R89-19 RESOLUTION NO. R89-19
A RESOLUTION ADOPTING GUIDELINES FOR GRANTING TAX ABATEMENT
IN A REINVESTMENT ZONE CREATED IN THE CITY OF PEARLAND;
PROVIDING FOR A SUNSET PROVISION, A REPEALER CLAUSE, AND A
t
Whereas, the creation an re ion o 3o oppor uni ies
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 City of Pearland 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 of Pearland would
tax revenue unless strictly limited in application to
existing industries that bring new wealth to the
reduce needed
those new and
community; and
Whereas,
competitive position
Pearland; and
Whereas,
primary jobs
any tax incentives should not adversely affect the
of existing companies operating in the City of
the abatement of property taxes, when offered to attract
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
communities' economic development,
should be adopted only through the
districts,
coordinated effort to promote our
any such Guidelines and Criteria
cooperation of affected school
cities and the City of Pearland; and
NOW, THEREFORE, BE IT RESOLVED THAT THE CITY OF PEARLAND DOES
HEREBY ADOPT THESE GUIDELINES AND CRITERIA FOR GRANTING TAX ABATEMENT
IN REINVESTMENT ZONES IN THE CITY OF PEARLAND:
(a)
(b)
(C)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(1)
(m)
(n)
(o)
DEFINITIONS - Section 1.
"Abatement" means the full or partial exemption from ad valorem
taxes of certain real property in a reinvestment zone designated
for economic development purposes.
"Eligible Jurisdiction" means the City of Pearland and its Extra
Territorial Jurisdiction in Brazoria County that levies ad
valorem taxes upon and provides services to property located
within the proposed or existing reinvestment zone.
"Agreement" means a contractual agreement between a property
owner and/or lessee and an eligible jurisdiction 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.
"Economic Life" means the number of years a property improvement
is expected to be in service in a facility.
"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, fixed
machinery or equipment for purposes of increasing production
capacity.
"Facility" means property improvements completed or in the pro-
cess of construction which together comprise an integral whole.
"Manufacturing Facility" means buildings and structures,
including fixed 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 buildings, structures, fixed
machinery or equipment. 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 and structures includ~n~
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 the Houston Consolidated
Metropolitan Statistical Area (CMSA) and result in the creation
of new permanent jobs and bring new wealth in.
"Productive Life" means the number of years a
improvement is expected to be in service in a facility.
property
"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 100
miles from any part of the City of Pearland.
"Regional Entertainment Facility" means buildings and structures,
including fixed machinery and equipment, used or to be used to
provide entertainment through the admission of the general public
(p)
(q)
where the majority of users reside at least 100 miles from any
part of the City of Pearland.
"Regional Service Facility" means buildings and structures,
including fixed machinery and equipment, used or to be used to
service goods where a majority of the goods being serviced
originate at least 100 miles from any part of the City of
Pearland.
"Research Facility" means building and structures, including
fixed 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.
(a)
(b)
(C)
(d)
(e)
(f)
(g)
ABATEMENT AUTHORIZED - Section 2.
Authorized Facility. A facility may be eligible for abatement if
it is a: Manufacturing Facility, Research Facility, Regional
Distribution Center Facility, 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 listed in an abatement agreement between the
City of Pearland and the property owner and lessee (if required),
subject to such limitations as 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
buildings, 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; deferred maintenance investments; property to be
rented or leased except as provided in Section 2(f); 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 an economic life of less than 15
years; property owned or used by the State of Texas or its
political subdivisions or by any organization owned, operated or
directed by a 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.
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. The percent of the
abatement and other provisions, such as number of years of
abatement, shall be negotiated by the applicant and City, the
final percent of abatement and other provisions being subject to
approval of the City Council. The number of years of abatement
shall not exceed five years plus two years for construction. 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 seven 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)
(i)
Economic Qualification. In order to be eligible for designation
as a reinvestment zone and receive tax abatement the planned
improvement:
(i)
must be reasonably expected to increase the value of the
property in the amount of $1 million after the period of
abatement has been expired;
(2)
must be expected to prevent the loss of employment, retain
or create employment for at least 30 people on a permanent
basis in the City of Pearland;
(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; and,
(4)
must be necessary because capacity cannot be provided effi-
ciently utilizing existing improved property when reasonable
allowance is made for necessary improvements.
