R2006-121 09-05-06
RESOLUTION NO. R2006-121
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, UPDATING AND APPROVING THE CITY'S GUIDELINES AND
CRITERIA FOR GRANTING TAX ABATEMENT IN A REINVESTMENT
ZONE CREA TED IN THE CITY OF PEARLAND, BRAZORIA COUNTY,
TEXAS, FOR PURPOSES OF BRINGING IT INTO COMPLIANCE WITH
CURRENT STATE LAWS; CLARIFYING THE DURATION OF TAX
ABATEMENT AGREEMENTS AND THE AMOUNT OF TAXES THAT MAY
BE ABATED; CHANGING THE MINIMUM CAPITAL INVESTMENT
REQUIRED; AND CHANGING THE NOTICE REQUIREMENTS FOR
HOLDING PUBLIC HEARINGS FOR TAX ABATEMENT; HAVING A
SAVINGS CLAUSE, A REPEALER CLAUSE, AND A SEVERABILITY
CLAUSE.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That Resolution No. R2006-121 ("Guidelines and Criteria for Granting
Tax Abatement") is hereby adopted in compliance with state law and shall read as follows:
RESOLUTION NO. R2006-121
GUIDELINES AND CRITERIA FOR GRANTING TAX ABATEMENT
IN A REINVESTMENT ZONE CREATED IN THE CITY OF PEARLAND,
BRAZORIA COUNTY, TEXAS
WHEREAS, the creation and retention of job opportunities that bring new wealth is
one of the highest civic priorities; 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 must compete with other localities across the nation currently
offering tax inducements to attract new plant and Modernization projects; and
WHEREAS, any tax incentives offered in the City would reduce needed tax revenue
unless strictly limited in application to those new and existing industries that bring new
wealth to the community; and
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RESOLUTION NO. R2006-121
WHEREAS, any tax incentives should not adversely affect the competitive position
of existing companies operating in Pearland, Texas; 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 unchanged for a two year period unless amended by a three-quarters vote of the City
Council; 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 governmental entities; and
WHEREAS, the attached Guidelines and Criteria shall be considered as a common
policy for all Affected Jurisdictions which choose to participate in tax Abatement
Agreements;
Now, therefore, be it resolved that the City Council of the City of Pearland does
hereby propose for consideration and adoption these Guidelines and Criteria for granting
tax abatement in reinvestment zones in the City of Pearland, as amended.
DEFINITIONS Section 1
(a) "Abatement" means the full or partial exemption from ad valorem taxes of certain
real property in a reinvestment zone designated by the City of Pearland for
economic development purposes.
(b) "Affected Jurisdiction" means any county and any municipality or school district, the
majority of which is located in Brazoria County, that levies ad valorem taxes upon
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RESOLUTION NO. R2006-121
and provides services to property located within the proposed or existing
reinvestment zone designated by the City of Pearland.
(c) "Abatement Agreement" and "Agreement" mean a contractual agreement between a
property owner and/or lessee and the City of Pearland for the purposes of tax
abatement.
(d) "Base Year Value" means the assessed value of eligible property as of January 1 in
the year preceding the execution of the agreement plus the agreed upon value of
eligible property improvements made after January 1 of that same year, but before
the execution of the Agreement.
(e) "Deferred Maintenance" means improvements necessary for continued operations
which do not improve productivity or alter the process technology.
(f) "Distribution Center Facility" means buildings and structures, including 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 50 miles from its location in Pearland.
(g) "Expansion" means the addition of buildings, structures, 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 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.
U) "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 building, structures, fixed machinery or
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RESOLUTION NO. R2006-121
equipment. Modernization shall not be for the purpose of reconditioning,
refurbishing or repairing.
(k) "New Facility" means a property previously undeveloped which is placed into service
by means other than or in conjunction with Expansion or Modernization.
(I) "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 serve a market primarily outside the Brazoria Primary
Metropolitan Statistical Area ("PMSA") and result in the creation of new permanent
jobs and create new wealth in the PMSA.
(m) "Productive Life" means the number of years a property improvement is expected to
be in service.
(n) "Regional Entertainment Facility" means buildings and structures, including
machinery and equipment, used or to be used to provide entertainment through the
admission of the general public where the majority of users reside at least 50 miles
from its location in the City of Pearland.
(0) "Research Facility" means building and structures, including 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.
(p) "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 at least 50 miles from the facility's location in the City of Pearland.
