Ordinance No. 10,289ORDINANCE NO. 10,289
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS,
® AUTHORIZING AND DIRECTING THE CITY MANAGER TO EXECUTE AND THE
CITY CLERK TO ATTEST TO A TAX ABATEMENT AGREEMENT FOR CERTAIN
TAXABLE PROPERTY LOCATED WITHIN THE TEXAS PETROCHEMICALS
REINVESTMENT ZONE WITH TEXAS PETROCHEMICALS LP; AND PROVIDING
FOR THE EFFECTIVE DATE THEREOF.
WHEREAS, the City Council of the City of Baytown has established through Resolution No. 1771
guidelines and criteria governing tax abatement agreements by the City of Baytown in a reinvestment zone;
and
WHEREAS, the City Council of the City of Baytown through Resolution No. 1771 has elected to
participate in tax abatements; and
WHEREAS, Resolution No 1771 provides for the availability of tax abatements for both new
facilities and structures and for the expansion or modernization of existing facilities and structures; and
WHEREAS, the City Council of the City of Baytown finds that the terms of the agreement and the
property subject to the tax abatement agreement with Texas Petrochemicals LP, meet the applicable
guidelines and criteria adopted by the City of Baytown; and
WHEREAS, the City Council of the City of Baytown finds that entering into the proposed agreement
will not result in a substantial adverse affect on the provision of the City's services or tax base and that the
planned use of the property will not constitute a hazard to public safety, health or morals; NOW
THEREFORE
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS:
Section 1: That the City Council of the City of Baytown, Texas, hereby authorizes and directs
the Mayor and City Clerk of the City of Baytown to execute and attest to a Tax Abatement Agreement for
certain taxable property within the Texas Petrochemicals Reinvestment Zone with Texas Petrochemicals LP.
A copy of said agreement is attached hereto, marked Exhibit "A," and made a part hereof 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 23rd day of March, 2006.
1
1
CALVIN MUNDINGER, Mayor
APPROVED AS TO FORM:
eTZINACIO RAMIREZ, SR., Oty Attorney
RAKarcn\Files\City Councill0rdinances0006\March 231TaxAbatementAgreemcntTexasPetrochemicals .doc
Avok
City Of Baytown
Tax Abatement Agreement for Certain Taxable Property
located in the
Texas Petrochemicals Reinvestment Zone
THE STATE OF TEXAS §
COUNTY OF HARRIS §
This Tax Abatement Agreement ("Agreement ") is made and entered into by and between
City of Baytown, Texas ("City "), and Texas Petrochemicals, L.P., a Texas limited partnership
("Owner "), the owner of taxable property in Harris County, Texas, located in Texas
Petrochemicals Reinvestment Zone ('Reinvestment Zone ").
I
Authorization
This Agreement is authorized by the Texas Property Redevelopment and Tax Abatement
Act and Ordinance No. of the City Council of the City of Baytown, Texas, providing for
the designation of the Reinvestment Zone.
I1
Definitions
For the purpose of this Agreement, the definitions set forth in Resolution No. 1771 of the
City Council of the City of Baytowm, Texas. which is attached hereto as Exhibit "A" and
incorporated herein for all intents and purposes (the "Guidelines'), shall govern unless it is
apparent from the context that the term as used herein has a different meaning or unless such
word is specifically defined in this article. All other words shall be given their common, ordinary
meanings. as the context may reasonably suggest.
a. Abatement means the full or partial exemption from ad valorem taxes of certain property
in the Reinvestment Zone designated for economic development purposes.
b. Abatement Period means the period of time commencing with the effective date of this
Agreement and ending upon the sooner of (i) the fourth anniversary of the Effective Date
of Abatement or (ii) the termination of this Agreement pursuant to the provisions of
AV. Article VI1 hereof.
Tax Abatement Aereement, Pate 1 OW A
oft
C. Application means the Owner's Application for Tax Abatement in Baytown, Texas,
which is attached hereto as Exhibit "B" and incorporated herein for all intents and
purposes.
C. Base Year Value means the appraised value of the property within the Reinvestment Zone
as certified by the Harris County Appraisal District as of January 1 preceding the
execution of this Agreement plus the agreed upon value of eligible property
Improvements made after such January I but before the execution of the Agreement.
d. Construction Phase means a material and substantial improvement of the property which
represents a separate and distinct construction operation undertaken for the purpose of
erecting the Improvements. The period of Construction Phase ends upon the earlier of (i)
the corresponding date exactly one year after the Effective Date or (ii) the date that the
New Facility commences operations as a manufacturing facility.
e. Effective Date of Abatenent has the meaning given to that term in Article IV hereof.
f. Eligible Property means the buildings, structures, fixed machinery, equipment and
process units, site improvements, and that office space and related fixed improvements
necessary to the operation and administration of the New Facility as hereinafter defined.
g. Improvements means the buildings or portions thereof and other improvements, including
fixed machinery, equipment and process units, used for commercial or industrial
purposes that are erected by the Owner on the property after the execution of this
Agreement.
h. Ineligible Properry means land, inventories, supplies, tools, furnishings and other forms
of movable personal property, vehicles, vessels, aircraft, housing, hotel accommodations,
deferred maintenance investments, improvements for the generation or transmission of
electrical energy not wholly consumed by a new facility or expansion, any
Improvements, including those to produce, store, or distribute natural gas, fluids, or gases
which are not integral to the operation of the facility, and property that has an economic
life of less than fifteen (15) years, and any property owned or used by the State of Texas
or its political subdivisions or any organization owned. operated, or directed by a political
subdivision of the State of Texas.
