HomeMy WebLinkAboutResolution No. 2001-34 RESOLUTION NO. R2001-34
A RESOLUTION OF THE CITY COUNCIL OF TI� CITY OF
FRIENDSWOOD, TEXAS, PROVIDING FOR THE ADOPTION OF TAX
ABATEMENT GUIDELINES FOR THE CITY AND PROVIDING FOR
CONSIDERATION OF REINVESTMENT ZONES FOR TAX INCREMENT
FINANCING AND TAX ABATEMENT PURPOSES.
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BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FRIENDSWOOD,
TEXAS:
Section 1. That the Guidelines and Criteria for Granting Tax Abatement in
Reinvestment Zones Created in the City of Friendswood, Texas, a true and correct copy of which
is attached hereto as E�ibit "A" made a part hereof for all purposes, are hereby adopted by the
City Council of the City of Friendswood, Texas.
Section 2. That the City Council hereby affirms that it will consider any and all
applications for the creation of reinvestment zones for the purpose of tax increment financing and
the granting of tax abatement, in accordance with State law, and instructs the City's Economic
Development Coordinator to receive and process such requests.
PASSED, APPROVED, AND RESOLVED this 16th day of July , 2001.
Harold L. Whitaker
Mayor
ATTEST
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Deloris McKenzie, RM
City Secretary
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CITY OF FRIENDSWOOD
GUIDELINES AND CRITERIA FOR GRANTING TAX
ABATEMENT IN A REINVESTMENT ZONE
Whereas, the creation and retention of job opportunities that bring new wealth is
a high priority; and
Whereas, new investment and jobs will benefit the economy by producing new
employment centers, diversify the tax base, and generate tax revenue to support local
services; and
Whereas, the City of Friendswood must compete with other localities currently
offering tax inducements to attract investments and jobs; and
Whereas, any tax incentives offered in Friendswood, Texas 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 Friendswood; 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
and activities which bring in money from outside that 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
Now, therefore, be it resolved that the City Council of the City of Friendswood
does hereby adopt these Guidelines and Criteria for granting tax abatement in
reinvestment zones in Friendswood, Texas.
Section I
DEFINITIONS
Sec. 1-01. Definitions.
The following words, terms and phrases, when used in this article, shall have the meanings ascribed to
them in this section, except where the context clearly indicates a different meaning.
Abatement means full or partial exemption from ad valorem taxes of certain real property in a
reinvestment zone designated for economic development purposes.
Agreement means a contractual agreement between a property owner and the city for the purposes of
tax abatement.
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 1 but before
the execution of the agreement.
Basic industry means a business that sells its products or services nationally or around the world
bringing in new jobs and investments from outside the city, rather than providing products or services to the
immediate Friendswood market area or servicing primarily the local population.
Deferred maintenance means improvements necessary for continued operations, which do not
improve productivity or alter the process technology.
Expansion means the addition of buildings, structures, machinery, or equipment for purposes of
increasing production capacity.
Facilify means property improvements completed or in the process of construction which together
comprise an integral whole.
Manufacfuring facility means buildings and structures, including machinery and equipment, the
primary purpose of which is or will be the manufacturing of tangible goods or materials or the processing of
such goods or materials by physical or chemical change.
Modernizafion means a complete or partial demolition of facilities and the complete or partial
reconstruction or installation of a facility or similar or expanded production capacity. Modernization may result
from the construction, alteration, or installation of buildings, structures, machinery, or equipment.
Modernization shall include improvements for the purpose of increasing productivity or updating the technology
of machinery and equipment, or both. It shall not be for the purpose of reconditioning, refurbishing or repairing.
New facility means a property previously undeveloped, which is placed into service, by means other
than or in conjunction with expansion or modernization.
Other basic industry means buildings or structures including fixed machinery and equipment not
elsewhere described, used or to be used for the production of products or services, which primarily serve a
market outside of the city.
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Primary (basic) jobs means employment that brings in new payroll dollars to the community from
businesses that primarily engage in selling its products or services to outside the local market area. Jobs that
depend upon the local market area such as restaurants, grocery stores, residential real estate, retail, doctor's
offices, etc. are secondary jobs which depend upon the local population and market to grow.
Productive life means the number of years a property improvement is expected to be in service in a
facility.
Research facility means buildings and structures, including machinery and equipment, used or to be
used primarily for research or experimentation to improve new tangible goods or materials or to improve or
develop the production processes thereto.
Regional service facility means buildings and structures, including machinery and equipment, used or
to be used to service goods where a majority of the goods being serviced originate outside of the city.
