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16 - Chapter 380 Retail Economic Development ProgramTO: Mayor, Mayor Pro Tem & City Council FROM: Grayson Path, City Manager Stephanie Harris, City Attorney Rob Vine, Assistant City Manager SUBJECT: Chapter 380 Retail Economic Development Program DATE: February 28, 2022 BACKGROUND: On tonight's agenda, the City Council will consider an Agreement with Alpha Lake, Ltd. for a Chapter 380 Retail Economic Development Agreement. To accomplish this, the City must have a Chapter 380 Program outlining the parameters for having such an agreement. Texas Local Government Code Chapter 380.001 allows City's to establish programs "...for making loans and grants of public money ... to promote state or local economic development and to stimulate business and commercial activity in the municipality. " The full Section 380.001 is included at the end of this memo. The City approved a Chapter 380 Program several years ago, but it has been found to be too restrictive. The recent negotiations with Alpha Lake, Ltd. has led City Staff to producing a revised Chapter 380 Retail Economic Development Program. STATUS OF ISSUE: City Staff reviewed over a dozen examples of Chapter 380 programs from other communities. After careful review and pulling from these examples, we have created a short, concise, and reasonably flexible Program for the City of Paris. There are many more options we can include in this program at a future time, but for now this will give us a great starting point using incentives that we know today to be successful for development. Our primary focus at this time are grants involving calculations from Sales and Property Taxes. We have developed several incentive options as well as eligibility requirements to make this policy reasonably open, but at the same time not so easily attainable that all instantly qualify. The goal is not to simply give away public funds, but rather to incentive the growth of our local economy, thus an increase in public funding coming in. As we have stated in the public purpose, "...this Retail Economic Development Program is to protect and enhance the City's fiscal ability to provide high quality municipal services for the safety, comfort and enjoyment of Paris residents." The Retail Economic Development Agreement with Alpha Lake, Ltd. is in compliance with the attached Program, minus them having filled out an application given the City did not have an application prior to this night. This program can always be amended by the City Council at a future date. So as we have new ideas or opportunities, we can revisit this at that time. BUDGET: This item does not have a budgetary note. OPTIONS: 1. Approve the resolution authorizing the new Chapter 380 Retail Economic Development Program. 2. Request additional information, edits, and/or reject the resolution and advise City Staff. RECOMMENDATION: Approve the resolution authorizing the new Chapter 380 Retail Economic Development Program. Sec. 380.001. ECONOMIC DEVELOPMENT PROGRAMS. (a) The governing body of a municipality may establish and provide for the administration of one or more programs, including programs for making loans and grants of public money and providing personnel and services of the municipality, to promote state or local economic development and to stimulate business and commercial activity in the municipality. For purposes of this subsection, a municipality includes an area that: (1) has been annexed by the municipality for limited purposes; or (2) is in the extraterritorial jurisdiction of the municipality. Q The governing body may: (1) administer a program by the use of municipal 110aw"Um (2) contract with the federal government, the state, a political subdivision of the state, a nonprofit organization, or any other entity for the administration of a program; and (3) accept contributions, gifts, or other resources to develop and administer a program. (c) Any city along the Texas -Mexico border with a population of more than 500,000 may establish not-for-profit corporations and cooperative associations for the purpose of creating and developing an intermodal transportation hub to stimulate economic development. Such intermodal hub may also function as an international intermodal transportation center and may be colocated with or near local, state, or federal facilities and facilities of Mexico in order to fulfill its M�WWWN�Ww Added by Acts 1989, 71st Leg., ch® 555, Sec. 1, eff. June 14, 1989. Amended by Acts 1999, 76th Leg., ch. 593, Sec. 1, eff. Sept. 1, 1999. .AiT.i.ended by: Acts 2005, 79th Leg., Ch. 57 (H. B. 918), Sec. 1, eff. May 17, 2005. EXISTING CHAPTER 380 POLICY—TO BE REPLACED BY NEW PROGRAM City, ot'llaris Retail General Purpose ai�W Objectives The City of Paris is committed to the promotion and retention of high quality development in all parts of the city as part of an overall effort to improve the