Standards for Tax Abatement. The following factors, among
others, shall be considered in determining whether to grant Tax
Abatement and, if so, the percentage of value to be abated and
the duration of the Tax Abatement:
(1) value of land and existing improvements, if any;
(2) type and value of proposed improvements;
(3) Productive Life of proposed improvements;
(4) number of existing jobs to be retained by proposed improve-
ments;
(5) number and type of new jobs to be created by proposed
improvements;
(6) amount of local payroll to be created;
(7)
whether the new jobs to be created will be filled by persons
residing or projected to reside within affected taxing
jurisdictions; and
(8) amount of local sales taxes to be generated directly;
(9)
amount of property tax base valuation will be increased
during term of Abatement and after Abatement, which shall
include a definitive commitment that such valuation shall
not, in any case, be less than $1,000,000;
(io)
the costs to be
facilities or
improvements.
incurred by the City of Pearland to provide
services directly resulting from the new
(ii)
the amount of ad valorem taxes to be paid the City of
Pearland during the Abatement period considering (a) the
existing values, (b) the percentage of new value abated, (c)
the Abatement period, and (d) the value after expiration of
the Abatement period;
(12) the population growth of the City of Pearland that occurs
directly as a result of new improvements;
(13) the types and values of public improvements, if any,
made by applicant seeking Abatement;
to be
(14) whether the proposed improvements complete with existing
businesses to the detriment of the local economy;
(15) the impact on the business opportunities of existing
businesses;
(j)
(k)
(17)
(i8)
the attraction of other new businesses to the area;
the overall compatibility with the zoning ordinances and
comprehensive plan for the area;
whether the project is environmentally compatible with no
negative impact on quality of life perceptions.
Each Eligible Facility shall be reviewed on its merits utilizing
the factors provided above. After such review, Abatement may be
denied entirely or may be granted to the extent deemed
appropriate after full evaluation.
Denial of Abatement. Neither reinvestment a 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;
(4) violation of other codes or laws; or
(5) any other reason deemed appropriate by the City Council of
the City of Pearland.
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 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).
(a)
(b)
(c)
(d)
APPLICATION - Section 3.
Any present or potential owner of taxable property in the City of
Pearland or its Extra Territorial Jurisdiction may request the
creation of a reinvestment zone or tax abatement by filing a
written request with the City Manager.
The application shall consist of a completed application form
accompanied by: a general description of the new improvements to
be undertaken; a descriptive list of the improvements for which
an abatement is requested; a list of the kind, number and
location of all proposed improvements of the property; a map and
property description; a time schedule for undertaking and
completing the proposed 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 proceeding the application. The
application form may require such financial and other information
as the City deems appropriate for evaluating the financial
capacity and other factors of the applicant.
Upon receipt of a completed application, the City Manager shall
notify in writing and provide a copy of the application to the
City Council for their consideration.
After receipt of an application for creation of a reinvestment
zone and application for abatement, the City 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
(e)
(f)
effect of 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. The feasibility study shall be commenced
upon receipt by the City of payment of a $500 processing fee for
preparation of the feasibility study.
The City shall not establish a reinvestment zone or enter into an
abatement agreement if it finds that the request for the abate-
ment was filed after the commencement of construction, altera-
tion, or installation of improvements related to a proposed
modernization, expansion or new facility. An applicant is
ineligible for abatement if a decision to commence a
modernization, expansion or new facility in the City of Pearland
or its Extra Territorial Jurisdiction has been formally announced
on or before the date of adoption of these guidelines and
criteria.
Variance. Requests for variance from the provisions of
Subsections (a), (e) and (g) of Section 2 may be made in written
form to the City Manager, provided, however, the total duration
of an abatement shall in no instance exceed seven 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. The Pearland City Council, not more
than 45 days after receipt of the application and feasibility
study, shall approve or disapprove the application for Abatement
and notify the applicant in writing.
(a)
(b)
(c)
(d)
PUBLIC HEARING AND APPROVAL - Section 4.
The City Council may not adopt an Ordinance designating a
reinvestment zone until it has held a public hearing at which
interested persons are entitled to speak and present evidence for
or against the designation. Notice of the hearing shall be
advertised in the official newspaper at least ten days prior to
the public hearing.
Prior to entering into a tax abatement agreement the City Council
may, at its option, hold a public hearing at which interested
persons shall be entitled to speak and present written materials
for or against the approval of the tax abatement agreement.