1Vetit, Eligible Property means Eligible Property, the construction of which commences
subsequent to the date of execution of this Agreement. A list of the New Eligible
Property is set forth in the Application. During the Construction Phase of the New
Eligible Property. the Ov.-ner may make such change orders to the New Eligible Property
as are reasonably necessary to accomplish its intended use.
Nei,, Facility has the meaning given to that term in Article VI hereof.
k. Subject Property has the meaning given to that term in Article III hereof.
"Tax Abatement A,,reement. Paee 2
Auk
III
Property
The Reinvestment Zone is an area within Harris County, Texas, more fully described in
Exhibit "C," which is attached hereto and made a part hereof for all intents and purposes. The
property subject to this Agreement (the "Subject Property ") is comprised of a tract of land
totaling approximately 17.6329 acres of land, which is located within the Reinvestment Zone,
assigned Harris County Appraisal District Account Number 0451440010070, and more fully
described in the Application.
The values hereinafter established for tax year 2006, by the Harris County Appraisal
District, plus -0 -, representing the agreed upon value of Improvements made after January 1,
2006, but before the execution of this Agreement. shall be the Base Year Values for purposes of
this Agreement.
IV
Value and Term of Agreement
Abatement on the Improvements shall be permitted only for the value of New Eligible
Property as defined in Article 1I of this Agreement and as specifically listed in Exhibit `B." This
Abatement shall be granted effective January 1, immediately following the date of execution of
this Agreement (the "Effective Date of Abatement "). The portion of New Eligible Property
value to be abated shall be in accordance with the following schedule:
1 100%
Constriction Phase _
2 100%
I' Year after Construction Phase
2"4 Year after Construction Phase 100% I
4 80%
3rd Year After Construction Phase
i 5 1
4`" Year After Construction Phase 60%
The Construction Phase shall continue for (i) one year or (ii) until the modernization of the New
Facility is complete and the New Facility commences regular operation of a manufacturing
facility, whichever is earlier. If the period of construction extends beyond the Construction
Phase, the New Facility shall be considered completed for purposes of the Abatement and in no
case shall the Abatement Period inclusive of construction and completion extend past the fourth
A,, anniversary of the Effective Date of Abatement. The abated value shall be the value of New
Eligible Property, as adjusted each year.
Tax Abatement Agreement, Pace 3
V
Taxabilin
During the Abatement Period, taxes shall be payable as follows:
(1) The value of Ineligible Property shall be fully taxable;
(2) The Base Year Value of Eligible Property existing prior to the execution of this
Agreement, as the same may be adjusted each year, shall be fully taxable; and
,1
(3) The additional value of New Eligible Property shall be taxable in the manner as
described in Section 2(g) of the Guidelines and in accordance with Article IV of
this Agreement. The estimated value of the New Eligible Property to be abated
pursuant to the Agreement is $20.000,000.
The City shall enter into only one tax abatement agreement for the. Now Facility
described in this Agreement during the existence of the Reinvestment Zone as designated by
Ordinance No.
VI
Contemplated Improvements
As set forth in the Application, the Owner represents that it will modernize a
manufacturing facility that it reasonably expects will cost approximately $20,000,000, which
shall be used for commercial or industrial purposes ( "New Facility ").
It is contemplated that this construction project will result in the creation of 15 to 25 jobs
and approximately 140 to 250 construction jobs during the Construction Phase of the New
Facility. The project is not expected solely to transfer, or primarily have the effect of
transferring. employment from one part of the City of Baytown to another.
The New Facility as well as any other Improvements within the Subject Property shall be
completed in accordance with all applicable laws, ordinances, rules or regulations, including the
City's zoning ordinance. The New Facility is expected to initiate or further the active conduct of
a trade or business within the Reinvestment Zone.
The Owner further agrees that construction of the Improvements will begin on or before
June 30, 2006. with completion on or before December 3l, 2007.
Tax Abatement Agreement Page 4
Ark
VII
Event of Default
During the Abatement Period covered by this Agreement, the City may declare a default
hereunder by the Owner if the Owner (i) fails to commence construction of the New Facility
described in Part VI above and the Application on or before June 30, 2006, (ii) fails to complete
construction on or before December 31, 2007, (iii) fails to construct the New Facility described
in Part VI above, (iv) refuses or neglects to comply with any of the terms of this Agreement, or
(v) makes any representation pursuant to this Agreement which is false or misleading in any
material respect.
