ODC votes for first Nacero incentive payment

The Odessa Development Corporation Board voted 6-1 Thursday to pay Nacero the vast majority of its first-year $2 million incentive payment although there was some question as to whether the company actually complied with all of the conditions within its Economic Development Agreement with the city.

In June 2021, the Odessa City Council agreed to allow Nacero to build a $7 billion natural gas processing and production facility near Penwell. The project is expected to create 3,500 construction jobs and 350 permanent jobs.

As a result of the agreement, the ODC will provide Nacero $20 million in grant incentives over 10 years, assuming they meet all of the benchmarks set out in the agreement annually.

On Thursday, Assistant City Manager Cindy Muncy informed the ODC board that the accounting firm, Weaver, tested a sampling of the expenditure documents presented by Nacero and discovered they’d spent 99.58% of the $100 million they had promised to spend on the project during the first year.

Since Nacero didn’t completely fulfill the terms of the contract, the company is now only entitled to a pro-rated amount.

The Odessa City Council will have a final say on the matter and four members of the council were in attendance during Thursday’s meeting – Mayor Javier Joven and councilmembers Denise Swanner, Mark Matta and Steve Thompson.

ODC board member Kris Crow voted against paying Nacero the incentive. Both he and board member Larry Robinson voiced concern that Nacero included amongst its expenditures those made in 2018-2020 when the contract with the city wasn’t signed until June 2021.

Included in the expenditures are options to purchase 2,530 acres of land.

They also questioned whether Nacero should be able to consider salaries as capital expenditures.

Crow also questioned why the ODC’s compliance committee didn’t review Nacero’s grant request, but was told protocols changed that made it unnecessary.

The question as to whether the city can consider expenditures prior to June 2021 is up for interpretation, Muncy said. As for salaries, she said it was a common accounting practice to consider them when a company is designing a new process and a new type of facility.

Board Chairman David Boutin said he believed the earlier expenditures should be considered.

“If you had a company that was interested in a piece of property, and they were intending to apply for a grant, there’s a likelihood, because their information would become public, that they may purchase that property prior to the execution of the agreement in order to keep them from seeing a competitive disadvantage,” Boutin said. “So if that’s the case, and that’s part of their investment, why would you disallow that when truly that is a part of it?”

Boutin said he intends to meet with City Attorney Natasha Brooks to fine tune the language in the contracts so it’s clear when expenditures can be considered.

Crow said he thinks the Nacero project is a “fabulous” one that he’s looking forward to, but he has concerns. The groundbreaking keeps getting pushed back and other projects have never come to fruition.

“I’m really hoping this one is going to, but at the same time that this was going on, Nacero was looking at projects in Arizona and looking at projects in Pennsylvania,” Crow said. “Are we sure that all of these expenses are 100% attributable to Penwell and not to other projects? There’s just a lot of questions here.”

Knowing that representatives of Nacero were in the audience, Crow said he is sure they’d answer “absolutely” to his question, but when given the opportunity to address them directly, declined.

However, Robinson did take the chance to ask Nacero’s Chief Operating Officer Hal Bouknight questions. He wanted to know if residents could see any evidence actual work is being done on the site and if any money has been spent in Odessa, thus far.

“No, we haven’t turned any dirt. We have looked for environmental contamination, so we’ve spotted and identified those points with stakes so we can go back when we do a Phase Two and we can clear that up,” Bouknight said.

A local engineering survey firm was hired to do that work, Bouknight said.

Bouknight also introduced Nacero’s new chief financial officer, Jessi Wong. He and Wong assured the board the financial documents provided to the city did not include any expenditures for projects outside Penwell.

“We’ve done zero design development on any other site,” Bouknight said. “So anything we did on the prior job, when we were looking first at Arizona, that was not part of this documentation report. We pulled that out. There’s probably another $30 or $40 million and stuff that we pulled out in that process.”

Crow still wasn’t satisfied.

“I look forward to funding this project. I really do. I think we’ve got the cart before the horse a little bit here. I would like to feel better about making sure we really have a viable project. This is me, I know my opinion and five bucks won’t buy a coffee at Starbucks, but I would rather see more of a tangible capital investment before” paying the incentive, Crow said.

In other matters, the board voted 5-2 to sign a new contract with the Weaver auditing firm, with Crow and Jay Kirk casting the dissenting votes.

Muncy told the board the city council approved a new contract with Weaver because the city recently moved all of its billing and collection into a new system and it was “wise” to have the existing accounting firm watch over the transfer process.

Muncy said that transfer did not impact ODC, however.

Board member Melanie Hellmann noted no other qualified firms responded to the city’s request for bids.

During the ODC meeting Feb. 10, board members had a lengthy discussion about ODC not having its own bank accounts. They also discussed the city’s auditing practices.

Crow told his fellow members that “co-mingling” ODC’s assets with the city’s seemed dangerous to him. Although he stressed he wasn’t alleging any wrongdoing, he said he only gets the financial information the city and Weaver provides him.

During the earlier discussion about Nacero, Crow alluded to what he said were “discrepancies” in Weaver’s report on the company.