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HomeMy Public PortalAboutOrdinance No. 949-03 01-14-2003 • ORDINANCE NO. 949-03 AN ORDINANCE ADOPTING GUIDELINES AND CRITERIA FOR TAX ABATEMENT AGREEMENTS WITffiN THE CITY OF RICHLAND HILLS; PROVIDING THAT TffiS ORDINANCE SHALL BE CUMULATIVE OF ALL ORDINANCES; PROVIDING A SEVERABII.ITY CLAUSE; PROVIDING FOR PUBLICATION A5 REQUIRED BY LAW; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, economic development through the creation of a new industry and expansion of existing industry that results in new wealth and/or job opportunities is important for the well being and health of the local economy; and WHEREAS, the City of Richland Hills must compete with other localities throughout the United States currently offering tax incentives to attract new facilities and plant modernization projects; and WHEREAS, the abatement of property taxes, when offered to attract businesses which bring in money from outside a community instead of merely recirculating dollars within a community, has been shown to be an effective method of enhancing and diversifying an area's economy; and WHEREAS, Chapter 312 of the Texas Tax Code requires any eligible taxing jurisdiction to • establish Guidelines and Criteria as to eligibility for tax abatement agreements prior to granting of any future tax abatement or creation of a reinvestment zone; and WHEREAS, the City Council last adopted appropriate guidelines and criteria on March 23, 1999; and WHEREAS, Chapter 312 of the Texas Tax Code provides that such guidelines and criteria are effective for at most two years, so that the guidelines and criteria adopted on March 23, 1999 have expired; and WHEREAS, the City Council now desires to adopt new tax abatement guidelines and criteria; NOW, THEREFORE BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF RICHLAND HILLS, TEXAS: SECTION 1. ESTABLISHMENT OF GUIDELINES AND CRITERIA The City Council hereby establishes the guidelines and criteria governing property tax abatement agreements as set forth on Exhibit "A" to this ordinance as the City of Richland Hills Tax • Abatement Guidelines and Criteria. • SECTION 2. TIME LIMITATION The guidelines and criteria shall be effective for two (2) years from the date of adoption, provided, however, that the guidelines and criteria may be earlier amended, modified or repealed as allowed by state law. SECTION 3. EFFECTIVE DATE This ordinance shall be in full force and effect from and after its passage and it is so ordained. SECTION 4. PROVISIONS CUMULATIVE This ordinance shall be cumulative of all provisions of ordinances and of the Code of Ordinances of the City of Richland Hills, Texas, as amended, except where the provisions of this ordinance are in direct conflict with the provisions of such ordinances and such Code, in which event the conflicting provisions of such ordinances and such Code are hereby repealed. SECTION 5. PROVISIONS SEVERABLE • It is hereby declared to be the intention of the City Council that the phrases, clauses, sentences, paragraphs, and sections of this ordinance are severable, and if any phrase, clause sentence, paragraph or section of this ordinance shall be declared unconstitutional by the valid judgment or decree of any court of competent jurisdiction, such unconstitutionality shall not affect any of the remaining phrases, clauses, sentences, paragraphs and sections of this ordinance, since the same would have been enacted by the City Council without the incorporation in this ordinance of any such unconstitutional phrase, clause, sentence, paragraph or section. SECTION 6. EFFECTIVE DATE This ordinance shall be in full force and effect from and after its passage and publication as required by law, and it is so ordained. PASSED AND APPROVED ON THIS 14 DAY OFJanuary ~ 2. 2003 G2'~~U THE ONORABLE NELDA STRODER, MAYOR • ATTEST: • TERRI WII.,LIS, CITY SECRETARY EFFECTIVE: APPROVED AS TO FORM AND LEGALITY: TIM G. SRALLA, CITY ATTORNEY • CITY OF RICHLAND HILLS TAX ABATEMENT GUIDELINES AND CRITERIA Section 1 POLICY STATEMENT The City of Richland Hills is committed to the promotion of quality development in all parts of the City and to the ongoing improvement in the quality of life for its citizens. Insofar as these objectives are generally served by the enhancement and expansion of the local economy, the City of Richland Hills will, on a case-by-case basis, give consideration to providing tax abatement as a stimulation for economic development in Richland Hills. It is the policy of the City that said consideration will be provided in accordance with the procedures and criteria outlined in this document. However, nothing herein shall imply or suggest that the City is under obligation to provide any incentive to any applicant. All applications shall be considered on a case-by-case basis. Section Z DEFINITIONS For purposes of these Guidelines and Criteria, the terms below will have the following meanings: (a) "Abatement" means the full or partial exemption from ad valorem taxes of certain • improvements on real property and/or tangible personal