Economic Development in the Houston Bay Area
 
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Specialty Chemical

The Bay Area Houston region has been at the forefront of the oil and gas industry from the early 20th century and has since developed into the Energy Capital of the World. The area has some of the largest petrochemical complexes in the world and supports the highest concentration of energy and chemical related companies in the nation. No other metropolitan area maintains the nexus of chemical manufacturing resources, technology, and expertise to stimulate economic development opportunities for stable growth. The industry is currently experiencing new and expansion projects that have not been seen on this scale since the Second World War. Much of this progress is due in large part to the low cost and abundance of shale gas that is used as an energy source as well as a feedstock.




The specialty chemical sector of Bay Area Houston remains one of the main pillars of the region's economy with much of the industry concentrated in the Bayport Industrial District. These companies transform natural resources into the materials needed to make many essential consumer products such as cosmetics, gasoline, jet fuel, lubricants, pharmaceuticals, electronics, building supplies, household goods, clothes, plastics, automobile parts and thousands of other everyday items that are a part of your daily routine.

Established in the early 1960s, the Bayport Industrial District has grown from an isolated industrial park with only a handful of plants to a major manufacturing presence with over 70 specialty chemical companies operating on a global scale.

The district is comprised of 12 square miles (8,500 acres) with a diverse manufacturing community of over 15,000 people. Annually, these companies contribute about $6 billion to the local economy through taxes, payrolls, purchases and capital expenditures. Collectively, the companies spend more than $2.5 billion annually on operating and capital improvement costs related to pollution control and abatement.

Incentives

A range of local and state incentives are available to qualifying companies in the Bay Area Houston region to support new, expanding and relocating companies. Many of these are listed on BAHEP's Incentives page with others listed below.

Industrial District Incentives at a Glance

Freeport Tax Exemption
Summary: Property tax abatement on inventory.


Description:
The Freeport tax exemption allows local authorities to exempt from ad valorem property taxes all business inventories acquired in or brought into Texas for fabricating, assembling, manufacturing, storing or processing and then exported outside the state within 175 days.

All inventories are covered except oil, gas and petroleum products, with no restriction on the destination of such goods. The goods must remain in the continuous ownership of the person who exports them from the time of their acquisition until the time of their export.

Sample Inventory Schedule for Freeport Tax Exemption

Day 1 Inventory arrives in Texas
Day 2 – 174 Inventory stored, assembled, manufactured, fabricated, processed, repaired or serviced
Day 175 Inventory leaves Texas
Inventory Tax due: NONE


Five cities and two school districts offer the Freeport Tax Exemption in our region. They are: City of El Lago, City of Friendswood, City of Kemah, City of Houston, City of League City, the Deer Park Independent School District (ISD) and the La Porte ISD. 

Harris County Property Tax Abatement
Summary: Property tax abatement on major capital investments.


Description:
Projects are eligible for abatement of new value, subject to an abatement cap: to be calculated as $1,000,000 per job created / retained times the number of such jobs as required in a tax abatement agreement. Such cap shall not exceed the increased value requirement as set out in the Agreement, and will be adjusted annually. To determine the amount of the abatement each year, the adjusted cap shall be multiplied by up to 50 percent, up to a total of 10 years.

If a company moves into a leased facility, the Agreement shall be executed with both the lessor (owner) and the lessee.

An applicant's proposed new project as of January 2010 must:
  1. Increase tax roll value of new real property by at least $1,000,000.
  2. Create at least 25 new full-time permanent positions at the project site.
  3. Be competitively sited. In other words, senior management is actively evaluating jurisdictions, in addition to Harris County, and, but for tax abatement, the project would not be constructed in Harris County.
Industrial District Agreements – La Porte and Pasadena
Summary: De-annexed portions of the City featuring greatly reduced municipal property taxes.


Description:
The Bayport Industrial District is a geography that falls within the extraterritorial jurisdiction of two cities: La Porte and Pasadena. Both cities have de-annexed the area to encourage industrial growth within the district.

According to terms of the City’s current Industrial District Agreement (IDA), the Company renders to the City an amount "in lieu of taxes” on Company’s land, improvements and tangible personal property equal to the sum of up to 63% of the amount of ad valorem taxes payable if the Company’s land, improvements and tangible personal property had been located within the City.

