Chemicals & Plastics
Overview of the Industry
Industrial District Incentives
Maps of the District
Workforce Sample Wages
History of the Bayport Industrial District
Overview of the Industry
Despite the recent economic recovery slowdown that most of the United States has experienced, the outlook for the specialty chemicals industry in the Bay Area Houston region is more encouraging. The American Chemistry Council’s (ACC) 2011 Year-End Outlook forecasts steady growth for the next several years in the specialty chemicals industry. This is due in large part to the continued access to new supplies of natural gas from the southern Texas Eagle Ford Shale deposits that had previously remained untapped. In 2011 the Texas Railroad Commission issued 2,828 permits to drill in Eagle Ford, up from only 26 permits that were issued in 2008.
The abundant supply of shale gas has created a competitive advantage for Texas manufacturers, which has led to higher capital investments, greater job creation, and overall industry growth. Along with domestic growth, emerging markets are expected to experience even more rapid expansion, which will strengthen the export market. According to the ACC, 2011 total U.S. chemical exports grew by 11 percent generating $189 billion and are expected to reach $230 billion by 2014. The price ratio of oil-to-natural gas at 6:1 is typically viewed as having an increased advantage for the industry; the 2011 average remained well above 25:1, which has led companies to expand operations and increase investments throughout the Bay Area Houston region. The region has over 400 chemical manufacturing entities and employs over 35,000.
The specialty chemical sector of Bay Area Houston remains one of the main pillars of the region's economy with much of the industry concentrated in the Bayport Industrial District. These companies transform natural resources into the materials needed to make many essential consumer products such as cosmetics, gasoline, jet fuel, lubricants, pharmaceuticals, electronics, building supplies, household goods, clothes, plastics, automobile parts and thousands of other everyday items that are a part of your daily routine.
Established in the early 1960s, the Bayport Industrial District has grown from an isolated industrial park with only a handful of plants, to a major manufacturing presence with over 70 specialty chemical companies operating on a global scale.
The district is comprised of 12 square miles (8,500 acres) with a diverse manufacturing community of over 15,000 people. Annually, these companies contribute about $6 billion to the local economy through taxes, payrolls, purchases and capital expenditures. Collectively, the companies spend more than $2.5 billion annually on operating and capital Improvement costs related to pollution control and abatement.
Industrial District Incentives at a Glance
Freeport Tax Exemption
Summary: Property tax abatement on inventory.
Description:
The Freeport tax exemption allows local authorities to exempt from ad valorem property taxes all business inventories acquired in or brought into Texas for fabricating, assembling, manufacturing, storing or processing and then exported outside the state within 175 days.
All inventories are covered except oil, gas and petroleum products, with no restriction on the destination of such goods. The goods must remain in the continuous ownership of the person who exports them from the time of their acquisition until the time of their export.
Sample Inventory Schedule for Freeport Tax Exemption
| Day 1 | Inventory arrives in Texas |
| Day 2 – 174 | Inventory stored, assembled, manufactured, fabricated, processed, repaired or serviced |
| Day 175 | Inventory leaves Texas |
| Inventory Tax due: | NONE |
Five cities and two school districts offer the Freeport Tax Exemption in our region. They are: City of El Lago, City of Friendswood, City of Kemah, City of Houston, City of League City, the Deer Park Independent School District (ISD) and the La Porte ISD. The site under consideration is within the La Porte ISD.
Harris County Property Tax Abatement
Summary: Property tax abatement on major capital investments.
Description:
Projects are eligible for abatement of new value, subject to an abatement cap: to be calculated as $1,000,000 per job created / retained times the number of such jobs as required in a tax abatement agreement. Such cap shall not exceed the increased value requirement as set out in the Agreement, and will be adjusted annually. To determine the amount of the abatement each year, the adjusted cap shall be multiplied by up to 50 percent, up to a total of 10 years.
If a company moves into a leased facility, the Agreement shall be executed with both the lessor (owner) and the lessee.
An applicant's proposed new project as of January 2010 must:
- Increase tax roll value of new real property by at least $1,000,000.
- Create at least 25 new full-time permanent positions at the project site.
- Be competitively sited. In other words, senior management is actively evaluating jurisdictions, in addition to Harris County, and, but for tax abatement, the project would not be constructed in Harris County.
Industrial District Agreements – La Porte and Pasadena
Summary: De-annexed portions of the City featuring greatly reduced municipal property taxes.
Description:
The Bayport Industrial District is a geography that falls within the extraterritorial jurisdiction of two cities: La Porte and Pasadena. Both cities have de-annexed the area to encourage industrial growth within the district.
