CAI(LOCAL) - APPROPRIATIONS AND REVENUE SOURCES: AD VALOREM TAXES
Discount options shall not be provided for the early payment of property taxes in the College District.
Split payment of taxes shall be allowed in accordance with statutory provisions.
Tax Abatement Agreements
The College District has elected to become eligible to participate in tax abatement agreements as permitted by Chapter 312 of the Texas Tax Code.
Guidelines and Criteria for Tax Abatement Agreements
Under the authority of the Tax Abatement Act (Section 312.001 et. Seq. Texas Tax Code), the governing body of a taxing unit is eligible to enter into tax abatement agreements with property owners in an area designated as a reinvestment zone or enterprise zone to exempt from taxes all or part of the increased value in the property on the condition that the owner makes specified improvements. The governing body must adopt guidelines and criteria for granting abatements.
"Abatement" means the full or partial exemption from ad valorem taxes of certain real property in a reinvestment zone or enterprise zone designated for economic development purposes.
"Reinvestment Zone" is an area where a municipality or Bowie County has decided to influence development patterns and attract major investments that will contribute to the development of the municipality or the county through the use of tax abatement for specified real property improvements and has taken formal action to designate a specific area as such.
"Enterprise Zone" means an area declared by the Texas Enterprise Zone Board to be eligible for the benefits of the Texas Enterprise Zone Act.
"Modernization" means the replacement and updating of existing facilities, which increases the productive input or output, updates the technology, or substantially lowers the unit cost of operation. Modernization may result from the construction, alteration, or installation of buildings.
"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.
"Manufacturing 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. Establishments engaged in assembling component parts of manufactured products are also considered manufacturing.
"Biomedical/Biotech Research Facility" means buildings and structures, including fixed machinery and equipment, used or to be used primarily for research on experimentation to improve or develop new tangible goods or materials or to improve or develop the production process thereto.
"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 Bowie County.
"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 are likely to stay in the city for more than one day and will, therefore, likely utilize local restaurants and hotel/motel accommodations.
"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 that result in the creation of new, permanent full-time jobs and bring new wealth into the community.
A facility may be eligible for abatement if it is a manufacturing/assembly facility, regional distribution facility, regional tourist entertainment facility, biomedical/biotech research facility, or other basic industry and is located in a reinvestment zone or enterprise zone.
Creation of New Values
Abatement may only be granted for the additional value of eligible real property improvements subject to such limitations as the College District may require. The College District shall not enter into an abatement agreement if it finds that:
- The application for tax abatement was filed after the commencement of construction, expansion, or modernization; or
- The College District was not officially notified that construction, expansion, or modernization would commence on a given date.
New and Existing Facilities
Abatement may be granted for new facilities for purposes of modernization or expansion.
Abatement may be extended to the value of buildings, structures, fixed machinery and equipment, site improvements, plus office space and related fixed improvements necessary to the operation and administration of the facility.
If a leased facility is granted abatement, the agreement will be executed with both the lessor and lessee. In such cases, the lessor shall demonstrate binding contracts with the lessee to guarantee job creation. Said lease shall include the tax abatement agreement.
Value and Term of Abatement
Abatement may be granted on a case-by-case basis at the sole discretion of the Board. Abatement, if granted, will be 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 term of the standard abatement can be up to six years.
Standard and Special Abatements
Standard six-year abatement is 90 percent if the capital cost of the project improvements is over $5,000,000 or 50 or more new permanent jobs are created and sustained each year of the abatement.
Special ten-year tax abatement allowances are applicable to a project if the project, in addition to meeting the criteria for the standard six-year abatement above, also meets one of the following criteria:
- If the project is located in a state-approved enterprise zone, the term of the abatement can be up to ten years.
- If initial total project costs are greater than $50,000,000, the term of the abatement can be up to ten years.
- If the project is located in an area designated by the municipality or county as eligible for tax abatements longer than the standard six-year term, the abatement, when granted, will be for the duration of the agreement by the entity that designated the area as a reinvestment zone.
