City of Houston Economic Development 2010 in Review

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1 City of Houston Economic Development 2010 in Review TOTALS $654,000,000 in new capital investment 10,800 jobs TEXAS ENTERPRISE ZONE SPECIFIC PROJECTS 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. Designated Enterprise Projects are eligible to apply for the state s portion of sales and use tax refunds on qualified expenditures. The level and amount of refund is related to the capital investment and jobs created or retained at the qualified business site. Depending on investment amount, there is a maximum refund of $2,500 - $7,500 per job for the company. The program incentives are funded 100% by the State of Texas and no City funding is required. Legislation limits allocations to the state by local communities per biennium; the City is limited to a maximum of 9 project designations that ends on August 31, CITY NOMINATIONS: (1) Alcon Research, Ltd. develops, manufactures, and distributes eye care products throughout the world. The company plans to improve and upgrade its existing facility located at 9965 Buffalo Speedway (Council District C ) with an estimated capital investment of $32 million and retention of 551 jobs. (2) Reliant Energy Retail Holdings, LLC is the second largest mass market electricity provider in Texas with approximately 1.6 million customers. Reliant currently operates a Customer Services Call Center in Houston, TX. and will relocate to the Travis Tower at 1300 Main St (Council District I ). The Call Center will be reconstructed to achieve a LEED (Leadership in Energy and Environmental Design) Silver Certification. Reliant will expend an estimated capital investment of $13 million and retain 287 jobs and create 132 new jobs. (3) NRG Energy, Inc. is a wholesale power generation company that employs approximately 3,526 people worldwide. The primary business is ownership and operation of power generation facilities and sale of energy, capacity and related products in the United States and internationally. NRG will construct 11 floors in the Pavilions office complex in Council District I to consolidate its existing two offices in Houston with an estimated capital investment of $36 million and retention of 969 jobs and the creation of 50 new jobs.

2 Specifically, NRG plans to make significant modifications to the technical infrastructure of The Pavilions office, which will be reconstructed to achieve a LEED (Leadership in Energy and Environmental Design) Gold Certification. (4) Sysco Corporation, a homegrown company founded in Houston in 1970, is the #1 foodservice supplier in North America, serving more than 400,000 customers. The company is consolidating its internal business services operations throughout North America in several phases over the next 4 years with an estimated capital investment up to $81 million and the creation of 2,000 new jobs. Sysco will incorporate finance, accounting, human relations, procurement, customer service, and supply chain logistics in its Houston Shared Services Business Center at Northwest Freeway, located in the City s ETJ. (5) Tyson Refrigerated Process Meats, Inc. produces deli-style meats. The company consolidated its meat processing and has transferred all personnel from its 3100 Canal St. facility into their 300 Portwall St. facility located in Council District B. The Portwall facility has been expanded and upgraded to include new refrigeration units with an estimated capital investment up to $22 million and the retention of 750 jobs. (6) Plains All American Pipeline, L.P. is engaged in the transportation, storage, and marketing of crude oil, refined products, and liquefied petroleum gas. The company intends to build-out the trading floor at its headquarters location at 333 Clay Street (Council District I ), purchase new computers and equipment, invest in capitalized software and upgrade other FF&E assets with an estimated capital investment of $16 million, the retention of 600 jobs and creation of 28 new jobs. (7) Invesco/AIM Management Group is a leading global investment management company with a significant presence in the institutional and retail markets. The company intends to upgrade its 440,000 square-foot office space and invest in new FF&E and Information Technology upgrades (estimated at $32 million) at 11 Greenway Plaza (Council District C ). The company has recently hired over 190 new employees, and currently has more than 1,500 Houston employees (a 24% increase in the last two years based on acquisitions and new hires. (8) JPMorgan Chase Bank, National Association is a leading global bank and financial services firm with a significant presence in Houston. The company intends to improve, enhance, and add technology and equipment at each of the following four facilities located at: 700 Louisiana Street (Global Commodities) 9900 Katy Freeway (Telephone Banking Call Center) 1111 Fannin Street (Infrastructure and Technology Support) and 712 Main Street (JPMorgan Chase Bank, National Association Administration Building), located in Council District I, with an estimated capital investment up to $17.6 million and the retention of 3,400 jobs. (9) Cameron International Corporation ( Cameron ) is a leading provider of flow equipment products, systems and services to worldwide oil, gas and process industries. Cameron operates around the world from more than 300 locations covering virtually all of the world s oil and gas operating basins. Cameron employs approximately 125 people at its global headquarters located at 1333 West Loop South, Suite 1700, Houston, (Council District G ) and employs approximately 304 people at its manufacturing operations for

