 1 of2 ......--...~..._.... FERTILE GROWTH I A SHOVEL ,,- %" , '0 b 0"h =b>{,",V~' " ~ ~' '7~:::~:;if;' # '_ , . ffi '4* \";iltl'< w . % ./If ~ { , ~ t Jr ~ ~~ ,i1:~ w" R click to view a larger image Foreign-Trade Zone Nancy Stephens, FTZ Administral Stephens@portfreeport,cc 979-233-2667 x 43 Understanding Foreign-Trade Zones Foreign-Trade Zones (FTZs) were created to neutralize irrational U.S. tariff structures on products used by manufacturers operating in the United States and keep U.S. businesses competitive with businesses operating offshore or overseas. Though the benefits of operating in an FTZ vary, they are substant and are certainly worth investigating. The following information is meant to provide insight into FTZs in general and into FTZ #149 in particular. What Is A Foreign-Trade Zone? Authorized by the Foreign-Trade Zone Act of 1934, FTZs exist within the boundaries of the United States, but are considered to be outside of U.S. customs territory. These areas were designed to increase the use of Americal labor and to stimulate capital investment by allowing activity to occur within' U.s. prior to application of U.S. customs laws. The benefits of using an FTZ include duty deferral, lower duty rates, duty elimination on defective or damaged materials and waste or scrap materials, management of quota restrictions, and the possibility of tax and licensing savings. How Do These Benefits Apply To My Company? As one of the primary benefits of using an FTZ, duty deferral allows companiE to defer paying duty on imported merchandise until the merchandise leaves t FTZ and enters the commerce of the United States. For merchandise admitte. into and re-exported from an FTZ, no duty is assessed. An FTZ user that assembles or manufacturers in a zone can apply to the Foreign-Trade Zones Board for authorization to elect to pay duties on importE components either at the duty rate applicable to the components or at the dl rate applicable to the finished product. If the duty rate on the finished produ< is lower than the components, an FTZ provides lower overall duties. Quota restrictions can generally be managed by admitting goods into a FTZ. Over-quota merchandise can usually be held in a zone until the next quota period begins, and may often be used as a component part of a product that not over quota. Some marking restrictions can also be avoided by bringing goods into an FTZ. Export savings can be realized by moving domestic goods into an FTZ due to the fact that they are treated as already being exported upon entering a zonE Consequently, exporters can accelerate drawbacks by moving goods to be exported into a zone. Additionally, defective merchandise is treated as expon and subject to drawback. http://www.portfreeport.com/ftz/index.htm 11/16/2005 port Freeport Page 2 of2 Savings are also available through the exemption of state or local taxes on merchandise admitted in an FTZ due to federal preemption. For example: Stc and local ad valorem tax is not applicable to foreign origin or foreign destinat goods in an FTZ. What Does FTZ #149 have To Offer? FTZ # 149 exists within the boundaries of the Brazos River Harbor Navigation District and provides manufacturer-shippers with duty deferred, in-transit storage and assembly of products for import and no duty assessment on products re-exported. Sites within the district have been set aside for this purpose and general light