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Ordinance No. 16,302 (Item 7.e.) ORDINANCE NO. 16,302 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS, ADOPTING THE INCENTIVE POLICY FOR THE BAYTOWN REVITALIZATION INCENTIVE ZONE TO EXERCISE CERTAIN MUNICIPAL POWERS IN SUCH NEIGHBORHOOD EMPOWERMENT ZONE; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS: Section l: That the City Council of the City of Baytown, Texas, hereby adopts the Incentive Policy for the Baytown Revitalization Incentive Zone to exercise certain municipal powers in such neighborhood empowerment zone, which policy is attached hereto as Exhibit "A" and incorporated herein for all intents and purposes. Section 2: This ordinance shall take effect immediately from and after its passage by the City Council of the City of Baytown. INTRODUCED, READ and PASSED by the affirmative vote of the City Council of the City of Baytown this the 13th day of November, 2025. CHARLES JOWOayor ATTEST: o" •s e' • 4 0� ARGEi A K-SO1 , Ci` rk . ! l f �,, •�erg 0 APPROVE A TO1F` OTT OND, City Attorney R Ordinances and Resolutions Ordinance Drafts 2025-1 1-13 7 e-Ordinance Approving R1Z Incentive Guidelines 2025 kh doex Exhibit "A" BAYTOWN REVITALIZATION INCENTIVE ZONE GUIDELINES SUMMARY OBJECTIVES Promote an increase in economic development. Promote the rehabilitation of affoi dable housing. Promote quality and more sustainable building materials. PROGRAM 1: Waiver of construction permit fees. BASIC INCENTIVES Waiver of impact fees. PROGRAM 2: Refund of municipal ad valorem taxes based upon the following schedule: TAX REFUND Year 1 100% INCENTIVES Year 2 100% Year 3 80% Year 4 60% Year 5 50% Year 6 0% and based only upon the incremental value increase of the improvement as detenmined by HCAD. QUALIFYING All commercial and residential improvements within the Neighborhood Empowerment Zone. STRUCTURES AUTHORIZED New facilities. INVESTMENTS Expansions. SUBJECT TO TAX Buildings and structures. REFUND Site improvements NOT SUBJECT TO TAX Land. REFUND Existing Improvements. Constrttc tion-i n-progress. Personal property. Pipelines. Deferred maintenance. Property with an economic life less than fifteen(15)years. ECONOMIC CRITERIA FOR PROGRAM 1• Minimum investment of 201 o of the base value for both residential and commercial. EXISTING STRUCTURES ECONOMIC CRITERIA Residential: Minimum investment of S65,000. FOR PROGRAM 1: Commercial: Minimum investment of S 100,000. NEW STRUCTURES ECONOMIC CRITERIA Residential: FOR PROGRAM 2• ► Minimum investment of 20°o of the appraised value of the improvement value as EXISTING determined by HCAD. STRUCTURES ► Residential improvements must increase the appraised value of the improvements by S20,000 or more within the first two tax years after completion of the improvement. Commercial: ► Minimum investment of 2010 of the appraised value of the improvement value as determined by HCAD. ► Commercial improvements must increase the appraised value of the improvements by S75,000 or more within the first two tax years after completion of the improvement. ECONOMIC CRITERIA Residential: FOR PROGRAM 2: ► Minimum investment of S65,000. NEW STRUCTURES ► Minimum appraised value of S65,000 within the first two tax years after completion of the improvement. Commercial- 0- Minimum investment of S 100,000. ► Minimum appraised value of S 100,000 within the first two tax years after completion of the improvement INCENTIVE POLICY FOR THE BAYTOWN REVITALIZATION INCENTIVE ZONE SECTION I PURPOSE It is the City of Baytown's goal to promote development within its Neighborhood Empowerment Zones in an effort to improve the local economy and enhance the quality of life for its citizens. Insofar as these goals are served by enhancing the value of the local tax base, rehabilitating affordable housing, and increasing economic opportunities, the City of Baytown will give consideration to providing the following incentives for development within Neighborhood Empowerment Zones SECTION 2 DEFINITIONS (a) "Abatement" means the full or partial refund of ad valorem taxes of certain improvements on eligible properties in a neighborhood enterprise zone designated for economic development Purposes, (b) "Agreement" means a contractual agreement between a property owner and the City for the purposes of Program 2 tax refund incentives. (c) "Base Year Value" means: (1) either: a. the assessed value of eligible property on January I"preceding the execution of the agreement as detennined by HCAD or b. the sales price of the eligible property, if the property was conveyed subsequent to such January I'`, whichever is Greater; or (2) the appraised value of the eligible