R96-46 09-09-96RESOLUTION NO. R96-46
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, AUTHORIZING THE CITY MANAGER TO ENTER INTO A TAX
ABATEMENT AGREEMENT WITH KEMLON PRODUCTS &
DEVELOPMENT CO./WHK FAMILY INTERESTS PARTNERSHIP LTD.
("KEMLON") FOR PURPOSES OF ABATING THE INCREASED VALUE OF
THE PROPERTY OWNED BY KEMLON ON STATE HIGHWAY 35 WITHIN
THE CITY LIMITS OF PEARLAND AT A RATE OF ONE HUNDRED
PERCENT (100%) FOR A CONSTRUCTION PERIOD OF ONE YEAR TO
BEGIN JANUARY 1, 1997, AND ENDING DECEMBER 31, 1997, ANDAT
A RATE OF FIFTY PERCENT (50%) ANNUALLY FOR A PERIOD OF
SEVEN (7) YEARS BEGINNING JANUARY 1, 1998, AND ENDING
DECEMBER 31, 2004; FINDING AND DETERMINING THAT TERMS OF
SAID AGREEMENT AND PROPERTY SUBJECT TO THE AGREEMENT
MEET THE REQUIREMENTS OF CHAPTER 312 OF THE TAX CODE,
V.A.T.S. AS AMENDED, ORDINANCE NO. 743, WHICH ESTABLISHED
A REINVESTMENT ZONE, AND THE GUIDELINES AND CRITERIA FOR
GOVERNING REINVESTMENT ZONES AND TAX ABATEMENT
AGREEMENTS SET FORTH IN RESOLUTION NO. R96-12.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That certain tax abatement agreement, by and between the City of
Pearland and Kemlon, a copy of which is attached hereto as Exhibit "A" and
incorporated herein for all purposes, is hereby authorized and approved.
Section 2. The City Council finds and determines that the tax abatement
agreement and the property subject to this agreement meet the requirements of
Chapter 312 of the Tax Code, V.A.T.S. as amended, Ordinance No. 743, which
established a reinvestment zone, and the Guidelines and Criteria for Governing
Reinvestment Zones and Tax Abatement Agreements set forth in
Resolution No. R96-12.
RESOLUTION NO. R96-46
Section 3. The City Manager is hereby authorized to execute, and the City
Secretary to attest, the said Tax Abatement Agreement and any counterparts thereof.
PASSED, APPROVED, AND ADOPTED this the ~ dayof ~
A.D., 1996.
TOM REID
MAYOR
ATTEST:
CITY SECRETARY
APPROVED AS TO FORM:
~MY MATES McCULLOUGH ~"~
CITY ATTORNEY
2
THE STATE OF TEXAS
COUNTIES OF BRAZORIA
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 and Harris
Counties, Texas, duly acting by and through its City Manager ("City"), and Kemlon Products
& Development Co., duly acting by and through its Vice President, Russell Ring, and
WHK Family Interests Partnership Ltd., duly acting by and through its ~P~ent,
John Ring ("KernIon").
WITNESSETH'
WHEREAS, on the 9th day of September, 1996, the City Council of the City of
Pearland, Texas, passed Ordinance No. 743 establishing a Reinvestment Zone in the City of
Pearland, Texas, for commercial/industrial tax abatement, as authorized by Chapter 312,
Tax Code, V.A.T.S. as amended ("Code"); and
WHEREAS, the City has adopted Resolution No. R96-12, 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 commercial/industrial
economic and employment base of the Pearland area for the long term interest and benefit of the
City, in accordance with Resolution No. R96-12 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. R96-12
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,
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 facility on the Premises, described in Exhibit "B"
("Improvements") will cost approximately Two Million Dollars ($2,000,000.00) and is to be
substantially complete on or about December 1, 1997; provided, that Kemlon shall have such
additional time to complete the Improvements as may be required in the event of "force
majeure" if KernIon 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 KernIon 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 KernIon), 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 con-
sideration 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 KernIon, 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 approximately
150-160 jobs during the period of the abatement, beginning with 150 employees in 1998.
Accordingly, Kemlon shall provide to the City annual manpower reports (Exhibit "E") 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
2
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 one hundred
percent (100%) of the taxes assessed upon the increased value of the Property and
Improvements, in accordance with the terms of this Agreement and all applicable state and local
regulations for a construction period of one year to begin January 1, 1997, and ending
December 31, 1997, and at a rate of fifty percent (50%) annually for a period of seven (7) years
beginning January 1, 1998, and ending December 31, 2004. 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 "C" ("Estimated Values").
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. In
accordance with Resolution No. R96-12, the City will conduct at least one inspection annually
to ensure compliance. 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 "D") is true and correct and that any materially false
or misleading 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: Russell Ring, Vice President, P.O. Box 14666,
Houston, Texas 77221. 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.
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 stated in paragraph 8 or the termination date
stated in paragraph 9, 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. R96-12.
