MIN CC 07/30/1991CITY COUNCIL MEETING OF JULY 30, 1991 BOOK "0" 453
MINUTES OF THE HUNTSVILLE CITY COUNCIL MEETING HELD ON THE 30TH DAY OF JULY, 1991 IN THE CITY HALL COUNCIL
CHAMBERS, LOCATED AT 1212 AVENUE M IN THE CITY OF HUNTSVILLE, COUNTY OF WALKER, TEXAS AT 5:15 P.M.
The Council met in a regular session with the following members present:
W. H. Hodges, Mayor 0. Eugene Barrett City officers present:
Gary Bell James L. Carter Gene Pipes, City Manager
Ila G. Gaines William B. Green Scott Bounds, City Attorney
William H. Knotts, Jr. Charles Robinson Ruth DeShaw, City Secretary
Ronald L. Lange
CALL TO ORDER
Mayor Hodges called the meeting to order. Reverend Jim Crawford of the First United Methodist Church
presented the invocation. Mayor Hodges noted Reverend Crawford has only been in Huntsville about six months.
He said he hopes he has had a warm Huntsville welcome. Reverend Crawford said he has been warmly welcomed and
thanked the Council for including him tonight. Mayor Hodges noted he will be invited again.
EXECUTIVE SESSION
Mayor Hodges then recessed the Council to an Executive Session for the annual evaluation of City Charter
officers as reviewed by the Personnel Committee of the Council, Dr. Gene Barrett, Mayor Pro Tem, Chairman: Gene
Pipes, City Manager; Ruth DeShaw, City Secretary; Scott Bounds, City Attorney, and Robert DeLong, City Judge;
and to also discuss pending litigation, Walker County Appraisal District, et. al., v. Quality Valve and Machine
Works, Inc. in the 278th State District Court.
The Mayor and Council returned to the formal meeting approximately thirty minutes later. Mayor Hodges
noted the review of the Charter Officers was held and the Council did discuss the pending Litigation matter.
Councilmember Green made the motion to approve an agreement for installment of delinquent taxes concerning the
' matter of Walker County Appraisal District, et. al. v. Quality Valve & Machine Works Inc as discussed in the
Executive Session. Councilmember Gaines seconded the motion. ALL were in favor and the motion passed
unanimously [note: Councilmember Robinson is absent for this vote]
CONSIDER FREEPORT EXEMPTION FOR QUALIFIED BUSINESSES
Consider a faint request by the Economic Development Corporation and Chamber of Commerce for the City to adopt
an ordinance "granting the Freeport Exemption for qualified businesses": and consider an ordinance to adopt the
Freeport Exemption.
Mr. Dave Lich, President, Huntsville - Walker County Chamber of Commerce, Executive Director, Economic
Development Corporation, advised the Economic Development Corporation (EDC) and the Chamber of Commerce, jointly
recommend that the city take action to grant the Freeport Exemption for qualified businesses currently
operating in Huntsville or considering relocating to Huntsville. He said the Freeport Exemption was approved
by Texas voters in November, 1989, as an option for Local governments to decide whether or not to tax goods -in-
transit which will be shipped out -of -state within 175 days. He noted the Freeport Exemption is a valuable too[
for economic development, especially as an incentive for manufacturing and distribution facilities. The Council
was advised that in 1989, following the statewide election, the City and other local governments voted not to
grant the Freeport Exemption due to concerns related to the potential impact on the local tax base. Mr. Cich
said the EDC and Chamber recommend that the City Council reverse that decision and approve the Freeport
Exemption to take effect in 1992. He presented information on the estimated impact of freeport (goods -in-
transit) exemption for Walker County (source: Walker County Appraisal District); a fact sheet on the Freeport
Exemption (Texas Chamber of Commerce, December, 1989); an article on "Freeport ": First Year Impact on the Tax
Base, State Property Tax Board, December, 1990); and an article on "Implementing the Freeport Exemption."