Regional distribution center facility means buildings and structures, including fixed machinery and
equipment, used or to be used primarily to receive, store, service, or distribute goods or materials owned by
the facility operator where a majority of the goods or services are distributed to points at least one hundred
(100) miles from any part of the city.
Sec. 1-02. Abatement authorized.
(a) Reinvestment zone. To be eligible for tax abatement, the owner of taxable real property must
enter into a written agreement with the city, wherein the owner agrees to make specified improvements or
repairs to the property in conformity with the city's comprehensive plan, where applicable; and the property
must be within a reinvestment zone designated by city ordinance as allowed under section 312.202 of the Tax
Code.
(b) Authorized facilify. A facility may be eligible for tax abatement if it is a business or manufacturing
facility, research facility, distribution center, regional service facility, a basic industry, or a facility that is deemed
essential to the city's growth and that meets the guidelines of section 312.002 et seq. of the Tax Code.
(c) Creation of a new value. Tax abatement may only be granted for the additional value of eligible
property improvements made subsequent to and specified in a tax abatement agreement between the city and
the property owner, subject to such limitations as the city and state law may require.
(d) New and existing facilities. Tax abatement may be granted for new facilities and improvements
to existing facilities for purposes of modernization or expansion.
(e) Eligib/e property. Tax abatement may be extended to the value of buildings, structures, fixed
machinery and equipment, site improvements plus the office space and related fix improvements necessary to
the operation and administration of the facility.
(f) Ineligible property. The following types of property shall be fully taxable and ineligible for tax
abatement: land; inventories, supplies, tools, furnishings and other forms of movable personal
property when not in conjunction with leased facilities; vehicles; vessels; aircraft, housing, furniture,
deferred maintenance investments, property to be rented or leased except as provided in section
1-02(g), 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 productive life of less than fifteen (15) years; and property owned or used by the State of
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Texas. Nevertheless, the City Council can consider this property to be eligible upon a vote of
three-fourths (3/4) of the city council.
(g) Owned/leased facilities. If a leased facility is granted tax abatement, both the lessor and the
lessee shall execute the agreement.
(h) (1) Value and term of tax abatement. Tax abatement shall be granted effective with the January
1 valuation date immediately following the date of execution of the agreement. Up to one hundred
(100) percent of the value of new eligible properties may be abated for up to two (2) years during
the period of construction and for up to five (5) years thereafter, as herein provided and listed on the
sliding scale below. The abatement may be extended through an initial agreement and a
subsequent agreement. 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 seven (7) years, unless it is approved by the vote
of three-fourths (3/4) of the city council. Abatement shall be granted on a sliding scale as follows:
Year Abated Percentage of Value
1-3 Including Construction 100%
4 80%
5 60%
6 40%
7 20%
No abatement shall be given in any year in which the facility fails to meet the employment minimum set
forth in Section 1-02 (i), I (a) or (b).
(2) In the event the applicant plans the removal in whole or part of existing improvements in
connection with the construction of new eligible properties, tax abatement may be reduced from
the one-hundred percent level provided for herein. The percentage to be abated may, at the
City Council's discretion, be found as follows: ascertain the appraised value of the
improvements to be removed as of January 1 immediately preceding the date of the application.
Subtract the appraised value from the amount of the eligible properties to be constructed.
Divide the remainder by the amount of eligible properties to be constructed to find the
percentage of abatement of the value of such eligible properties.
(i) Economic qualificafions. In order to be eligible for designation as a reinvestment zone and at the
City Council's sole discretion to receive tax abatement of the planned improvement, the planned development
shall:
(1) (a) Create employment for at least ten additional people on a permanent basis in the city or
provide at least ten retained jobs and the total expenditures for the construction of
improvements on eligible property must exceed five-hundred thousand dollars ($500,000) ; or
(b) Create employment for at least five additional people on a permanent basis in the city or
provide at least five retained jobs and the total expenditures for the construction of
improvements on eligible property must exceed one-million dollars ($1,000,000); or
(2) Expenditure of one million dollars ($1,000,000) and create or retain at least five jobs for
modernization projects on eligible property, with the provision that the abatement in no year
shall exceed 80 percent. 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); and
(3) Meet the published tax abatement guidelines of a similar city in Galveston or Harris County.
would enhance neighboring tourist related businesses.
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(j) 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 1-02(f) shall be fully taxable;
(2) The base year value of existing eligible property as determined each year shall be fully taxable;
and
(3) The additional value of new eligible property shall be taxable in the manner described in section
1-02(h).
