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HomeMy WebLinkAbout026810 RES - 05/30/2006RESOLUTION AUTHORIZING THE EXECUTION OF AN AGREEMENT WITH NUECES LOFT APARTMENTS, L.P., PROVIDING FOR TERMPORARY PROPERTY TAX ABATEMENT WHEREAS, Texas Tax Code, Chapter 312, authorizes the City of Corpus Christi, Texas E `the City') to enter into Tax Abatement Agreements for projects meeting the guidelines and criteria for granting tax abatement, as amended, duly adopted by the City; and, WHEREAS, the area covered by the attached Agreement is within the Renewal Community and is therefore eligible for tax abatement in accordance with the provisions of the Act NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI, TEXAS: SECTION 1. The City Council finds and determines that the terms of the proposed agreement and the property subject to the proposed agreement meet the applicable guidelines and criteria, as amended. adopted by the City, and the City further determines that the proposed project is feasible and the proposed temporary abatement of taxes will inure to the long -term benefit of the City. SECTION 2. The execution of the Tax Abatement Agreement Attached hereto in substantial form as Exhibit "A" is hereby authorized and approved. Armando Chapa City Secretary APPROVED: May 23, 2006. By id i aryoW. Smith Assistant City Attorney for City Attorney H:LegDiNws\agenda1 2006105- 30\taxabatemenNuecesLofts THE OF CORPUS CHRISTI enry Gar -tt Mayor Corpus Christi, Texas of 2 , 2006 U The above resolution was passed by the following vote: Henry Garrett Brent Chesney Melody Cooper Jerry Garcia Bill Kelly Rex A. Kinnison John E Marez Jesse Noyola Mark Scott H:LegDir\gws\ agenda 12006',05- 30 \taxabatemenNuecesL offs tot S 1 U TAX ABATEMENT AGREEMENT THE STATE OF TEXAS COUNTY OF NUECES This Tax Abatement Agreement (hereinafter referred to as the "Agreement ") is made and entered into by and between the CITY OF CORPUS CHRISTI, TEXAS (the "Governmental [ -nit ") and NUECES LOF 1' APARTMENTS, L.P.. (the "Owner "). the owner of taxable property in the Cit. of Corpus Christi, Texas. 317 Peoples Street (the "Property "). I. AUTHORIZATION This Agreement is authorized by the Texas Property Redevelopment and Tax Abatement Act, Texas Tax Code, Chapter 312. as amended (the "Act"). and is subject to the laws of the State of Texas and the charter. ordinances. and orders of the Governmental Unit. 1L DEFINITIONS As used in this Agreement. the following terms shall have the meanings set forth below: A. -Base Fear Value' means the assessed value of the Improvements on the Property as certified by the Nueces County Appraisal District as of the January 1 preceding the execution of this Agreement plus the agreed upon value of Improvements made after January 1 hut before the execution of this Agreement. B. 'Improvements' means the buildings or portions thereof and other improvements, including fixed machinery and equipment, used for commercial or industrial purposes on the Property. '('onstructton Phase' means the period during which a material and substantial improvement of the Property occurs which represents a separate and distinct construction operation undertaken for the purpose of erecting the Improvements. The ( onstruction Phase ends upon the earliest to occur of the following events: when <i certificate of occupancy is issued for the project (if within City limits); or (_' i when commercial production of a product or provision of a service is achieved at the facility. .)r (�) when the architect or engineer supervising construction issues a certificate of substantial completion, or some similar instrument, or (4) two (2) years after the date of this Agreement. H :LegDir.gws ;EcoDev "1 ax \bate/NuecesLofts('RDRes "age! 01.1 Fite determinatuon of the end of the (' onstruction Phase shall be made by the tovernmental 1 nit. in its sole and absolute discretion, based upon the above criteria and such other factors as the Governmental Unit may deem relevant. The determination of the end of the Construction Phase by the Governmental Unit shall be onc1usi e. and any judicial review of such determination shall be governed by the 'substantial e' idence rule -Abatement' means the temporary or partial exemption from ad valorem taxes of certain added value to real and personal property in a zone designated for economic development purposes pursuant to the Act E. Eligible Property means the buildings, structures, site Improvements, and that office space and certain personal property necessary to the operation and administration of the Facility to he constructed pursuant to this Agreement. A list of the Eligible Property is set forth in the Project Description which is attached hereto as Exhibit "A" and made a part hereof. During the Construction Phase of the Eligible Property, the )wner may make such change orders to the Eligible