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memorandum Item No. 24 TO: Mayor, Mayor Pro Tem, and City Council FROM: Rose Beverly, City Manager Stephanie H. Harris, City Attorney SUBJECT: Repeal of residential tax abatement program DATE: June 9, 2025 BACKGROUND: In 2013, the City Council adopted a residential tax abatement program for new construction and renovations to single family homes. Qualifying properties could receive 5 year de-escalating tax abatements (Years 1 and 2-100%, Year 3-80%, Year 460%, and Year 5- 40%). For a renovation of an existing structure to qualify, the homeowner was required to invest at least 20% of the appraised value of the property on the renovation. The initial reinvestment zone encompassed Council Districts 1-5. In 2015, Council expanded the reinvestment zone and the program to cover all 7 Council Districts. Council reauthorized and redesignated the reinvestment zone as Reinvestment Zone No. 2025-1 and readopted program guidelines earlier this year. This is a separate program than the 5 in 5 Housing Infill Redevelopment Program which has its own guidelines and criteria adopted by separate resolution, but the 5 in 5 program also takes advantage of Reinvestment Zone 2025-1. STATUS OF ISSUE: Since its inception, the program has been utilized no more than ten times, and it has been many years since the city granted a tax abatement for a new or remodeled home. Recently, there has been some interest by subdivision developers and builders in taking advantage of the residential tax abatement program. The initial intent of the program was to promote infill anywhere in the initial reinvestment zone, and then in the expanded zone. In fact, minutes show that in 2013, the Council specifically stated that they did not want the program to extend to the creation of new subdivisions, so the intent of the program is clear. Staff has been unable to locate any documentation to indicate that the intent of the program was ever changed other than to expand the geographic zone. While the guidelines of the program do not expressly state that the program does not apply to new subdivision development, they do expressly state that applications will be considered on a case by case basis and that each application will be evaluated on its own merits. State law is also clear that no applicant is entitled to a tax abatement. Texas Tax Code Sec. 312.002(d) provides: