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R94-47 08-22-94RESOLUTION NO. R94-47 GUIDELINES AND CRITERIA FOR GRANTING TAX ABATEMENT IN A REINVESTMENT ZONE CREATED IN THE CITY OF PEARLAND, BRAZORIA COUNTY, TEXAS Whereas, the creation and retention of job opportunities that bring new wealth is the highest civic priority; and Whereas, new jobs and investment will benefit the area economy, provide needed opportunities, strengthen the real estate market and generate tax revenue to support local services; and Whereas, the communities within Brazoria County must compete with other localities across the nation currently offering tax inducements to attract new plant and modernization projects; and Whereas, any tax incentives offered in Brazoria County would reduce needed tax revenue unless strictly limited in application to those new and existing industries that bring new wealth to the community; and Whereas, any tax incentives should not adversely affect the competitive position of existing companies operating in Brazoria County, Texas; and Whereas, the abatement of property taxes, when offered to attract primary jobs in industries which bring in money from outside a community instead of merely recirculating dollars within a community, has been shown to be an effective method of enhancing and diversifying an area's economy; and Whereas, effective September 1, 1987, Texas law requires any eligible taxing jurisdiction to establish Guidelines and Criteria as to eligibility for tax abatement agreements prior to granting of any future tax abatement, said Guidelines and Criteria to be unchanged for a two year period unless amended by a three-quarters vote; and Whereas, to assure a common, coordinated effort to promote our communities' economic development, any such Guidelines and Criteria should be adopted only through the cooperation of affected school districts, cities and Brazoria County; and Whereas, Brazoria County Commissioners Court has approved the circulation of the attached Guidelines and Criteria to affected taxing jurisdictions for consideration as a common policy for all jurisdictions which choose to participate in tax abatement agreements; Now, therefore be it resolved that the City Council of the City of Pearland does hereby propose for consideration and adoption these Guidelines and Criteria for granting tax abatement in reinvestment zones in the City of Pearland. 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 Brazoria County and any municipality or school district, the majority of which is located in Brazoria County, that levies ad valorem taxes upon and provides services to property located within the proposed or existing reinvestment zone designated by Brazoria County. (c) "Agreement" means a contractual agreement between a property owner and/or lessee and the City of Pearland for the purposes of tax abatement. (d) "Base year value" means the assessed value of eligible property January 1 preceding the execution of the agreement plus the agreed upon value of eligible property improvements made after January 1 but before the execution of the agreement. (e) "Deferred maintenance" means improvements necessary for continued operations which do not improve productivity or alter the process technology. "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 Brazoria County. (g) "Expansion" means the addition of buildings, structures, machinery or equipment for purposes of increasing production capacity. (h) "Facility" means property improvements completed or in the process of construction which together compromise an integral whole. (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. 0) "Modernization" means the replacement and upgrading of existing facilities which increases the productive input or output, updates the technology or substantially lowers the unit cost of the operation. Modernization may result from the construction, alteration or installation of building, structures, fixed machinery or equipment. It shall not be for the purpose of 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. "Other Basic Industry" means buildings and structures including fixed machinery and equipment not elsewhere described, used or to be used for the production of products or services which serve a market primarily outside the Brazoria Primary Metropolitan Statistical Area and result in the creation of new permanent jobs and create new wealth in the PMSA. (m) "Productive Life" means the number of years a property improvement is expected to be in service. (n) "Regional Entertainment Facility" means buildings and structures, including machinery and equipment, used or to be used to provide entertainment through the admission of the general public where the majority of users reside at least 50 miles from its location in Brazoria County. (O) "Research Facility" means building and structures, including machinery and equipment, used or to be used primarily