FortBendNow.com

Sugar Land City Council has granted the new owners of Sugar Land’s Unocal Building – now known as One Sugar Creek Place – a tax abatement that will limit the amount of taxes the owners pay on the property while major renovations are made.

The Ellman Cos., through a related company, completed the purchase some four months ago of a 9-acre site that includes the 25-year-old, 521,000-square-foot building.

Ellman sought, and Sugar Land Economic Development Director Regina Morales recommended, the tax abatement as an incentive for the building’s new owners, while it refurbishes the aging structure to bring it up to its former Class A office standards.

While addressing the City Council before its members voted in favor of the tax break, Morales and other city officials presented their views on the benefits of such abatements, and referred to concerns about the tax break strategy – some raised in comments following a recent FortBendNow news report on the tax proposal.

“Why an abatement?” Morales asked as she addressed councilors at last week’s meeting. “This project, because it’s in decline, it’s an aging building, it has decreased in value. We’ve seen over a 40% decrease in value over the past five years.”

Morales said the abatement would not only help the building’s owners by not increasing its property taxes while it makes millions of dollars of renovations, but it also would help economic development efforts as the city works “to reposition it for the major corporate relocations we hope to land for this facility.”

Morales said the 10-year tax abatement – beginning in 2012 or 2013 depending on whether the owner-developer meets criteria set by the city – applies only to the new value added to One Sugar Creek Place as a result of renovations. Ellman will continue to pay taxes on the property at 2008 assessed values, she said.

Morales also told council members the proposed abatement is “consistent with” other abatements granted Class A office buildings in Sugar Land.

Mayor David Wallace said financial benefits from such abatements are “typically passed through to the tenant” by building owners.

Such abatements, Morales said, are “based on a net gain to the city, based on tax revenues and primary job creation.”

Sixteen tax abatements are now on the city books, Morales said. And, since 1989, they have been responsible for creating about 2,800 jobs in the city.

The companies that benefited from those abatements were to have invested more than $82 million in the city, in real or personal property and inventory, as a condition from receiving the tax breaks. Instead, Morales said, the actual value of those companies property and inventory in Sugar Land today has reached more than $249 million.

“So what we hav efound typically with these companies that participate in these projects is…they typically under-project and over-produce.

Morales said the city monitors to see that recipients of tax abatements comply with terms of their agreements. Since 1989, three had “some minimum shortfalls” and, as a result, received no tax incentives. Nonetheless, she said, the city “still received the full benefit of ad valorem taxes and jobs created.”

The council voted unanimously – with the exception of Councilman Tom Abraham, who was absent – to approve the abatement.

Ellman reportedly paid Unilev Capital Corp. of Beverly Hills, Calif. $60.5 million for the Unocal Building and 9 acres. The Fort Bend County Central Appraisal District, however, lists the property’s assessed value at just $32 million.

City officials said it’s likely the appraisal district has not updated its property records to reflect the recent sale – something the district does once a year. If true, officials speculated the assessed value for the property would increase.