2003T30-Guidelines-Tax Abatement
ORDINANCE NO. () 3 - T 30
AN ORDINANCE
BY THE CI1Y COUNCIL OF THE CI1Y OF SCHERfZ, TEXAS,
ADOPTING GUIDELINES AND CRITERIA FOR TAX
ABAlEMENT AND REINVESTMENT ZONES AND PROVIDING
FOR A REPEALING CIAUSE.
WHEREAS, the Texas Property Tax Code, Section 312, allows governing
units to provide ad valorem tax abatements in the interests of economic
development; and
WHEREAS, the City Council desires to support the establishment of
reinvestment zones and provide tax abatements in the interests of economic
development; NOW THEREFORE,
BE IT ORDAINED BY THE CI1Y COUNCIL OF THE CI1Y OF SCHERfZ, TEXAS:
THAT the City Council adopts the City of Schertz Guidelines and Criteria
for Tax Abatement and Reinvestment Zones, as attached and made a part
hereof.
THAT this ordinance replaces Ordinance No. 01-T-9 in its entirety and
will be effective on Janucuy 1, 2004, and will expire on December 31, 2005, a
period of two years.
Approved on first reading the~day of ~ 2003.
PASSED, APPROVED AND ADOPTED this the ~bI day of
~
2003.
ATTEST
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Mayor, City of Schertz, Texas
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City Secretcuy, City of Schertz
(SEAL OF CI1Y)
CITY OF SCHERTZ GUIDELINES AN CRITERIA FOR
TAX ABATEMENT AND REINVESTMENT ZONES
1. Introduction
a. Under the Authority of the Property Redevelopment and Tax Abatement Act (Section
312 et. Seq. Texas Property Tax Code), the City of Schertz hereby establishes Guidelines and
Criteria for Tax Abatements and Reinvestment Zones.
b. The intent of this abatement program is to provide an incentive to current and future
commercial property owners to invest in the City of Schertz. These guidelines are but a part of
the overall incentive program of the City of Schertz. Abatements granted under this program
must take into account any other incentives provided by the City in order to assure the overall
incentive package is in the best interests of the citizens of Schertz.
c. Nothing in this policy shall imply or suggest that the City of Schertz is under any
obligation to provide any incentive to any applicant. All such applications for tax abatement
and other economic development incentives shall be considered on an individual basis. The
City Council of the City of Schertz has final approval or disapproval on any application, at its
discretion.
2. Definitions
a. "Abatement" means the full or partial exemption from partial exemption from ad
valorem taxes of certain real property in a reinvestment zone designated for economic
development purposes.
b. "Reinvestment Zone" is an area where the City has decided to influence development
patterns and attract major investments that will contribute to the development of the City
through the use of tax abatement.
c. "Modernization" means the replacement and upgrading of existing facilities which
increases the productive input or output, updates the technology or substantially lowers the cost
of 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.
d. "Base Year Value" means the assessed value of property on the 1st of January
preceding the execution of the agreement.
e. Manufacturing or Assembly means those companies that make goods from raw
materials or assemble component parts into a final product for sale.
Tax Abatement
Guidelines and Criteria
Pagel of 11
f. "Personal Property" is defined, as Capital Equipment required in the manufacture of
an end product. It is not inventory that is used up in the manufacture of an end product.
g. "Other City Revenue" means revenue to the City of Schertz from any other source
excepting ad valorem taxes.
h. "Existing / Expanding" business is defined as businesses currently located in the City
of Schertz that are expanding their facility, enlarging their workforce, or adding equipment to
increase production capacity.
3. Criteria for Reinvestment Zones. To be designated a reinvestment zone; an area must meet
one of the criteria per Sub-Chapter B of the Property Redevelopment and Tax Abatement Act.
The fundamental criteria is based on City Council intent to create reinvestment zones where
creation of such a zone would be reasonably likely to contribute to the retention or expansion of
primary employment, attract investment into the zone, generally be a benefit to the property,
and contribute to the economic development of the City of Schertz.
4. Impact of Municipal Tax Abatement on Other Taxing Units.
a. The benefits oftax abatements may vary among taxing entities depending on whether
or not the taxing jurisdiction receives benefits from an increase in business activity. These
Guidelines and Criteria take into account these potential differences.
b. However, Section 312.206 of the State Property Tax Code also recognizes the need
for consistency in the application of tax abatements among the various taxing jurisdictions.