3 compression systems at Port Northwest Drive, In total, Cameron has over 3,000 employees in Houston. The company intends to invest in equipment upgrades, technology improvements, production enhancements, and infrastructure improvements at these two locations with an estimated capital investment up to $25 million and the intention to create 75 jobs and retain over 400 jobs. TAX ABATEMENTS The City of Houston tax abatement program was created to encourage new development and stimulate new job growth and investment in the city. The current ordinance has a competitive siting requirement - but for the abatement, the company would locate elsewhere. There is no standard tax abatement and no entity or individuals other than designated city officials are authorized to negotiate with respect to any tax abatement proposal or incentive that might be available on a case-by-case basis. Property owners receiving these abatements agree to construct certain real property and/or personal property improvements in consideration of the abatement of City ad valorem taxes on such improvements for a specified period of time. The tax abatement recipient must invest a minimum of $1 million and create or retain at least twenty-five (or more) full-time jobs. 100% of all ad valorem taxes are paid on all other property CITY COUNCIL APPROVED TAX ABATEMENTS: 1. Dean Foods/Oak Farms Dairy, the nation s leading processor and distributor of fresh milk and dairy products, was founded in 1925, is headquartered in Dallas, and is the parent company for Southern Foods Group, LLC ( Dean Foods ). It manufactures, markets, and distributes various branded and private label dairy case products - Oak Farms Dairy being one of them. The company utilizes an internal sales force and independent brokers to market its products to retailers, distributors, foodservice outlets, educational institutions, governmental entities, grocery stores, mass merchandisers and convenience stores. Oak Farms Dairy, a subsidiary of Dean Foods, has milk plants in San Antonio, Dallas, Houston and Waco. Its Houston location located at 3430 Leeland Street (Council District I ) is the last surviving dairy inside the City of Houston. The Dairy is still at its original location and much of the work takes place in the original building, where it began as the Lone Star Creamery in In order for the Houston plant to remain competitive and retain the existing 500-plus permanent jobs, it must renovate and modernize its existing facilities and construct new buildings totaling approximately 82,500 square feet at an estimated cost of $21.2 million. The company considered making the investment in its Dallas area facility. These new improvements are the basis of the tax abatement. It is intended for the proposed 4-year tax abatement to offset the costs of one half of the estimated $500,000 in project development related impact fees. Harris County will also offer a tax abatement for the other one half. 2. Emerson Process Management LLLP is one of five business groups of its parent company, Emerson Electric Co., a diversified global manufacturing and technology company incorporated in Emerson Electric Co. offers a wide range of products and services in the areas of process management, climate technologies, network power, storage solutions, motor technologies and industrial automation. Emerson generated $2.6 billion in revenue, accounting for 29% of Emerson Electric Co. total 2009 sales. This project involves the national consolidation of Emerson s businesses currently located in