quality of life for its residents. Since this purpose can be served, in part, by the expansion of its commercial business, retail, and mixed use base, the City of Paris will give consideration to providing economic development grants, sales tax rebates, loans, and other incentives, such as tax abatements, as may be allowed by law as stimulation for selected economic development within the community. It is the policy of the City of Paris that consideration will be provided in accordance with the criteria set forth in this document. Nothing within this policy shall imply or suggest that the City of Paris is under any obligation to provide tax abatement or any other incentive or assistance to any applicant. All applicants shall be considered on a case -b -case basis. Applicability This Economic Development Policy establishes guidelines and criteria for economic development agreements, including possible tax abatement programs, under the provisions of Chapter 312 of the Texas Tax Code, and other economic grants, loans, or incentives as authorized by Chapter 380 of the Texas Local Government Code, the Development Corporation Act; Article 5190.6, Tex. Rev. Civ. Stat.; Article III, Section 52-a of the Texas Constitution; and other applicable laws. .���''�IIC��')IIr'Inilc l ev wl�"�IC^��"IIr'IV�Pnl: Grants, I o�' iI'i , andtl':Ieir l�"��:��"VP"IIItives l� Section I. Criteria A. Any application for economic development grants, loans, and/or other incentives shall be reviewed and approved or disapproved by the Paris City Council. In the review process, the council will, if applicable, consider the recommendations of the Lamar County Chamber of Commerce and/or the Paris Economic Development Corporation. In general, the application will be considered based upon the following: • The value added to the community by the applicant's proposed project; • The sustainability of the project; and • The likelihood of the development of the proposed project occurring without grants and/or other incentives. Specific considerations for approving economic development applications will be based upon the degree to which the proposed project: • Furthers the goals and objectives of the community as expressed in its comprehensive plan, master land use plan, and zoning ordinances; the master parks, recreation & open space plan; the Cox Field Planned Development District ordinance; the Lake Crook Planned Development District ordinance; the downtown redevelopment plan; any and all other adopted economic development plans and policies of the city and the PEDC; and any extant city infrastructure development plans and programs; • Impacts the city's costs and ability to provide existing and expanded municipal services; • Impacts the local environment, housing market, and available infrastructure; • Offers potential for long-term payback in tax revenues for the city's participation; and • Likely stimulates other desirable economic development within the city. EXISTING CHAPTER 380 POLICY—TO BE REPLACED BY NEW PROGRAM In addition, priority shall be given to: • Businesses that: 1) fill existing retail or service gaps; 2) reduce retail leakages; and/or 3) introduce new capital into the local economy from outside the city. • Highly unique or specialized businesses that draw from an unusually large trade area, thereby bringing new capital into the local economy. • Expansions of existing businesses that meet the above objectives. Section II. Funding Funds can be used for infrastructure, relocation, training, land acquisition, and other business necessities. Any such economic development grants, loans, or other incentives may come from any one or combination of the following: • Grants or loans as authorized by Chapter 380 of the Texas Local Government Code; • The general sales and use taxes of the City of Paris; • Sales and use taxes of the Paris Economic Development Corporation paid by the actual development only; • Hotel occupancy taxes paid by the actual development only; and/or • Any other lawful source of revenue of the city including, but not limited to, bond or other debt financing which furthers the purpose of economic development. Section III. Development Agreement To be eligible to apply and qualify for consideration of any grants, loans, or other incentives under this section, the applicant must submit documentation, and enter into a development agreement with the City of Paris, which ensures the following development within the city: • A minimum of 60,000 new gross leasable or owner -occupied retail square footage all contained within one mixed use development containing any combination of: retail, residential, office and other commercial space; and • The project is reasonably expected to generate a minimum of $80,000 annually in sales and use tax receipts to the city. It shall be the goal of the city to negotiate said agreements as creatively as possible, such that: • Each development