Paragraphs 6 and 7 below, outlines the basic tax abatement to be provided for capital
improvements and/or personal property.
c. Paragraphs 8 and 9 are optional and special abatement provisions. Other taxing
entities have the option of including or not including these provisions in the their agreements
made with landowners.
5. General Abatement Criteria
a. Creation of New Value. Abatement may be granted for the additional value of
eligible real property improvements subject to such limitations as the City of Schertz may
require, and;
(1) Must be reasonably expected to increase the appraisal value of the improved
property;
(2) Must be expected to promote increased employment based on the number of
permanent jobs and sustained in each year of the abatement.
Tax Abatement
Guidelines and Criteria
Page 2 of 11
(3) Should not have the effect of merely transferring existing employment from
one part of the City of Schertz 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.
b. The City shall not enter into an abatement agreement if, the City Council finds that
the Application for Tax Abatement was filed after the commencement of construction,
expansion, or modernization.
c. No abatement will be approved that exceeds 90% of new appraised value of capital
improvements and/or personal property, or that will reduce current ad valorem revenues.
d. If the computed percentage from a standard abatement in Table 1, and any additive
percentage from the optional or special categories, as defined below, exceeds 90% of appraised
new value, an extension of the abatement term beyond 5 years may be considered, up to a
maximum of 10 years.
e. No tax abatement shall be considered if the ad valorem cost/benefit ratio developed
during the evaluation process is below 1.5. If necessary, abatement percentages may be
adjusted to fit the ratio.
6. Standard Abatement
a. The standard tax abatement is for a period of 5 years and is based solely on capital
improvements to real property. Table I below establishes the level of capital improvements
required and the percentages to be allowed.
Table 1
STANDARD FIVE- YEAR ABATEMENT
Percent Abatement
Capital Cost of the
Projected Improvements
5%
Approved Capital Improvements
Under $75,000 that double the
Assessed Valuation
10%
$75,000 of approved Capital
Improvements.
1%
For each additional $50,000 of
approved Capital Improvements.
Tax Abatement
Guidelines and Criteria
Page 3 of 11
(Note: The above percentages are not cumulative except "For each additional $50,000 of
Approved Capital Improvements over the $75,000 threshold).
b. The provisions of paragraph 5c above apply.
7. Personal Property Abatement.
a. Abatement of personal property is considered as a special category of abatement
intended for new or existing manufacturing companies. Any applicant whose personal property
is expected to exceed the cost of capital improvements to real property and also exceeds
$1,000,000 may apply.
Table 2
Personal Property Abatement
Percent Abated
Amount of Personal
Property Declared
10%
$1,000,000.00
1%
For Each Additional
$100,000 of Declared
Personal Property
b. A minimum of $1,000,000 in personal property is required to qualify for a personal
property abatement.
c. The standard term of a personal property abatement is (5) five years.
d. The term of the abatement will run concurrently with any abatements approved for
Capital Improvements derived from Table 1, Optional Abatements, and or Special Abatements.
The term of the abatement shall not exceed the term allowed for Capital Improvements derived
from Table 1, Optional Abatements, and/or Special Abatements.
e. The provisions of paragraph 5c above apply.
f. Changes in valuations of personal property from year to year, whether increases or
decreases, will not be cause to re-negotiate increases or decreases in the approved abatement
percentage.
g. Manufacturing companies who expand or relocate operations as tenants of leaseable
space in the City of Schertz may apply for tax abatement on personal property if the company
meets the requirements derived from Table 2, Personal Property Abatement.
Tax Abatement
Guidelines and Criteria
Page 4 of 11
8. Optional Abatement Additives
a. Optional Criteria. The following optional abatements may also be considered with
each abatement request. These optional abatements are to be considered separate and apart
from the standard abatement above, and may be added by the City or other taxing entities at
their discretion.
(I) Job creation has always been an underlying goal of economic development
actIvity. The impact of jobs however, varies from community to community. The City of
Schertz also considers jobs to be an important part of this program and will consider lower
dollar value assessments in recognition of new employment growth. For each $25,000.00 of
additional payroll in facilities based in Schertz, 1 % will be added to the standard abatement as
derived from Table 1.
(2) Other Revenues. Other revenues, as defined above that inure to a taxing
entity should also be considered during the incentive process. These include sales taxes,
hotel/motel taxes, and any other source of revenue apart from ad valorem. Those businesses
that make a substantial contribution to the "other revenue" stream may also request additive
abatement percentages based on those revenues. Subject to paragraph 5c, for each $1,000 of
added "other revenues" received by the City, an additional 2% will be added to the percentage
established by the standard abatement in Table 1.
