Tax Lean

Want a subsidy for your corporate expansion? Local governments are ready with millions in property-tax abatements -- and very little oversight.

The response to the query may have been more than the judge had bargained for. Rob Barrett, the pollution control director, unearthed 23 violations in the county and more than $1 million in fines levied by the state against Phillips for air and water infractions. All in all, the information compiled by Barrett made for a sizable stack of documents.

Eckels's office probed the records to determine whether there were any pending enforcement actions against the company. The previous year, the county had been in the awkward position of receiving an abatement request from a chemical company that was being sued by residents for air pollution infractions. Commissioners denied that application.

But track records apparently didn't matter. Phillips, despite all the past violations, seemed to be free from pending fines or litigation. Commissioners approved the tax break, exempting the company from paying hundreds of thousands of dollars in taxes for the next ten years. For its part, the company pledged to add 33 full-time positions to its sprawling Pasadena operation and an estimated $50 million in improvements.

UH economist Craig says tax breaks for some companies provide advantages over competitors.
Deron Neblett
UH economist Craig says tax breaks for some companies provide advantages over competitors.

Optimistic forecasts came crashing down, however, in March. An explosion ripped through the plant, killing one and injuring more than 70. It was the second fatal blast there within a year.

The facility remains closed while OSHA continues an investigation.

In June 1998 commissioners court amended its abatement criteria to include environmental qualifications.

"Tax incentives should not be used to attract those industries that have demonstrated a lack of commitment to protecting our environment, but should be used to encourage projects designed to protect our environment," the revised guidelines read. The document goes on to say that consideration will be given to compliance with all federal and state laws designed to protect human health, welfare and the environment.

Eckels says the changes were by no means aimed at Phillips specifically. But, he says, the company would "not likely get an abatement today."

Phillips now finds itself in a situation similar to that of 1989, the year a horrific blast at its polyethylene facility killed 23 and halted production. In the aftermath, the company sought -- and Harris County approved -- abatements for two new polyethylene plants.

Ralph Schelburne, a regional manager for Phillips, says he cannot confirm whether the company will seek another abatement from Harris County to rebuild the K-Resin plant. But he wants to be clear on a particular point: "Safety and environmental regulation are two of the biggest priorities at Phillips Petroleum regardless of tax abatements."

The company's avowed embrace of safety and the environment echo the county's newfound consideration of such issues for granting abatements. But it is possible officials may be looking for more than just words now when they consider tax breaks.

Commissioner Fonteno, whose district includes Pasadena, says a Phillips representative approached one of his staffers about another abatement. When Fonteno learned of the conversation, he says, he stopped the idea in its tracks.

"I told him I wouldn't recommend it [to commissioners court], so that was the end of it," he says. "They never did formally apply for it."

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