Should the City determine the Owner to be in default of this Agreement or in any respect,
except for the failure to timely commence construction or pay taxes when due, the City shall
notify the Owner in writing prior to the end of the Abatement Period, and if such default is not
cured within sixty (60) days from the date of such notice ("Cure Period "), then this Agreement
may be terminated; provided, however, that in the case of a default that, for causes beyond
Owner's reasonable control, cannot with due diligence be cured within the Cure Period, the Cure
Period may be extended, at the sole discretion of the City. if the Owner (i) promptly, upon the
receipt of such notice. advises the City of Owner's intention to institute all steps necessary to
cure such default and (ii) institutes and thereafter prosecutes to completion with reasonable
dispatch all steps necessary to cure such default. If this Agreement is terminated, all taxes
previously abated by virtue of this Agreement will be recaptured and paid within 30 days of the
termination.
If the default is caused by the Owner's failure to commence the project described in
Exhibit "B" within the above - referenced time frame. this Agreement will terminate automatically
with no further notice to the Owner or opportunity to cure the default being necessary. If this
Agreement is automatically terminated, all taxes previously abated by virtue of this Agreement,
if any, will be recaptured and paid within 30 days of the automatic termination.
In the event that Owner allows its ad valorem taxes owed the City to become delinquent
and fails timely and properly to follow the legal procedures for their protest and /or contest, this
Agreement will terminate automatically with no further notice to the Owner or opportunity to
cure the default being necessary. If this Agreement is terminated, all taxes previously abated by
virtue of this Agreement will be recaptured and paid within 30 days of the termination.
In the event the New Facility is completed and begins operations as a manufacturing
facility, but subsequently discontinues such operations for any reason excepting fire, explosion
or other casualty, accident or actual disaster. for a period of one -year during the Abatement
Period, then this Agreement shall be terminated. In the event of termination pursuant to the
provisions of this paragraph, the Abatement of taxes and payments for the calendar year during
which the New Facility discontinues operations shall terminate, but there shall be no recapture of
prior years' taxes and payments abated by virtue of this Agreement. The taxes and payments
.AP16' otherwise abated for the calendar year during which the New Facility no longer produces shall be
paid to the City prior to the delinquency date for such year.
Tax Abatement Agreement. Page 5
Any and all recaptured taxes not paid within the 30 -day periods prescribed hereinabove
shall accrue interest and penalties as set forth in the applicable provisions of the Texas Tax Code
as if the same were never subject to Abatement.
VIII
Administration
This Agreement shall be administered on behalf of the City by the City Manager or his
designee pursuant to the direction of the City Council. The Owner shall allow employees and/or
representatives of the City who have been designated by the City Manager to have access to the
New Facility during the term of this Agreement to inspect the New Facility to determine
compliance with the terms and conditions of this Agreement. All inspections required herein
will be made only after giving of twenty -four (24) hours' prior notice and will only be conducted
in such manner as will not unreasonably interfere with the construction and /or operation of the
New Facility. All inspections required herein will be made with one or more representatives of
the Owner and in accordance with the Owner's safety standards.
Upon completion of the contemplated construction, the City Manager or his designee
shall annually evaluate the New Facility to ensure compliance with the terms and provisions of
this Agreement and shall report possible defaults to the City Council and the City Attorney.
The Chief Appraiser of the Harris County Appraisal District shall annually determine (i)
the taxable value after giving effect to the terms of this Agreement of the real and personal
property located on the Subject Property and (ii) the full taxable value without Abatement of the
real and personal property located on the Subject Property. The Chief Appraiser shall record
both the abated taxable value and the full taxable value in the appraisal records. The full taxable
value figure listed in the appraisal records shall be used to compute the amount of abated taxes
that are required to be recaptured and paid in the event this Agreement is terminated in a manner
that results in recapture. Each year the Owner shall furnish the Chief Appraiser with such
information outlined in Chapter 22 of the Texas Tax Code, as may be necessary for the
administration of the Abatement specified herein.
If the City terminates this Agreement. it shall, when required, provide Owner written
notice of such termination. If Owner believes that such termination was improper, Owner may
file suit in the Harris County District Courts appealing such termination within sixty (60) days
after receipt from the City of written notice of the termination. if an appeal suit is filed, Owner
shall remit to the City. within sixty (60) days after receipt of the notice of termination, any
additional and /or recaptured taxes as may be payable during the pendency of the litigation
pursuant to the payment provisions of Section 42.08 of the Texas. Tax Code. if the final
determination of the appeal increases Owner's tax liability above the amount of tax paid. Owner
shall remit the additional tax to the City pursuant to Section 42.42 of the Texas Tax Code. If the
final determination of the appeal decreases Owner's tax liability, the Cite shall refund to Owner.
/ft as appropriate, the difference between the amount of tax paid and the amount of tax for which
Owner is liable pursuant to Section 42.43 of the Tax Code.