manufacturing. Available real estate and warehous space, combined with an energetic and skilled local labor force make FTZ # 1, an excellent choice for manufacturers exporting to other countries or serving U.S. markets. To see a use case study of the Foreign-Trade Zone, click here. http://www.portfreeport.com/ftzlindex.htm 11/16/2005 List of Foreign-Trade Zones by State Page 1 of4 - hT:\i 2 I (I TEXAS FTZ No. 12 McAllen Hidalgo/Pharr Grantee/Operator: McAllen Economic Development Corporation I,............). . --'" -- \ 6401 South 33rd Street, McAllen, TX .-._~_.,_...,..,-- ... 78501 Joyce Dean (956) 682-2875 Fax (956) 682-9111 FTZ No. 36 Galveston 36A Deepsea Flexibles Houston Operator: Port of Galveston P.O. Box 328, Galveston, TX 77553 Diane Falcioni (409) 766-6121 Fax (409) 766-6107 Grantee: Board of Trustees of the Galveston Wharves HZ No. 39 Dallas/Fort Worth 39B GM Dallas/Fort Grantee/Operator: Dallas/Fort Worth 39C Sanden Worth International Airport Board 39E Fossil Partners P.O. Drawer 619428, DFW Airport, TX 39F Zale Corporation 75261-9428 39G Maxtor Corporation Michael Pyles (972) 574-3214 39H American Eurocopter LLC Fax (972) 574-8069 391 Turbomeca U.S.A. HZ No. 62 Brownsville Brownsville/Los Grantee/Operator: Brownsville Navigation Indios District 1000 Foust Road, Brownsville, TX 78521 Jo Lynne Saban (956) 831-4592 Fax (956) 831-5353 HZ No. 68 EI Paso EI Paso Grantee: City of EI Paso 501 George Perry, Suite i, EI Paso, TX 79906 Jose Quinonez (915) 771-6016 Fax (915) 772-2491 Quinonezji@elpasotexas.gov www.elpasotexas.govlftz FTZ No. 80 San Antonio 80A Bausch & Lomb San Antonio Grantee: City of San Antonio Economic 80B Colin Medical Instruments Development Department 80C Friedrich Air Conditioning P.O. Box 839966, San Antonio, TX 78283 800 R. G. Barry Carmelina Davis (210) 207-6529 Fax (210) 207-8151 carmelinad@sanantonio.gov www.saftz.com ~ HZ No. 84 Harris County 84C DuPont Houston Grantee: Port of Houston Authority 84E Gulf Coast Maritime 111 East Loop North 84F Valero Refining Houston, TX 77029 84H Shaffer, Inc. Jack Beasley (713) 670-2604 841 Tuboscope Vetco Int'I Fax (713) 670-2564 84J Shell Oil Co. 84K Dril-Quip 84L Tadiran Microwave Networks 84M Hydril 84N Crown Central Petroleum 800 EXXON Mobil 84P Lyondell-CITGO 84Q Equistar Chemicals 84R Michelin North America, Inc. HZ No. 94 Laredo I I La,edo Operator: Laredo International Airport Operator of Foreign-Trade Zone No. 94 5210 Bob Bullock Loop, Laredo, TX 78041 http:// ia. ita. doc. go V / ftzpage/l etters/ ftzlist.html 11/18/2005 List of Foreign-Trade Zones by State Page 2 of 4 LJ Humberto Garza (956) 795-2000 I ILJ Fax (956) 795-2572 Grantee: City of Laredo FTZ No. 95 Starr County Rio Grande Grantee/Operator: Starr County Industrial City Foundation P.O. Box 502, Rio Grande City, TX 78582 Hector Soliz (956) 487-2709 Fax (956) 716-8560 FTZ No. 96 Eagle Pass Eagle Pass Operator: Maverick Co. Dev. Corp. P.O. Box 3693, Eagle Pass, TX 78853 Marga Baker (830) 773-6166 Fax (830) 773-6287 Grantee: City of Eagle Pass FTZ No. 113 Ellis County Dallas/Fort Operator: Trade Zone Operations, Inc. Worth 1500 North Service Road, Highway 67 Midlothian, TX 76065 Mark Nichols (800) 235-7378 Fax (949) 706-7994 Grantee: Midlothian Trade Zone Corporation FTZ No. 115 Beaumont 115A Bethlehem Steel Port Arthur Grantee: Foreign-Trade Zone of 115B EXXON Mobil Southeast Texas, Inc. P.O. Drawer 2297, Beaumont, TX 77704 David C. Fisher (409) 835-5367 Fax (409) 835-0512 FTZ No. 116 Port Arthur 116A Motiva Enterprises Port Arthur Grantee: Foreign-Trade Zone of 116BATOFINA Southeast Texas, Inc. 116C Premcor Refining Group P.O. Drawer 2297, Beaumont, TX 77704 1160 US DoE Strategic David C. Fisher (409) 835-5367 Petroleum Reserve Fax (409) 835-0512 FTZ No. 117 Orange Port Arthur Grantee: Foreign-Trade Zone of Southeast Texas, Inc. P.O. Drawer 2297, Beaumont, TX 77704 David C. Fisher (409) 835-5367 Fax (409) 835-0512 FTZ No. 122 Corpus Christi 122C Trigeant, Ltd. Corpus Christi Grantee/Operator: Port of Corpus Christi 1220 Baker's Port Authority 122E Berry Contracting 222 Power Street, P.O. Box 1541 122H TOR Minerals Inti Corpus Christi, TX 78403 1221 Citgo Refining & Hilda Boyce (361) 885-6187 Chemicals Fax (361) 882-7110 122J Valero Refining Co. 122K Sherwin Alumina Co. 122L Flint Hills Resources LLC 122M Valero Three Rivers Refinery 122N Equistar Chemicals 1220 I nternational Resistive Company 122P Kiewit Offshore Services FTZ No. 149 Freeport 149A BASF Freeport Grantee: Port of Freeport 149B DSM Nutritional Brazos River Harbor Navigation District Products, Inc. P.O. Box 615, Freeport, TX 77542-0615 149C ConocoPhillips Phyllis Saathoff (979) 233-2667 x4258 1490 Seaway Crude Pipeline Fax (979) 233-5625 149E BP Products North America http://ia. ita. doc. go vi ftzpage/l ettersl ftzlist.h tml 11/1812005 List of Foreign-Trade Zones by State Page 3 of 4 I II 1149F Equistar Chemicals I I 149G Dow Chemical FTZ No. 150 EI Paso EI Paso Grantee: Westport Economic Development Corporation 1865 Northwestern Dr., EI Paso, TX 79912 Brent Harris (915) 877-4300 FTZ No. 155 CalhounNictoria Counties 155C Alcoa Port Lavaca- Grantee: Calhoun-Victoria Foreign-Trade Point Comfort Zone, Inc. P.O. Drawer 397, Point Comfort, TX 77978 Robert Van Borssum (361) 987-2813 Fax (361) 987-2189 FTZ No. 156 Weslaco Progreso Grantee: City of Weslaco 500 South Kansas, Weslaco, TX 78596 Bernard Rodriguez (956) 447-3401 Fax (956) 973-3128 FTZ No. 165 Midland 165A ConocoPhillips Midland Grantee: City of Midland c/o Midland International Airport 9506 Laforce Blvd., P.O. Box 60305, Midland, TX 79711 Tommy Martin (432) 560-2200 Fax (432) 560-2237 FTZ No. 168 Dallas/Fort Worth 168A B&F Systems Dallas/Fort Operator: Foreign Trade Zone Operating 168B Ultrak Worth Co. of Texas P.O. Box 742916, Dallas, TX 75374-2916 (Ms.) Lou Thomas (972) 915-0083 Fax (972) 929-7228 Grantee: Metroplex International Trade Development Corporation FTZ No. 171 Liberty County Houston Grantee: Liberty County Economic Development Corporation Foreign-Trade Zone 171 P.O. Box 857, Liberty, TX 77575 John Hebert (936) 336-7311 Fax (936) 336-9285 FTZ No. 183 Austin 183A Dell Computer Austin Grantee: Foreign Trade Zone of Central Corporation Texas, Inc. City of Round Rock 301 W. Bagdad Ave. # 210 Round Rock, TX 78664-5835 Joe Vining (512) 218-5420 Fax (512) 218-3286 FTZ No. 196 Fort Worth [Dallas/Fort Grantee: Alliance Corridor, Inc. Worth c/o Hillwood Development Corporation 13600 Heritage Pkwy., Suite 200 Fort Worth, TX 76177 Tom Harris (817) 224-6008 Fax (817) 224-6060 FTZ No. 199 Texas City 199A BP Products North Houston Grantee: Texas City Foreign-Trade Zone America Corporation 199B Marathon Petroleum P.O. Box 2608, Texas City, TX 77592 Company LLC Doug Hoover (409) 643-5927 199C Valero Refining Fax (409) 942-1073 199D Seaway Crude Pipeline Co. http://ia. ita. doc. go vi ftzpage/l etters/ftzlist.htrnl 11/18/2005 List of Foreign-Trade Zones by State Page 4 of 4 -- ."