In order to enter into a tax abatement agreement, the City
Council must find that the terms of the proposed agreement meet
these Guidelines and Criteria and that:
(1) there will be no substantial adverse affect on the provision
of the jurisdiction's service or tax base; and
(2) the planned use of the property will not constitute a hazard
to public safety, health or morals.
Any applicant requesting a variance under Section 3(f) shall be
approved by a vote of at least four-fifths (4/5) of the City
Council. No application which deviates from the requirements of
these Guidelines and Criteria shall be approved unless
accompanied by a request for variance as provided under Section
3(f).
(a)
AGREEMENT - Section 5.
After approval, the City shall formally pass an Ordinance and
execute an agreement with the owner of the facility and lessee as
required which shall include:
(1) estimated value to be abated and the base year value;
(2) percent of value to be abated each year as provided in
Section 2(g);
6
(3) the commencement date and the termination date of abatement;
(4)
the
time
list
proposed use of the facility; nature of construction,
schedule, map, property description and improvement
as provided in Application, Section 3(b);
(5)
contractual obligations in the event of default, violation
of terms or conditions, delinquent taxes, recapture,
administration and assignment as provided in Sections 2(a),
2(f), 2(g), 6, 7 and 8, or other provisions that may be
required for uniformity or by state law, and;
(6) amount of investment and average number of jobs involved.
(7) such other provisions as the City shall deem appropriate.
Such agreement shall normally be executed within 60 days after
the applicant has forwarded all necessary information and
documentation to the City.
(a)
(b)
(o)
RECAPTURE - Section 6.
In the event that the facility is completed and begins producing
product or service, but subsequently discontinues producing
product or service for any reason excepting 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 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 City within sixty (60) days from the date of termination.
Should the City determine that the company or individual is in
default according to the terms and conditions of it's agreement,
the City 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.
In the event that the company or individual (1) allows its ad
valorem taxes owed the City to become 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 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.
(a)
(b)
ADMINISTRATION - Section 7.
The Chief Appraiser of the County shall annually determine an
assessment of the real and personal property comprising the
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 City
of Pearland which levies taxes of the amount of the assessment.
The agreement shall stipulate that employees and/or designated
representatives of the City 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.
7
(C)
Upon completion of construction, the City shall annually evaluate
each facility receiving abatement to ensure compliance with the
agreement and report possible violations to the contract and
agreement to the City Council and the City Attorney.
(a)
(b)
ASSIGNMENT - Section 8.
Tax abatement agreements may be assigned to a new owner or lessee
of the facility with the written consent of the City Council,
which consent shall not be unreasonably withheld. Any assignment
shall provide that the assignee shall irrevocably and
unconditionally assume all the duties and obligations of the
assignor upon the same terms and conditions as set out in the
agreement. Any assignment of a tax abatement agreement shall be
to an entity that contemplates the same improvements or repairs
to the property, except to the extent such improvements or
repairs have been completed. No assignment shall be approved if
the assignor or the assignee are indebted to the City for ad
valorem taxes or other obligations.
Any tax certificates issued on property subject to abatement
shall state, that the property is subject to a rollback in the
event of default.
(a)
(b)
SUNSET PROVISION - Section 9.
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 to
determine whether the goals have been achieved. Based on that
review, the Guidelines and Criteria will be modified, renewed or
eliminated.
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.
REPEALER CLAUSE - Section 10.
All resolutions or portions of resolutions heretofore
conflict with the terms hereof are specifically repealed.
passed in
SEVERANCE CLAUSE - Section 11.
If any provision, section, subsection, sentence, clause, phrase
of this Resolution, or the application of same to any person or set of
circumstances is for any reason held to be unconstitutional, void or
invalid, the validity of the remaining portions of this Resolution or
their application to other persons or sets of circumstances shall not
be affected thereby, it being the intent of the City Council in
adopting this Resolution that no portion thereof or provision, or
regulation contained herein, shall become inoperative or fail by
reason of any unconstitutionality of any other portion hereof and all
provisions of this Resolution are declared to be severable for that
purpose.
PASSED, APPROVED and ADOPTED on this ____
A. D. , 1989.
day of
ATTEST:
Mayor
City Secretary
APPROVED AS TO FORM:
City Attorney
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) . 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 Dr. , Pearland, Texas 77581.