property as determined by an appraisal conducted within one year of an application hereunder by a professional appraiser holding a license in the State of Texas if the eligible property is owned by a tax-exempt organization. (d) "Commercial Improvement" means an improvement that is not a residential improvement. (e) "Coverage" means all building facades other than accessory use buildings less than 500 square feet, shall have all exterior walls constructed using masonry materials in accordance with the minimum n4asonry materials coverage percentage shown in Exhibit A of these guidelines. (f) "Debt" means any delinquent sum of money levied, imposed or assessed by the City against any applicant or property of the applicant, including, but not limited to, those for ad valorem taxes on real or personal property located within the boundaries of the City. Such term does not include those delinquent sums subject to a valid installment agreement executed prior to the date of the submission of an NEZ incentive application and under which all payments are current. (g) "Deferred Maintenance" means improvement necessary for continued operations which do not improve productivity or alter the process technology. (h) "Economic Life" means the number of years a property improvernent is expected to be in service. (i) "Eligible Improvements" means buildings, structures, and site improvements on eligible properties made subsequent to and listed in an NEZ incentive application and for which a certificate of occupancy or certificate of completion has been issued by the City's chief building official. The term does not include pipelines, personal property, those improvements with an economic life of less than fifteen (15) years, or deferred maintenance improvements. [j) "Eligible Properties" means commercial or residential properties within a neighborhood empowerment zone. (k) "Existing Structure" means an improvement on real property to which HCAD has assigned or will assign a value regardless of any improvement, which is the subject of an NEZ incentive application. (1) "Expansion" means the addition of buildings andior structures. (m) "Facility"means property improvements completed or in the process of construction which together comprise an integral whole. (n) "HCAD" means the Harris County Appraisal District or its successor agency. (o) "Masonry" materials means and includes that form of construction defined below and composed of clay brick, natural stone, decorative concrete block, stucco, glass block, tilt- wall, rock, synthetic stucco material meeting applicable windspeed requirements, exterior insulation and finish systems (EIFS) complying with ASTM-E 330 structural testing and ASTM-C 1093 fastening, or other materials of equal characteristics laid up unit by unit set in mortar. A combination of at least three materials shall be used, two of which shall be masonry. The following materials shall not qualify nor be defined as "masonry materials" in meeting the minimum requirements for exterior construction of buildings, unless specifically approved by variance. exterior plaster or mortar wash surface material; acrylic matrix, synthetic plaster, or other similar synthetic material; cementitious fiber board siding (such as "Hardy Plank" or"Hardy Board"). (p) "Modernization" means the replacement and upgrading of existing facilities which increases the productive input or output, updates the technology or substantially lowers the unit cost of the operation. Modernization may result from the construction, alteration or installation of buildings, structures, fixed machinery or equipment. It shall not be for the purpose of reconditioning, refurbishing or repairing. (q) "Neighborhood Empowerment Zone" or "NEZ" means an area designated as such for the purpose of providing economic incentives, including a tax refund, as authorized by the City of Baytown in accordance with Chapter 378 of the Texas Local Government Code. (r) "New Construction" means a property previously undeveloped which is placed into service by means other than an expansion or modernization. (s) "Owner" means an individual or entity in possession of title for land,building or structure or individual or entity who possesses a leasehold of ten or more years on land, building or structure. (t) "Real Property" means an area of land defined by legal description as being owned by the person applying for a tax abatement or permit/impact fee waivers, including any improvements thereto, which is to be improved and valued for property tax purposes, and which is included in the Neighborhood Empowerment Zone. (u) "Residential Improvement" means a structure associated