March 05, 2004
Hitch in Enron building sale

Uh oh. The sale of the Enron building has hit a snag over promised tax abatements.

ChevronTexaco spokesman Mickey Driver said Thursday that the San Ramon, Calif.-based oil giant assumed it would get millions in tax breaks from the city and Harris County before finalizing the purchase of the property at 1500 Louisiana.

White has forwarded to City Council a proposed 10-year tax abatement on $64 million in improvements and furniture that would reduce the company's tax payments to the city by $3.5 million. ChevronTexaco still would pay full taxes on the building's current assessed value of $79.3 million, which would bring the city $520,000 a year.

The abatement would average 89 percent of the investment, significantly more than the city's standard abatement of 56 percent. The city has offered similar deals on three of its more than 40 abatements. Council members are scheduled to vote on the proposal next week.

But county officials so far have balked at giving ChevronTexaco a similar offer, primarily because White's announcement made it seem to them that ChevronTexaco had already decided to ink the deal. Abatements typically are used to lure companies into an area when they are considering other locations.

"The ChevronTexaco project was announced before the request for the abatement was made," said Harris County Judge Robert Eckels. "That indicates the abatement is not necessary as part of the economic decision. We have in the past denied abatements to folks who have previously announced their plans."

In a memo sent to county commissioners, David Turkel, Harris County's director of community and economic development, said an unnamed ChevronTexaco representative "was very distressed to learn that they would not qualify for an exemption."

"He opined that the mayor told them they would have no problem with the county," Turkel wrote.

Turkel said the representative was Tim Relyea, vice chairman of New York-based Cushman & Wakefield, which is brokering the proposed purchase. Relyea could not be reached after he was identified.

Driver and White spokesman Frank Michel vehemently denied that White made any such promises.

The proposed abatement applies to $45 million in improvements and $19 million in new furniture, the latter of which Turkel said would violate county policy because the items depreciate quickly. It also is higher than typical county abatements, he said.

Commissioner Steve Radack said he agreed with Turkel's analysis.

"If they're willing to cut the citizens of Harris County a big break on the price they pay for gasoline, let's talk," Radack said.

Neither Driver nor Relyea would directly answer whether the deal could fall through if the county does not provide an abatement.

"Our answer to that question is we think we qualify both for the city and county abatements, and we assume we're going to get them once we explain the situation to those folks," Driver said.

He said ChevronTexaco had originally planned to close the purchase by mid-March but that will probably be delayed. The only remaining snag is the issue of the abatements, he said.

On the one hand, you won't catch me shedding tears because a megacorporation failed to get a tax break. On the other hand, so much for all that county-city cooperation we heard about last month. I think in the end, Eckels and Radack are too inherently pro-big business to hold the line on this. They may demand some kind of tribute for not being properly notified, but I believe the deal will go through with ChevronTexaco getting most of what they thought they were getting.

Posted by Charles Kuffner on March 05, 2004 to Enronarama | TrackBack