- I II 11199E ISP Technologies II I D FTZ No. 234 Gregg County 234A Eubank Manufacturing Shreveport- Grantee: Gregg County, Texas Enterprises, Inc. Bossier City 269 Terminal Circle, Longview, TX 75603 234B Letourneau, Inc. Shelby Keys (903) 643-3031 Fax (903) 643-7371 FTZ No. 246 Waco Dallas/Fort Grantee: City of Waco, Texas Worth c/o Economic Development Division Greater Waco Chamber of Commerce 900 Washington Avenue, Suite 501 Waco, TX 76701 Sarah Roberts (254) 296-0405 Fax (254) 296-2505 FTZ No. 251 Edinburg Hidalgo/Pharr Grantee: City of Edinburg 210 W. Mcintyre Street, P.O. Box 1079 Edinburg, TX 78540-1079 John Milford (956) 383-5661 Fax (956) 383-7111 FTZ No. 252 Amarillo Amarillo Grantee: City of Amarillo c/o Amarillo Economic Development Corporation Bank One Center, Suite 1503, 600 South Tyler Amarillo, TX 79101 Alan Taylor (806) 378-3012 Fax (806) 378-9394 FTZ No. 258 Bowie County Shreveport- Grantee: Red River Redevelopment Bossier City Authority 107 Chapel Lane, New Boston, TX 75570 Duane E. Lavery (903) 223-9841; Fax (903) 223-8742 FTZ No. 260 Lubbock Lubbock Grantee: City of Lubbock Lubbock International Airport Reese Technology Center 5401 North Martin Luther King Boulevard Lubbock, TX 79403 Warren Warner (806) 775-2048 Fax (806) 775-3133 D FTZ No. 265 Con roe (Montgomery I IHou~n County) Grantee: City of Con roe 300 W. Davis Street, Conroe, TX 77305 Tommy Metcalf (936) 539-4431 http://ia.ita.doc.gov/ftzpage/1etters/ftz1ist.htm1 11/1812005 t ~ HDUSTD~HRDNICLE :Z3+ I . ; '.':f I I I' 'j L "' . ...... ....~ .. '.' ,j ~, .~ ."'~"'.. ., , ;' ,';'~ ~. ~'.t:' ,~';';.">';'01'\T . . I "~.~1;I'I/ '<;{': i; ]:!~, ',l .:l.' -: t-.,: P;~lI~Uets.I~~~i:~~. ~3~(';~J~~lsll'I' ,s,enOumq JQI.II/Il>'t$'llUliljWii.~.'jiito!i'rt$ . . \ '- n . 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A~Th~ Terr3:ce, :'take :~~?f""'~~~~you~~~;take ~1rr'i!:~~~~~~;~~~ ' .;. f ?~.i .t1~i~~; .;~;.~ :_~:.~ "', i -~~~~~.~;.~.;;~~ .,-~~:;~~~ ) ) ) i ~3:;~ ,'., 't . . )USTD~HRDNICLE ~1~~ii{:'2;}::-'\-) ~~f4tut~ by ::'2(jd:ror~lgn the 'United "t; ! I I r i ' I , j I ! i I I ! i I Lre "'4cpating foreign'trade ia11o~piisi- ", i#eriiation- ~~~~S~a:: CouJdi ~on! :.~ _. .' . . '_ io,~, , proval"pf exemptitig 'soDie busi- nesses from local t3.i,ationi' -\ '" "I think it's;'a')l?ai1..'a~al,for . Deer Park. Once w~' do t1:Ms; it's irrevocable and. we i can"t go' '-....... ,..~7:, '..,? i I , I ' , i I! Ii , I ! I ; 1 I' 11 'I II : II I I I j ';.1'"' <'1l' " r ': If t;-;'~~'/t:I:'-' : 1,1 npoJd s'a5ri~~ .' , \: f . ' OPl:IIIIiI'~_'''''''''I'' iIiIi Q;.-h;t:lGni"ArtiA1 p'u~:a;>~l!!S!S~~.\I~!lIt\.'l!wr ~!\':""".~'1'. .~: r. ."/. , .,' '. Il!UOS/ad pre~~(IlS!lBU3I4S!V.l!ds) . 'Sle~llu!llq JO! J4/H$'llufuii!lijallii'j47og!r~$ ,.1 -, , , '(JU/RJt) llUlUIl!JDIM 7.' ~e b~~~7:!;:j:;:'~:'_i:. .)~...~ ,~\j,,~.~iii?r$"-;":~!{:p;";1_~:'~~ ~. 10 InO pue9! ijOnpOJd.9W Qj p9J!n~J ~ ~~*'''!p~t~ :' . "saU!ladJd puli',sm:l [Il!l ,1ilI:xuI'SI9$A'SliUJ!fWOJi pu'e' Olpa; HoustonChronicle.com - Harris County challenges Shell Oil's tax break lawsuit ,. .. Page 1 of2 (ik: [ore'<2?