ABATEMENT AUTHORIZED Section 2
(a) Authorized Facility. A Facility may be eligible for abatement if it is a: Manufacturing
Facility, Research Facility, Distribution Center Facility or Regional Service Facility,
Regional Entertainment Facility or Other Basic Industry.
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RESOLUTION NO. R2006-121
(b) Creation of New Value. Abatement may only be granted for the additional value of
eligible property improvements made subsequent to and specified in an abatement
Agreement between the City of Pearland and the property owner or lessee, subject
to such limitations as the City Council 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 building, 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; retail facilities; Deferred Maintenance investments; property to be
rented or leased except as provided in Section 2(f); property owned or used by the
State of Texas or its political subdivisions or by any organization owned, operated or
directed by 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. Publicly owned land leased to
private entities shall be eligible if otherwise qualified.
(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. Up to one hundred percent of the value of new eligible properties may
be abated for up to two years during the period of construction and for up to eight
years thereafter or one-half (1/2) the Productive Life of the improvement, whichever
is less. The abatement may be extended through an initial agreement and a
subsequent agreement as may be required to comply with state law regarding the
term of a reinvestment zone. If the period of construction exceeds two years, the
Facility shall be considered completed for purposes of abatement and in no case
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RESOLUTION NO. R2006-121
shall the period of abatement inclusive of construction and completion exceed ten
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 value of the property in the
amount of $500,000 or more;
(2) must be expected to prevent loss of employment, retain or create
employment for at least 10 people on a permanent basis in the City of
Pearland; and
(3) must not be expected to solely or primarily have the effect of transferring
employment from one part of the City of Pearland to another part of the City
of Pearland; and
(4) must be necessary because capacity cannot be provided efficiently utilizing
existing improved property.
(i) Taxability. From the execution of the abatement contract 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; and,
(3) the additional value of new eligible property shall be taxable in the manner
described in Section 2(g).
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RESOLUTION NO. R2006-121
APPLICATION Section 3
(a) Any present or potential owner of taxable property in the City of Pearland may
request the creation of a reinvestment zone and tax abatement by filing a written
request with the Pearland Economic Development Corporation.
(b) The application shall consist of a completed application form accompanied by: a
general description of the proposed use and the general nature and extent of the
Modernization, Expansion or new improvements to be undertaken; a descriptive list
of the improvements which will be a part of the Facility; a map and property
description; and a time schedule for undertaking and completing the planned
improvements. In the case of modernizing, 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 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 shall notify in writing the
presiding officer of the legislative body of each Affected Jurisdiction of the
application and give written notice of a public hearing, not less than 15 days prior to
the hearing. Notice of the public hearing shall also be properly posted and
published in the City's official newspaper not less than 15 days prior to the hearing.
Before acting upon the application, the City of Pearland shall, through public
hearing, afford the applicant and the designated representative of any Affected
Jurisdiction an opportunity to show cause why the abatement should, or should not,
be granted.
(d) After receipt of an application for creation of a reinvestment zone and application for
abatement, the City of Pearland 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, the abatement of taxes, and the proposed benefit to the
Affected Jurisdiction and the property to be included in the zone.
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RESOLUTION NO. R2006-121
(e) The City Council shall not establish a reinvestment zone for the purpose of
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.
(f) Variance. Requests for variance from the provisions of Subsections (a), (e), and (g)
of Section 2 must be made in writing to the City Manager of the City of Pearland,
provided, however, the total duration of an abatement shall in no instance exceed
ten years. The applicant shall include in the variance request a complete
description of the circumstances the applicant believes supports the requested
variance. Approval of a request for variance requires a three-fourths (3/4) vote of
the City Council.
PUBLIC HEARING Section 4
(a) Should any Affected Jurisdiction be able to show cause in the public hearing why
the granting of a tax abatement will have a substantial adverse effect on its bonds,
tax revenue, service capacity, and/or the provision of services, that showing shall be
reason for the City Council to deny designation of the reinvestment zone, the
granting of abatement, or both.
(b) Neither a reinvestment zone nor Abatement Agreement shall be authorized if it is
determined that:
(1) there would be a substantial adverse affect on the provision 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; and/or
(4) violation of other codes or laws.