According to terms of the City’s current Industrial District Agreement (IDA), the Company renders to the City an amount “in lieu of taxes” on Company’s land, improvements and tangible personal property equal to the sum of up to 63% of the amount of ad valorem taxes payable if the Company’s land, improvements and tangible personal property had been located within the City.
In return, the City agrees that the Company’s land covered by an IDA:
- Will not be annexed within the 12 year term of agreement
- Shall have no right to City services
- Shall not be subject to City ordinances governing plats and subdivision of land as well as any building, electrical, plumbing or inspection codes.
Also, within the Industrial Districts, the City has established policies for limited amounts of water and sewer service for specified contract periods. The City also currently provides Ambulance Service to the Bayport Industrial District through an agreement with the Bayport Association.
Sales and Use Tax Exemption
Summary: Exemption on paying sales tax on equipment and energy used for product manufacturing.
Who can get the exemption?
To qualify for a manufacturing exemption, the taxpayer must manufacture, fabricate or process tangible personal property for sale; repair tangible personal property from their own inventory for sale (rebuilders); or repair tangible personal property from their own inventory for rental.
The manufacturing exemption does not extend to contractors, persons who repair property belonging to others and service providers (such as data processors and nonresidential remodelers) even when they manufacture tangible personal property for use in performing their services. Separately stating manufactured repair parts on a customer's invoice does not make the taxpayer a manufacturer eligible for this exemption.
What is exempt?
The manufacturing exemption applies to machinery or equipment that causes a physical or chemical change in a product in order to make it saleable. The manufacturing process generally begins with the first activity that changes raw materials or ingredients and ends with the packaging of the tangible personal property as it will be sold.
Natural Gas & Electricity
Texas companies are exempt from paying state sales and use tax on electricity and natural gas used in manufacturing, processing, or fabricating tangible personal property. The company must complete a “predominant use study” that shows that at least 50% of the electricity or natural gas consumed by the business directly causes a physical change to a product.
Texas Enterprise Zone
Summary: Job creation program for workers of low to moderate income.
Program Objective:
The Texas Enterprise Zone Program is an economic development tool for local communities to partner with the State of Texas to promote job creation and capital investment in economically distressed areas of the state.
Participation:
Local communities must nominate a company as an Enterprise Project to be eligible to participate in the Enterprise Zone Program. Legislation limits allocations to the state and local communities per biennium. The state accepts applications quarterly with deadlines on the first working day of March, June, September and December.
Benefits to Participation:
Designated projects are eligible to apply for state sales and use tax refunds on qualified expenditures. The level and amount of refund is related to the capital investment and jobs created at the qualified business site.
| Level of Capital Investment |
Maximum Number of Jobs Allocated |
Maximum Potential Refund |
Maximum Refund Per Job Allocated |
|---|---|---|---|
| $40,000 to $399,999 |
10 | $25,000 | $2,500 |
| $400,000 to $999,999 |
25 | $62,500 | $2,500 |
| $1,000,000 to $4,999,999 |
125 | $312,500 | $2,500 |
| $5,000,000 to $149,999,999 |
500 | $1,250,000 | $2,500 |
| Double Jumbo Project $150,000,000 to $249,999,999 |
500 | $2,500,000 | $5,000 |
| Triple Jumbo Project $250,000,000 or more |
500 | $3,750,000 | $7,500 |
Participation Requirements:
Communities may nominate projects, for a designation period up to five years, non-inclusive of a 90-day window prior to the application deadline. Employment and capital investment commitments must be incurred and met within this time frame. Projects may be physically located in or outside of an Enterprise Zone. If located within a zone, the company commits that at least 25% of their new employees will meet economically disadvantaged or enterprise zone residence requirements. If located outside of a zone, the company commits that at least 35% of their new employees will meet economically disadvantaged or enterprise zone residency requirements.
Maps of the District
Bayport Industrial District Map
This is a downloadable aerial map of the Bayport Industrial District. Companies from every corner of the globe call the Bayport Industrial District's 12 square miles / 8,500 acres home.
The pdf file contains 1.36 MB with a 17" x 11" page size: Bayport Industrial District Map
Pipeline Information
Here is a link to the Texas Railroad Commission’s public GIS viewer for oil, gas and pipeline location: http://www.rrc.state.tx.us/data/online/gis/index.php#
This interactive tool is unique in for Texas. You can click anywhere on the map and zoom in to see the pipelines near any site, find out who owns it, the size and length of the line, and what materials normally flow through the pipeline.
Workforce Salaries (sample)
The plants located in Bayport produce nearly half the U.S. capacity for polymers while three out of five chemical (polymers and plastics) workers in the U.S. are employed in Bay Area Houston. Below is a sample chart of the salaries (base annual salary + benefits) of specialty chemical employees in the Bay Area Houston region.
| Operator | $59,202 |
| Accountant | $106,888 |
| General Manager | $188,196 |
| Human Resources Manager | $119,808 |
| Plant Manager | $194,111 |
| Plant Superintendent | $122,169 |
SOURCES: Texas Workforce Commission report June 2010, Gulf Coast Region.