- {fado. ~ HQuslQl1I:hronicle.com -- http://~.HQustQnChI"Qnick.co~ I Section: Houston & Texas Feb. 7, 2006, 11:50PM County challenges Shell Oil's tax break lawsuit Officials dispute firm's claim that fees were unfair By BILL MURPHY Copyright 2006 Houston Chronicle A county official assailed Shell Oil Co. on Tuesday for suing to avoid paying $2 million annually in county taxes on its local inventory. Commissioners Court authorized the county attorney's office to seek to intervene in Shell's lawsuit to try to prevent the tax relief. ADVERTISEMENT "SjJ.ell Oil doesn't think they have to pay taxes," Commissioner S ; Radack said. "We have hospital district costs going up, and we have all kinds of costs going up. We expect more from our corporate citizens like Shell." In 2004, Shell sued the Harris County Appraisal District, looking to revisit a 1993 agreement requiring it to pay county taxes on oil and other inventory in a foreign trade zone at its Deer Park complex. It is this suit that the county now will try to enter. Shell spokeswoman Destin Singleton wrote in an e-mail, "Shell has always paid its share of taxes. In 2005, Shell and related companies paid more than $50 million in property taxes to Harris County and other taxing jurisdictions within Harris County." Shell paid the taxes at the center of the court dispute and is arguing that it should receive a refund because the assessments were "unfairly applied and unlawful," Singleton wrote. Shell received a county tax bill of $1.5 million on its $300 million inventory in the zone two years ago. Its bill rose to about $2 million last year, County Judge Robert Eckels said. The trade zone was created in 1993 after the county sponsored Shell's application for the zone in exchange for the company's commitment to pay county taxes on inventory within it. The sponsorship was needed to get federal approval fo- zone, which provides certain tax breaks to trade-related activity and property. As a matter of policy, the county has protected its tax base by declining to sponsor applications for firms that won't agree to pay county taxes on inventory. http://www.chron.com/cs/CDA/printstory .mpl/headline/metro/364 3551 2/9/2006 .HoustonChronicle.com - Harris County challenges Shell Oil's tax break lawsuit Page 2 of2 . . The city of Deer Park and the Deer Park Independent School District do not receive tax payments on such inventory. The agreement with Shell was to stay in place as long as the county did not let competing oil firms avoid paying taxes on.inventory in foreign trade zones created after Shell's pact, Harris County Appraisal District Chief Appraiser Jim R .lson has said. Shell argues that a competitor, Valero, is not paying county taxes on its foreign trade zone inventory, Eckels said. The appraisal district contends that the agreement allowing Valero not to pay taxes on its inventory predates the Shell pact, Robinson said. That agreement was in place before Valero bought the property and, as a matter of law, remains intact after a sale, Robinson said. The lawsuit "is just a blatant abrogation by Shell on the agreement that they made," he said. "I don't object to a company making money. But I think they are acting in bad faith on this." bill. murphv@chron.com HoustonChronicle.com -- http://www.HoustonChmnicJ~,C9Jl11 Section: Houston & Texas This article is: http://www.chron.com/disp/story.mpl/headline/metro/3643551.html http://www.chron.com/cs/CDAlprintstory .mpl/headline/metro/3 643551 2/9/2006 ) ) HOUSTON?icHRDNICLE Z3 ** THURSDAY, FEBRUARY 16,2006 · chron.com '.1.:"., I DEER PARK I GAlE;NA PARK I SOUTH HOUSTON ! JACINTO CITY I CHANNElVIEW I SHOREACRES .. Deer. Park b6un~11'11i0~Cls.jj~~f(on trade zone plan 1 . ' .