HomeMy WebLinkAbout029298 RES - 12/06/2011Page 1 of 2
Resolution adopting the revised the City's Guidelines and Criteria for
Granting Tax Abatements.
WHEREAS, on November 17, 2009, the City Council by Resolution 028424, adopted
the City of Corpus Christi Economic Development Incentive Policies 2009 — 2011
("Incentive Policies"), which incorporated the City's Guidelines and Criteria for Granting
Tax Abatement;
WHEREAS, the City's Guidelines and Criteria for Granting Tax Abatement need to
revised to update the standards used to grant tax abatements and clarify the catalyst
areas where expanded tax abatement is available;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
CORPUS CHRISTI, TEXAS:
SECTION 1. The City's Guidelines and Criteria for Granting Tax Abatement are
revised. A copy of the revised Guidelines and Criteria are attached to and incorporated
into this resolution as Exhibit A.
ATTEST:
Armando Chapa
City Secretary Mayor
APPROVED: day of ('GJahe , 2011.
THE CITY OF CORPUS CHRISTI
Joe Ad e
R. J Feining
First Assistant City Attorney
For City Attorney
Revised Tax Abatement Guidelines Resolution--10052011.docx
INDEXED
Page 2 of 2
Corpus Christi, Texas
of NO2"&e&, , 2011
The above resolution was passed by the following vote:
Joe Adame
Chris N. Adler
Larry R. Elizondo, Sr.
Kevin Kieschnick
Priscilla Leal
David Loeb
John E. Marez
°431—
Nelda Martinez 0
Mark Scott
Revised Tax Abatement Guidelines Resolution -- 10052011.docx
029298
CITY OF CORPUS CHRISTI
GUIDELINES AND CRITERIA
FOR GRANTING TAX ABATEMENT
, 2011
WHEREAS, the attraction of long-term Added Value and the establishment of new
permanent full-time jobs in the area would enhance the economic base of area taxing
entities;
WHEREAS, Corpus Christi must compete with other communities across the nation
currently offering tax inducements to attract new plant and modernization projects, and
studies have shown that a favorable local tax climate and start-up tax concessions rank
second on the list of priorities for new plant installations or expansions;
WHEREAS, tax abatement is one of the principal means by which the public sector and
the private sector can forge a partnership to promote real economic growth within a
community;
WHEREAS, any tax incentives offered must be strictly limited in application to those
new and existing industries that bring new wealth to the community in order to avoid
reducing the needed tax revenues of area taxing entities;
WHEREAS, the Property Redevelopment and Tax Abatement Act ("Act"), Chapter 312
of the Texas Tax Code authorizes taxing units to provide property tax abatement for
limited periods of time as an inducement for the development or redevelopment of a
property;
WHEREAS, a Texas Enterprise Zone constitutes designation as a Reinvestment Zone
without further hearing or other procedural requirements under Chapter 312, Texas Tax
Code;
WHEREAS, the Act requires eligible taxing jurisdictions to establish Guidelines and
Criteria ("Guidelines") as to eligibility for tax abatement agreements prior to granting any
future tax abatement, the Guidelines may not be changed for a two-year period unless
amended by a three-fourths vote;
WHEREAS, the City Council by Resolution 028424, on November 17, 2008, adopted
the City of Corpus Christi Economic Development Policies, 2009-2011, which contain
the City's Guidelines for tax abatement;
WHEREAS, there is a need to supplement those Guidelines with greater detail on the
requirements for tax abatement agreements;
WHEREAS, in order to assure a common, coordinated effort to promote economic
development in the area, these Guidelines have been circulated among Nueces County,
Del Mar College, and other taxing entities for consideration as a common policy for all
jurisdictions which choose to participate in tax abatement agreements; and
1
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
Exhibit A
NOW, THEREFORE, BE IT RESOLVED by the City of Corpus Christi that these
Guidelines for granting tax abatement be adopted:
Section 1. Definitions.
"Abatement" means the temporary, full or partial exemption from ad valorem
taxes of certain added value to real and personal property in a zone designated
for economic development purposes under the Act.
