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HomeMy WebLinkAboutC2006-528 - 5/30/2006 - ApprovedTAX ABATEMENT AGREEMENT THE STATE OF TEXAS CO~JNTY OF NUECES This T'ax Abatement Agreement (hereinafter referred to as the "AgreemenY') is made and entereci into by and between the CITY OF CORPUS CHRISTI, TEXAS (the `Governmental L'nit') and ULLAH [NVESTMEI~TS, INC. (the 'Owner'), the owner of taxable property in the Citv of Corpus Christi, Texas, Lot i, Block 8. River Square Unit 2(the "Property"). I. AUTHORIZATION This Agreement is authorized by the Texas Property Redevelopment and Tax Abatement Act. Texas Tax Code, Chapter 31 ~. 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. [I. DEFINITIONS As used in this A~-eement, the following terms shall have the meanings set forth below: A. "Base Year 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 ~xecution of this Agreement plus the agreed upon value of Improvements made after :f anuarv 1 but before the execution of this Agreement. B. "Improvements" means the buildings or portions thereof and other improvements, ~ncluding fixed machinery and equipment, used for commercial or industrial purposes i~n the Property. C. "Construction 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 Construction Phase ends upon the earliest to occur of the following events: i 1) when a certificate of occupancy is issued for the project (if within City limits); or ( 2) when commercial pruduction of a product or provision of a service is achieved at the facility, or i 3) when the architect or engineer supervising construction issues a certificate of substantial completion, or some similar instrument, or 2006-528 05/3Q/06 Res026808 UllahRenewComm L111ah Investments ~~a~~~~ (4) two (2) years after the date of this Agreement. The determination of the end of the Construction Phase shall be made by the Governmental tlnit, 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 conclusive, and any judicial review of such determination shall be governed by the substantial evidence rule. D. ~`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 be constructed pursuant to this Ageement. 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 Owner 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 Guidelines and Criteria for Granting Tax Abatement approved by the Governmental Unit. F. "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 ~xcept as provided in Section 2(e); improvements for the generation or transmission of ~lectrical energy not whally consumed by a New Facility or expansion; any ~mprovements, ~ncludin~; those to produce, store or distribute natural gas, fluids or ~ases, which are not integral to the operation of the Facility; improvements to real property which have an economic life of less than I S years; property owned or used by the State of Texas or its political subdivisions or by any organization owned, operated f~r directed by a political subdivision of the State of Texas; unless any of the above types of propem are specifically authorized by the Governmental Unit. G. '`Added Value" means the increase In the assessed value of the Eligible Property as a a esult uf "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 Center 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 Governmental tlnit as set forth in the Guidelines and Criteria for Granting Tax Abatement adopted by the Governmental LJnit. H: LegDir/gws/EcoDe~~-TaxAbate/U11ahRenewComm Page 2 of 1 3 The Guidelines and Criteria for Granting Tax Abatement adopted by the Governmental Unit are incorporated as a part of this Agreement. Except as the same may be modified herein, all definitions set forth therein are applicable to this Agreement. III. 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" attach~d hereto and made a part hereo£ Said Property is located within a zone for tax abatement established pursuant to Chapter 31 ? of the Texas Tax Code, as amended, by the City of Corpus Christi. Texas. The Nueces County ~ppraisal 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. rva Per•sonal pr~oper•t-% $ n/a Account No. R292018 Land $ 225,124 Improveme-ats ~ 1,300,000 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 Value: $1,300,000. [V. TERM OF ABATEMENT AND AGREEMENT The Governmental 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 three (3) full tax years thereafter, expiring as of December3l of 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 Abaternent inclusive of construction and completion exceed five (5} tax years. The years of Abatement provided herein shall in each instance coincide with the tax year commencing on January 1 and expiring on December 3 l, and in no event shall the Abatement extend beyond December 31 of the fifth tax year. This Abatement shall also cover as Eligible Property those H: LegDir- gws/EcoDe~; TaxAbatelUllahRenewComm Page 3 of l3 supplemental impruvements to the Eligible Property that are added or constructed during the post-constr~etion three (3 ) year period ot' Abatement. In no