Tax Abatements & Incentives For New Schlumberger Headquarters As Sugar Land Homeowners Get Steamrolled

/Tax Abatements & Incentives For New Schlumberger Headquarters As Sugar Land Homeowners Get Steamrolled

Tax Abatements & Incentives For New Schlumberger Headquarters As Sugar Land Homeowners Get Steamrolled

As residents of Fort Bend County begin opening up their 2015 property tax bills in the coming weeks and months, they can be proud that they are helping to support what has become one of the most regressive, crony capitalist property tax systems in the United States. This is the undeniable truth here in Texas where puppet officials continue to tow the line for big business and help companies skate on billions in property taxes. The news that Schlumberger will relocate their national headquarters to their Sugar Land Texas campus provides yet another example of how corporations have been been shifting the burden of property taxes onto residential homeowners.

Buried in the story of Schlumberger’s Sugar Land expansion plans is this little tidbit:

“At Tuesday’s Sugar Land City Council meeting, proposals to approve economic development agreements and tax abatements for the project will be considered.  The city declined to comment until any agreements were approved.”

Of course they are declining to comment. The City Council of Sugar Land and Fort Bend County leaders don’t want to discuss how they are selling out residential homeowners to keep Sugar Land’s largest employer happy. They don’t want to tell local homeowners that Schlumberger is going to get some nice discounts on their property tax bills if history is any guide. Sugar Land’s City Council probably won’t tell local homeowners that Schlumberger’s shiny new digs will likely be “appraised” by the local CAD at a fraction of its real market value while Schlumberger’s existing campus is also likely underassessed by the Fort Bend Central Appraisal District. We know this because businesses have been receiving large discounts to market value across the state by virtue of the fact that Texas is a non-disclosure state and the local CADs can’t get their hands on all of the relevant commercial sales data.

If the Sugar Land City Council really wants to evaluate a tax abatement and incentive package for Schlumberger’s new national headquarters, perhaps they should first hire a real licensed commercial appraiser to determine the real market value of Schlumberger’s Sugar Land campus, and see how the Fort Bend Central Appraisal District assessments reflect that market value . I think that would be a fascinating study indeed! I wonder how such an independent analysis would stack up against Travis County’s recent independent study showing that commercial property was being underappraised (undertaxed) by roughly 50 percent during the last three years.

The city of of Sugar Land owes Fort Bend County homeowners an honest accounting of what they are proposing to give away to Schlumberger in the name of “economic development”, and the only way for City Council to really determine that would be to perform a real independent commercial appraisal of Schlumberger’s properties. Since most central appraisal districts, including both the Fort Bend CAD and Harris County CAD, only have a fraction of the real sales data available to assess market values for these large commercial properties, we know that local appraisal districts have been undershooting on many of the values to avoid getting sued in district court. The the recent case of HEB in Sugar Land is just one example where a business obtained a 35 percent discount to the Fort Bend CAD’s original notice value after the Fort Bend CAD and Appraisal Review Board knocked over $6 million off the original FBCAD “appraisal”. (See here…Commercial CAD Record Dissected).

UPDATED (10-7-2015): The City Council of Sugar Land and Mayor James Thompson apparently rolled out the red carpet for Schlumberger at the Tuesday night meeting. The City Council reportedly approved a measure for Schlumberger to move its headquarters and avoid paying millions in local property taxes. Here’s what Schlumberger is getting in return for padding themselves on the back while they undertake their roughly $200 million project:

  • Direct incentive of $2.5 million will be paid over 10 years in annual payments
  • A one-time construction-related sales tax reimbursement grant of $750,000 will be paid once the project is completed
  • Tax abatement of 100 percent per year over 10 years on real improvements and personal property
  • The city will widen Industrial Boulevard to a four-lane divided roadway by 2017

The irony of this comical farce is that the City Council and mayor of Sugar Land provided the handouts to Schlumberger without even questioning whether Schlumberger has already been receiving preferential treatment on their property taxes in Fort Bend County. If Travis County Texas is any guide (and I think it is), let’s just say that the Fort Bend CAD has been a lap dog for Schlumberger and other large commercial property owners in the area while they extract every last dime from local homeowners who are stuck in this two-tiered travesty of a mockery of a sham. I emailed the mayor and his secretary Tuesday morning to ask whether Mr. Thompson and City Council had done an independent study on the real market value of Schlumberger’s properties and they failed to comment.

