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.
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Guidelines and Criteria for Reinvestment Zones, Page 7