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07-C Tax Abatement GuidelinesDRAFT H:\ATTORNEY\JANICE\ENTERPRISE\W AREHOUSE RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS, ESTABLISHING GUIDELINES AND CRITERIA GOVERNING TAX ABATEMENT INCENTIVES WITHIN THE CITY OF PARIS AND ITS EXTRATERRITORIAL JURISDICTION; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City Council ofthe City ofParis desires to promote economic development within the corporate limits of the City of Paris and within its extraterritorial jurisdiction; and WHEREAS, the provision of certain economic development incentives may encourage prospective businesses and companies to locate within such corporate limits or extraterritorial jurisdiction or existing businesses and companies located therein to expand; and, WHEREAS, the establishment of specific guidelines, criteria, and procedures are necessary to insure that tax abatement incentives are given and administered effectively; and, WHEREAS, the adoption of guidelines and criteria are required by state law before an area may be established as a reinvestment zone; NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS: Section 1. That the findings set out in the preamble to this resolution are hereby in all things approved. Section 2. That the City of Paris hereby establishes certain guidelines and criteria, attached hereto as Exhibit A, governing tax abatement incentives within the City of Paris and its extraterritorial jurisdiction, and such guidelines and criteria shall expressly govern all subsequent tax abatement agreements in the City of Paris and its extraterritorial jurisdiction. Section 3. That such guidelines and criteria shall be effective for two (2) years from the date of adoption and may only be amended or repealed by a vote of three-fourths vote of the City council. Section 4. That this resolution shall be effective from and after its date of passage. PASSED AND APPROVED this 22nd day of September, 2004. Curtis Fendley, Mayor ATTEST: Sherian Dixon, Assistant City Clerk APPROVED AS TO FORM: Larry W. Schenk, City Attorney CITY OF PARIS, PARIS, TEXAS GUIDELINES AND CRITERIA FOR TAX ABATEMENT AGREEMENTS L DEFINITIONS a) "Abatement" means the full or partial exemption from ad valorem taxes of certain real and tangible personal property in a Reinvestment Zone designated for economic development purposes. b) "Agreement" means the written agreement for tax Abatement between a property owner and/or lessee and the City. c) "Base Year Value" means the assessed value of eligible property as of January 1 preceding the date of execution of the Agreement plus the agreed upon value of eligible property improvements made after 7anuary 1 but before the execution of the Agreement. d) "Enterprise Zone" means that area of the City designated as an enterprise zone under the Texas Enterprise Zone Act (Texas Government Code Chapter 2303); where a Reinvestment Zone as defined herein is also located in an Enterprise Zone, the reference to Reinvestment Zone shall be interchangeable with Enterprise Zone. e) "Manufacturing Facility" means buildings and structures, including fixed machinery and equipment, the primary purpose ofwhich is or will be the manufacture oftangible goods or materials or the processing of such goods or materials by physical or chemical change. Facilities primarily engaged in assembling component parts of manufactured products are also considered manufacturing facilities. f) "Modernization" means the replacement and upgrading of existing facilities which increases the productive input or output, updates the technology, or substantially lowers the unit cost of operation. Modernization may result from the construction, alteration or installation of buildings, structures, fixed machinery or equipment, but shall not be for the purpose of reconditioning, refurbishing, repairing, or deferred maintenance. g) "Other Basic Industry" means buildings and structures, including fixed machinery and equipment, not elsewhere described, used, or to be used for the production of products or services which result in the creation of new, permanent, full-time jobs and bring new wealth into the community. h) "Regional Distribution Facility" means buildings and structures, including fixed machinery and equipment, used or to be used primarily to receive, store, service, or -3- distribute goods or materials where a majority ofthe goods or services are distributed to points at least 100 miles from its location in the City. i) "Regional Tourist Entertainment Facility" means buildings and structures, including fixed machinery and equipment, used or to be used in providing amusement/entertainment through the admission of the general public where the majority of users reside at least 100 miles from the City and where the majority of users are likely to stay in the City for more than one day and will therefore likely utilize local restaurants and hoteUmotel accommodations. j) "Reinvestment Zone" is an area where the City or County has decided to influence development patterns and attract major investments that will contribute to the development of the area through the use of tax Abatement for specified improvements. k) "Research Facility" means buildings and structures, including fixed machinery and equipment, used or to be used primarily for research or experimentation to improve or develop new tangible goods or materials or to improve or develop the production processesthereto. IL DESIGNATION OF A REINVESTMENT ZONE. The City may designate an area as a Reinvestment Zone in accordance with the criteria and procedural requirements set forth in the Property Redevelopment & Tax Abatement Act, as amended (Chapter 312, Texas Tax Code). IIL TAX ABATEMENT AUTHORIZED. The City, through its City