-' '~ . '" ,- ," " :"', ,:',' ".:.:',' ,., :'''..':.,,'. ," '~-':. <, - <. Shell OilCo.'s' suit against. county could sink deal . fj'; By HEATHER LNICHOLSON CHRONtCLE COItRESPONDEN.T , ,'''':' ',.':,', , .... A.recent.' lawsuit . between Shell Oil Co.andliarris County . has the citypf Deer Parkfeeling squeamish about granting more foreign trade zones. The .Feb. 7 announcement that Shell wants to rescind its contract to pay $2 million, in taxes to tpe Harris County Ap- praisal. Distri~t is having some. impact on whether Deer Park will create a foreign trade' zone for Clay Development & Con- sulting Inc., city officials said. Deer Park city officials began discussing the. idea of a foreign trade.zone)n January~. The pro- posal'would allow businesses dealing. with overseas trade. to . setup sh()p in Deer Parkandnot paylocaUaxes on their prod.. ucts. some wary of plan From the beginning, some' c()un.cilmembers were waryofa' 'plall to waive.a tax exe111ptipn, an.dnews of Shell's lawsuit with , the county only .multiplied the city'sworries.., .'. ..Ii "I think the decision we need to make wouldbe.'a loteasier if this Shell thing wasn't going on. We still got some homework to do on this'one,".saidDeer Park MayorWayne Riddle.. . " .The Shell. refinery in.peeri Park's'industrial district is part of a 1993 foreign trade zone' agreement. Under that agreement, the ttD()n'tthrbwthe bhby out of the bath water; }ffe' arei1J.a poten,fial situation to get a rather largebusitu~$sProposition in Deer Park. " '. . -DENTON MCDUGLE. " Deer Park City Council . - . . -...... . " .. .. .. .." '- . \ ',_.,:.":,' "....'"..- ,_'," '0, ' '_' co~nty.would.,only.sP6nsotthe ;~()n~if ~hellagreedto con.tinue. paying taxes.;". ... Granting a'foreign trade zone cary beamajor,~sset forcompa- .' '. nie~ ~ince it providesc~rtain ,federal and local tax bl'eakson their)1l'1P()rted and, exported property.;', '..;' . ......, . It'haslongbe.enthe c?~nty' s policynof to grant tax ex~tiip- tions as away to protect its tax base.', " . . "It may be worth further cpnsideratioh. We probably KEY TO TH,E I R . 1 {"co" Illilifli"i,;;.-,i'.(.;,!lIJj,',:, .1JII1",i-,:..'/iiflfif1oll'.-"-;'rncr0"i.WJIVii,'"IfIiili!JIJ_'":(!~':.'!fi!i'i'" ;",yliii';':':":!ifiJ!!.'y"i,~','i,i,''&i i/i;,-,r~:!,"';nfij_ .. .. ','.'."-;,_'if.:'0i;.~."i.'ii,'2';.i'_~":.". '."...,: J.!I;';"'?~~.ifl( .:!Ji'!lidi,::,'i,';;~~i'!t:"'::"):.>,'i:'__':ii/I!':ii:'~' need to take more time to, see what exactly we, can do to un- derstand more about the impact of a foreign trade zone, not only on us but businesses, too," said Deer. Park City Manager Ron Crabtree. Clay Development. has ap~' proached both Deer Park and La Porte. about the new foreign trade zone agreement. Both cit- ies are. in preliminary discus- sions. Clay is hoping to build a . 100,000 to 200,000 square- ,- foot building and then. rent ou~ the facilitie.s to different firms. ", It would be more attractive to incoming businesses if local, taxes were exempt, said Steve. Schellenberg, vice president..o~ business development at IMS< Worldwide. " AttraCtion for importers ,I "I'd like to set some of the mystery about foreign trade' zones to rest. Importerswhd look at Houston see this as a ~e~ sirable location," Schellenber~ said. .' ,."We're asking for some~ where between zero to 100per-' cent, of (tax)exetnption," he said. . ..j Schellenberg said La Porte, Independent School District: has already agreed to give a 70 percent tax . exemption in sup- Please see PACT, Page 5 I:I....';....L&- ..... 