event, however, shall the total Abatement period for such Eligible Property exceed the maximum five (5) year Abatement period for the entire project as specified herein. The tertn of this Ageement shall continue for a period of five (5} years following expiration oi~the abatetnent period. All terms and conditions imposed upon the Owner shall continue in etfect during such period, and the Owner shall be obligated specifically to continue the minimum e~nployment levels specified herein. Any default shall be subject to the provisions of Article VIII hereof. V. TAXABILITY During the period that the Abatement is effective, taxes shall be payable as follows: (1) 'The value of the land comprising the Property shall be fully taxable; (2) The Base Year Value of existing Improvements comprising the Property shall be fully taxable; {3) The value of Ineligible Property shall be fully taxable; and (4) The Added Value of Eligible Property shall be abated as set forth in Part VI herein. VL AMOUNT OF ABATEMENT The Abatement provided by this Agreement shall be based upon (for a Renewal Community Facilityj for each created one (1) new permanent full-time job per $50,000 of Added Va1ue to a property foilowing the completion of construction and maintains the same level of employment for the tem~ of the abatement agreement, the percentage of tax abated shall be in accordance with the f~llowing schedule_ Construction Period (not to exceed 2 years) Year l Year 2 Year 3 Percenta~e of Abatement 100% 75% 75% 0% In order to be counted as a permanent job under this Agreement, the job must be a full-time position providing regular work schedules at least 35 hours per week. For compliance purposes, the determination date shall be January 1 of each year commencing with the January 1 following the date of completion of construction. The percentage of abatement provided each year under this Ageement shall be based upon the employment information H: LegDir~gws/EcoDe~ ~ "TaxAbate/LJllahRenewComm Page 4 of 1 ~ . ~ ~ .Y _, ~,,,,. ._ ~.~..~ . . . _ . ~ _ .. , ~ _ ~ ~_ ~ . _..~_ _.,_ ._ _.,.. _...~ ._ ._... _, ~. _. _ ~,,,, as~~f January 1 of such year. As a result, the actual amount of abatement may vary from year to year based upon emplc~yment levels and property valuations. [Note: If this project is designated as a"rehabilitation projecY' under the Guidelines and Criteria 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 c~f the land and the existing improvements. The Owner and Owner's landlord specifically disclaim any abatement for improvements to the building, and the cc~venants and obligations hereof shall not be binding upon Owner's landlord. T'he sole 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 [neligible Property tor any other type of abatement category. In no event, however, may the total ti~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 Unit that the Added Value comprising permanent Improvements upon c~~mpletion of the Construction Phase shall be: $ 1,300,000 ("Estimated Added Value") In the event that upon completion of the Construction Phase the Added Value of permanent Improvements, as determirted by said Appraisal District, shall at any time thereafter during the period of Abatement be 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 dit~erence between the Added Value from eighty-five percent (SS%) of the Estimated Added V alue, 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, strikzs, acts c~f war; and the like. The formula for calculating such additional tax is outlined as follows: [Tax Rate] x[(85°~"0 of Est. Added Value - Actual AV) x(100% - Abatement%)] = Additional Tax VIL CONTEMPLATED IMPROVEMENTS T'he contemplated improvements are set forth in the Project Description attached as Exhibit "A." 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 eompleted in accordance with all applicable laws, ordinances, rules ur regulations. During the term of this Agreement, use of the H : LegDir,igws/EcoDe~~r'TaxAbate/UllahRene wC omm Page 5 of 13 Property ~hall be limited to operation of the Facility described in the Project Description cc~nsistent with the general purpose of encouraging development or redevelopment of the zone during the period of this Agreement. Owner represents and warrants that this project will add at least 26 additional permanent or full-time operating or contract employees to the project site. The current estimate of employment upon completion of construction is 26. The project is not expected to solely or primarily have the effect of transferring employment from one part <~f Nueces County to another. VIIi. EVENTS OF DEFAULT AND RECAPTURE A. Faailure to Commence Operation During Term of A~reement. In the event that the Facility is not completed and does not begin operation with the minimum number of 26 permanent jobs 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 f~r that tax year. In the event that the Owner fails to begin operation with the minimum number of 26 permanent jobs by the next January !, then the abatement Agreement shall