CHEVRON GETS A CHEVRON-SIZED TAX ZONE DOWNTOWN 
To further persuade Chevron to build that 50-story tower that it told everyone back in July that it was gonna go ahead and build, city council voted unanimously yesterday to create a tax abatement reinvestment zone for the 2 acres on which the tower would stand at 1600 Louisiana. The resulting cash should help Chevron replace a sewer line on the former Downtown YMCA property, the Houston Chronicle reports. And the Houston Business Journal’s Shaina Zucker adds up all the incentives that might be coming to help out the energy giant: “[The zone] could mean $2.7 million to $3 million for the company . . . . That money would be in addition to the $12 million it could receive from the Texas Enterprise Fund, which Gov. Rick Perry’s office announced in July.” [Houston Chronicle; Houston Business Journal; previously on Swamplot] Rendering: HOK
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Man.. it must be nice to get corporate welfare. Too bad use plebe homeowners don’t get any “tax abatements”.
Bill,
It is worse than that. Every time there is an abatement given means that taxes must be higher for everyone else to get the same amount of revenue/public services. That is the fundamental failure of tax incentives. If you are doing them enough to actually appreciably influence development then your tax rates are enough higher than otherwise to appreciably hurt development.
Thank goodness the City and the State of Texas ponied up $15 mil to Chevron to get them to move 800 jobs from San Fran to Houston. It is not like Chevron was already planning to shift its focus to the upstream market where Houston is the more geographically practical and relevant location. I am sure there were many a white knuckled board meeting where directors grilled executives on how they could possibly make the move without getting $15 mil from taxpayers. A charge like that on the corporate books would reduce net quarterly income by at least .2% (ignoring offsets for tax benefits, increased efficiencies and the generally huge savings of getting people out of CA). Had we not put up this kind of money, the corporate jobs would have certainly gone to New Iberia, LA or Fort Walton Beach. I am sure there were many choices for Chevron and the fact that they already had the vast majority of their non-California corporate office and upstream development personnel already located in Houston didn’t tie their hands as to site selection. Certainly Chevron needs our tax dollars more than we do. It’s not like our schools are strained under the influx of new residents (it is sooo easy to get into a good magnet in HISD that I am amazed people go to their zoned schools at all). And our neighborhoods are safer than ever, as long as you don’t mind getting your car windows smashed every week and having your garage raided bi-annually. And flooding is a non-issue thanks to our state of the art open ditch drainage system that was just put into place in 1912.
Governments are competing for Business’s business to provide tax base, jobs in their district, and general development. When you become important enough to the society, you will get tax abatement as well.
I am all for business incentives, but when they are unnecessary it seems horribly wasteful. The boom will be here for a while, but it will be worthless if we local government doesnt take advantage of it. Its okay to have half-off donuts to get people in the door, but once the line is out the door, there’s no need to price them half-off.
commonsense,
Governments should compete on the basis of low taxes vs high public services. Giving tax incentives to favored companies raises taxes on every other individual/company in that jurisdiction. Tax abatements are pro-favored-corporation not pro-business or pro-growth.
I could use an abatement or something. I just found out I need repairs/replacement on MY sewer line. And mine will “only” cost $2000. A bargain for the city.
I have no issue with Chevron’s tax abatements, they’ve created tons of great jobs and are generous in their giving to the Arts–maybe Houston is being overly generous, however, why wouldn’t you do everything you could not to kill the Golden Goose–right?
commonsense is right, well said. Also isn’t a “tax abatement” given to a corp so that they will hire local people?
I actually have no problem with the tax abatement for Chevron. I just find it mildly amusing that the traditionally anti-welfare crowd here is stumbling over themselves to support corporate welfare. Either way. Kudos to Chevron for building downtown, go build this thing!
My suspicion of welfare is especially strong for welfare to MegaCorps.
@Purdueenginerd, corporate welfare is a misnomer to put the practice in bad connotation. In return for tax abatements and perks, Corporation provide great benefit and return to the given community (in general), regular welfare recipients provide absolutely no benefit and only consume at the community’s expense.
the city and downtown lost united and exxon because it failed to take actions like this. im happy chevron is investing in downtown houston. how long until the increase in property value on this lot will more than make up for the $2.7 million in tax abatement–one year? it can’t be long.
Awwww come on dudes! The energy industry is really hurting right now…I mean, the profits are low, employement is taking a hit…and Houston’s employment scene really sucks. So, the City and State need to do everything possible to address these issues. We all know that no one wants to live or build inside the loop or downtown afterall. I am amazed that some contributers to this that I have assumed are rather libertarian in their policial leanings think this is just OK, good business, and all that.
Fun facts:
Chevron FY 2012 (all amounts $million USD)
Current US Tax Expense: 1,703 Federal, 652 State and Local.
Global Effective Tax Rate: 43.2%
Source: Page FS-43 of Independently Audited Form 10-K filed with the SEC.
http://www.sec.gov/Archives/edgar/data/93410/000009341013000003/cvx-123112x10kdoc.htm#s64B33D714E0B2DB3BA3C342EFC818B99
@commonsense, I dont deny that welfare (corporate or not) benefits the community. How about “Crony Capitalism” or “Picking winners and losers?” Is that better terminology for providing a tax break, or hand out?
I don’t suppose that any of you bothered to read that the abatement is in lieu of the city upgrading a sewer line which is their responsibility. I also suppose that you don’t understand that an abatement isn’t giving money away. It is a credit against future taxes which wouldn’t be collected anyway if the development didn’t happen. So whine away but it is pretty silly and uninformed.
i think some folks have hit on the head here. no tax abatement was needed to get CVX to move jobs here, but to move jobs downtown it was probably a requirement.