If a project qualifies for the special ten-year abatement, the abatement shall be:
- 90 percent for years one–six
- 60 percent for year seven
- 40 percent for year eight
- 20 percent for year nine
- 10 percent for year ten
In order to be eligible and receive tax abatement, the planned improvement:
- Must be located in an area designated by the municipality or the county as a reinvestment zone under Section 312 of the Texas Tax Code, or in an enterprise zone as designated by the state;
- Must be reasonably expected to increase the appraised value of the improved property according to Section 2(f);
- Must be expected to increase employment based on the number of permanent jobs created and sustained in each year of the abatement as per Section 2(f);
- Should not be expected to solely or primarily have the effect of merely transferring existing employment from one part of the College District 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
- 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.
From the execution of the abatement to the end of the agreement, period taxes shall be payable as follows:
- The base year value of existing eligible property as determined each year shall be fully taxable; and
- The additional value of new eligible property shall be taxable in the manner described in Section 2(g), Subsections 1, 2, and 3.
Any present or potential owner of taxable property in the College District may request tax abatement by filing an Application for Tax Abatement with the College President.
The application shall consist of a completed application form accompanied by:
- A general description of the new improvements to be undertaken;
- A descriptive list of the improvements for which an abatement is requested; 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 College President deems appropriate for evaluating the financial capacity and other factors of the applicant.
Upon approval by the College President, consideration of a tax abatement agreement shall be presented to the Board.
In order to enter into a tax abatement agreement, the College District must find that the terms of the proposed agreement meet these guidelines and criteria and that:
- There will be no substantial long-term adverse effect on the provision of the College District tax base; and
- The planned use of the property will not constitute a hazard to public safety, health, or morals.
After approval, the College District shall formally pass a resolution and execute an agreement with the owner of the facility, which shall include:
- Estimated value to be abated and the base year value;
- The commencement date and the termination date of abatement;
- The proposed use of the facility, nature of construction, time schedule, map, property description, and improvement list as provided in CAI (Form) Application for Tax Abatement;
- 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;
- Amount of investment and average number of jobs involved; and
- Percent to be abated as provided for in Section 2.
Such agreement shall normally be executed within 60 days after the applicant has forwarded all necessary information and documentation to the College President.
In the event that the facility is completed and begins producing products or services, but subsequently discontinues producing products or services for any reason except fire, explosion, or other casualty or accident or natural disaster for a period of one year during the abatement period, 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 College District within 60 days from the date of termination.
Should the College District determine that the company or individual is in default according to the terms and conditions of its agreement, the College District shall notify the company or individual in writing at the address stated in the agreement, and if such is not cured within 60 days from the date of such notice (Cure Period), then the agreement may be terminated.
The agreement may be terminated, and all taxes previously abated by virtue of the agreement will be recaptured and paid within 60 days of termination in the event that the company or individual:
- Allows its ad valorem taxes owed the College District to become delinquent and fails to timely and properly follow the legal procedures for their protest and/or contest;
- Violates any of the terms and conditions of the abatement agreement and fails to cure during the Cure Period;
- Is in default with any other city-sponsored program;
- Decides to relocate the company to a location outside of the designated reinvestment zone; or
- Ceases operation.
The chief appraiser of the Bowie 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 established, the chief appraiser shall notify the affected jurisdictions that levy taxes of the amount of the assessment.
The agreement shall stipulate the employees and/or designated representatives of the College District who will have access to the 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 the giving of 24 hours' prior notice and will only be conducted in such a manner as to not unreasonably interfere with the construction and/or operation of the facility.
Upon completion of construction, the College President or designee shall annually evaluate each facility receiving abatement to ensure compliance with the agreement and report possible violations of the contract and agreement to the Board.
Tax abatement agreements may be assignable to a new owner only with the Board's approval.
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 created pursuant to its provisions will be reviewed by the College District to determine whether the goals have been achieved. Based on that review, the guidelines and criteria will be modified, renewed, or eliminated.
Conflicts of Interest
Property within a reinvestment zone that is owned or leased by a Board member is excluded from property tax abatement or tax increment financing.