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 may be transferred or assigned by Kemlon only
upon written permission by the City in accordance with Resolution R96-12, 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 RELEASES, ACQUITS, INDEMNIFIES, AND HOLDS
HARMLESS THE CITY, ITS OFFICERS, AGENTS, EMPLOYEES, SUCCESSORS, AND
ASSIGNS, FROM ANY AND ALL KINDS OF CLAIMS, DEMANDS, LOSSES,
DAMAGES, INJURIF~S, RIGHTS, CAUSES OF ACTION, OR JUDGMENTS OF WHAT-
SOEVER 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.
4
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 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. co~d '
16. This Agreement was authorized by Resolution of the City Council at its
meeting on the 9th day of September, 1996, authorizing the ~ to execute 't~~rement
on behalf of the City. C i-I,.5 ~a,,-ac3 a r
17. This Agreement is entered into by KernIon pursuant to authority granted by its
Vice President on the ~13*~day of ~_s f , 19 9/_,,, whereby the Vice President was
authorized to execute th-~ss Xgreement on §ehalf of KernIon.
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 }~)oA_ day of ~¢(~b}~o~f , 19 6]~, .
CITY OF PEARLAND
By: ~ .......
Paul Grohman
City Manager
ATTEST: .
//YoJanda C. Benitez
Ci%y Secretary
APPROVED//~ TO FORM:
./Amy lVl/OtCity Atttore2eyl~lcCullought
5
KEMLON PRODUCTS & DEVELOPMENT CO.
By:
ATTEST:
By:
Printe~.bL~.:
Title:
Russell Ring
Vice President
ATTEST:
BY:Printed Na /~ ~ ~
Title: ~>R L:% t I> ~ro'~-
WHK FAMILY INTERESTS PARTNERSHIP LTD.
~'~..resident
6
THE STATE OF TEXAS §
COUNTIES OF HARRIS AND BRAZORIA §
This instrument was acknowledged before me on August 30, 1996, by Russell Ring,
Vice President of Kemlon Products & Development Co., a Texas corporation, on behalf of said
corporation.
STATE OF TEXAS
THE STATE OF TEXAS §
COUNTIES OF HARRIS AND BRAZORIA §
This instrument was acknowledged before me on August 30, 1996, by John Ring,
President of WHK Family Interests Partnership Ltd., a family limited partnership, on behalf of
said partnership.
STATE OF TEXAS
THE STATE OF TEXAS §
COUNTIES OF HARRIS AND BRAZORIA §
This instrument was acknowledged before me on O-~)~c~004/ l~), 1996, by
Paul Grohman, City Manager of the City of Pearland, Texas, fiTexas home rule municipal
corporation, on behalf of said corporation.
STATE OF TEXAS
KEMLON.AGR
ExhtbXt
l~cla]. l)e-<crt priori
described as
2.9.90 acres of land
~2, and ~he }tT&B
Lees ~-A and 65 o~ the Zychl~.~k~ ~ubdivi~to~, and beins morc par~iculnr7
de~cribe<l as
BF~I~ING a~ a coac~e monument $e~ a~ the tntersec~ion o~ ~he South line of
l~c ~ of the
T~ENCE South ~9 d~, 59 ~Ln, ~ea~ a distance of 2098.73 ~eet to a concroco
Easterly ri. th~ o~ we? line of ~he ~.C.& $.F. Rail~o~dl
corner o! ~he herein desrtbed ~rac~ i~-~ ~htch ano~hcr iron red se~ a~ the
~orh~v~s~ corner
No~cheaa= corner
EXHIBIT "B"
IMPROVEMENTS
The proposed facility will probably consist of two primary structures, Building A and
Building B. The purpose of the facility is to manufacture hostile environment electrical
connectors. Building A will probably contain approximately 10,000 square feet and is expected
to be a two story brick office building. Building B will probably be a metallic building
containing approximately 35,000 square feet and be used for manufacturing. The facility will
include parking spaces to accommodate approximately 150-160 employees.
KEMLON.AGR
Estimated value of site as of January 1
immediately preceding abatement
agreement
Current estimated value
Estimated value of ineligible property
Estimated value of eligible improvements
Estimated value of abated properties after
abatemere expires
Value upon completion of project
personal property and project improve-
ments not subject to abatemere
EXHIBIT "C"
ESTIMATED VALUES
PERSONAL
PROPERTY
1MPRO VEMENTS
$0.00
$o.oo
N/A
$1.5 mil
$0.00
$o.oo
N/A
$2.0 nail
$2.0 rail
$150,000
$0.00
$320,000
$320,000
$320,000
N/A
N/A
$320,000
K~MLON. AGR
Exhibit "D"
APPLICATION FOR TAX ABATEMENT IN THE CITY OF PEARLAND
This application should be filed at least 90 days prior to the beginning of construction of
the installation of equipment. The filing of this document acknowledges familiarity and
conformance with Guidelines and Criteria for Granting Tax Abatement in a Reinvestment Zone
Created in the City of Pearland (attached). Please review Instructions attached before executing
this. application. This application will become part of the agreement and any knowingly false
representations will be grounds for the City to void the agreement. Original copy of this request
should be submitted to the City Manager, City of Pearland, 3519 Liberty Drive, Pearland,
Texas 77581. Please attach exhibits if additional space is needed.