Mr. Cich said the Walker County Appraisal District estimates a total of $5.5 million valuation for
inventory which may be eligible for the Freeport Exemption. He said the actual percentage of eligible inventory
which qualifies for the exemption cannot be determined until businesses actually apply for the exemption. He
noted the exemption applies only to inventory which is in -place as of January 1, and will be shipped out of
state within 175 days. He said it is unlikely that the actual impact of the exemption would exceed 50 percent
' of the eligible inventory, and may be as Low as 10 percent. Mr. Cich said they have calculated that estimated
impact based on 10, 30 and 50 percent exemptions for all local taxing jurisdictions. He said it is estimated
the impact on the city would result in a loss of $250 per year in tax revenues (10 percent exemption) up to
$1,250 (50% exemption). Mr. Cich said the total estimated impact for all taxing jurisdictions would be a Loss
of $10,000 to $50,000 per year in tax revenues. He said it should be noted that the Freeport Exemption is
already available through the Hospital District, and will be available trough the new Walker County Education
District.
CITY COUNCIL MEETING OF JULY 30, 1991 BOOK "o" 454
Mr. Cich noted the EDC and Chamber have been developing a new economic development program for 11
Huntsville and Walker County and due to HuntsviLle's Location on IH -45 between Houston and Dallas, they are
promoting this area as a distribution center. He said the Freeport Exemption would be an essential tool to
attract regional manufacturing an distributing facilities, which ship a Large percentage of their products out - '
of- state. He said the Freeport Exemption is now available in Montgomery County, one of Huntsville's primary !'
competitors, and several other counties throughout the state; so approval will allow Huntsville to be more
competitive. Mr. Cich said the exemption will also provide tax relief to many of Huntsville's existing
businesses, and may offer then an incentive to expand their operations. He felt the Exemption wilt also tie -.
in well with the community's existing tax abatement program as an incentive for new industries. Mr. Cich
said the EDC and Chamber strongly recommend that the City Council approve the Freeport Exemption.
Mr. Cich recognized Gloria Wright, Chairman of the Board, Buddy Aber, Chamber Board Member, and MorrisI
1. Waller, representing the Secretary to the Economic Development Council. He noted Dianne Lowe, President
of the Economic Development Council was not able to be present. Mr. Cich advised the Commissioner's Court
approved the Freeport Exemption unanimously in their meeting of Monday, July 29. He said the Freeport Exemption
is a valuable incentive for distribution facilities, manufacturing facilities and ties in well with the
community's current tax abatement program which the city has strongly supported. He said when this proposal
was presented to state -wide voters, Walker County voters voted 68 percent in favor of it; state -wide, the vote
was 65 percent in favor; there was staunch support for the exemption.
The Council was advised that any impact from this exemption will be realized until next year's budget.
He said this is considered an investment in the future, it is an exemption that applies to existing businesses
in support of them as well as new businesses that may be looking at locating in this area. Mr. Cich said there
is a misunderstanding in that all inventories will not be exempt. He said the maximum of 50 percent for each
taxing jurisdiction may vary with a range of 10 percent up to 50 percent; a realistic range. He said the City
has competition in Montgomery County as they also offer this exemption. He said this exemption will make
Huntsville more competitive. He said HISD will consider this exemption in their next meeting.
Mr. Cich said the prospect that asked the City to consider this is a fairly substantial business well
suited for this area that could produce initially approximately 200 jobs and who would benefit substantially
from this exemption. He said the company said this is critical to their business, or the major factor in their
decision and they are looking at Huntsville and Montgomery County. He said this company has also expressed an
interest in the city's tax abatement program, and if the exemption is passed, they do intend to apply for tax
abatement. He said the city will be hearing more about who the prospect is then. Mr. Cich said he feels this
will be a valuable incentive for other prospects as well and he is working with at least two other prospects
who could benefit from it, and the adoption could also attract others. He said both the Economic Development
Council and the Chamber have strongly recommended adoption of this exemption by the city county and school
district.
Mayor Hodges said the actual ordinance is available for review. Councilmember Knotts expressed concerns
about "enforcing" and "rescinding" and asked how enforceable this exemption is going to be and whether it is
simply volunteer. He said he read in the agenda what some methods would be, noting it is Like a personal
property tax and expressed concern about its enforceability. He said a future city council will not have the
power to rescind it if it decides it has gotten out of hand. He felt if the city didn't provide do this then
the legislature would probably come through with a provision so that it could be rescinded. He said he felt
some of them needed more information on it.