"Added Value" means the increase in the assessed value of an 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."
"Agreement" means a contractual agreement between an Owner and the City for
the purposes of tax abatement.
"Base Year Value" means the assessed value of eligible property as of the
January 1 preceding the execution of an Agreement, plus the agreed upon value
of eligible property improvements made after January 1 but before the execution
of the Agreement.
"Basic Manufacturing or Service Facility" means buildings and structures,
including fixed machinery and equipment not elsewhere described, used or to be
used for the production of products or services that derive a majority of revenue
from points beyond a 50 -mile radius of Nueces County.
"Catalyst Area" mean an area within a Texas Enterprise Zone, Downtown,
Corpus Christi (North) Beach, Padre and Mustang Islands (other than areas
within Tax Increment Reinvestment Zone Number Two, City of Corpus Christi), or
other areas designed as catalyst areas by the City Council.
"City" means the City of Corpus Christi that levies ad valorem taxes upon and
provides services to property located within a proposed or existing zone
designated under the Act.
"Convention Center Hotel" means a hotel.
"Deferred Maintenance" means improvements necessary for continued
operations that do not improve productivity or alter the process technology.
"Downtown Revitalization Housing Facility" means a Multi -family Housing Facility
constructed or renovated in the area encompassed by the Downtown
Management District; provided that a Multi -family Housing Facility, which is
located near the boundaries of the Downtown Management District, may be
considered if the Facility is determined by the City Council to assist in the
revitalization of the downtown area and the Owner of the Facility enters into an
agreement to contribute amounts to the Downtown Management District on the
same basis as if it were part of the District for two times the life of the Agreement.
2
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
"Economic Life" means the number of years a property improvement is expected
to be in service in a Facility.
"Enterprise Zone Residential Redevelopment Facility" means buildings and
structures used or to be used primarily for residential purposes that is located
within a Texas enterprise zone.
"Expansion" means the addition of buildings, structures, fixed machinery, or
equipment for the purposes of increasing capacity.
"Facility" means property improvements completed or in the process of
construction that together compromise an integral whole.
"Locally Owned" means a facility, manufacturer, supplier, contractor, and labor
supplier whose owner resides in or maintains its principle office in either Nueces
County or San Patricio County.
"Mixed-use facility" means a facility having residential and commercial uses
where the commercial use occupies more than 20% of the structure.
"Multi -family housing" means a facility designed, arranged, or used exclusively
for the use and occupancy of three or more families living independently of each
other. The dwelling structure may include a triplex, apartment, townhouse,
condominium, cooperative, high-rise, etc.
"Modernization" means the replacement and upgrading of existing facilities that
increases the productive input or output, updates the technology, or substantially
lowers the unit cost of the operation, and extends the economic life of the
facilities. Modernization may result from the construction, alteration, or
installation of buildings, structures, fixed machinery, or equipment.
"Modernization" does include work done for the purpose of reconditioning,
refurbishing, repairing, or completion of deferred maintenance to a structure.
"New Facility" means a property previously undeveloped, which is placed into
service by means other than or in conjunction with an expansion or
modernization.
"Owner" means the owner of a Facility subject to abatement. If the Facility is
constructed on a leased property, the Owner is the party that owns the property
subject to tax abatement. The other party to the lease must join in the execution
of Agreement, but may not be obligated to assure performance of the party
receiving abatement.
"Permanent full-time job" means a new employment position or full-time
equivalent created by a business that provides a regular work schedule of at
least 32 hours per week or 1664 hours of employment per year to a Corpus
Christi Metropolitan Statistical Area resident and maintains the employment
position during the term of the Agreement.
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
"Petrochemical Facility" means buildings and structures, including fixed
machinery and equipment, the primary purpose of which is or will be the
manufacture or processing of petrochemicals or fuels by physical or chemical
change.
"Regional Distribution Center Facility" means buildings and structures, including
fixed machinery and equipment, used or to be used primarily to receive, store,
service, or distribute goods or materials owned by the Facility operator where a
majority of the goods or services are distributed to points beyond a 50 -mile
radius of the City.
