City agrees to IDA for Navasota
Initial payment to the city in 2007 expected to be $153,000
By BARRY HALVORSON bhalvorson@journal-spectator.com

Putting the future ahead of immediate gratification, Wharton City Council approved the creation of an Industrial District Agreement for Navasota Energy's Colorado Bend Energy Center Monday night.

Under the terms of the agreement, Navasota Energy will initially make industrial district payments to the city of less than the full taxable value of the property. In exchange for the payments, the city will not annex the property and will not have to extend or provide any municipal services, such as water, wastewater or streets maintenance to the plant property.

Navasota Assets Manager Andy Morris said the IDA is an important part of the company's being able to grow its Wharton County site.

"This arrangement is certainly better than annexation and beneficial to both sides," he said.

"The city is relieved of the burden of delivering utilities while we are in a position to be able to go back to our investors with something that will allow them to consider expanding our operations in Wharton. I don't think the city would have agreed to the arrangement if they didn't see a benefit to the citizens of the community."

Included in the agreement document are industrial district payment rates for both the existing Phase I and under construction Phase II electric generation facilities.

Phase I payments will be 50 percent of the "Full Value Payment," based on the appraised value as set by the Wharton County Central Appraisal District multiplied by the city's tax rate through year 2011. It then increases to 75 percent in 2012 and an additional 5 percent each year until the company payments will match 100 percent of the full value payment starting in 2017.

Phase II payments will escalate along a similar increase only one year behind Phase I.

With an estimated value of $60 million, multiplied by the city tax rate of about 51 cents per $100 valuation, the initial 2007 payment will amount to about $153,000 to the city.

At the current value and tax rate, the city would start collecting the full value of $306,000 in year 2017.

The agreement also outlines the payment schedule for any future expansions at the plant. Those payments would be 25 percent of the value for the first five years, 75 percent for years 6- 10 and full value starting in year 11.

Under Texas Law, an IDA can only run for 15 years, but is renewable after that date. The agreement also includes a modified payment schedule if the proposed Phase III is not substantially completed by 2012.

Under the agreement, the company would pay the agreed upon 50 percent through year 2011 and then make 100 percent payments on both Phase I and II starting in 2012.

Mayor Bryce Kocian said the agreement is important to the city for several reasons. In addition to putting the company in a position to approach its investors about future expansions, he said it sends a message to other industrial investors.

"It shows that the city is willing to work with companies to reach a mutually beneficial arrangement," he said.

City Manager Andres Garza called Monday's decision an "historic agreement" for the city based on it being the city's first IDA. He said it sets the tone for future industrial recruitment.

"When the city and Council looks at this type of investment, it encourages additional companies to consider us," he said. "We realize that we might have to give something up front, but in exchange we encourage additional expansion and investment by the companies in the community."

While agreeing to not annex the Colorado Bend site, the Council did approve an ordinance annexing a tract of land running along Hwy. 60 from the south city limits to the northside of the plant property.

The tract is 1,000 feet wide and adjacent to but does not include the highway. In addition to approving the annexation, the Council was also required to approve a municipal services plan for the area.

The main features of that plan are extending water and sanitary sewer service policies for the newly annexed area within two-and-a-half years with possible extension not to exceed fourand a-half years after annexation.

Under current policy, the city will extend a service line to a residential property at no cost for the first 200 feet. Any additional distance is paid for by the property owner with an agreement they will receive compensation for their expense as others tie into the line.