Tax Abatement Aereement. Pate 6
AVW
Ix
Assignment
The Owner may assign its rights and obligations under this Agreement to a new owner of
the New Facility with the written consent of the City Council, which consent shall not be
unreasonably withheld. Any assignment shall provide that the assignee shall irrevocably and
unconditionally assume all the duties and obligations of the assignor upon the same terms and
conditions as set out in this Agreement. Any assignment of this Agreement shall be to an entity
that contemplates the same Improvements to the property, except to the extent such
Improvements have been completed. No assignment shall be approved if the assignor or the
assignee is indebted to the City for delinquent ad valorem taxes or other obligations.
X
Notice
Any notice required to be given under the provisions of this Agreement shall be in
writing and shall be duly served when (i) it is personally delivered or (ii) it is deposited, enclosed
in a wrapper with the proper postage prepaid thereon, and duly registered or certified, return
receipt requested, in a United States post office, addressed to the City or the Owner, as
appropriate, at the following addresses. If mailed, any notice or communication shall be deemed
to be received three days after the date of deposit in the United States mail. Unless otherwise
provided in this Agreement, all notices shall be delivered to the following addresses:
Owner: Texas Petrochemicals, LP
Three Riverway, Suite 1500
Houston, TX 77056
Attention: Legal Department and David Vaughn, Consultant
City: City of Baytown
P. O. Box 424
Baytown, Texas 77522 -0424
Attention: City Manager
Either party may designate a different address by giving the other party ten (10) days'
written notice.
Tax Abatement Agreement. Page 7
XI
Non - Waiver
Failure of the City to insist on the strict performance of any of the agreements herein or
to exercise any rights or remedies accruing thereunder upon default or failure of performance
shall not be considered a waiver of the right to insist on, and to enforce by an appropriate
remedy, strict compliance with any other obligation hereunder to exercise any right or remedy
occurring as a result of any future default or failure of performance.
X1I
Venue
This Agreement shall in all respects be interpreted and construed in accordance with and
governed by the laws of the State of Texas. regardless of the place of its execution or
performance. The place of making and the place of performance for all purposes shall be
Baytown, Harris County, Texas.
XIII
Severabilit-'
All parties agree that should any provision of this Agreement be determined to be invalid
or unenforceable, such determination shall not affect any other term of this Agreement, which
shall continue in full force and effect.
XIV
Date of Agreement; Condition to Effectiveness
The City executes this Agreement by and through the City Manager, acting pursuant to
Ordinance No. of the City of Baytown, and this Agreement shall become effective on
2006, the date this Agreement is signed by the City Manager.
This Agreement has been executed by the parties in multiple originals, each having full
force and effect.
ATTEST:
AM LORRI COODY, City Clerk
Tax Abatement Agreement, Nee 8
CITY OF BAYTOWN
GARY JACKSON. City Manager
F
STATE OF TEXAS §
COUNTY OF HARRIS §
TEXAS PETROCHEMICALS LP
Printed Name
\ q �F�b tr Co.nn(SF.L
Title
On this 14'' day of March. 2006, Christopher A. Artzer. the Vice President and
General Counsel of Texas Petrochemicals LP, personally appeared before me, a Notary
Public for the State of Texas, and axed his signature hereto.
Notary Public for the State of Texas
:, -a',. A. LAPP
Si
ture
Printed Name
\ q �F�b tr Co.nn(SF.L
Title
On this 14'' day of March. 2006, Christopher A. Artzer. the Vice President and
General Counsel of Texas Petrochemicals LP, personally appeared before me, a Notary
Public for the State of Texas, and axed his signature hereto.
r'
Notary Public for the State of Texas
:, -a',. A. LAPP
S, of Texas
� Jor Ex� res
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03
My commission expires: OS O
_ o�, seoa
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RESOLUTION NO. 1771
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BAYTOWN,
TEXAS, ELECTING TO BECOME ELIGIBLE TO PARTICIPATE IN TAX
ABATEMENT PURSUANT TO THE PROPERTY REDEVELOPMENT AND
TAX ABATEMENT ACT; ADOPTING GUIDELINES AND CRITERIA FOR
GRANTING TAX ABATEMENTS IN A REINVESTMENT ZONE CREATED
IN HARRIS COUNTY OR CHAMBERS COUNTY; ADOPTING SUCH
GUIDELINES AND CRITERIA; AND PROVIDING FOR THE EFFECTIVE
DATE THEREOF.