property in a reinvestment zone designated by the City of Richland Hills for economic development purposes. (b) "Agreement" means a contractual agreement between a property owner and a taxing jurisdiction for the purpose of tax abatement. (c) "Base Year Value" means the assessed value of either the applicant's subject real property and improvements on January 1 of the year of the execution of the agreement plus the agreed upon value of any property improvements made after January 1 but before execution of the agreement, and/or the assessed value of any tangible personal property located on the owner's real property at any time prior to the abatement period covered by the agreement. (d) "Deferred Maintenance" means improvements necessary for the continued operation which do not improve productivity or alter the process technology. (e) "Economic Life" means the number of years a property improvement is expected to be in service in a Facility. (f) "Enterprise Zone" means an area designated pursuant to the Texas Enterprise Zone Act (Chapter 2303 of the Texas Government Code). • (g) "Expansion" means the addition of buildings, structures, fixed machinery, equipment, or C:\wmdows\TEMP\Tax abatement guidelines and cr~tena.l2-17-03.wpd. Page 1 • tangible personal property for the purpose of increasing production capacity. (h) "Facility" means property improvements completed or in the process of construction which together comprise an integral whole. (i) "Lease" means a relationship whereby the business applying for a tax abatement has a contract for exclusive possession of either the real property on which improvements are to be made and/or movable personal property to be used for the operation of the business for a defined period of time. (j) "Modernization" means the replacement and upgrading of existing facilities which increase the productive input or output, updates the technology, or substantially lowers the unit cost of operation and/or extends the economic life of the facility. Modernization may result from the construction, alteration or installation of buildings, structures, fixed machinery, or equipment. It shall not be for the purpose of reconditioning, refurbishing, repairing, or completion of deferred maintenance. (k) "New Facility" means a property previously undeveloped which is placed into service by means other than, or in conjunction with, expansion or modernization, as defined herein. (1) "Personal Property" means equipment and/or tools used, or bought or leased for use, in the operation of the business applying for tax abatement, other than that which was located on the real property at any time before the period covered by the tax abatement agreement, and other than • inventory, supplies, and/or office equipment. (m) "Real Property" means the area of land defined by legal description as being owned or leased by the business applying for a tax abatement, including any improvements thereto, which is to be improved and valued for property tax purposes, and which is to be included in the Reinvestment Zone. (n) "Reinvestment Zone" means an area designated as such for the purposes of tax abatement as authorized by the City in accordance with the Texas Tax Code Chapter 312, as amended. (o) "Value to be Abated" means that portion of the assessed value of the eligible facilities which are by agreement to be exempted from taxation pursuant to the agreement, whether expressed as either a percentage of the assessed value of the eligible facilities, a percentage of the assessed value of the eligible facilities in excess of the base year value, or as an amount expressed in monetary terms. Section 2 ABATEMENT AUTHORIZED (a) Abatement Authorized on Eligible Facilities. Upon application, eligible facilities shall be considered for tax abatement as hereinafter provided. (b) Creation of New Value. Abatement may only be granted for the additional value of eligible • C:\windows\TEMP\Tax abatement guidelines and criteria.l2-17-03.wpd. Page 2 • property improvements made subsequent to and specified in an abatement agreement between the City of Richland Hills and the property owner or lessee, subject to such limitations as the City of Richland Hills may require. (c) New and Existing Facilities. Abatement may be granted to the taxable value of the new facilities and improvements to existing facilities for the purpose of modernization or expansion. (d) Elisible Property. Abatement may be extended to the value of buildings, structures, fixed machinery and equipment, site improvements, related fixed improvements, and tangible personal property, and the increased value of the real property. (e) Ineligible Property. The following types of property shall be fully taxable and ineligible for tax abatement: residential property of any type, land, supplies, inventory, deferred maintenance, , vehicles, property to be rented or leased (except as provided in Section (f)), property that is associated with any activity which is illegal under federal, state and local law, and propertyowned by an organization owned, operated, or directed, in