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RESOLUTION NO. R2006-121
After the public hearing, the City of Pearland must:
(1) find that the improvements sought are feasible and would be of benefit to the
zone after expiration of the Agreement;
(2) that the zone is reasonably likely to contribute to the retention or Expansion
of primary employment or to attract major investment in this area; and
(3) the City Council must also designate property as a reinvestment zone.
AGREEMENT Section 5
At least 7 days before the City Council grants a tax abatement, it must deliver written
notice of its intent to enter into the tax Abatement Agreement to the presiding officer of the
legislative body of each Affected Jurisdiction. Said notice must include a copy of the
proposed tax Abatement Agreement.
(a) After proper notice has been given to the Affected Jurisdictions, the City Council
shall, at a regularly scheduled meeting, cast a vote concerning the adoption of the
tax Abatement Agreement, which may be adopted only by a majority vote of the City
Council and, if adopted, the City Council shall then authorize the City Manager to
execute an Agreement with the owner of the Facility and/or lessee, as required.
The Agreement may include any of the optional provisions allowed in accordance
with Chapter 312 of the Tax Code. The Agreement shall:
(1) include a list of the kind, number, and location of improvements to the
property;
(2) authorize inspection of the property to ensure compliance with the
agreement;
(3) limit the use of the property consistent with the City of Pearland's
development goals; and
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RESOLUTION NO. R2006-121
(4) provide for recapturing property tax revenues that are lost if the owner fails to
make the improvements.
If the City Council fails to adopt the Agreement, the City Manager shall notify the applicant
of the disapproval, such notification to be in writing and to be sent within 60 days of the City
Council's decision.
A tax Abatement Agreement shall be executed by the City Manager within 60 days after
the applicant has forwarded all necessary information and documentation to the City of
Pearland.
(b) No later than March 31 of the year a reinvestment zone has been designated or a
tax Abatement Agreement has been executed, the City Manager shall deliver a
report to the State Property Tax Board and the Texas Department of Commerce,
briefly describing the terms of the zone or the agreement.
RECAPTURE Section 6
(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, except
fire, explosion, or other casualty or accident or natural disaster for a period of one
year during the abatement period, then the Abatement Agreement shall terminate
and so shall the abatement of taxes for the calendar year during which the Facility
no longer produces product or service. The taxes otherwise abated for that
calendar year shall be paid to the City of Pearland 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 Abatement Agreement, the City
Manager 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 (the "Cure Period"), then the Agreement shall be terminated
(c) In the event that the company or individual (1) allows its ad valorem taxes owed to
any affected taxing entity to become delinquent and fails to timely and properly
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RESOLUTION NO. R2006-121
follow the legal procedure 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 shall be paid within sixty (60) days of
the date of the notice of termination.
ADMINISTRATION Section 7
(a) The local Tax Assessor/Collector shall annually determine an assessment of the
real and personal property comprising a reinvestment zone. Each year, the
company or individual receiving 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 Pearland 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 standards.
(c) Upon completion of construction, the City of Pearland shall annually evaluate each
Facility and prepare a written report of possible violations to the Abatement
Agreement to the City Council, the City Manager, and the City Attorney and provide
written notice of the report to the applicant that such report has been submitted.
ASSIGNMENT Section 8
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 provided that all conditions and obligations in the abatement
Agreement are guaranteed by the execution of a new contractual agreement with the City
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RESOLUTION NO. R2006-121
of Pearland. No assignment or transfer shall be approved if the parties to the existing
Agreement, the new owner or new lessee are liable to any affected taxing entity for
outstanding taxes or other obligations. Approval shall not be unreasonably withheld.
SUNSET PROVISION Section 9
(a) These Guidelines and Criteria are effective upon the date of their adoption and will
remain in force for two years, at which time all reinvestment zones and
tax abatement contracts created pursuant to its provisions will be reviewed by the
City Council to determine whether the goals have been achieved. Based on that
review, the Guidelines and Criteria will be modified, renewed or eliminated providing
that such actions shall not affect existing Abatement Agreements.
(b) This policy is mutually exclusive of existing Industrial District Contracts and owners
of real property in areas deserving of special attention as agreed by the Affected
Jurisdictions.
