By Julie Anderson, Editor
Matagorda County Judge Nate McDonald might put it like this: Create a magnet. After months of negotiations, after preparing, planning and strategizing, Bay City is set to welcome such a magnet, one that will attract growth, lure and expand businesses, generate permanent jobs, and invite new families.
On June 10 of this year, Tenaris, a global manufacturer of steel pipe products used for drilling in the energy industry, solidified plans to build a 1-million-square-foot, state-of-the-art seamless pipe mill in Bay City, Matagorda County, that will produce some 600,000 tons of pipe annually.
Scheduled to open in 2016, TenarisBayCity represents a $1.5-billion investment and is projected to create 600 direct manufacturing jobs with an average salary of $66,000, representing an annual projected payroll of approximately $40 million. This does not include indirect and induced jobs that will result from the project, along with an influx of students into the school district as construction workers and their families fill temporary and permanent positions.
“Certainly the opportunity for our citizens to have great new career opportunities is a huge plus for our county,” McDonald shared. “At the end of the day, I think the biggest benefit for those of us who live here, and always will, is the sense that our county is moving forward in a big way and building new long-term opportunities for the next generation of ‘Matagorda Countians.’ ”
From Suggestion to Success: How Matagorda Made it Happen
On June 10, 2013, the Matagorda County Commissioners Court passed the final piece of an economic incentive package offered to Tenaris – a Chapter 381 agreement – bringing a packed audience to its feet in a standing ovation, applauding the closure of a deal that was 12 months in the making.
The story began one year earlier. On June 21, 2012, McDonald received a phone call from a friend in Austin. A large international manufacturing company wanted to build a plant in the Southern United States. The project was still somewhat secretive; McDonald’s friend could not reveal the name of the company nor the product to be manufactured. Thankfully, McDonald continued to ask questions and learned enough to pique his interest.
“Are they environmentally clean?” the judge queried.
“Very much so,” the friend replied.
“How many permanent employees will they employ, and what is the average wage?” McDonald continued.
“Six hundred and $66,000,” the caller answered; he then elaborated on indirect jobs that would be required to support the plant upon completion.
McDonald was sold – at least on the possibilities – and he asked for a couple of days to consult with the Matagorda County Economic Development Corporation (MCEDC). Surprisingly, the answer was no. The company was on the fast track to site selection with 13 locations on the list, and if Matagorda wanted in, a discussion needed to take place within 24 hours.
The judge made it happen, and the trio – McDonald, MCEDC Executive Director Owen Bludau, and the caller – gathered on June 22. The meeting was a success, and five days later this same group met with the mystery company’s director of development, during which time the name of the company and product to be produced were revealed. Tenaris, the world’s largest steel pipe manufacturer, was seeking a site near a deep water port to construct their first new seamless pipe mill in North America.
Matagorda’s first hurdle was clear: The county did not have a deep water port. However, this wasn’t an automatic deal breaker, and the judge was advised to have three sites prepared for perusal within the week. McDonald took the project to the County Commissioners, who gave the county’s four-person economic development team the go-ahead to pursue Tenaris. After multiple meetings with Bay City leaders and other interested parties, the decision was made to enlist an accomplished realtor to develop the site proposals.
The first three sites presented were not a good fit, and the realtor was given one week to prepare three more for consideration. In fact, Tenaris advised the county to keep three sites in continual play throughout the process; the realtor responded by completely preparing seven sites with an eighth on standby.
“This became a seven-day-a-week job for us until we became one of the final two candidates still under consideration for the plant in late fall/early winter of 2012,” McDonald recounted.
Hurdles Along the Way
The Answer to the Port: Good Neighbors to the North
The question of a deep water port was looming from the get-go, and a neighboring county would provide the much-needed answer.
“We were lucky to have an excellent deep water port immediately to our north in Freeport, Brazoria County, complete with a forward-thinking and accomplished Commissioners Court, Port of Freeport Board of Directors, and economic development team,” McDonald declared.
Originally, Freeport was in the running to be considered for the Tenaris pipe mill, but was denied the project because of the county’s environmental non-attainment designation.
However, in the end Brazoria County will win a piece of the economic pie via the planned importation of some 600,000 tons of billets a year through Freeport. The 40-foot-long billets will arrive by vessel and then be transported by rail to Bay City, where they will be blown into seamless steel pipe at the mill.
According to Brazoria County’s Economic Development Alliance, Tenaris’ usage of Freeport will generate approximately 1,800 indirect jobs in Brazoria County.
Drilling Waivers and Mineral Rights
In late fall/early winter 2012, Tenaris had narrowed the list of sites to two finalists, Bay City and Calcasieu Parish, Louisiana. At that time, Tenaris indicated that they did not want to be inhibited by any potential drilling on the proposed 1,000-acre site in Matagorda County.