WHEREAS, the creation and retention of job opportunities that bring new wealth is the
highest civic priority; and
WHEREAS, new jobs and investment will benefit the area economy, provide needed
opportunities, strengthen the real estate market and generate tax revenue to support local
services; and
WHEREAS, the City of Baytown must compete with other localities across the nation
currently offering tax inducements to attract jobs and investments; and
WHEREAS, any tax incentives offered in the City of Baytown would reduce needed tax
revenue unless strictly limited in application to those new and existing industries that bring new
wealth to the community; and
WHEREAS, any tax incentives should not have a substantial adverse effect on the
competitive position of existing companies operating in the City of Baytown; and
WHEREAS, tax incentives should not be used to attract those industries that have
demonstrated a lack of commitment to protecting our environment, but should be used to
encourage projects designed to protect our environment; and
WHEREAS, the abatement of property taxes, when offered to attract primary jobs in
industries which bring in money from outside a community instead of merely recirculating
dollars within a community, has been shown to be an effective method of enhancing and
diversifying an area's economy; and
WHEREAS, Texas law requires any eligible taxing jurisdiction to establish Guidelines
and Criteria as to eligibility for tax abatement agreements prior to granting any tax abatement,
said Guidelines and Criteria to be unchanged for a two year period unless amended by a three -
quarters vote; and
WHEREAS, to assure a common, coordinated effort to promote our communities'
economic development, any such guidelines and criteria should be adopted only through the
cooperation of affected school districts. counties. and the City of Baytown; and
WHEREAS, the attached guidelines adopted by the City Council in December 1989, and
have been amended in July 1990, July 1992, September 1995, September 1997, September 1999.
[:4,141111
r�
and February 12, 2004, have been reviewed by the City Council and it has determined that
progress towards the goals therein stated has been made; NOW THEREFORE
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN,
TEXAS:
Section 1: That the findings of the City Council of the City of Baytown contained in
the recitals of this resolution are hereby approved and adopted.
Section 2: That the City Council of the City of Baytown elects to become eligible to
participate in tax abatement pursuant to the Property Redevelopment and Tax AbatemedAct
Section 3: That the City of Baytown hereby adopts the Guidelines and Criteria for
granting tax abatements in a reinvestment zone, which are attached hereto as Exhibit "A" and
incorporated herein for all intents and purposes.
Section 4: This resolution shall take effect immediately from and after its 0assage 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 91h day of February, 2006.
% 'W4
CALVIN MUNDINGER, M or
ATTEST:
LORRI COODY, City Clerk
APPROVED AS TO FORM:
q 1,4
NACIO RAMIREZ, SR.&y Attorney
R• \Karen \Files \City Council \ResoiutionaQ006`.February 9 \TaxAbatcmentGuidelines2006.doc
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TAX ABATEMENT GUIDELE\TES SUMMARY
OBJECTIVES Primary job creation -- target industries.
Amount abatement -- minimum to be competitive.
Fair to taxing jurisdictions -- It is a local option.
Fair to existing business -- modernization, expansion.
Regional cooperation -- similar abatements.
Flexibility -- toughly enforced variance procedure.
TERMS Year 1 100%
Year 2 100%
Year 3 100%
Year 4 80%
Year 5 60%
Year 6 0%
FACILITIES Manufacturing.
THAT QUALIFY Regional service & distribution.
Regional entertainment.
Research and development.
Other basic industry.
AUTHORIZED New plant.
INVESTMENTS Expansion.
Modernization.
ABATED Buildings and structure.
Fixed machinery and equipment.
Site improvements.
Office space to administer plant.
NOT ABATED Land.
Existing improvements.
Construction -in- progress.
Personal property.
Hotels.
Housing.
Pipelines.
Gas and fluid storage.
Electrical generating facilities.
Deferred maintenance.
Propeny with useful life less than fufieen (15) years.
ECONOMIC Minimum one million dollar ($1,000,000) investment.
CRITERIA Retain or create at least fifleen (15) jobs.
Cannot reasonably use existing property.
No serious adverse affect on jurisdictions.
Tax Abatement Guidelines Summary; Page Solo A
GUIDELINES AND CRITERIA
FOR REINVESTMENT ZONES
SECTION 1
DEFINITIONS
(a) "Abatement" means the full or partial exemption from ad valorem taxes of certain real
property in a reinvestment zone designated for economic development purposes.
(b) "Eligible Jurisdiction" means any county, municipality, school district or college district that
levies ad valorem taxes upon and provides services to property located within the proposed
or existing reinvestment zone.
(c) "Agreement" means a contractual agreement between a property owner and/or lessee and an
eligible jurisdiction for the purposes of tax abatement.
(d) "Base Year Value" means the assessed value of eligible property January 1 preceding the
execution of the Agreement plus the agreed upon value of eligible property improvements
made after January ]" but before the execution of the Agreement, or the sales price, if the
property was conveyed subsequent to January I", plus the agreed upon value of eligible
property improvements made after January 155, whichever is greater.
(e) "Deferred Maintenance" means improvement necessary for continued operations which do
not improve productivity or alter the process technology.
(f) "Economic Life" means the number of years a property improvement is expected to be in
service in a facility.
(g) "Expansion" means the addition of buildings, structures, fixed machinery or equipment for
purposes of increasing production capacity.
(h) "Facility" means property improvements completed or in the process of construction which
together comprise an integral whole.