terminate and all abated taxes during the period ~>f 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 with the required minimum number of 26 permanent jobs but subsequently discontinues operations and the minimum number of 26 permanent jobs is not maintained on any January 1 during the term of the Agreement after the completion of construction, for any reason except on a temporary basis due to tire, explosion or other casualty or accident or natural disaster, the Agreement may be terminated by the Governmental Unit, and all taxes previously abated by virtue of the agreement shall be recaptured and paid within 60 days of such termination. G Uelinquent 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 for the calendar year of the delinquency. The total taxes assessed without abatement for that calendar year shall be paid within sixty (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 of recapture under this provision until the first day of the month following ~uch sixty (60) day notice, at which time penalty and interest shall accrue in accord with the laws r~f the State of' Texas. Penalty and interest on the amount of taxes ~~riginally levied based upon the Abatement shall, of course, begin to accrue as of the ciate such taxes ~-ere 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 ~f 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 H:LegDir gws/EcoDev~`TaxAbate/UllahRenewComm Page 6 of t ~ `aid default during the ('ure Period, this Agreement may be terminated and the taxes abated by virtue 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 A~led Value during any year of the term of this Agreement after completion of the Construction Phase is lower than the Estimated Added Value such that a lower percentage uf Abatement is applicable, for each year during which an .~batement has heen 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 (;overnmental t; nit and paid within 60 days of notification to the Owner of such ~ietermination. Penalty and interest shall not begin to accrue upon such sum until the f~irst day ot~ the ~nonth following such sixty (60) day notice, at which time penalty and interest shall accrue in accord with the laws of the State of Texas. F. Reduction in Rollback T~ 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 hut is not treated as `new property value' (as defined in Section 26.012 (17) of the 1'exas 'I'ax Code) for the purpose of establishing the "effective maintenance rate" in 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 ~xcess of the `rallback ta~c rate' is required to fund the operations of the Governmental t Init for the succeeding year, then the Governmental Unit shall recapture from the Owner a tax in an amount equal to the lesser of the following: ~ I) The amount of the taxes abated for that year by the Governmental Unit with respect to the Property. t 2) The amount obtained by subtracting the rollback t~ 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 L'nit If the Governmental Unit 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 of the value of the abatement with respect to each taxpayer. This event shall not constitute a`default' under this Agreement, and the sixty (60) day Cure Period provided above shall not apply. Such recaptured ta~ces must be paid within thirty (30} days after 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 Tax Lien. The amount of tax abated each year under the terms of this ~greement shall be secured by a first and prior taa~ lien which shall continue in existence from year te~ year until such time as this Agreement between the H: LegDirigws/EcoDe~-~"I'axAbate/UtlahRenewComm Page 7 of 1 ~ C;overnmental Unit and Owner is fully performed by Owner, or until all taxes, whether assessed or recaptured, are paid in fail. In the event of any default by Owner, the governing body of the Governmental Unit reserves the right to terminate or modify this Ageement. Owner shall be afforded written notice of such default and the opportunity to cure as provided above. If Owner believes such action was impraper, Owner may file an appeal in Nueces ('ounty district court within sixty (60) days after written notice of the actic~n by the Governmental Unit. Owner shall remit to the Governmental L nit, within such 60-day period, any additional or recaptured taxes levied pursuant to the payment provisions of Texas Tax C'ode ~ 42.08. If the final determination of the appeal increases Owner's tax liability above the amount paid, Owner shall remit the additional taY pursuant to Tax Code § 42.4?. 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 far which Owner is liable pursuant to Tax Code § 42.43. [X. ADMINISTRATION It~spections. 