'ThUrsday, February 16, 2006 NEIGHBORHOOD NEWS PA~T: Deer Park council TAX: Bay town ponders ~u1ls trade plan further for funding public sa CONTINUED FROM PAGE 1 . . $1.4 million in revenue to the port of the. zone, ,but admitted~ity. ... ", . mat Harris County has denied '~'What we have with Shell su~h an exemption and s~ic~ to expires at the end of this year. It its policy of zero percent. .... ..' wj11hav~tp be renegotiated Jan. -"Harris. County only sup" 1, 2007. There is $1.4 inillion at ports foreign trade zones if they risk with the negotiation of this get to tax all the productsina contract," he said. foreign.trade zonetlte said. .. CouncU asked Schcl,lenberg But Schellenberg's presE!nce for his opinion on 'the Shell law- as a proponent of Clay's opera-suit and wanted to know if Clay tion" at the. Feb. 7. city council Development could provide any meeting did little to quell some assurances they wouldn't also counciltnembers' concerns. rescind years from now. . ,. ,.councilman CharlesGarri- "With me not being able to son was once again the most read the arrartgements (be-. skeptical to grant.a .!OO percent tween Shell and the county) I tax-exempted . foreign trade am on the cautious side to giv- zone.' 'ing a flon conunent on that. . "Tome, it doesn't sound like it's in the best interest to the parties involved," he said.' . Councilman Denton McDu- gle . voiced his support in the matter. He said he believes Deer Park passing on the foreign trade zone would ensure more businesses flock to other cities willing to grant such .. exemp- tions. "Don't throw the baby out of the bath water. We are in a po~ tential situation to get a rather large business proposition in Deer Park," McDugle said. centrad with' COunty "What is the future of this?" he- said. "The countyls' und.er cont"-~ with Shell saying they vgqu . )ay.t~e,s.. ptla' foreign tradezone:They'vedonethat aI!:these years, except,n()w Shell is contesting' the '. agreement. They are tryirig to get out of that ~eement. "It would appear the attitude Shell had a few years ago has to- tally changed," Garrison said. Shell has stated publicly that the reason it wants a refund on its county tax payments is be- cause a competitor, Valero, is e~empt. However, VCl1ero's for- eign trade agreement was estab- lished before Shell's. Deer Park will re-exatnine tlwir current zone agreement with. Shell' when it expires in W07. '^.Crabtree said Shell brings in A win-win situation "The way I continue to look at this is it has got to be a win- win situation for us. We can still tax on land, machines, build- ings - the only thing we're giv- ing UP' are items. importing and exporting '.in the' foreign' trade zone." SERVING OUR ~OUNTRY i:ody Blair, 17, Of La Porte has :oined the U. S.Navyunder :he Delayed Entry Program. fie is the son of Reed and rhe"'- Blair of La Porte. He is l sel. at La Porte High ;Chool and is scheduled to lttend boot camp July 13. After lOot camp he will receive urther training to become an \viation Ordanceman. :rancisco Guerra Jr. of South : many job flelds. I I I i Jeffrey Newcomb Jr. of !Pasadena has joined the i Navy through the Delayed ! Entry Program. He is the , I son of Jeffrey Newcomb of ! Pasadena and Terri O'Kelly i of Irvington, Ala. He is i attending his senior year I at C.E. King High School. I He is scheduled to attend i boot camp at Nav~ Trai~g CONnNUEDFRO~ PAGE 1 . 