How Economic Development works in the Houston Ship Channel Region

logo copyRecently, two significant projects were announced: (1) a $250 million joint venture between INEOS Olefines & Polymers and Sasol Chemicals North America to build a polyethelene plant in La Porte and (2) a $1.3 billion build-out of a refrigerated ethane export terminal by Enterprise Products Partners LP in Morgan’s Point.

Projects, like these, are welcome and celebrated because they bring jobs. Temporary jobs needed for construction, permanent jobs to manage and operate the facilities, and up to 7 indirect jobs for every direct job arise from ancillary businesses that may expand or move to the area as a result of these projects. Communities also welcome the increased revenue streams from property taxes, personal property taxes on inventory, permitting fees, franchise fees on utilities, supplies purchased, and maintenance supplied on their operations.

While announcements in media often share expected project completion timelines, proposed capital expenditures, and anticipated number of jobs created; the story not often communicated is how the project came to fruition, who was involved and how decisions were made to invest in our region. This is, as Paul Harvey used to say, “the rest of the story.”

What is Economic Development?

The meaning behind the term, “economic development” remains obscure to many. Texas State Attorney General, Greg Abott, has recently defined economic development as the process by which communities “strengthen its businesses, encourage entrepreneurs, build a better environment for commerce and industry and creates jobs for residents.”

Communities are being looked at not just as a location for capital investments, but also as places for employees to live and send their children to school. “Economic development creates communities” states Karen Gregory, CenterPoint Energy Regional Manager of Economic Development and Chairman of the Economic Alliance.  “The obvious upside is that existing residents also benefit from improvements required to attract new or expanding manufacturing facilities, and various company headquarters.”

Scott D. Livingston, Economic Development Coordinator for La Porte, further explains: “While the traditional technical definition of economic development always includes goals such as job creation, increased tax base, and economic multipliers, today’s economic development often includes quality of life initiatives such as recruitment of retail and restaurants, civic amenities, improved streetscapes, as well as the development of a competent, flexible, workforce for new companies to draw upon.”

Randy Drake, President of The Drake Companies and Chairman of the Economic Alliance New Business Development Task Force, provides additional insight. “When it comes down to it, the job of the economic development professional is to listen, listen and problem solve.” The ability of economic development professionals in this region to do just that is evident in the success of the INEOS/Sasol and Enterprise Partners projects.

The Inside Scoop on the INEOS/Sasol Project

As to what it takes to land a project, it depends on the project. Work on the INEOS/Sasol project lasted over three years, explains Marie McDermott, Vice President of New Business Development for the Economic Alliance. Conversations started in 2011, when the country was still in the midst of a recession. By the time an announcement was made, the Greater Houston Partnership, Economic Alliance Houston Port Region, CenterPoint Energy, Deer Park Independent School District, San Jacinto College, City of La Porte, State of Texas, and Harris County had all sat down with company representatives.  This unified response proved effective against strong competition from Louisiana.

What had everyone so excited was not just the prospect of a $250 million build-out of a new polyethelene plant projected to come online in August of 2016 at the INEOS Battleground Manufacturing Complex in La Porte, but also the prospect of a larger, second phase, of the project. The team worked hand-in-hand with global representatives from the company to pull together a package of incentives that in the end included: Texas Enterprise Funds, a Chapter 313 Agreement with Deer Park ISD, funds towards public infrastructure improvements, a County Tax abatement, and a workforce development program partnership with San Jacinto College.

The City of La Porte will not be the only beneficiary of the INEOS/Sasol project. Mayor Michel Bechtel of Morgan’s Point, explains “The semi-finished raw materials to be produced at this new facility are high-value products that will bring significant revenues in the form of personal property taxes to the surrounding cities where the product is warehoused and then eventually exported to create final consumer goods.”

An Enterprise-ing  Opportunity

On the other hand, the project timeline for the Enterprise Products refrigerated ethane export terminal facility was much shorter, to allow the company to take advantage of the window of opportunity brought about by the current, low, natural gas prices.

Conversations began between company representatives, the city of Morgan’s Point, and the Economic Alliance in July of 2013, and in June of 2014, Enterprise signed a 30-year agreement with the Port of Houston Authority for use of the facilities adjacent to its existing Morgan’s Point terminal. Enterprise expects to begin operations in the third quarter of 2016.  The $1.3 billion project includes the removal of old equipment, the construction of a pipeline from Enterprise’s Mont Belvieu natural gas and liquids fractionation and storage complex, and the construction of a refrigerated ethane export facility.

Morgan’s Point faced very real competition from Louisiana and other Texas locations, but the site’s proximity to the Barbour’s Cut Terminal, existing business in Mont Belvieu, and an existing small barge operation nearby, made Morgan’s Point the clear choice; even without any incentives or abatements being included as a condition of the deal. The swift action by Enterprise Products is a direct response to the needs of their customers.

Another important factor for business is that Houston Port Region community leaders and residents already understand industry needs and understand what it means to live with and flourish within and near industry footprints. That is especially important when a quick turn-around is desired. “Companies go where they are wanted and welcome,” says City of Morgan’s Point Mayor, Michel Bechtel. “As a city, it is our job to create an attractive environment for business, and this can be as much about helping as it is about getting out of the way.”

Final Thoughts

Both of these projects have the potential to permanently raise the base economic level of our region.  Morgan’s Point alone will realize very substantial gains and increases across many municipal revenue streams, such as, property taxes, construction permit fees, annual pipeline permits and utility franchise fees, for a great many years to come as a direct result of the new Enterprise Ethane Export Terminal.

Then there is the effect on the overall gravitational pull of the region. Each expansion, each new project announced, has exponential ramifications of making a powerful industry cluster even more powerful, making the region a destination for related projects and furthering the region’s competitiveness on a global scale.

As chairman of the Economic Alliance New Business Development Task Force, Randy Drake observes that companies considering expansion or relocation projects in the Houston Port Region benefit when they reach out early to those who can help. Local cities and counties come to attention when companies call about relocation or expansion.  Their respective Economic Development professionals are ready and able to substantially support the process. Groups like the Economic Alliance also help by providing referrals to engineering and infrastructure professionals and acting as a project consultant. “I have watched Marie McDermott take a company under her wing, guide them through an analysis of available incentives, get the right people in the room to ensure infrastructure needs are met, and explain the permitting process. Her depth of local knowledge has been an invaluable asset for these companies.”

For additional information on Economic Development services of the Economic Alliance, please visit http://www.allianceportregion.com/economic-development/ or contact Marie McDermott, VP of Business Development, at marie@allianceportregion.com.

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