Annova LNG Doesn't Just Want A $25,000,000 Tax Break; They Want $220,000,000!

Proposed LNG Plants

by Stefanie Herweck and Scott Nicol

On September 10 the Cameron County Commissioners Court considered a request from Annova LNG for a huge tax break.

But, in the face of growing community opposition to the proposed liquefied natural gas (LNG) export terminals, and public anger that Annova would try to avoid paying taxes, the commissioners tabled the tax break, putting it off until some unspecified future date.

Now Annova is asking the Point Isabel Independent School District for another, much larger tax giveaway that the school board will take up on Tuesday evening.

You wouldn’t know it from Annova’s Facebook page, where they are repeatedly posting a meme which reads, “Fact: we will pay our fair share in taxes.”

Here’s an actual fact: Annova LNG is aggressively seeking at least two separate tax breaks that could top out in excess of $220 million.

The tax break that Point Isabel ISD will consider is the largest. Governed by Chapter 313 of the Texas Economic Development

Port Isabel High School

Act, it’s actually administered by the Texas State Comptroller, but the school district has to sign off on it. If they do, Annova would be able to limit the assessed value of their facility when it comes to paying property taxes for the maintenance and operation of schools. If the state grants them an Appraised Value Limitation under Chapter 313, they would pay property taxes on their $2.9 billion LNG export terminal as if it were only worth $25 million.

That is less than one percent of the facility’s cost.

This would slash Annova’s school taxes by about $195 million over ten years. The state of Texas would then use your tax dollars to pay school districts for the estimated lost revenue.
So, why would the school district sign off on this giveaway?

In one of the most egregious cases of Texas tax laws skewed toward corporations, it’s actually legal for Annova to pay off Point Isabel ISD in exchange for their consent. They can make “Payments in Lieu of Taxes” far smaller than their would-be tax bill directly to the district. These payments amount to legal bribe money that can be used for anything the school board sees fit. It’s a recipe that encourages school boards to act against the best interests of their communities.

The tax break that Cameron County Commissioners voted to table last week is governed by Chapter 381 of the Local Government Code. The County’s summary of the deal only says that it is similar to a deal made with Tenaska, which waived 76 percent of property taxes for 10 years for their power generation station. Annova’s tax break, according to the summary, would add up to $25 million in lost revenue over 10 years.

Unlike the 313 tax breaks, the money that the county loses under a 381 deal is not reimbursed by the state, so Annova, unlike average Cameron County property owners, will not be paying their fair share for county services like road repairs, police, and fire fighters.

County Commissioners have not released a copy of the terms of the Chapter 381 deal for taxpayers to see, and Annova apparently doesn’t want anyone to know about it either. Although they are required by law to report all of the tax breaks that they are asking for in their application for the 313 Appraised Value Limitation, Annova left the box for 381 blank.

This blatant omission is not surprising coming from Annova. Elsewhere in this same application, they only commit to create ten qualifying jobs with salaries of $36,197.72, after months of publicly touting 165 new jobs with salaries of $70,000 in order to gain the support of Rio Grande Valley chambers of commerce and elected officials.

In addition, any estimate of the costs of these tax breaks is tied to the future assessed value of Annova LNG’s facility, and it looks like Annova may be significantly underestimating that. They have said they will invest $2.9 billion in this project, but on their Chapter 313 application they claim that the year it is completed, it will only be worth $1.47 billion—essentially that it will halve in value the moment it begins operating. Why would anyone invest in a property that is worth half what they paid to build it? Is Annova lowballing the post-construction value to conceal the real price tag of these tax cuts and to save themselves millions when finally do get their tax bill?

If the goal is putting a paycheck in people’s pockets, each year the state could cut checks to 165 people for $70,000 each, and it would cost taxpayers $11.5 million annually. Instead, we as taxpayers are being asked to pay at least twice as much and maybe more.

Why would we even consider such a bad deal?

These expensive tax giveaways were created to lure companies to Texas or to the county that might otherwise set up shop elsewhere. But Annova, like Texas LNG and Rio Grande LNG, is not considering building its LNG export terminal anywhere else. As their websites and permitting applications make clear, all three LNG companies consider the Port of Brownsville the only feasible place for their operations. In fact, Annova explicitly rejects locations in Corpus Christi and in Port Aransas in their “Preliminary Draft Resource Report 10” filed with the Federal Energy Regulatory Commission.
We are not competing with any other place to attract Annova LNG, Texas LNG, or Rio Grande LNG.

So why should we give them hundreds of millions of dollars? Especially when we will be the ones who pay for the costs of air pollution, increased risks of industrial disasters, and negative impacts on our tourism and fishing economies thanks to the LNG export complex?

Cameron County Commissioners, Port Isabel ISD and the Texas State Comptroller should reject Annova’s appeal for corporate welfare. There should be no tax breaks for LNG.

Editor’s Note: The above op-ed was written by Stefanie Herweck and Scott Nicol. Both serve on the executive director of the Lower Rio Grande Valley Sierra Club.