TAX ABATEMENT GUIDELINES
OBJECTIVES
- JOB CREATION IN EXISTING AND TARGET BASIC
INDUSTRIES
- COMPETITIVE AMOUNTS AND TERMS OF ABATEMENT
- LOCAL OPTION APPLICABLE
- CONSENSUS OF ALL PARTICIPATING TAXING ENTITIES
- FLEXIBILITY THROUGH VARIANCE PROCEDURE
TERMS
- UP TO 100% DURING MAXIMUM TWO-YEAR
CONSTRUCTION PERIOD
- UP TO 100% EIGHT YEARS THEREAFTER, OR 1/2
USEFUL L1FES OF PROPERTY
- MAXIMUM TERM - TEN YEARS
QUALIFYING
FACILITIES
- MANUFACTURING & PROCESSING
- SERVICE & DISTRIBUTION
- RESEARCH & DEVELOPMENT
- ENTERTAINMENT (LARGE COMPLEXES)
- OTHER BASIC INDUSTRY N.E.C.
- NEW PLANTS
QUALIFYING
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RESOLUTION NO. R2006-121
INVESTMENTS - EXPANSIONS
- MODERNIZATIONS
ALLOWABLE - BUILDINGS AND STRUCTURES
ITEMS - FIXED EQUIPMENT
- SITE IMPROVEMENTS
- ADMINISTRATIVE OFFICE SPACE
NON-ALLOWABLE - LAND, EXISTING IMPROVEMENTS, CONSTRUCTION-IN-
PROGRESS, PERSONAL PROPERTY, HOTELS, HOUSING,
DEFERRED MAINTENANCE, RETAIL
ECONOMIC - MINIMUM $500,000 INVESTMENT
- RETAIN OR CREATE AT LEAST 10 PERMANENT FULL-
TIME JOBS IN THE CITY OF PEARLAND
- NO SERIOUS ADVERSE EFFECT ON AFFECTED
JURISDICTIONS
- CANNOT REASONABLY USE EXISTING PROPERTY
REVIEW AFTER TWO YEAR TEST PERIOD. ANY AGREEMENTS MADE DURING THE
PERIOD WILL BE ENFORCEABLE.
Section 2. Savings. All rights and remedies which have accrued in favor of the
City of Pearland under this Chapter and amendments thereto shall be and are preserved
for the benefit of the City of the Pearland.
Section 3. Repealer. All resolutions or portions of resolutions heretofore passed in
conflict with the terms hereof are specifically repealed.
Section 4. Severability. If any section, subsection, sentence, clause, phrase or
portion of this Resolution is for any reason held invalid, unconstitutional or otherwise
unenforceable by any court of competent jurisdiction, such portion shall be deemed a
separate, distinct, and independent provision and such holding shall not affect the validity
of the remaining portions thereof.
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RESOLUTION NO. R2006.121
PASSED, APPROVED, AND ADOPTED this the 5th day of September, A.D., 2006.
C~~
TOM REID
MAYOR
ATTEST:
APPROVED AS TO FORM:
C'\ "' It ~
~KER
CITY ATTORNEY
14
P444.
Darrin M. Coker
City Attorney V °� Nghiem V. Doan. Deputy City Attorney
Telephone (281) 652-1678 PEAKAND Telephone (281) 652-1665
Telecopier (281) 652 1679 Telecopier (281) 652-1679
Jenifer K. SmithT E X A 5 Lawrence G. Provins
Legal Secretary Assistant City Attorney
Telephone (281) 652-1664 �At Telephone (281) 652-1 666
Telecopier (281) 652 1679 r• i 89 Telecopier (281) 652- 1679
TO: FRED WELCH, DIRECTOR PEDC
FROM: DARRIN M. COKER, CITY ATTORNEY ti C.
DATE: JULY 25, 2006
SUBJECT: TAX ABATEMENT FOR BISON BUILDING MATERIALS, LTD.
I have prepared a tentative calendar for completion of the tax abatement process for Bison
Building Materials,LTD. ("Bison"). I am in receipt of your feasibility study and the proposed terms
of the agreement;therefore I will proceed with the preparation of all necessary documentation unless
advised otherwise.
•
August 21, 2006 Provide notice of public hearing to the Pearland Reporter News.
August 23, 2006 Notice of public hearing will be published in the Pearland Reporter
News. Written notice of public hearing must be forwarded to all
necessary governmental entities at least 15 days prior to the public
hearing, in accordance with the City's tax abatement guidelines and
criteria. The agenda for the public hearing must be posted.
September 11, 2006 City Council will conduct a public hearing, after which the Council
must take action at the regular meeting to designate the reinvestment
zone. This will be the first reading of the reinvestment zone
ordinance.
