RESO 2002-20 - Tax Abatement ZoneRESOLUTION NO. 2002-20
A RESOLUTION OF THE CITY OF HUNTSVILLE, TEXAS, ADOPTING GUIDELINES AND CRITERIA
FOR GRANTING TAX ABATEMENT IN A REINVESTMENT ZONE CREATED BY THE CITY; AND
DECLARING AN EFFECTIVE DATE.
WHEREAS, the creation and retention of job opportunities that bring new wealth are the two 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 of Huntsville 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 Huntsville 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, the abatement of property taxes, when offered to attract primary jobs in industries which
bring in money from outside a community instead of merely re-circulating dollars within a community, has
been shown to be an effective method of enhancing and diversifying an area economy; and
WHEREAS, any tax incentives should not adversely affect the competitive position of existing
companies operating in the City of Huntsville; and
WHEREAS, 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, and said guidelines
and criteria to be unchanged for a two year period unless amended by a three-quarters (3/4) vote; now,
therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF HUNTSVILLE, TEXAS, that:
POLICY BASIS - Section 1
The City of Huntsville is a community that is beautiful, historic, culturally diverse, affordable, safe, and well
planned with great opportunity for our citizens. We will know the City of Huntsville is affordable when,
residents have a variety of employers for entry level jobs; well paying jobs are available for all segments of
the community; and when employing businesses find it attractive to relocate to Huntsville and relocation
incentives for businesses successfully induce relocations and/or expansions. In order to accomplish these
end statements, the City of Huntsville will consider providing tax abatement phase-in to stimulate growth
and development in the City of Huntsville. It is the policy of the City that such incentives will be provided in
accord with the procedures and criteria outlined in this resolution. However, nothing in this policy shall imply
or suggest, or be construed to imply or suggest, that the City is under any obligation to provide any
incentives to any applicant. All such applications for tax phase-in incentives shall be considered on an
individual basis for both the qualification for abatement and the amount of any abatement.
DEFINITIONS - Section 2
a. 'Abatement' means the full or partial exemption from City ad valorem taxes on certain real property
in a reinvestment zone designated by the City of Huntsville for economic development purposes.
b. `Affected jurisdiction' means the City of Huntsville, Walker County, Texas, and any school district or
other taxing jurisdiction eligible to abate taxes according to Texas law, the majority of which is
located in the City of Huntsville that levies ad valorem taxes upon and provides services to a
reinvestment zone designated by the City of Huntsville.
c. 'Agreement' means a contractual agreement between a property owner and /or lessee and the City
of Huntsville for the purpose 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 the improvements necessary for continued operations, which do not
improve productivity or alter the process technology.
f. 'Distribution Center Facility' means building and structures, including machinery and equipment,
used or to be used primarily to receive, store, service and /or distribute goods or materials owned by
the business, from which a majority of revenues generated by activity at the facility are derived for
outside of Walker 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
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 operation.
Modernization may result from the construction, alteration or installation of buildings, structures,
fixed, machinery or equipment. It shall not be for the purpose of reconditioning, refurbishing, or
repairing.
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. 'New Jobs' shall represent a newly created employment position on a full time permanent basis.
Two or more part time permanent employees totaling an average of not less than 40 hours per week
may be considered as one full time permanent employee.
m. `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 City of Huntsville.
n. 'Productive Life' means the number of years a property improvement is expected to be in service.
o. `Qualified Vendors and Services' means those vendors and services that meet the company's
individual stated requirements, that employ Huntsville residents and pay taxes in the City of
Huntsville.
p. `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 fifty (50) miles from its location in the City of Huntsville.
'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 fifty
(50) miles from the facility's location in the City of Huntsville.
q.
r. 'Research Facility' means buildings and structure, 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.
GUIDELINES AND CRITERIA - Section 3
In order to be eligible for designation as a reinvestment zone and receive tax abatement, the Council must
determine that the proposed planned improvement meet the following guidelines:
a. Support economic development by expanding existing business or industry, diversifying the
economic base of the City, creating new jobs, and /or substantially increasing City tax revenue after
the abatement period.
b. Shall not have a substantially adverse effect on City tax base or City budget.
c. Shall be extended only to the improved property value of site, buildings, structures, and fixed
machinery and equipment.
d. Add at least $250,000 to the tax roll of eligible property and retain or create a net gain of 5 full -time
employees.