Council, may agree in writing with the owner and/or lessee of taxable real property that is located in a Reinvestment Zone, but that is not in an improvement project financed by tax increment bonds, to exempt from taxation a portion of the value of the real property, or of tangible personal property located on the real property, or both. The period of the Abatement granted under the Agreement shall not exceed the term authorized by law. Such Agreement will be based on the condition that the owner or lessee of the property make specific improvements or repairs to the property. An Agreement may provide for the exemption of the real property in each year covered by the Agreement only to the extent its value for that year exceeds the Base Year Value. An Agreement may provide for the exemption of tangible personal property located on the real property in each year covered by the Agreement other than tangible personal property that was located on the real property at any time before the period covered by the Agreement. Inventory or supplies cannot be abated as tangible personal property. -4- A property owner and/or lessee shall be eligible for tax Abatement only upon the following terms and conditions: a) Authorized Facilities. A facility may be eligible for Abatement if it is a Manufacturing Facility, Research Facility, Regional Distribution Facility, Regional Tourist Entertainment Facility, or Other Basic Industry. b) Creation of New Value. Abatement may only be granted for the additional value of eligible real and tangible personal property improvements, subject to such limitations as the City may require. c) New and Existing Facilities. Abatement may be granted for new facilities and improvements to existing facilities for purposes of modernization or expansion. d) Eligible Property. Abatement may be extended to the value of buildings, structures, fixed machinery and equipment, site improvements, tangible personal property, and that office space and related fixed improvements necessary to the operation and administration of the facility; provided, however, that inventory or supplies shall not be eligible for Abatement. e) Leased Facilities. If a leased facility is granted Abatement, the Agreement may be executed with the lessor and/or lessee, depending upon the particular circumstances of the proposed project. If the Agreement is with the lessor, lessor shall demonstrate binding contracts with the lessee to guarantee compliance with the terms of the Agreement. f) Value and Term of Abatement. The City will decide whether to grant tax Abatement to an applicant, and the amount, if any, of such Abatement, on a case-by-case basis. The term of Abatement granted under any Agreement may not exceed that permitted by applicable state law. The amount of the Abatement shall be based upon a percentage (0 to 100%) of all or a portion of the eligible property. Abatement may only be granted for the additional value of eligible property improvements made pursuant to and listed in the Agreement between the City and property owner and/or lessee subject to such limitations as the City may require. If a modernization project includes facility replacement, the value eligible for Abatement shall be the value of the new unit(s), less the value of the replaced unit(s). The criteria that will be used in evaluating a particular application for Abatement will include, but not be limited to: 1) the dollar amount of the increase in the tax roll for the proposed project; 2) the number of jobs created by the proposed project; 3) the possible effect the proposed project will have on attracting other taxable -5- improvements into the City; 4) the nature of the proposed project and its overall effect on the community; 5) the proposed project's effect on the safety, health, and morals of the City's residents; 6) whether the proposed project will have any substantial long-term adverse effect on the provision of the City's services or its tax base; 7) whether the project meets all relevant zoning requirements; 8) whether the project is consistent with the comprehensive plan of the City of Paris or County of Lamar; and 9) the types and cost of public improvements and services (water and sewer main extensions, streets and alleys, etc.) required of the City and the types and values of public improvements to be furnished by the applicant. g) Economic Qualification. In order to be eligible to receive tax Abatement, the planned improvements: 1) must be reasonably expected to increase the appraised value of the properry; AND 2) must be expected to prevent the loss of employment, retain, or create employment on a permanent, full-time basis in the City during the term of the Agreement; AND 3) should not be expected to solely or primarily have the effect of inerely transferring existing employment from one part of the City to another without demonstration of increased future investment (Dollars or jobs) or unusual circumstances whereby without such a move employment is likely to be reduced; AND 4) must be necessary because capacity cannot be provided efficiently utilizing existing improved property, even when reasonable allowance is made for necessary improvements or relevant governmental actions. h) Taxability. During the term of the Agreement, taxes shall be payable as follows: 1) the Base Year Value of eligible property as determined each year shall be fully taxable; and -6- 2) the additional value of eligible property above the Base Year Value shall be taxable in the manner described in the Agreement. The ChiefAppraiser ofthe City shall annually determine an assessment ofthe real and personal property comprising the Reinvestment Zone. Each year, the company or individual receiving Abatement pursuant to an Agreement shall furnish the