Property as are reasonably necessary to accomplish its intended use, provided that no such change order may be made which will change the qualification of the project as a "Facility" under the luidelines and 'riteria for Granting Tax Abatement approved by the Governmental nit ineligible Property' means land; inventories: supplies: tools; furnishings and other forms of movable personal property; vehicles; vessels; aircraft; housing; hotel accommodations. deferred maintenance investments; property to be rented or leased except as provided in Section 2(e); improvements for the generation or transmission of electrical energy not wholly consumed by a New Facility or expansion; any improvements. including those to produce, store or distribute natural gas, fluids or gases. which arc not integral to the operation of the Facility; improvements to real property which have an economic life of less than 15 years; property owned or used by the State 01. Texas or its political subdivisions or by any organization owned, operated ter directed h' a political subdivision of the State of Texas; unless any of the above types of property are specifically authorized by the Governmental Unit. C.a. ' Added Value' means the increase in the assessed value of the Eligible Property as a result of `expansion" or "modernization" of an existing facility or construction of a '-new facility.- It does not mean or include "deferred maintenance." H° °facility` means a Basic Manufacturing or Service Facility, Regional Distribution enter Facility. Regional Telecommunications /Data Processing Center Facility, Regional Visitor Amusement Facility. Central Business District (CBD) Residential Facility_ Renewal Community Facility, or Petrochemical Facility approved by the C Tovernmentai l nit as set forth in the Guidelines and Criteria for Granting Tax Abatement adopted by the Governmental Unit. 11:LegDir gws'EcoDev "; axAbareiNuecesl _ oftsCBDRes Page 2 of ?. r he Guidelines and Criteria for Granting Tax Abatement adopted by the Governmental Unit are incorporated as a pan 01 this Agreement. Except as the same may be modified herein, all definitions set forth therein are applicable to this Agreement. 111. PROPERTY The Property is an area within the City of Corpus Christi, Texas, located in whole or in part within the _jurisdiction of the Governmental Unit as is more fully described in Exhibit "B" attached hereto and made ._t part hereof. Said Property is located within a zone for tax abatement established pursuant to Chapter 3 1 2 of the Texas Tax Code. as amended, by the City of Corpus Christi. Texas. Theyueces County Appraisal District has established the following values for the Property as of the January 1 valuation date prior to the date of execution of this Agreement. Account No. ma Persona! p1 ()peril' S n/a kccount No. 0054- 0004 -0070 Land Improvements S 112,214 S 1,052,964 The Governmental Unit and the Owner agree that the value of any additions to the Improvements made after January 1 or not otherwise reflected on the above valuation of Improvements is: Additional Improvements: $0 Addition of the above amount to the valuation of the Improvements as of the January 1 valuation date prior to the date of execution of this Agreement results in a Base Year Value as follows: Base Year Valuc $1.165.17* IN . TERM OF ABATEMENT AND AGREEMENT The (iovernmental Unit agrees to abate the ad valorem taxes on the Eligible Property in accordance with this paragraph and paragraphs V and VI hereof. The Abatement shall be effective with the January 1 valuation date immediately following the date of execution of this Agreement. The Abatement shall continue for up to two (2) years during the period of the Construction Phase and for the next five (5) full tax years thereafter, expiring as of December3l {tf such third tax year. if the period of the Construction Phase exceeds two (2) 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 (7) tax years. The years of Abatement provided herein shall in each instance coincide with the tax year commencing on Januar} 1 and expiring on December 31, and in no event shall the Abatement extend beyond December 3 1 of the sixth tax year. This Abatement shall also cover as Eligible Property those supplemental improvements to the Eligible Property that are added or constructed during the R :LegDir gws 'EcoLlev 1 axAbate /Nueces1 otts('BDRes Page 71 o!1 post- construction fi'e t 5) Lear period of Abatement. In no event, however, shall the total Abatement period for such Eligible Property exceed the maximum seven (7) year Abatement period for the entire project as specified herein. The term of this Agreement shall continue for a period of five (5) years following expiration of the abatement period. All terms and conditions imposed upon the Owner shall continue in effect during such period, and the Owner shall be obligated