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Editor's note–Ordinance 2885 adopted December 10, 2018, re-establishes the tax abatement guidelines as provided in article 11.04.
Abatement.
The full or partial exemption from ad valorem taxes of certain real property in a reinvestment zone designated for economic development purposes.
Agreement.
A contractual agreement between a property owner and/or lessee and an eligible jurisdiction for the purposes of tax abatement.
Base year value.
The assessed value of eligible property January 1 preceding the execution of the agreement plus the agreed-upon value of eligible property improvements made after January 1 but before the execution of the agreement.
Deferred maintenance.
Improvements necessary for continued operations which do not improve productivity or alter the process technology.
Economic life.
The number of years a property improvement is expected to be in service in a facility.
Eligible jurisdiction.
Harris County or Fort Bend County or Waller County, Texas, and any school district or college district located in Harris, Fort Bend or Waller County that levies ad valorem taxes upon and provides services to property located within the proposed or existing reinvestment zone.
Expansion.
The addition of buildings, structures, fixed machinery or equipment for purposes of increasing production capacity.
Facility.
Property improvements complete or in the process of construction which together comprise an integral whole.
Manufacturing facility.
Buildings and structures, including fixed machinery and equipment, the primary purpose of which is or will be the manufacture of tangible goods or materials or the processing of such goods or materials by physical or chemical change.
Modernization.
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 installation of buildings, structures, fixed machinery or equipment. It shall not be for the purpose of reconditioning, refurbishing or repairing.
New facility.
A property previously undeveloped which is placed into service by means other than or in conjunction with expansion or modernization.
Other basic industry.
Buildings and structures, including fixed machinery and equipment, not elsewhere described, used or to be used for the production of products or services which primarily serve a market outside the Houston Consolidated Metropolitan Statistical Area (CMSA) and result in the creation of new permanent jobs and bring in new wealth.
Productive life.
The number of years a property improvement is expected to be in service in a facility.
Regional distribution center facility.
Buildings and structures, including fixed machinery and equipment, used or to be used primarily to receive, store, service or distribute where a majority of the goods or services are distributed to points at least 100 miles from any part of Harris, Fort Bend or Waller County.
Regional entertainment facility.
Buildings and structures, including fixed machinery and equipment, used or to be used to provide entertainment through the admission of the general public where the majority of users reside at least 100 miles from any part of Harris, Fort Bend or Waller County.
Regional service facility.
Buildings and structures, including fixed machinery and equipment, used or to be used to service goods where a majority of the goods being serviced originate at least 100 miles from any part of Harris, Fort Bend or Waller County.
Research facility.
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 processes thereto.
(1999 Code, sec. 1.1601)
(a) 
Authorized facilities.
A facility may be eligible for abatement if it is a manufacturing facility, research facility, regional distribution center facility, regional service facility, regional entertainment facility or other basic industry.
(b) 
Creation of new value.
Abatement may only be granted for the additional value of eligible property improvements made subsequent to and listed in an abatement agreement between the city and the property owner and lessee (if required), subject to such limitations as the city council may require.
(c) 
New facilities and improvements to existing facilities.
Abatement may be granted for new facilities and improvements to existing facilities for purposes of modernization or expansion. Expansion and improvement of existing facilities must meet the $3,000,000.00 test and other abatement requirements.
(d) 
Eligible property.
Abatement may be extended to the value of buildings, structures, fixed machinery and equipment, and site improvements plus that office space and related fixed improvements necessary to the operation and administration of the facility. Eligible property includes hotels as defined in Texas Tax Code chapter 156, but is limited to those structures whose use is taxed under such chapter.
(e) 
Ineligible property.
