R2011-012 -2011-01-24RESOLUTION NO. R2011 -12
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 CREATED IN THE CITY OF PEARLAND,
BRAZORIA COUNTY, FORT BEND COUNTY, AND HARRIS COUNTY,
TEXAS; 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. R2011 -12 "Guidelines and Criteria for Granting
Tax Abatement is hereby adopted in compliance with state law and shall read as
follows:
"GUIDELINES AND CRITERIA FOR GRANTING TAX ABATEMENT
IN A REINVESTMENT ZONE CREATED IN THE CITY OF PEARLAND,
BRAZORIA COUNTY, FORT BEND COUNTY, AND HARRIS COUNTY, TEXAS
WHEREAS, the creation and retention of job opportunities that bring economic
growth is one of the highest civic priorities for the City of Pearland (the "City and
WHEREAS, new jobs and capital 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 Eligible Projects; and
WHEREAS, any tax incentives offered in the City may 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 the City; and
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RESOLUTION NO. R2011 -12
WHEREAS, the abatement of ad valorem property taxes levied by the City, when
offered to attract primary jobs in industries which bring job creation and capital
investment from outside a community instead of merely circulating 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
Now, therefore, be it resolved that the City Council of the City does hereby
propose for consideration and adoption these Guidelines and Criteria for granting tax
abatement in reinvestment zones in the City, 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 for economic
development purposes.
(b) "Abatement Agreement" and "Agreement" mean a contractual agreement
between a property owner and /or lessee and the City for the purposes of
permitting abatement of a portion of ad valorem property taxes assessed to the
Premises and Improvements as defined herein and otherwise owed to the City.
(c) "Base Value of Premises" means the assessed value of property located at the
Premises at the time of execution of the Agreement, which shall consist of the
assessed value of the Premises as of January 1 immediately preceding the
execution of the agreement plus the agreed upon value of Improvements made
thereafter, but before the execution of the Agreement.
(d) "Deferred Maintenance" means labor and materials necessary for continued
operations which are scheduled or periodic in nature.
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RESOLUTION NO. R2011 -12
(e) "Distribution Center Premises" 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 Premises operator where a
majority of the goods or services are distributed to points at least 50 miles from
its location in Pearland.
(f) "Company" means the party receiving the benefit of the abatement of ad
valorem property taxes levied by the City pursuant to an Abatement Agreement
for which this Resolution shall govern and may include a corporation, limited
liability company, partnership, limited partnership, sole proprietorship, joint
venture, natural person(s) or any other form of business association that may be
formed or is recognized by the State of Texas.
(g) "Employment Positions" means new full -time employment positions of at least
2,000 hours per employee in the City with the Company at the Premises, with a
specified average annual gross compensation (excluding benefits), which shall
adjust upward by 3% per year over the term of the Agreement to take account of
inflation, and for which medical benefits must be provided.
(h) "Expansion" means the addition of buildings, structures, machinery or
equipment for purposes of increasing production capacity.
(i) "Headquarters Facility" means Premises used primarily as the executive
offices for a Company the primary purpose of which is to provide support
services to other entities affiliated through common ownership with the Company.
(j) "Improvements" means Fixed Improvements and Fixed Machinery and
Equipment.
(k) "Fixed Improvements" means real property and/or leasehold improvements.
(1) "Fixed Machinery and Equipment" means Tangible Personal Property
excluding vehicles, vessels or aircraft.
RESOLUTION NO. R2011 -12
(m) "Funding Conditions" means capital improvements and job creation conditions
outlined in the Agreement. The capital improvements conditions shall specifically
set forth value of the Improvements which must be made by the Improvement
Completion Date. The job creation conditions shall specifically set forth the
number and quality of Employment Positions.
(n) "Hotel and Convention Premises" means buildings and structures, including
machinery and equipment, the primary purpose of which is to provide a
destination conference facility with 250 or more hotel rooms and more than
25,000 square feet of contiguous conference space. This shall also include
facilities with 25,000 square feet or more of contiguous conference space without
the requirement of a related hotel.
