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City Veto of Abatement Could Hinder $12M State Grant to Chevron

By Mike Morris and Nancy Sarnoff
8:37 AM

The Houston City Council could veto a $12 million state grant to help Chevron build a 50-story tower downtown if it fails to add some city money to the pot.

Few on the council appear inclined to vote down a $2.7 million tax abatement for the oil and gas giant, but some have questioned the wisdom of the proposal, noting Chevron long has had plans for the tract at 1600 Louisiana.

Program rules for the Texas Enterprise Fund, an economic development tool run by Gov. Rick Perry's office, from which the $12 million would be drawn, require a local match. Perry spokesman Rich Parsons said a City Council rejection would not automatically torpedo the deal, however.

Precisely what Houston would need to do to satisfy its role is unclear. The only written guidelines are on a state website, stating deals require "community involvement … primarily in the form of local economic incentive offers."

Chevron, which reported a first-quarter profit of $6.2 billion, announced it would buy the tract at 1600 Louisiana - next door to the former Enron towers, which the firm also owns - five years ago, saying the purchase would allow "flexibility and options for the future."

The Texas Enterprise Fund also requires the company receiving the funds to be considering whether to invest in Texas or another state. Chevron stated it was deciding between California or Houston, Parsons said.

Chevron, which has said it plans to create 1,700 new jobs in Houston over the next eight years, said it considered other locations for those positions.

"We evaluated a number of factors - including the potential for incentives - in the decision to locate them in Houston and build new office space to accommodate this growth," Chevron spokesman Russell Johnson said in an email Thursday. Other factors, he said, included "the availability and quality of space, economics, and the locations of businesses that these jobs would support."

Early this month, Chevron announced its intention to build the downtown tower, creating an "urban campus" for its growing ranks of employees. The building, Chevron said, would allow the company to consolidate workers from nearby leased space. It also would house the 1,700 new workers.

Councilman Dave Martin said the tower will be built because it makes business sense for Chevron, not because of tax breaks.

"I don't understand why you're giving financial incentives or inducements to people who have already stated that they're coming," Martin said. "They have a couple of buildings over in that area now, so it makes sense if they want to build something else, they'll build it right there. You think $270,000 (a year) to a corporation like that means a hill of beans? That isn't squat."

Mayor Annise Parker alternately embraced and distanced herself from the deal.

"Chevron is a great corporate citizen," Parker declared. "They're going to be building a huge commercial tower in the middle of downtown Houston, which will generate much more money than potential rebates coming back to them through this arrangement."

Asked whether Chevron would have done so without tax rebates, Parker first said, "You're going to have to ask the governor's office about that, because they initiated this one," then said, "We believe it meets the 'but-for' clause, and we support the state of Texas analysis of that."

The "but-for" clause refers to the idea that the project would not occur without the incentives.

Houston's chief development officer, Andy Icken, said Chevron will spend at least $2.7 million on public amenities, and must spend at least that much to move a storm sewer that runs through the property.

University of Houston economist Steven Craig said taxes are a small consideration to a firm like Chevron in comparison to the presence of refineries, equipment and a trained workforce. And, he said, tax abatements are difficult to do effectively.

"If you happen to be on the cycle of your physical infrastructure when you need a new building, you get a subsidy? If Chevron gets a subsidy, what about Exxon and Shell and Apache and all these other guys?" he said. "We don't want them to grow at the expense of Shell. That doesn't make the local area any better off."

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