for research of experimentation to improve or develop new tangible goods or materials or to improve or develop the production processes thereto. (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 Brazoria County.. ABATEMENT AUTHORIZED Section 2, (a) Authorized Facility. A facility may be eligible for abatement if it is a: Manufacturing Facility, Research Facility, Distribution Center or Regional Service Facility, Regional Entertainment Facility or Other Basic Industry. (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 of 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 or modernization or expansion. (d) Eligible Property. Abatement may be extended to the value of building, structures, fixed machineryand 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 otherforms 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. (0 Owned/Lease 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. One hundred percent of the value of new eligible properties shall be abated for up to two years during the period of construction and for five years thereafter or one-half (1/2) the productive life of the improvement whichever is less. The abatement may be extended through an initial agreement and a subsequent agreement as may be required to comply with state law regarding the term of a reinvestment zone. If the period of construction exceeds two years the facility shall be considered completed for purposes of abatement and in no case shall the period of abatement inclusive of construction and completion exceed 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) 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 $1 million 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 Brazoria County; and, (3) must not be expected to solely or primarily have the effect of transferring employment from one part of Brazoria County to another. (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; (2) (3) the value of ineligible property as provided in Section 2(e) shall be fully taxable; the base year value of existing eligible property as determined each year shall be fully taxable; and, the additional value of new eligible property shall be taxable in the manner described in Section 2(g). APPLICATION Section 3 (a) Any present or potential owner of taxable property in the City of Pearland may request the creation of a reinvestment zone and tax abatement by filing a written request with the City of Pearland. (b) The application shall consist of a completed application form accompanied by: a general description of the proposed use and the general nature and extent of the modernization, expansion or new improvements to be undertaken; a descriptive list of the improvements which will be a part of the facility; a map and property description; a time schedule for undertaking and completing the planned improvements. In the case of modernizing a statement of the assessed value of the facility, separately stated for real and personal property, shall be given for the tax year immediately preceding the application. The application form may require such financial and other information as the City Council deems appropriate for evaluating the financial capacity and other factors of the applicant. (C) Upon receipt of a completed applications, the County Judge shall notify in writing the presiding officer of the legislative body of each affected jurisdiction. Before acting upon the application, the City of Pearland shall through public hearing afford the applicant and the designated representative of any affected jurisdiction opportunity to show cause why the abatement should or should not be granted. Notice of the public hearing shall, be clearly identified on a City Council agenda to be posted at least 30 days prior to the hearing. (d) After receipt of an application for creation of a reinvestment zone and application for abatement, the City of Pearland shall prepare a feasibility study setting out the impact of the proposed reinvestment zone and tax abatement. The feasibility study shall include, but not be limited to, an estimate of the economic effect if the creation of the zone and the abatement of taxes and the benefit to the eligible jurisdiction and the property to be included in the zone. (e) The City Council shall not establish a reinvestment zone for the purpose of abatement if it finds that the request for the abatement was filed after the commencement of construction, alteration, or installation of improvements related to a proposed modernization, expansion or new facility. Variance. Requests for variance from the provisions of Subsections (a), (e), and (g) of SeCtion 2 may be made in written form to a designated member of the City of Pearland, 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. PUBLIC HEARING Section 4 (a) Should any affected jurisdiction be able to show cause in the public hearing why the granting of abatement will have a substantial adverse