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1996 12 20 CC Minutes, SpecialId MINUTES OF THE SPECIAL SESSION OF THE CITY COUNCIL OF THE CITY OF BAYTOWN December 20, 1996 The City Council of the City of Baytown, Texas, met in special session on December 20, 1996, at 12:00 noon, in the Council Chamber of the Baytown City Hall, with the following in attendance: Manuel Escontrias E. Frank Hinds, Jr. Stephen DonCarlos Rolland J. Pruett Pete C. Alfaro Bobby Rountree Ignacio Ramirez Myrna Bernier Absent: Eva Benavides David Byford Council Member Council Member Council Member Council Member Mayor City Manager City Attorney Deputy City Clerk Council Member Council Member The meeting was opened with a quorum present, and Council Member DonCarlos offered the invocation, after which the following business was conducted: Hold a Public Hearing on the Proposed Designation of Approximately 698 Acres of Land Located in the Southeast Portion of the City on Tri City Beach Road as "Reinvestment Zone No. One, City of Baytown" Mayor Alfaro called to order the public hearing on the proposed designation of approximately 698 acres of land located in the southeast portion of the city on Tri City Beach Road as "Reinvestment Zone No. One, City of Baytown" at 12:00 noon. He asked those present desiring to speak to register on the list provided in the lobby as that would provide the speaking order for the hearing. No one registered to speak. The City Manager said that Joe Fogerty, President of Arete Real Estate and Development, Inc., and Brad Dill, President of BD Realty Advisors, L.L.C., were leading an investment group that intends to purchase and develop approximately 698 acres of land into a residential, planned community along Cedar Bayou. This property is located in the 961220 -2 Minutes of the Special Session - December 20,1996 southeast portion of the community bounded on the east by Cedar Bayou, on the north by the HUP channel, on the west by the Bay Oaks Harbor. The developers plan to feature water oriented amenities including boat ramps, full marina slips, club house, recreational areas, swimming pools, tennis courts, and jogging paths. They are considering a school site, a private gate canal, a waterfront lot section, and an elderly assisted living center. The developers have requested that a TIF or reinvestment zone be created. The TIF can be created within the boundaries of the city by a vote of City Council. Other taxing entities which include the school district, the college, and the county, may choose to participate, but they are not required to do so. The TIF raises tax dollars through the incremental increase in taxable value of the property. The reinvestment zone statute allows each taxing entity to determine what percent increase in the tax revenue would be placed in the TIF if any. Two thirds of the designated tax revenue would go to fund the improvements needed to create and support the increased value and is applicable to most improvements necessary to provide adequate services within the TIF area. Examples are water, sewage, drainage, roads, bridges, parks and recreational facilities, and schools. The remaining one third would be dedicated to provide, upgrade, and support low- income housing within the boundaries of the city. This one -third portion of the tax revenue is controlled by the city. Any bonds that are issued by the city to fund the TIF improvements are backed only by the incremental increases in tax revenue and are not general obligation bonds of the city or any other taxing entity. Procedurally, the TIF is created by a vote of City Council. The city and the developer determine the development and reimbursement agreement or the financing plan. The Board of Directors is appointed by the city with representatives from all taxing entities. The board is then empowered to administer all matters of the TIF including the request of the city to issue bonds. The ordinance on the agenda creates the reinvestment zone but does not obligate the city to continue its designation. It establishes a termination date of July 1, 1997, if a financing plan and a development plan are not approved by the City Council. Prior to this date, the administration will perform its due diligence to determine if a development financed in this manner would be beneficial to the City of Baytown. The staff will develop a service plan, determine the service levels necessary, the cost, and the potential revenues, as well as meet with the city's financial advisors to learn more about TIF financing and its potential effect on the city's bond rating if any. Plans are to visit with other cities where TIF's have been established. There are eleven other cities in Texas that have created TIFs. If the project appears to be beneficial to the City of Baytown, the staff will negotiate with the developer and come back to Council with the financing plan. Council is not