(3) Business Retention. Current Business Retention and Growth is a key to the
continued stability of the commercial tax base. Some provision to acknowledge the
contribution of existing businesses should also be considered. Subject to paragraph 5c, an
additional 25% will be added to the percentage established by the standard abatement in Table 1
will be included for those businesses currently based in the City of Schertz.
b. In all cases, in order to be considered for the optional abatement, the applicant must
meet the initial $75,00.00 capital improvement criteria of the standard abatement as
outlined in Table 1. In addition, the period of the abatement of each of the optional
additives will run concurrently with the approved rate from the standard criteria in
Table I, subject to paragraph 5c.
c. These optional abatements will be included in the terms of the abatement agreement.
The agreement will provide that, other taxing entities mayor may not choose to
allow these abatements, in the same amounts.
9. Special Abatements
a. Research has indicated the City of Schertz has special qualifications for certain
industries, as well as needs for certain industries. These industries are those we
believe to be critical to our future development and as such should receive special
Tax Abatement
Guidelines and Criteria
Page 5 of 11
consideration. The underlying philosophy is to diversify/expand the commercial tax
base.
b. For companies in the broad categories below, Table 1 criteria is modified as follows:
After achieving the initial $75,000 capital investment, ($500,000.00 for
Hotel/Motel/Retail) and subject to paragraph 5c, a 1 % abatement may be granted for
each additional $25,000 of capital investment.
(I) Hotel/Motel Operations. To qualify for this special abatement, companies
must have a minimum capital investment of $500,000.00.
(2) Industries in a Foreign Trade Zone. With the approval of the Tri-County
Business Park as a Foreign Trade Zone, consideration should be given to increased incentives
for companies that use the Foreign Trade Zone.
(3) Retail Operations. To qualify for this special abatement, companies must
have a minimum capital investment of $500,000.00.
(4) Automotive Sub-Assembly Manufacturing - New Locations. With a major
automotive sub-assembly manufacturing plant in the region, consideration should be given to
increase incentives for suppliers and vendors who locate in the City to provide "just in time"
delivery to the plant.
(5) Automotive Sub-Assembly Manufacturing - Local Business Expansions.
With a major automotive sub-assembly manufacturing plant in the region, consideration should
be given to increase incentives for suppliers and vendors who are currently located in the City
that expand their businesses to provide "just in time" delivery to the plant.
c. These special abatements will be included in the terms of the abatement agreement.
The agreement will provide that other taxing entities mayor may not choose to allow
these abatements in the same amounts.
10. Variances
a. As with the creation of any definitive document, all possible circumstances are not
likely to be addressed. The General Criteria established throughout this document is for
minimum allowances. If the requested abatement deviates in any substantive way from the
criteria established herein, a variance is required.
b. A variance is requested by including the request in the basic application, identifying,
and justifying the adjustments requested. Approval of a variance request requires a three-
fourths vote of City Council. In no cases shall variances be approved that exceed an abatement
of90% of new appraised value, or the term [of the abatement] exceeds 10 years.
Tax Abatement
Guidelines and Criteria
Page 6 ofll
11. Application Procedures
a. Applicability and Eligibility. These abatement guidelines and criteria apply to any
present or potential owner of taxable commercial property in the City of Schertz.
b. The application shall consist of a letter requesting consideration for a tax abatement,
including any optional or special abatement. The following information is required to be
attached to the letter:
(1) A general description ofthe project including overall project costs.
(2) Estimated values of the following:
(a) Capital improvements to be made to the property;
(b) Personal Property;
( c) Land (may be purchase price);
(d) Inventory.
(3) A brief description of the kinds and number of jobs at the new facility and an
estimate of payroll expenses at the new facility.
(4) If an abatement percentage is based on the sales tax, briefly describe the
products or services being taxed and an estimate of taxes to be collected.
(5) The tax LD. of the property.
(6) A site plan that shows the building footprint, landscaping, fencing, etc. A site
plan approved (or proposed) by the City of Schertz Planning and Zoning Commission will
satisfy this requirement.
(7) If a personal property abatement is requested, a listing of the capital
equipment to be installed in the facility, and estimated costs.
(c) The completed application will be presented to the City's Economic Development
Department. A copy of the application will be provided to the City Manager.