"Regional Telecommunications/Data Processing Center Facility" means buildings
and structures used or to be used primarily for the provision of
telecommunication or data processing services by the Facility operator where a
majority of the services are provided to points beyond a 50 -mile radius of the
City.
"Regional Visitor/Amusement Facility" means buildings and structures used or to
be used primarily as a stadium, arena, amusement park, or similar attraction or
sports venue.
"Rehabilitation" means that the Added Value, as defined, of the project exceeds
the base year of a development property by $250,000.
"Texas Enterprise Zone" means any area designated as an enterprise zone
under Chapter 2303, Texas Government Code.
Section 2. Abatement Authorized.
(a) Authorized Facilities. A Facility may be eligible for abatement if it is one of the
following:
(1) Basic Manufacturing Facility.
(2) Basic Service Facility.
(3) Regional Distribution Center Facility.
(4) Regional Telecommunications/Data Processing Center Facility.
(5) Regional Visitor/Amusement Facility.
(6) Enterprise Zone Facility.
(7) Downtown Revitalization Housing Facility.
(8) Petrochemical Facility.
(9) Convention Center Hotel.
4
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
(b) Abatement for New Facilities or Improvements to Existing Facilities. Abatement may
be granted for new facilities and improvements to existing facilities for the purpose of
modernization or expansion.
(c) Creation of New Value. Abatement may only be granted for the additional value of
eligible property improvements made subject to and listed in an Agreement between the
City and the Owner, subject to the limitations as the City requires. The economic life of
the improvements must exceed the term of the Agreement.
(d) Eligible Property. Abatement may be extended to the value of the improvements to
real property, including buildings, structures, fixed machinery and equipment, and site
improvements, plus that office space and related fixed improvements necessary to the
operation and administration of the Facility. Abatement may also be extended for
tangible personal property as defined by the Texas Tax Code.
(e) Ineligible Property. The following types of property are fully taxable and ineligible for
abatement, unless specifically authorized by the City Council:
(1) Land.
(2) Inventories.
(3) Supplies.
(4) Tools.
(5) Furnishings and other forms of movable personal property.
(6) Vehicles.
(7) Vessels.
(8) Aircraft.
(9) Housing, other than an Enterprise Zone Residential Redevelopment Facility
or Downtown Revitalization Housing Facility.
(10) Hotel accommodations, other than a convention center hotel.
(11) Deferred maintenance investments.
(12) Property to be rented or leased, except when the Owner is the lessee of the
land, but is the Owner of the Facilities.
(13) Improvements for the generation or transmission of electrical energy not
wholly consumed by a New Facility or expansion.
(14) Any improvements, including those to produce, store, or distribute natural
gas, fluids, or gases that are not integral to the operation of the Facility.
5
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rir 10052011 rev 1
(15) Improvements to real property that have an economic life of less than 15
years.
(16) Property owned or used by the State of Texas or its political subdivisions, or
by any organization owned, operated, or directed by a political subdivision of the
State of Texas.
(f) Period of Abatement.
(1) Abatement may be granted effective with the January 1 valuation date
immediately following the date of execution of the Agreement. Abatement may
be allowed for a period of up to ten years, including the period of construction. If
the period of construction exceeds two years, the Facility is considered
completed for purposes of abatement at the end of two years, and in no case
may the total period of abatement, inclusive of the construction period, exceed
ten years.
(2) Abatement for a Downtown Revitalization Housing Facility may be granted
effective with the January 1 valuation date immediately following the date of
execution of the Agreement. Abatement may be allowed for a period of seven
years, including the period of construction. If the period of construction exceeds
two years, the Facility is considered completed for purposes of abatement at the
end of two years, and in no case may the total period of abatement, inclusive of
the construction period, exceed seven years.
(g) Completion of Construction. The completion of construction is deemed to occur
upon the earliest of the following events:
(1) When a certificate of occupancy is issued for the project (if it is located within
a city).