(o) "Improvement Completion Date" means the date upon which the Fixed
Improvements and Fixed Equipment shall be substantially completed by the
Company.
(p) "Manufacturing Premises" 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.
(q) "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. Modernization shall not be for the purpose of reconditioning,
refurbishing or repairing including scheduled and periodic maintenance of real
property or Tangible Personal Property.
(r) "New Premises" means a property previously undeveloped which is placed into
service by means other than or in conjunction with Expansion or Modernization.
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RESOLUTION NO. R2011 -12
(s) "Office Premises" means one or more multi -level office buildings each one of
which consists of 80,000 square feet of office space no more than 20% of which
is dedicated to retail industry.
(t) "Other Basic Industry" means buildings and structures including Tangible
Personal Property 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 City and result in the creation of new permanent jobs and create new
wealth in the City.
(u) "Premises" means property Improvements completed or in the process of
construction which together comprises an integral whole and which are the
subject of the Agreement and shall be designated in that Agreement by metes
and bounds or other substantially similar description.
(v) "Productive Life" means the number of years a property improvement is
expected to be in service.
(w) "Regional Entertainment Premises" 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.
(x) "Research Premises" 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.
(y) "Regional Service Premises" 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 Premises'
location in the City.
RESOLUTION NO. R2011 -12
(z) "Tangible Personal Property" means (i) personal property that can be seen,
weighed, measured, felt, or otherwise perceived by the senses, (ii) that is owned
for its role in contributing directly to the business's ability to generate profit but
does not include, office furniture and fixtures such as laptop computers, desktop
computers, printers, chairs, desks, decorations, reprographics devices, and other
similar office appurtenances which may indirectly contribute to the business'
ability to generate a profit. Tangible Personal Property also does not include:
intangibles which shall include a document or other perceptible object that
constitutes evidence of a valuable interest, claim, or right and has negligible or
no intrinsic value, inventory and/or supplies and Tangible Personal Property that
was located in the reinvestment zone prior to execution of the Agreement with
the City or located in the reinvestment zone subsequent to the execution of the
Agreement with the City but not specifically identified in the Agreement.
ABATEMENT AUTHORIZED Section 2
(a) Eligible Premises. Premises may be eligible for abatement if it is a: Hotel and
Convention Premises, Manufacturing Premises Office Premises, Research
Premises Distribution Center Premises, Headquarters Premises, Regional
Service Premises Regional Entertainment Premises or Other Basic Industry.
(b) Creation of New Value. Abatement may only be granted for the additional value
of eligible property and Improvements incorporated into the Premises
subsequent to and specified in an Abatement Agreement between the City and
the property owner, lessee or member of an affiliated group which includes the
property owner and the lessee in which a controlling interest (more than 50 is
owned by a common owner, subject to such limitations as the City Council may
require.
(c) New and Existing Facilities at the Premises. Abatement may be granted for
new facilities and improvements to existing facilities at the Premises for purposes
of Modernization or Expansion.
RESOLUTION NO. R2011 -12
(d) Eligible Property. Abatement may be extended to all or a portion of the value of
Fixed Improvements and Fixed Machinery and Equipment as defined herein, at
the Premises.
(e) Ineligible Property. The following types of property shall be ineligible for
abatement: land; inventories; supplies; tools; furnishings, and other forms of
movable personal property which do not meet the definition of Tangible Personal
Property set forth above; vehicles, vessels; aircraft; housing and dwellings; retail
facilities and Deferred Maintenance
(f) Leased Facilities. Leasehold Interest: Abatement may be granted to the owner
of a leasehold interest in real property, including tax- exempt real property,
located in a reinvestment zone designated to exempt all or a portion of the value
of the leasehold interest in the real property Tax Code, Section 312.402 (a -1).
Lessee Interest: Abatement may be granted to a lessee of taxable real property
located in a reinvestment zone to exempt from taxation all or a portion of the
value of Improvements that meet the criteria of Eligible Property set forth above
owned by the lessee and located on the property that is subject to the lease.