Sec. 1-03. Application.
(a) Any owner of taxable property in the city may request the designation of a reinvestment zone and a
tax abatement agreement by filing a written application to the city.
(b) The application shall be signed by the owner, accompanied by a specific description of the
proposed use and the specific nature and extent of the modernization, expansion, or new improvements which
will be a part of the facility; an estimate of the cost of the improvements; an estimate of the number of
employees during construction, and thereafter, to operate the facility; a map and metes and bounds or other
valid legal property description of the property proposed as a reinvestment zone; and a time schedule for
undertaking and completing the planned improvements. In the case of modernization, a statement of the
assessed value of the facility, separately stated for real and personal property, shall be given for the tax year
immediately preceding the application. The application shall provide such financial and other information as
required by the city to enable it to evaluate the financial capacity of the applicant, including, but not limited to, a
projection of the cost of city services to serve the projected development. In the case of modernization, a
statement of the assessed value of the facility, separately stated for real and personal property, shall be given
for the tax year immediately preceding the application. The application shall provide such financial and other
information as required by the city to enable it to evaluate the financial capacity of the applicant, including, but
not limited to, a projection of the cost of city services to serve the projected development. In the case of an
application based on job retention, the applicant shall include sufficient information to verify the potential of job
loss that would occur without abatement.
(c) If the City intends to act favorably on the application and enter into an agreement, it shall do so in
writing with the owner of the taxable real property located in an area designated as a reinvestment zone to
exempt from taxation a percentage of the increase in the value of the property over its value in the year in
which the agreement is executed, subject to the provisions of section 1-02(h)(2). Not later than the seventh
day before the date on which the city enters into such an agreement, the mayor of the city, or an officer or
employee of the city designated by him, shall deliver tot he presiding officer of the governing body of each
other taxing unit in which the property to be subject to the agreement is located a written notice that the city
intends to enter into an agreement. The notice shall be placed in the mail, return receipt requested.
(d) An ordinance designating an area as a reinvestment zone may not be adopted by the city until the
city has held a public hearing on the designation and has found that the improvements sought are feasible and
practical and would be a benefit to the land to be included in the zone and to the city after the agreement
entered with the owner has expired. It also must be found that the area of the proposed reinvestment zone is
reasonably likely as a result of the designation to contribute to the retention or expansion of primary
employment or to attract major investment in the zone that would be a benefit to the property and would
contribute to the economic development of the city or meets the other criteria of section 312.201 et seq. of the
Tax Code. At the hearing, interested persons are entitled to speak and present evidence for or against the
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designation. Not later than the seventh day before the date of such hearing, notice of the hearing must be
published in a newspaper having general circulation in the city; and said notice shall be 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. The notice shall be placed in the mail, postage prepaid,
properly addressed, and sent by certified mail, return receipt requested.
(e) The City may deny an application for abatement if it finds that the request for the abatement was
filed after the commencement of construction, alteration, or installation of improvements related to a proposed
modernization, expansion or new facility.
Sec. 1-04. Objections to abatement.
(a) Neither a reinvestment zone nor a tax abatement agreement shall be authorized if it is determined
that:
(1) There would be a substantial adverse effect on the provisions of government service or tax
base;
(2) The applicant has insufficient financial capacity;
(3) Planned or potential use of the property would constitute a hazard to public safety, health, or
morals; or
(4) Violation of laws of the United States or State of Texas or policies of the city would occur.
(b) The city shall make the determination of the validity of any objections to the project, if any, provided
for in this section.
Sec. 1-05. Agreement.
After the hearing, the City of Friendswood shall adopt a resolution finding: that the proposed agreement
filed with the resolution, a copy of which is to be attached thereto, meets the applicable provisions of these
"Guidelines and Criteria". The resolution may also authorize the execution of the agreement with the owner, to
include provisions for:
(1) The exemption from taxation of a percentage of the increases in value of the property, over its
value in the year in which the agreement was executed for a period of time provided in section
1-02(h),
(2) A listing of the kind, number, and location of all proposed improvements of the property;
(3) Access to and inspection of property by city employees to ensure that the improvements or
repairs are made according to the specifications and conditions of the agreement;
(4) Limiting the uses of the property consistent with the general purpose of encouraging
development or redevelopment of the zone during the period that property tax exemptions are in
effect;
(5) Recapturing property tax revenue lost as a result of the agreement if the owner of the property
fails to make the improvements or repairs as provided by the agreement;
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(6) A map showing proposed improvements and uses in the reinvestment zone;
(7) Total estimated cost of the improvements and employment estimates;
(8) The commencement date and the termination date of the tax abatement;
(9) The nature of the construction, time schedule, property description, and improvement list as
provided in the application in accordance with section 1-03(b);
(10) A provision that the agreement shall be effective when executed by all parties and upon the final
passage of an ordinance designating the reinvestment zone; and
(11) A recapture provision if the cost of city services to the proposed project exceed the benefits to
the community that such project poses.
