90-T-2 Tax Abatement
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ORDINANCE
NO .9t!~T-: ~
AN ORDINANCE
BY THE CITY COUNCIL OF THE CITY OF SCHERTZ,
TEXAS, ADOPTING GUIDELINES AND CRITERIA FOR
TAX ABATEMENT AND RE-INVESTMENT ZONES
WHEREAS, the Texas Property Tax Code, Section 312.
effective September 1, 1989, allows governing units and school
distr icts to create re-investment zones and provide ad valorem
tax abatements in the interest of economic development; and
WHEREAS. the City Council desires to support the
establishment of re-investment zones and provide tax abatements
in the interest of economic development: NOW THEREFORE.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS:
THAT the City Council adopts the
Guidelines and Criteria for Tax Abatement
zones, as attached and made a part hereof.
City of Schertz
and Re-investment
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. 1989.
PASSED, APPROVED AND ADOPTED
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ATTEST:
(SEAL OF CITY)
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City of Schertz
Guidelines and Criteria
for
TAX ABATEMENT AND REINVESTMENT ZONES
Introduction.
Under the Authority of the Property Redevelopment and Tax
Abatement Act (Section 312 et. seq. Texas Tax Code), the
governing body of a city, county or school district is eligible
to enter into tax abatement agreements with property owners in an
area designated a Reinvestment Zone to exempt from taxes all or
part of the increased value in the property on the condition that
the owner makes specified improvements.
To be designated as a reinvestment zone, an area must meet one of
the following criteria per Subsection (a) Section 3 of the
Property Redevelopment and Tax Abatement Act:
Criteria.
(a) substantially impair or arrest the sound growth of a
city or town, retard the provision of housing accommodations, or
constitute an economic or social liability and be a menace to the
public health, safety, morals, or welfare in it's present
condition and use by reason of the presence of a substantial
number of substandard, slum, deteriorated, or deteriorating
structures; predominance of defective or inadequate sidewalk or
street layout; faulty lot layout in relation to size,
accessibility, or usefulness; unsanitary or unsafe conditions;
deterioration of site or other improvements; tax or special
assessment delinquency exceeding the fair value of the land;
defective or unusual conditions of title; the existence of
conditions that endanger life or property by fire or other cause;
or any combination of these factors or conditions;
(b) be predominantly open and, because of obsolete platting
or deterioration of structures or site improvements, or other
factors, substantially impair or arrest the sound growth of the
city or town;
(c) be in a federally assisted new community located within
a home-rule city or in an area immediately adjacent to the
federally assisted new community;
(d) be located wholly wi thin an area which meets the
requirements for federal assistance under Section 119 of the
Housing and Community Development Act of 1974;
(e) encompass signs, billboards and other outdoor
advertising structures designated by the governing body of the
incorporated city or town for relocation, reconstruction, or
removal for the purpose of enhancing the physical environment of
the city or town, which the legislature hereby declares to be a
public purpose;
(f) be designated a local or state federal enterprise zone
under the Texas Enterprise Zone Act; or
(g) be reasonably likely as a result of the designation to
contribute to the retention or expansion of primary employment or
to attract major investment in the zone that would be a benefit
to the property and that would contribute to the economic
development of the city or town.
Definitions. Section 1
(a) "Abatement" 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 Ci ty 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 for specified real property
improvements.
(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 eligible
property January 1 preceding the execution of the agreement plus
the agreed upon value of eligible property improvements made
after January 1.
(e) "Other
municipal sales
hotel/motel tax.
City Revenue" means City
tax, personal property
revenue
tax, or
from
the
the
City
(f) "Manufacturirig Facility" means buildings and structures,
including fixed machinery and equipment, used or to be used for
the mechanical or chemical transformation of materials or
substances into new products. Establ ishments engaged in
assembling component parts of manufactured products are also
considered manufacturing.