whole or in part, by a political subdivision of the State. (f) OwnedlLeased Facilities. If a leased facility is granted abatement, the agreement shall be executed with the owner and lessee. Prior to any tax abatement agreement being executed, a copy of the lease shall be provided to the City. • (g) Economic Qualification. In order to be eligible for designation as a reinvestment zone and receive value added tax abatement, the planned improvement: (I) must be expected to have an increased appraised ad valorem tax value of at least $500,000 based upon the Tarrant County Appraisal District's assessment of eligible property. However, this requirement may be waived at the discretion of City Council; or (2) must be expected to prevent the loss of payroll, or retain, increase, or create payroll in Richland Hills, Texas. (h) Standards and Procedures for Tax Abatement. Any request for tax abatement shall be reviewed by the Board of the City of Richland Hills Industrial Development Corporation. This committee serves as a recommending body to the City Council whether tax abatement should be offered in each individual case. Their recommendation shall be based upon the subjective evaluation of the criteria described herein, as well as any other factors and criteria deemed by the Board to be significant. The Board's recommendation is non binding. After the Board makes its recommendation, the City Council shall determine, in its sole discretion, whether to grant tax abatement, on what conditions, and, if abatement is granted, the percentage of value to be abated and the duration of the tax abatement. In making their decisions, the Board and City Council shall consider the following factors: • Pa e 3 C:\windows\TEMP\Tax abatement guidelines and criteria.l2-17-03.wpd. g • (1) value of land and existing improvements, if any; (2) type and value of proposed improvements; (3) economic life of proposed investments; (4) number of existing jobs to be retained by proposed improvements; (5) number of type of new jobs to be created by proposed improvements; (6) amount of local payroll to be created; (7) whether the new jobs to be created will be filled by persons residing or projected to reside within the City of Richland Hills; (8) amount of local sales taxes to be generated directly; (9) amount property tax base valuation will be increased during the term of abatement and after the expiration of the abatement; (10) whether the applicant is qualified for a freeport exemption, and if so, what percentage of inventory valuations qualify and the dollar value of exemption each year for each • taxing entity; (11) the costs to be incurred by the City of Richland Hills to provide infrastructure or services directly resulting from the new improvements; (12) the amount of ad valorem taxes to be paid to the City of Richland Hills during the abatement period considering (a) the existing valued base year; (b) the percentage of new value abated; (c) the abatement period; and (d) the value after expiration of the abatement period; (13) the population growth of the City of Richland Hills that occurs directly as a result of the proposed improvements and how this will effect the infrastructure needs of the City; (14) the types and values of public improvements, if any, to be made by applicant seeking abatement; (15) whether the proposed improvements compete with existing businesses to the detriment of the local economy; (16) the impact on the business opportunities of existing businesses; • Pa e 4 C:\windows\TEMP\Tax abatement guidelines and criteria.l2-17-03.wpd. g • (17) the attraction of other new businesses to the area; (18) the overall compatibility with the zoning ordinance and comprehensive plan for the City Council; (19) whether the project is environmentally compatible with no negative impact on quality of life perceptions; (20) any other factor(s) related to the proposed improvements that may have an effect, positive or negative, on the City of Richland Hills and other affected taxing entities. Each application shall be reviewed on its merits utilizing the factors provided above. After such review, abatement may be denied entirely or may be granted to the extent deemed appropriate after evaluation. (i) Denial of Abatement. Neither a reinvestment zone nor abatement agreement shall be authorized if it is determined that: (1) there would be a substantial adverse effect on the provision of government service or tax base; (2) the applicant has insufficient financial capacity; • (3) planned or potential use of the property would constitute a hazard to public safety, health or morals; (4) violation of other codes or laws; or (5) any other reason deemed appropriate by the City Council of the City of Richland Hills. (j) Taxabilitv. During the term of the abatement agreement, taxes shall be fully payable on the following property as provided by law: (1) the assessed value of the ineligible property; and (2) the base year value of existing eligible property as determined each year; and (3) that portion of the value of the eligible property which is not included