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Caterpillar transportation supplier loses tax break, cites global economy woes

Aug. 3, 2014 at 5:57 p.m.


KEEN TAX BREAK 2013

• 2013 appraised value: $3.7 million

• City tax abatement value: $2.9 million

• City taxable value: $762,373

• City tax rate: 59.96 cents

• Estimated city taxes paid: $4,571

• Estimated value of city tax abatement: $17,642

Source: Victoria County Appraisal District

IF YOU GO

• WHAT: Victoria City Council

• WHEN: 5 p.m. Tuesday

WHERE: 107 W. Juan Linn St.

• MORE INFO: Victoriatx.org

OTHER CITY COUNCIL ACTION

• Receive certified tax roll and proposed annual budget

• Publish notice to issue certificate of obligation bonds in the maximum principal amount of $6.135 million, which includes the amount of bonds and the anticipated cost to issue them

• Vote to approve seven sales of foreclosed properties

• Reappoint two members and appoint a new member to the planning commission

Award $900 preservation incentive program grant agreement with Victoria Preservation Inc.

Victoria's first Caterpillar-related business to lose its tax break says the global economy is to blame.

Keen Transport Inc. has not met the employee minimum for the seven-year tax break valued at $2.9 million Victoria City Council approved in 2012.

The company, located at 7910 Lone Tree Road, provides logistics service for heavy equipment transportation and relies heavily on Caterpillar, its largest customer.

After a 60-day window to come into compliance with the agreement, Keen's chief financial officer, Victor Birchmeier, notified the city in June that it wouldn't meet the mark.

"We have been unable to meet the employment targets outlined in the agreement due to lower than anticipated activity at our facility," Birchmeier wrote. "Caterpillar volumes have been unfavorably impacted by the decline in global mining markets, which has directly impacted our business."

Once the tax abatement is terminated, the business is required to pay back $17,642 it saved on its city tax bill last year, said Victoria Finance Director Gilbert Reyna.

Keen also received a tax abatement from the county and its Road and Bridge assessment. The company's total tax bill in 2013 was $64,628.

According to records from Victoria County Appraisal District, the property is valued at $4.9 million for 2014.

Unless the business plans an expansion, it is ineligible for another tax abatement.

Keen Transport is based in Carlisle, Penn.

During the past 40 years, the company has provided transportation and logistics services to Caterpillar from Aurora, Ill.; East Peoria, Ill.; Decatur, Ill.; Clayton, N.C.; Stanford, N.C.; Winston Salem, N.C.; La Grange, Ga.; and Little Rock, Ark.

Caterpillar was one of the worst-performing stocks on the Dow Jones Industrial average last year.

24/7 Wall St., which offers financial news and commentary, anticipates sales of mining equipment to remain low in the second half of 2014.

Caterpillar CEO Doug Oberhelman said in the company's latest earnings report they are pleased with their second-quarter results, particularly the improvement in profit.

"We increased the bottom line despite a weak quarter for our resource industries segment, which is principally mining," he said.

The diversity of the business, successes in operational improvements and the strength of Caterpillar's cash flow and balance sheet are contributing to the company's finance results, he said.

The construction industry's positive sales and profits and the stable sales and record profits from energy and transportation "has helped us improve profit despite the downturn in the mining industry," Oberhelman said.

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