(i) "Manufacturing Facility" means buildings and structures, including fixed machinery and
equipment, the primary purpose of -which is or will be the manufacture of tangible goods or
materials or the processing of such goods or materials by physical or chemical change.
(j) "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
AVk 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.
Guidelines and Criteria for Reinvestment Zones, Page l
A
(k) "New Facility" means a property previously undeveloped which is placed into service by
means other than or in conjunction with expansion or modernization.
(1) "Other Basic Industry" means buildings and structures, including fixed machinery and
equipment not elsewhere described, used or to be used for the production of products or
services which primarily serve as a market outside the Houston Consolidated Metropolitan
Statistical Area and result in the creation of new permanent jobs and bring new wealth in.
(m) "Regional Distribution Center Facility" means buildings and structures, including fixed
machinery and equipment, used or to be used primarily to receive, store, services or distribute
goods or materials owned by the facility operator where a majority of the goods or services
are distributed to other points.
(n) "Regional Entertainment Facility" means buildings and structures, including fixed machinery
and equipment, used or to be used to provide entertainment through the admission of the
general public.
(o) "Regional Service Facility" means buildings and structure, including fixed machinery and
equipment, used or to be used to service goods where a majority of the goods being serviced
originate at least one hundred (100) miles away from any part of the City of Baytown.
(p) "Research Facility" means buildings and structures, including fixed machinery and
equipment, used or to be used primarily for research or experimentation to improve or
develop new tangible goods or materials or to improve or develop the production processes
thereto.
SECTION 2
ABATEMENT AUTHORIZED
(a) Authorized Facility. A facility may be eligible for abatement if it is a Manufacturing
Facility, Research Facility, Regional Distribution Center Facility, Regional Service Facility,
Regional Entertainment Facility, Research and Development Facility, or Other Basic
Industry.
(b) Creation of New Value. Abatement may only be granted for the additional value of
eligible property improvements made subsequent to and listed in an abatement agreement
between the City of Baytown and the property owner and lessee (if required), subject to such
limitations as City Council and the properly tax code may require.
(e) New and Existing Facilities. Abatement may be granted for new facilities and
J1W improvements to existing facilities for purposes of modernization or expansion.
Guidelines and Criteria for Reinvestment Zones, Page 2
dpk
1 1 1
(d) Eligible Property. Abatement maybe extended to the value ofbuildings, structures, fixed
machinery and equipment, site improvements plus that office space and related fixed
improvements necessary to the operation and administration of the facility. The value of all
property shall be the appraised value for each year, as finally determined by the applicable
appraisal district.
(e) Ineligible Property. The following types of property shall be fully taxable and ineligible for
abatement: land; inventories; supplies; tools; furnishings; and other forms of movable
personal property; vehicles; vessels; aircraft; housing; hotel accommodations; deferred
maintenance investments; property to be rented or ]eased except as provided in Section 2 (f);
Y
improvements for the generation or transmission of electrical energy not wholly conAned by
a new facility or expansion; any improvements, including those to produce, store or distribute
natural gas, fluids or gases, which are not integral to the operation of the facility; property
which has an economic life of less than fifteen (15) years; and property owned or used by the
State of Texas or its political subdivision or by any organization owned, operated or directed
by a political subdivision of the State of Texas, or any property exempted by local, state or
federal law. When such exempted property includes manufacturing machinery and equipment
listed in the Investment Schedule (as required in Section 3(b)), then the value of such
property may not be included toward the achievement of the investment or valuation
thresholds set out in the abatement agreement.
(fl Owned/Leased Facilities. If a ]eased facility is granted abatement, the agreement shall be
executed with the lessor and the lessee.
(g) Value and Term of Abatement. Abatement shall be granted effective with the January 1
valuation date immediately following the date of execution of the agreement. One hundred
percent (100 %) of the value of new eligible properties shall be abated for the first three (3)
years, followed by eighty percent (80 %) abatement for the fourth year, sixty percent (60 %)
abatement 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).
(h) Economic Qualification. In order to be eligible for designation as a reinvestment zone and
receive tax abatement, the planned improvement:
(1) must be reasonably expected to increase the appraised value of the property in the
amount of one million dollars (51,000,000) after the period of abatement has expired;
(2) must be expected to directly create or prevent the loss of permanent full -time
employment, retain or create employment for at least fifteen (15) people reasonably
AVW required in order to operate the facility in an efficient manner, provided that this
emplowneni qualification shall be satisfied on January 1 of the fourth year of the
abatement agreement and continue through the term of the abatement;
Guidelines and Criteria for Reinvestment Zones. Page 3
i
(3) must not be expected to solely or primarily have the effect of transferring
employment from one part of the City of Baytown to another. Competitive siting
analysis may satisfy this requirement; and
(4) must be necessary because capacity cannot be provided efficiently utilizing existing
improved property when reasonable allowance is made for necessary improvements.
(i) Taxability. From the execution of the abatement to the end of the agreement period, taxes
shall be payable as follows:
(1) The value of ineligible property as provided in Section 2(e) shall be fully taxable.