specifically to continue the minimum employment levels specified herein. An default shall be subject to the provisions of Article VIII hereof. . TAXABILITY During the period that the Abatement is effective. taxes shall be payable as follows: (1) I he value of the land comprising the Property shall be fully taxable; (2) The Base Year \ alue of existing Improvements comprising the Property shall be fully taxable. (3) The value of Ineligible Property shall be fully taxable; and (4) I he Added Value of Eligible Property shall be abated as set forth in Part VI herein. VI. AMOUNT OF ABATEMENT The Abatement provided by this Agreement shall be in accordance with the following schedule: Construction Period (not to exceed 2 v ears) Year Year Year ; Year 4 Year Percentage of Abatement - -- 100 % 100% 100 °, 100 °'0 100% 1000 o I Note: If this project is designated as a "rehabilitation project" under the Guidelines and ( 'riteria which involves the adaptive reuse of an existing structure or building for a Facility, the project must involve a minimum capital expenditure of $250,000. The rehabilitation project must involve the adaptive reuse of an existing structure or building currently on the property tax rolls so that the Base Year Value associated with the project will include both the value of the land and the existing improvements. The Owner and Owners landlord specifically disclaim any abatement for improvements to the building, and the covenants and obligations hereof shall not he binding upon Owner's landlord. The sole H:LegDir: gw /EcoDe‘ 1 axAbate /NuecesLofts( "BDRes Page 4 of 13 Eligible Property subject to abatement shall be the value of personal property such as furniture and movable equipment installed by Owner which would otherwise be considered Ineligible Propert ■ fol any other type of abatement category. In no event, however, may the total ; alue of such personal property subject to abatement exceed $1 million.] At the time of execution of this ,Agreement. the Owner reasonably estimates and represents to the Governmental Unnt that the added Value comprising permanent Improvements upon completion of the Construction Phase shall be: S 2,787 786 ( "Estimated Added Value "). in the event that upon completion of the Construction Phase the Added Value of permanent Improvements. as determined by said Appraisal District, shall at any time thereafter during the period of Abatement he less than eight -five percent (85 %) of the Estimated Added Value, not due to circumstances beyond the control of Owner, the Owner agrees to pay, as additional taxes hereunder. an amount equal to the then current tax rate of the Governmental Unit applied to the difference between the Added Value from eighty -five percent (85 %) of the Estimated Added Value, multiplied by 100% minus the net percentage of Abatement provided under this agreement. For the purposes of this provision, the term "circumstances beyond the control of Owner- shall include casualty losses, national economic factors, shutdowns due to governmental regulations. strikes. acts ( f war; and the like. The formula for calculating such additional tax is outlined as follows. Tax Rate! x ((85% of Est. Added Value - Actual AV) x (100° %% - Abatement %)] = Additional Tax VII. CONTEMPLATED IMPROVEMENTS The contemplated improvements are set forth in the Project Description attached as Exhibit During the Construction Phase. the Owner may make such change orders to the project as are reasonably necessary. provided that no such change order may be made which will change the qualification of the project as a "Facility" under the Guidelines for Granting Tax Abatement approved by the Governmental Unit. All improvements shall be completed in accordance with all applicable laws, ordinances, rules or regulations. During the term of this Agreement, use of the Property shall be limited to operation of the Facility described in the Project Description consistent with the general purpose of encouraging development or redevelopment of the zone during the period of this Agreement. VIII. EVENTS OF DEFAULT AND RECAPTURE A. Failure to Commence Operation During Term of Agreement. In the event that the Facility is not completed and does not begin operation by the January 1 following the completion of construction, no abatement shall be given for that tax year, and the full amount of taxes _assessed against the property shall be due and payable for that tax year. H:LegDir'gwsiEcoDev Fax AbaterNuecesL.oftsCBDRes Page ol 1 In the event that the Owner fails to begin operation by the next January 1, then the abatement Agreement shall terminate and all abated taxes during the period of construction shall be recaptured and paid within 60 days of such termination. B. Discontinuance of Operations During Term of Abatement. In the event the Facility is completed and begins operation