September 25, 2006 City Council will have the second reading of the reinvestment zone
ordinance.
3519 LIBERTY DRIVE•PEARLAND,TEXAS 77581-5416-19•281-652-1600 •www.ci.pearland.tx.us
Printed on Recycled Paper IS
Fred Welch
July 25, 2006
Page 2
The tax abatement must be drafted in accordance with the City's tax
abatement guidelines and criteria, and must include mandatory
provisions promulgated by state law.
September 26, 2006 Delivery of written notice of the City's intent to enter into a tax
abatement agreement must be sent to the presiding officers of the
taxing entities in whose taxing jurisdiction the property is located,
along with a copy of the agreement.
October 9, 2006 City Council must adopt a resolution accepting the tax abatement
agreement.
October 10, 2006 Tax abatement agreement may be executed.
This is a proposed time frame by which by the City may proceed in order to successfully
complete the Bison tax abatement process. If you have any questions or comments regarding the
same, please contact our office as soon as possible.
DMC/jks
cc: Bill Eisen, City Manager
Eric Gage, Business Development/Marketing Manager
THE STATE OF TEXAS §
COUNTIES OF BRAZORIA, §
FORT BEND, AND HARRIS §
TAX ABATEMENT AGREEMENT
This Tax Abatement Agreement ("Agreement") is entered into by and between the City of
Pearland, Texas, a home rule city and Municipal Corporation of Brazoria, Fort Bend, and
Harris Counties,Texas,duly acting by and through its City Manager("City"),and Kemlon Products
and Development Company LTD.,duly acting by and through its Vice President,Russell Ring,and
Pearland Building II Limited Partnership, duly acting by and through its President, John Ring
("Kemlon").
WITNESSETH :
WHEREAS, on the 25th day of September, 2006 the City Council of the City of Pearland,
Texas, passed Ordinance No. 1299 establishing Reinvestment Zone #15 in the City of Pearland,
Texas, for general business tax abatement, as authorized by Chapter 312, Tax Code, V.A.T.S. as
amended ("Code"); and
WHEREAS, the City previously adopted Resolution No. R2006-121, which established
appropriate guidelines and criteria for governing reinvestment zones and tax abatement agreements
to be entered into by the City as contemplated by the Code; and
WHEREAS,the City's objective is to maintain and/or enhance the general business economic
and employment base of the Pearland area for the long term interest and benefit of the City, in
accordance with Resolution No. R2006-121 and the Code; and
WHEREAS,the contemplated use of the Premises,as hereinafter defined,the contemplated
improvements to the Premises in the amount as set forth in this Agreement and the other terms
hereof are consistent with encouraging development of said Reinvestment Zone in accordance with
the purposes for its creation and are in compliance with Resolution No.2006-121 and the guidelines
and criteria adopted by the City and all applicable law; and
WHEREAS, the Improvements as defined below constitute a major investment within the
Reinvestment Zone that will substantially increase the appraised value of property within the zone
and will contribute to the retention or expansion of primary and secondary employment within the
City; and
WHEREAS,there will be no substantial adverse affect on the provision of city services or on
its tax base and the planned use of the Premises will not constitute a hazard to public safety,health,
or welfare; now,
1
THEREFORE :
For and in consideration of the mutual agreements and obligations set forth below, the
sufficiency of which is hereby acknowledged by the parties hereto,Kemlon and City mutually agree
as follows:
1. The property to be the subject of this Agreement shall be that property described by
metes and bounds and map attached hereto as Exhibit"A" ("Premises").
2. Construction of Kemlon's improvements on the Premises,described in Exhibit"B"
("Improvements") will cost approximately four million dollars ($4,000,000.00) and is to be
substantially complete on or about June 6, 2007; provided,that Kemlon shall have such additional
time to complete the Improvements as may be required in the event of"force majeure"if Kemlon is
diligently and faithfully pursuing completion of the Improvements. For this purpose, "force
majeure" shall mean any contingency or cause beyond the reasonable control of Kemlon including,
without limitation, acts of God or the public enemy, war, riot, civil commotion, insurrection,
governmental or de facto governmental action(unless caused by acts or omissions of Kemlon),fires,
explosions or floods, and strikes. The date of completion of the Improvements shall be defined as
the date a Certificate of Occupancy is issued by the City of Pearland.
