Fort Worth tax abatement policy

I. GENERAL PURPOSE AND OBJECTIVES

Certain types of investment result in the creation of new jobs, new income and provide for positive economic growth and inner-city economic stabilization which is beneficial to the City as a whole. The City of Fort Worth is committed to the promotion of high quality development in all parts of the City and improvement in the quality of life for its citizens.

The City of Fort Worth will, on a case-by-case basis, give consideration to the granting of property tax incentives to eligible residential, commercial, and industrial development projects. It is the policy of the City of Fort Worth that consideration of eligible projects will be provided in accordance with the guidelines and criteria outlined in this document. Texas law authorizes the City of Fort Worth to grant tax abatement on the value added to a particular property by a specific development project which meets the economic goals and objectives of the City, and the requirements of the statute (Vernon’s Tax Code Ann. Section 312.001, et. seq.).

As mandated by state law, this policy applies to the owners of real property. It is not the policy of the City of Fort Worth to grant property tax abatement to any development project for which a building permit has been previously issued by the City’s Department of Development. Nothing in the policy shall be construed as an obligation by the City of Fort Worth to approve any tax abatement application.

Although all applications which meet the eligibility criteria (Section III.) of this policy statement will be reviewed, it is the objective of the City of Fort Worth to encourage applications from projects that:

(a) are located in enterprise zones or other designated target areas; or

(b) result in a development with little or no additional cost to the City; or

(c) result in 1,000 or more new jobs, with a commitment to hire Fort Worth and inner city residents.

II. DEFINITIONS

"Abatement" means the full or partial exemption from ad valorem taxes on eligible properties for a period of up to ten years and an amount of up to 100% of the increase in appraised value (as reflected on the certified tax roll of the appropriate county appraisal district) resulting from improvements begun after the execution of the tax abatement agreement. Eligible properties must be located in a reinvestment zone.

"Reinvestment Zone" is an area designated as such by the City of Fort Worth or State of Texas in accordance with the Texas Property Redevelopment and Tax Abatement Act, Sections 312.001 through 312.209 of the Tax Code.

"Residential Development Project" is a development project which proposes to construct or renovate multi-family residential living units on property that is (or meets the requirements to be) zoned multi-family as defined by the City of Fort Worth Zoning Ordinance.

"Fort Worth Company" is a business which has a principal office located within the city limits of Fort Worth.

"Minority Business Enterprise (MBE) and Women Business Enterprise (WBE)" is a minority or women owned business that has received certification as either a MBE or WBE by either the North Texas Regional Certification Agency (NTRCA) or the Texas Department of Transportation (TxDOT), Highway Division.

"Capital Investment" includes only real property improvements such as new facilities and structures, site improvements, facility expansion, and facility modernization. Capital investment does NOT include land acquisition costs and/or any existing improvements, or personal property (such as machinery, equipment, and/or supplies and inventory).

"Facility Expansion" is a new permanent real property improvement such as a building or buildings constructed to provide additional square footage to accommodate increased space requirements of a Fort Worth company.

"Facility Modernization" is a new permanent real property improvement under taken to provide increased productivity for a new or existing Fort Worth company.

"Supply and Service Expenses" are discretionary expenses incurred during the normal maintenance and operation activities of a business.

III. ELIGIBILITY CRITERIA

A. RESIDENTIAL PROJECT ELIGIBILITY

A residential development project is eligible for property tax abatement if:

1. The project is located in any of the following census tracts: 1002.02, 1010, 1011, 1016, 1017, 1018, 1019 (partial), 1025, 1028 (partial), 1029, 1030, 1031, 1033, 1035, 1036.01, 1037.01, 1038, 1040, 1041 (partial) (see Map- Exhibit "A"); AND

2. a. The project will construct or renovate no less than 50 residential living units of which no less than 20% shall be affordable (as defined by the U.S. Department of Housing and Urban Development) to persons with incomes at or below 80% of median family income; OR

b. The project has a minimum capital investment of $5 million (excluding acquisition costs for land and any existing improvements).