DISCRETIONARY CONSIDERATION - Section 4
The following matters should be considered by the City Council in its discretionary approval or disapproval
of each tax abatement application:
a. The amount of real and personal property value that will be added to the tax roll, the amount of
direct sales tax that will be generated, the infrastructure improvements by the City that will be
required by the facility, the infrastructure improvements made by the facility, and the compatibility of
the project with the City's master plan for development.
b. For the duration of the abatement period, the projected new jobs created and /or retained the types
of jobs, the average payroll and the number of persons hired locally.
c. The community impact which could include the revitalization of a depressed area; business
opportunities of existing local vendors; the impact on other taxing entities; and/or the pollution, if any,
as well as other negative environmental impacts affecting the health and safety of the community.
d. Whether the improvement is expected to solely or primarily have the effect of transferring
employment from one part of the City to another, and whether the business will be in direct
competition with another established company in the City.
f. Whether the facility may be eligible for abatement - if it is a distribution facility, manufacturing facility,
regional entertainment/tourism facility, regional service facility, research facility, or other basic
industry.
VALUE AND TERM OF PHASE -IN ABATEMENT - Section 5
Abatement shall be granted effective with the January 1 valuation date immediately following the date of
completion of improvements. The amount of valuation of eligible improvement as determined by the Tax
Appraisal District shall be abated according to the following schedule:
INDUSTRIAL DEVELOPMENT
Investment Year Maximum Abatement
$ 250,000 - $1,000,000 1 100 %
2 75%
3 50%
4 25 %
$1,000,001 - $2,500,000 1 - 2 100 %
3 75%
4 50%
5 25%
$2,500,001- $4,000,000 1 - 3 100 %
4 75 %
5 50%
6 25 %
$4,000,001 - $5,000,000 1 - 4 100 %
5 75 %
6 50%
7 25 %
$5,000,001 and up 1 - 5 100
6 75%
7 50 %
8 25%
Additionally, one hundred percent (100 %) of the value of eligible improvements shall be abated for up to two
(2) years during construction of such improvement. Upon completion of improvements, as determined
solely by the City Council, the abatement period shall begin as set forth above. If the period of construction
exceeds two (2) years or other designated construction period, whichever is less, improvements shall be
considered complete for purposes of beginning the abatement period.
APPLICATION - Section 6
A. Any present or potential owner of taxable property in the City of Huntsville may request the creation
of a reinvestment zone and tax abatement by filing a written request with the City Manager of the
City of Huntsville, or his /her designee. The application shall consist of a completed application form
accompanied by:
a. A general description of the proposed use and the general nature and extent of the
modernization, expansion or new improvements to be undertaken plus an estimate of the
number of employees retained or added as result of the proposed project ;
b. A descriptive list of the improvements which will be a part of the facility;
c. A map and property description or site plan;
d. A time schedule for undertaking and completing the planned improvements;
e. In the case of modernizing existing facilities, 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;
f. A statement of the assessed values of the property, separately stated for real and personal
property, for the then current year; and,
g. Any other information that may be deemed appropriate for evaluating the financial capacity
and other factors of the application.
B. Upon receipt of a completed application, the City shall notify in writing the presiding officer of the
legislative body of each affected jurisdiction (Walker County & the Hospital District). Before acting
upon the application, the City of Huntsville City Council shall through public hearings afford the
applicant and the designated representative of any affected jurisdiction the opportunity to show
cause why the abatement should or should not be granted. The public hearing shall also afford any
interested parties the opportunity to speak and present written material for or against the approval of
the tax abatement. Notice of the public hearing shall be given by posting same on the City's official
bulletin board and by publishing in the City's official newspaper at least seven (7) days prior to the
hearing.
C. The City Council shall approve or disapprove the application for tax abatement within sixty (60) days
after receipt of the application. The Mayor shall notify the applicant of the approval or disapproval
promptly thereafter.