(2) When commercial production of a product or provision of a service is
achieved at the Facility.
(3) When the architect or engineer supervising construction issues a certificate of
substantial completion, or some similar instrument.
(4) Two years after the date of the Agreement.
(h) Determination of Completion of Construction. The determination of the completion
of construction is made by the City, in its sole and absolute discretion, based upon the
above criteria and the other factors as the City deems relevant. The determination of
the completion of construction is conclusive, and any judicial review of the determination
must be governed by the substantial evidence rule.
(i) Abatement Percentage. Temporary property tax abatement may be authorized for
the development of a New Facility, Expansion, or Modernization that meets either
qualification criteria of capital investment or a qualification criteria based upon a
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
combination of the number of new jobs created plus the average salary of all jobs at the
facility.
(1) The capital investment qualification criteria is as follows:
Added Value from Capital Investment
Abatement Level
$2,000,000 to $10,000,000
Level 1
$10,000,001 to $50,000,000
Level 2
$50,000,001 to $150,000,000
Level 3
$150,000,001 to $500,000,000
Level 4
Over $500,000,000
Level 5
Note: The qualification for abatement by capital investment is based upon the added
value of Eligible Property as reflected on the tax rolls of the applicable appraisal district.
(2) The combination of new jobs and salary criteria is as follows:
Number of New Jobs'
Average Salary Up to
$5Cy0,000
Average Salary
$50,001 to $I% 0,000
Average Salaryf�Over
$70,000
20 to 99 New Jobs
Level 1
Level 2
Level 3
100 to 199 New Jobs
Level 2
Level 3
Level 4
200 or more New
Jobs
Level 3
Level 4
Level 5
Note: ' Provided that obtaining temporary tax abatement based solely on the creation
of the new jobs must be further conditioned on the requirement for the improvement or
repair of property in order to meet the minimum requirements of the Act.
(3) The level of any New Facility, Expansion, or Modernization that is located
within a Catalyst Area or that is a Locally -Owned Facility is increased by one
level above the standards set forth in Section 2(i)(1) and (2) above, with a
minimum level of 3 for any the project. Further, if a Facility qualifies under both
the capital investment qualification criteria and the new jobs and salary criteria,
the Facility will be increased by one level above the highest criteria level
achieved.
(4) Any New Facility, Expansion, or Modernization that utilizes the Leadership in
Energy and Environmental Design (LEED) Green Building Rating System may be
increased at least one level above the qualifying level for abatement.
(5) Abatement for a small business facility providing Added Value of at least
$250,000 may be considered within a Catalyst Area or as a Locally -Owned
Facility by the City Council on a case-by-case basis.
(6) Upon compliance with the above criteria, the percentage of tax abated may
be under the following schedule, with 100% abatement in each case during the
construction period of up to two years:
7
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
Year
Level 1
Level 2
Level 3
Level 4
Levels
Year 1*
100%
100%
100%
100%
100%
Year 2*
100%
100%
100%
100%
100%
Year 3
100%
100%
100%
100%
100%
Year4
75%
100%
100%
100%
100%
Year 5
50%
75%
100%
100%
100%
Year 6
25%
50%
75%
100%
100%
Year 7
25%
50%
75%
100%
Year 8
25%
50%
75%
Year 9
25%
50%
Year 10
25%
*Construction Period
(7) In the event the Added Value caused by the Project is less than $2.0 million,
no abatement may be granted unless the Facility is a Rehabilitation Project as
described in Section 2(k).
(8) In order to be counted as a permanent job under these Guidelines, the job
must be a full-time position providing regular work schedules of at least 32 hours
per week.
(A) The percentage of abatement provided each year under the
Agreement must be based upon the employment information as of
January 1 of the year. As a result, the actual amount of abatement may
vary from year to year based upon employment levels and property
valuations.
