Loading...
HomeMy WebLinkAboutC2008-438 - 11/11/2008 - ApprovedTAX ABATEMENT AGREEMENT THE STATE OF TEXAS COUNTY OF NUECES This Tax Abatement Agreement ("Agreement") is made and entered into by and between the City of Corpus Christi, Texas ("City") and Metropolis Lofts, LLC, a Texas Limited Liability Company ("Owner"), the owner of taxable property in the City of Corpus Christi, Texas, located at 401 and 405 North Chaparral Street, Corpus Christi, Nueces County, Texas ("Property"). I. AUTHORIZATION This Agreement is authorized by the Texas Property Redevelopment and Tax Abatement Act, Texas Tax Code, Chapter 312, as amended ("Act"), and is subject to the laws of the State of Texas and the charter, ordinances, and orders of the City. II. DEFINITIONS A. As used in this Agreement, the following terms have the following meanings: 1. "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 under the Act 2. "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." 3. "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 execution of this Agreement, plus the agreed upon value of Improvements made after January 1, but before the execution of this Agreement. 4. "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. (a) The Construction Phase ends upon the earliest to occur of the following events: (1) When a certificate of occupancy is issued for the project (if within City limits). 2008-438 11/11/08 Page 1 of 13 Res. 027932 Metropolis Lofts 17032008_1.doc Metropolis Lofts (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 (2) years after the date of this Agreement. (b) The determination of the end of the Construction Phase is made by the City, in its sole and absolute discretion, based upon the above criteria and the other factors as the City may deem relevant. (c) The determination of the end of the Construction Phase by the City is conclusive, and any judicial review of the determination is governed by the substantial evidence rule. 5. "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 under this Agreement. A list of the Eligible Property is set forth in the Project Description, which is attached to this Agreement as Exhibit A and made a part of this Agreement. During the Construction Phase of the Eligible Property, the Owner may make the change orders to the Eligible Property as are reasonably necessary to accomplish its intended use, provided that no the change order may be made which will change the qualification of the project as a "Facility" under the City of Corpus Christi Guidelines for Granting Tax Abatement ("Guidelines"). 6. "Facility" means a Central Business District (CBD) Residential Facility approved by the City under the Guidelines. 7. "Improvements" means the buildings, portions of buildings, and other improvements, including fixed machinery and equipment, used for commercial or industrial purposes on the Property. 8. "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); any improvements, including those to produce, store or distribute natural gas, fluids or gases, which are 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 of Texas or its political subdivisions or by any organization owned, operated, or directed by a political subdivision of the State of Texas; unless any of the above types of property are specifically authorized by the City. Page 2 of 13 TAX ABATEMENT AGREEMENT -Metropolis Lofts 11032008_1.doc B. The Guidelines adopted by the City are incorporated as a part of this Agreement. Except as the Guidelines are specifically modified by this Agreement, all definitions in the Guidelines are applicable to this Agreement. III. PROPERTY A. The Property is an area within the City of Corpus Christi, Texas, located in whole or in part within the jurisdiction of the City, and is more fully described in Exhibit B attached to this Agreement and made a part of this Agreement. The Property is located within a zone for tax abatement established under Chapter 312 of the Texas Tax Code, as amended, by the City of Corpus Christi, Texas. C. The Nueces County Appraisal District has established the following combined values for the Property as of the January 1, 2007. Account No. R191705 0540-0012-0010 R191707 0540-0012-0040 Personal property $0.00 Account No. R191705 0540-0012-0010 R191707 0540-0012-0040 Land $198,556.00 Improvements $1,376,109.00 C. The City 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: $0.00 D. 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: $1,574,665.00 IV. TERM OF ABATEMENT AND AGREEMENT A. The City agrees to abate the ad valorem taxes on the Eligible Property under this Article and Articles V and VI of this Agreement. The Abatement is effective with the January 1 valuation date immediately following the date of execution of this Agreement. The Abatement continues for up to two (2) years during the period of the Construction Phase and for the next five (5) full tax years after the Construction Phase, expiring as of December31 of the fifth tax year. If the period of the Construction Phase exceeds two Page 3 of 13 TAX ABATEMENT AGREEMENT -Metropolis Lofts 11032008_1.doc (2) years, the Facility is considered completed for purposes of Abatement, and in no case may the period of Abatement, inclusive of construction and completion exceed seven (7) tax years. The years of Abatement provided in this Agreement in each instance coincide with the tax year commencing on January 1 and expiring on December 31, and in no event may the Abatement extend beyond December 31 of the fifth tax year. This Abatement also covers as Eligible Property those supplemental improvements to the Eligible Property that are added or constructed during the post- construction five (5) year period of Abatement. In no event, however, may the total Abatement period for the Eligible Property exceed the maximum seven (7) year Abatement period for the entire project as specified in this Agreement. B. The term of this Agreement continues for a period of five (5) years following expiration of the abatement period. All terms and conditions imposed upon the Owner continue in effect during the period, and the Owner is obligated specifically to continue the minimum employment levels specified in this Agreement. Any default is be subject to the provisions of Article VIII of this Agreement. V. TAXABILITY During the period that the Abatement is effective, taxes is payable as follows: 1. The value of the land comprising the Property is fully taxable. 2. The Base Year Value of existing Improvements comprising the Property is fully taxable. 3. The value of Ineligible Property is fully taxable. 4. The Added Value of Eligible Property is abated under Article VI of this Agreement. VI. AMOUNT OF ABATEMENT A. The Abatement provided by this Agreement is based upon improvements for a Central Business District Residential Facility -- residential multi-family housing. There is no job creation requirement. The percentage of tax abated for each dollar of Added Value is under the following schedule: Percentage of Abatement ons ruc ion eno (not to exceed 2 years) ° Yearl 100% Year 2 100% Page 4 of 13 TAX ABATEMENT AGREEMENT -Metropolis Lilts 11032008_1.doc Year3 100% Year 4 100% Year 5 100% B. At the time of execution of this Agreement, the Owner reasonably estimates and represents to the City that the Added Value comprising permanent Improvements upon completion of the Construction Phase is: $9,000,000.00 ("Estimated Added Value"), of which $9,000,000.00 is eligible for tax abatement. C. In the event that upon completion of the Construction Phase, the Added Value of permanent Improvements, as determined by the Appraisal District, is at any time 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 under this Agreement, an amount equal to the then current tax rate of the City 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" includes casualty losses, national economic factors, shutdowns due to governmental regulations, strikes, acts of war; and the like. D. The formula for calculating the 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 "A." During the Construction Phase, the Owner may make the change orders to the project that are reasonably necessary, provided that no the change order may be made that will change the qualification of the project as a "Facility" under the Guidelines. All improvements must be completed under all applicable laws, ordinances, rules, or regulations. During the term of this Agreement, use of the Property is 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. Page 5 of 13 TAX ABATEMENT AGREEMENT -- Metropolis Lofts 11032008_1.doc VIII. EVENTS OF DEFAULT AND RECAPTURE A. Failure to Commence Operation During Term of Agreement. In the event that the Facility is not completed by the January 1 following the completion of construction, no abatement is given for that tax year, and the full amount of taxes assessed against the property is due and payable for that tax year. In the event that the Owner fails to begin operation by the next January 1, then this Abatement Agreement terminates and all abated taxes during the period of construction are recaptured and must be paid within 60 days of the 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 of the Agreement after the completion of construction, for any reason except on a temporary basis due to fire, explosion, or other casualty, accident, or natural disaster, the Agreement may be terminated by the City, and all taxes previously abated by virtue of this Agreement are recaptured and must paid within 60 days of the termination. C. Delinquent Taxes. In the event that the Owner allows its ad valorem taxes to become delinquent or fails to timely and properly follow the legal procedures for their protest or contest, this Agreement terminates and the abatement of the taxes for the calendar year of the delinquency also terminates. The total taxes assessed without abatement for that calendar year must be paid within sixty (60) days from the date of termination. Penalty and interest do 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 the sixty (60) day notice, at which time penalty and interest accrues under the laws of the State of Texas. Penalty and interest on the amount of taxes originally levied based upon the Abatement begin to accrue as of the date the taxes were due under the laws of the State of Texas. D. Notice of Default. Should the City determine that the Owner is in default under the terms and conditions of this Agreement, City must notify the Owner that if the default is not cured within sixty (60) days from the date of the notice ("Cure Period"), then this Agreement may be terminated. In the event the Owner fails to cure the default during the Cure Period, this Agreement may be terminated and the taxes abated by virtue of the Agreement will be recaptured and must be paid as provided in this Agreement. E. Actuat 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 completion of the Construction Phase is lower than the Estimated Added Value the that plieable; fer-eaeh-year~laring-whi°` -- Abatement has been granted, the difference between the tax abated and the tax that should have been abated based upon the actual Added Value is determined by the City and must paid within 60 days of notification to the Owner of the determination. Penalty and interest does not begin to accrue upon the sum until the first day of the month following the sixty (60) day notice, at which time penalty and interest accrues under the laws of the State of Texas. Page 6 of 13 TAX ABATEMENT AGREEMENT -Metropolis Logs 11032008_1.doc F. Reduction in Rollback Tax Rate. 1. If during any year of the period of Abatement any portion of the abated value is added to the current total value of the City, 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) of the 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 recaptures from the Owner 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 Property. (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 subparagraph (b) above is prorated on the basis of the value of the abatement with respect to each taxpayer. 3. This event does not constitute a "default" under this Agreement, and the sixty (60) day Cure Period provided above does not apply. The recaptured taxes must be paid within thirty (30) days after notice of the rollback in tax rate has been given to the Owner. Penalty and interest do 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 accrue under the laws of the State of Texas. G. Continuation of Tax Lien. 1. The amount of tax abated each year under the terms of this Agreement is secured by a first and prior tax lien, which continue in existence from year to year until the time as this Agreement between the City and Owner is fully performed by Owner, or until all taxes, whether assessed or recaptured, are paid in full. H. City Council Reserves Ripht to Terminate of Modify Agreement. In the event of any default by Owner, the City Council reserves the right to terminate or modify this Agreement. I. Owner's right to appeal. 1. Owner must be afforded written notice of the default and the opportunity to cure as provided above. Page 7 of 13 TAX ABATEMENT AGREEMENT -Metropolis Lofts 11032008_1.doc 2. If Owner believes the 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 City. 3. Owner shall remit to the City, within the 60-day period, any additional or recaptured taxes levied under the payment provisions of Texas Tax Code § 42.08. 4. If the final determination of the appeal increases Owner's tax liability above the amount paid, Owner shall remit the additional tax under Tax Code § 42.42. 5. If the final determination of the appeal decreases Owner's tax liability, the City will refund the Owner the difference between the amount of tax paid and the amount of tax for which Owner is liable under Tax Code § 42.43. IX. ADMINISTRATION A. Inspections. The Owner shall allow employees and/or representatives of the City 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 conducted in the manner as to not unreasonably interfere with the construction or operation of the Facility. All inspections must be made with one or more representatives of the Owner and under Owner's safety standards. B. Appraisals. 1. The Chief Appraiser of the Nueces County Appraisal District annually determines: (a) The taxable value of the real and personal property comprising the Property taking into consideration the Abatement provided by this Agreement. (b) The full taxable value without Abatement of the real and personal property comprising the Property. 2. The Chief Appraiser records both the abated taxable value and the full taxable value in the appraisal records. e u axa a va ue tgure t 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. 4. Each year the Owner shall furnish the Chief Appraiser with the information outlined in Chapter 22, Texas Tax Code, as amended, as may be necessary for the administration of the Agreement specified in this Agreement. Page 8 of 13 TAX ABATEMENT AGREEMENT -- Metropolis Lofts 11032008_1.doc C. Annual Reports. 1. Owner shall certify to the governing body of the City on or before April 1 each year that the Owner is in compliance with each applicable term of this Agreement. 2. Additionally, during the initial four years of the term of property tax abatement, Owner shall provide to the City an annual report covering those items listed on Schedule I attached to this Agreement in order to document the efforts of the Owner to acquire goods and services on a local basis. 3. The annual report must be prepared on a calendar year basis and is submitted to the City no later than ninety (90) days following the end of each the calendar year. 4. The annual report must accompanied by an audit letter prepared by an independent accounting firm which has reviewed the report. 