3. Kemlon agrees and covenants that it will diligently and faithfully, in a good and
workmanlike manner,pursue the completion of the Improvements as a good and valuable considera-
tion of this Agreement. Kemlon further covenants and agrees that all construction of the
Improvements will be in accordance with all applicable state and local laws and regulations or valid
waiver thereof In further consideration, Kemlon shall thereafter, from the date a Certificate of
Occupancy is issued until the expiration of this Agreement, continuously operate and maintain the
Premises as Kemlon,limiting the use of said Premises to that use which is consistent with the terms
of this Agreement and the general purpose of encouraging development or redevelopment of the
Reinvestment Zone during the period that the property tax exemptions evidenced herein are in effect.
4. Kemlon agrees and covenants that the Improvements shall provide a minimum of
twenty(20)jobs during the period of the abatement.Accordingly,Kemlon shall provide to the City
annual manpower reports (Exhibit"D") within sixty(60) days following the end of each calendar
year.
5. Subject to the terms and conditions of this Agreement, and subject to the rights and
holders of any outstanding bonds of the City, a portion of ad valorem property taxes assessed to the
Property and otherwise owed to the City shall be abated. City hereby acknowledges that it is not
aware of any terms or conditions of any outstanding bonds,which would invalidate this Agreement.
Said abatement shall be an amount equal to fifty percent (50%) of the taxes assessed upon the
increased value of the Improvements and Fixed Equipment,annually for a period of seven(7)years
beginning January 1, 2007, and ending December 31, 2013, in accordance with the terms of this
2
Agreement and all applicable state and local regulations. The taxable value shall be determined on a
uniform and equal basis of assessment by the methods used by the Brazoria County Tax Appraisal
District, which information necessary for abatement shall be provided by Kemlon to the chief
appraiser of said district. Estimated values,estimated abated values,and estimated base year values
for the Improvements are listed in Exhibit "B".
6. Kemlon further agrees that the City, its agents and employees shall have the right to
enter upon the Premises at any reasonable time and to inspect the Improvements in order to
determine whether the construction of the Improvements is in accordance with this Agreement and
all applicable federal, state, and local laws, ordinances, and regulations or valid waiver thereof.
After completion of the Improvements, the City shall have the continuing right to enter upon and
inspect the Premises at any reasonable time, after 24 hours' notice has been given, to determine
whether the Premises are thereafter maintained and operated in accordance with this Agreement and
all applicable federal, state, and local law, ordinances, and regulations. The City shall conduct at
least one inspection annually to ensure compliance with the guidelines contained in Resolution No.
R2006-121. Notwithstanding any other provision of this Agreement, if the City determines that a
violation of a federal, state, or local law, ordinance or regulation exists on the Premises, the City
may, in addition to any other authorized enforcement action, provide to Kemlon written notice of
such violation. For the purposes of this Agreement,Kemlon shall have ten(10) days from the date
of the notice to cure or remedy such violation. If Kemlon fails or refuses to cure or remedy the
violation within the ten (10) day period, Kemlon is subject to the forfeiture, at the discretion of the
City,of any right to any tax abatement for a portion of the period or the entire period covered by this
Agreement.
7. Kemlon agrees and covenants that the information provided in the attached
Application for Tax Abatement(Exhibit"C")is true and correct and that any materially false or mis-
leading information that is provided to the applicable taxing jurisdictions may be grounds for
termination of the agreement with possible liability for recovery of abated taxes.
8. In the event that(1)the Improvements for which an abatement has been granted are
not completed in accordance with this Agreement;or(2)Kemlon allows its ad valorem taxes owed
to the applicable taxing jurisdictions to become delinquent and fails to timely and properly follow the
legal procedures for protest and/or contest of any such ad valorem taxes;or(3)Kemlon breaches any
of the terms or conditions of this Agreement,then this Agreement shall be in default. In the event
that Kemlon defaults in its performance of(1), (2), or (3) above, then the City shall give Kemlon
written notice of such default,which notice shall be delivered by personal delivery or certified mail
to: Kemlon Products and Development Company, 1424 North Main, Pearland, Texas 77581.
If Kemlon has not cured such default within sixty(60) days of said written notice,this Agreement
may be modified or terminated by the City. Notwithstanding the provisions set forth herein, this
Agreement may be terminated at any time after the execution hereof by agreement of both parties.