in the value to be abated. (k) Lapse of Agreement. All taxable property shall be fully taxable at the end of the abatement period. • C:\windows\TEMP\Tax abatement guidelines and criteria.l2-17-03.wpd. Page 5 • (1) Value and Term of Abatement. Upon execution of an abatement agreement, abatement shall be effective as provided therein, or, if no effective date is provided therein, upon January 1 immediately following the date of execution of the agreement. The term of the agreement shall be as provided in the agreement, provided, however, that if the term expressed in the agreement would be contrary to law, the term of the agreement shall be deemed to be that period of time which is closest to the expressed term of the agreement which would be consistent with prevailing law. Likewise, the value to be abated shall be as provided in the agreement, provided, however, that if the value to be abated as expressed in the agreement would be contrary to law, the value to be abated shall be deemed to be that amount which is closest to the value to be abated expressed in the agreement which would be consistent with prevailing law. Under no circumstances, however, shall the value to be abated in any year exceed the assessed value of the eligible property in said year. (1) Discretion not Limited. The adoption of these guidelines and criteria for tax abatement shall not limit the discretion of the City Council to decide whether to enter into a specific tax abatement agreement and shall not create any property, contract or other legal right in any person to have the City Council consider or grant a specific application or request for tax abatement, except to the extent, if any, that such specific guidelines and criteria are mandated by then prevailing state or federal law. (m) Conflict of Interest Prohibited. Property that is owned or leased, in whole or in part, by a member of the City Council or member of the Planning and Zoning Commission is excluded from property tax abatement. • Section 3 APPLICATION (a) Application Reduired Any present or potential owner of taxable property in Richland Hills, Texas may request the creation of a reinvestment zone and tax abatement by filing a written request with the City of Richland Hills. The application shall consist of a completed application form which shall provide detailed information on the items described in Section 2(h) hereof, a map and legal description, an estimated time schedule for undertaking and completing the planned improvements, and such financial and other information as the City Manager or his designee may deem appropriate for evaluating the financial capacity of the applicant and other relevant factors. A statement of the assessed value of the property and facilities for the tax year immediately preceding the application, separately stated for real and personal property, shall also be provided. The applicant shall state the value and account numbers used by the Tarrant County Appraisal District as of the January 1 valuation date prior to the date of the execution of a Tax Abatement Agreement as follows: Account Number: Personal Property $ Account Number: • C:\windows\TEMP\Tax abatement guidelines and criteria.l2-17-03.wpd. Page 6 • Land $ Improvements $ In addition to any information requested by the City Manager or his designee, the Planning and Zoning Commission or the City Council may request such additional information as they deem relevant during the review process described herein. (b) Review by Economic Development Corporation. The application shall then be forwarded to the Richland Hills Economic Development Corporation for review by the Board of said Corporation and possible recommendation to the City Council of the City of Richland Hills for that final disposition, provided, however, that the City Council may elect to act upon any application without prior review by the Board of the Richland Hills Economic Development Corporation in its discretion. (c) Review by the City Council. After the Board of the Richland Hills Economic Development Corporation has made its recommendation, the application shall be placed upon the City Council agenda, provided, however, that the City Council may elect to act upon any application without prior review by the Board of the Richland Hills Economic Development Corporation in its discretion. (d) Deficient Application. Neither the absence of any required information in the application nor any other deficiencies shall prohibit either the Board of the Richland Hills Economic Development • Corporation or the City Council from acting on the application, should they decide, in their discretion, to proceed. (e) Notice and Hearing_ Prior to taking any action provided for herein, the City Manager shall provide for the giving of any notice to those parties entitled to receive notice as provided by Chapter 312 of the Texas Tax Code and other prevailing law, and the City shall provide for any public hearings required by prevailing law. (f) Feasibility Studv and Staff Recommendations Before taking the application under consideration, any member of