with single-family detached,single- family attached, and two family duplex uses. (V) "Tax-Exempt Organization" means an entity that is a nonprofit corporation, nonprofit association,or other entity that is exempt from the payment of ad valorem taxes pursuant to the Texas Property Tax Code. SECTION 3 PROGRAM POLICY It is the policy of the City of Baytown that consideration will be provided in accordance with the guidelines, criteria and procedures outlined in this document. This policy applies to the owners of real property. Project consideration will include the potential impact of each project on the immediate and surrounding area. (a) Program Elizibility. f 1) Eligible Property. Neighborhood Empowerment Zone Incentives may be granted for both commercial and residential improvements within the Neighborhood Empowerment Zone, designated by the City Council of the City of Baytown,Texas. (2) Inclip-ible Pronertv. Property owned by a tax-exempt organization is not eligible for Program 2 tax refund incentives. (3) Eliaible Improvements. Neighborhood Empowerment Zone Incentives may only be granted for eligible improvements, which arc built in accordance with all codes and ordinances of the City, and which are made subsequent to and listed in an NEZ incentive application, subject to such limitations as City Council may require. (4) Inelieible Improvements. Neighborhood Empowerment Zone Incentives shall not be granted for: a. improvements to real property owned by a persomentity who owes a debt to the City; b. improvements to properties which have received assistance through the City's Owner-Occupied Housing Rehabilitation Program within five years of the commencement of the improvement for which an NEZ incentive is sought; C. improvements that are subject to a Chapter 380 Economic Development Agreement with the City: and d. improvements to real property that is subject to a Tax Abatement Agreement with the City. (b) Program 1: I Basic Incentive Program (1) Economic Qualification for Program I . a. Existing Structures. In order for an existing residential or commercial improvement to be eligible for the basic incentive program, the construction cost of the proposed improvement must equal or exceed 201-o of the base value. b. New Construction. In order for a new construction to be eligible for the basic incentive program, there must be a minimum investment of $65,000 for a residential improvement or a minimum investment of $100,000 for a commercial improvement, and the construction must comply with the masonry standards listed in Exhibit A of these guidelines, as well as the applicable provisions of Chapter 1 I 1 of the Baytown Code of Ordinances. (2) Economic Incentives for Proaram I. a. Waiver of Certain Permit Nees. The following fees may be waived for eligible improvements in a neighborhood empowerment zone upon application of the property owner and approval by the Chief Building Official. I. building permit fees as enumerated in Section 2-595(2)(a) and (b) of the Code; 2. electrical permit fees as enumerated in Scction2-595(2)(d) and (c) of the Code 3. plumbing permit fees as enumerated in Section 2-595(2)(f) and (g) of the Code; 4. mechanical permit fees as enumerated in Section 2-595(2)(h) of the Code; 5. miscellaneous permit fees as enumerated in Section 2-595(2)(i) of the Code; and 6. plan review fees as enumerated in Section 2-595(2)0) of the Code. If inspection fails,any re-inspection fee(s)will not be waived and will be the responsibility of the owner applicant. b. Waiver of Impact Fecs_ Impact fees may be waived in accordance with Section 114-99(d) of the Code of Ordinances, Baytown, Texas, upon application of the property owner. The adoption of this incentive policy shall constitute the city council's approval of such waiver subject to reversal as stated in such section- (C) Pro9Lgm_2: Tax Refund Incentive Program. (1) Economic Oualification for Program 2. a. Existing Structures_ 1. Residential. In order for an improvement to an existing residential improvement to be eligible for the tax refund inccntive program, ► the construction cost of the proposed improvement must equal or exceed 20°-n of the appraised value of the existing improvements based upon the most recently certified value by the chief appraiser of HC"AD, and ► the eligible improvement must increase the appraised value of the existing improvements as determined by HCAD by at least $20,000 within the first two tax years after completion of the improvements, as evidenced by a certificate of completion or certificate of occupancy issued by the Chief Building Official. 