In return, the City agrees that the Company’s land covered by an IDA:
  1. Will not be annexed within the 12 year term of agreement
  2. Shall have no right to City services
  3. Shall not be subject to City ordinances governing plats and subdivision of land as well as any building, electrical, plumbing or inspection codes.
Also, within the Industrial Districts, the City has established policies for limited amounts of water and sewer service for specified contract periods. The City also currently provides Ambulance Service to the Bayport Industrial District through an agreement with the Bayport Association.

Sales and Use Tax Exemption
Summary: Exemption on paying sales tax on equipment and energy used for product manufacturing.


Who can get the exemption?
To qualify for a manufacturing exemption, the taxpayer must manufacture, fabricate or process tangible personal property for sale; repair tangible personal property from their own inventory for sale (rebuilders); or repair tangible personal property from their own inventory for rental.

The manufacturing exemption does not extend to contractors, persons who repair property belonging to others and service providers (such as data processors and nonresidential remodelers) even when they manufacture tangible personal property for use in performing their services. Separately stating manufactured repair parts on a customer's invoice does not make the taxpayer a manufacturer eligible for this exemption.

What is exempt?
The manufacturing exemption applies to machinery or equipment that causes a physical or chemical change in a product in order to make it saleable. The manufacturing process generally begins with the first activity that changes raw materials or ingredients and ends with the packaging of the tangible personal property as it will be sold.

Natural Gas & Electricity

Texas companies are exempt from paying state sales and use tax on electricity and natural gas used in manufacturing, processing, or fabricating tangible personal property. The company must complete a "predominant use study” that shows that at least 50% of the electricity or natural gas consumed by the business directly causes a physical change to a product.

Texas Enterprise Zone
Summary: Job creation program for workers of low to moderate income.


Program Objective:
The Texas Enterprise Zone Program is an economic development tool for local communities to partner with the State of Texas to promote job creation and capital investment in economically distressed areas of the state.

Participation:
Local communities must nominate a company as an Enterprise Project to be eligible to participate in the Enterprise Zone Program. Legislation limits allocations to the state and local communities per biennium. The state accepts applications quarterly with deadlines on the first working day of March, June, September and December.

Benefits to Participation:
Designated projects are eligible to apply for state sales and use tax refunds on qualified expenditures. The level and amount of refund is related to the capital investment and jobs created at the qualified business site.

Level of Capital
Investment
Maximum Number
of Jobs Allocated
Maximum
Potential Refund
Maximum Refund
Per Job Allocated
$40,000
to $399,999
10
$25,000 $2,500
$400,000
to $999,999
25
$62,500 $2,500
$1,000,000
to $4,999,999
125
$312,500 $2,500
$5,000,000
to $149,999,999
500 $2,500,000 $5,000
Double Jumbo Project
$150,000,000
to $249,999,999
500 $2,500,000 $5,000
Triple Jumbo Project
$250,000,000
or more
500
$3,750,000 $7,500

Participation Requirements:
Communities may nominate projects, for a designation period up to five years, non-inclusive of a 90-day window prior to the application deadline. Employment and capital investment commitments must be incurred and met within this time frame. Projects may be physically located in or outside of an Enterprise Zone. If located within a zone, the company commits that at least 25% of their new employees will meet economically disadvantaged or enterprise zone residence requirements. If located outside of a zone, the company commits that at least 35% of their new employees will meet economically disadvantaged or enterprise zone residency requirements.

Maps of the District

Bayport Industrial District Map


This is a downloadable aerial map of the Bayport Industrial District. Companies from every corner of the globe call the Bayport Industrial District's 12 square miles / 8,500 acres home.

The pdf file contains 1.36 MB with a 17" x 11" page size: Bayport Industrial District Map


Pipeline Information

Here is a link to the Texas Railroad Commission’s public GIS viewer for oil, gas and pipeline location.

This interactive tool is unique in for Texas. You can click anywhere on the map and zoom in to see the pipelines near any site, find out who owns it, the size and length of the line, and what materials normally flow through the pipeline.


  

 
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Member Cities and Organizations

Clear Lake Shores Kemah Nassau Bay Webster
Dickinson La Porte Pasadena Galveston County
El Lago League City Seabrook Harris County
Houston Airport System
Morgan's Point Taylor Lake Village Port Houston
Houston





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