(B) For example, Company A has an Agreement entered 5/1/11 and
projects to create 250 permanent jobs. If the actual experience of
Company A involves fluctuating job levels, the actual abatement under the
Agreement could follow the following pattern:
Year
Employment
Abatement
(First $10M)
Abatement
(Over $10M)
1/1/12*
0
100%
100%
1/1/13*
0
100%
100%
1/1/14
150
75%
75%
1/1/15
250
100%
75%
1/1/16
150
75%
50%
1/1/17
50
50%
50%
1/1/18
250
100%
25%
*Construction Period
8
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
(9) For a Downtown Revitalization Housing Facility, the percentage of tax abated
is under the following schedule:
Year
Percentage of Abatement
Year 1*
100%
Year 2*
100%
Year 3
100%
Year 4
100%
Year 5
100%
* Construction Period
(10) For compliance purposes, the date for determining a permanent full-time job
will be six months from the date of completion. The business must maintain the
same level of employment or increase employment during the term of the
agreement.
(11) For an Enterprise Zone Facility, the jobs must created within six months
following the completion of construction. One new permanent full-time job must
be added per $50,000 of Added Value to a property. The Owner must maintain
the same level of employment or increase employment during the term of the
Agreement. For example:
Company X is rehabilitating a building in a Texas Enterprise Zone for a
commercial use. The current value of the building is $250,000 and
Company X estimates an added value of $750,000. The job requirement
will be to create and maintain a minimum of 15 permanent full-time
positions during the term of the Agreement. ($750,000 / $50,000 = 15)
(12) For residential multi -family housing, the job creation requirement will be
waived.
(13) For mixed-use facilities, the job requirement will be prorated. For example:
Company Y is constructing a mixed-use facility that is 30% non-residential
and the Added Value is $1,500,000. The job requirement will be to create
and maintain a minimum of 9 permanent full-time jobs during the term of
the Agreement. (1,500,000 X .30 = $450,0001$50,000=9)
(j) Living Wage Requirement. In order to count as a permanent full-time job under this
tax abatement program, the job should provide a "living wage" for the employee. The
target living wage under this abatement program is that annual amount equal or greater
than poverty level for a family of three, established by the 2011 U.S. Department of
Health and Human Services Poverty Guidelines, divided by 2,080 hours per year, which
is $8.91 per hour. The City has the right to adjust the living wage target under these
Guidelines and insert a specific target in each property Agreement to govern the
abatement offered under that Agreement.
9
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
(k) Rehabilitation Projects. The $2 million minimum Added Value requirement for
abatement does not apply to rehabilitation projects that involve the adaptive reuse of an
existing structure or building for a Facility.
(1) In order to qualify as a rehabilitation project under this provision, the project
must involve a minimum Added Value, as defined, of $250,000. Any
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.
(2) For the rehabilitation projects, all Eligible Property in excess of the Base Year
Value are subject to abatement, plus the value of personal property, such as
furniture and movable equipment that would otherwise be considered Ineligible
Property for any other type of abatement category.
(3) In no event, however, may the total value of personal property subject to
abatement exceed $1 million or the total amount of all property subject to
abatement in a rehabilitation project exceed $5 million.
(I) Properties in Industrial Districts. For eligible property to be constructed in an area
which is covered by an executed industrial district agreement with the City, the method
of calculating payments in lieu of property taxes for the eligible property is set forth in
the industrial district agreement. As an alternative to an industrial district agreement, an
eligible property may be covered by an Agreement.
(m) Economic Qualification for Non -Residential Development and Mixed -Use Facilities.
(1) In order to be eligible for tax abatement, the planned improvement for a Non -
Residential Development or Mixed -Use Facility may create no later than the
January 1 following the completion of construction and maintain throughout the
remainder of the term of the Agreement the minimum number of 50 permanent
full-time jobs in City.
(2) The planned improvement for a Non -Residential Development or Mixed -Use
Facility may not adversely affect competition in the local market with established
local businesses.
(n) Taxability. From the execution of the Agreement to the end of the abatement period,
taxes will be payable as follows:
(1) The value of Ineligible Property as provided in Section 2(e) are fully taxable
(except for personal property added in connection with a Rehabilitation Project).
(2) The Base Year Value of existing Eligible Property as determined each year
are fully taxable.
