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17-ECONOMIC DEVELOPMENT - AD VALOREM TAX ABATEMENT POLICYCITY COUNCIL AGENDA ITEM BRIEFING SHEET Submittal Date: Originating Department: Presented By: Agenda Item No.: 07/16/12 Council Date: City Manager John Godwin 17. 7/23/12 RECOMMENDED MOTION: POLICY ISSUE(S): Economic Development BACKGROUND: For many years the city has maintained a very detailed and very specific ad valorem tax abatement policy. Both the county and PJC adopted and maintained the very same policy, which was developed over a long period of time and with much input from a number of sources. This single policy approach promotes consistency and predictability in economic development negotiations, which are typically the responsibility of the PEDC, which, within certain restrictions, acts on behalf of all three jurisdictions. Recently, based on state law, the city was required to re-adopt its abatement policy to maintain its authority. At that time, the city attorney researched policies from other cities and noted the trend in many municipalities and counties to adopt much shorter policies with more freedom to negotiate on a case by case basis. He prepared a new policy, reducing the old one in complexity, and also eliminating specific tables that directly related job creation to abatement eligibility and scope. Both Lamar County and Paris Junior College expressed some initial concern over making these major changes, and we spoke briefly about the proposed new policy last month at a PEDC meeting. In response I recommended that the city council go ahead and at least temporarily readopt the old policy as is so we would have a valid one in place should a significant ED opportunity present itself. In the meantime, a committee consisting of the county judge, city manager, chief appraiser, tax collector, and college president scheduled a meeting to try to come to a consensus. We met on July 12 and both the county and the college reiterated their preference for all three jurisdictions to have the same policy rather than two or three different ones, and also expressed their plan to leave the existing policy in place as is, with no changes. The PEDC director also indicated he preferred keeping the old policy, as it made the process of requesting and granting abatements more predictable and consistent. At this point, the city needs to adopt the new draft policy, make additional modifications to the new draft, or take no action and leave the existing policy in place. BOARD/COMMISSION RECOMMENDATION: EXHIBITS: Resolution, Guidelines & Criteria for Granting Tax Abatements ACTION: BUDGET INFO: ❑ Financial Report ❑ Minute Order Expense $ ❑ Department Report Z Resolution Budgeted Amt. $ ❑ Presentation ❑ Ordinance yTD Actual $ ❑ Public Hearing ❑ Other Acct. Name Acct. Number FISCAL NOTES: City of Paris 5n Revised 6/20/12 .7 Draft RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS AUTHORIZING THE CITY TO BECOME ELIGIBLE TO PARTICIPATE IN TAX ABATEMENT AND APPROVING AMENDED GUIDELINES AND CRITERIA FOR GRANTING TAX ABATEMENTS IN THE CITY OF PARIS, TEXAS; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND DECLARING AN EFFECTIVE DATE. WHEREAS, the City Council of the City of Paris, Texas has previously adopted a resolution expressing its intent to consider Tax Abatements and adopting Tax Abatement Guidelines as required by the Texas Tax Code. Chapter 312; and WHEREAS, Section 312.002 of the Texas Tax Code requires the city to update its guidelines and criteria for granting tax abatements every two years; and WHEREAS, the Paris City Council desires to amend the Tax Abatement Guidelines that will govern the implementation of the City's Tax Abatement Program as allowed by the Texas Tax Code, Chapter 312; 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 elects to be eligible to participate in a tax abatement program and adopts the Amended Guidelines and Criteria for Tax Abatements attached hereto and incorporated herein as Exhibit "A". The Guidelines are the policies that the City of Paris, Texas will follow in considering and approving Tax Abatement Agreements with property owners within the City Limits. Section 3. This resolution shall become effective from and after the date of passage. PASSED AND APPROVED this 23th day of July, 2012 A.J. Hashmi, M.D., Mayor ATTEST: Janice Ellis, City Clerk APPROVED AS TO FORM: W. Kent McIlyar, City Attorney - ~ 60 CITY OF PARIS, TEXAS GUIDELINES AND CRITERIA FOR TAX ABATEMENTS JULY 2012 Section 1. General Purpose and Objectives. The City of Paris, Texas (Hereinafter referred to as the "City"), is committed to the promotion of high- quality development in all parts of the City, and to an ongoing improvement in the quality of life for its citizens. Insofar as these objectives are generally served by the enhancement of the tax base and expansion and diversification of the local economy, the City