Sec. 1-06. Recapture.
(a) In the event that the facility is completed and begins producing products or services, but
subsequently discontinues producing products or services for any reason except in fire, explosion, or other
casualty or accident or natural disaster for a period of one (1) year during the abatement period, then 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 affected
jurisdiction and other taxing agencies within sixty (60) days from the date of termination.
(b) Should the city determine that the company or individual is in default according to the terms and
conditions of its agreement, the city shall notify the company or individual in writing at the address stated in the
agreement, and if the default is not cured within sixty (60) days from the date of such notice ("cure period"), the
agreement may be terminated.
(c) In the event that the company or individual (1) allows its ad valorem taxes owed the city or affected
jurisdictions to be come 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
any default within the cure period, the agreement then may be terminated and all taxes previously abated by
virtue of the agreement shall be recaptured and paid within sixty (60) days of the termination.
Sec. 1-07. Administration.
(a) Each year, the company or individual receiving abatement shall furnish the chief appraiser of
Galveston/Harris County and the City of Friendswood with such information as may be necessary for the
abatement. The chief appraiser will annually determine the assessment of the real and personal property
comprising the reinvestment zone and notify the affected jurisdictions of the amount of the assessment.
(b) Upon completion of construction, the city shall annually evaluate each facility receiving abatement
to ensure compliance with the agreement.
Sec. 1-08 Assignment.
Tax abatement may be transferred and assigned by the holder to a new owner or lessee of the same
facility upon the approval by resolution of the city council, subject to the financial capacity of the assignee, and
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provided all conditions and obligations in the tax abatement agreement are guaranteed by the execution of a
new contractual agreement with the city. No assignment or transfer shall be approved if the parties to the
existing agreement, the new owner or new lessee are liable to the city or any affected jurisdiction or other
taxing agency for outstanding taxes or other obligations.
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Sec. 1-09. Nonrefundable application fee.
The nonrefundable application fee for applying for tax abatement shall be five-hundred dollars ($500.)
and the costs of outside consulting firms which shall be paid at the time of the filing of the application or when
the outside costs can be ascertained, whichever is earlier. The payment of the application fee can be waived
by a vote of three-fourths (3/4) of the city council on a finding that the proposed project is an essential
development for the city.
Sec. 1-10. Sunset provision.
These "guidelines and criteria" are effective for two (2) years from the date adopted. During that period,
the "Guidelines and Criteria" may be amended or repealed only by a vote of three-fourths (3/4) of the members
of the city council.
Sec. 1-11. Legal notice to potential applicants.
The adoption of these guidelines and criteria by the city do not:
(1) Limit the discretion of the city to decide whether or not to enter into a specific tax abatement
agreement;
(2) Limit the discretion of the city to delegate to its employees the authority to determine where or
not the city should consider a particular application or request for tax abatement; or
(3) Create any property, contract, or other legal right in any person to have the city consider or
grant a specific application or request for tax abatement.
Sec. 1-12. Confidentiality.
Information that is provided to the city in connection with an application that describes the specific
processes or business activities to be conducted or the equipment or other property to be located on the
property for which tax abatement is sought is confidential and not subject to public disclosure until the tax
abatement agreement is executed. Nevertheless, the city shall not be liable for any disclosure of the
application. However, the city may take disciplinary action against the city employee who made an
unauthorized disclosure of confidential information.
Sec. 1-13. Notice to Texas Department of Economic Development.
The city secretary shall upon the approval of a tax reinvestment zone or a tax abatement agreement,
send a report as required by section 312.005 of the Tax Code to the Texas Department of Economic
Development.
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Sec. 1-14. State law controls.
This article shall not in any way limit the authority of the city to enter into a specific tax abatement
agreement as authorized under section 312.002 et seq. of the Tax Code, as amended. This ordinance shall
not in any way allow the city to enter into a specific tax abatement agreement that is contrary to the provisions
of section 312.002 et seq. of the Tax Code, as amended.
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