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(g) "Biomedical/Biotech Research Facil i ty" means buildings
and structures, including fixed machinery and equipment, used or
to be used primarily for research or experimentation to improve
or develop new tangible goods or materials or to improve or
develop the production process thereto.
(h) "Regional Distribution Facility" means buildings and
structures, including fixed machinery and equipment, used or to
be used primarily to receive, store, service or distribute goods
or materials where a majority of the goods or services are
distributed to points at least 100 miles from any part of
Guadalupe/Comal/Bexar County.
(i) "Regional Tourist Entertainment Facility" means
buildings and structures, including fixed machinery and
equipment, used or to be used in providing
amusement/entertainment through the admission of the general
public where the majority of users reside at least 100 miles from
Bexar County and where the majority of users are likely to stay
in the City for more than one day and will therefore likely
utilize local restaurants and hotel/motel accommodations.
(j) "Other Basic Industry" means buildings and structures,
including fixed machinery and equipment, not elsewhere described,
used or to be used for the production of products or services
which result in the creation of new permanent full-time jobs and
bring new wealth into the community.
Abatement Authorized. Section 2
(a) Authorized Facilities. A facility may be eligible for
abatement if it lS a Manufacturing/Assembly Facility,
Biomedical/Biotech Research Facil i ty, Regional Distribution
Facility, Regional Tourist Entertainment Facility or Other Basic
Industry.
(b) Creation of New Value. Abatement may only be granted
for the additional value of eligible real property improvements
subject to such limitations as the City of Schertz may require.
The City shall not enter into an abatement agreement if (1) it
finds that the Application for Tax Abatement was filed after the
commencement of construction, expansion or modernization or (2)
if it finds that the city was not officially notified that
construction, expansion, or modernization would commence on a
given date.
(c) New and Existinq Facilities. Abatement may be granted
for new facilities and improvements to existing facilities for
purposes of modernization or expansion.
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(d) Eligible Property. Abatement may be extended to the
val ue of buildings, structures, fixed machinery and equipment,
site improvements plus that office space and related fixed
improvements necessary to the operation and administration of the
facility.
(e) Leased Facilities. If a leased facility 1S granted
abatement, the agreement may only be executed with the lessor.
In such case, le~sor shall demonstrate binding contracts with the
lessee to guarantee criteria included in the abatement agreement
are met. Said lease shall include tax abatement agreement.
(f) Value and Term of Abatement. Abatement shall be granted
on a case-by-case basis effective with the January 1 valuation
date immediately preceding the date of the execution of the
agreement. 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). The percent of value
to be abated (which ranges from 0 percent to 100 percent) is
based on the capital cost of the project improvements OR the
number of new permanent jobs created and sustained in each year
of the abatement period. The table below establishes the
specific criteria:
STANDARD SIX-YEAR ABATEMENT
Percent
Abatement
Capital Cost
of the Project
"Improvements"
OR
No. of New Permanent
Jobs Created & Sus-
tained in Each Year
of Abatement
0% 0 - Less than double the
assessed value
10% Double the assessed value
or 75,000
20% 75,001 - 275,000
30% 275,001 - 500,000
40% 500,001 - 750,000
50% 750,001 - 1,000,000
60% 1,000,001 - 1,250,000
70% 1,250,001 - 1,500,000
80% 1, 500,001 - 1, 750,000
90% 1,750,001 - 2,000,000
100% over 2,000,"000
0-05
6-12
13-20
21-30
31-41
42-53
54-65
66-77
78-89
90-100
over 100
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Additionally, tax abatement allowances are
project, in addition to meeting the criteria
also meets one of the following criteria:
applicable
in Section
if
2
the
( f) ,
(1) Enterprise Zones.
located in a State-approved enterprise
abatement can be up to 10 years; or
I f the
zone, the
project
term of
is
the
( 2) If the project is
substantial City revenue other than real
municipal sales tax, personal property tax,
Cost of improvements exceeds $10 million,
abatement can be up to 10 years; or
likely to generate
property taxes (i. e.
etc.), or the Capital
the term of the tax
(3) For Regional Tourist Entertainment
Facilities, the abatement is equal to 50% of taxes net other City
Revenue for up to 5 years unless the facility is an Enterprise
Zone, then the abatement is equal to 75% of taxes net Other City
Revenues for the first 5 years. Refer to following example.