'samem~~prig,. fire. Chief'Shon Blake addressed.thecouncil about a. proposed five-year bud - getfoc:' a FireControl,preven- tion. .' and' Emergency Medical SerVIces Djstrict. also iJ fleers , sible t to ail< mone: Jac the b, cIDc y ReI trainil .' parlm it ylOt . overti ~ayto1 intov ,Porte' could be put to a variety of uses, frompersonn~lto capital equip~ ment,jackson told the counciL Jones said that.;ifapproyed by voters,. nine of the}O.. extra officers funded by the new dis~ trict would be u~edon the night shift, inutiiform,!lS'a ~~hotsppt' Building, amblllaDees eyed team" or to auginent routine P<l~ The fire corttl;"ol district bud- trol.. ' . . . .... . . .' ..' get )Vould inc1tldefunding for a' . The 10th officer would be newfrreflghters' training build- added to BaYtown'stwp-person ing,fp-efighting~quipment, am- crewthatE:lnforces state trans- bulance,sand improved conunu- p~rtation.' regulations; Jones nicationt~chnology. satd.., ..... ..... .., . ..................... , Each district'sproposedflve- ,. Based on feedback from resi- year b9dg~i is<$3.75 million, dents, Jones said hetMughf' wltichwouldbe funded by an most peoplew,?,uld prefertos~ .... Cidditional1!B-centsales tax for extra taxrevenuespentonaddi- each distJic::tif approved by vot- tional. ,offlcers, . rather .than . ~rs.,. ..'. ., equipment upgrades;, ' , ,The proposals arlscheduled "This would help US a.ddress. tobe discUssed at a public hear- burglary of vehicles and robber- ing cit 5 p.:in.Feb~23 at CitY-Hall, ies," the chief said.~ItwoWd . 'i401'Market St. . give us more flexibility~.. n" At the ertdqfthe hearing, the Mayor 'Calvin Mundinger pr(}p()salS. .arc"expected to be said that although he previously voted on by.each district's tem- had doubts about payingsala~ porary board, City Manager ries with' funding of limited du- Gary Jackson ~aid. ration, he liked the proposal for The City Council is serving 10 extra offlcers. .... .'. .. . . as .' each . district',s temporary' "I'm proud of this.proposal," Qoard. The council will appoint.. the maYor said. "I thinkthe ho~:- separClte, permanent boards for spot approach is valid. ~1 ..' .... '. thenvodistricts if voters ap- Councilman Ronnie Ander- .. prove s.uestax increases to fund son, who also voiced s~pport for the districts. .' the proposal, said he thought . Proposals to. create the two part of the crime control district safety districts will be included money' . should go tOWard. an on the May 13 municipal e1ec- anti-gang task force. . tions ballot, if approved by City "It's beelliny belief for sev- ~ouncil in its role as temporary eral years tha.twe're seeUJ:g a re- board. stirgence in gang activity," By state law, the revenue Anderson said. from the two proposed districts Councilman Don Murray, . Cost-. Mu goodi analys ity, wI . eratiol . nearly , years. : ;Ba~ Crime DiStril Contr< ., The distric years' expire vQters Be! contrc tax in mum $1. As the Ih 2004 tax fm carol.l CIlronicle subscril Next time you goon vacation, consider to The CIlronicle's Adllpt-A.:class pro! schools to help teach a whole range c out, your donation still covers requesl X\to\\\\i\6 a lesSon ation for schools The 1 Cii CaIl.713-220-7211 or 1-888-220-7211. bUI ~,,,,.-;,~- ~:.,..,',,~{,,'~_',}W~H*,.A@WN>>:~~ ~~"","~;~_\: <-:,.;;;,.~ :<i:' ~ PRESENTATION TO BE MADE AT MEETING