will, on a case-by case basis, give consideration to providing tax abateinent, pursuant to the Texas Property Redevelopment and Tax Abatement Act, Chapter 312 Texas Tax Code, as from time to time amended, as a stimulus for economic growth and diversification in the City. Consideration will be given to both new facilities and structures and for the expansion or modernization of existing facilities and structures. Proposed abatement agreements will be considered in accordance with the guidelines, criteria and procedures outlined in this document. Nothing herein shall suggest or iinply that the City is under any obligarion to provide tax abatement in any amount or value to any applicant. All applicants shall be considered on a case-by-case basis. Section. 2. Definitions. (a) Act - means the Property Redevelopment and Tax Abatement Act, Texas Tax Code Ann. § 312.001 et. Seq., as amended from time to time. (b) Agreeinent - means a contractual agreement not to exceed ten (10) years between a property owner and a lessee (if necessary) and the City for the purposes of tax abatement. (c) Applicant - means an owner of real property located in a reinvestment Zone or in a Historic District or Historically Designated Property who requests tax abatement in accordance with these guidelines. (d) City - means the Ciry of Paris, Texas. (e) Eligible Propert v - means real property located within a Reinvestment Zone or real property located in a Historic District or Historically designated Property and /or tangible personal property located on the real property which is eligible far tax abatement under the Act. The Eligible Property may not be in an improvement project financed by tax increment bonds. (f) Expansion - means the addition or enlargement of buildings, structures, fixed machinery or equipment far the purposes of increasing production capacity. (g) IneliQible Propert y - means property not eligible for tax abatement under the Act, including without limitation inventories, supplies, or property owned or leased by a member of the City Council of the City or by a member of any other zoning or planning board or commission of the City. 1 I\ ~ % - - 61 EXHIBIT (h) 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 the operation. Modernization may result from the construction, alteration or installarion of buildings, structures, fixed machinery or equipinent, but shall not include reconditioning, refurbishing or repairing. (i) Reinvestment Zone - means an area within the corporate city limits of the City of Paris, Texas designated in accordance with the Act. Section 3. Availability of Tax Abatements. (a) Tax abatement is available for new facilities, structures, and equipment and for the Expansion or Modernization of existing facilities and structures. (b) As provided in the Act, abatement may only be granted for the value of Eligible Property listed in an agreement between the Ciry and the property owner and lessee (if required), subject to such liinitations as the City may require and to the following limitations. In the case of real property that is Eligible Property, an Agreement may provide for exemption of the real property in each year covered by the Agreement only to the extent its value for that year exceeds its value for the year in which the Agreement is executed. In the case of tangible personal property that is Eligible Property, and Agreement may not provide for the exemption of tangible personal property that is located on the real property at any time before the period covered by the Agreement. (c) Tax abateinent is not available for Ineligible Property. (d) Upon determination that tax abatement should be offered to the Applicant, the value and tenns of the abatement will be detennined by the City on a case-by-case basis. (e) Abatement will be granted effective with the first valuation date immediately following the date of execution of the Agreement. The period of abatement may not exceed ten (10) years including the construction period. Section 4. Tax Abatement Agreements. (a) The City council may not enter into a tax abatement agreement unless it finds that the terms of the Agreement and the property subject to the Agreement meet these Guidelines and Criteria. (b) An Agreement must contain the following provisions: (1) A list of the kind, number and location of all proposed improvements of the Eligible Property; (2) Applicant shall provide access to and authorize inspection of the Eligible Property by Ciry or the City's employees or agents to insure compliance with the specifications and conditions of the Agreement; 2 62 (3) Limit the uses of the Eligible Property consistent with the general purpose of encouraging development or redevelopment of tbe Reinvestinent Zone or Historic District or Historically Designated Property during the period that property tax exemptions are in effect; (4) Provide for recapturing property tax revenue