10
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
(3) The Added Value of new Eligible Property (and certain personal property
added in connection with a Rehabilitation Project) is taxable, less the authorized
abatement provided in Section 2(i).
Section 3. Application.
(a) Written Application. Any present or potential owner of taxable property may request
tax abatement by filing a written application with the City Manager.
(b) Contents of Application. The application must consist of a completed application
form provided by the City or Corpus Christi Regional Economic Development
Corporation accompanied by the following:
(1) A general description of the new improvements to be undertaken.
(2) A descriptive list of the improvements for which abatement is requested.
(3) A list of the kind, number, and location of all proposed improvements of the
property.
(4) A map and metes and bounds property description.
(5) A time schedule for undertaking and completing the proposed improvements.
(6) In the case of a modernization or expansion project, a statement of the
assessed value of the Facility, separately stated for real and personal property,
must be given for the tax year immediately preceding the application.
(c) Additional Information. The City may require additional financial and other
information that the City deems appropriate for evaluating the financial capacity and
other relevant factors of the applicant.
(d) Written Notification to Other Governing Bodies. Upon receipt of a completed
application, the City Manager will forward a copy of the application to the presiding
officer of the governing body of each jurisdiction that has taxing authority over the
property covered by the application.
(e) Feasibility. After receipt of an application for abatement, the City will consider the
feasibility and the impact of the proposed tax abatement. The study of feasibility
includes, but not be limited to, an estimate of the economic effect of the abatement of
taxes and the benefit to the City and the property to be covered by the abatement.
(f) No Abatement if Construction has Commenced. No Agreement may be approved if
the application for the abatement was filed after the commencement of construction,
alteration, or installation of improvements related to the proposed Modernization,
Expansion, or New Facility.
11
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
(g) Variance. Requests for variance from the provisions of Section 2 may be made in
written form, provided, however, that no variance may extend the term of abatement
beyond ten years. The requests must 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 vote of the City Council.
Section 4. Public Hearing and Approval.
(a) Designation of Tax Abatement Reinvestment Zone. An action designating a
reinvestment zone for tax abatement under the Act may not be adopted by the City
Council until a public hearing has been held at which interested persons are entitled to
speak and present evidence for or against the designation. Notice of the hearing must
be provided to the public in the manner required by the Act.
(b) Tax Abatement Reinvestment Zone. Under Chapter 312, Texas Tax Code, a
designated Texas Enterprise Zone constitutes designation as a Reinvestment Zone
without further hearing or other procedural requirements. Under Chapter 2302 of the
Texas Government Code, a federally designated Renewal Community or Census Block
Group with poverty greater than 20% constitutes designation as a Texas Enterprise
Zone. Therefore, the Renewal Community is a Reinvestment Zone, without further
hearing.
Section 5. Agreement.
(a) Required Findings. In order to enter into an agreement, the City must find that the
terms of the proposed Agreement meets the requirements of the Act and these
Guidelines.
(b) Reservation of Rights. Nothing in these Guidelines may be construed to limit the
authority of the City to examine each application for tax abatement before it on a case-
by-case basis and determine in the City's sole and absolute discretion whether or not
the proposed project should be granted temporary tax abatement, whether or not it
complies with these Guidelines, is feasible, and whether or not the proposed temporary
abatement of taxes will inure to the long-term benefit of the City.
(c) Contents of Tax Abatement Agreement. The Agreement with the Owner of the
Facility must include all of the following:
(1) The estimated value to Facility subject to abatement and the Base Year
Value.
(2) The percentage of value to be abated each year as provided in Section 2.
(3) The commencement date and termination date of abatement.
(4) A provision that the term of the Agreement must extend until five (5) years
after the expiration of the period of tax abatement.
12
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
(5) The proposed use of the Facility, nature of construction, time schedule, map,
metes and bounds property description, and improvements list as provided in the
application.
(6) The contractual obligations in the event of default, delinquent taxes,
recapture, administration, and assignment as provided in these Guidelines, or
other provisions that may be required for uniformity or by state law.