Mr. Cich said that is an excellent point; while there was a local option in 1989, now, once it is
enacted, there are no other options available. He said as far as the overall impact, the prospect with whom
they are working now has 50 -75 percent of its inventory that may be exempt, but they would add 30 to 50 percent
of their inventory to the tax rolls; the city is trading out something and giving some incentive - -it is the same
philosophy for tax abatement - -to be on a level playing field with other communities if Huntsville is going to
promote itself as a distribution area for clean industry that most people agree would be good. He said the city
really needs to offer something like this to be competitive - -this is targeted toward that type of industry.
Counci lmember Knotts said because he was in business for himself and because of the particular business
he was in, the quickest way to go broke is to bid your competition. He said another thing that concerns him,
and he has been involved with Mr. Walter, the Chamber, and the Economic Development Corporation on the Highway
190 Industrial Foundation for about 40 years, he has never seen any of these efforts brought to fruition. He L.
said many of Huntsville's residents think of industry, and he feels he can speak for some of the older people,
CITY COUNCIL MEETING OF JULY 30, 1991 BOOK "V 455
that the reason Huntsville is trying to get industry, more payroll, etc. is to di Lute its taxes or increase its
tax base, yet everything the city does to try to get an industry, is to give industry all the advantages. He
said the people who have been in Huntsville and are staying here are always the ones burdened with more taxes
every time the city needs more money. He said someone who lives in the city Limits has a $2.34 per $100
valuation tax liability with the city's four taxing entities. He said many of Huntsville's residents built
homes in the 1940% 1950's and 1960's when one could do it for $8 and $10 per square foot. He said many of
these people are still Living in those homes. He said a 2,000 square foot hone then was in the $25,000 to
$35,000 range and the owners were taxed on one -third of the valuation. He said the people are still in those
houses and they are taxed on 100 percent valuation. He said valuations are anywhere from four to five times
what they were then. He said the people still have the same water taps, same sewer taps, same garbage pick -up
they always had, but on the last few years of the mortgage on his particular house, the taxes alone were more
than his mortgage payment. He said the city needs, in enticing industry here, to reduce this $2.34 rather than
trying to buy their loyalty to come to Huntsville.
Councilmember Knotts said he is going to vote against the Freeport Exemption and may be alone in doing
so, but he feels the Chamber is cyclical, about every ten years, it wants to give away something, charge the
people that live here to try to entice industry here. He said he does not know of any that have ever really
come in here other than on their own volition. He said Champion International was up here probably defensively
and the chamber didn't have a lot to do with Brown Oil Tool moving here. He said other than the Industrial
Foundation on Highway 190, when the City acquired the Dr. Pepper plant from Trinity, which Lasted about two
years --the building burned down -- everyone was behind it and the city did everything to help and everyone that
had anything to do with it had rather the thing not even started. He said speaking for the older people of
Huntsville, they don't have a lot of ways to pass on any tax increase. He said many of these people are widows,
their pensions and retirements their husbands received are not as fLuid as they are today or it is not a great
amount of money and a lot of those people are strapped and when we take a $100,000 valuation and we have to pay
' $2340 taxes in a year, even though that house probably cost that widow $30,000 or her husband who built it, she
still has to pay $2,340 a year, and that is pretty tough! He said he feels the city needs to get something in
Huntsville where the city can spread out the tax base and create value to increase the amount of tax money that
comes in rather than give the tax money away.
Mr. Morris I. Waller, responding on behalf of the Industrial Group, said he shares many of Counci Lmember
Knotts' comments and believes the two of them are the oldest living active participants in the work of the
Industrial Foundation of the last 40 years in this community, but feels Mr. Knotts should consider that a new
industry to a community brings an ad valorem tax with it anyway. He said if we have a $2-$3 -$4 million dollar
industry, we have a real nice ad valorem tax just Like the Huntsville residents pay in relation to it. He said
this particular tax feature is sort of a minuscule tax abatement related to an incentive to a particular type
of industry that has its goods bought outside the state for sales outside of the state and it is really a
competitive thing that is important. He agreed many times the city does not do a lot of things to entice
industry, but one thing it has to do is keep abreast of what everyone else is doing and whether Huntsville likes
it or not, those people are going to go where it is cost effective to locate. Councilmember Knotts said he
feels if everyone does it, then he does not feel it becomes a selling point. He said when we are number two,
we just have to work a little harder. Mr. Waller said if everyone else does it but you, you won't even be
considered. Councilmember Knotts felt the city needs to sell itself on other things. Mr. Waller said one of
the things in building a community base is payroll. Councilmember Knotts said he does not think that any
particular industry coming to Huntsville brings an automatic ad vatorem--if the city gives them tax abatement- -
then they don't.
