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HomeMy WebLinkAbout1993-O-03 - Tax AbatementORDINANCE NO. 1993-03 AN ORDINANCE OF THE CITY OF STEPHENVILLE ADOPTING GUIDELINES AND CRITERIA FOR GRANTING TAX ABATEMENT IN A REINVESTMENT ZONE. WHEREAS, the creation and retention of job opportunities that bring new wealth is a high 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 Stephenville 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 Stephenville would reduce needed tax revenue unless strictly limited in applica- tion to those new existing industries that bring new wealth to the community; and WHEREAS, any tax incentives should not adversely affect the com- petitive position of existing companies operating in the City of Stephenville; and WHEREAS, the abatement of property taxes, when offered to attract pri- mary 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, the City of Stephenville wishes to offer abatement to private business which assist the City in constructing needed public improvements; and WHEREAS, Texas law requires any municipal government 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tax abatement, said Guidelines and Criteria to be effective for a two year period from date adopted unless amended or repealed by a three-quarters vote of the City Council. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF STEPHENVILLE, TEXAS, DOES HEREBY ADOPT THESE GUIDELINES AND CRITERIA FOR GRANTING TAX ABATEMENT IN A REINVESTMENT ZONE. DEFINITIONS SECTION 1 n (a) "Abatement" means the full or partial exemption from ad valorem (E taxes of certain real property in a reinvestment zone designated for economic development purposes. (b) "Eligible jurisdiction" means Erath County and any municipality, school district, or college district or other taxing district eligible to abate its taxes according to Texas law that levies ad valorem taxes upon and provides service to property located within the proposed or existing reinvestment zone. (c) "Agreement" means a contractual agreement between a property owner and/or lessee and an eligible jurisdiction for the purposes of tax abatement. (d) "Base year value" means the assessed value of eligible property on 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) "Economic life" means the number of years a property improvement is expected to be in service in a facility. (f) "Deferred maintenance" means improvements necessary for continued operations which do not improve productivity or alter the process technology. (g) "Expansion" means the addition of buildings, structures, fixed machinery or equipment for purposes of increasing production capacity. (h) "Facility" means property improvements completed or in the pro- cess of construction which together comprise the integral whole. (i) "Manufacturing Facility" means buildings and structures, including fixed machines 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 physi- cal or chemical change. (j) "Modernization" means the replacement and upgrading of existing facilities which increases the productive input or output, upda- tes the technology or substantially lowers the unit cost of the operation. Modernization may result from the construction, alteration or installation of buildings, structures, fixed machi- nery or equipment. It shall not be for the purpose of recon- ditioning, 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. (1) "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 or the sale of products or services and result in the creation of new permanent j1 jobs and bring new wealth in. II (m) "Regional Distribution Center Facility" means buildings and structures, including fixed machinery and equipment, used pri- marily 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 Stephenville. (n) "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 where the majority of users reside at least 100 miles from any part of the City of Stephenville. (o) "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 origi- nate at least 100 miles from any part of the City of Stephenville. (p) "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 pro- cesses thereto. ABATEMENT AUTHORIZED Section 2 (a) 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. (b) Creation of New Value. Abatement may only be granted for the additional value of eligible property improvements made sub- sequent to and listed in an abatement agreement between the City of Stephenville and the property owner and lessee (if required), subject to such limitations as the City 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 buildings, structures, fixed machinery and equipment, site impro- vements 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 accom- modations; deferred maintenance investments; property to be rented or leased except as provided in Sections 2(f); improve- ments for the generation or transmission of electrical energy not wholly consumed by a new 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 15years; property owned orused bythe State ofTexas 0 or its political subdivisions or by any organization owned, operated or directed by a political subdivision of the State of Texas. (f) Owned/Leased Facilities. If a leased facility is granted abate- ment the agreement shall be executed with the owner and the lessee. (g) Value and Term of Abatement. Abatement shall be granted effec- tive with the January 1 valuation date immediately following the date of execution of the agreement. Projects which meet the employment minimum set forth in Section 2 (h)(2) are eligible for abatement for a portion of the real pro- perty stated in terms of the amount of tax dollars as may be determined by the City Council. Provided, however, that no abatement shall be given in the year when the facility fails to meet the employment minimum set forth in Section 2 (h)(2) except where the jurisdiction has determined that employment falls below minimum due to accident, casualty, fire, explosion, market conditions, technological changes or natural disaster. Modernization projects are eligible for abatement for a portion of the real property stated in terms of the amount of tax dollars as may be determined by the City Council. 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 Qualifications. 