REGIONAL TOURIST ENTERTAINMENT FACILITY EXAMPLE
Total Real Property Taxes:
50% Abatement
Subtota 1 :
Less Other City Revenue
NET:
$1,000,000
500,000
500,000
750,000
$ 250,000*
*When NET < 0, then taxes =
0, thus no taxes for 5 years.
(g) Economic Qualification. In order to be eligible for
designation as a reinvestment zone and receive tax abatement, the
planned improvement:
(1) must be reasonably expected to increase the
appraised value of the improved property according to Section 2
(f); OR
(2) must be expected to increase employment
based on the number of permanent jobs created and sustained ln
each year of the abatement as per Section 2 (f); furthermore
(3) should not be expected to solely or
primarily 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; AND
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(4) must be necessary because capacity cannot
be provided efficiently utilizing existing improved property when
reasonable allowance is made for necessary improvements or
relevant governmental actions.
(h) Taxability. From the execution of the abatement to the
end of the agreement period, taxes shall be payable as follows:
(1) the base year value of existing el igible
property as determined each year shall be fully taxable; and
(2) the additional value as a resul t of
improvement shall be taxable in the manner described in Section 2
(f), Subsections (1),(2),(3), and (4).
Application. Section 3
(a) Any present or potential owner of taxable property
ln the City of Schertz may request the creation of a reinvestment
zone or tax abatement by filing an Application for Tax Abatement
with the Director of Planning.
(b) The application shall consist of a letter requesting
a tax abatement or creation of a reinvestment zone accompanied
by: a general description of the new improvements to be
undertaken; a descriptive list of the improvements for which an
abatement is requested; a list of the kind, number and location
of all proposed improvements of the property; a map and property
description; and, a time schedule for undertaking and completing
the proposed improvements. In the case of modernization, a
statement of the assessed value of the facility, separately
stated for real and personal property, shall be given for the tax
year immediately preceding the application. The application form
may require such financial and other information as the City
deems appropriate for evaluating the financial capacity and other
factors of the applicant.
(c) Upon receipt of a completed application, the
Director of Planning shall notify in writing the presiding
officer of the governing body of each eligible jurisdiction.
(d) The completed application will also be forwarded to
appropriate City departments (Planning, Zoning, Fire, Building
Inspections, Public Works) and the Economic Development Task
Force for their consideration and comment.
(e) Upon review by the city Manager, consideration of a
reinvestment zone designation will be presented to the City
Council.
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(f) Variance. Requests for variance from the
provisions of Subsections (a) and (f) of Section 2 may be made in
written form to the Director of Planning. Such request shall
include a complete description of the circumstances explaining
why the appl icant should be granted a variance. Approval of a
request for variance requires a publ ic hearing followed by a
three-fourths (3/4) vote of the City Council.
Public Hearing and Approval. Section 4
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(a) By State law, the governing body of a city may not
adopt an ordinance, or a county a resolution, 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
clearly posted or identified on the City Council Agenda at least
7 days prior to the hearing and published in a local newspaper.
The presiding officers of eligible jurisdictions shall be
notified in writing at least 7 days prior to the hearing.
(b) Prior to entering into a tax abatement agreement,
the City of Schertz shall 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. Notice' of the hearing shall be clearly posted or
identified on the city Council Agenda at least 7 days prior to
the hearing and publ ished in a local newspaper. The presiding
officers of eligible jurisdictions shall be notified in writing
at least 7 days prior to the hearing.
