2006T09-Tax Abatement
ORDINANCE NO. 06- T -09
AN ORDINANCE
BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS,
ADOPTING GUIDELINES AND CRITERIA FOR TAX ABATEMENT
AND REINVESTMENT ZONES AND PROVIDING FOR A
REPEALING CLAUSE.
WHEREAS, the Texas Property Tax Code, Section 312, allows governing unites
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 CITY COUNCIL OF THE CITY OF SCHERTZ, 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 03-T-30 in its entirety and will be
effective on March 7, 2006 and will expire on March 6, 2008, a period of two years.
Approved on first reading the !-, $T day of Pre. 2006.
PASSED, APPROVED AND ADOPTED this the 1 ~ of ~ ~ 2006.
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"Mayor, City of Schertz, Texas
ATTEST
(SEAL OF CITY)
CITY OF SCHERTZ GUIDELINES AND CRITERIA FOR
TAX PHASE.IN 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, as amended), the City of Schertz hereby establishes Guidelines and
Criteria for Tax Phase-Ins and Reinvestment Zones.
b. The intent of this Tax Phase-In 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. Tax Phase-Ins 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 cililens of Schw.
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 applications for Tax Phase-Ins 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 complete and sole discretion.
2. Definitions
a. "Tax Phase-In" means the full or 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 pattems
and attract major investments that will contribute to the development of the City throug h the use of a Tax
Phase-In.
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 Tax Phase-In agreement.
e. "Manufacturing" or "Assembly" means those companies that make goods from raw materials or
assemble component parts into a final product for sale.
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 other revenues that inure to a taxing entity. These include sales
taxes, hotel/motel taxes, and any other source of revenue other than ad valorem taxes.
h. "Existing I Expanding" business is defined as businesses currenUy located in the City of Schertz
that are expanding their faeility, enIa'lJing their workforce, or adding equipment to inerease produetion
capacity.
3. Criteria for Reinvestment Zones. To be designated a reinvestment zone, an area must meet one of
the criteria of 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
Tax Phase-in
Guidelines and Criteria
Page lof9
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 Phase.ln on other Taxing Units.
a. The benefits of Tax Phase-Ins 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 Texas Property Tax Code also recognizes the need for
consistency in the application of Tax Phase-Ins among the various taxing jurisdictions. See Paragraphs 6
and 7 below which outiine the basic Tax Phase-In to be provided for capital improvements and/or personal
property.
c. Paragraphs 8 and 9 are Optional and Special Tax Phase-In provisions. Other taxing entities
have the option of including or not including these provisions in the agreements made with landowners.
5. General Tax Phase-ln Criteria
a. Creation of New Value. Tax Phase-Ins 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 appraised value of the improved
property;
(2) Must be expected to promote increased employment based on the number of
permanent jobs and sustained jobs in each year of the Tax Phase-In; and
(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 a Tax Phase-In Agreement if the City Council finds that the
Application for Tax Phase-In was filed after a permit is issued for construction, expansion, or
modemization.
c. No Tax Phase-In will be approved that exceeds 90 percent 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 Tax Phase-In in Table 1, and any additive
percentage from the optional or special categories, as defined below, exceeds 90 percent of appraised
new value, an extension of the Tax Phase-In term beyond five (5) years may be considered, up to a
maximum of 10 years.
e. No Tax Phase-In shall be considered if the ad valorem cost/benefit ratio developed during the
evaluation process is below 1.5. If necessary, Tax Phase-In percentages may be adjusted to fit the ratio.
6. Standard Tax Phase-In
a. The Standard Tax Phase-In is for a period of five (5) years and is based on a minimum of
$500,000 in capital improvements to real property. Table 1 below establishes the level of capital
improvements required and the percentages to be allowed.