Councilmember Green said he feels Councilmember Knotts has missed the point of this whole thing - -this
is not . . . Councilmember Knotts said he does understand. Mr. Waller said all taxes, inventory taxes
particularly, are rendered as of the first of January, so these taxes relate to only what is rendered by the
first of January, then the industry has to complete several forms qualifying for this particular exemption.
He said it is not something that is automatic; it is very strictly administered by the Appraisal District so
' it is a very carefully done thing. He said it is an insignificant cost to the city now. He said as a practical
matter, there are probably very few industries of any major consequence that will locate in the city in the
first place. He said they do desperately need city services, but as far as overall incentive and attitude of
the community of wanting industry, it is important to those industries coming in that the three taxing entities
approve this particular abatement. He said he realizes everyone has to vote their conscious. Councilmember
Knotts said the city's existing businesses don't receive abatement on inventory. Mr. Waller said they would
if they had this particular type of feature. Councilmember Knotts said this is for very few people and he
understands that and he understands Mr. Waller's point. Mr. Waller said people that have the tax on regular
CITY COUNCIL MEETING OF JULY 30, 1991 BOOK "0" 456
inventory are going to pay the tax just like every other business, but if they buy their inventory outside of
the state and sell it outside of the state within this particular six month time frame, they are going to be it
exempt and that is the feature.
Mayor Hodges said this seems to be a good economic development toot and he intends to support it.
Councilmember Green said we are not talking about plant fixtures, etc. Councilmember Green said we are
talking about a distribution kind of center where goods come in and stay here for a shorter period of time and
are redistributed somewhere else and sold somewhere else and we are really talking about exempting those
inventory items from tax. Councilmember Knotts said he understands that. Councilmember Green said given the
option of a distribution center that has a tremendous inventory in transit, there is no way that they would
Locate in an area unless there were no other options, where they had the tax in- place; if Huntsville does not
exempt it, they will not locate here. Councilmember Knotts said if it is so minuscule, why is the city even
concerned about it. Councilmember Green said it is minuscule from the standpoint of the city because they are
probably not going to locate in the city Limits anyway. Councilmember Knotts said they probably won't and that
is the reason he feels the city is getting into something . . . Mayor Hodges called for any other questions.
He then presented the ordinance for approval, the caption of which is as follows:
ORDINANCE NO. 91 -17
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF HUNTSVILLE, TEXAS, ADOPTING THE PROPERTY TAX
EXEMPTION (FREEPORT EXEMPTION) UNDER ARTICLE VIII, SECTION 1 -J, OF THE TEXAS CONSTITUTION
BEGINNING WITH THE 1992 TAX YEAR; AND MAKING OTHER PROVISIONS AND FINDINGS RELATED THERETO
Councilmember Green made the motion to approve Ordinance No. 91 -17 and Councilmember Gaines seconded the motion.
All were in favor except Councilmembers Knotts and Carter who voted OPPOSED The motion however, passed by a
vote of seven to two.
Consider bids and award contract for plumbing service connections to the H.U.D. sewer projects to be paid with '
Community Development Block Grant Funds
Mr. Pipes presented information from Mr. Dale Brown, Director of Planning, advising that a pre -bid
conference was held to discuss the individual sewer hookups to the new sewer lines in the Pinehil L, Montgomery,
FM 247, Ryan's Ferry, Alley 1, Alley 2 and Watkins Street area. Mr. Brown stated notice of the conference was
sent to seven area plumbers, however, only two plumbers attended the meeting, after which the City solicited
bids for sewer hookups. He noted the two sealed bids received were opened on July 29 at 2:00 P.M. Mr. Brown
recommended the lowest bid on each individual item be approved and that the City Manager be authorized to award
a contract in the amount of $24,718 to McGowan Plumbing and 817,426.50 to Bruce Plumbing from the Texas
Community Development Program grant funds. Councilmember Knotts made the motion to approve of Mr. Brown's
recommendation as stated and Councilmember Gaines seconded the motion. After a question for clarification
from Councilmember Bell all were in favor of the motion and it passed unanimously.