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 appraised value of the property in the amounts as stated in Section 2, TABLE (h)(5); and (2) must be expected to prevent the loss of full-time employ- ment, retain or create employment for a number of new full- time jobs as stated in Section 2, TABLE (h) (5) that is reasonably required in order to operate the facility in an efficient manner manner; provided that this employment qualification shall take effect one year after the effective date of the abatement and continue through the remaining term of the agreement; and (3) must not be expected to solely or primarily have the effect of transferring employment from one part of the City of Stephenville 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. (5) Minimum Capital Cost and Minimum No. of New of Project Full -Time Jobs Created 50,000 150,000 500,000 1 Million 2.5 Million 5 Million 100 5 16 26 51 76 (i) Assistance to the City. In order to be eligible for abatement by the City of Stephenville, the applicant must propose to provide substantial financial assistance to the City by constructing public works that the City is unable to provide from existing budgeted funds. Public works shall include the construction of roads, streets, public buildings, and other such public facili- ties or equipment as may be identified by the City. (j) 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 proved in Section 2(e) !' shall be fully taxable; and (2) the base year value of existing eligible property as deter- mined each year shall be fully taxable; and (3) the additional value of new eligible property shall be taxable in the manner described in Section 2(g). APPLICATION Section 3. (a) Any present or potential owner of taxable property in the City of Stephenville may request the creation of a reinvestment zone by filing a written request with the City of Stephenville and may request tax abatement by filing a written application with the City of Stephenville. (b) 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 loca- tion of all proposed improvements of the property; a map and pro- perty description; a time schedule for undertaking and completing the proposed improvements. In the case of modernization a state- ment of the assessed value of the facility, separately stated for real and personal property, shall be given for the tax year imme- diately 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. The application form shall also iden- tify any public improvements proposed to be constructed by the applicant on behalf of the City or any financial assistance pro- posed to be provided to the City in the construction of public improvements. (c) Upon receipt of a completed application, the City Administrator of the City of Stephenville shall notify in writing the presiding' officer of the governing body of each eligible jurisdiction. (d) After receipt of an application for creation of a reinvestment zone and application for tax abatement, the City shall determine whether the application qualifies for an abatement under the terms of these guidelines and criteria. Such determination may be delegated to an employee or City department. If it is deter- mined that an application qualifies for abatement, it shall be recommended to the City Council that the applicant be notified in writing that subject to completion of a contract, the project qualifies for abatement. (e) The City of Stephenville shall not enter into an abatement agreement 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 and Section 3(e) may be made in written form to a designated employee of the City of Stephenville provided, however, the total duration of an abate- ment shall, in no instance, exceed ten years. Such request shall include a complete description of the circumstances explaining why the applicant should be granted a variance. Approval of a request for variance requires a three -fourths (3/4) vote of the City Council. PUBLIC HEARING AND APPROVAL Section 4 (a) The governing body of a city may not adopt a resolution, 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 clearly posted or identified on the City agenda at least 7 days prior to the hearing. The presiding officers of eligible jurisdictions shall be notified in writing at least 7 days prior to the hearing. (b) Prior to entering into a tax abatement agreement the City Council of the City of Stephenville, 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. (c) 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 effect 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. (d) Any applicant requesting a variance under Section 3(f) shall be approved by a vote of at least three -fourths (3/4) of the City Council. No application which deviates from the requirements of these Guidelines and Criteria shall be approved unless accom- panied by a request for variance as provided under Section 3(f). 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 ) the dollar amount of taxes to be abated each year as pro- vided 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, admi- nistration 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 state law; (6) amount of investment and average number of jobs involved; (7) a requirement that the applicant annually submit at a time requested by the City of Stephenville a January employee count for the abated facility which corresponds to employment counts reported in their Employer's Quarterly Report to the Texas Employment Commission, which submission shall be used to determine abatement eligibility for that year and be subject to audit if requested by the governing body. (8) a requirement that the applicant annually submit to the Erath County Appraisal District an application for exemption for so long as such annual application shall be required by law. Such agreement shall normally be executed within 60 days after the applicant has forwarded all necessary information and documentation to the City. RECAPTURE Section 6 (a) In the event that the facility is completed and begins producing product or service, but subsequently discontinues producing pro- duct 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 other- wise abated for that calendar year shall be paid to the City of Stephenville within sixty 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 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, after exercising due diligence to pay taxes properly due, (1) allows its ad valorem taxes owed the City of Stephenville 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. ADMINISTRATION Section 7 (a) The Chief Appraiser of the County shall annually determine an assessment of the real and personal property comprising the rein- vestment 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 of the amount of the assessment. (b) The agreement shall stipulate that employees and/or designated representatives of the City of Stephenville 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 inspec- tions will be made with one or more representatives of the com- pany or individual and in accordance with its safety standards. (c) Upon completion of construction the jurisdiction which created the zone shall annually evaluate each facility receiving abate- ment to ensure compliance with the agreement and report possible violations to the contract and agreement to the City of Stephenville and its attorney. - 16K - 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 of Stephenville whose 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 of Stephenville for ad valorem taxes or other obligations. 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. (b) This policy is mutually exclusive of existing Industrial District Contracts and owners of real property in areas deserving of spe- cial attention as agreed by the affected jurisdictions. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF STEPHENVILLE, TEXAS, this the 2nd day of February, 1993. AT T:J'eLavinia Lo rmann, Mayor yc emberton, City Secretary