Tax Phase-in
Guidelines and Criteria
Page 2 of9
Table 1
STANDARD FIVE.YEAR TAX PHASE.IN
Percent Tax Phase-In Capital Cost of the
Projected Improvements
Ten (10) Percent $75,000 of approved Capital
Improvements
One (1) Percent Each additional $50,000 of
Approved Capital Improvements
(Note: The above percentages are not cumulative except "Each additional $50,000 of
Approved Capital Improvements over the $75,000 threshold).
b. The provisions of paragraph 5c above apply.
c. The tenn of the Standard Tax Phase-In will run concurrently with any Tax Phase-Ins approved
for Capital Improvements derived from Optional Tax Phase-Ins, and or Special Tax Phase-Ins. The term
of the Tax Phase-In shall not exceed the tenn allowed for Capital Improvements derived from Standard
Tax Phase-Ins, Optional Tax Phase-Ins, and/or Special Tax Phase-Ins.
7. Personal Property Tax Phase-In.
a. Tax Phase-In of personal property is considered as a special category of Tax Phase-In 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 $500,000 may apply.
Table 2
Personal Property Tax Phase-In
Percent Abated Amount Declared
Ten (10) Percent $500,000
One (1) Percent Each Additional
$100,000 of Declared
Personal Property
b. A minimum of $500,000 in personal property is required to qualify for a Personal Property Tax
Phase-In.
c. The standard term of a Personal Property Tax Phase-In is (5) five years.
d. The term of the Personal Property Tax PIlase-ln will run eoneunently with any Tax Phase-Ins
approved for Capital Improvements derived from Standard Tax Phase-Ins in Table 1, Optional Tax Phase-
Ins, and or Special Tax Phase-Ins. The tenn of the Tax Phase-In shall not exceed the tenn allowed for
Capital Improvements derived from Standard Tax Phase-Ins, Optional Tax Phase-Ins, and/or Special Tax
Phase-Ins.
Tax Phase-in
Guidelines and Criteria
Page 3 of9
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 Tax Phase-In percentage.
g. Manufacturing companies which expand or relocate operations as tenants of leaseable space in
the City of Schertz may apply for Tax Phase-In on personal property if the company meets the
requirements derived from Table 2, Personal Property Tax Phase-In.
8. Optional Tax Phase-In
a. Optional Criteria. The following Optional Tax Phase-Ins may also be considered with each Tax
Phase-In request. These Optional Tax Phase-Ins are to be considered separate and apart from the
Standard Tax Phase-In above, and may be added by the City or other taxing enttties at their discretion.
(1) Job creation has always been an undel1ying goal of economic development
activity. The impact of jobs, however, varies from community to community. The City of
Schertz 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 of
additional payroll in facilities based in Schertz, one percent (1%) may be added to the
Standard Tax Phase-In as derived from Table 1.
(2) Other City Revenues. Other revenues that inure to a taxing entity may also be
etlftsidered during the incentive pmeess. 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 Tax
Phase-In percentages based on those revenues. Subject to paragraph 5c, for each
$1,000 of added "other revenues" received by the City, an additional two percent (2%)
may be added to the percentage established by the Standard Tax Phase-In in Table 1,
(3) Business Retention. Current Business Retention and Growth is a key to the
continued stability of the commercial tax base. Some provision to acknowledge the
contribution of existing businesses may also be considered. Subject to paragraph 00, an
additional twenty-five percent (25%) may be added to the percentage established by the
Standard Tax Phase-In in Table 1 and may be included for those businesses currently
based in the City of Schertz.
b. In all cam, in order to be considered for the OPtional Tax Phaee-In, the applicant mU$t meet
the initial $75,000 capital improvement criteria of the Standard Tax Phase-In as outlined in Table 1. In
addition, the period of the Tax Phase-I n of each of the optional additives will run concurrently with the
approved rate from the standard criteria in Table 1, subject to paragraph fic.
c. These Optional Tax Phase-Ins, if granted, will be included in the terms of the Tax Phase-In
agreement. The agreement will provide that other taxing entities mayor may not choose to allow these
Tax Phase-Ins, in the same amounts.