(d) The application may be forwarded to appropriate City departments (Planning and
Zoning, Building Inspections, Fire, Public Works, Police, etc.) for staff review and comments.
Tax Abatement
Guidelines and Criteria
Page 7 ofll
(e) After staff review, the City's Economic Development Commission will review the
application for policy implications, and make a recommendation to the City Council (through
the City Manager) to approve, modify, or disapprove the requested abatement. The Economic
Development Commission may also return the application to the Economic Development
Department for additional information without action.
(f) If the Economic Development Commission recommends approval, the City's
Economic Development Department shall notify in writing the presiding officer of the
governing body of each taxing jurisdiction.
(g) The City Manager will forward the application to City Council with comments
and/or recommendations. The City Manager may also return the application to staff or the
Commission for additional information if necessary.
(h) City Council will consider the application and all comments and recommendations.
If the City Council concludes that the application has merit, the City Council will approve the
original or modified application for abatement by ordinance and authorize City Manager to
enter into an abatement agreement within the guidelines established within the ordinance. If a
variance was requested, City Council must adopt the ordinance by a three-fourths vote of the
entire council.
(i) In order to enter into a tax abatement agreement, the City Council of Schertz must
find that the terms of the proposed agreement meet these Guidelines and Criteria and that:
(1) There will be no substantial long-term adverse effect on the provision of the
City's service or tax base; and
(2) The planned use of the property will not constitute a hazard to public safety,
health, or morals.
G) If City Council does not believe the application has merit, a motion to disapprove the
application shall be considered and acted upon.
(k) The City Council explicitly states that tax abatement is not applicable to projects
wherein the primary purpose of the business is serving alcoholic beverages or where nudity is
involved.
(1) One major policy function during this review is the creation of new re-investment
zones and the size of such a zone as a result of the application, unless the property is already in
a re-investment zone (See paragraph 12).
12. Public Hearings
Tax Abatement
Guidelines and Criteria
Page 8 of 11
a. By State law, the governing body of a city 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 such hearing shall be
published in a local newspaper having general circulation within the City of Schertz, at least 7
days prior to the public hearing. The presiding officers of other taxing jurisdictions shall be
notified in writing at least 7 days prior to the public hearing.
b. After the public hearing, City Council may pass an Ordinance approving the Re-
Investment Zone, or, pass a motion to disapprove.
13. Tax Abatement Agreement
a. After approval of an ordinance by City Council, the City Manager shall enter into an
agreement with the applicant, which may include:
(1) Estimated new value to be abated and the base year value;
(2) The commencement date and the termination date of the abatement for
Capital Improvements; and/or a personal property abatement.
(3) The proposed use of the facility, the proposed construction or modernization
time schedule;
(4) A map or approved plat of the property and a, property description;
(5) 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 for uniformity or state law;
(6) Amount of investment and average number of jobs involved;
(7) Percent to be abated as provided by paragraphs 5, 6, and 7 of the Tax
Abatement Guidelines and Criteria.
(8) City Council may approve the Tax Abatement and the abatement agreement
in a single ordinance if all other statutory and evaluation requirements have been met.
b. The agreement shall stipulate the employees and/or designated representatives of the
City of Schertz will have access to the applicant's property/reinvestment zone during the term
of the abatement to inspect the facility to determine if the terms and conditions of the agreement
are being met. All inspections will be made only after giving of 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.
Tax Abatement
Guidelines and Criteria
Page 9 ofl1
c. The agreement shall also include, within the terms of the agreement, those portions of
the abatement amounts that are optional for other taxing entities.
d. The agreement shall also include a statement by the company, that on or prior to
January 15th of each year during the term of the abatement, they will provide the Economic
Development Department a letter certifying the company meets or exceeds the criteria upon
which the abatement was approved. Failure to do may constitute default by the company, and
cause termination of the agreement.