but subsequently discontinues operations during the term ot the Agreement after the completion of construction, for any reason except on a temporary basis Jue to fire. explosion or other casualty or accident or natural disaster, the Agreement may be terminated by the Governmental Unit, and all taxes previously abated by t irtue of the Agreement shall be recaptured and paid within 60 days of such termination. Delinquent Taxes. In the event that the Owner allows its ad valorem taxes to become delinquent and fails to timely and properly follow the legal procedures for their protest and /or contest, this Agreement shall terminate and so shall the abatement of the taxes tor the calendar year of the delinquency. The total taxes assessed without abatement for that calendar year shall he paid within 60 days from the date of termination. Penalty and interest shall not begin to accrue on the additional amount of taxes due as the result ot recapture under this provision until the first day of the month following such sixty ( 60) day notice, at which time penalty and interest shall accrue in accord with the laws of the State of ", exas. Penalty and interest on the amount of taxes originally levied based upon the abatement shall. of course_ begin to accrue as of the date such taxes were due in accord with the laws of the State of Texas. D. Notice of Default. Should the Governmental Unit determine that the Owner is in default according to the terms and conditions of this Agreement, it shall notify the Owner that i! such default is not cured within sixty (60) days from the date of such notice (`Cure Period' ). then this Agreement may be terminated. In the event the Owner fails to cure said default during the Cure Period. this Agreement may be terminated and the taxes abated by y irtue of the Agreement will be recaptured and paid as provided herein. E. Actual Added Value. Should the Nueces County Appraisal District determine that the total level of Added Value during any year of the term of this Agreement after Lumpletion of the Construction Phase is lower than the Estimated Added Value such that a lower percentage of Abatement is applicable, for each year during which an Abatement has been granted the difference between the tax abated and the tax which should have been abated based upon the actual Added Value shall be determined by the ( ioernmental 1. nit and paid within 60 days of notification to the Owner of such determmnation. Penalty and interest shall not begin to accrue upon such sum until the krst day of the month following such sixty (60) day notice, at which time penalty and interest shall . tccrue in accord with the laws of the State of Texas. Reduction in Rollback Tax Rate. If during any year of the period of Abatement any portion of the abated value is added to the current total value of the Governmental Unit but is not treated as `new property value' (as defined in Section 26.012 (17) of the Texas Tax Code) for the purpose of establishing the "effective maintenance rate" in ti :LegDir Ecol )eN Page 6 o` 1 ax Abate /Nuecesl offs( :HDRes calculating the `rollback tax rate' in accord with Section 26.04 (c) (2) of the Texas Tax ( *ode and if the Governmental Unit's budget calculations indicate that a tax rate in excess of the 'rollback tax rate- is required to fund the operations of the Governmental I nit for the succeeding year. then the Governmental Unit shall recapture from the ( >wner a tax in an amount equal to the lesser of the following: The amoun of the taxes abated for that year by the Governmental Unit with respect to the Property. The amount obtained by subtracting the rollback tax rate computed without the abated property value being treated as new property value from the rollback tax rate computed with the abated property value being treated as new property value and multiplying the difference by the total assessed value of the Governmental 1'nit_ If the Governmental 1 nit has granted an abatement of taxes to more than one taxpayer, then the amount of the recapture calculated in accord with subparagraph (2) above shall be prorated on the basis ; )f the value of the abatement with respect to each taxpayer. Ihts ev ent shall not constitute a `default" under this Agreement, and the sixty (60) day Cure Period provided ahoy e shall not apply. Such recaptured taxes must be paid within thirty (30) days sifter notice thereof has been given to the Owner. Penalty and interest shall not begin to accrue upon such sum until the first day of the month following such thirty (30) day notice, at which time penalty and interest shall accrue in accord with the laws of the State of Texas. G. Continuation of fax Lien. The amount of tax abated each year under the terms of this Agreement shall be secured by a first and prior tax lien which shall continue in existence from year tc peat until such time as