9. Special Tax Phase-Ins
a. Research conducted by the City for the Comprehensive Economic Development Plan indicates
that the City of Schertz has special qualifications for speCific types of industries, as well as a need to
diversify and expand our commercial tax base. These targeted industries are those we believe to be
critical to our Mure development and as such, should receive special consideration. The targeted
Tax Phase-in
Guidelines and Criteria
Page 4 of9
industries are listed in the Comprehensive Economic Development Plan and shall be reviewed annually by
the Schertz Economic Development Corporation and Schertz Economic Development Commission for
possible revisions. The Comprehensive Economic Development Plan and the current list of targeted
industries shall be maintained by the Schertz Economic Development Department.
b. For companies in the broad categories below, Table 1 criteria are modified as follows: After
achieving the initial $500,000 capital Investment, ($1,ooo,Ooo.00 for HoteVMotel/Retail) and subject to
paragraph 5c, a one percent (1%) Tax Phase-In may be granted for each additional $25,000 of capital
investment.
(1) Hotel/Motel Operations. To qualify for this special Tax Phase-In, companies
must have a minimum capital investment of $1 ,000,000.
(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 Tax Phase-In, companies must
have a minimum capital investment of $1 ,000,000.
(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 which 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 may be
given to increase incentives for suppliers and vendors which are currenUy located in the
City that expand their businesses to provide "just in time" delivery to the plant.
c, These special Tax Phase-Ins. if granted, will be Included in the terms of the Tax Phase-In
agreement. The agreement will proVide that other taxing entities mayor may not choose to allow these
Tax Phase-Ins in the same amounts.
10. Variances
a. As with the creation of any definitive document, all possible circumstances are not likely to be
addressed in these Guidelines and Criteria. The General Criteria established throughout this document
are for minimum allowances. If the requested Tax Phase-In deviates in any substantive way from the
criteria established herein, a variance is required to be granted by the City Council.
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 a Tax Phase-In of 90 percent of new
appraised value, ora 10-year term .
11. Application Procedures
a. Applicability and Eligibility. These Tax Phase-In 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 Phase-In, including
any Optional or Special Tax Phase-Ins. The following information is required to be attached to the letter:
(1) A general description of the project including overall project costs.
Tax Phase-in
Guidelines and Criteria
Page 5 of9
(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 a Tax Phase-In 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 ad valorem tax identification number for 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 Tax Phase-In is requested, a listing of the capital
equipment to be installed in the facility. and estimated costs.
(c) The completed application will be presented by the applicant to the City's Economic
Development Department. A copy of the application will be provided by the Economie Development
Department to the City Manager.
(d) The application may be forwarded by the Economic Development Department to appropriate
City departments (Planning and Zoning. Building Inspections, Fire, Public Works, Police, etc.) for staff
review and comments.
(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 Tax Phase-In. The Economic Development Commission
may also retum the application to the Economic Development Department for additional infonnalion
without action.
(f) If the Economic Development Commission recommends approval, the City's Economic
Development Department shall notify the presiding officer of the goveming body of each taxing jurisdiction
in writing.
(g) The City Manager will fOfWam the application to City Council with comments and/or
recommendations. The City Manager may also retum the application to staff or the Commission for
additional infonnation.
(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 Tax Phase-In by ordinance and authorize the City Manager to enter into a Tax Phase-In
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 Phase-In agreement, the City Council of Schertz must find that the
tenns of the proposed agreement meet these Guidelines and Criteria, with any approved variances, and
that:
Tax Phase-in
Gnidelines nnd Criteria
Page6of9
(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.
0) 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 Phase-In is not applicable to projects wherein the
primary purpose of the business is serving alcoholic beverages or where nudity is Involved.
Q) 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
a. By State law, the goveming 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 entided 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 seven (7) days prior to the public
hearing. The presiding officers of other taxing jurisdictions shall be notified in writing at least seven (7)
days prior to the public hearing.
b. After the public hearing, City Council may pass an Ordinance approving the Re-Investment
Zone, or, adopt a motion to disapprove.
13. Tax Phase-In 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 Tax Phase-In for
Capital Improvements; and/or a Personal Property Tax Phase-In.