14. Default and Recapture
a. In the event that the facility is completed and begins producing products or services,
but subsequently discontinues producing products or services for any reason excepting 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 taxes for the
calendar year during which the facility no longer produces.
b. Should the City of Schertz determine that the company or individuals are in default
according to the terms and conditions of its agreement, the City of Schertz may terminate the
agreement. Taxes will be due in full for the year in which the agreement is terminated.
c. In the event that the company or individuals:
(I) Allows it's ad valorem taxes owed the City of Schertz, or other taxing entities
who are a party to the abatement, to become delinquent and fails to timely and properly follow
the legal procedures for the protest and/or contest; or,
(2) Violates any of the terms and conditions of the abatement; or,
(3) Is in default with any other City sponsored program, the agreement then may
be terminated;
d. Taxes will be due in full for the year in which the agreement was terminated in
Section 13c(I), (2), or (3) above.
e. In the event that the company, during the abatement period, decides to relocate the
company to a location outside of the designated reinvestment zone, or the City of Schertz, and
remains in business, the City of Schertz by an Ordinance adopted by City Council shall have the
right to recapture taxes abated in all previous years.
15. General Administration
a. The Chief Appraiser of the Comal, Bexar, or Guadalupe Appraisal District shall
annually determine an assessment of the real and personal property comprising the reinvestment
Tax Abatement
Guidelines and Criteria
Page 10 of 11
zone. Each year, the company or individual recelvmg abatement shall furnish the Chief
Appraiser with such information as necessary. Once value has been established, the Chief
Appraiser shall notify the affected jurisdiction in the normal fashion.
b. Each year the City Tax Assessor will review all approved abatements and determine
the adjustment to ad valorem taxes based on the abatement agreement.
c. The Economic Development Department shall retain administrative responsibility and
control over all abatement agreements, and their administration.
16. Assignment. Tax abatement agreements may be assignable to a new owner only with City
Council approval.
17. Sunset Provision.
a. These Guidelines and Criteria are effective upon the date of their adoption and will
remain in force for two years, at which time all reinvestment zones and tax abatement contracts
pursuant to it's provisions will be reviewed by the City of Schertz to determine whether the
goals of Guidelines and Criteria have been achieved and Guidelines and Criteria have been
followed. Based on that review, the Guidelines will be modified, renewed or eliminated as
necessary.
b. During the two-year period, the Guidelines and Criteria may be amended, repealed or
renewed only by a majority vote of three-fourths ofthe City Council.
Tax Abatement
Guidelines and Criteria
Page 11 ofIl
PUBLISHER'S AFFIDAVIT
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THE STATE OF TEXA~I
County of Guadalupe
Before me, the undersigned authority, on this date personally appeared
"''''vun:r ,....../"'!t ' known to me, who, being by me duly
sworn, on his oath dePfses and says that he is the Publisher of The Seguin Gazette-
Ent€?rprise, a newspaprr of general circulation, published in said county; that a copy of
the within and foregoinp notice was publishe<:l in said newspaper I time(s) before
the return day named terein, such publications being on the following dates:
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THE' CITY. ~. cotlNdl..
. .oF THE cnV~...G)F
SCHERTZ~' tbAS
ADOPTtNO OUt DE..
LINES' AND 'CRm!hrA
FOR TAX ABATE-
AND.;"JREfN~
" ENT.:i" 2 NES':
.. . "PRO.N,,~, . OR
A'..,'vJ. RlireAllNG'
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and a newspaper cop~ of which is hereto attached.
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Sworn to and sUbscrib~d before me this / tf..L! day of
tOe/--... · ~ ' AD., 2003~
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Notary Public, Guadalupe County. Texas
PUBLISHER'S AFFIDAVIT
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THE STATE OF TEXA ,
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. County of Guadalupe I
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Before me, the undersirned authority. on this date personally appeared
~ IT' ~ , known to me, who, being by me duly
sworn, .on his oath dep ses and says that he is the Publisher of The Seguin Gazette-
Enterprise, aO newspap r of general circulation. published in said county; that a copy of
the within and foregoin notice was published in said newspaper L time(s) before
the return day named t erein, such publications being on the following dates:
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AN ORDfNANCE
THE CITY . COUNCIL
OF . THJ:; :. cITY '.. OF
SCHERTZ, TEXAS
ADOPTING' '~GUIDE-
LINES'AND 'CRITERIA
FOR "TAx'AbATE-
MENT';,;' ';'AN1) .....~tAEIN-
VESTMENt~ ZONES
AND - PROVIDING FOR
A' '.; . -REPEALING
CLAUse.
PASSED, APPROVEO
AND, I :ABOPTEO' .~s
the 211t ., of odober
2003.
Norma ~ .~_
SecrwMry
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O~T~c2t 2013
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and a newspaper copy pf which is hereto attached.
Sworn to and subscribe before me this :J:ll--L day of
Q~
, A.D., 2003.
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Notary Public, Guadalupe County, Texas
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