Brazosport ISD approves tax incentive with Dow Chemical
CLUTE — Dow Chemical plans to build a carbon capture manufacturing facility within Brazosport ISD, and the school district granted them a tax break to further encourage them to put the $1.9 billion project here.
The Brazosport ISD Board of Trustees approved a tax incentive agreement with Dow Chemical at its meeting Monday night. While it will reduce the taxable value of the project site initially, it is expected to produce more tax revenue for the district over the facility’s life than is being abated.
“This investment supports growth in domestic electric vehicle (EV) and energy storage markets and builds on Dow’s successful track record of growth projects,” Dow Public Affairs Manager Gabriella Cone said in an email to The Facts.
The facility involves carbonate solvents production for lithium-ion battery manufacturing on the U.S. Gulf Coast. Dow is collaborating with the U.S. Department of Energy Office of Clean Energy Demonstrations. It will hold more than 90 percent of carbon dioxide from ethylene oxide manufacturing, according to Dow Chemical’s website at corporate.dow.com.
Construction would begin in 2026 and take about five years, according to meeting documents.
Dow previously submitted a Jobs, Energy, Technology and Innovation Act (JETI) application for a 10-year limitation on taxable value for economic development and investment attraction.
The agreement has three parties: Brazosport ISD, Dow Chemical and the governor’s office. Dow also has applied for an abatement with Brazoria County, but commissioners’ court has not acted on it.
With the school district’s approval of the application, the Texas Comptroller’s office, which coordinates the JETI program, will forward it to the governor’s office for approval.
“The agreement is going to be under the rule in effect at the time the board signs it,” O’Hanlon McCollom & Demerath Office Manager Mali Hanley said. “Over the course of the entire project, they’re (Dow’s) going to invest about $2.7 billion.”
The comptroller’s office has five requirements for recommending a project.
“One, whether or not Dow is an eligible applicant,” Hanley said. “That means that the governor’s office maintains a list of companies that are eligible to receive a state contract.”
Another requirement is project eligibility, in which the facility is under Miscellaneous Chemical Product and Preparation Manufacturing.
The comptroller has a 20-year analysis to determine whether Dow will pay more than it saves. This helps determine the state’s best interest, Hanley said.
“Based on what the comptroller’s calculated, Dow will actually pay well over what they would save,” she said.
A fourth requirement is the agreement being a compelling factor for the state. This transition into the last requirement is the qualified opportunity zone of the project, which is within Dow property.
“We communicate with the governor’s office that we have no intent to change the current relationships we have with BISD,” Dow Chemical Governmental Affairs Sam Gammage said.
Hanley and MoakCasey and Associates Executive Director of Economic Development Kathy Mathias presented the project’s financial impact to the board Monday.
They compared how a JETI is similar, same and different to Chapter 313, the state’s previous economic incentive program which JETI replaced after the Texas Legislature’s 2023 session. The district’s current Chapter 313 is not impacted by the program, Hanley said.
“We’re still looking at a 10-year incentive period where the project is limited for your Maintenance and Operations purposes only,” Hanley said.
The entire project is fully taxed with the district’s Interest and Sinking, which involves debts for district facilities.
The district still gets a deduction on property values. This recognizes district grants that aren’t penalized for generated state aid.
“It’s fully taxed at whatever value exists at the end of the 10 years,” Hanley said. “They have to maintain a presence for three years beyond that, or else they risk the entire incentive they received during that 10 years.”
The difference between JETI and Chapter 313 is the district does not require Dow Chemical to pay a revenue protection payment or supplemental payments to benefit the agreement.
Renewable projects also are not allowed.
“This is strictly geared toward manufacturing, nonrenewable energy, research and development,” Hanley said. “Fortunately, Dow is manufacturing. They’re within that category.”
Taxing Maintenance and Operations during the facility’s construction period is a new factor. The M&O is still taxable for 10 years but is based on Brazosport ISD’s location.
As for job waivers in Brazoria County, there’s a 50 job minimum with a $100 million investment. This is based on the county population.
“If you’re in an opportunity zone, the project is only taxed at 25 percent of its appraised value,” Hanley said.
Manufacturing includes utility services, natural resources, critical infrastructure, and research and development.
The total M&O financial impact for the project is $42.7 million in collected taxes for non-land.
“We’re looking at, like $5,000 to $13,000 a year for about a total over the incentive period,” Mathias said. “The company would save about $74.7 million, and that includes the construction period savings.”
I&S collected taxes are estimated at $34.4 million. This also includes a maximum rate reduction of 1.8 center per $100 of valuation.
The peak value in the 2031-32 incentive year is $1.45 billion as it is applied to the debt portion of the tax rate, Mathias said.