The following types of property shall be fully taxable and ineligible for abatement: land, inventories, supplies, tools, furnishings, and other forms of movable personal property, vehicles, vessels, aircraft, residential development, housing, group homes, nursing homes, assisted living facilities, any assisted care facility, deferred maintenance investments, property to be rented or leased except as provided in subsection (f) of this section, improvements for the generation or transmission of electrical energy not wholly consumed by a new facility or expansion, any improvements, including those to produce, store or distribute natural gas, fluids or gases, which are not integral to the operation of the facility, property which has an economic life of less than 15 years, and property owned or used by the state or its political subdivisions or by any organization owned, operated or directed by a political subdivision of the state.
(f) 
Leased facilities.
If a leased facility is granted abatement, the agreement shall be executed with the owner, lessor and lessee.
(g) 
Value and term of abatement.
(1) 
Abatement shall be granted effective with the January 1, valuation date immediately following the date of execution of the agreement. The agreement will provide for up to 100% abatement in the first two years and up to 50% abatement for the remainder of the agreement period. The number of years of abatement shall not exceed five years plus two years for construction. If the period of construction exceeds two years, the facility shall be considered completed for purposes of abatement, and in no case shall the period of abatement, inclusive of construction and completion, exceed seven years.
(2) 
If a modernization project includes facility replacement, the abated value shall be the value of the new unit(s) less the value of the old unit(s).
(h) 
Economic qualification.
In order to be eligible for designation as a reinvestment zone and receive tax abatement, the planned improvement must:
(1) 
Be reasonably expected to increase the appraised value of the property in the amount of $3,000,000.00 after the period of abatement has expired;
(2) 
Be expected to prevent the loss of employment or retain or create employment on a permanent basis in Harris, Fort Bend or Waller County;
(3) 
Not be expected to solely or primarily have the effect of transferring employment from one part of Harris, Fort Bend or Waller County to another;
(4) 
Be necessary because capacity cannot be provided efficiently utilizing existing improved property when reasonable allowance is made for necessary improvements; and
(5) 
Not compete with existing businesses nor adversely impact on the business opportunities of existing businesses.
(i) 
Standards for tax abatement.
(1) 
The following factors, among others, shall be considered in determining whether to grant tax abatement and, if so, the percentage of value to be abated and the duration of the tax abatement:
(A) 
Value of land and existing improvements, if any;
(B) 
Type and value of proposed improvements;
(C) 
Productive life of proposed improvements;
(D) 
Number of existing jobs to be retained by proposed improvements;
(E) 
Number and type of new jobs to be created by proposed improvements;
(F) 
Amount of local payroll to be created;
(G) 
Whether the new jobs to be created will be filled by persons residing or projected to reside within affected taxing jurisdictions;
(H) 
Amount of local sales taxes to be generated directly;
(I) 
Amount the property tax base valuation will be increased during the term of abatement and after abatement, which shall include a definitive commitment that such valuation shall not, in any case, be less than $3,000,000.00;
(J) 
The costs to be incurred by the city to provide facilities or services directly resulting from the new improvements;
(K) 
The amount of ad valorem taxes to be paid the city during the abatement period considering (i) the existing values, (ii) the percentage of new value abated, (iii) the abatement period, and (iv) the value after expiration of the abatement period;
(L) 
The population growth of the city that occurs directly as a result of new improvements;
(M) 
The types and values of public improvements, if any, to be made by the applicant seeking abatement;
(N) 
Whether the proposed improvements compete with existing businesses to the detriment of the local economy;
(O) 
The impact on the business opportunities of existing businesses;
(P) 
The attraction of other new businesses to the area;
(Q) 
The overall compatibility with the zoning ordinances and comprehensive plan for the area; and
(R) 
Whether the project is environmentally compatible, with no negative impact on quality of life perceptions.
(2) 
Each eligible facility 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 full evaluation.
(j) 
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 affect on the provision of government service or the 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.
(k) 
Taxability.
From the execution of the abatement to the end of the agreement period, taxes shall be payable as follows:
(1) 
The value of ineligible property as provided in this section shall be fully taxable;
(2) 
The base year value of existing eligible property as determined each year shall be fully taxable; and
(3) 
The additional value of new eligible property shall be fully taxable at the end of the abatement period, howsoever said period shall end.
