AP NEWS

Proposed plant prompts tax-break debate in Orange Co.

March 13, 2019

The possibility of landing a second Chevron Phillips plant in Orange County has prompted debate on whether tax breaks are the best way to entice new companies to the area.

County commissioners, and many residents, have said the investment could be a game changer for the local economy, so incentives should be offered as such. County Judge Dean Crooks has drawn ire for urging caution. He wants more analysis of other incentives that could be offered and a better sense of the real value Chevron could bring.

“The argument then becomes, in the community, you’re for economic development or you’re against it,” he said in a recent court meeting. “That can’t be further from the truth. We’re really discussing how we get there.”

Crooks didn’t return multiple requests for comment.

On Wednesday, a group of residents who favor tax abatements plans to attend the Commissioners Court meeting in a public show of support.

Chevron has operated a plant at 5309 FM 1006 since 1955. It employs about 200 people and produces three chemicals that are sold to make plastics and other products.

The proposed new facility, in which the company confirmed an interest in late January, would convert the natural gas liquid ethane into ethylene, the building block of most plastics.

At issue is the likelihood that the county would offer Chevron property tax abatements if the company chooses to construct its new plant in Orange County.

Cities, counties and school districts are allowed to award such breaks in the name of economic development. The size of the break, the number of years a company gets it and other conditions vary based on situation and awarding entity.

Orange County Commissioner Johnny Trahan said abatements are almost a necessity when attracting new businesses, especially so close to Louisiana — a state that often offers more breaks.

“If you don’t make an abatement, you’re probably not going to get the project,” he said.

Dale Craymer, president of the Texas Taxpayers and Research Association, said Texas’ property taxes on manufacturing plants are 65 percent higher than the national average. Most abatements, he said, simply bring the taxes down to the national average.

The idea is that even without additional property taxes from the new company, government bodies are expected to see a bump in sales tax that comes from a rising number of residents spending their money and the cost of materials to build the new plant.

“We’ll see businesses come here to serve the new residents and other businesses expand,” Trahan said. “The new employees will be eating here, buying their groceries here and keeping their dollars floating through Orange County.”

How many employees that could be is unclear.

According to paperwork submitted to the school district for tax breaks, Chevron could commit to bringing 10 new, permanent jobs to Orange County and a plant with an assessed value of $30 million.

Trahan, other commissioners and a few experts say that’s the minimum number a company would have to bring to qualify for tax breaks. It’s not uncommon for companies to undershoot their plans, thus ensuring tax breaks won’t be taken back if they fail to deliver on promises, Craymer said.

“That’s a fairly common practice — to conservatively estimate — so that companies don’t over promise,” he said.

Trahan said he’s been told Chevron is expecting the project will actually warrant between 500 and 800 jobs.

Commissioner Robert Viator said a $5.6 billion investment — the number Orange County’s Economic Development Corp. has given him on how much it would cost to build the plant — would have to bring at least 400 permanent jobs.

“This could put Orange County on a prosperous future,” he said.

So if tax abatements are necessary to bring that “game changer” to Orange County, then that’s what should be done, the commissioners said.

Crooks isn’t so sure.

“The people of this county elected us to make the best deals for them,” he said at a recent meeting. “We’ve got to look out for them and that’s what we should be doing.”

As a result, Crooks encouraged the commissioners to be more “creative” in the deals they’re making and really weigh if the new revenue Chevron could bring in is worth the lost tax dollars.

“My question to that would simply be, ‘Was it really worth it?’ ‘Did we get enough out of it to make a difference?’” he said.

Bill Peacock, vice president of research for the Texas Public Policy Foundation, said government bodies and residents usually don’t. The foundation spent much of the summer meeting with residents who have struggled with similar issues, which Peacock characterized as “corporate welfare,” in their counties.

“The benefits of those (tax abatements) tend to accrue to owners and employees of these businesses,” he said. “But other owners and residents are left to bear the rest of the cost.”

Peacock says elected officials should instead decrease property taxes for all businesses and residents and reduce regulations and red tape. This should make it easier for all businesses to locate to an area instead of targeting a few individuals.

Orange County is a finalist for the “new petrochemical investment” from Chevron, the company said in an email statement. But it has not said how many finalists are being considered or when it will announce which site will be chosen.

Jessica Hill, Orange County EDC executive director, said premature conjecture about the project could potentially derail an important business investment.

“When it is in the public and everyone is talking about it with misinterpreted numbers, it damages the project,” Hill said. “It’s just hearsay. This isn’t the first time a billion-dollar project has made an investment in Southeast Texas, but it’s the first time for Orange in a long time.”

The development group has initial talks with companies interested in locating in Orange County to determine what a company would need in terms of incentives. The corporation then gets approval from its board, made up of community leaders and business partners, before making a presentation to the county’s commissioner and judge.

Hill said a presentation hadn’t been given to the commission and Chevron Phillips hasn’t yet requested any incentives.

kaitlin.bain@beaumontenterprise.com

jacob.dick@beaumontenterprise.com