obligated until action is taken on a permanent financing plan. This 961220 -3 Minutes of the Special Session - December 20,1996 is an opportunity for the staff to learn more about this type of financing structure in order to make a recommendation to Council. In response to inquiry from council, the City Manager stated that the one - third, two- thirds split is by statute and the money spent on low- income housing can be spent in HUD designated areas anywhere in the city. The value of the property is frozen at the 1996 valuation of $2.3 Million. If the value of the property next year is $6 Million, the city will get the value of $2.3 Million. Also, the city will get one -third of TIF taxable revenues for low- income housing projects. If the value of the property increases, the city can negotiate for payment on the increased value. Council Member Pruett expressed his concern of how granting TIF status to this development would impact growth in other areas of the city and questioned the payment of improvements in the TIF by having the taxes paid flow back to the TIF. He also questioned the term of the bonds. Joe Fogerty responded that once the improvements are paid for, all tax revenues revert to the city. Upon completion of the project, the developers expect to create a $300 Million new tax base which, once the bonds are paid, becomes part of the tax base of the city. Mr. Fogerty added that the final financing has not been done. In this case, if the financing plan includes only the improvements within the TIF, then those could be paid off in less than fifteen years. The financing plan can include improvements outside the area of the TIP if those improvements are necessary to support the TIF. The City will have an opportunity to use some of the funds outside the TIF to improve sewer capacity, sewer lines, or other things that are necessary to support this infrastructure. Mr. Fogerty emphasized the importance of negotiation with the other taxing authorities; it will not be only city taxes involved. In fact, if it were only the City's taxes, those would probably not support the project. This means that the City gets the benefit of taxes that are normally paid to other taxing entities. Lee College and the school district must make the same kind of decision as City Council. The Council will decide the city's requirements for the financing plan, and the school board will have that same opportunity. Their representatives will negotiate what their needs and goals are. The City Manager explained that Lee College, the school district, and the county have waived the sixty -day notification requirement in order to hold the public hearing. The City has given them written information to let them know that they do not have to participate even if the City decides to do so. They also understand that the city's only interest at this point is time to study this concept a little further to see if it is possible. A lot of the questions being asked are 961220 -4 Minutes of the Special Session - December 20, 11996 questions the staff has too. This entire process is new to the staff; therefore, more time is needed for evaluation. Mr. Fogerty indicated that the developers would like to meet with the city staff as soon as possible in order to answer those questions. The City Manager noted that the administration will meet with Mr. Fogerty and his staff immediately after the council meeting. Council Member Pruett inquired why this piece of property was chosen. He had understood that a TIF was for depressed property, and this is a choice piece of property. Joe Fogerty responded that this piece of property has been there since God made it, and an opportunity to develop it would have existed at any time. In the past when developers wanted to develop property, many times, a water district was created. The water district could then reimburse the developers for some of their expenses. That is where development has occurred, outside the city, causing property inside the city such as this parcel to go undeveloped. The creation of a TIF provides an opportunity to develop property that otherwise would go undeveloped. The risk and economics are such that without the TIF the developers would not develop the property. The City Manager stated that it was his understanding originally, that TIFs were for blighted areas that may have a mix of commercial and residential, but the statute does allow for the creation of a TIF in the manner being discussed. Since no one had registered to speak, the Mayor closed the public hearing. Consider Proposed Ordinance No. 961220 -1 Designates and Establishes "Reinvestment Zone No. One, City of Baytown" and Provides for other Necessary Provisions in Accordance with the Tax Increment Financing Act This ordinance designates the area comprising approximately 698 acres of land located in the southeast portion of the city on Tri City Beach Road as "Reinvestment Zone No. One, City of Baytown," establishes a board of directors, sets commencement and termination dates for the zone and establishes a tax increment fund. The current taxable value in the zone is approximately $2 Million. The development proposed within the zone includes 1,800 residential lots with a projected average value of land and improvements of $167,000 per lot resulting in a projected net increase in taxable value of $298 Million. All of the prerequisites of designating the zone have been satisfied, As such, should Council determine that (i) the development would not occur solely through 961220 -5 Minutes of the Special Session - December 20,1996 private investment in the foreseeable future, and (ii) the improvements in the zone will significantly enhance the value of all taxable real property within the zone and will be of general benefit to the City Council may designate the zone as a reinvestment zone pursuant to the Tax Increment Financing Act. Creation of Reinvestment Zone No. One does not obligate the City to continue its designation. The attached ordinance establishes a termination date of July 1, 1997. Prior to this date, the administration will perform its due diligence to determine if a development financed in this manner will be beneficial to the City. The staff will (i) develop a service plan for the area( as we do with new annexations) to determine the service level necessary, costs, and potential revenues, (ii) meet with our financial advisor to learn more about TIF financing and its potential effect on the City's bond rating, if any, (iii) visit with other Texas cities (there are eleven) who have created TIFs to discuss their experiences, and (iv) if the project appears to be beneficial to the City, negotiate the details of the TIF with the developer. The City Manager asked the City Attorney to explain some changes made to the ordinance in order to more closely follow the statute. The City Attorney said that there were some changes to allow for staggering of the terms. The odd number of positions shall be for two terms and the even numbers will be for one term. After that all positions will be for two terms. The other change is in Section 5 under 5(i). In response to inquiry from Council, the City Manager said that there must be one board member from each entity and the statute determines who is to be appointed to that board. They do not have to be residents of the TIF. The City Manager said that the Council would be asked to approve a financing plan before appointing any board members. The financing plan would use TIF funds and not require any commitment of city money. Council Member DonCarlos moved to adopt the ordinance. Council Member Hinds seconded the motion. The vote follows: Ayes: Council Members Escontrias, Hinds, and DonCarlos Mayor Alfaro Nays: Council Member Pruett 961220 -6 Minutes of the Special Session - December 20, 1996 ORDINANCE NO. 7868 AN ORDINANCE ESTABLISHING AND DESIGNATING REINVESTMENT ZONE NO. ONE, CITY OF BAYTOWN PURSUANT TO THE TAX INCREMENT FINANCING ACT; MAKING VARIOUS FINDINGS AND PROVISIONS RELATED THERETO; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF. Consider Proposed Ordinance No. 961220 -2 Authorizing Agreement with Southern Pacific Transportation Company to Upgrade the Crossing on Airhart Drive The ordinance authorizes an agreement to upgrade the crossing on Airhart Drive in the amount of $12,620. The railroad will install all paving materials for the upgrade where the proposed sidewalk crosses the tracks. The City will pay the railroad $12,620 for the work. The sidewalk will cross a track located just south of Oakwood Street. ORDINANCE NO. 7869 AN ORDINANCE AUTHORIZING AND DIRECTING THE CITY MANAGER TO EXECUTE AND THE CITY CLERK TO ATTEST TO AN AGREEMENT WITH SOUTHERN PACIFIC TRANSPORTATION COMPANY TO UPGRADE THE CROSSING ON AIRHART DRIVE; AUTHORIZING PAYMENT BY THE CITY OF BAYTOWN, THE SUM OF TWELVE THOUSAND SIX HUNDRED TWENTY AND NO1100 DOLLARS ($12,620.00); MAKING OTHER PROVISIONS RELATED THERETO; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF. Consider Proposed Ordinance No. 961220 -3 Authorizing Agreement with Union Pacific Railroad Company to Upgrade the Crossing on Airhart Drive Council will consider this item at a future date. W 961220 -7 Minutes of the Special Session - December 20,1996 J City Manager Report Maggie Hinojosa, one of our police officers, has been recognized as Officer of the Year by the Houston 100 Club. She is the third Baytown officer to be so recognized. Mayor Comments The Police Association did an outstanding job December 19 at the Christmas program for the Baytown Housing Authority. It was extremely well attended. Adjourn As there was no further business to be transacted, the meeting was adjourned. ISEAL) APPROVED BY: i � A4.� Eileen P. Hall, City Clerk minutes112- 20 -96spc rN ' i WrnWbernier, Deputy City Clerk