(l) 
Determination of compliance.
Throughout the agreement period, the city shall be authorized to make scheduled and unscheduled inspections of the improvements to ensure compliance with the agreement.
(m) 
Noncompliance.
Should there be a breach of or noncompliance with the abatement agreement, the city may cancel or modify the agreement and shall be entitled to recover taxes for all preceding years of the agreement period which had been abated.
(1999 Code, sec. 1.1602; Ordinance 2542, sec. I, adopted 8/27/12)
(a) 
Any present or potential owner of taxable property in the city may request the creation of a reinvestment zone or tax abatement by filing a written request with the office of the mayor.
(b) 
The application shall consist of a completed application form designed by the mayor accompanied by:
(1) 
A general description of the new improvements to be undertaken;
(2) 
A descriptive list of the improvements for which an abatement is requested;
(3) 
A list of the kind, number and location of all proposed improvements of the property;
(4) 
A map and property description;
(5) 
A time schedule for undertaking and completing the proposed improvements;
(6) 
In the case of modernization, a statement of the assessed value of the facility, separately stated for real and personal property, for the tax year immediately preceding the application; and
(7) 
Such financial and other information as the mayor may deem appropriate for evaluating the financial capacity and other factors of the applicant.
(c) 
Within ten (10) days following receipt of a completed application, the mayor shall notify in writing the presiding officer of the governing body of each eligible jurisdiction.
(d) 
After receipt of an application for creation of a reinvestment zone and application for tax abatement, the mayor, as designated officer, shall cause to have prepared a feasibility study setting out:
(1) 
The impact of the proposed reinvestment zone and tax abatement;
(2) 
An estimate of the economic effect of the creation of the zone on existing business;
(3) 
The impact of the proposed abatement of taxes and the benefit to the eligible jurisdiction; and
(4) 
The property to be included in the zone.
The feasibility study shall be commenced upon receipt by the city of a sum equal to 1-1/2 times the estimated cost of such study, said sum to be donated to the city by the applicant for abatement.
(e) 
The city council shall not establish a reinvestment zone or enter into an abatement agreement if it finds that the request for the abatement was filed after the commencement of construction, alteration, or installation of improvements related to a proposed modernization, expansion or new facility. An applicant is ineligible for abatement if a decision to commence a modernization, expansion or a new facility in Harris, Fort Bend or Waller County has been formally announced on or before the date of adoption of these guidelines.
(f) 
Requests for variance from the provisions of section 11.04.002(a), (e) and (g) may be made in written form to the mayor; provided, however, the total duration of an abatement shall in no instance exceed seven years. Such request shall include a complete description of the circumstances explaining why the applicant should be granted a variance. Approval of a request for variance requires a three-fourths (3/4) vote of the city council.
(g) 
The city, not more than 45 days after receipt of the application and feasibility study, shall by resolution either approve or disapprove the application for tax abatement. The city shall notify the applicant of approval or disapproval.
(1999 Code, sec. 1.1603)
(a) 
The city council may not adopt an ordinance designating a reinvestment zone until it has held a public hearing at which interested persons are entitled to speak and present evidence for or against the designation. Notice of the hearing shall be clearly posted or identified on the city council's agenda at least thirty (30) days prior to the hearing. The presiding officers of eligible jurisdictions shall be notified in writing at least fifteen (15) days prior to the hearing.
(b) 
Prior to entering into a tax abatement agreement, the city council may, at its option, hold a public hearing at which interested persons shall be entitled to speak and present written materials for or against the approval of the tax abatement agreement.
(c) 
In order to enter into a tax abatement agreement, the city council must find that the terms of the proposed agreement meet these guidelines and criteria and that:
(1) 
There will be no substantial adverse affect on the provision of the jurisdiction's service or tax base; and
(2) 
The planned use of the property will not constitute a hazard to public safety, health or morals.
