Ordinance No. 8,731991028 -3
ORDINANCE NO. 8731
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS,
AUTHORIZING THE MAYOR TO EXECUTE AND THE CITY CLERK TO ATTEST
TO THE FIRST AMENDMENT TO THE FOREIGN TRADE ZONE AGREEMENT
WITH EXXON CORPORATION; AND PROVIDING FOR THE EFFECTIVE DATE
THEREOF.
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WHEREAS, the City of Baytown (the "City") and Exxon Corporation ( "Exxon ") entered into a
Foreign Trade Zone Agreement on August 16, 1995 ( "Agreement "); and
WHEREAS, Exxon has requested that the City tender a letter of support to the Port of Houston
Authority for the extension of the U.S. Department of Commerce Grant for the Exxon Complex, which
includes The Exxon USA Baytown Refinery, The Exxon Baytown Chemical Plant, The Baytown Olefins
Plant, and The Exxon Chemical Technology; and
WHEREAS, in exchange for such letter Exxon has agreed to extend the three -year phase -out
period to five years and to make other revisions beneficial to the City; NOW THEREFORE
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS:
Section 1: That the City Council of the City of Baytown, Texas, hereby authorizes and
directs the Mayor and the City Clerk of the City of Baytown to execute and attest to the First Amendment
to the Agreement. A copy of said amendment is attached hereto, marked Exhibit "A," and made a part
hereof for all intents and purposes.
Section 2: This ordinance shall take effect immediately from and after its passage by the
City Council of the City of Baytown.
. INTRODUCED, READ and PASSED by the affirmative vote of the City Council of the City of
Baytown this the 28th day of October, 1999.
PETE C. ALFARO, Mayor
,ATTEST:
EILEEN P. HALL,City Clerk
APPROVED AS TO FORM:
4Z�(
® 4MACIO RAMIREZ, SA.&Ay Attorney
c: klh206 \CityCouncil \Ordinances\Exxon 1 stAmendment2FreeTradeZoneAgreementwExxon .Ordinance 102899
FIRST AMENDMENT TO THE FOREIGN -TRADE ZONE AGREEMENT
BETWEEN
EXXON CORPORATION AND THE CITY OF BAYTOWN
STATE OF TEXAS
COUNTY OF HARRIS
This First Amendment ("Amendment") to that certain Foreign -Trade Zone Agreement
between Exxon Corporation and the City of Baytown, dated August 16, 1995, is made by and
between the same parties on the date hereinafter last specified.
WITNESSETH:
WHEREAS, the City of Baytown (the "gity") and Exxon Corporation, a New Jersey
corporation with a permit to engage in business in the State of Texas ("EXXON") did enter into a
Foreign -Trade Zone Agreement on August 16, 1995 ("Agreement"); and
WHEREAS, EXXON has requested that the City tender a letter of _support to the Port of
Houston authority for the extension of the U.S. Department of Commerce Grant for the EXXON
COMPLEX, which includes The Exxon USA Baytown Refinery, The Exxon Baytown Chemical
Plant, The Baytown Olefins Plant, and The Exxon Chemical Technology Center (the
"COMPLEX"); and
WHEREAS, in exchange for such letter EXXON has offered to extend the three-year
phase -out period to five years; thus, EXXON shall be required to make Foreign -Trade Zone
supplemental payments to the City even after 51% or more of the Texas Gulf Coast Refining
Capacity becomes totally exempt from payment of any tax or other revenue enhancing proceeds
based on federal trade zone status; and
WHEREAS, EXXON renews its intent to cause no net loss of tax revenue or financial
harm to the City of Baytown as a result of its foreign;trade zone status;
NOW THEREFORE, for and in consideration of the mutual covenants and agreements
herein contained, the parties hereto do hereby mutually agree as follows:
I.
Unless a different meaning clearly appears from the context, words and phrases as used
in this Amendment shall have the same meanings as in the Agreement.
First Amendment to the Foreign -Trade Zone Agreement, Page 1
II.
Section 2 (b) of the agreement shall be amended by adding the following:
(b)
In the event such Market Value of Exempted Inventory is not provided to the City
or the City disputes the calculation of such Market Value of Exempted Inventory,
then the City and EXXON shall mutually name an independent professional
appraiser in the State of Texas to compute such value. In the event that the parties
cannot agree on a single professional appraiser, each party shall name an
appraiser and these two appraisers shall name a third appraiser and the panel of
three shall determine the value by majority vote. The cost of such independent
appraiser shall be borne equally by each party. EXXON agrees to furnish all
documents and permit such inspections and audits of those records and documents
submitted to the Harris County Appraisal District or its successor and its contract
appraiser, and those documents mutually deemed reasonable by the parties for
purposes of such independent appraisal. EXXON shall provide in its annual
reports required by the Texas Tax Code all necessary documents, forms and
reports necessary for the Harris County Appraisal District or its successor to
calculate the amount and value of property subject to the foreign trade zone
exemption.