Consider authorizing payment of professional and personal services in the amount of 824.504 related to issuance
of waterworks and sanitary sewer revenue bonds and consider authorizing payment of professional and personal
services in the amount of $4,000 related to the issuance of street improvement bonds.
Mayor Hodges presented the memorandum from Patricia Allen, Director of Finance, summarizing the total
expenses incurred to -date for the bond issues: Revenue Bond Issue: 830,681.75 and General Obligation Bond
Issue: 834,954.99. Ms. Allen also presented bills now due from:
Cowen [bond counsel services -W &SI . . . . . . . . 813,750
Vinson & Elkins [legal services-W &SI. . . . . . . 8 5,000
Standard & Poor's [anaLyticaL services -W &SI 8 3,300
Chas. P. Young Company [printing -W &SI . . . 8 1,535
Helms Printing Co., Inc. [printing -W &SI . . 8 919
standard & Poor's [analytical services - streets) 8 4.000
828,504 '
Ms. Allen said these expenses are payable from bond proceeds. She noted there may be one more printing bill,
but she feels most of the bills have been submitted for payment. Councilmember Gaines made the motion to
approve of these bills totaling $28,504 to be paid from bond proceeds and Councilmember Barrett seconded the
motion All were in favor and the motion passed unanimously.
COUNCIL ACTION
CITY COUNCIL MEETING OF JULY 30, 1991 BOOK "O" 457
Dislike for Cavender's Boot City Landscaping
Councilmember Lange said he still does not like the lack of landscaping at Cavender's Boot City.
Proclamation honoring Grandpa Hodges
Councilmember Barrett then read a proclamation that he officially signed which establishes and confirms,
that Mayor Bill Hodges has became a grandfather for the second time upon the birth of his grandson, Bryce Andrew
Whitmire on July 22 in Temple, Texas [Leslie Hodges Whitmire, mother; Andrew Whitmire, father].
Demobilization of Troops
Councilmember Gaines said she had the pleasure of joining with Councilmember Charles Robinson and Mayor
Hodges on Saturday to witness tho demobilization ceremony of the troops, noting the ceremony was very
impressive. She said she was proud of Mayor Hodges for the speech he gave and of the city itself that day.
She said Hank Eckhardt, Police Chief was also there. She said she appreciates the opportunity to be there.
Sidewalk on Normal Park
Councilmember Bell noted he has observed that work is ongoing to complete the sidewalk on 19th Street
between Normal Park and Avenue S. He said he is somewhat relieved now that perhaps children will not fall into
the creek there.
Arby's Advertizing Standard on a Telephone Pole on Sam Houston Avenue
Councilmember Bell reported that Arby's Restaurant has hung an advertising standard on a telephone pole
on Sam Houston Avenue which he feels is not only illegal, but obstructs the traffic and the people walking down
the sidewalk. Mr. Pipes, City Manager, advised proper notice is being made. He said it would be in the right -
of-way if it is on a telephone pole.
' Economic Development-- Freeport Idea
Councilmember Carter noted while he did not enter into the debate over the Freeport Exemption, he did
vote against the Freeport idea, not that it is that big of a deal because the Council did talk about its
minuscule effect. He said he does favor economic development and because he voted against this does not mean
he does not support economic development. He said he philosophically opposes, as he feels Councitmember Knotts
expressed, tax abatement and what he considers 'give-aways to corporations," or what some may call "corporate
socialism." In addition, he said, from what he reads in the literature, cities often give away tax dollars and
do not gain anything in return that is worthwhile. He said he would like to see some evidence that communities
gain economically in some way from tax abatements as he has yet to see that in the literature. He said he knows
there is a lot of hope and desire, but he does not see evidence in the literature. He asked if someone could
show him some hard figures that tax abatement, or the type of Freeport situation just shown, is a net gain.
He said he isn't saying it won't bring in some new jobs, but if it is a net gain to the community, then he wilt
vote for this. He said again, he is not against economic development, but he just doesn't think these programs
are working to the extent that they are offered.
RECESS TO WORK SESSION
Mr. Gene Pipes, City Manager, distributed and reviewed the FY 1991-1992 budget.
ADJOURNMENT
R pectfully su 'tted.
Rut 'r
July 30, 1991