UPDATE (10-9-2015): I had a productive conversation with the Sugar Land city manager, Allen Bogard, this morning. I thanked Mr. Bogard for reaching out to me, but it appears my original concerns have only been confirmed. The city manager confirmed Sugar Land did NOT perform an independent fee appraisal of the Schlumberger campus in Sugar Land prior to the approval of the new tax incentive package. That is particularly troublesome for all Fort Bend County homeowners. The issue is not whether Schlumberger’s new “business activity” produces more tax receipts than the cost of services that will be required by Schlumberger. The issue is an absence of transparency and accountability. The City of Sugar Land apparently has no idea how much property tax revenue they have given up in the last few years on Schlumberger’s current and past FBCAD assessments. Without a real appraisal and accounting of this, we can only assume that it was a large sum of money!

For those who are not familiar with this oil and gas technology juggernaut, Schlumberger has some experience exploiting business-friendly governments willing to lend a helping hand. Schlumberger is actually incorporated in Curacao, a tiny Caribbean island known to be a tax haven. In a rather informative piece from the Guardian, you can see how Schlumberger routes many of its companies through subsidiaries in offshore tax havens. The Guardian also details how Schlumberger was fined $155 million by the U.S. government earlier in the year after it was caught conducting business with both Iran and Sudan while those countries were under sanctions.

How do we know that Schlumberger is already the recipient of local government handouts? Well it’s simple really when you put two and two together. As fate would have it, the Chronicle also reported this week that ConocoPhillips is in talks to buy the Energy Center Three tower for $275 million. That’s very interesting indeed. Energy Center Three was reportedly finished late last year before ConocoPhillips moved into it this year as a tenant.

“The 20-story Energy Center Three, located at 935 N. Eldridge Parkway, will be completed by the end of the year, and ConocoPhillips plans to move into the building in May 2015.”

That begs one very large question. If the tower was finished at the end of 2014, Why did the Harris County Appraisal District “appraise” the market value of Energy Center Three at only 39 percent of the $275 million price reportedly under consideration?

Energy-Center-3

See how big business received huge discounts on their property taxes in Travis County. Read the Analysis of TCAD’s Commercial Valuations for the City of Austin.

 

greed

 

By | 2017-02-03T23:32:03+00:00 October 6th, 2015|Development, Politics, Spin Cycle|3 Comments

About the Author:

Aaron Layman is the broker/owner of Aaron Layman Properties LLC, based in Dallas Texas.

3 Comments

  1. Kreditanstalt October 8, 2015 at 12:00 am - Reply

    Normally, I think tax competition between governments is a good thing. But with governments having all the guns – and a captive tax herd in property owners – not only is there ample opportunity for unseen payoffs but there is no incentive to cut spending at all. So they won’t; they’ll just pass it on to YOU.

    Look for this to become MUCH more prevalent all over North America in the next five to ten years.

  2. Ty Kelly October 12, 2015 at 4:17 pm - Reply

    Aaron, I came across your blog in the national Mish blog and really appreciate your raising these issues. I live in one of Houston’s high value neighborhoods and pay really fierce property taxes. I’d be curious as to the macro-statistics. What is the total ratio of commercial/industrial property to residential property in Harris County and what is the ratio of property taxes paid in each case on a per acre or per square foot basis? Are those types of statistics available? Thanks.

    • aaronlayman October 14, 2015 at 7:28 pm - Reply

      I think the closest thing you’ll find for the type of data you mention is the PVS (property valuation study) reports on the comptroller’s website.

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