(2) The base year value of existing eligible property as determined each year shall be
fully taxable.
(3) The additional value of new eligible property shall be taxable in the manner
described in Section 2(g).
SECTION 3
APPLICATION
(a) Any present or potential owner of taxable property in the City of Baytown may request the
creation of a reinvestment zone or tax abatement by filing a written request with the City of
Baytown.
(b) The application shall consist of a completed application form accompanied by a general
description of the new improvements to be undertaken; a descriptive list of the improvements
for which an abatement is requested, a list of the kind, number and location of all proposed
improvements of the property, including the economic life of each and its eligibility for a
TCEQ exemption (if known); a map and legal description of the property; and a time
schedule for undertaking and completing the proposed improvements. The applicant shall
also include information pertaining to the reasons the abatement is necessary in order to have
the project undertaken in the City of Baytown. The applicant shall also include a
certification of the current number of permanent full -time, part -time and contract employees
of the applicant, by category, employed in the City of Baytown at the time of the application.
In the event the project is to be located in a ]eased facility, the applicant shall provide with
the application the name and address of the lessor and a copy of the lease, if executed, or
option contract. In the case of modernization, a statement of assessed value of the facility,
Al► separately stated for real and personal property, shall be given for the tax year immediately
proceeding the application. The application form may require such financial and other
Guidelines and Criteria for Reinvestment Zones, Page 4
r�.o
information as the City Council deems appropriate for evaluating the financial capacity and
other factors of the applicant.
(c) Upon receipt of a completed application, the City Manager of the City of Baytown or his
designee shall notify in writing the presiding officer of the governing body of each eligible
jurisdiction.
(d) After receipt of an application for creation of a reinvestment zone and application for tax
abatement, the City Council through its designated officer or employee shall determine
whether the application qualifies for an abatement under the terms of these guidelines and
criteria. Such determination may be delegated to an employee or City departrrmente'yIf it is
determined that an application qualifies for abatement, it shall be recommended to the City
Council that the applicant be notified in writing that subject to a public hearing, if applicable,
and approval of a contract by the City Council, the project qualifies for abatement.
(e) The City Council shall not establish a reinvestment zone or enter into an abatement
agreement if it finds that the request of the abatement was filed after the commencement of
construction, alteration, or installation of improvements related to a proposed modernization,
expansion or new facility.
(f) Variance. Requests for variance from the provisions of Subsections (a), (e) and (g) of
Section 2 may be made in written form to the City Manager, provided, however, the total
duration of an abatement shall in no instance exceed five (5) years. Such request shall
include a complete description of the circumstances explaining why the applicant should be
granted a variance. Approval of a request for variance requires a three - fourths ('/<) vote of
the City Council.
SECTION 4
PUBLIC HEARING AND APPROVAL
(a) The City Council may not adopt an ordinance designating a reinvestment zone until it has
held a public hearing at which interested persons are entitled to speak and present evidence
for or against the designation. Not later than the seventh (7th) day before the date of the
hearing notice of the hearing must be published in a newspaper having general circulation in
the municipality; and delivered in �vriting to the presiding officer of the governing body of
each taxing unit that includes in its boundaries real property that is to be included in the
proposed reinvestment zone.
(b) Prior to entering into a tax abatement agreement, the City Council may, at its own option,
aft, hold a public hearing at which interested persons shall be entitled to speak and present
written materials for or against the approval of the tax abatement agreement.
Guidelines and Criteria for Reinvestment Zones, Page'
(c) In order to enter into a tax abatement agreement, the City Council must find that the terms of
the proposed agreement meet these Guidelines and Criteria and that:
(1) there will be no substantial adverse affect on the provision of the jurisdiction's
service or tax base; and
(2) the planned use of the property will not constitute a hazard to public safety, health or
morals.
(d) Any applicant requesting a variance under Section 3(f) shall be approved by a vote of at least
three - fourths (3/4) of the City Council. No application which deviates from the requlryements
of these Guidelines and Criteria shall be approved unless accompanied by a request for
variance as provided under Section 3(f).
SECTION 5
AGREEMENT
After approval the City Council shall formally pass an ordinance and execute an agreement
with the owner of the facility and lessee as required which shall include:
(1) the estimated value to be abated and the base year value;
(2) the percent of value to be abated each year as provided in Section 2(g).