2. Commercial. In order for an improvement to an existing commercial structure to be eligible for the tax refund incentive program, ► the constriction cost of the proposed improvement must equal or exceed 20% of the appraised value of the existing improvements based upon the most recently certified value by the chief appraiser of HCAD, and ► the eligible improvement must increase the appraised value of the existing improvements as determined by HCAD by at least $75,000 within the first two tax years after completion of the improvements, as evidenced by certificate of completion or certificate of occupancy issued by the Chief Building Official. b. New Construction. I. Residential. In order for a new construction residential improvement to be eligible for the tax refund incentive program, ► there must be a minimum investment of$65,000; ► the improvements shall comply with the masonry. architectural and site design standards listed in Exhibit A of these guidelines, as well as the applicable provisions of Chapter I 1 I of the Baytown Code of Ordinances; and No. the eligible improvement must increase the appraised value of the existing improvements as detennined by HCAD by at least $65,000 within the first two tax years after completion of the improvements, as evidenced by certificate of completion or certificate of occupancy issued by the Chief Building Official. 2. Commercial. In order for new construction commercial improvement to be eligible for the tax refund incentive program, ► there must be a minimum investment of$100,000, ► the improvements shall comply with the masonry, architectural and site design standards listed in Exhibit A of these guidelines, as well as the applicable provisions of Chapter l l I of the Baytown Code of Ordinances; and ► the eligible improvement must increase the appraised value of the existing improvements as determined by HCAD by at least $100,000 within the first two tax years after completion of the improvements, as evidenced by a certificate of completion or certificate of occupancy issued by the Chief Building Official. (2) Value and Term of Refund. If the owner certifies in writing that no planned or pending action, which would affect the taxable value of the eligible property, is pending and none will be sought for the tax year for which a refund is requested, a refund may be issued in accordance with the tax refund agreement. One hundred percent(100%)ofthe value ofnew eligible properties shall be abated for the first two (2) years, followed by eighty percent (801-o) abatement for the third year, sixty percent (60%) abatement for the fourth year and fifty percent (50%) for the fifth year. In no case shall the period of abatement exceed five (5) years. If a modernization project includes facility replacement, the abated value shall be the value of the new unit(s) less the value of the old unit(s). (3) Taxability. In order for a property owner to be entitled to a refund, the property owner must pay all ad valorem taxes due and owing to the City prior to the delinquency date and submit proof thereof along with a request for a refund in the subsequent tax year. The refund shall be calculated as follows: (HCAD Improvement Value for Current Year-HCAD Improvement Value for Base Year) X Applicable Abatement Percentage X City Tax Rate $100 valuation Late refund requests will not be considered. SECTION 4 APPLICATION (a) Application Required. Any owner of taxable property in the NEZ may apply for neighborhood empowerment zone incentives by submitting an application with the City of Baytown's Community Development Division via the Citizen Self Service portal. (b) Anplication Contents. A complete application for Program I and/or Program 2 incentives shall be submitted and must include,at minimum, the following infonnation: ► address and legal description of the real property; ► proof of ownership of the real property; ► a general description of the new improvements, i.e., floor plans and elevations, to be undertaken for which any incentive is requested; ► current assessed value of the improvements for which incentives are requested; ► bid documents and construction estimates necessary to determine the construction cost of the proposed improvements; and ► a time schedule for undertaking and completing the proposed improvements. The application form may require such financial and other information as may be appropriate for evaluating the project. (c) Application Consideration. Upon receipt of a completed application, the City Manager of the City of Baytown or his designee shall consider the requested incentives and may request additional information as needed. Thereafter, the City Manager or his designee shall determine whether the