(3) The proposed use of the facility, the proposed construction or modemization
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 Phase-
In Guidelines and Criteria.
(8) City Council may approve the Tax Phase-In and the Tax Phase-In 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 applicanfs property/reinvestment zone during the teIm of the Tax Phase-
In to inspect the facility to determine if the terms and conditions of the agreement are being met. All
Tax Phase-in
Guidelines and Criteria
Page 7 of9
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.
c. The agreement shall also include, within the terms of the agreement, those portions of the Tax
Phase-In 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 Tax Phase-In, it will provide the Economic Development Department a
letter certifying the company meets or exceeds the criteria upon which the Tax Phase-In was approved.
Failure to do so will constitute default by the company, and may cause termination of the agreement.
1.. Default and Recapture
a. In the event that the facility is completed and begins producing products or services, but
subsequenUy 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 Tax Phase-In period, then the
agreement shall terminate and so shall the Tax Phase-In 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 Tax Phase-In agreement.
Taxes will be due in full for the year in which the agreement is terminated.
c. The agreement may be terminated in the event that the company or individuals:
(1) Allows ad valorem taxes that are owed to the City of Schertz, or other taxing entities
who are a party to the Tax Phase-In, to become delinquent and fails to timely and property follow the legal
procedures for the protest and/or contest; or,
(2) Violates any of the terms and conditions of the Tax Phase-In; or,
(3) Is in default with any other City sponsored program
d. Taxes will be due in full for the year in which the agreement was terminated in Section 14c (1),
(2), or (3) above.
e. Should a company receiving a Tax Phase-In decide to relocate the company outside of the
designated reinvestment zone or move outside the City of Schertz, and continue to remain in business,
the City of Schertz as authorized 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 Coma!, 8exar, or Guadalupe Appraisal District shall annually
determine an assessment of the real and personal property comprising the reinvestment zone. Each year,
the company or individual receiving Tax Phase-In shall fumish 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 Tax Phase-Ins and determines the
adjustment to ad valorem taxes based on the Tax Phase-In agreement.
c. The Economic Development Department shall retain administrative responsibility and control
over all Tax Phase-In agreements, and their administration.
Tax Phas<>-in
Guidelines and Criteria
Page g of9
16. Assignment. Tax Phase-In agreements may be assignable to a new owner only with City Council
approval.
17. Legal Fees. All legal fees incurred by the City of Schertz in the research and preparation of Tax
Phase-Ins shall be the responsibility of the applicant requesting the Phase-In.
18. 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 Phase-In 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 of the City Council.
Tax Phase-in
Guidelines and Criteria
Page9of9
> .. Affidavit of Publisher lo:~!t~::~::~
AN ORDINANCE BY THE
CITY COUNCIL OF THE CITY
STATE OF TEXAS OF SCHERlZ, TEXAS ADoPT-
iNG GUIDELINES AND CRITE-
RIA FOR TAX ABATEMENT
AND REINVESTMENT ZONES
COUNTY OF BEXAR AND PROVIDING. FOR A
REPEALING CLAUSE.
Approyed .on firsl reading
City of Schertz . the 21 ~t day of February 2006.
.. Passed, Approved and
adopted this the 7th day ot
March 2006.
. . . .. . JuqYTokar
CIty Secretary, City of Schertz
3/13 .
Before me, the undersigned authority, on this day personally appeared Helen 1. Lutz, who being
by me duly sworn, says on oath that she is Publisher of the Commercial Recorder, a newspaper of
general circulation in the City of San Antonio, in the State and County aforesaid, and that the
Ordinance 06-T-09 here to attached has been published in every issue of said newspaper on the
following days, to wit:
03/13/2006.
~) J/~d
Sworn to and subscribed before me this 13th day of of March, 2006.
I''';'">;}, STElLA A. OROZCO ~ A. ()~
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;~ ~: NOTARY PUBLIC
..
\'!l: : STATE OF TEXAS
"':';, ,,' MyComm,Exp.03-29.2009