B. COMMERCIAL/INDUSTRIAL ELIGIBILITY

1. New Projects

In order to be eligible for property tax abatement, a new commercial/industrial development project must satisfy one of the following three criteria:

a. Upon completion will have a minimum capital investment of $10 million and commits to hire an agreed upon percentage of residents from an eligible inner city census tract (as identified on Exhibit "A") for full time employment.; OR

b. Is located in the "inner city" (as identified on Exhibit "A") or property immediately adjacent to the major thoroughfares which serve as boundaries to any of these inner city census tracts and commits to hire an agreed upon percentage of residents from an eligible inner city census tract (as identified on Exhibit "A") for full time employment.; OR

c. Is located outside of the "inner city", has a minimum capital investment of less than $10 million, and commits to hire an agreed upon percentage of residents from an eligible inner city census tract (as identified on Exhibit "A") for full time employment.

2. Existing Business Expansion and/or Modernization

In order to be eligible for property tax abatement, a facility expansion and/or modernization by an existing commercial/industrial business

a. Upon completion will have a minimum capital investment of $10 million.; OR

b. Must result in increased employment for which the business commits to hire and retain an agreed upon percentage of residents from an eligible inner city census tract (as identified on Exhibit "A") for new, full time positions; AND

c. Must have a minimum capital investment of (1) $500,000, OR (2) an amount equal to or greater than 25% of the appraised value, as certified by the appropriate appraisal district, of real property improvements on the property for the year in which the abatement is requested.

C. PROOF TESTS

1. Building Permits

No tax abatement will be granted to any development project which has applied for or received a building permit from the City’s Department of Development.

2. Evidence of Need for Tax Abatement

The applicant must provide evidence to substantiate and justify the tax abatement request including (but not limited to) an analysis demonstrating the tax abatement is necessary for the financial viability of the project.

IV. ABATEMENT GUIDELINES

The tax abatement agreement must provide that the applicant:

(1) Hire Fort Worth residents for an agreed upon percentage (at least 25%) of new full time jobs to be created and make a good faith effort to hire 100% Fort Worth residents for all new jobs created as a result of the abatement,

(2) Commit to hire an agreed upon percentage of Fort Worth residents from an eligible inner city census tract (as identified on Exhibit "A") for all new jobs created as a result of the project. The agreed upon percentage shall be determined by negotiation.

(3) Utilize Fort Worth companies for an agreed upon percentage of the total costs for construction and Supply and Service Contracts, and

(4) Utilize Minority and Women owned Business Enterprises (M&WBEs) for an agreed upon percentage of the total costs for construction and supply and service contracts in the manner provided in the City of Fort Worth’s Minority and Women Business Enterprise ordinance.

In addition to the above, the abatement must comply with the following guidelines:

A. State law prohibits abatement of taxes levied on inventory, supplies or the existing tax base. City policy is not to abate taxes on personal property located within Fort Worth prior to the date of the tax abatement agreement.

B. Unless otherwise specified in the agreement, the amount of the taxes to be abated shall in no event exceed the amount of the capital investment (as specified in the application) multiplied by the City’s tax rate in effect for the year in which the calculation is made.

C. In certain cases, the City may consider a tax abatement application from the owner of real property who serves as a landlord or lessor for a development project which meets the eligibility criteria of this section.

D. The City may consider an application from the owner or lessee of real property requesting abatement of real and or personal property owned or leased by a certified air carrier on the condition that the certified air carrier make specific real property improvements or lease real property improvements for a term of 10 years or more.

E. For an eligible development project to be considered for tax abatement, the "Application for Tax Abatement" form must be completed and submitted to the Office of Economic Development.

F. An application fee must accompany the application. The fee is calculated at the lesser of: (i) 1% of the project capital investment, or (ii) $15,000.

If construction on the project is begun on the site specified in the application within a one (1) year period from the application submittal date (with or without a tax abatement), this fee shall be credited to any permit, impact, inspection or any other lawful fee required by the City of Fort Worth. If the project is not constructed on the site specified in the application or if construction takes place at the specified site more than one (1) year after the application submittal date, the application fee shall not be refunded or otherwise credited.

G. If requested, the applicant must provide evidence that there are no delinquent property taxes due on the property on which the development project is to occur.

H. The tax abatement agreement shall limit the uses of property consistent with the general purpose of encouraging development or redevelopment of the zone during the period that property tax abatements are in effect.

I. Tax abatement may only be granted for projects located in a reinvestment or enterprise zone. For eligible projects not currently located in such a zone, the City Council may choose to so designate the applicant’s property in order to allow for a tax abatement.