APPLICANT INFORMATION Date
MUST SUBMIT ANNUAL REPORT
Company Name (See Instructions . )
Address Number of Employees
Annual Sales (period)
Corporation ( ) Partnership ( ) Proprietorship ( )
PROJECT INFORMATION
Type of Facility: Manufacturing ( ) Reg. Distribution Center ( )
(See Instructions) Regional Service ( ) Reg. Entertainment Center ( )
Other Basic Industry ( )
Location Address and School District__
Legal Description College District___
City or Town
Attach map showing proposed site
Describe Product or Service to be provided.
Project Description:
Attach statement fully explaining project, describe existing site and
improvements, describe all proposed improvements and provide list of
improvement and equipment for which abatement is requested.
NEW PLANT ( ) EXPANSION ( ) MODERNIZATION ( )
ECONOMIC INFORMATION
Construction Estimates IF MODERNIZATION:
Start Month/Year___/ Estimated Economic Life of
Construction Man Years Existing Plant years
Completion Date / Added Economic Life from
Peak Construction Jobs Modernization _ —years
Permanent Employment Estimates (FTE' s1
Current Plant Employment
Number of plant jobs retained ( ) or created ( )
at start/opening in year
5 years into operation in year __ _
Personal Improve-
Estimated Appraised Value on Site Property ments Land
Value January 1 preceding abatement
agreement
Est. Value of abated properties after
abatement expires _ Y__
Value upon completion of project
personal property and project
improvements not subject to
abatement _______ _ _
VARIANCE
Is the applicant seeking a variance under Section 3(f)
of the Guidelines? YES ( ) NO ( )
If "YES" attach required supplementary information.
OTHER ABATEMENTS. Has company made application for
abatement of this project by another taxing juris-
diction or nearby counties? YES ( ) NO ( )
If "YES" provide dates of application, hearing dates
if held or scheduled, name of jurisdictions and
contacts, and letters of intent.
COMPANY REPRESENTATIVE TO BE CONTACTED:
Name _
Signature of Company Official
Title
Address Name & Title of Company Offi ial
Telephone
INSTRUCTIONS
Applicants and projects must meet the requirements established by the
City of Pearland Guidelines and Criteria (attached) in order to
receive positive consideration. Section 2 of the Guidelines, for
example, sets out regulations governing eligible facilities, eligible
and ineligible improvements, terms and economic qualifications. Con-
formance with all sections, however, is required for eligibility.
APPLICANT INFORMATION
The taxing unit may consider applicant financial capacity in
determining whether to enter into an abatement agreement. Establi hed
companies for which public information is available, or the wh lly
owned businesses of such companies, should include with the
application a copy of their latest annual report to stockhold rs.
Other applicants and new companies should attach statement sho ing
when the company was established, business references (name, con act
and telephone number of principal bank, accountant and attorney) and
t'
may be required to submit an audited financial statement and business
plan.
PROJECT INFORMATION
Only facilities listed in Section 2(a) of the Guidelines may receive
abatement without applying for a variance. Check guideline
definitions in Section 1 to see if project qualifies. If project is a
Regional Entertainment Facility, Regional Service Facility, Regi nal
Distribution Center Facility or Other Basic Industry, the applica ion
should include market studies, business plans, agreements or o her
materials demonstrating that the facility is intended to sery a
market the majority of which is outside of the City of Pear and
region.
ECONOMIC INFORMATION
Permanent Employment Estimates - In estimating the perma ent
employment, include the total number of jobs retained or created at
this site by your firm as well as known permanent jobs of service
contractors required for operation.
Estimated Appraised Value on Site - The value January 1 prece ing
abatement should be the value established by the Brazoria Co my
Appraisal District. If the applicant must estimate value because the
taxable value is not known or is combined with other properties u der
a single tax account, please so state. To qualify, the abated
properties must be expected to result in an addition to the tax blase
of at least two million dollars after the period of abatement
expires . Projections of value should be a "best estimate" based on
taxability in Texas . The projection of project values not ab.ted
should include personal property and ineligible project-rel-ted
improvements such as office space in excess of that used for plant
administration, housing, etc.
DO NOT WRITE IN THIS AREA -- FOR PROCESSING PURPOSES ONLY
1 . EDC contact
2. Precinct_
3. Jurisdictions notified __/__/__
4. Initial review completed _/__/_
5. Review circulated _/`/__
6. ISD concurrence?_
7. College concurrence?______
8. City concurrence?_
9. Letter of Intent `/__/
10 . Hearing noticed on agenda /__/
11 . Public hearing __/_/_
12. ISD action __/__/_
13. College action __/_/
14. City action _/__/
15. Agreement signed __/__/