D. A request for a reinvestment zone for the purpose of abatement shall not be granted if the City
Council finds that the request for the abatement was filed after the commencement of the
construction, alteration, or installation of improvements related to a proposed modernization
expansion or new facility began.
E. Variance. Request for variance for the provisions of Subsections A. through D. of Section 6 may be
made to the City in writing. Such request shall include a detailed explanation why the applicant
should be granted a variance. Approval of a request for variance requires a three - fourths vote of the
City Council.
PUBLIC HEARING - Section 7
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 or tax revenue, cause service
incapacity or impede the provision of service, that showing shall be reason for the City Council to
deny the granting of ad valorem tax abatement.
B. The decision to create a reinvestment zone and grant an abatement is entirely discretionary on the
part of the City Council; but in no event will a reinvestment zone be created or an abatement
agreement be authorized if it is determined that:
a. There would be a substantial adverse effect on the provision of government service or tax
base;
b. The applicant has insufficient financial capacity;
c. Planned or potential use of the property would constitute a hazard to public safety, health or
morals; and
d. Planned or potential use of the property violates other government codes or laws.
AGREEMENT - Section 8
A. After approval, the City of Huntsville City Council shall formally pass a resolution and execute an
agreement with the owner and /or lessee as required, which shall include:
a. Estimated value to be abated and the base year value;
b. Percent of value to be abated each year as provided in Section 5;
c. The commencement date and the termination date of abatement;
d. The proposed use of the facility; nature of construction, time schedule, map, property
description and improvement list as provided in Application - Section 6;
e. Contractual obligations in the event of default, violation of terms or conditions, or
delinquent taxes, for recapture administration and assignment as provided herein
and other provisions that may be required for uniformity or by state law;
f. Amount of investment and average number of jobs involved for the period of
abatement;
g.
Provision that owner shall annually furnish information necessary for the City of
Huntsville's evaluation of owner's compliance with the terms and conditions of the
tax abatement agreement and these guidelines and criteria; and
B. Said contract shall meet all the requirements of Texas Tax Code Sec. 312.et seq.
C. If a leased facility is granted abatement, the agreement shall be executed with the lessor and the
lessee.
D. Such agreement shall be executed within sixty (60) days after the applicant has forwarded all
necessary information and documentation to the City of Huntsville.
E. Each affected jurisdiction shall make its own determination of abatement which shall not bind any
other affected jurisdiction.
RECAPTURE - Section 9
A. In the event that the facility is completed and begins producing products or services but
subsequently discontinues production or service for any reason except fire, explosion or other
casualty or accident or natural disaster for a period of one (1) year during the abatement period, 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 Huntsville within sixty (60) days from the date of termination.
B. Should the City of Huntsville determine that the company or individual is in default according to the
terms and conditions of its agreement, the City of Huntsville 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'), the agreement may be terminated.
C. In the event the company or individual:
a. Allows its ad valorem taxes owed the City of Huntsville or an affected jurisdiction to become
delinquent and fails to timely and properly follow the legal procedures for their protest and/or
contest; or
b. 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 10
A. The Chief Appraiser of the Walker County Appraisal District 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 City with such information as may be necessary for
the abatement. Once value has been established, the Chief Appraiser shall notify the eligible
jurisdictions, which levies taxes on the amount of the valuation.
B. The agreement shall stipulate that employees and/or designated representatives of the City of
Huntsville 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) hour prior notice and will only be conducted in
such a 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 their safety standards.
C. All proprietary information acquired by any affected jurisdiction for purposes of monitoring
compliance with the terms and conditions of an abatement agreement shall be considered
confidential.
ASSIGNMENT - Section 11
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 of Huntsville 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 an assignment with the City of Huntsville. No assignment or
transfer shall be approved if the assignees are liable to the City of Huntsville or any eligible
jurisdiction for delinquent taxes or other obligations. Approval shall not be unreasonably withheld.
EFFECTIVE DATE — Section 12
This Resolution shall take effect immediately from and after the date of its passage.
PASSED AND APPROVED THIS 16th DAY OF JULY 2002.
CITY OF HUNTSVILLE, TEXAS
ATTEST:
Danna Welter, City Secretary
APPROVED AS TO FORM:
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Paul C. (sham, City Attorney
William B. Green, Mayor