assessor with such information as may be necessary to determine the amount of any Abatement. Once such value has been established, the Chief Appraiser shall notify the affected jurisdictions which levy taxes on such property. IV. APPLICATION. a) Eligibility. Any present or potential owner of taxable property in the City may request tax Abatement by filing a written request with the City Manager. b) Form. The application shall consist of a completed application form accompanied by (i) general description of the improvements to be undertaken together with the projected new value to the property and the type of business operation proposed; (ii) descriptive list of the improvements for which an Abatement is requested; (iu) list of the kind, number, and location of all proposed improvements of the property, (iv) the number and type of jobs created, including information pertaining to anticipated job transfers; (v) metes and bounds description and plat of the proposed Reinvestment Zone that shows all roadways within 200 feet of the site and all existing zoning and land uses within 200 feet of the site; (vi) time schedule for undertaking and completing the proposed improvements; (vii) the type and value of any economic development incentives requested; and, (viu) any other information about the proposed project as may be required by the City or as deemed desirable. c) Review. Once the Application has been received, the information submitted will be reviewed by the City Manager for completeness and accuracy. The City Manager will then distribute the Application to the appropriate department heads for internal review and comments. Following staffreview, copies of the complete Application package and staff comments will be provided to the City Council and to other taxing entities that may be willing to participate in offering tax abatement incentives. Generally, the City Council, staff, and other taxing entities will discuss the proposed Application at a work session prior to its formal consideration by the City Council. Following the work session, the City Manager may be requested to obtain other information prior to further consideration of the Application. At a subsequent regular City Council meeting, the Application for any tax Abatement incentive may be considered. Prior to final approval, all legal documents to effect such Reinvestment Zone(s) and tax Abatement Agreement(s) shall be drafted and approved by the City Attorney. -7- d) Public Hearing. The City will comply with certain public notices and hearings required as mandated by state law under the Property Redevelopment and Tax Abatement Act prior to the designation of a reinvestment zone and execution of a tax abatement agreement. e) Findings. In order to enter into an Agreement, the City Council must find that (i) the terms ofthe proposed Agreement comply with these Guidelines and Criteria, (ii) there will be no substantial adverse affect on the provision of the City's services or tax base, and (iu) the planned use of the property will not constitute a hazard to public safety, health, or morals. f) Variances. Requests for variance from the provisions of these Guidelines may be made in writing to the City Manager; provided, however, that in no event shall the term of any Abatement exceed the period authorized by applicable state law. Such request shall include a complete description ofthe circumstances requiring a variance. Approval of a request for variance shall require the affirmative vote of three-fourths (3/4) of the members of the City Council. V. AGREEMENT. After approval, the City Council shall formally pass an order or resolution and authorize the execution of an Agreement with the owner and/or lessee of the facility which shall include, but not be limited to, the following terms: a) the Base Year Value; b) percent of increased value to be abated each year; c) the commencement date and the termination date of Abatement; d) amount of investment and average number of jobs involved during the term of the Agreement; e) the proposed use of the facility, nature of construction, time schedule, plat, property description, and improvement list, as provided in the Application; f) a listing of the kind, number, location, and costs of all proposed improvements of the property; g) a statement limiting the uses of the property consistent with the general purpose of encouraging development or redevelopment of the zone during the period that property tax exemptions are in effect; h) that access to the project be provided to allow for the inspection by City inspectors and officials in order to ensure that the improvements or repairs are made according -8- to the specifications and conditions of the agreement; i) that property tax revenue lost as a result of the tax abatement agreement will be recaptured by the City if the owner of the property fails to make the improvements or repairs as provided by the agreement; j) each term agreed to by the owner of the property; k) a requirement that the owner of the property shall certify annually to the City Council that the owner is in compliance with each applicable term of the agreement; 1) contractual obligations in the event of default, violation of terms or conditions, delinquent taxes, recapture, administration and assignment, or other provisions that may be required by state law, or in the discretion of the City Council; and m) that the City Council may cancel or modify the agreement if the property owner fails to comply with the agreement. VL DEFAULT. If the City determines that the person or entity receiving an Abatement is in default according to the terms and conditions of its Agreement, the City shall notify the company or individual in writing at the address stated in the Agreement, and if such default