5. The copies of the four prior quarterly IRS 941 returns must be provided to verify employment D. "Buy Local" Provision. 1. The Owner shall 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. 2. In the case of an exception involving a purchase over $10,000.00, the justification for the purchase must be included in the annual report. 3. 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. 4. For the purposes of this provision, 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. 5. In the event of a breach of the buy local provision, the percentage o abatement is proportionately reduced - to the amount the disqualified contract bears to the total construction cost for the project. X. ASSIGNMENT Page 9 of 13 TAX ABATEMENT AGREEMENT -Metropolis Lofts 11032008_1.doc A. 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. B. The Owner may assign this Agreement to any other new owner or lessee of the Facility with the prior written consent of the City, which consent may not be unreasonably withheld. C. Any assignment must provide that the assignee shall irrevocably 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. D. In the event more than one entity is Owner under this Agreement, the obligations of the entities is joint and several. E. Any assignment of this Agreement is to an entity that must provide substantially the same improvements to the Property, except to the extent the improvements have been completed. F. No assignment is approved if the Owner or any assignee is indebted to the City for ad valorem taxes or other obligations. XI. NOTICES A. Any notice required to be given under the provisions of this Agreement must be in writing and are duly served when deposited, with the proper postage prepaid, and registered or certified, return receipt requested, with the United States Postal Service, addressed to the City or Owner at the addresses listed below. B. If mailed, any notice or communication is deemed to be received three days after the date of deposit in the United States Mail. Unless otherwise provided in this Agreement, all notices is delivered to the following addresses: To the City: CITY OF CORPUS CHRISTI 1201 Leopard Street P. 0. Box 9277 Corpus Christi, Texas 78469 Attn: City Manager To the caner: , LZ c/o J. Golden Properties, Inc. 143 W. 4"' Street Yorktown, Texas 78164 C. Either party may designate a different address by giving the other party ten days" written notice. Page 10 of 13 TAX ABATEMENT AGREEMENT - Metropolis Lofts 11032008_t.doc This Agreement has been executed by the parties in multiple originals or counterparts, each having full force and effect. Executed this ~bday of ~t /L~~i3'kk2PA, 2008. ATTEST: CITY OF CORPUS CHRISTI, TEXAS Armando Chapa /~ngqtj R. ~5cobar City Secretary City'Manager APPROVED AS TO FORM: By: R. ay einin First Assistar City Attorney For City Attorney THE STATE OF TEXAS COUNTY OF NUECES r This instrument was acknowledged before me on (~ oP~.trythe v I , 2008, by .Qrw~tl R. ~s'r~6ar•, -TnFerwCity Manager, City of Corpus Christi, Texas, a Texas home-rule municipal corporation, on behalf of the corporation. Notary Pu lic, Sta f Texas HOLLY HOUGHTON MY COMMISSION EXPIPES Seplertber24,2012 ~' ~ I~~ AUTHORILt~ {T COUNCIL. Og SECRETARY Page 11 of 13 TAX ABATEMENT AGREEMENT -Metropolis Lofts 11032008_1.doc OWNER: METROPOLIS LOFTS, LLC By its Member: J. Golden Properties, Inc. ey: John M. Golden President J. Golden Properties, Inc. THE STATE OF TEXAS COUNTY OF NUECES This instrument was acknowledged before me on _~~(q~P~2 ~, 2008, by John M. Golden, President, J. Golden Properties, Inc., on ehalf of Metropolis Lofts, LLC, a Texas domestic limited liability company, on behalf of the company, as its member. ,.a•o~~ TERESA L. RANLY ~''~ ,'~ Notary Public ~` ~('~ State of Texas ~'°Ea*~ My Comm. Exp. 04/24/2011 Page 12 of 13 TAX ABATEMENT AGREEMENT -Metropolis Lofts 11032008_1.doc SCHEDULE 1 "Buy Local" Annual Reports The following information is reported to the City on acalendar-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" are 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 shall include firms, businesses, and persons who reside in or maintain an office in either Nueces County or San Patricio County. TAX ABATEMENT AGREEMENT -Metropolis Lofts 11032008_1.doc Exhibit A Project Plan Renovation of existing buildings into mixed-use residential apartments over commercial retail. For lease apartments and for lease retail. At least $9,000,000.00 will be spent on improving the existing buildings. Metropolis Lofts, LLC will create 5 permanent full-time jobs to manage and operate the property. It is anticipated that the commercial retail spaces will result in the creation of 50 permanent full-time or part-time jobs. A-1 TAX ABATEMENT AGREEMENT -Metropolis Lofts 11032008_1.doc EXHIBIT B PROPERTY DESCRIPTION Main building, located at 401-405 N. Chaparral Street, is a 5-story, poured-in-place concrete construction building, 114,000 sq. feet. Legal description Beach Subdivision, Block 12, Lot 1A. Building 2, located at 401-405 N. Chaparral Street, is a 3-story, poured-in-place concrete construction building, with 10,000 sq. feet. Legal description Beach Subdivision, Block 12, Lot 1A. B-1 TAX ABATEMENT AGREEMENT -Metropolis Lofts 11032008_1.doc