Salary.com data, June 2010, median annual gross income estimates for zip code 77507 (Bayport Industrial District).
History of the Bayport Industrial District
Background
In the late 1920s, James Marion West (unknown 1871 - August 24, 1941) bought a 30,000-acre cattle ranch in southern Harris County where he spent most of his time running his cattle and lumber businesses. He installed a three-acre lake (now called Clear Lake) and hired Joseph Finger, architect of Houston's City Hall, to design a mansion next to the lake.
The mansion was completed in 1929 at the total cost of $500,000 (approximately $6.2 million in 2008 dollars) and featured 40 rooms with gold fixtures, indoor pools and mosaics imported from Italy.
West's namesake son, James Marion West, Jr., also known as Silver Dollar Jim (September 26, 1903 - December 18, 1957), continued the ranching and business affairs of his father at the West Mansion by raising cattle and maintaining the ranch as a preserve for deer, quail, peccary and prairie chickens. Much of the ranch surrounded Middle and Horsepen Bayous (now known as Armand Bayou).
In 1937, oil was discovered on the ranch, and the Wests sold the entire estate, including the mansion, to Humble Oil and Refining Company in 1938 at a price of $8,500,000 ($126 million in 2008 dollars) plus royalties. Subsequent drilling resulted in the discovery of the Friendswood and Clearlake Fields, producers of both oil and natural gas. Although productive from an oil and gas standpoint, the West Ranch remained virtually undeveloped.
In the late 1950s, with the growth of the Houston area, Humble’s management began looking at the West Ranch for possible additional uses. Humble’s management considered the land closest to Galveston Bay suitable for heavy industrial development once a port and waterway could be crafted to link the area to Houston Ship Channel.
During 1960, Albert Langston Thomas (April 12, 1898 – February 15, 1966), a Democratic congressman from Houston who served on the Joint Committee on Atomic Energy, was instrumental in securing the location of the United States National Aeronautics & Space Administration's Manned Spacecraft Center (later named after Lyndon Johnson) in Houston in 1961.
Thomas was one of the members of the Suite 8F Group , which included his college roommate at Rice University, George R. Brown. Brown's company Brown and Root, donated the land on which the Johnson Space Center would be located to Rice University. Then Vice President Lyndon Johnson was chairman of the Space Council, and Thomas, a member of the NASA board, played leading roles in the eventual acceptance of Rice University's offer. This involved obtaining 1,698 acres of land that had originally been owned by the Humble Oil Company and donated to The Rice Institute—later renamed Rice University. George R. Brown was chairman of the Rice board of trustees, which subsequently offered the university’s 1,000 acres to the federal government as the site for the space center.
In 1962, Humble created a real estate subsidiary, Friendswood Development Company, and placed 15,000 acres and 7,250 acres under its control for residential and industrial development, respectively. The industrial development is now called the Bayport Industrial District.
First Steps
The first major step in making the Bayport Industrial District a reality was taken early in 1960 when the Harris County Navigation District announced it would build, own and operate a channel and a port at Bayport. Plans were made for a deep water seaport to be built in stages that would serve the industrial sector in the area and also provide additional capacity for the Port of Houston. Approximately 725 acres of land was donated by Humble to the Navigation District to accommodate the port facilities.
The first stage of the port, which is known as Bayport Division-Port of Houston, was completed in 1966 and included the dredging of a barge channel just north of Toddville Road. This 1.2 mile long cut (100 feet wide, 10 feet deep with a turning basin and docks) connected Bayport with the Houston Ship Channel and Galveston Bay. With the opening of this channel, Bayport became an industrial development.
Records at the Harris County archive show that the first companies to begin operations in the district in 1965 were:
Offenhauser - Pressure vessels and steel fabrication
Haldor Topsoe - Catalyst manufacturing
By 1969, the list had grown to include:
Southwest Latex Corporation - Latex materials manufacturing
Big Three Industrial Gas & Equipment - Liquefied gases and materials
Celanese - General chemical manufacturing
American Cryogenics - Liquefied gases
Prior to Bayport’s development, Pasadena had structured an industrial district on the North side of the city, close to the ship channel. This area was called the Battleground Industrial District. Each of the companies located at Battleground had a separate industrial contract with the city.
Bayport would be different. Instead of separate contracts with each company, the area would be covered under one contract and subdivided into smaller entities. All companies would be assessed at the same rate of fees in lieu of taxes by ordinance of the city. Contracts ran on average for seven years. At the end of those seven years, you could either renew the contract at whatever amount that was agreed upon by the city after receiving input by the industries. Or, stop the agreement and literally re annex the area and then meet the full tax value that everybody else.