Thank you Walt for posting the facts. So the city is giving Chevron $3 mill and state giving them $12 mill tax break so that they will upgrade our sewer lines, stay downtown, and continue to pay approximately $650 mill in state and local taxes annually. This is probably the best deal that the city of Houston has ever made for the benefit of all of the people. Beats the equity investment in The Pavilions!!
@Purdueenginerd, Corporate Incentives as they’re called do not pick or choose winners or losers (on a local level, Solyndra is a whole another story), but merely where the activity of the business may go on, or to persuade a business that’s on the fence about a certain decision. Overall, such as in this case, it’s a simple prudent business transaction on the part of the City to get huge local benefit for a small tax credit.
Pavilion facts
To finance “The Pavilions” development, developers obtained a construction loan from North Houston Bank, an $8,800,000 development grant for infrastructure improvements from the city of Houston, and $5,500,000 from Harris County.
The Houston Chronicle reported that the Pavilions will provide around 1,800 to 2,000 full- and part-time jobs.
I assume a large part of the 1,800 to 2,000 jobs created were bankruptcy lawyers
I don’t think so Joel. One reason for the building is so that Chevron can move people from Bellaire and Westchase to be near the other two buildings downtown.
It’s also not the San Ramon moves, those were announced last year.
2.7-3.0 Mil as an abatement is paltry in comparison to some famous past incentive packages (Ainbinder >6.0Mil) this administration has championed for comparatively less job benefit. Further building + people in downtown means more true tax revenue for the city itself + long term stability and growth. These are the kinds of projects the city should be incentivizing at reasonable amounts. They cost developers far more than the abatements, and provide greater overall welfare to the public than strip centers in the loop typically do. This is positive, sustainable growth for Houston.
the chevron announcement that went out to employees said the bellaire and briarpark locations would not be consolidated downtown.
Jesus loves corporate welfare. However, you poor people need to pull your damn selves up by your boot straps.
I am a big supporter of this. Regardless of whether Chevron was already going to move these jobs to Houston, this was done to get them to build downtown and not out in the lame energy corridor. Imagine how awesome the inner loop would be if all the density that has ended up out in no man’s land (i.e. all the tall buildings that line I-10 and Beltway 8) would now be built around downtown. The dollars being directed to building that stupid highway between Katy and the Woodlands for Exxon could have been redirected to revitalizing downtown by giving Exxon an incentive to build downtown.
@ John C.: Chevron already has their workforce in two towers downtown. Why in the world would they send 800 workers to the energy corridor and make them sit in traffic on I-10 to get to meetings with their co-workers downtown? I am proud to say as a Houstonian that the City has reached the point where companies want and need to be in Houston and have little choice where else to go. We don’t need to pay companies to come to Houston anymore. Chevron, especially, had no real choice but to add on downtown. The whole point of the move was efficiencies. Had they put the offices anywhere else, they would have lost well over $15 mil worth of efficiencies by either having to move everyone else out of Houston or just dealing with having key personnel in two different locations. Houston needs to have a Sally Field moment and realize that businesses like us and will come here and happily foot the bill for infrastructure improvements and not need any tax gifts to pick Houston over other cities.
Chevron’s employees are well-compensated, highly-educated, technically-proficient, and make stuff that nobody else would’ve made if they were sited elsewhere. (This is in contrast with retail, service, healthcare, education, and government employment, which by and large reflects secondary business activity that would’ve gone to one establishment if not the other.)
By adding Chevron employment, we add all the other secondary business activity that comes with it. We add the children of such people to our schools, they patronize our arts scene, they buy nicer houses and more stuff and thusly pay into the tax base. That’s why cities fight over Chevron and its ilk. Yes, it seems obvious that they should have moved their employees here; but what were the incentives packages offered in California or elsewhere? The competition is always fierce!
So, taking that into consideration, I support aggressive local and state incentives for as long as there is not a federal ban on the activity; and in the interests of market efficiency and fighting corruption/cronyism, I also support a federal ban.
If a $15M one time incentive helps spur a 50 story tower downtown why wouldn’t we support it? Long run Chevron will pay the equivalent of a windfall back to the City in terms of property tax. And the city is getting Chevron to finance some utility upgrades. People need to understand that this $15M incentive does not translate into “higher taxes for rest of us”, that’s not how this equation works. Right now, that parcel of land is generating next to nothing for the city. Giving Chevon a $15M incentive is a small downpayment on massive tax revenue to come (plus the knock on revenue from the employees, supporting businesses, etc).
Everyone needs to think a little deeper than the face value of this type of headline. You’re right, it’s $15M that the city is giving up. But it’s $15M to get more than 10 times that into the future. I’d rather have $100+M over the long haul than $15M now when it comes to public finances.
Richmond, California is suing Chevron. Google it. You might see why they’ll eventually move to Texas. We offer plenty of incentives to corporations like “right to work” and “we turn a blind eye to pesky regulations like having explosive material adjacent to schools” and “we hate the EPA just as much as you do.” Not sure why we need to write them a check too…
I’m OK with the city’s TIRZ, assuming that the numbers pencil out in terms of Chevron paying for infrastructure that the city would have to buy otherwise, etc. On the other hand, I’m skeptical that the Perry Slush, er, Enterprise Fund is going to anything that wouldn’t have occurred anyway.
Exactly–Welcome to Tayxis, we don’t care what you do or how you treat your workers just come on down, we’ll run cover for you, treat the Federal Government like an annoying meddling parent of a juvenile delinquent–having said that I’m all for plunking the San Deigo Chargers for San Antonio, now that’s a TIRZ I could get behind