is not cured within a reasonable period of time specified in such notice ("Cure Period"), then the Agreement may be modified or terminated without further notice. In the event that the company or individual (i) allows its ad valorem taxes owed the City to become delinquent and fails to timely and properly follow the legal procedures for their protest and/or contest, or (ii) violates any of the terms and conditions of the Agreement and fails to cure during the Cure Period, the Agreement then may be modified or terminated without further notice, and the Agreement may provide a formula for recapture of all or part of the taxes abated. VIL CONFIDENTIALITY OF PROPRIETARY INFORMATION. Information that is provided to a taxing unit in connection with an application or request for tax Abatement under these Guidelines and that describes the specific processes or business activities to be conducted or the equipment or other property to be located on the property for which tax Abatement is sought is confidential and not subject to public disclosure unless otherwise mandated by state law until the Agreement is executed. Such information in the custody of the City after the Agreement is executed is not confidential under these Guidelines. VIIL PROPOSED TAX ABATEMENT AGREEMENTS TO BE DECIDED ON AN INDIVIDUAL BASIS. The adoption of these Guidelines by the City Council does not (i) limit the discretion of the City Council to decide whether to enter into a specific tax Abatement agreement, or (ii) limit the discretion of the City to delegate to its employees the -9- authority to determine whether or not the City Council should consider a particular application or request for tax Abatement, or (iu) create any property, contract, or other legal right in any person or entity to have the City Council consider or grant a specific application or request for tax Abatement. IX. INSPECTIONS. The Agreement shall stipulate that employees and/or designated representatives of the City will have access to the Reinvestment Zone during the term of the Agreement to inspect the facility to determine if the terms and conditions of the Agreement are being met. All inspections will be made only after the giving of at least 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 company or individual and in accordance with its safety standards. Upon completion of construction, the City shall annually evaluate each facility receiving Abatement to ensure compliance with the Agreement and report possible violations of the Agreement to the City Council. X. MODIFICATIONS OF AGREEMENT. At any time before the expiration of an Agreement made under these Guidelines, the Agreement may be modified by the parties to the Agreement to include other provisions that could have been included in the original Agreement or to delete provisions that were contained in the original Agreement. The modification must be made by the same procedure by which the original Agreement was approved and executed. The original Agreement, however, may not be modified to extend the term of the Agreement or the term of the Abatement granted therein beyond the time permitted by state law. XL ASSIGNMENT. An Agreement may be assigned to a new owner or lessee of the facility only with the prior written consent of the City. Any assignment shall provide that the assignee shall irrevocably and unconditionally assume all the duties and obligations of the assignor upon the same terms and conditions as set out in the Agreement, and the City's approval shall be subject to the determination ofthe financial capability of such assignee. Any assignment of an Agreement shall be to an entity that contemplates the same improvements or repairs to the property, except to the extent such improvements or repairs have been completed. No assignment shall be approved if the assignor or the assignee are indebted to the City for ad valorem taxes or other obligations, or if any event of default under the Agreement remains uncured. XII. AMENDMENTS. These Guidelines are effective for two (2) a year period from the date of their adoption, unless amended or repealed by the affirmative vote of three-fourths (3/4) of the members of the City Council. -10- AGENDA INFORMATION SHEET PROJECT: A resolution adopting guidelines and criteria governing tax abatement agreements BACKGROUND: Section 312.002 (a) ofthe Texas Tax Code requires municipalities desiring to participate in tax abatement to establish guidelines and criteria governing tax abatement agreements. The City of Paris has previously adopted such guidelines and criteria, but those guidelines and criteria must be re-adopted to be applicable to the new tax abatement proposal by Paris Warehouse 107, Inc. DESCRIPTION: The guidelines and criteria proposed to be adopted by this resolution essentially track the same guidelines and criteria the City of Paris has used in prior tax abatements. However, because those guidelines and criteria were specific to individual projects, it is necessary to adopt the enclosed guidelines and criteria, which will be generally applicable for the next two years. The City may amend such guidelines and criteria in the future, with a 3/4 vote of the City Council. The enclosed resolution will formally adopt the guidelines and criteria for granting tax abatements, which are attached to the resolution. RECOMMENDED ACTION: Approval of the resolution and the accompanying guidelines and criteria. STAFF CONTACT: Larry W. Schenk, City Attorney, and Gary Vest, Director of Economic Development of the Paris Economic Development Corporation. SUPPLEMENTAL MATERIALS: See attached resolution and accompanying guidelines and criteria. COUNCII, DATE: Consider for approval at the City Council's September 22, 2004, special Council meeting. -11- -12-