shall pay for itself. • The city shall receive, whenever feasible, direct, in-kind benefits from the developer that are designed to enhance Paris's quality of life. • Little or no funds are expended by the city in advance of development, but rather the develop- ment is funded from future returns on investment. • The provision of wet utilities are specifically provided and/or planned for. • Likely traffic pattern and traffic count changes are analyzed and accommodated so that no undue detriment to public safety results from the development. Section IV. Exceptions The city may utilize lower minimum thresholds for considering and approving development agreements in the following areas: • Downtown. • Cox Field Airport PD. • Lake Crook PD. • Sustainable mixed use developments. • Other areas that may be identified. EXISTING CHAPTER 380 POLICY—TO BE REPLACED BY NEW PROGRAM rax. Abateriuneints Section I. Criteria Any application for an ad valorem tax abatement shall be reviewed and approved or disapproved by the Paris City Council. In the review process, the council will, if applicable, consider the recommendations of the Paris Economic Development Corporation and/or the Lamar County Chamber of Commerce. Considerations will be based on the same criteria as for development grants, as described above in "Economic Development Grants, Loans, and Other Incentives. Section 1. Criteria", as well as a com-parison of the use of abatements to that of other potential incentives. Section II. Value of the Abatement The amount of the abatement will be determined by the city council based on the merits of the project including, but not limited to, the factors referenced above, and the following specific economic considerations: • total capital investment, in both real and personal property; • added employment and types thereof, and • generation of tax revenues, both direct and indirect. Abatements may be granted only for the additional value of eligible property improvements made subsequent to and listed in the executed tax abatement agreement. Target thresholds are established as expected qualifying levels for abatement consideration as indicated in paragraphs A and B as follows: A. New Businesses. The project must be reasonably expected to produce an added value of $2.5 million in real and personal property improvements within the City of Paris; or to create a minimum of 100 full-time jobs with an average annual salary of at least $35,000; or to generate annual sales tax revenues to the city of at least $80,000. B. Expansion or Modernization of Existing Businesses. The project must be reasonably expected to produce an added value of $1.5 million in real and personal property improvements within the city; or to create a minimum of 50 full-time jobs with an average annual salary of at least $35,000; or to generate additional annual sales tax revenues to the City of at least $50,000. Section III. Term of Abatement An abatement may be granted for a maximum of ten years. The term of the abatement may be granted for a lesser number of years depending upon the anticipated value added to the city. The term of the abatement may also be changed in accordance with the Inspection and Inspection and Verification section of this policy if the applicant fails to comply with the terms of the contractual agreement for the abatement originally granted. Section IV. Inspection, Verification and Abatement Modification The City of Paris shall maintain its right to: (a) require the submission of an annual certification of compliance for the property receiving abatement; (b) conduct an on-site inspection of the project in each year during the life of the abatement to verify compliance with the terms of the agreement; and (c) reduce or eliminate the granted tax abatement if the applicant has failed to comply with the requirements of the abatement agreement. EXISTING CHAPTER 380 POLICY—TO BE REPLACED BY NEW PROGRAM Section V. Evaluation Upon completion of the construction of any buildings, facilities, or other property improvements upon which the abatement is based, the city shall no less than annually evaluate each project receiving an abatement to ensure compliance with the terms of the agreement. Any incidents of non-compliance will be reported to all affected taxing units. Section VI. Severability and Limitation In the event that any section, clause, sentence, paragraph or any part of this Tax Abatement Policy shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid, such invalidity shall not affect, impair, or invalidate the remainder of the guidelines and criteria in this Tax Abatement Policy, Section VII. Expiration and Modification This Tax Abatement Policy is effective upon the date of its adoption and will remain in force for two years, at which time all reinvestment zones and tax abatement contracts created pursuant to its provisions will be reviewed by the city council to determine