4 several facilities around the Houston area, Connecticut and Missouri. Emerson intends to retain 210 jobs and transfer at least 144 jobs from its Fort Bend locations by January 1, Additionally, Emerson will create 96 jobs by January 1, Emerson considered consolidating its operations in Fort Bend County. To complete the proposed consolidation, Emerson purchased the currently vacant, 158,200 square-foot facility located on 11.4 acres at 6005 Rogerdale Road, Houston, Texas (Council District F ) at an estimated cost of $15.3 million. Emerson expects to invest an additional $13,850,000 in constructing and installing the improvements in the reinvestment zone. A potential expansion phase could include the construction of an additional 67,000 square feet of office space - expected to cost an additional $11.9 million. The real property improvements (approximately $7.6 million) and new personal business property investments (estimated at $5.5 million) are the basis of the proposed ad valorem tax abatement. Emerson s proposed facility is located within the boundaries of TIRZ #20, Southwest Houston Zone ( Zone ). On December 2, 2010, pursuant to Section of the Texas Tax Code, the Zone s board of directors voted to approve the City s proposed tax abatement to Emerson in the Zone. CHAPTER 380 LOAN / GRANT PROGRAM In 1989, the State legislature enacted Chapter 380 of the Texas Local Government Code (the Code ) to create a mechanism that municipalities could use to grant or loan local tax revenue for economic development purposes. Subsequently, by Ordinance , the City established the City of Houston Chapter 380 loan/grant program to provide the City with an additional tool to encourage development in targeted areas to help stimulate new business growth. The City offered performance-based rebates of the City s portions of its ad valorem taxes and sales and use taxes ( Taxes ) to commercial and residential development projects. The performance-based tax rebates will be determined solely upon post-project proven increases in Taxes assessed and collected after the projects are operational and the Taxes can be accurately measured. The rebates will be equal to the incremental increases in Taxes in the specific economic impact area from the base year (year prior to project commencement) and a pre-determined time period stipulated in each development agreement. The rebates will only reimburse the recipient for public infrastructure. At no time will the City s rebates exceed the recipients actual costs CITY COUNCIL APPROVED 380 PROJECTS: 1. Ainbinder Heights, LLC intends to construct a multi-tenant retail project totaling an estimated 242,000 square feet on approximately 24 acres known as Washington Heights located at the intersection of Yale and Koehler Street (Council District H ). The Developer will extend off-site City water, sewer, and drainage facilities, construct City streets and roads, install traffic signals, enhance street lighting and sidewalks, improve the appearance of the existing bridges over White Oak Bayou, and upgrade the landscaping beyond the minimum COH landscape requirements. ( Public Infrastructure ). The total estimated costs of the Public Infrastructure, which will also benefit other properties in the area, are not expected to exceed $6 million. The City will reimburse the Developer for the Public Infrastructure costs by rebating the increase in ad valorem and sales taxes from the

5 project s base year, not to exceed the actual costs and associated interest attributable to the Public Infrastructure. Developer shall satisfy all permitting requirements, including but not limited to detention and building permitting requirements. Building permits will not be issued until a city approved traffic study shows that the development mitigates to acceptable levels of traffic impact. 2. InTown Homes, Ltd. intends to develop three separate developments primarily for single-family residential use (collectively, the Project, located in Council Districts A and H ): (1) The Cottage Grove Development totaling approximately 44 acres with an estimated value of $120 million; (2) The Upland Park Development totaling approximately 15 acres with an estimated value of $60 million; and (3) The 100 Acres Development totaling approximately 40 acres with an estimated value of $110 million. The Developer intends to design and construct public streets and alleys, permanent access easements; construct public water, sewer, storm drainage systems, and public parks; and design and install landscaping in accordance with the design standards of the City of Houston. The total estimated costs of the infrastructure, which will also benefit other properties in the area, are not expected to exceed $20 million. 3. Dean Foods was offered a Chapter 380 Economic Development Grant to help offset the value difference of the street rights-of-way that Dean Foods would otherwise be required to pay upon the City s abandonment of these rights-of-way. The estimated value of the Chapter 380 Economic Development Grant is approximately $560,000. Dean Foods/Oak Farms Dairy received both a tax abatement and a 380 Economic Development Grant.