The Agreement shall be amended by
section reads as follows:
adding : a new section numbered Section 2.5 which
2.5 Documentation Accompanying Payment. EXXON will provide to the
City, with its annual contribution, documentation for the calculations used
to arrive at the amount of contribution, including the value of the
exempted property as determined by HCAD or its successor and the
applicable tax rate and Industrial District Payment rate used to calculate
the final payment.
IV.
Section 9 of the Agreement shall be amended to read as follows:
9. Competitiveness Protection 1 The parties agree that a key element of
foreign trade zone designation to enhance the competitiveness of
American businesses. Further, it is, EXXON's intent not to cause financial
harm or loss of tax ..revenue to the City through the designation of the
foreign trade subzone for the COMPLEX. Therefore, provided the
First Amendment to the Foreign -Trade Zone Agreement, Page 2
Agreement is not otherwise terminated under the provisions of Section 8,
the parties agree that EXXON will compensate the City as described in
Section 2 above for a minimum period of five years from the effective
date of. the Agreement. If after the five (5) year period, 51 % or more of
the Texas Gulf Coast Refining " Capacity, as defined in Attachment I
hereto, become totally exempt from payment of any tax or other revenue
enhancing proceeds to local municipalities, based on federal trade zone
status, whether by act of law (other than statutes currently exempting such
property from ad valorem taxation) or private agreement, then the
compensation owed by EXXON under this Agreement will be phased out
in equal increments (100% the firs year, 80% the second year, 60% the
third year, 40% the fourth year, 20% the fifth year) over the next five year
period after such event; provided, however, that (i) full payments will
continue and such phase -out shall not occur unless and until new capital
investment projects have been added, to the tax rolls for the COMPLEX
that were formally approved and commenced after the date of execution of
this Agreement, in an amount equal to or exceeding the value of the
personal property inventory or other taxable value affected by the granting
of subzone status to the COMPLEX in the fifth year of this Agreement
and (ii) if the phase out is caused by private agreement, the City must
receive the same or comparable consideration and benefits from EXXON.
After completion of the phase -out as outlined above, no further
compensation payment to the City ; under this Agreement is required.
Further, the parties hereto agree that there are no such projects which have
been formerly approved by EXXON but not commenced that will qualify
as a project referred to in this paragraph as of the date of the Agreement.
In determining that the 51 % level of exemption has been achieved, the
parties will not include the refining capacity of the COMPLEX as being
totally exempt from payment of any tax or other revenue enhancing
proceeds to municipalities.
The parties agree that the phase -out of compensation from EXXON will
have an impact on the fmaricial planning of the City. Therefore, the
parties agree that EXXON will notify in writing the City Manager of the
City of the date that EXXON determines that 51 % or more of the Texas
Gulf Coast Refining Capacity', as defined in Attachment I hereto, becomes
totally exempt from payment of any tax or other revenue enhancing
proceeds to local municipalities, based on federal trade zone status,
whether by act of law (other than statutes currently exempting such
property from ad valorem taxation) or private agreement. If the phase out
is caused by private agreement, EXXON must notify in writing the City
Manager the consideration and/or benefits received in exchange for the
exemption. Said notice shall' be delivered on or before January 1 of the
year in which EXXON contends that the phase -out of compensation by
EXXON will begin or before January 1 of the year in which EXXON
First Amendment to the Foreign -Trade Zone Agreement, Page 3
' I
contends that the compensation will end altogether because new capital
investment projects have been added. to the tax rolls for the COMPLEX
that were formally approved and commenced after the date of execution of
the Agreement, in an amount equal to or exceeding the value of the
personal property inventory or other taxable value affected by the granting
of subzone status to the COMPLEX If EXXON fails to deliver the notice
required by this section to the City prior to January 1 of a particular year,
then the notice shall be effective for subsequent years only when the
notice was sent prior to January 1 for that year.
Further, the notice to the City shall contain an identification of the
refineries which have become totally exempted from payment of any tax
or other revenue enhancing proceeds to local municipalities, based upon
federal tax zone status. Accompanying the notice, EXXON shall provide
the City with the referenced public documents or private agreements
which support EXXON's claim that the 51% level of exemption has been
achieved. The City shall have the opportunity to review such documents
and other materials it deems necessary to confirm or refute the
determination that the 51% level ;of exemption has been achieved by
written notice to EXXON delivered within 180 days following the date
that EXXON has delivered the public documents or private agreements
which support its position.
V.
Attachment I of the Agreement is hereby amended by adding Subsection B, which reads
as follows:
B. It is agreed that the capacity of each refinery will be determined by
reference to the annual refining capacity volumes published by the Oil &
Gas Journal in December of each year. Should such annual publication of
this data cease, then the parties will mutually agree on an acceptable
alternative public source of such information.
VI.
The provisions of this Amendment and the provisions of the Agreement should be read
together and construed as one agreement provided that, in the event of any conflict or
inconsistency between the provisions of this Amendment and the provisions of the Agreement,
the provisions of this Amendment shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple
copies, each of which shall be deemed to be an original, but all of which shall constitute but one
and the same amendment, this day of October,1999.
First Amendment to the Foreign -Trade Zone Agreement, Page 4
CITY OF BAYTOWN
PETE C. ALFARO, ' ayor
ATTEST:
EILEEN P. HALL, City Clerk
• STATE OF TEXAS
COUNTY OF HARRIS
Before me, T Er -/E4J P / feller , the undersigned notary public, on this day
personally appeared S� �/3(� AJ P HA,G7"' , as the / 6 eAf r A Tract Nty-/N-Frre
of Exxon Corporation, on behalf of such corporation, the owner of the above -referenced property,
✓ known to me;
First Amendment to the Foreign -Trade Zone Agreement, Page 5
(✓ one)
proved to me on the oath of ; or
proved to me through his/her current
{description of identification card or other document issued by the federal
government or any state government that contains the photograph and signature of
the acknowledging person}
to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me
that he/she executed that instrument for the purposes and consideration therein expressed.
Given under my hand and seal of office this ag day of 6ebuiteu
1999.
Notary Public in and for the State of
Texas
My commission expires: '- 04' 0��3
c:k1h206\Contracts\ExxonForeignTradeZone\FTZExtensionof5YearGuarantee 101399
First Amendment to the Foreign -Trade Zone Agreement, Page 6
EON COMPANY, U.S.A.
POST OFFICE BOX 3950 • BAYTOWN, TEXAS 77522-3950
REFINING DEPARTMENT
BAYTOWN REFINERY
STEPHEN P. HART
MANAGER
Monte Mercer
Manager, City of Baytown
P.O. Box 424
Baytown, Texas 77522
October 28, 1999
Letter of Support for Exxon Baytown
Foreiqn-Trade Zone Status
The U.S. Department of Commerce Foreign -Trade Zones (FTZ) Board is in the process of
administratively extending the Foreign -Trade Zone Grants under which refineries and petro-
chemical plants can reduce U.S. Customs duties on imported feedstocks. Exxon, through the
Port of Houston Authority, has requested thisextension of FTZ status for the Baytown Complex.
The Port has filed Exxon's request'along withthe other five Houston refinery/petrochemical FTZs.
Concurrently, all 62 existing refinery/petrochemical FTZs around the country are seeking extension
of this Federal program. The Department of Commerce posted notice of the program extension in
the September 2, 1999 Federal Register and the Port of Houston Authority listed notice in the
Houston Chronicle on October 8. Both requested comment by November 1.
As foreign sourced inventory in FTZs is exempt from Ad Valorem Taxes (AVT) by the Foreign -Trade
Zones Act, the Department of Commerce requires that FTZ operators
ensure local tax authorities understand the implication of FTZ status within their jurisdiction. In
Exxon's case, we currently have in place an agreement that provide that Exxon will hold the City
even by making in -lieu of AVT payments. This agreement, completed in 1996, is on -going as long
as Exxon Baytown Complex is an FTZ.
The Exxon Baytown Complex has requested a letter of support from the City of Baytown confirming
that in fact Exxon and the City of Baytown have letters of agreement regarding AVT and that we are
abiding by the agreement. This letter will help support Exxon's request for extension of FTZ status
for the Baytown Complex by confirming to the Department of Commerce that Exxon and the City
have a satisfactory arrangement. Exxon has been making in -lieu of payments per the agreement
and expects to continue to do so.
While desirable to provide comment during the public notice period, the real importance is that
Exxon and the City have a clear agreement. Therefore, a letter in support of Exxon's requested
extension will be helpful at any time.
If you need further information on our FTZ agreement, please call Warren Dold at 281-834-3333.
S.P. Hart
A DIVISION OF EXXON CORPORATION
RECYCLED