whether the objectives of the abatement program are being achieved. Based upon that review, this Tax Abatement Policy may be modified, renewed or eliminated. However, any contracts created pursuant to this Policy will remain in effect according to their respective contract terms without regard to any change to this Abatement Policy unless mutually agreed by the contract parties. Prior to the scheduled date for review, as defined above, this Tax Abatement Policy may be modified by a three-fourths vote of the city council, as provided for in Chapter 312 of the Texas Tax Code. RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS AUTHORIZING THE CITY A CHAPTER 380 RETAIL ECONOMIC DEVELOPMENT PROGRAM; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND DECLARING AN EFFECTIVE DATE. WHEREAS, the home rule municipalities are authorized by Article 52-a of the Texas Constitution and Chapter 380 of the Texas Local Government Code to provide economic development incentives to promote local economic development and to stimulate business and commercial activity in the municipality; and WHEREAS, the City wishes to adopt a program of such development incentives for the purpose of encouraging the growth of the City's retail economy; and WHEREAS, the City has determined that adopting the Chapter 380 Retail Economic Development Program attached hereto as Exhibit A and incorporated herein by reference will: (i) further the objectives of the City; (ii) benefit the City and the City's inhabitants; and (iii) promote local economic development and stimulate business and commercial activity in the city; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS, THAT: Section 1. The findings set out in the preamble to this resolution are hereby in all things approved. Section 2. The City hereby adopts the Chapter 380 Retail Economic Development Program attached hereto and incorporated herein as Exhibit A. Section 3. This resolution shall become effective from and after the date of passage. PASSED AND APPROVED this 28th day of February, 2022. Paula Portugal, Mayor ATTEST: Janice Ellis, City Clerk APPROVED AT TO FORM: Stephanie H. Harris, City Attorney V F t �.. l J, v6 jr m Date Approved by City Council: February 28, 2022 General Purpose ITy`PS AM! �t Chapter 380 Retail Economic Development Program The City of Paris is committed to the promotion of quality development in all parts of the City and to ongoing improvement in the quality of life of its citizens. The City has developed a Retail Economic Development Program and incentives designed to encourage quality business growth, retail development and expansion of the City's sales tax revenue. This Program is established in an effort to develop and expand the local economy by promoting and encouraging development and redevelopment projects that enhance the City's economic base as well as projects that create additional revenue for the city without substantially increasing the demand on City services or infrastructure. Public Purpose The goal and public purpose of this Retail Economic Development Program is to protect and enhance the City's fiscal ability to provide high quality municipal services for the safety, comfort and enjoyment of Paris residents. In furtherance of these objectives, the City of Paris will, on a case-by-case basis, give consideration to providing economic incentives to applicants in accordance with this policy as authorized by Chapter 380 of the Texas Local Government Code, as may be amended from time to time. General Parameters 1. Nothing in this document is intended to imply or suggest that the City of Paris is under any obligation to provide economic incentives to any applicant. 2. All applicants shall be considered on a case-by-case basis. The decision to approve or deny economic incentives shall be at the discretion of the City Council. 3. Each applicant granted economic incentives under this policy must enter into a Retail Economic Development Agreement with the City of Paris containing all terms required by this policy and by law to protect the public interest of receiving public benefit in exchange for public funds, assets and services invested to stimulate economic development in Paris. 4. The City of Paris cannot abate delinquent taxes as part of any Retail Economic Development Agreement. 5. The City of Paris has a 1.5% sales tax rate which includes a portion dedicated to the Paris Economic Development Corporation (PEDC) in an amount of 0.25%. The City cannot Page 1 of7 �, b,- ,A, rebate that additional portion of sales tax dedicated to the PEDC, therefore the sales tax rate for consideration of any incentive under this policy shall be 1.25%. All sales tax calculations in any application under this policy must be based strictly on 1.25%. 