(3) the commencement date and the termination date of abatement;
(4) the proposed use of the facility, nature of construction, time schedule, map property
description and improvement list as provided in Application Section 3(b),
(5) the contractual obligations in the event of default, violation of terms or conditions,
delinquent taxes, recapture, administration and assignment as provided in Section
2(a), 2(f), 2(g), 6, 7 and 8, or other provisions that may be required for uniformity or
compliance with state law, and;
(6) the amount of investment, increase in assessed value and the average number of jobs
involved as provided in Section 2(h)(2); and
(7) a requirement that the applicant annually submit to the appraisal district and the City,
a January employee count for the abated facility which corresponds to employment
gob, counts reported in the facility's Employer's Quarterly Report to the Texas Workforce
Commission, and a separate notarized letter certifying the number of jobs created or
retained as a direct result of the abated improvements and the number of employees
Guidelines and Criicria for Reinvestmem Zones, Page 6
in other facilities located within the City of Baytown. Submission shall be used to
determine abatement eligibility for that year and shall be subject to audit if requested
by the governing body. Failure to submit may result in the ineligibility to receive an
abatement for that year and the termination of the tax abatement agreement and
subject any abated taxes to recapture pursuant to Section 6 hereof.
Such agreement normally shall be executed within sixty (60) days after the application and all
necessary information and documentation has been forwarded to the City Council.
SECTION 6
RECAPTURE
(a) In the event that the facility is completed and begins producing product or service, but
subsequently discontinues producing product or service for any reason excepting fire,
explosion or other casualty or accident or natural disaster of a period of one year during the
abatement period, the agreement shall terminate and so shall the abatement of the taxes for
the calendar year during which the facility no longer produces. The taxes otherwise abated
for that calendar year shall be paid to the City of Baytown within sixty (60) days from the
date of termination. The company or individual shall notify the City in writing at the address
stated in the agreement within ten (10) days from any discontinuation, stating the reason for
the discontinuation and the projected length of the discontinuation. If the City determines
that this subsection has not been complied with, the agreement may be terminated
immediately and all taxes previously abated by virtue of the agreement may be recaptured
and paid within sixty (60) days of the termination.
(b) If the company or individual is in default according to the terms and conditions of its
agreement, the company or individual shall notify the City in writing at the address stated in
the agreement within ten (10) days from the default and cure such default within sixty (60)
days from the date of such default ( "Cure Period'. If the City determines that this
subsection has not been complied with, the agreement maybe terminated immediately and all
taxes previously abated by virtue of the agreement may be recaptured, together with interest
at 6% per annum calculated from the effective date of the agreement and paid within sixty
(60) days of the termination. if the City does not receive full payment within said sixty (60)
days, a penalty maybe added, equal to 15% of the total amount abated.
(c) I If the company or individual (1) allows its ad valorem taxes owed the City of Baytown to
become delinquent and fails to timely and properly follow the legal procedures for their
protest and/or contest; or (2) violates any of the terms and conditions of the abatement
agreement and fails to cure during the Cure Period, the agreement then maybe terminated,
and all taxes previously abated by virtue of the agreement will be recaptured and paid within
AM, sixty (60) days of the termination, and penalties and interest may be assessed as set out in
Section 6(b).
Guidelines and Criteria for Reinvestment Zones, Page 7
.Alk
SECTION 7
ADMINISTRATION
(a) The Chief Appraiser of the applicable appraisal district shall annually determine an
assessment of the real and personal property comprising the reinvestment zone. Each year,
the company or individual receiving the abatement shall furnish the assessor with such
information as may be necessary for the abatement. Once value has been established, the
Chief Appraiser shall notify the affected jurisdictions which levy taxes on the amount of the
assessment.
(b) The agreement shall stipulate that employees and/or designated representatives of the City of
Baytown will have access to the reinvestment zone during the term of the abatement to
inspect the facility to determine if the terms and conditions of the agreement are being met.
All inspections will be made only after the giving of twenty-four (24) hours' prior notice and
will only be conducted in such manner as to not unreasonably interfere with the construction
and/or operation of the facility. All inspections will be made with one or more
representatives of the company or individual and in accordance with the facility's safety
standard.
(c) The City annually shall evaluate each facility receiving abatement to ensure compliance with
the agreement and report possible violations of the contract and agreement to the City
Council.
SECTION 8
ASSIGNMENT
Tax abatement agreements may be assigned to a new owner or lessee of facility with the
written consent of the City Council which consent shall not be unreasonably withheld. Any
assignment shall provide that the assignee shall irrevocably and unconditionally assume all the duties
and obligations of the assignor upon the same terms and conditions as set out in the agreement. Any
assignment of a tax abatement agreement shall be to an entity that contemplated the same
improvements or repairs to the property, except to the extent such improvements or repairs have been
completed. No assignment shall be approved if the assignor or the assignee is indebted to the City of
Baytown for ad valorem taxes or other obligations.
SECTION 9
SUNSET PROVISION
These Guidelines and Criteria are effective February 12, 2004, and will remain in force until
February 12, 2006, at which time all reinvestment zones and tax abatement contracts created
AM pursuant to these provisions will be reviewed by the City to determine whether the goals have been
achieved. Based on that review, the Guidelines and Criteria will be modified, renewed or eliminated.
F:\ C are n \Filec\Commmmip'rh,clopnent \7:x Abztenent Guideline:\ Guidelines4 7a xAbatcmentNR tinvestmentZonrN0212.doc
Guidelines and Crileria for Reinvestment Zones, Page 8