PORT ARTHUR —

Depending on how state legislation designed to offset companies’ expenditures on pollution control equipment is interpreted, the county could be looking at millions in lost property tax revenue.

Passed in 2007, House Bill 3732 amended the Texas Clean Air Act, in the Health and Safety Code, to define certain advanced clean energy projects that companies could claim for tax exemptions.

The bill was intended to clarify a 1993 bill passed by state voters as Proposition 2. The bill was designed to offset companies’ cost for capital expenditures on property used to curb air, water and land pollution by allowing property tax exemptions.

In spite of the 2007 bill, determining what projects qualify for an exemption continues to be subject of debate — one that is prompting Jefferson County officials to consider legal action while the possibility of losing millions in tax revenue hangs in the balance.

Don Lee, executive director of Texas Conference of Urban Counties, said Monday some industry is claiming exemptions on equipment used to make production more efficient. While companies claim language in the 2007 legislation expands the scope of allowed exemptions, Lee said it is his group’s position that the expanded exemptions are nothing more than an attempt to find a loophole.

“If they prevail, it will cause every county in the state of Texas to be impacted. In my opinion it will drive a huge loophole in the property tax system,’ Lee said.

Currently it falls to the Texas Commission on Environmental Quality to determine what exemptions qualify under the legislation.

“If those amendments to the tax code are given expansive interpretation by the TCEQ, it could be billion of dollars in exemptions,” Lee said.

Locally, Valero has filed application for an exemption on the company’s hydrotreater units, Jeff Branick, assistant to County Judge Ron Walker, said.

If that exemption, or others like it are allowed, it could be billions lost in tax value on the rolls, Branick said.

Jefferson County officials are in talks with other coastal counties about possible remedies that could include legal action.

“The county could attack the constitutionality of the tax exemption statutes,” Branick said.

Whenever the bill was first voted on in the early 1990s, counties supported it because it would produce pollution in the area.

“Now, we are talking about an expansion that we can’t really get our arms around,” Branick said. “It could be expanded to where virtually every piece of equipment in the plant could be exempted from property tax.”

Lee said the exemptions should be allowed on property meant to make the plant cleaner, not on products that come out cleaner and are shipped to other parts of the nation, or the world.

“If the Toyota plant in San Antonio converts to make the Prius and applies for an exemption, wouldn’t that be the same,” he said.

In that case, the lost revenue would have to be absorbed by residential property owners. It would take 10,000, $100,000 homes to replace a billion dollars in lost property on the tax rolls, Branick said.

Lee said TCEQ board members recently took up the issue, and directed the agency’s staff to look for  ways companies could be granted at least a partial exemption.

State Representatives Allan Ritter and Joe Deshotel are working in behalf of the counties, Lee said.

skoonce@panews.com