6. The City of Paris maintains a separate property tax rate for its Operations and Maintenance (O&M) from that of Bonded Indebtedness. The City will only consider property tax rebates of the City's O&M rate and not the Bonded Indebtedness rate. 7. The Lamar County Appraisal District (LCAD) shall be the official source of all property valuation data used in this policy. 8. A project shall not be eligible for incentives under this policy if a building permit has been issued for the project prior to making application in accordance with this policy. 9. The City discourages potential applicants from announcing their projects publicly prior to the execution of the Retail Economic Development Agreement. 10. A project shall not be eligible for incentives under this policy if the applicant and/or property has an outstanding structure lien, nuisance lien, utility bill, contractual debt and/or tax lien to any governmental entity unless said tax lien is negotiated as part of the Retail Economic Development Agreement. 11. A project shall not be eligible for incentives under this policy if the applicant is a party to a claim or proceeding against the City or is implicated in a claim or proceeding against a third party that may hinder or interfere with the efficacy of the incentive. 12. All eligible projects must: a. Conform to the City's Zoning and Subdivision Ordinances. b. Comply with all City ordinances as well as state and federal laws and regulations. c. Conform to the City's Building and Fire Codes. 13. The City shall have, without limitation, the right to: a. Review and verify the applicant's financial statements and records related to the development project and the amount of any incentive that may be payable in any given year. b. Conduct an on-site inspection of the development project in order to verify compliance with the terms and conditions of the Retail Economic Development Agreement. Eligibility To be considered eligible to receive incentives under this policy, a project must: 1. Exist within the City's corporate limits; and Page 2 of 7 2. Produce sales tax; and 3. Invest a minimum of $1,000,000.00 or more into the project property; and 4. Be able to be completed within twenty-four (24) months of signing the Retail Economic Development Agreement; and Must meet at least one or more of the following requirements: 1. Will result in a minimum increased taxable value of $250,000.00 or more in real and business property (excluding inventory and supplies) per City fiscal year in the City limits; or 2. Will result in an annual increase of $30,000.00 or more in city sales and use tax; or 3. Is specifically determined by resolution of the City of Paris City Council to bring benefit to the City consistent with the General Purpose and Policy as stated herein. Incentives The following incentives may be considered options under this policy: 1. Annual grants in the amount of up to 50% of the applicant's sales and use taxes not exceed to three (3) years. 2. Annual grants in the amount of up to 50% of the applicant's added sales tax growth beyond a base line for a period not to exceed three (3) years. Said base line shall be equal to the highest annual sales tax paid over the previous recorded five (5) city fiscal years. 3. Annual grants in the amount of 50% of the existing property taxes assessed on the taxable value of the project property as of January 1St of the year in which the Retail Economic Development Agreement is executed (the "base value") for a period of up to five (5) years provided that new sales tax (sales tax on a new development or sales tax above the base line described in Incentive 2 on an expansion of existing development) paid to and retained by the City as a part of the Retail Economic Development Agreement exceeds the value of the grant attributable to the annual existing property tax. 4. Annual grants of up to 100% of new property taxes assessed on the incremental taxable value of the project property over and above the base value for a period of up to five (5) years. Eligible projects may receive one or more of the foregoing incentive options as provided below: 1. New retail not operating within the City of Paris during the previous 36 consecutive months, whether in a vacant structure or new construction, are eligible for Incentives 1, 3 and 4. 2. New retail that has previously operated in the City of Paris and then left within the previous 36 consecutive months, whether in a vacant structure, relocation, or new construction, are Page 3 of 7 eligible for Incentives 2, 3, and 4. 