this Agreement between the Governmental Unit and Owner is fully by Owner, or until all taxes, whether assessed or recaptured. are paid to fail In the event of am default by Owner. the governing body of the Governmental Unit reserves the right to terminate or modify this Agreement. Owner shall be afforded written notice of such default and the opportunity to cure as provided above. If Owner believes such action was improper. Owner may file an appeal in Nueces County district court within sixty (60) days after written notice of the action by the Governmental Unit. Owner shall remit to the Governmental nit. v 'thin such (0 -da■ period_ any additional or recaptured taxes levied pursuant to the payment provisions of Texas Tax Bode § 42.08. It-the final determination of the appeal increases Owner', tax liability abo'.e the amount paid. Owner shall remit the additional tax pursuant to lax Code 42.42 If the final determination of the appeal decreases Owner's tax liability, the Governmental Unit shall refund the Owner the difference between the amount of tax paid and the amount of tax for which Owner is liable pursuant to Tax Code § 42.43. H;LegDir gws%EcoDe‘ 1 axAbate /Nuecest_ofts('BDRes Page 1 IX. ADMINISTRATION Inspections. The Owner shall allow employees and/or representatives of the Governmental Unit to have access to the Property during the term of this Agreement to inspect the Facility to determine compliance with the terms and conditions of this Agreement. 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 .A11 inspections .will be made with one or more representatives of the Owner and in accordance with Owner's safety' standards. Appraisals. The Chief Appraiser of the Nueces County Appraisal District shall annually determine (i) the taxable x,alue of the real and personal property comprising the Property taking into consideration the Abatement provided by this Agreement, and (ii) the full taxable value without Abatement of the real and personal property comprising the Property. The Chief -appraiser shall record both the abated taxable value and the full taxable value in the appraisal records The full taxable v alue figure listed in the appraisal records shall be used to compute the amount of abated taxes that are required to be recaptured and paid in the event this Agreement is terminated in a manner that results in recapture. Each year the Owner shall furnish the Chief -Appraiser with such information outlined in Chapter 22. Texas Tax Code, as amended, as may be necessary for the administration of the Agreement specified herein. Annual Reports. Owner shall certify to the governing body of the Governmental Unit on or before April 1 each year that the Owner is in compliance with each applicable term of this Agreement. Additionally. during the initial four years of the term of property tax abatement, Owner shall provide to the Governmental Unit an annual report covering those items listed on Schedule 1 attached hereto r in order- to document the efforts of the Owner to acquire goods and services on a local basis. Such annual report shall he prepared on a calendar year basis and shall be submitted to the Governmental Unit no later than ninety (90) days following the end of each such calendar year. The annual report ,hall be accompanied by an audit letter prepared by an independent accounting firm which has reviewed the report. -Buy Local Provision. The Owner additionally agrees to give preference and priority to local manufacturers. suppliers, contractors and labor. except where not reasonably possible to do so without added expense. substantial inconvenience. or sacrifice in operating efficiency. In any such exception cases involving purchases over 510,000.00 a justification for such purchase shall he included in the annual report. The Owner further acknowledges that it is a legal and moral obligation of persons receiving property tax abatements to favor local manufacturers, suppliers, contractors and labor. all other factors being equal. For the purposes of this provision, the term local" as used to describe manufacturers, suppliers. contractors and labor shall include firms, businesses. and persons vho reside in or maintain an office in either Nueces County or San Patricio County. In the event of a breach of the buy local provision, the percentage of abatement shall he proportionately reduced by the amount the disqualified contract bears to the total construction cost for the project. H:LegDir gws/ EcoDev- -ax Abate/Nuecesl_oftsCBDRes Page 8oi 1 X. ASSIGNMENT The Owner may assign this Agreement to any one or more corporation(s), 50% or more of The outstanding voting securities of which are owned, directly or indirectly, by one of the Owners. or any partnership(s) or Limited partnership(s) in which an Owner, or a subsidiary of an Owner. is a general partner. The Owner may assign this Agreement