CC Resolution No. 2124 - Guidelines4TaxAbatementNReinvestmentZone RESOLUTION NO. 2124
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
amended in July 1990, July 1992, September 1995, September 1997, September 1999, February
12, 2004, February 9, 2006, and January 8, 2009, 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 Abatement Act.
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 passage by
the City Council of the City of Baytown.
INTRODUCED, READ and PASSED, by the affirmative ote of the City Council of the
City of Baytown this the 10" day of March,2011.
�'.0" ST HEN . DONCARLOS, M or
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LETI RYSPH°Ci " lerk
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APPROVED AS TO FORM:
CIZNAC10 RAMIREZ, SR., i Attorney
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2
Exhibit "A"
TAX ABATEMENT GUIDELINES SUMMARY
OBJECTIVES Primary job creation--target industries.
Encourage LEEDS development.
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 80%
Year 4 60%
Year 5 50%
Year 6 0%
FACILITIES Manufacturing.
THAT QUALIFY Service &distribution.
LEED®certified office building.
Regional entertainment.
Research and development.
Other basic industry.
Class"A"office.
AUTHORIZED New facilities.
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.
Property with useful life less than fifteen (15)years.
ECONOMIC Minimum one million dollar($1,000,000) investment.
CRITERIA Retain or create at least five (5)jobs.
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) "Class A office"is characterized as buildings that have excellent location and access,attract
high quality tenants,and are managed professionally.Building materials are high quality and
rents are competitive with other new buildings. Examples are the office buildings that are
found in the heart of the business or financial district with lots of brass and glass fixtures and
huge,expensive lobbies and they are usually steel-framed and tall. They are often occupied
by banks, law firms, investment banking companies, and other high-profile companies.
(c) "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.
(d) "Agreement"means a contractual agreement between a property owner and/or lessee and an
eligible jurisdiction for the purposes of tax abatement.
(e) "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 I'but before the execution of the Agreement, or the sales price, if the
property was conveyed subsequent to January is', plus the agreed upon value of eligible
property improvements made after January 1st,whichever is greater.
(f) "Deferred Maintenance"means improvement necessary for continued operations which do
not improve productivity or alter the process technology.
(g) "Economic Life" means the number of years a property improvement is expected to be in
service in a facility.
(h) "Expansion"means the addition of buildings,structures, fixed machinery or equipment for
purposes of increasing production capacity.
(i) "Facility"means property improvements completed or in the process of construction which
together comprise an integral whole.
(j) "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.
Guidelines and Criteria for Reinvestment Zones.Page 1
(k) "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.
(1) "New Facility" means a property previously undeveloped which is placed into service by
means other than or in conjunction with expansion or modernization.
(m) "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.
(n) "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.
(o) "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.
(p) "Service Facility"means buildings and structure,including fixed machinery and equipment,
used or to be used to service goods.
(q) "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.
(r) "LEEDW means Leadership in Energy and Environmental Design (LEEDS), which
encourages the use of certifiable systems,materials and practices designed to reduce energy
consumption and utilize recycled material.
SECTION 2
ABATEMENT AUTHORIZED
(a) Authorized Facility. A facility may be eligible for abatement if it is a Manufacturing
Facility, Research Facility, Distribution Center Facility, Class A office, Service Facility,
Regional Entertainment Facility,Research and Development Facility,or LEEDS certified
office building.
(b) Creation of New Value. Abatement may only be granted for
Guidelines and Criteria for Reinvestment zones,Page 2
I. 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), or
2. the marginal costs to secure LEEDS®certification for the building,
subject to such limitations as City Council and the property tax code may require.
(c) New and Existing Facilities. Abatement may be granted for new facilities and
improvements to existing facilities for purposes of modernization or expansion.
(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 or LEEDS
certified building. 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 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, 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.
(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 the first two(2)
years, followed by eighty percent(80%)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).
Guidelines and Criteria for Reinvestment Zones,Page 3
(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 directly create or prevent the loss of permanent full-time
employment, retain or create employment for at least five (5) people reasonably
required in order to operate the facility in an efficient manner, provided that this
employment qualification shall be satisfied on January I of the fourth year of the
abatement agreement and continue through the term of the abatement;
(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;
Guidelines and Criteria for Reinvestment Zones,Page 4
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 leased 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, 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 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 department. If 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
earthwork,site preparation,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(3/a)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
Guidelines and Criteria for Reinvestment zones.Page 5
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 C/e)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).
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;
Guidelines and Criteria for Reinvestment Zones.Page 6
(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
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
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 may be 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 may be added, equal to 15%of the total amount abated.
Guidelines and Criteria for Reinvestment Zones.Page 7
(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 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,and penalties and interest may be assessed as set out in
Section 6(b).
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.
Guidelines and Criteria for Reinvestment zones,Page 8
SECTION 9
SUNSET PROVISION
These Guidelines and Criteria are effective March 10,2011,and will remain in force until
March 9,2013,at which time all reinvestment zones and tax abatement contracts created 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.
I1CobsrvllLegaAKaren\FileslCatnmunity DevelopmenlWax Abatement Guidelines\Guidelints4TaxAbatementNReinvestmcntZonc201(doc
Guidelines and Criteria for Reinvestment Zones,Page 9