(g) Owned /Leased Facilities. If a leased facility is granted abatement, the
agreement shall be executed with the lessor and the lessee. The Lessee shall be
required to submit, with its abatement application, a copy of the executed lease
agreement with the lessor demonstrating a minimum lease term of5 years. Under
no circumstance will the term of the abatement be longer than the term of the
lease. Publicly owned land leased to private entities shall be eligible if otherwise
qualified.
(h) Value and Term of Abatement. Abatement from ad valorem property taxes
levied by the City 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 property may be abated for up to two
years during the period of construction and for up to eight years thereafter. 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
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RESOLUTION NO. R2011 -12
reinvestment zone. If the period of construction exceeds two years, the
Premises 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 it is determined that the abatement period would better
benefit the City and the applicant by deferring the commencement date beyond
the January 1st following the City's authorization of the abatement, the City may
defer the commencement date of the abatement period to a future date certain.
The deferral of the commencement date will not allow the duration of the
abatement period to extend beyond ten (10) years. Tax Code 312.007(b). If a
project includes facility replacement, the abated value shall be the value of the
new unit(s) less the value of the old unit(s).
(i) 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 retain or create employment positions for at least 10
people on a permanent basis in the City; and
(3) Must not be expected to solely or primarily have the effect of transferring
employment from one part of the City to another part of the City; and
(4) Must be necessary because capacity cannot be provided efficiently
utilizing existing improved property.
(j) Taxability. From the execution of the Agreement until its termination, taxes shall
be payable as follows;
(1) The value of ineligible property as provided herein shall be fully taxable;
(2) The Base Value of Premises, as determined herein, shall be fully taxable;
and,
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RESOLUTION NO. R2011 -12
(3) Only the additional value of new eligible property specifically identified
within the Agreement shall be subject to abatement under the Agreement.
APPLICATION Section 3
(a) Any present or potential owner of taxable property in the City 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, provided by the
Pearland Economic Development Corporation and shall be accompanied by: a
general description of the proposed use and the general nature and extent of the
Modernization, Expansion or new Improvements to be incorporated at the
Premises; a descriptive list of the Improvements which will be a part of the
Premises; a map and property description; and a time schedule for undertaking
and completing the planned Improvements. In all cases a statement of the
assessed value of the Premises, 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 or his designee 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 shall,
through public hearing, afford any interested party 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, a feasibility study shall be prepared setting out the impact of the
proposed reinvestment zone and tax abatement. The feasibility study shall
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RESOLUTION NO. R2011 -12
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.
(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
announcement or the commencement of construction, alteration, or installation of
Improvements related to a proposed Modernization, Expansion, or new
Premises.
(f) Variance. Requests for variance from the provisions of Section 2 must be made
in writing to the City Manager of the City, or his designee, provided, however, the
total duration of 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 (314) vote of the City Council.
PUBLIC HEARING Section 4
(a) Should any party be able to show cause in the public hearing why the granting of
a tax abatement will have a substantial adverse effect on the City, 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, morals, and/or violation of other applicable codes or
laws.
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RESOLUTION NO. R2011 -12
(c) In order for the reinvestment zone to be created, the City must make the
following findings:
(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 the
City; and
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 pursuant to Chapter 312 of the Texas
Property Tax Code. 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 Premises 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's development goals;
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RESOLUTION NO. R2011 -12
(4) Require an Applicant to annually furnish any information necessary for the
City's evaluation of Applicant's compliance with the terms of the
agreement; and
(5) Provide for recapturing property tax revenues that are lost if the owner
fails to make the Improvements or comply with annual compliance
reporting requirements.
(b) If the City Council fails to adopt the Agreement, the City 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.
(c) An approved 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.
