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CC Resolution No. 14022656 RESOLUTION NO. 1402 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS, REVIEWING THE FORMER GUIDELINES AND CRITERIA FOR GRANTING TAX ABATEMENT 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 a high civil priority of the City of Baytown; and WHEREAS, new jobs and investment will benefit the area's economy, provide needed opportunities, strengthen the real estate market and generate tax revenue to support local services; and WHEREAS, the communities within Harris and Chambers Counties must compete with other localities across the nation currently offering tax inducements to attract new plants and modernization projects; and WHEREAS, any tax incentives offered in the City of Baytown and Harris and Chambers Counties 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 adversely affect the competitive position of existing companies operating in the City of Baytown and Harris and Chambers Counties; 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, effective September 1, 1987, Texas law requires any eligible taxing jurisdiction to establish Guidelines and Criteria as to eligibility for tax abatement agreements prior to granting of any future tax abatement, said Guidelines and Criteria to be effective for a period of two years and are to remain unchanged during such 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, cities and counties; and WHEREAS City Council has determined that the Guidelines and Criteria as to eligibility for tax abatement agreements should be changed to conform with the criteria adopted by overlapping taxing jurisdictions; and 2657 WHEREAS, the attached guidelines adopted by the City Council in December 1989, amended and/or adopted in July 1990, July 1992, September 1995, and September 1999, have been reviewed by the City Council and they have 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 City of Baytown has reviewed the Guidelines and Criteria for granting tax abatement in a reinvestment zone and determined that the goals stated therein are still appropriate, and are being met. Section 2: That the City of Baytown hereby adopts the Guidelines and Criteria for granting tax abatement in a reinvestment zone, which are attached hereto as Exhibit "A." Section 3: This resolution 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 23`d day of September, 1999. /°. n a5 PETE C. ALFARO, Mayor ATTEST: EILEEN P. HALL, City Clerk APPROVED AS TO FORM: � M-,i c:klh 195 \Council\ Resolution \CriteriaGuidelinesTaxAbatement .Resolution 1999 TAX ABATEMENT GUIDELINES 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 100% during construction, not to exceed two (2) years. 100% 1 st year after construction. 75% 2nd year after construction. 50% 3rd year after construction. FACILITIES THAT QUALIFY AUTHORIZED INVESTMENTS Manufacturing. Regional service & distribution. Regional entertainment. Research and development. Other basic industry. New plant. Expansion. Modernization. ABATED Buildings and structure. Fixed machinery and equipment. Size 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. Property with useful life less than fifteen (15) years. ECONOMIC Minimum one million dollar ($1,000,000) investment. CRITERIA Retain or create at least fifteen (15) jobs. Cannot reasonably use existing property. No serious adverse affect on jurisdictions. Tax Abatement Guidelines Summary, Page Solo 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 valued of eligible property improvements made after January 1 but before the execution of the Agreement. (e) "Economic Life" means the number of years a property improvement is expected to be in service in a facility. (f) "Deferred Maintenance" means improvement necessary for continued operations which do not improve productivity or alter the process technology. (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 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 1 (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 of 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 material 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. (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 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 may require. (c) New and Existing Facilities. Abatement maybe granted for new facilities and improvements to existing facilities for purposes of modernization or expansion. Guidelines and Criteria for Reinvestment Zones, Page 2 (d) Eligible Property. Abatement may be extended to the value of buildings, structures, fixed machinery and equipment, site improvements plus that office space and related fixed improvements necessary to the operation and administration of the facility. (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 leased except as provided in Section 2 (f); 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; 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. (f) Owned/Leased Facilities. If a leased 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 up to two (2) years during the period of construction, followed by one hundred percent (100 %) abatement for the first year after construction, seventy -five percent (75 %) abatement for the second year after construction and fifty percent (50 %) abatement for the third year after construction. If the period of construction exceeds two (2) years the facility shall be considered completed for purposes of abatement and in no case shall the period of abatement inclusive of construction and completion 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 ($1,000,000) after the period of abatement has expired; (2) must be expected to prevent the loss of employment, retain or create employment for at least fifteen (15) people on a permanent basis; (3) must not be expected to solely or primarily have the effect of transferring employment from one part of a county to another; and Guidelines and Criteria for Reinvestment Zones, Page 3 (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; a map and property description; and a time schedule for undertaking and completing the proposed improvements. In the case of modernization, a statement of real and personal property shall be given for the tax year immediately proceeding the application. The application form may require such financial and other 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 Mayor 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 prepare a feasibility study setting out the impact of the proposed reinvestment zone and tax abatement. The feasibility study shall include, but not be limited to, an estimate of the economic effect of the creation of the zone and the abatement of taxes and the benefit to the eligible jurisdiction and the property to be included in the zone. Guidelines and Criteria for Reinvestment Zones, Page 4 (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 a designate member of City Council, 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 (3/4) vote of the City Council. SECTION 4 PUBLIC HEARING AND APPROVAL (a) The governing body of a city may not adopt an ordinance, or a county a resolution 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 writing 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, 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. (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 requirements of these Guidelines and Criteria shall be approved unless accompanied by a request for variance as provided under Section 3(f). Guidelines and Criteria for Reinvestment Zones, Page 5 SECTION 5 AGREEMENT After approval the City Council shall formally pass a resolution or 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 and the average number of jobs involved. Such agreement shall normally 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. (b) Should the City Council determine that the company or individual is in default according to the terms and conditions of its agreement, the City Council shall notify the company or individual in writing at the address stated in the agreement, and if such is not cured within sixty (60) days from the date of such notice ( "Cure Period "), then the agreement may be terminated. Guidelines and Criteria for Reinvestment Zones, Page 6 (c) In the event that 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 may be terminated and all taxes previously abated by virtue of the agreement will be recaptured and paid within sixty (60) days of the termination. SECTION 7 ADMINISTRATION (a) The Chief Appraiser of the County 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 levies 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 its safety standard. (c) Upon completion of construction, the jurisdiction which created the zone shall annually evaluate each facility receiving abatement to ensure compliance with the agreement and report possible violations of the contract and agreement to the City Council and its attorney. 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. c: \klh I95\ CommunityDevelopment\Guidel ines4TmAbatementNReinvestmentZones 1999 Guidelines and Criteria for Reinvestment Zones, Page 7