(7) The amount of Added Value and required number of permanent full-time jobs.
(d) Time of Execution. The Agreement will normally be executed within 60 days after
the applicant has provided all necessary information and documentation.
(e) Attorney's Fees. In the event any attorney's fees are incurred by the City in the
preparation of an agreement, the fees must be paid by the applicant upon execution of
the Agreement.
Section 6. Recapture.
(a) Failure to Commence Operation During Term of Agreement.
(1) In the event that the Facility is not completed and does not begin operation
with the required minimum number of permanent full-time jobs by the January 1
following the completion of construction, no abatement may be given for that tax
year, and the full amount of taxes assessed against the property is due and
payable for that tax year.
(2) In the event that the Enterprise Zone Facility is not completed and does not
begin operation with at least one permanent full-time job per $50,000 of Added
Value within six months following the completion of construction, no abatement
may be given for that tax year, and the full amount of taxes assessed against the
property are due and payable for that tax year. In the event that the Owner of
such a Facility fails to begin operation with the required minimum number of
permanent full-time jobs by the next January 1 or for an Enterprise Zone Facility,
at least one permanent full-time job per $50,000 within 1 year following the
completion of construction, then the abatement agreement terminates and all
abated taxes during the period of construction must be recaptured and paid
within 60 days of the termination.
(b) Discontinuance of Operations During Term of Agreement. In the event the Facility is
completed and begins operation with the -required number of jobs, but subsequently
discontinues operations and the required number of permanent full-time jobs are not
maintained as required, for any reason, except on a temporary basis due to fire,
explosion, other casualty or accident, or natural disaster, the Agreement may be
terminated by the City providing abatement, and all taxes previously abated by virtue of
the Agreement must be recaptured and paid within 60 days of the termination.
13
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
(c) Delinquent Taxes. In the event that the Owner allows its ad valorem taxes to
become delinquent and fails to timely and properly follows the legal procedures for their
protest and/or contest, the Agreement automatically terminates and there may be no
abatement of the taxes for the tax year of the delinquency. The total taxes assessed
without abatement, for that tax year must be paid within 60 days from the date of
termination.
(d) Notice of Default. Should the City determine that the Owner is in default under the
terms and conditions of its Agreement, the City will notify the Owner in writing at the
address stated in the Agreement that if the default is not cured within 60 days from the
date of the notice ("Cure Period"), then the Agreement will be terminated. In the event
the Owner fails to cure the default during the Cure Period, the Agreement may be
terminated and the taxes abated by virtue of the Agreement will be recaptured and paid
as provided in these Guidelines.
(e) Actual Capital Investment. Should the City determine that the total level of capital
investment in eligible property is lower than provided in the Agreement, the difference
between the tax abated and the tax that should have been abated based upon the
actual capital investment as determined must be paid to the City within 60 days of
notification to the Owner of the determination.
(f) Reduction in Rollback Tax Rate.
(1) If during any year of the period of abatement with respect to any property any
portion of the abated value that is added to the current total value of the Facility,
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 calculating the "rollback tax rate" under Section 26.04(c)(2), Texas Tax
Code, and if the City's budget calculations indicate that a tax rate in excess of the
"rollback tax rate" is required to fund the operations of the City for the succeeding
year, then the City may recapture from the taxpayer a tax in an amount equal to
the lesser of the following:
(A) The amount of the taxes abated for that year by the City with respect
to the taxpayer.
(B) 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 City.
(2) If the City has granted an abatement of taxes to more than one taxpayer, then
the amount of the recapture, calculated under Section 6(f)(1)(B) above, will be
prorated on the basis of the amount of the abatement with respect to each
taxpayer.
14
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
(3) All recaptured taxes must be paid within thirty (30) days after notice the
recapture has been given to the affected taxpayer. Penalty and interest may not
begin to accrue upon the sum until the first day of the month following the thirty
(30) day notice, at which time penalty and interest accrues under the laws of the
State of Texas.