(c) In order to enter into a tax abatement agreement,
the City of Schertz must find that the terms of the proposed
agreement meet these Guidelines and Criteria and that:
(1) there will be no
adverse affect on the provision of the
base; and
substantial long-term
City's service or tax
(2) the planned use of the property will not
consti tute a hazard to publ ic safety, health or moral s. As a
matter of policy, 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.
(d) Any appl icant requesting a variance under Section
3(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 3(f).
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Agreement. Section 5
(a) After approval, the City of Schertz shall formally
pass an ordinance and execute an agreement with the owner of the
facility which shall include:
year value;
(1) estimated value to be abated and the base
( 2) the commencement date and the termination
date of abatement;
(3) the proposed use of the facility, nature of
construction, time schedule, map, property description and
improvement list as provided in Application for Tax Abatement;
(4) contractual obI igations 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;
jobs involved;
(5) amount of investment and average number of
( 6 ) percent
to be abated as provided by ln
Section 2.
Such agreement shall normally be executed within 60 days after
the applicant has forwarded all necessary information and
documentation to the Planning Director, City of Schertz.
Recapture. Section 6
(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
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 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 of Schertz within sixty
days from the date of termination.
(b) Should the City of Schertz determine that the
company or individuals is in default according to the terms and
conditions of it's agreement, the City of Schertz shall notify
the company or individual in writing by Certified Mail (Return
Receipt Requested) at the address stated in the agreement, and if
such is not cured within sixty (60) days from the date of such
"notice ("Cure Period"), then the agreement- may be terminated.
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(c) In the event that the company or individual (1)
allows it's ad valorem taxes owed the City of Schertz to become
delinquent and fails to timely and properly follow the legal
procedures for their protest and/or contest; or (2) violates any
of the terms and conditions of the abatement agreement and fails
to cure during Cure Period, or (3) is in default with any other
City sponsored program, the agreement then may be terminated and
all taxes previQusly abated by virtue of the agreement will be
recaptured. and paid within sixty (60) days of termination.
(d) In the event that the company, during the abatement
period or after, the agreed upon abatement period ends, decides to
relocate the company to a location outside of the designated
reinvestment zone, the City of Schertz by an Ordinance adopted by
city Council shall have the right to recapture a percentage of
abated taxes based on the following table:
YEAR
(6 Year Abatement Period)
TOTAL TAXES PREVIOUSLY ABATED
SHALL BE MULTIPLIED BY:
1-7
8
9
10
11
12
100%
80%
60%
40%
20%
10%
FORMULA: The relocation formula Shall Be:
Total Taxes Abated x
in Each Abatement Yr.
Applicable Percentage
from above Table
Amount to be
Recaptured
Administration. Section 7
(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 zone.
Each year, the company or individual receiving abatement shall
furnish the Chief Appraiser with such information as may be
necessary for the abatement. Once value has been establ ished,
the Chief Appraiser shall notify the affected jurisdiction which
levies taxes on the amount of the assessment.
(b) The agreement shall stipulate the employees and/or
designated representatives of the City of Schertz will have
access to the reinvestment zone during the termcof the abatement
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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.
(c) Upon completion of construction, the City Manager or
the City Manager's designee shall annually evaluate each facility
receiving abatement to ensure compliance with the agreement and
report possible violations to the contract and agreement to the
City attorney.
Assignment. Section 8
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Tax abatement agreements may be assignable to a new owner only
with City Council approval.
Sunset Provision. Section 9
(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 have been achieved. Based
on that review, the Guidelines and Criteria may be modified,
renewed or eliminated.
(b) The policy 1S mutually exclusive
Industrial District Contracts and owners of real
areas deserving of special attention as agreed by
jurisdiction.
of existing
property in
the affected
This document was officially adopted by City Council Resolution
No. In accordance with State law,
the City of Schertz Guidelines and Criteria for Tax Abatement and
Reinvestment Zones are effective for two years from the date
adopted, and during that period ( )
the Guidelines and Criteria may be amended or repealed only by a
vote of three-fourths of the members of the City Council.
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