(d) No later than 90 days after a reinvestment zone has been designated or a tax
Abatement Agreement has been executed or July 1, whichever occurs first, the
City Manager or his designee shall deliver a report to the Comptroller of the State
of Texas and the Chief Appraiser of Appraisal District with jurisdiction over the
reinvestment zone, briefly describing the terms of the zone or the agreement and
including a copy of the agreement
(e) Annual Abatement Filings. The Company may be required to make additional
filings with the appropriate County Appraisal District, or other state or local offices
or agencies, annually or from time to time, in order for the Agreement to have full
force, effect and applicability. These filings shall be the responsibility of the
Company and in no way shall the City, it's elected officials, officers, employees or
assigns, including the Pearland Economic Development Corporation, be
responsible for the timely filing of any form or documents, except those set forth
by law, on behalf of the Company. These filings may include, but are not limited
to, the "Application for Property Tax Abatement Exemption" Comptroller Form
No. 50 -116 which must be filed with the appropriate County Appraisal District
between January 1st and April 30 for property owned as of January 1 St of the
year in which the abatement is to be applied. Failure of the Company to meet
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RESOLUTION NO. R2011 -12
any filing obligation with the appropriate County Appraisal District, or other state
or local offices or agencies shall not be grounds for extension of the term of the
Agreement.
RECAPTURE Section 6
In the event a Tax Abatement Agreement is approved by City Council, the Agreement
shall include recapture provision substantially similar to the following:
If a Company fails to meet the capital improvements funding conditions of a Tax
Abatement Agreement by the agreed upon improvement completion date, the City may,
at its discretion, terminate the Agreement and require the Company to immediately
repay the entirety of any amounts abated under the Agreement plus interest at the rate
of 4% plus prime, as published in the Wall Street Journal, per year, compounded
annually from January 1 of the year following the execution of the Agreement to the
date of repayment.
(a) If after the end of a calendar year a Company fails to provide any annual
compliance reports related to a funding condition, to the City or the Pearland
Economic Development Corporation, required under the Agreement by the
deadline for that year, the abatement for the year for which verification was not
timely provided according to the terms of the Agreement may be forfeited, at the
discretion of the City, and the Company shall have thirty (30) days to pay the City
any outstanding damages for failure to provide verification. If the Company does
not make payment to the City during the thirty (30) day period this Agreement
shall terminate.
(b) If a Company fails to meet a funding condition required under the Agreement by
the deadline for that year, the abatement for the year for which the funding
condition was not met according to the terms of the Agreement may be forfeited,
at the discretion of the City, and the Company shall have thirty (30) days to pay
the City any outstanding damages for failure to meet the Funding Condition. If
the Company does not make payment to the City during the Thirty (30) day
period this Agreement shall terminate.
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RESOLUTION NO. R2011 -12
(c) In the event a Company allows its ad valorem taxes owed to any taxing
jurisdiction to become delinquent and fails to timely and properly follow the legal
procedures for protest and/or contest of any such ad valorem taxes then the
Agreement shall be in default. In the event that the Company defaults in this
manner and has not cured such default within sixty (60) days of said default, the
abatement may be modified or terminated by the City. If at its discretion, the
City modifies or terminates an Agreement because a Company allows its ad
valorem taxes owed to any taxing jurisdiction to become delinquent and fails to
timely and properly follow the legal procedures for protest and/or contest of any
such ad valorem taxes the City may, at its discretion require that the Company
immediately repay the part or the entirety of any amounts abated under this
Agreement plus interest, at the rate of 4% plus prime as published in the Wall
Street Journal, per year, compounded annually from January 1 of the year
following the execution of the Agreement to the date of repayment.
(d) In the event a Company shall move the Employment Positions or Improvements
outlined in a Agreement from the Premises during the term of the Agreement
then all abatements of tax previously earned under this Agreement may be
refundable to the City by the Company and the Agreement may terminate at the
discretion of the City. After notice, the Company shall have thirty (30) days to
pay outstanding damages to the City for failure to meet any of the requirements
in this Section. If the Company does not make payment to the City during the
Thirty (30) day period this Agreement may terminate at the discretion of the City
(e) No party shall be required to perform any obligation under an Agreement or be
liable or responsible for any loss or damage resulting from its failure to perform
so long as performance is delayed by force majeure or acts of God, including but
not limited to strikes, lockouts or labor shortages, embargo, riot, war, revolution,
terrorism, rebellion, insurrection, flood, natural disaster, or interruption of utilities
from external causes.