APPLICANT INFORMATION
Date ~August t, 1996
Number of Employees _150 est.~
Annual Sales $10.000,000
Company Name KernIon Products & Development
Co. & WHK Family Interests I,td.
Address 6310 Sidney St. PO Box 14666
Houston, TX 772221
Corporation ( ) Partnership (X) Proprietorship ( )
PROJECT INFORMATION
Type of facility:
(See Instructions)
Manufacturing (X)
Regional Service ( )
Location address and description of area to be
designated as reinvestment zone
(attach map showing site and legal description):
Reg. Distribution Center ( )
Reg. Entertainment Center ( )
Other Basic Industry ( )
SEE ATTACHED LEGAL
DESCRIPTION
Description of eligible improvements (real property)
to be constructed: Manufacturing facility with manufacturing equipment.
Description of ineligible (taxable) property to be included in project: Inventory, Land
The proposed reinvestment zone is located in:
City Pearland
County l~razoria
School District Pearland I.S.D.
Other Taxing Jurisdictions Brazoria Co. Drainage District//4
Description of product or service to be provided (proposed use): Hostile environment electrical connectors
Project Description:
Attach statement explaining the general nature and extent of the project, describing existing site
and improvements; describe all proposed improvements and provide list of improvements and
equipment for which abatement is requested.
NEW PLANT (X) EXPANSION ( ) MODERNIZATION ( )
Attach a proposed time schedule for undertaking and completing the planned improvements.
ECONOMIC INFORMATION
A. Construction Estimates
Commencement Date:
Construction Man Years:
Completion Date:
Peak Construction Jobs
March 1. 1997
November 30, 1997
IF MODERNIZATION:
Estimated Economic Life of
Existing Plant: ~ Years
Added Economic Life from
Modernization: Years
B. Permanent Employment Estimates (FTE's)
Current Employment 150
Number of jobs retained ( ) created (150)
at start/opening 150
5 years into operation
in year 1998~
in year
Co
,19
,19
, 19
Local Transfer
Other Estimated Taxes Generated by Project
(1) Sales Taxes:
199_fi_: $__6381.26
1922_: $__7000.t90
199_8_: $__7800.00
1999 · $ 8800.00
19 -$
Total
Est. Salaries
(2) Other (Identify):
D. Estimated Aopraised Value on Site
Estimated value of site as of January 1
immediately preceding abatement
agreement
Current estimated value
Estimated value of ineligible property
Estimated value of eligible improvements
Estimated value of abated properties after
abatement expires
Value upon completion of project
personal property and project
improvements not subject to abatement
Personal Improve- Land
Property ments
0 __0__ $320,000
0 0 $320,000
N/A N/A $320,000
$1.5 mil $2.0 mil N/A
$1.5 mil $2.0 mil N/A
$150,000 0 $320,000
TAX ABATEMENT REQUESTED
_100__% of eligible property for year 1.
50__ % of eligible property for year 2 through year 8.
VARIANCE
Is the applicant seeking a variance under Section 3(0
of the Guidelines?
If "YES" attach required supplementary information.
OTHER ABATEMENTS: Has company made application
for abatement of this project by another taxing
jurisdiction or nearby counties?
If MYES" provide dates of application, hearing dates, - ..
if held or scheduled, name of jurisdictions and "
contacts, and letters of intent.
YES ( ) NO (X)
YES ( ) (X)
COMPANY REPRESENTATIVE TO BE CONTACTED
Name:
Title:
Address:
Telephone:
Russell Ring
Vice President
PO Box 14666
Houston, Texas 77221
713-747-5020
Authorized Company Official:
Printed Name: Russell Ring
Title: Vice President
PROJECT DESCRIPTION
The project will be the construction of a new manufacturing facility that will also include our sales
and engineering staff. We expect to have approximately 150-160 employees on site. We expect
the project will require the construction of a building of approximately 60,000 square feet at a cost
of approximately $2,000,000. It is anticipated that manufacturing equipment of approximately
$1,500,000 will be included in the project. Abatement will be sought on all items allowed by law.
T1M'E SCHEDULE
September - Dec 31, 1996
January 1 - Jan 30, 1997
February 1-February 28, 1997
March 1-October 30, 1997
November 1-November 30, 1997
December 1, 1997
Arch., dwg
Permits/Applications
Bid phase
Construction
Move-in, start up
Completion
EXHIBIT "E"
MANPOWER REPORT
& Development Co. ("Kemlon"), do certify that on
~ individuals employed full time at Kemlon.
of Kemlon Products
,19 there were
PrintedName:
Title:
Date:
THE STATE OF TEXAS
COUNTY OF
BEFORE ME, the undersigned Notary Public, on this day personally appeared
, of Kemlon Products & Development Co.,
being by me duly sworn on his/her oath deposed and said that he/she is duly qualified and
authorized in all respects to make this affidavit; and that every statement contained in the
Manpower Report is within his/her knowledge and true and correct.
SUBSCRIBED AND SWORN TO BEFORE ME on the
1996, to certify which witness my hand and official seal.
~day of
NOTARY PUBLIC, STATE OF TEXAS
Printed Name:
My Commission Expires:
KEMLON. AGR