Valero’s special deal

I’m sorry, I just can’t get behind this.

Companies routinely relocate to the city or state that lures them with the best tax break, but Valero wants Houston City Council to give its eastside refinery the same treatment without having to pack its bags.

Valero wants most of its Manchester facility, the only refinery inside Houston city limits, be considered outside the city boundaries for tax purposes. The rare move would let the energy giant pay lower fees than if it remained in the city and paid property taxes, and would, officials say, ensure a planned $800 million expansion – and the jobs that would accompany it – happens here and not at a Valero facility in Louisiana.

Some community leaders in the struggling Manchester neighborhood that borders the refinery question the proposal, saying the plan amounts to corporate welfare for a firm they blame for polluting the air and devaluing their homes.

The proposal, which City Council will consider this week, would see 161 acres of the refinery’s 190-acre site transition to a so-called industrial district. The remaining 29 acres at the plant sit more than 2,500 feet from the Houston Ship Channel, and, per a provision in state law, must remain inside city limits.

A Houston Chronicle analysis shows Valero would pay a projected $37.7 million in fees under the 15-year industrial district deal. If the refinery remained in Houston and paid property taxes, it could pay an estimated $10 million to $18 million more than that depending on the city’s future tax rate. Andy Icken, the city’s chief development officer, said a voter-imposed cap on the revenue Houston can collect from property taxes means the Valero tax break would not cost the city money. Icken said Houston has already hit the cap and will collect all the property tax revenue it is allowed to collect whether those dollars are paid by Valero or by other taxpayers.

Houston attorney Beto Cardenas, who negotiated the deal for Valero, said the Manchester refinery is at a disadvantage by being inside city limits when all adjacent facilities are in industrial districts. Valero, he said, simply seeks “parity” with its competitors.

Houston has used industrial districts since the 1960s, and today has 104 such agreements in place, generating $16 million in fees annually. Most were initiated in past decades when the city aggressively sought to annex surrounding areas. The agreements, which typically are renegotiated every 15 years, are a sort of economic standoff: The city gets revenue without having to provide services, and companies pay less in fees than they would pay if the city annexed them and levied its full property tax rate.

The Valero proposal would be the second public tax break granted to its refinery this year, and for the same expansion plan. Valero also has come under fire in recent years for seeking controversial state tax breaks and stressing local school districts’ budgets by suing to lower its tax bills.

The previous subsidy, which was approved by City Council and then by Gov. Rick Perry’s office, per the rules of the governor’s Texas Enterprise Zone program, saw Valero commit to the expansion plan in exchange for an up to $1.6 million rebate of state sales and use taxes.

“It’s a perfect corporate double-dip,” said Tom “Smitty” Smith of Public Citizen Texas. “There’s an ongoing assumption now that tax abatements and so forth are going to be given to any existing company that says, ‘We’re threatened,’ even though they may be some of the most profitable companies in the country.”


Unlike other industrial district agreements, which typically give a company’s existing buildings and equipment an immediate tax break, the Valero deal would ensure the city collects no less than the $2.2 million property tax bill the refinery will owe in January. Also unlike other such agreements, Valero would be annexed back into the city in 2017 if it has not begun the expansion, and in 2020 if it hasn’t completed the project. The facility also would be annexed back into the city at the end of the agreement in 2027 unless the agreement is renegotiated.

Valero also has agreed to continue paying its drainage fee under the ReBuild Houston program, which Icken said is about $200,000 a year.

I get the rationale for this, and the two paragraphs quoted at the end make it all a bit less disagreeable. But it’s stuff like this that makes too many people feel like the system is stacked against them, with one set of powerful interests currying favor from another, to their detriment. Who else can get this kind of deferential treatment, and for what? A handful of jobs whose security are tied to the price of a commodity? In the spirit of the season, let me offer up a two-word summary of this and my feelings towards it: Bah, humbug. Hair Balls has more.

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