Another selling point of the Bayport Industrial District was the availability of resources specifically for industry. This included feedstock from the area refineries along with a wastewater disposal facility designed to handle effluent and industrial wastewaters. Another advantage was that companies were allowed to build their own facilities on as little or as much land as needed. Additionally, the district was isolated from communities but still had access to major road thoroughfares including Bay Area Boulevard, which was opened in 1967.
Concurrently in 1962, the Friendswood Development Company developed the master plan for the City of Clear Lake. The modern planned city (or “city-within-a-city”) concept began in 1963 with the creation of Reston, Va. This was quickly followed by Columbia, Md. and then Clear Lake City, Texas (both also began in 1963). The area was named for a lake south of the Johnson Space Center that separates Harris County from Galveston County and connects Clear Creek to Galveston Bay.
By 1966, the City of Houston began annexing different areas surrounding the main city. The City of Pasadena, Texas quickly began taking steps to inhibit Houston’s efforts for annexing too much land around industry and the community. During this time, new state legislation allowed for the creation of navigation districts by communities. Pasadena moved to create the Pasadena Navigation District, which included parts of Armand Bayou and its respective waterways. This 2,500 acre strip of land prevented Houston from annexing additional land within the South Pasadena area.
In 1970, as development of the industrial district continued, community members began working to create a protected wildlife area surrounding Armand Bayou. By 1974, the Armand Bayou Nature Center was incorporated to preserve 2,500 acres – thus making it the largest urban wilderness preserve in the United States. The center was named in honor of Armand Yramategui, a Houston environmental visionary who died in 1970.
Development Continues
The Gulf Coast Waste Disposal Authority (GCWDA) was created by an act of the Texas Legislature in 1969 and began operation the following year. It was developed as a non-tax-supported unit of local government dedicated to waste management activities. The GCWDA constructed two main pipelines (both currently operational) in Bayport: one for clean water and a second for organic waste.
Also of note during the decade, the number of companies escalated from a simple handful to well over 30 by 1979, many with sizable holdings in real estate. Celanese alone controlled over 950 acres while Lonza, Lubrizol, Goodyear, Hercules, and Petrolite Chemicals all owned 100+ acre sites for production and storage.
This brings up an interesting part of the history. One of the original concepts of Bayport that did not develop as planned was the idea that several stages of a product would be developed and manufactured within the district. Very raw product would be processed by one of the companies along the Ship Channel and then handed off to the next company in the same area for additional refining and/or manufacturing with a finished product rolling off the assembly line at the end. All of this was envisioned to occur in the Bayport area – which is why many of the early tax records for companies in the area show holdings of over 100+ acres each.
What prevented this from happening (according to sources) is that the industry began to automate and increase productivity measures. By the mid 1980s, plants that had once hired 1,500 to 2,000 people began requiring less manpower and more brainpower. New plants were a prime example of these advances in productivity. For example, in 1978, the first Japanese specialty chemical plant to move into Bayport was Kaneka Texas. Their site was 50 acres (as opposed to the 100+ of other plants) and they hired less than 50 people. The company is still located at their original site on the southern portion of Underwood Road and (over time) has greatly expanded their site to include several lines of polymer production as well as the an organic vitamin supplement production facility.
Even though Bayport was one of the first developments of its kind in the nation and certainly in Texas, Friendswood Development recognized from the very beginning that it needed a vehicle to insure the vitality of the plants to be constructed within the Bayport project as well as protect surrounding land owners in residential and commercial areas from property depreciation and health impairment.
Environmental Stewardship
To this end, Friendswood subjected Bayport to certain covenants, restrictions, and provisions called the “Environmental standards—Bayport Industrial Area” (the “Environmental standards”) which were recorded in Volume 5920, page 165 et seq. in the Deed Records of Harris County, Texas.
The Environmental standards control air emission such as smoke, particular matter, odors and toxic materials; levels of noise, vibration, and glare; and the volume, quality and point of discharge of industrial and domestic liquid waste. In addition, the Environmental Standards also provide certain basic qualifications as to proper use, reasonable development, and the maintenance of the Bayport.
Besides establishing the above use restrictions, the Environmental Standards also established the Bayport Industrial Association, an organization composed of landowners and occupants of Bayport. The Bayport Industrial Association is a self- regulating body whose stated purpose “is and shall be the planning, support and execution of programs and projects of mutual benefit and concern to the industrial occupants of Bayport.” These programs and projects currently include:
1. Administration of Bayport Environmental Standards,
2. The formation and implementation of a preparedness plan when justified and
3. Coordination of industrial fire protection and other protective services when needed