3. Existing retail, whether in the same structure or relocation to an existing or new construction, are eligible for Incentives 2, 3, and 4. Application Process An application for consideration as a project shall be made on forms supplied by the City. The City shall have full authority to request any additional information from the applicant that the City deems necessary to assist it in considering such application. If City Staff determines that the requirements of this policy have been met, City Staff shall prepare and present the applicant's proposal to the City Council for consideration. The City Council may consider the proposal and may take action as it deems appropriate. Nothing in this policy, application or process shall create any property, contract, or other legal right in any person to have the City Council consider or grant incentives. Confidentiality Information provided by applicants on the Application Form may be subject to release to the public pursuant to the Texas Public Information Act as codified in Chapter 552 of the Texas Government Code. However, certain information provided to the City in connection with an application under this policy may be confidential and not subject to public disclosure until the Retail Economic Development Agreement is executed. The City will respond to requests for disclosure as required by law, and will assert exceptions to disclosure as it deems relevant. The City will make reasonable attempts to notify the applicant(s) of the request so it may assert its own objections to the Attorney General. Amendment The City Council reserves the right, by majority vote, to amend any portion of this policy at any time or to temporarily deviate from said policy, subject to financial and/or legal constraints. Page 4of7 .a CITY° p.At IS' Chapter 380 Retail Economic Development Program Application The City of Paris requires the following information in order to process an application for incentives. Customarily, this information is protected by the State of Texas through the Texas Government Code § 552.131 and is not subject to public disclosure until the Retail Economic Development Agreement is executed. An application does not guarantee a Retail Economic Development Agreement until it is reviewed and approved by the City Council of the City of Paris. The Applicant acknowledges that the City of Paris is a government body subject to the Texas Public Information Act (PIA) and thus may be required to release information in accordance with the PIA. Any information the Applicant considers to be proprietary, trade secret, or otherwise confidential in its application or other information furnished to the City of Paris to facilitate the procedure for notice to the third party under the PIA should be marked or noted. Section I — Company Information 1. Applicant Company: 2. Applicant Headquarters Address: City: 3. Contact Name: State: Zip: 4. Ownership: Private 0 Public 5. Business Structure: =Proprietorship Partnership orporation ther Section II — Project Information 1. Proposed Location Address: 2. Proposed Location PID#: 3. Building:ew Construction E pansion Im rovements 4. Acquisition: urchased,eased 5. If applicable, indicate date of acquisition: Page 5 of 7 6. Company NAICS Code: 7. List other communities considered for this project: 8. Reason for request for incentive: Section III - Investment Information 1. Total dollar investment for proposed project: REAL PROPERTY Land $ Existing Building Improvements�$� .. - ...... New Building, Improvements$ _..._. ............................ ...... ....................... . -- Real Property Total ......--- _.----------- .....- . . . . . . ................ $ . ........ PERSONAL PROPERTY ........ Equipment$ ....... Computers ------------- .._............... ... _ ........-- $ Machinery _----- $ .....�.._ � � _.rrrr...� .� .,........ Furniture and Fixtures ®. ... �--- �---------------.m.m.....,,__ $ Personal...Pro Property Total ............ ...p , _ ._. $ _ . ..... ,..,. ... �,____ ......... GRAND TOTAL $ Section IV - Legal Entities 1. Please list all applicant subsidiaries that would be a party to the Retail Economic Development Agreement: Affiliate #1: Relationship to Applicant: Affiliate #2: IT Relationship to Applicant: Affiliate #3: Relationship to Applicant: Affiliate 44: Relationship to Applicant: Page 6 of 7 Section V — Additional Information 1. Please include the following documents when submitting the application: a. Company Insurance b. Financial Statements three (3) years or prior year report c. Property Information i. Metes and Bounds ii. Site Survey / Renderings showing the location of existing and proposed improvements. iii. Legal Description d. Projected Sales and Use Tax Information for the next three (3) years. Section VI — Certification I hereby certify that I am familiar with the provisions contained in the current Chapter 380 Retail Economic Development Program and that the information provided in this application may become part of an incentive agreement with the City of Paris. I also certify that I am authorized to sign this application and that the information here is true and correct, and that knowingly providing false information may result in voiding this application and termination of any incentive agreement. Name: Title: Signature: Date: Please submit this application and any additional documents to: City Manager PO Box 9037 Paris, TX 75461 Page 7 of 7