(g) Continuation of Tax Lien. The amount of tax abated each year under the terms of
these Guidelines and the Agreement must be secured by a first and prior tax lien that
continues in existence from year to year throughout the entire term of the Agreement or
until all taxes, whether assessed or recaptured, are paid in full.
(h) Automatic Termination. The Agreement must automatically terminate on and as of
the date any of the following events occur:
(1) The filing of a petition in bankruptcy by the Owner.
(2) The making by the Owner of an assignment for the benefit of creditors.
(3) Any involuntary petition in bankruptcy or petition for an arrangement under
the federal bankruptcy code is filed against the Owner.
(4) A receiver is appointed for the business of the Owner
(i) Prior Notice of Automatic Termination Not Required. In the event of automatic
termination for any of the reasons in Section 6(h), the prior notice of default provisions
in Section 6(d) do not apply.
Section 7. Administration.
(a) Annual Assessment. The applicable appraisal district shall annually determine an
assessment of the real and personal property subject to an Agreement. Each year, the
Owner shall furnish the Appraisal District with the information as may be necessary for
the abatement. Once value has been established, the Appraisal District may notify the
affected jurisdictions which levy taxes of the amount of the assessment and the
abatement.
(b) Access to Facility. The Agreement must stipulate that employees or designated
representatives of the City will have access to the Facility during the term of the
Agreement to inspect the Facility to determine if the terms and conditions of the
Agreement are being met. All inspections will be made only after giving 24 hours prior
notice and will only be conducted in the manner as to not unreasonably interfere with
the construction or operation of the Facility. All inspections will be made with one or
more representatives of the Owner and under its safety standards.
(c) Annual Evaluation. Upon completion of construction, the City individually or in
conjunction with other affected jurisdictions, will annually evaluate each Facility
receiving abatement to ensure compliance with the Agreement and report possible
violations of the Agreement.
15
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
(d) Annual Reports. The Owner shall certify to the City Council on or before April 1
each year that the Owner is in compliance with each applicable term of the agreement.
Additionally, during the term of property tax abatement, the Owner shall provide to the
City approving the abatement an annual report covering those items listed on Schedule
1 in order to document its efforts to acquire goods and services on a local basis. The
annual report must be prepared on a calendar year basis and must be submitted to the
City no later than ninety (90) days following the end of each the calendar year. The
annual report must be accompanied by an audit letter prepared by an independent
accounting firm which has reviewed the report.
(e) "Buy Lace!" Provision. Each recipient of property tax abatement shall additionally
agree 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 exception
involving purchases over $10,000.00, a justification for the purchase must be included
in the annual report. Each recipient shall further acknowledge 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 included firms, businesses, and persons who reside in
or maintain an office in the Corpus Christi Metropolitan Statistical Area. In the event of
a breach of the buy -local provision, the percentage of abatement will be proportionately
reduced equal to the amount the disqualified contract bears to the total construction
cost for the project.
(f) Right to Modify or Cancel. Notwithstanding anything in these Guidelines or in any
agreement to the contrary, the City Council may cancel or modify the agreement if the
Owner fails to comply with the Agreement.
(g) Transition Rule. For any project which obtained an Agreement within the twelve
months prior to adoption of these Guidelines, the project may, upon the agreement of
the Owner and the City, obtain an amendment to its Agreement to incorporate the terms
and conditions of these Guidelines.
16
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1
SCHEDULE 1
"Buy Local" Annual Reports
The following information must be reported to the City on a calendar -year basis during
the first four years of the tax abatement program:
1. Dollar amount spent for materials* (local).
2. Dollar amount spent for materials* (total).
3. Dollar amount spent for labor`* (local).
4. Dollar amount spent for labor** (total).
5. Number of jobs created in the construction project (local).
6. Number of jobs created in the construction project (total).
7. Number of jobs created on a permanent basis (local).
8. 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, fire 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
includes firms, businesses, and persons who reside in or maintain an office in either
Nueces County or San Patricio County.
17
2011 TAX ABATEMENT SUPPLEMENTAL GUIDELINES AND CRITERIA rjr 10052011 rev 1