(d) 
Any applicant requesting a variance under section 11.04.003(f) shall be approved by a vote of at least three-fourths (3/4) of the city council. No application which deviates from the requirements of these guidelines and criteria shall be approved unless accompanied by a request for variance as provided under section 11.04.003(f).
(1999 Code, sec. 1.1604)
(a) 
After approval, the city council shall formally pass a resolution and execute an agreement with the owner of the facility and lessee, as required, which shall include:
(1) 
Estimated value to be abated and the base year value;
(2) 
Percent of value to be abated each year as provided in section 11.04.002(g);
(3) 
The commencement date and the termination date of abatement;
(4) 
The proposed use of the facility, nature of construction, time schedule, map, property description, and improvement list as provided in the application, section 11.04.003(b);
(5) 
Contractual obligations in the event of default, violation of terms or conditions, delinquent taxes, recapture, administration and assignment as provided in sections 11.04.002(a), (f) and (g), 11.04.006, 11.04.007, and 11.04.008, or other provisions that may be required for uniformity or state law;
(6) 
Amount of investment and average number of jobs involved; and
(7) 
Such other provisions as the city shall deem appropriate. (Note: This provision may require further definition to set ascertainable standard.)
(b) 
Such agreement shall normally be executed within sixty (60) days after the applicant has forwarded all necessary information and documentation to the city council.
(1999 Code, sec. 1.1605)
(a) 
In the event that the facility is completed and begins producing product or service, but subsequently discontinues producing product or service for any reason except fire, explosion or other casualty or accident or natural disaster for a period of one year during the abatement period, then the agreement shall terminate and so shall the abatement of the taxes for the calendar year during which the facility no longer produces. The taxes otherwise abated for that calendar year shall be paid to the city within thirty (30) days from the date of termination.
(b) 
Should the city council determine that the company or individual 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 is not cured within thirty (30) days from the date of such notice (“cure period”), then the agreement may be terminated.
(c) 
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 abatement agreement and fails to cure during the cure period, the agreement then may be terminated and all taxes previously abated by virtue of the agreement will be recaptured and paid within thirty (30) days of the termination.
(1999 Code, sec. 1.1606)
(a) 
The chief appraiser of the Waller County Appraisal District shall annually determine an assessment of the real and personal property comprising the reinvestment zone. Each year, the company or individual receiving abatement shall furnish the appraiser with such information as may be necessary for the abatement. Once value has been established, the chief appraiser shall notify the city of the amount of the assessment.
(b) 
The abatement 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 ensure that the terms of the agreement] are being met. All inspections 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.
(c) 
Upon completion of construction, the city shall annually evaluate each facility receiving abatement to ensure compliance with the abatement [agreement] and report possible violations of the contract and agreement to the city council regarding the findings of each evaluation.
(1999 Code, sec. 1.1607)
(a) 
Tax abatement agreements may be assigned to a new owner or lessee of the facility upon the approval by resolution of the city subject to the financial capacity of the assignee and provided that all conditions and obligations in the abatement agreement are guaranteed by the execution of a new contractual agreement with the city, which consent shall not be unreasonably withheld. 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. Any assignment of a tax abatement 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 is indebted to the city for ad valorem taxes or other obligations.
(b) 
Any tax certificates issued on property subject to abatement shall state that the property is subject to a rollback in the event of default.
(1999 Code, sec. 1.1608)
(a) 
These guidelines and criteria are effective upon the date of their adoption and will remain in force for two (2) 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 goals have been achieved. Based on that review, the guidelines and criteria may be modified, renewed or eliminated.
(b) 
This policy is mutually exclusive of existing industrial district contracts and owners of real property in areas deserving of special attention as agreed by the affected jurisdictions.
(1999 Code, sec. 1.1609)