I.  INTRO/GENERAL PURPOSE AND OBJECTIVES 

Denton County is committed to the promotion of high quality development in all parts of the County, and to an ongoing improvement in the quality of life for its citizens.  The Denton County Commissioners Court recognizes that each municipality within the County has a different vision and goal for its economic development efforts.  Insofar as these objectives are generally served by the enhancement and expansion of the local economy, Denton County will, on a case-by-case basis, give consideration to providing tax abatement as stimulation for economic development.  It is the policy of Denton County that said consideration will be provided in accordance with the procedures and criteria outlined in this document.  Nothing herein shall imply or suggest that Denton County is under any obligation to provide a tax abatement to any applicant. 

Taxing jurisdictions in Texas are authorized under Section 11.24 and Chapter 312 of the Tax Code to provide tax abatements for historic preservation, housing, and economic development. To help ensure that all tax abatement requests are consistently reviewed and that only the most effective and appropriate tax abatement projects are undertaken, the following policy has been developed.  Section II concerns the policy for municipality-initiated abatement agreements and the remaining sections are for those areas within Denton County that are not located within the boundaries or the extraterritorial jurisdiction of an incorporated municipality or if a municipality has deferred to the County regarding tax abatement matters.

II.    MUNICIPALITY-INITIATED ABATEMENT AGREEMENTS

(a) Denton County will endeavor to work in concert with other taxing authorities as part of an overall publicly supported incentive program designed to create job opportunities that bring new economic advantages or strengthen the current economic base of our community.

(b) It is the intent of the Commissioners Court to consider granting an abatement agreement to an applicant that has an economic development agreement with a municipality, provided the County’s agreement: 

1.                  Does not exceed the equivalent incentive granted by the municipality unless such action is contemplated by the guidelines set forth below;

2.                  May contain additional or differing terms and conditions that the Court may deem advisable;

3.                   Does not encourage an applicant to move from one Denton County municipality to another unless such agreement is acceptable to both municipalities, which have indicated their approval in writing; and

4.                  Does not provide one Denton County municipality with a competitive advantage over another Denton County municipality seeking the same project. 

(c) In the case where the property is located within a municipality’s extraterritorial jurisdiction, the municipality shall be the initiating taxing entity unless expressly deferred to the County.  

III.  COUNTY-INITIATED ABATEMENT AGREEMENTS 

For those areas within Denton County that are not located within the boundaries of an incorporated municipality or if municipality has deferred to the County, the following criteria contained in these guidelines will be considered by the Commissioners Court when establishing a reinvestment zone and adopting an abatement agreement. 

IV.  DEFINITIONS 

(a)  “Abatement” means the full or partial exemption from ad valorem taxes of certain real property and personal property in a reinvestment zone designated for economic development purposes. 

(b) “Eligible Jurisdiction” means Denton County and any municipality, school district or college district, which is located in Denton County, that levies ad valorem taxes upon and provides services to property located within the proposed or existing reinvestment zone 

(c) “Agreement” means a contractual agreement between a property owner and/or lessee and an eligible jurisdiction for the purposes of tax abatement. 

(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 I but before the execution of the agreement. 

(e) “Economic Life” means the number of years a property improvement is expected to be in service in a facility. 

(f) “Expansion” means the addition of buildings, structures, fixed machinery and equipment, and fixed personal property for purposes of increasing production capacity. 

(g) “Facility” means property improvements completed or in the process of construction, which together comprise an integral whole. 

(h) “Fixed Machinery and Equipment and/or Personal Property” means tangible machinery, equipment, or personal property that is securely placed or fastened and stationary within a building or structure. 

(i) “Manufacturing Facility” means buildings and structures, including fixed machinery and equipment, and fixed personal property, the primary purpose is to manufacture goods. 

(j) “Modernization” means the replacement and upgrading of existing facilities. Modernization may result from the construction, alteration or installation of buildings, structures, fixed machinery and equipment, and fixed personal property. It shall not be for the purpose of reconditioning, refurbishing or repairing. 

(k) “New Facility” means a property previously undeveloped that is placed into service by means other than or in conjunction with expansion or modernization. 

(1) “Other Basic Industry” means buildings and structures including fixed machinery and equipment, and fixed personal property not elsewhere described, used or to be used for the production of products or services and result in the creation of new permanent jobs and bring new wealth in to Denton County. 

(m) “Regional Distribution Center Facility” means buildings and structures, including fixed machinery and equipment, and fixed personal, property, used or to be used, primarily to receive, store service or distribute goods or materials owned by the facility operator. 

(n) “Non-Manufacturing Facilities” means building and structures, used to service and/or house individuals on a permanent or temporary basis. 

(o) “Regional Service Facility” means buildings and structures, including fixed machinery and equipment, and fixed personal property, used or to be used to service goods. 

(p)   “Research Facility” means building and structures, including fixed machinery and equipment, and fixed personal property, 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 processes thereto. 