application qualifies for incentives under the teens of these guidelines and criteria (1) Program 1. If it is determined that an application qualifies for NEZ incentives for Program 1, the City Manager or his designee will issue a certification for Program 1, which will be honored at the City's permit counter to waive the fees subject to such program. (2) Program 2. If it is believed that the applicant may qualify for NEZ incentives for Program 2, the applicant shall sign a statement detailing the procedural processes necessary in order to obtain Program 2 tax refund incentives at the same time that the applicant receives the certification under Program 1. If the applicant ultimately meets the requirements for the tax refund incentives under Program 2, the applicant will be required to execute an NEZ Tax Refund Agreement with terms and conditions consistent with this policy, including. ► the base year value of improvements; ► the percent of value to be abated each year; ► the commencement date and the termination date of the agreement; ► the proposed use of the facility improvements; ► the contractual obligations in the event of default, violation of terms or conditions, delinquent taxes, recapture, administration and assignment; and ► other provisions that may be appropriate or required. The City Manager or his designee shall not grant Program 1 incentives if it finds that earthwork, site preparation, construction, alteration, or installation of improvements commenced prior to the submission of NEZ Program I incentive application. SECTION 5 RECAPTURE If the owner allows his her ad valorem taxes owed to the City of Baytown to become delinquent during the tern of the tax refund incentive agreement, the City may terminate the incentive agreement and all previously waived fees and taxes refunded, if any, shall become immediately due to the City. If not paid within thirty (30) days from the termination of the agreement, interest at a rate of 60o per annum calculated from the effective date of the agreement shall be assessed. If the City does not receive full payment within sixty (60) days of the termination of the agreement, a penalty may be added, equal to 150 o of the total amount abated. SECTION 6 ADMINISTRATION (a) Insnections. Designated representatives of the City of Baytown will have access to the real property and improvements thereon subject to a tax refund incentive agreement during the term of the agreement to inspect the facility to determine if the terms and conditions of the agreement are being met. (b) Form 1099. The Director of Finance shall issue a Form 1099 or other form as appropriate to any person receiving a tax refund incentive under an agreement with the City pursuant to the terms and conditions hereof. SECTION 7 SUNSET PROVISION This policy is effective on November 19, 2025, and will remain in force until Friday, November 22, 2028, at which time all incentives created pursuant to these provisions will be reviewed by the City to determine whether the goals have been achieved. Based on that review, the policy will be modified, renewed or eliminated. Exhibit A Any parcel zoned one or more of the following zoning categories shall comply with the listed masonry standards. 1) Masonry All building facades, other than accessory buildings of less than 500 square feet, shall have all exterior walls constructed using masonry materials according to the zoning district in which the building is located and street on which the building faces, exclusive of doors and windows. Subdivisions platted after April 13, 2013, shall have all exterior walls constructed using masonry materials. a) A combination of at least three materials shall be used, two of which shall be masonry. b) Materials shall be used consistently on the same budding plane. The minimum offset to establish a new building plane is six inches. Minimum Masonry Materials Coverage Percentage(%) Requirement Zoning Building Arterial Streets, State Highway and Collector and Local Street District Square Interstate Highway (Freeway) Standards Footage Standards Front Side Rear Front Side Rear LDRIMDR** 60 60 60 60 60 60 GC 80 50 0* 60 20 0* NC 80 50 0* 60 40 0* MU No Masonry Standard LI 0-50k 75 50 0* 60 50 0* 50k-100k 60 50 0* 60 50 0* 100k + 50 50 0* 50 50 0* HI No Masonry Standard Table 1-1. Minimum Masonry Materials Coverage Percentage(%)Requirement *Rear facades facing a public street or parking lot shall be considered a side facade and shall be subject to the side facade standard applicable to that zoning district and street classification as shown in Exhibit A. **LDR/MDR shall include the following zoning districts: ER, SR, MR, UR and AR.