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9. In the event that the facility is completed and begins producing product or service,but
subsequently discontinues producing product or service for any reason except fire,explosion or other
casualty or accident or natural disaster for a period of one year during the abatement period,then this
Agreement shall be in default and shall terminate. The abatement of taxes for the calendar year
during which the facility no longer produces shall also terminate.
10. As liquidated damages in the event of default and in accordance with
Section 312.205,Tax Code,V.A.T.S.,as amended,all taxes which otherwise would have been paid
to the City without the benefit of abatement (but without the addition of penalty; interest will be
charged at the statutory rate for delinquent taxes as determined by Section 33.01 of the Tax Code)
will become a debt to the City and shall be due,owing and paid to the City within sixty(60)days of
the expiration of the cure period or the termination date, whichever is applicable. The City shall
have all remedies for the recapture and collection of the lost tax revenue as provided generally in the
Tax Code for the collection of delinquent property taxes and in accordance with Resolution No.
R2006-121.
11. The City represents and warrants that the Premises does not include any property that
is owned by a member of its council or boards,agencies,commissions,or other governmental bodies
approving, or having responsibility for the approval of, this Agreement.
12. The terms and conditions of this Agreement are binding upon the successors and
assigns of all parties hereto. This Agreement maybe transferred or assigned by Kemlon only upon
written permission by the City in accordance with Resolution R2006-121,which permission shall not
be unreasonably withheld. No assignment shall be approved if the assignor or assignee are indebted
to the City for ad valorem taxes or other obligations.
13. It is understood and agreed between the parties that Kemlon, in performing its
obligations hereunder,is acting independently,and the City assumes no responsibilities or liabilities
in connection therewith to third parties.
14. KEMLON ITS OFFICERS, AGENTS, SUCCESSORS AND ASSIGNS
HEREBY RELEASE,ACQUIT,AGREE TO INDEMNIFY,AND HOLDS HARMLESS THE
CITY, ITS OFFICERS,AGENTS,EMPLOYEES, SUCCESSORS,AND ASSIGNS,FROM
ANY AND ALL KINDS OF CLAIMS, DEMANDS, LOSSES, DAMAGES, INJURIES,
RIGHTS,CAUSES OF ACTION,OR JUDGMENTS OF WHATSOEVER CHARACTER OR
NATURE, INCLUDING ATTORNEYS' FEES, WHICH MAY ARISE AS A RESULT OF
THIS AGREEMENT. THE PROVISIONS OF THIS SECTION REFLECT THE
EXPRESSED INTENTIONS OF KEMLON AND THE CITY AND SHALL SURVIVE THE
TERMINATION, EXPIRATION, OR CANCELLATION OF THIS AGREEMENT.
15. It is understood and agreed by the City and Kemlon that if the Premises has been
designated and taxed as agricultural land pursuant to Chapter 23,Subchapter C,Tax Code,V.A.T.S.,
that this Agreement shall not be effective and no abatement granted until Kemlon has removed the
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agricultural use designation and all taxes due pursuant to Section 23.55, Tax Code, V.A.T.S., as
amended, (roll back taxes) have been paid.
16. Tliij Agreement authorized by Resolution of the City Council at its council
meeting on the Sfday odefle4, 2006, authorizing the City Manager to execute the Agreement on
behalf of the City.
17. This Agreement is entered into by Kemlon pursuant to authority granted by its vtcs
President, "a) , on the 276'day of r , 2006.
18. This shall constitute a valid and binding Agreement between the City and Kemlon
when executed in accordance herewith.
19. This Agreement is performable in Brazoria County, Texas.
20. Kemlon agrees and covenants to certify annually to the City,while this Agreement is
in effect, that Kemlon is in compliance with each applicable term of this Agreement.
-
Witness our hands this 27 day of / l ,ZOD 6.
ATTEST: CITY OF PEARLAND
By: By:
ou orfi , C Bill Eisen
City ecretary City Manager
APPROVED AS TO FORM:
By: ZLi . C
Darrin M. Coker
City Attorney
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ATTEST: Kemlon Products and Development Company
By: '.'t '4.12--&---`g"` By: ( -
Printed Name: Gc Printed Name: k U S S E LL K. ,l N[,
Title: t{-vr c.S.I Title: Pc zLi-ioD ?v i L 1j lL(, Co'e PD/l/17/D
lPOJT KEivu i ?(-z.,,) b,u.c1
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Pearland Buil.ing II Limited Partnership
By:
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Title: f?cu �aw.o4. �L �e� wX c
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