J. The owners of all projects receiving tax abatement shall properly maintain the property to assure the long term economic viability of the project.

V. PROCEDURAL STEPS

Each request for property tax abatement shall be processed according to the following procedural guidelines.

A. Application Submission:

Provided that the project meets the criteria detailed in Section III of this policy, the Applicant must complete and submit a City of Fort Worth "Application For Tax Abatement" form (with required attachments) and pay the appropriate application fee.

B. Application Review and Evaluation:

The Economic Development Office will review the application for accuracy and completeness. Once complete, the application will be evaluated based on:

1. Types of new jobs created, including respective wage rates, and employee benefits packages such as health insurance, day care provisions, retirement package(s), transportation assistance, and any other.

2. Percent of new jobs committed to Fort Worth residents.

3. Percent of new jobs committed to Fort Worth "Inner City" residents.

4. Percent of construction contracts committed to:

a. Fort Worth based firms, and

b. Minority and Women owned Business Enterprises (MBEs and WBEs).

5. Percent of supply and service contract expenses committed to:

a. Fort Worth based firms, and

b. Minority and Women owned Business Enterprises (MBEs and WBEs).

6. The project’s increase in the value of the tax base.

7. Costs to the City (such as infrastructure participation, etc.).

8. Other items which may be negotiated by the City and the applicant.

Based upon the outcome of the evaluation, the Economic Development Office may present the application to the City Council’s Expanding Economic Opportunities Committee.

C. Consideration by Council Committee

Should the Economic Development Office present the application to the City Council’s Expanding Economic Opportunities Committee, the Committee will consider the application at an open meeting. The Committee may:

(1) Approve the application. Staff will then incorporate the application into a tax abatement agreement which will be sent to the City Council with the Committee’s recommendation to approve the agreement; or

(2) Request modifications to the application. Economic Development staff will discuss the suggested modifications with the applicant and then, if the requested modifications are made, resubmit the modified application to the Committee for consideration; or

(3) Deny the application. The applicant may appeal the Committee’s finding by requesting the City Council to: (a) disregard the Committee’s finding and (b) instruct city staff to incorporate the application into a tax abatement agreement for future consideration by the City Council.

D. Consideration by the City Council

The City Council retains sole authority to approve or deny any tax abatement agreement and is under no obligation to approve any tax abatement application or tax abatement agreement. The City of Fort Worth is under no obligation to provide tax abatement in any amount or value to any applicant.

E. Effective Date for Approved Agreements

All tax abatements approved by the City Council will become effective on January 1 of the year following the year in which a Certificate of Occupancy (CO) is issued for the qualifying development project (unless otherwise specified in the tax abatement agreement). Unless otherwise specified in the agreement, taxes levied during the construction of the project shall be due and payable.

VI. RECAPTURE

If the terms of the tax abatement agreement are not met, the City Council has the right to cancel or amend the abatement agreement. In the event of cancellation, the recapture of abated taxes shall be limited to the year(s) in which the default occurred or continued.

VII. INSPECTION AND FINANCIAL VERIFICATION

The terms of the agreement shall include the City of Fort Worth’s right to: (1) review and verify the applicant’s financial statements in each year during the life of the agreement prior to granting a tax abatement in any given year, (2) conduct an on site inspection of the project in each year during the life of the abatement to verify compliance with the terms of the tax abatement agreement.

VIII. EVALUATION

Upon completion of construction of the facilities, the City shall no less than annually evaluate each project receiving abatement to insure compliance with the terms of the agreement. Any incidents of non-compliance will be reported to all affected taxing units.

On or before March 31st of every year during the life of the agreement, any individual or entity receiving a tax abatement from the City of Fort Worth shall provide information and documentation which details the property owner’s compliance with the terms of the respective agreement and shall certify that the owner is in compliance with each applicable term of the agreement. Failure to report this information and to provide the required certification by the above deadline shall result in any taxes abated in the prior year being due and payable.

IX. EFFECT OF SALE, ASSIGNMENT OR LEASE OF PROPERTY

No tax abatement rights may be sold, assigned or leased unless otherwise specified in the tax abatement agreement. Any sale, assignment or lease of the property which is not permitted in the tax abatement agreement results in cancellation of the agreement and recapture of any taxes abated after the date on which an unspecified assignment occurred.