effect on its bonds, tax revenue, service capacity or the provision of service, that showing shall be reason for the City Council to deny designation of the reinvestment zone, the granting of abatement, or both. (b) Neither a reinvestment zone nor abatement agreement shall be authorized if it is determined that: (2) (3) (4) there would be a substantial adverse affect on the provision of government service or tax base; the applicant has insufficient financial capacity; planned or potential use of the property would constitute a hazard to public safety, health or morals; or violation of other codes or laws. AGREEMENT Section 5 (a) After approval the City Council shall formally pass a resolution 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); (3) the commencement date and the termination date of abatement; (4) the proposed use of the facility; nature of construction, time schedule, map, property description and improvement list 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, and; (6) size of investment and average number of jobs involved for the period of the abatement. Such agreement shall be executed within 60 days after the applicant has forwarded all necessary information and documentation to the City Council. RECAPTURE Section 6 (a) In the event that the facility is completed and begins producing product or service, but subsequently discontinues producing product or service for any reason except fire, explosion or other casualty or accident or natural disaster for a period of one year during the abatement period, then the agreement shall terminate and so shall the abatement of 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 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 it's agreement, the City Council shall notify the company or individual in writing at the address stated in the agreement, and if such is not cured within sixty (60) days from the date of such notice ("Cure Period"), then the agreement may be terminated. (C) In the event that the company or individual (1) allows its ad valorem taxes owed Brazoria County or the City of Pearland to become delinquent and fails to timely and properly follow the legal procedure for their protest and/or contest, or (2) violates any of the terms and conditions of the abatement agreement and fails to cure during the Cure Period, the agreement then may be terminated and all taxes previously abated by virtue of the agreement will be recaptured and paid within sixty (60) days of the termination. ADMINISTRATION Section 7 (a) The 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 notifythe 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 report possible violations to the contract and agreement to the City Council and its attorney. ASSIGNMENT Section 8 Abatement may be transferred and assigned by the holder to a new owner or lessee of the same facility upon the approval by resolution of the City Council subject to the financial capacity of the assignee and provided that all conditions and obligations in the abatement agreement are guaranteed by the execution of a new contractual agreement with the City of Pearland. No assignment or transfer shall be approved if the parties to the existing agreement, the new owner or new lessee are liable to Brazoria County or the City of Pearland for outstanding taxes or other obligations. Approval shall not be unreasonably withheld. SUNSET PROVISION Section 9 (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 contracts. (b) This policy is mutually exclusive of existing Industrial District Contracts and owners of real property in areas deserving of special attention as agreed by the affected jurisdictions. R94-47 PASSED, APPROVED and ADOPTED the the 2- 2,., day of 1994. MAYOR ATTEST: CITY SECRETARY APPROVED AS TO FORM: BARRY ABi~MS INTERIM CITY ATTORNEY TAX ABATEMENT GUIDELINES BRAZORIA COUNTY OBJECTIVES -JOB CREATION IN EXISTING INDUSTRIES -COMPETITIVE AMOUNTS ABATEMENT -LOCAL OPTION APPLICABLE-CONSENSUS OF ALL PARTICIPATING TAXING ENTITIES -FLEXIBILITY THROUGH VARIANCE PROCEDURE AND TARGET BASIC AND TERMS OF TERMS -100% DURING MAXIMUM TWO CONSTRUCTION -100% FIVE YEARS THEREAFTER OR 1/2 LIFE OF PROPERTY -MAXIMUM TERM - SEVEN YEARS YEAR USEFUL QUALIFYING FACILITIES -MANUFACTURING & PROCESSING -SERVICE & DISTRIBUTION -RESEARCH & DEVELOPMENT -ENTERTAINMENT (LARGE COMPLEXES) -OTHER BASIC INDUSTRY N.E.C. QUALIFYING INVESTMENTS -NEW PLANTS -EXPANSIONS -MODERNIZATIONS ALLOWABLE ITEMS -BUILDINGS AND STRUCTURES -FIXED EQUIPMENT -SITE IMPROVEMENTS -ADMINISTRATIVE OFFICE SPACE NON-ALLOWABLE -LAND, EXISTING IMPROVEMENTS, CONSTRUCTION-IN-PROGRESS, PROPERTY, HOTELS, HOUSING, MAINTENANCE, RETAIL PERSONAL DEFERRED ECONOMIC -MINIMUM $1 MILLION INVESTMENT -RETAIN OR CREATE AT LEAST 10 JOBS -NO SERIOUS ADVERSE EFFECT ON JURISDICTIONS -CANNOT REASONABLY USE EXISTING PROPERTY REVIEW AFTER TWO YEAR TEST PERIOD. ANY CONTRACTS MADE DURING THE PERIOD WILL BE ENFORGEABLE.