(q) “Reinvestment Zone” means a geographical area of the County that meets the criteria or paragraph 312.202 VASC. 

V.        REINVESTMENT ZONE 

(a) Authorized Facility. A facility may be eligible for abatement if it is a Manufacturing Facility, a Regional Distribution Center Facility, a Regional Service Facility, a Non-Manufacturing Facility, or other Basic Industry as defined.  Projects under Section 4B of the Development Corporation Act can be eligible for abatement. The economic life of a facility and any improvements must exceed the life of the abatement agreement. 

(b) Creation of New Value. Abatement may only be granted for the additional value of eligible property improvements made subsequent to and listed in an abatement agreement between the County and the property owner and/or lessee, subject to such limitations as Commissioners Court may require. 

(c) New and Existing Facilities. Abatement may be granted for new facilities and improvements to existing facilities for the purposes of modernization or expansion. 

(d) Eligible Property. Abatement may be extended to the value of buildings, structures, fixed machinery and equipment, fixed personal property, and site improvements plus that office space and related fixed improvements necessary to the operation and administration of the facility. 

(e) Ineligible Property. The following types of property shall be fully taxable and ineligible for abatement: land; inventories; supplies; tools; furnishings; and other forms of moveable personal property; vehicles; vessels; private aircraft; property to be rented or leased except as provided in Section 4 (f); also, any property included in the calculation of base year value as defined. 

(f) Owned/ Leased Facilities. If a leased facility is granted abatement the agreement shall be executed with the lessor and the lessee. 

(g) Value and Term of Abatement. Abatement shall be granted effective with the execution of the agreement. Once a determination has been made that a tax abatement would be offered, a recommendation for the value and term of the abatement will be made by the Director of Economic Development through research and negotiations and by comparing incentives previously offered by Denton County.  Pursuant to Chapter 312 of the Tax Code, no abatement can legally exceed 100% or 10 years.   

 (h) 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 have an increase in positive net economic benefit to Denton County of at least $5 million over the life of the abatement, computed to include (but is not limited to) new sustaining payroll and/or capital improvements. The creation of (number and type) of new jobs will also factor into the decision to grant an abatement; and

2.         Must not be expected to solely or primarily have the effect of transferring employment from one part of Denton County to another without a super-majority vote of approval from the Commissioners Court. 

(i) Taxability. From the execution of the abatement to the end of the agreement period taxes shall be payable as follows: 

1.         The value of ineligible property as provided in Section III (e) shall be fully taxable;

2.         The base year value of existing eligible property shall be fully taxable;

3.         The additional value of the eligible property shall be taxable in the manner and for the period provided for in the abatement agreement, subject to terms described in Section V (g); and

4.         The additional value of the new eligible property shall be fully taxable at the end of the abatement period. 

VI.       APPLICATION 

(a) Any present or potential owner of taxable property in Denton County may request the creation of a reinvestment zone and/or tax abatement by filing a written request with the County Judge.  

(b) The application shall consist of: 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; 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 County may require such financial and other information as deemed appropriate for evaluating the financial capacity and other factors pertaining to the applicant, to be attached to the application. The completed application must be accompanied by the payment of a non-refundable, application fee in the amount of ONE THOUSAND AND 00/100 DOLLARS ($1,000.00) for administrative costs associated with the processing of a the tax abatement request.  All checks in payment of the administrative fee should be made payable to “Cindy Brown, County Treasurer.” 

(c) All applications for creation of reinvestment zones or abatements shall incorporate a feasibility study estimating the economic effect of the proposed reinvestment zone and tax abatement on Denton County, other eligible participating jurisdictions, and the applicant. 

(d) Upon receipt of a completed application for creation of a reinvestment zone, the County Judge shall notify in writing and provide a copy of the application to the presiding officer of the governing body of each eligible jurisdiction. 

(e) Upon receipt of a completed application and/or request to participate with the municipality in an abatement agreement, the Denton County Economic Development Director must review and provide recommendations to the Commissioners Court within 30 days and before the public hearing. 

(f) The County shall not establish a reinvestment zone if it finds that the request was filed after the commencement of construction, alteration, or installation of improvements related to the proposed modernization, expansion or new facility. 

VII.        PUBLIC HEARINGS AND APPROVAL 

(a) The Commissioners Court may not adopt a resolution designating a reinvestment zone until it has held a public hearing at which interested parties are entitled to speak and present evidence for or against its designation. Notice of the hearing shall be clearly identified on the Commissioners Court agenda at least 30 days prior to the hearing and a public notice shall be published in a general circulation publication at least 30 days prior to the hearing. 

(b) Prior to entering into a tax abatement agreement, the Commissioners Court may, at its option, hold a public meeting at which interested parties shall be entitled to speak and present written materials for or against the approval of the tax abatement agreement. 