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 onl~~ after the givin~ of twenty-four (24) hours prior notice and will only be conducted in such manner as to not unreasonably interfere with the construction and/or operation of the Facility. All inspections will be made with one or more representatives of the Owner and in accordance with Owner's safety standards. Apprai~als. The Chief Appraiser of the Nueces County Appraisal District shall annually determine (i} the taxable value of the real and personal property comprising the Property taking into consideration the Abatement provided by this Agreement, and (ii) the full t~able 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 ~ alue figure listed in the appraisal records shall be used to compute the amount ot~ 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 ot 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 Schec~ule I attached hereto in order to document the efforts of the Owner to acquire goods and sen-ices on a local basis. Such annual report shall be 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 shall be accompanied by an audit letter prepared by an independent accounting firm which has reviewed the report. H: LegDir- gws/EcoDe~ iTaxAbate/Ul lahRenewComm Page 8 of' 1 ~ `Buv Local' Provision. The Owner additionally agrees to give preference and priority to lacal manufacturers, suppliers, contractors and labor, except where not reasonably possible to do sc ~ w ithout added expense. substantial inconvenience, or sacrifice in operating efficiency. In any such exception cases involving purchases over $10,000.00 a justification for such purchase shall be included in the annual report. "The Owner further acknowledges that it is a legal and moral ohligation of persons receiving property tax abatements to favor local manufacturers, suppliers, ccmtractors and labor, all other factors being equal. For the purposes of this provision, the term `1~-ca1' 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 Patricio County. In the event of a breach of the buy local provision, the percentage of abatement shall be proportionately reduced by the amount the disqualified contract bears to the total constructicin cost for the project. X. ASSIGNMENT T'he Owner may assi~m 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 ofi the Facility with the prior written consent of the Governmental Unit, which consent shall not be unreasonably withheld. Any assignment shall provide that the assignee shall irrevocably and unconditionally assume all the duties and obligations of the assignor and become the (~wner 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 assi~~nment of this Agreement shall be to an entity that will provide substantially the same improvements to the Property, except ta the extent such improvements have been completed. No assi~nent shall be appro~ed if the Owner or anv assignee is indebted to the Governmental Unit for ad valorern 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 Governmental Unit 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 thz United States Mail. Unless c~therwise provided in this Agreement, all notices shall be delivered to the following addresses: To the Governmental Unit: CITY OF CORPUS CHRISTI, TEXAS 1?O1 Leopard Street P. 0. Box 9277 Corpus Christi, Texas 78469 Attn: C'ity Manager H: LegUir- gws/EcoDev. TaxAbate/LJ11ahRenewComm Page 9 of l 3 Tc~ the Owner: t' LLAH INVESTMENTS, INC. 5?20 Ayers C'orpus Christi, T'exas 78415 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 ot- ~ z C~*~~- ,?006. GOVERNMENT,~L UNIT: A TTES'I': Bv: / ~ :~rm~nndo Chapa, City Secretary APPROVED AS 'r0 FORM: B y~ ~~' -- G~ Smith. Assistant Citv Attorne Y ~ Y for Mary Kay Eischer, City Attornev CITY OF CORPUS CHRISTI, TEXAS By: George oe, City Manager ~~S ~- Z4 Sl~~ ~ ~ nu„r r,. .,..,.._..._.,...,....M,..~... ~~ 'r ; c;;"'+~G~ ....~..~.. ~-,~.~~~ i. ~ ~, _. .~ .,....M ._...-•--..._..-.. _... ..1 ~'L S~!'~~' iiSY 'Zy~. OWNER: LILLAH INVEST~'~'~, INC. By: Aman H: LegI)irigws/EcoDev~TaxAbate/U11ahRenewComm Page 10 of 13 SCHEDULE 1 `Buy Local" Annual Reports The following information shall be reported to the Governmental Unit on a calendar-year basis during the first four years of the tax abatement program: Dollar amount spent for materials* (local). 2. Dollar amount spent for materials (total}. i. Dollar amount spent for labor** (local). ~. Dollar amount spent for labor** (total). S. Number of jobs created in the construction project (local). ~i. Number of jobs created in the construction project (total). ,. 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 scaffQlding, 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 Patricio Countv. H : LegDir,- gws/EcoDev'TaxAbate/UllahRenewC omm Page 11 nf 13 Exhibit A i~orpus Christi Project Plan Mav 23. 200b This project will construct and operate a LaQuinta Inn and Suites with more at least 26 positions. The site is currentlv vacant. Permanent improvements $ 1,300,000 Estimated capital $ 1,300,000 H : LegDir; gws/EcoDev/T~Abate/UIIahRenewComm Page 12 of 13 EXHIBIT `B' Lot 5, Block 8, Ri~ er Square Llnit 2, a subdivision in the City of Corpus Christi, Texas, as shown by map or plat thereof recorded in the Map Records of Nueces County, Texas, and being known as 3500 McKenzie Road, Corpus Christi, Texas. H: LegDir%gwslEcoDev!'TaacAbate/LJIIahRenewComm Page 13 of 13