R98-59 10-26-98RESOLUTION NO. R98-59
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, CONFIRMING PASSAGE AND APPROVAL OF RESOLUTION
NO. R96-12, GUIDEI. INES 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. R96-12 ("Guidelines and Criteria for Granting
Tax Abatement") is hereby accepted in compliance with state law and shall read as
follows:
"RESOLUTION NO. R96~12
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 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 communities within Brazoria County must compete with other
localities across the nation currently offering tax inducements to attract new plant and
modernization projects; and
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RESOLUTION NO. R98-59
WHEREAS, any tax incentives offered in Brazoria County 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 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; and
WHEREAS, to assure a common, coordinated effort to promote our
communities' economic development, any such Guidelines and Criteria should be
adopted only through the cooperation of affected school districts, cities and
Brazoria County; and
WHEREAS, Brazoria County Commissioners Court has approved the circulation
of the attached Guidelines and Criteria to affected taxing jurisdictions for consideration
as a common policy for all 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.
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RESOLUTION NO. R98-59
DEFINITIONS Section I
(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 Brazoria County and any municipality or school
district, the majority of which is located in Brazoria County, that levies ad
valorem taxes upon and provides services to property located within the
proposed or existing reinvestment zone designated by the City of Pearland.
(c)
"Agreement" means 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 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.
(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 compromise an integral whole.
RESOLUTION NO. R98-59
(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.
"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 equipment. It shall not be for the purpose of reoonditioning,
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 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.
(o)
"Research Facility" means building and structures, including machinery and
equipment, used or to be used primarily for research of experimentation to
improve or develop new tangible goods or materials or to improve or develop
the production processes thereto.
RESOLUTION NO. R98-59
(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
Pearland.
ABATEMENT AUTHORIZED Section 2
(8)
(b)
(C)
(d)
(e)
(f)
Authorized Facility. A facility may be eligible for abatement if it is a.'
Manufacturing Facility, Research Facility, Distribution Center or Regional Service
Facility, Regional Entertainment Facility or Other Basic Industry.
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 of
lessee, subject to such limitations as the City Council may require.
New and Existing Facilities. Abatement may be granted for new facilities and
improvements to existing facilities for purposes of modernization or expansion.
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.
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.
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.
RESOLUTION NO. R98-59
(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
shall 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 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 9500,000 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 Pearland to another; 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;
RESOLUTION NO. R98-59
(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).
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 City of Pearland.
(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; 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 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
RESOLUTION NO. R98-59
jurisdiction 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 if the creation of the zone and the abatement of taxes and the
benefit to the eligible jurisdiction and the property to be included in the zone.
(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. Such request shall include a complete description
of the circumstances explaining why the applicant should be granted a variance.
Approval of a request for variance requires a three-fourths (3/4) vote of the City
Council.
PUBLIC HEARING Section 4
(8)
Should any affected. jurisdiction be able to show cause in the public hearing
why the granting of abatement will have a substantial adverse effect on its
bonds, tax revenue, service capacity or the provision of service, 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:
RESOLUTION NO. R98-59
(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 poten{ial use of the property would constitute a hazard to
public safety, health or morals; or
(4) violation of other codes or laws.
After the public hearing the City must:
(1)
find that the improvements sought are feasible and would be of benefit
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 effected jurisdictions, the City Council
shall, at a regularly scheduled meeting, adopt the tax abatement agreement by
a majority vote and execute an agreement with the owner of the facility and
lessee as required which shall:
(1)
include a list of the kind, number, and location of improvements to the
property;
RESOLUTION NO. R98-59
(2)
authorize inspection of the property to ensure compliance with the
agreement;
(3) limit the use of the property consistent with the taxing unit's
development goals; and
(4)
provide for recapturing property tax revenues that are lost if the owner
fails to make the improvements.
or applicant shall be notified in writing within 60 days that his application has been
disapproved.
(b)
§312.205(b) of the Tax Code contains optional provisions that City
Council may also include in the tax abatement agreement.
Such agreement shall be executed within 60 days after the applicant has forwarded
all necessary information and documentation to the City Council.
(C)
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 must 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 agreement shall
terminate and so shall the abatement of 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 Pearland within sixty (60) days from
the date of termination,
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RESOLUTION NO. R98-59
(b)
Should the City Council determine that the company or individual is in default
according to the terms and conditions of its agreement, the City Council shall
notify the company or individual in writing at the address stated in the
agreement, and if such is not cured within sixty (60) days from the date of such
notice ("cure period"), then the agreement may be terminated.
(C)
In the event that the company or individual (1) allows its ad valorem taxes
owed Brazoria County or the City of Pearland to become delinquent and fails to
timely and properly 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
paid within sixty (60) days of the 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.
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RESOLUTION NO. R98-59
(C)
Upon completion of construction the City of Pearland shall annually evaluate
each facility and report possible violations to the contract and agreement to the
City Council and its attorney.
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 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
Brazoria County or the City of Pearland for outstanding taxes or other obligations.
Approval shall not be unreasonably withheld.
SUNSET PROVISION Section 9
(8)
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 contracts.
(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.
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RESOLUTION NO. R98-59
TAX ABATEMENT GUIDELINES
BRAZORIA COUNTY
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
UP TO 100% EIGHT YEARS THEREAFTER OR Y2
USEFUL LIFE OF PROPERTY
MAXIMUM TERM - TEN YEARS
QUALIFYING
FACILITIES
MANUFACTURING & PROCESSING
SERVICE & DISTRIBUTION
RESEARCH & DEVELOPMENT
ENTERTAINMENT (LARGE COMPLEXES)
OTHER BASIC INDUSTRY N.E.C.
QUALIFYING
INVESTMENTS
- NEW PLANTS
- EXPANSIONS
- MODERNIZATIONS
ALLOWABLE
ITEMS
- BUILDINGS AND STRUCTURES
- 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 JOBS
- NO SERIOUS ADVERSE EFFECT ON JURISDICTIONS
- CANNOT REASONABLY USE EXISTING PROPERTY
REVIEW AFTER TWO YEAR TEST PERIOD. ANY CONTRACTS MADE DURING THE
PERIOD WILL BE ENFORCEABLE."
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RESOLUTION NO. R98-59
Section 2. Savings. All rights and remedies which have accrued in favor of the
City under this Chapter and amendments thereto shall be and are preserved for the
benefit of the City.
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.
PASSED, APPROVED, AND ADOPTED this the ~ ~ day of
~:) C-r~ ~A,r , a.d., 1998.
ATTEST:
C~ET -"~'~E T A R Y '
APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
TOM REID
MAYOR