Oil field-related company could receive tax abatement
May 1, 2012 at 12:01 a.m.
Updated May 2, 2012 at 12:02 a.m.
Approved two ordinances annexing 7.364 acres and 9.68 acres into the city; Approved a resolution to execute an $80,000 amendment to an agreement between University of Texas at Austin and the city for air quality research activities related to the oil and gas industry. Approved a resolution that allows commercial recycling in the city through Waste Management. Approved an amendment to the city's interlocal agreement with the county affecting the county's fee for fire, rescue, health, animal control and library services. The county will now pay $1.4 million a year for those services.
What is a Tax Abatement?
The city and county of Victoria established guidelines for the creation of reinvestment zones and granting tax abatements. Manufacturing, research or regional service facilities, distribution centers and other basic industries are eligible to apply. Economic qualifications include an increase to the appraised value of the property equal to or in excess of $500,000. In addition, the company must add a minimum of 10 full-time positions. Abatements are granted for up to eight years. Source: Victoria Economic Development Corporation
Victoria City Council accepted a tax abatement application from a new business looking to profit from machinery used in the Eagle Ford Shale, in a 6-0 vote.
East Bernard-based Hlavinka Equipment Co. is asking for a five-year, phased-in tax abatement for their proposed $2.5 million investment in a regional service center in Victoria.
Councilman Joe Truman made the motion to accept the application and Councilwoman Denise Rangel seconded it. Mayor Will Armstrong was absent.
Victoria Economic Development Corp. President Dale Fowler said the company would provide service to industry equipment, both heavy farm tools and construction.
"Over the past 10 years, more tax abatements have been used to help existing companies grow than have been used for new companies in Victoria and Victoria County," Fowler said. "It's not just big companies. Our guidelines specify a minimum of 10 jobs. It's not always the large companies that we're working with."
Fowler said the business could be "a regional service center" for the Eagle Ford Shale, and service the heavy equipment used in the oil and gas industry.
Hlavinka is considering establishing a distribution and service center in Victoria. The proposal includes a $2.5 million investment on about 4.25 acres of undeveloped property southwest of Baker Tools, near the U.S. Highway 59 and John Stockbauer Road intersection. The company estimates 12 new full-time permanent jobs by the start of second quarter 2013, and 20 full-time permanent jobs by 2014.
Councilman Tom Halepaska said the proposed business is "what we needed."
Halepaska was voted into office after the late Wayne Watkins.
Watkins was the one who pushed to buy that land Caterpillar is on, Halepaska said.
"He would be very happy with what's happened," Halepaska said. "It was his dream to see more industries come to town."
The Victoria facility would be equipped to service and recondition heavy duty farm and construction equipment - engine, transmission, electrical and hydraulic component overhaul and replacement.
Fowler's job now is to study the company and its potential economic impact and present it at the next council meeting.
Tax abatements are used as a tool to attract new investment, whether in a new company to town or existing company looking to expand.
"We never put ourselves in a position with tax abatement to give up revenue that we currently have," Fowler said.
There have been occasions where companies breached their contract by not maintaining employment levels. In those cases, they have to pay back their tax abatement, Fowler said.
"Obviously, our goal would be to help those companies get their employment levels back up because that is much more beneficial to the community," Fowler said.
But, Fowler said, there is a flip side to a breach of contract.
"Yes, according to their contract, they would owe back taxes, but because we used a tax abatement to get them here, if they wouldn't have come, we wouldn't have had tax from them anyway," Fowler said. "We're really not risking much."