(c) In order to enter into a tax abatement agreement, the Commissioners Court must find that the terms of the proposed agreement meet Guidelines and Criteria and that: 

1.         There will be no substantial adverse affect on the provision of the jurisdiction’s   service or tax base; and

2.         The planned use of the property will not constitute a hazard to public safety, health or morals. 

(d) Any applicant requesting an abatement shall require majority vote of the Commissioners Court for approval. No application shall be approved unless accompanied by a request for abatement as provided under Section V (a). 

VIII.    AGREEMENT 

(a) After approval, the County shall formally pass a resolution and execute an agreement with the owner of the facility and lessee as required. The Court Order shall include: 

1.         Estimated value to be abated and the base year value;

2.         Percent of value to be abated each year;

3.         The commencement date and the termination date of abatement;

4.         The proposed use of the facility; nature of construction, time schedule map, property description and improvement list as provided in Section IV (b);

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 by state law, and;

6.         Amount of investment and average number and types of jobs involved.

Such agreement shall normally be executed within 60 days after the applicant has forwarded all necessary information and documentation to the County.

(b) Participation in tax abatement agreements with municipalities requires additional information to be included in the Court Order approving the agreement, as follows: 

1.         A copy of the agreement between the applicant and municipality shall be attached and made a part of the Court Order for all purposes; and

2.         Authorization for the County Judge to execute a signatory page on behalf of the Commissioners Court which shall be attached and made part of the original agreement.  

IX. RECAPTURE 

(a) Commissioner’s Court reserves the right to review compliance for full or partial recapture in the event that the applicant fails to perform in “good faith.” If a project is not completed as specified in the tax abatement agreement, the County has the right to cancel the abatement agreement and abated taxes shall become due to the County and other affected taxing units as provided by law. If any of the provision contained in the tax abatement agreement, i.e., employment, amount of investment, etc., are not met, the County shall have the right to reduce or cancel the abatement agreement. If a project granted a tax abatement ceases to operate or is no longer in conformance with the tax abatement agreement, the agreement shall not be in effect for the period of time during which the project is not operating or is not in conformance. 

X.  ADMINISTRATION 

(a) The Chief Appraiser for the County shall annually determine as assessment of the real and personal property comprising the reinvestment zone. Each year, the company or individual receiving the abatement shall furnish the appraiser with such information as may be necessary for the abatement. Once value has been established, the Chief Appraiser shall notify the affected jurisdictions, which levies taxes of the amount of the assessment. 

(b) The agreement shall stipulate that the County Tax Assessor/Collector and Chief Appraiser and/or their designated representatives for the County 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 twenty-four (24) hours proper written notice and will only be conducted in such a manner as to not unreasonably interfere with the construction and/or operation of the facility. All inspections will be made with one or more representatives of the company or individual and in accordance with its safety standards. 

(c)  Upon completion of construction, the County or jurisdiction creating the reinvestment zone shall annually evaluate each facility receiving abatement to ensure compliance with the agreement and report possible violations to the contract and agreement to the Commissioners Court and the District Attorney.  On or before April 30^th of every year during the life of the abatement agreement, the company or individual receiving the abatement shall complete and file a Tax Abatement Evaluation Report with the Director of Economic Development, detailing and certifying the abatement recipient’s compliance with the terms of the abatement agreement.  Failure to provide information requested in the compliance evaluation by the prescribed deadline may result in taxes abated in the prior year being due and payable.  The company or individual receiving the abatement shall provide information to the County for the evaluation that shall include, but not be limited to, the following:

1.         The total number of employees of the company, their average salaries, and the number of employees residing in Denton County and their average salaries, reported in job classifications appropriate to the employee;

2.            The total dollar amount of inventory not subject to the Freeport Exemption;

3.         The number and dollar amounts of all construction contracts and subcontracts awarded on the project;

4.         The gross dollars spent on supplier and professional service contracts, indicating the amounts by contract awarded and performed by Denton County businesses and individuals;

5.         Evidence of compliance with any additional requirements of the abatement agreement;

6.         Should the dollars, percentages or actions not meet the original or modified requirements of the abatement agreement, a statement shall be provided explaining the reason for the failure to meet the requirements and a recommended course of rectification. 

XI.       ASSIGNMENT 

Tax abatement agreements may be assigned to a new owner or lessee of the facility with the written consent of the Commissioners Court, which consent shall not be unreasonably withheld. Any assignment shall provide that the assignee shall irrevocably and unconditionally assume all the duties and obligations of the assignor upon the same terms and conditions as set out in the agreement. Any assignment of a tax abatement agreement shall be to an entity that contemplates the same improvements or repairs to the property, except to the extent that such improvements or repairs have been completed. 

No assignment shall be approved if the assignor or the assignees are indebted to the County for ad valorem taxes or other obligations. 

XII.     SUNSET PROVISION 

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 County to determine whether the goals have been achieved. Based on that review, the Guidelines and Criteria will be modified renewed or eliminated. 

Approved by:

Denton County Commissioner’s Court              

Scott Armey
(Denton County Judge)