either the Board of the Richland Hills Economic Development Corporation or the City Council may request the City Manager to prepare a feasibility study and/or to make recommendations regarding the application. In addition, the City Manager or his designee may, on his own initiative, prepare a feasibility study and/or to make recommendations regarding the application, provided, however, that the absence of such a feasibility study and/or recommendations shall not prohibit either the Board of the Richland Hills Economic Development Corporation or the City Council from acting on the application, should they decide, in their discretion, to proceed, even if one or more members thereof has requested such information. (g) Pro np~y Information. All proprietary information of the applicant required by the City for the purposes of the application shall be considered confidential to the extent provided by law, provided, however, that by making application for tax abatement, the applicant waives any claim for damages for disclosure of such information to the public or another third party by any representative • Pa e 7 C:\windows\TEMP\Tax abatement guidelines and criteria.l2-17-03.wpd. g • of the City. Section 4 AGREEMENT If the City Council approves the creation of the reinvestment zone encompassing the applicant's property, the City Council may enter into a tax abatement agreement with the applicant as described herein and as permitted by prevailing law. In such event, the City of Richland Hills shall formally pass a resolution and execute a written agreement with the owner of the Facility and/or lessee, in full compliance Chapter 312 of the Texas Tax Code and other prevailing law. Section 5 ADMINISTRATION (a) Procedure for Assessment. Each year, the company or individual receiving abatement shall furnish the Appraiser and the City of Richland Hills with such information as may be necessary to calculate the abatement. The Chief Appraiser for the Tarrant County Appraisal District will annually determine the an appraised value of the real and personal property comprising the reinvestment zone. Once the appropriate values have been established, the Chief Appraiser will notify the City Richland Hills of the amount of the assessment pursuant to the agreement. (b) Verification of Compliance. Upon completion of construction, the City Manager or his • designee shall annually evaluate each facility receiving abatement to insure compliance with the agreement, and a formal report shall be made to the City Council of Richland Hills regarding the findings of each evaluation. Such evaluation may include a physical inspection of the facility. If the owner or operator of the facility denies the City Manager or his designee reasonable and prompt access, such denial may be deemed to be non-compliance authorizing termination of the agreement. (c) Enforcement. In the event that the facility receiving abatement is not in compliance with the agreement, the City Council may elect to terminate the agreement on the terms and conditions permitted therein and/or under applicable prevailing law. In the event the agreement is terminated, the abatement of taxes for the tax year of such termination shall be void, and the property fully taxable as if the agreement had lapsed or expired on its own terms. In addition, the City Council may elect to recapture all taxes previously abated pursuant to the agreement to the fullest extent allowed by prevailing law. (d) Proprie~ry Information. All proprietary information of the recipient of a tax abatement required by the City for the purposes of compliance and enforcement shall be considered confidential to the extent provided by law, provided, however, that by making application for tax abatement, the applicant waives any claim for damages for disclosure of such information to the public or another third party by any representative of the City. Section 6 • STATE ADMINISTRATION C:\windows\TEMP\Tax abateme~rt gutdelmes and crrtena.l2-17-03.wpd. Page 8 The City Manager may designate the Director of Economic Development for the City or other person as the City Liaison with the State for the purpose of meeting all reporting requirements imposed by Chapter 312 of the Texas Tax Code or other state law. Section 7 EFFECT ON OTHER REGULATIONS The existence of a tax abatement agreement does not affect or modify the applicant's obligation to satisfy all other obligations, duties and responsibilities imposed by any other law, regulation, code or ordinance. Section S SUNSET PROVISIONS These Guidelines and Criteria are effective upon the date of their adoption and will remain in force for two years thereafter, unless amended by three-quarters vote of the City Council of the City of Richland Hills, at which time all reinvestment zones and tax abatement agreements created pursuant to these provisions will be reviewed to determine whether the goals have been achieved. Based on that review, these Guidelines and Criteria maybe modified, renewed, or eliminated. • • C:\windows\TEMP\Tax abatement guidelines and criteria.l2-17-03.wpd. Page 9