lost if the owner of the Eligible Property fails to make the improvements or repairs as provided by the Agreement; (5) The terms that were agreed upon with the property owner and require the owner to annually certify coinpliance with the terms of the Agreement; (6) Provide the taxing unit the ability to cancel or modify the Agreement at any time should the owner fail to comply with the tenns of the Agreement. (c) At its option, the Ciry may require the inclusion of the following provisions in an Agreeinent: (1) A inap showing existing and proposed iinprovements and uses in the Reinvestment Zone; or (2) Improvements or repairs by the City and the applicants to streets, sidewalks, utility services or facilities associated with the Eligible Property and the approximate costs thereof, except that the Agreement will not provide for lower charges or rates that are made for other services or properties of a similar character; ar (3) The recapture of all or a portion of property tax revenue lost as a result of the Agreement if the owner of the Eligible Property fails to create or retain all or a portion of the number of new jobs provided by the Agreement. If the appraised value of the Eligible Property subject to the Agreeinent does not obtain a value specified in the Agreement, or if the owner fails to meet any other perfonnance criteria provided by the Agreement, and pa}nnent of a penalry or interest, or both on that recaptured property tax revenue; or (4) The foregoing options do not in any way limit the City from including additional criteria pennissible under § 312.205 of the Texas Tax Code, as it may be amended. (d) If a leased Faciliry is granted abateinent, the Agreement must be executed with the City, the lessor and the lessee. (e) To be effective, an Agreement must be approved by the affirmative vote of a majoriry of the members of the City Council at a regularly scheduled meeting of the city Council. ( fl At any time before its expiration, an Agreement may be modified by the parties to the Agreement to include other provisions that could bave been included in the original agreement or to delete provisions that are not necessary to the original agreement. The modification must be made by the saine procedure by which the original agreement was approved and executed. The original agreement may not be inodified to extend beyond ten years froin the date of the original agreement. (g) An Agreement may be tenninated by the mutual consent of the parties in the same manner that the Agreement was approved and executed. 3 - 63 (h) All improveinents, repairs, development and re-development of the Eligible Property must conform to the City's Comprehensive Zoning Ordinance, Building codes and other applicable ordinances. Section 5. Application and Review Procedures. (a) Application for Tax Abatement: (1) The procedures as hereinafter delineated shall be utilized in the implementation of the tax abatement program for the City of Paris. (2) Tax abatement applicants shall complete and submit an application for economic incentives as prescribed by the Executive Director for the Paris Economic Development Corporation (PEDC). While the specific contents of application inay vary, it is expected that the infonnation requested will include a brief description of the improvement and its economic impact, reveal the precise location of the property, provide a survey and legal description of the project site, provide projected job growth, and provide estimations for the projected capital investinent. (3) Applicants shall complete all information detailed in this document or other material as may be required by the PEDC or City and submit the application and supporting documents to the Executive Director of the Paris Economic Development Corporation, 1625 Bonham Street, Paris, Texas 75460, and to the Paris City Manager, P.O. Box 9037, Paris, Texas 75461-9037. (b) Application Review Steps: (1) All infonnation in the application package detailed above will be reviewed for coinpleteness and accuracy. Additional information may be requested as needed. (2) The application will be distributed to the Board of Directors of the Paris Economic Development Corporation for internal review and comments. Additional infonnation may be requested as needed. (3) Applicant will ineet with Paris Econoinic Development Corporation (PEDC) and the Paris city Manager or his/her designee to discuss details of the application. Additional meetings and proposal presentations inay be scheduled as necessary. (4) The PEDC Board along with the Paris Ciry Manager will consider the application at a regular or called meeting(s) of the board. (5) The findings of the PEDC Board will be forwarded, with all rel3evant materials, to the chief administrative officer of each local taxing entiry. (6) The City Council of the city of Paris may call a public hearing to consider establishment of a tax abatement reinvestment zone. The amount and length of abatement inay vary among tax abatement reinvestment zones approved by the City Council. 