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RESOLUTION NO. R2011 -12
(f) Should the City determine that a Company is subject to any Recapture provision
according to the terms and conditions of its Tax Abatement Agreement, the City
Manager or his designee need not provide any written notice to the Company of
the fact that it is subject to a Recapture provision. Any notice of Recapture
provided by the City may be made via electronic mail.
(g) All taxes abated shall be deemed due and owing to the City at any point that the
Company cannot pay its bills as they come due. If after a Company is no longer
able to pay its bills as they come due, it files for protection from its creditors by
any chapter of the bankruptcy code the City may, at its discretion, pursue the
abated taxes as a creditor in the bankruptcy for unpaid property taxes subject to
any and all tax liens applicable thereto.
ADMINISTRATION Section 7
(a) 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 Premises 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
Premises. All inspections will be made with one or more representatives of the
Company and in accordance with its safety standards.
(b) Upon completion of construction, the City, or its designee, shall annually evaluate
each Premises 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.
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RESOLUTION NO. R2011 -12
ASSIGNMENT Section 8
The terms and conditions of an Agreement are binding upon the successors and
assigns of all parties hereto. An Agreement may be transferred or assigned by the
Company only upon written permission by the City in accordance with Resolution
R2011 -12, which permission shall not be unreasonably withheld. No assignment shall
be approved if the assignor or assignee is indebted to the City for ad valorem taxes or
other obligations. The Company, or any legal successor thereto or prior assignee
thereof, may assign its rights and obligations under this Agreement, including by merger
or operation of law, to any legal successor or any person or entity that acquires all or
substantially all of its business and operations. In addition, with the prior written consent
of the City, which consent shall not be unreasonably withheld or delayed, the Company,
or any legal successor company thereto or prior assignee thereof, may assign its rights
and obligations under this Agreement to any parent or wholly owned subsidiary that it
currently has in place or later establishes, if it is constituted as a separate legally
recognized business entity. Any such assignment will be made without additional
consideration being payable to the City. An Agreement shall survive any sale, change of
control or similar transaction involving the Company, any successor thereto or prior
assignee thereof and no such transaction shall require the consent of the City. The
Company shall provide the City written notice of any assignment, sale, change of
control or similar transaction pursuant to this section as soon as possible and in no
event not later than thirty (30) calendar days following such event.
SUNSET PROVISION Section 9
These Guidelines and Criteria are effective upon the date of their adoption and will
remain in force for two (2) 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.
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RESOLUTION NO. R2011 -12
Section 2 Savings. All rights and remedies which have accrued in favor of the
City hereunder 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 prohibited by, or unlawful or unenforceable under, any
applicable law or jurisdiction is void without invalidating the remaining terms of this
Resolution. However, where the provisions of any such applicable law may be waived,
they are hereby waived by either party, as the case may be, to the fullest extent
permitted by the law, and the affected terms are enforceable in accordance with the
parties' original intent.
PASSED, APPROVED, AND ADOPTED this the 24 day of January, A.D., 2011.
0 lj R
TOM REID
MAYOR
ATTEST:
APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
ii WA
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 CREATED 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.
(j) "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.
(o) "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 LIFES OF PROPERTY
- MAXIMUM TERM - TEN YEARS
QUALIFYING - MANUFACTURING & PROCESSING
FACILITIES - SERVICE & DISTRIBUTION
- RESEARCH & DEVELOPMENT
- ENTERTAINMENT (LARGE COMPLEXES)
- OTHER BASIC INDUSTRY N.E.C.
QUALIFYING - NEW PLANTS
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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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p
RESOLUTION NO. R2006-121
PASSED, APPROVED, AND ADOPTED this the 5th day of September, A.D., 2006.
TOM RED
MAYOR
ATTEST:
UN�� * '�I RMC
ITY • CRETARY
APPROVED AS TO FORM:
DAR IN M. COKER
CITY ATTORNEY
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