“So now, we had to bring another partner into the mix to work on securing drilling waivers and/or mineral rights purchase options,” McDonald detailed. The owner of Bay City Abstract & Title Co. agreed to lead a team of four land men to work on securing rights and waivers from 77 mineral estates under the property, with the MCEDC footing the salary for the land men. Incidentally, the team leader, along with the realtor who worked on the site locations, did not charge for services rendered in pursuit of the Tenaris project.
Economic Incentives – What Could Matagorda Offer?
As challenges were presented, Matagorda County did their best to meet them head on.
Three potential sites in continual play? Check.
Deep water port? Check.
Drilling waivers? Check.
Mineral rights? Check.
When it came to economic incentives, the county and local community partners also did their best, knowing full well that competing sites had more to give.
“We were told many times that we could not match the dollars being offered by other jurisdictions,” McDonald reported. Nonetheless, Bay City stayed in the race.
“We could remain a viable candidate by being the best community partner to this 107-year-old company,” the judge explained. In October 2012, Matagorda County, along with all taxing entities involved, resolved to enter into 312 and/or 381 agreements with Tenaris upon their selecting a site in Matagorda County.
Tax Abatement Act – Chapter 312, Tax Code
A 312 agreement, or tax abatement, is an arrangement between a taxing unit and a property owner that exempts all or part of an increase in the value of real property and/or tangible personal property from taxation for a period not to exceed 10 years.
The Matagorda County Commissioners Court unanimously passed a 10-year, 100-percent per year property tax abatement agreement with Tenaris.
Chapter 380/381 Agreements –
Local Government Code
Chapters 380 (cities) and 381 (counties) of the Local Government Code grant cities and counties broad discretion to make loans and grants of public funds or the provision of public services, at little or no cost, to promote all types of business development including industrial, commercial and retail projects. Each agreement can be uniquely tailored to address the specific needs of both the local government entity and the business prospect.
The Matagorda County Commissioners Court voted 4-1 in favor of a Chapter 381 agreement that calls for the county to rebate the property taxes paid by Tenaris starting when the tax abatement agreement runs out in 10 years and extends for the next 15 years.
Under the terms of the 381 agreement, the county will rebate those taxes if Tenaris reaches agreed-upon terms of total investment and job creation. If it doesn’t reach those standards, the county will be allowed to recover an agreed-upon portion of those tax revenues.
Economic Incentives Part Two: Enter the State
As 2012 blended into 2013, the Matagorda site remained in strong contention against its Louisiana counterpart. On Jan. 11, 2013, McDonald and his team received notice that the State of Texas was offering an incentive of its own: a $6 million grant from the Texas Enterprise Fund, one of two funds the governor’s office operates to generate economic development. About one month later, Tenaris made their final decision.
On Feb. 15, Gov. Rick Perry conducted a press conference at Wharton County Junior College – Bay City Campus to announce Bay City as the future home of the Tenaris pipe mill. State Sen. Glenn Hegar, State Rep. Dennis Bonnen, and Tenaris North American President Germán Curá were also in attendance.
Plans were put into motion, with Tenaris closing on the purchase site just prior to the Sept. 9 groundbreaking ceremony.
“Breaking ground on TenarisBayCity represents a significant milestone for Tenaris,” said Curá, who returned to Matagorda County for the ceremony. “The mill will be the first of its kind for Tenaris in the United States and will help us strengthen our domestic production while addressing our customer’s growing needs.”
“Today is a great day for Matagorda County, the State of Texas, and the United States of America,” McDonald told gathered guests. “We all have worked together with Tenaris to help deliver the American dream to Matagorda County by creating career opportunities in our county and state for generations to come.”
Cura mentioned in his remarks that construction would ensue in two weeks, and as of press time pilings for the foundation were being hauled to the site.
“The pace is quickening,” McDonald noted, with construction expected to last approximately 30 months.
Matagorda County Judge Nate McDonald served as the leader of the six-member team that worked day in and day out for months to bring Tenaris’ pipe mill home to Bay City. And while the pipe will be seamless, the process was not.
“It seemed that my role was primarily one of problem solver, in that as challenges came up, we would convene a meeting and promulgate the solution so that we could take the next step in gaining this opportunity for our citizens,” McDonald reflected.
The yearlong timeline was punctuated not only by problems – certainly expected in a project of this magnitude – but also by defining moments that eventually led to a victory for Bay City, Matagorda County, and the State of Texas. Those moments are no doubt still fresh in the mind of McDonald:
The initial phone call from a friend presenting the possibility.
The first meeting with Tenaris’ director of development.
The naming of Bay City as a finalist.
The news of $6 million from the State of Texas.
The final announcement.
But one has to wonder, within the setting of county government where taxpayer apathy is often a problem, if one of the most memorable moments took place on June 10, 2013, when the Matagorda County Commissioners Court received a standing ovation.