4 - 64 (7) The Paris City Council may hold a public hearing to determine whether the project is feasible and would be of benefit to the land to be included in the zone and to the municipaliry. (8) The Paris City Council may consider adoprion of an ordinance designating the Project area as a tax abatement reinvestment zone. (9) The City Council may consider adoption of a resolution or ordinance approving the tenns and conditions of a contract between the City and the applicant governing the provision of a tax abatement. (10) The governing bodies of Lamar County, Texas and Paris Junior College may consider ratification of and participation in the tax abatement agreement between the ciry of Paris and the applicant. (c) Review Criteria: It is understood that much of the infonnation provided in the application will be, out of necessity, estimates only. The applicant should endeavar to provide the most accurate estimates possible based upon available information. The applicant may be requested by the Paris Economic Development Corporation or City to describe the logics/methodologies to be utilized and to supply supporting documentarion that substantiates the economic feasibility of the overall project and assists in determining the long-term benefit to the City. The applicant, if requested by the PEDC or City, shall provide the following information and estimated projections to the City. (1) Employment Impact The mmmber of new jobs to be created in the City or existing jobs to be retained. (2) Proposed Improvements Identification and description of the kind, number and location of all proposed unprovements to the property, as well as the land area and cost, accompanied by a discussion of the developinent schedule for the proposed improvements that applicant will ask City to provide to serve the proposed project and the estimated cost of these improvements. (3) FiscalImpact The amount of ad valorem taxes and sales tax to be generated by this project. The cost to provide inunicipal services or additional infrastructure to the proposed project. (4) Prior Years Taxes No tax abatement shall be granted for any property unless and until full market value taxes (including rollback taxes) have been paid prior to the execution of the agreement. Exceptions may be granted if it can be demonstrated that significant and sustained valuation increases will be achieved. (5) Project Life The economic life of the project and the improvements must exceed the life of the abatement agreement. 5 65 (6) EnvironmentalImpacts Environmental impact information must be provided, noting any anticipated impacts of the project on the environment, including water qualiry, stonn-water runoff, floodplains, solid waste management, noise levels, and air quality. (d) Confidentiality: Certain information provided to the City in connection with an application may be confidential and not subject to public disclosure until the incentive agreement is executed. The City of Paris, will respond to requests far disclosure as required by law and will make reasonable attempts to notify the Applicant of the request so it may assert its own objections to the Attorney General. Section 6. Effective Period, Amendment, Repeal, Effect. (a) These Guidelines and Criteria are effective two (2) years from the date adopted. During that period, these Guidelines and Criteria may be amended or repealed only by a vote of three-fourths of the total membership of the Paris City Council. (b) The adoption of these Guidelines and Criteria does not: (1) Limit the discretion of the City Council to decide whether to enter into a specific tax abatement agreement. (2) Limit the discretion of the Ciry Council to delegate to the PEDC Board ar the Paris Ciry Manager the authority to determine whether or not the City Council should consider a particular application or request for tax abateinent; or (3) Create any property, contract, or other legal rights in any person to have the City Council consider ar grant a specific application or request for tax abatement. Section 7. State Administration. As required by law, on July 1 of the year following the year in which the Reinvestment Zone is designated or the Ageement is executed, a report providing the following information shall be delivered to the State Comptroller: (a) For a Reinvestment Zone, a general description of the zone, including its size, the types of property located in it, its duration, and the Guidelines and Criteria established for the Reinvestment Zone under § 312.002 of the Texas Tax Code, including subsequent amendments and modifications; (b) A copy of each Tax Abateinent Agreement to which the City is a party; and (c) Any other information required by the State Comptroller to adininister its administrative duries. 6 6 E;