Navasota against annexation by city
Company officials say payment of taxes would derail construction of Phase III
By BARRY HALVORSON bhalvorson@journal-spectator.com

Staff Photo by Barry Halvorson A cooling towers rises majestically from the ground at the Colorado Bend Energy Center. Navasota Energy wants the city to adopt an IDA instead of pursuing annexation.

Wharton City Council will be faced with the decision of taking the money now or making an investment in the future when they vote on an ordinance that would annex Navasota Energy's Colorado Bend Energy Center into the city limits.

That vote could come as early as Monday night during the council's regular meeting starting at 7 p.m.

Prior to the vote, the company will make a presentation to the city fathers seeking an Industrial District Agreement with the city.

If annexed, the gas-fueled electric generation plant will become part of the city's tax base at its full value - an estimated $60 million for Phase I - which is currently in full operation. Phase II will add another $60 million to the tax base when it goes into full production.

According to the IDA being proposed by Navasota, the city would not annex the plant in exchange for the company making contributions to the city.

Those contributions would be less than fees generated by taxes.

The payoff for the city would be that it would make future development of Phase III more attractive to Navasota investors, Company President Frank Giacalone said.

In a meeting with city and county representatives Thursday afternoon at city hall, Giacalone said Phase II of the plant was originally a dream and a Phase III wasn't even being considered at that time.

Current market forces would make a third phase possible, he said, provided the city hold off on annexation.

The taxes the company would have to pay would make it virtually impossible for the company to go to its investors with any additional expansion plans, Giacalone added.

"If we are forced to pay (taxes), then we will pay what we have to pay," he said.

"But we won't be able to do Phase III if we don't deliver the return we thought we were going to on Phases I and II."

With the right incentives, he added, the company could eventually build beyond even Phase III.

"An IDA is a tool that is used across the state," Giacalone said.

"We currently don't receive any city services, handling our own water and waste water discharge. If those were services we needed from the city, it might be a different situation."

City Manager Andres Garza Jr. said he was more than willing to allow the company to make its presentation to the City Council, but added he was not going to stop the annexation proceeding, which started in July and have included publishing the city's intent as well as holding public hearings on the matter.

While a vote is scheduled for Monday, he said, there is a window of opportunity.

Under state law, the city actually has until Oct. 21 to act on the annexation ordinance before it would have to start the process all over.

"The bottom line is that we can annex them right now," Garza said. "It is perfectly within our rights."

While not offering an opinion on what action City Council should take, Garza did say there were benefits and risks to an IDA with the power plant.

"If we annex, we get all the money now," he said.

"But if we do an agreement, that is going to increase the value of the property in the future and the city would receive additional contributions as it expanded.

"The city would be making an investment and would lose money if Phase III is never done," Garza added.

"But Council also has to look at what decision will encourage future development both at the site and in the rest of the city."

Officials from Navasota and the city are scheduled to have another meeting at 10 a.m. Monday in advance of the Council meeting to discuss what payments the company would consider making to the city and the duration of any agreement reached.