to any other new owner or lessee of the Facility with the prior written consent of the Governmental Unit, which consent shall not he unreasonably. withheld Any assignment shall provide that the assignee shall trrevocabl and unconditionally assume all the duties and obligations of the assignor and become the Owner upon the same terms and conditions as set out in this Agreement. In the event more than one entity is Owner hereunder, the obligations of said entities shall be joint and several. Any assignment of this agreement shall be to an entity that will provide substantially the same improvements to the Property. except to the extent such improvements have been completed. No assignment shall be appro., ed if the Owner or am, is indebted to the Governmental Unit for ad valorem taxes or other obligations XI. NOTICES Any notice required to be given under the provisions of this Agreement shall be in writing and shall be duly served when it shall have been deposited, with the proper postage prepaid thereon, and duly registered or certified, return receipt requested, with the United States Postal Service. addressed to the t governmental L`nit or Owner at the following addresses. if mailed, any notice or communication shall be deemed to be received three days after the date of deposit in the United States Mail. Unless ;otherwise provided in this Agreement, all notices shall be delivered ro the following addresses: To the Governmental lJnit: CITY OF CORPUS CHRISTI, TEXAS 1 201 Leopard Street P. 0. Box 9277 ( orpus Christi, Texas 78469 Attn: City Manager 10 the ()wrier: Nt_IECES LOFT APARTMENTS, L.P. 13411 PM 1560 Helotes, Texas 78023 Either party may designate a different address by giving the other party ten days' written notice. This Agreement has been executed by the parties in multiple originals or counterparts, each having full force and effect. Executed this day of . 2006. H:LegDir gws /EcoDec Tax Abate/Nueces[ottsCBDRes Page 9 of 1 ( JOVERNMEN^[ A[ I NI ATTEST L ITY OF CORPUS CHRISTI, TEXAS By: By: Armando Chapa. City Secretary George Noe. City Manager APPROVED AS TO FORM: By: {/1�;..../I17 . Gary W. Smith. Assistant City Attorney for 'Mary Kay Fischer, City Attorney OWNER: H:LegDir gws'EcoDeN 1 axAbate/NuecesI oftsCBDRes Page 10 <a 1 NUECES LOFT APARTMENTS, L.P. By: William L. Hoover President of General Partner SCHEDULE 1 .Buv Local' Annual Reports 1'he following information shall be reported to the Governmental Unit on a calendar -year basis during the first four ears of the tax abatement program: Dollar amount spent for materials* (local). Dollar amount spent for materials (total). Dollar amount spent for labor ** (local). +. Dollar amount spent for labor ** (total). Number of jobs created in the construction project (local). ��. Number of jobs created in the construction project (total). Number of jobs created on a permanent basis (local). Number of jobs created on a permanent basis (total). 'Materials' is defined to include all materials used in excavation, site improvement, demolition. concrete, structural steel, tire proofing, piping, electrical, instruments, paintings and scaffolding, insulation, temporary construction facilities, supplies, equipment rental in construction, small tools and consumables. This term does not include major items of machinery and equipment not readily- available locally. ** `Labor is defined to include all labor in connection with the excavation, site improvement, demolition, concrete construction. structural steel. fire proofing, equipment placement, piping, electrical, instruments, painting and scaffolding. insulation, construction services, craft benefits, payroll burdens, and related labor expenses. This term does not include engineering services in connection with the project design The term "local" as used to describe manufacturers, suppliers, contractors and labor shall include firms, businesses. and persons who reside in or maintain an office in either Nueces County or San Patricia Countv IfLegDir gws EcoDe TaxAbate/NuecesLoftsCBDRes Page 11 <<t ' 1 Exhibit A Corpus Christi Project Plan May 23 2006 This project involves the adaptive reuse of a historic downtown building, the "Nueces Building" at 317 Peoples Street. The project will convert the building into 66 rental units comprised of lofts, one bedroom and tvo bedroom. The building is currently vacant. Permanent improvements Estimated apital H:LegDir- gws /EcoDev-Tax Abate/NuecesLoftsCBDRes Page 12 of 2,787,786 S 2,787,786 EXHIBIT `B' 1 -ract 1 Lot 7 and the north 3.7 feet of Lot 8, Block 4, Beach Portion, City of Corpus Christi_ Nueces County. Texas. and bract 2: Lots 1 and 2 and the east 105 feet of Lots 3 and 4. Block 11, Beach Portion, City f Corpus Christi, Nueces ('ounty. Texas, Aso known as 317 Peoples Street. Corpus Christi. Texas. H:LegDirgwsiEcoDev 1axAbate/NuecesLoftsCBDRes Page 13