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Consider a memorandum/resolution readopting the Guidelines and Criteria for Tax Abatement.
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DATE: May 20, 2025
TO: Kent Cagle, City Manager
FROM: Wallis Meshier, Executive Director of Development Services
SUBJECT: Readoption of Guidelines and Criteria for Tax Abatement
BACKGROUND AND FINDINGS:
In order to offer tax abatement, the City of Killeen is required to establish guidelines and criteria governing tax abatement (Texas Tax Code § 312.002). The Tax Code provides that the guidelines and criteria adopted are effective for two years from the date adopted. Guidelines and Criteria for Granting Tax Abatement in Reinvestment and Enterprise Zones were originally adopted by the City of Killeen in 1996. They have been re-adopted every two years since but have been modified to stay current with state law.
The proposed amendments to the guidelines focus on two key areas:
1. Residential Tax Abatement Guidelines
• Expand eligibility for residential tax abatement to all residential typologies, recognizing the importance of housing investment in revitalizing distressed areas.
• To qualify for residential tax abatement, projects must meet specific investment requirements:
o For new residential facilities, the investment must exceed 300% of the base year taxable value.
o For modernized residential facilities, the required investment is 50% of the base year taxable value.
2. Commercial Tax Abatement Guidelines
• Increased Minimum Investment: The guidelines for commercial facilities will see an increase in the minimum investment required to qualify for tax abatement. Projects must now involve an investment that is at least 300% of the base year taxable value, with a minimum overall investment of $5,000,000.
• Job Creation Provisions: A new provision will require that at least 50% of the jobs created by commercial facilities receiving tax abatement must offer salaries at or above 150% of the area median income. This provision aims to ensure that the jobs generated by these projects provide higher-than-average wages, contributing to long-term economic prosperity for the community.
These changes are designed to better align the Guideline with the City’s current economic development goals and to promote significant investment in distressed areas.
THE ALTERNATIVES CONSIDERED:
The City Council has three alternatives. The Council may:
• Disapprove continuing the City's eligibility under state law to participate in tax abatement and not adopt the Guidelines and Criteria for Tax Abatement;
• Approve continuing the City’s eligibility under state law to participate in tax abatement and amend the Guidelines and Criteria for Tax Abatement; or
• Approve continuing the City's eligibility under state law to participate in tax abatement and adopt the Guidelines and Criteria for Tax Abatement.
Which alternative is recommended? Why?
Staff recommends that the City Council adopt the Guidelines and Criteria for Tax Abatement as presented.
CONFORMITY TO CITY POLICY:
This item conforms to city policy and state law.
FINANCIAL IMPACT:
What is the amount of the revenue/expenditure in the current fiscal year? For future years?
The adoption of the Guidelines and Criteria for Tax Abatements will not have a direct fiscal impact on the City of Killeen. Individual cases wishing to pursue tax abatement opportunities will be presented to the City Council separately as appropriate.
Is this a one-time or recurring revenue/expenditure?
It is anticipated that tax abatement requests will be evaluated on a recurring basis.
Is this revenue/expenditure budgeted?
This is not applicable.
If not, where will the money come from?
This is not applicable.
Is there a sufficient amount in the budgeted line-item for this revenue/expenditure?
This is not applicable.
RECOMMENDATION:
Staff recommends that the City Council adopt the Guidelines and Criteria for Tax Abatement as presented.
DEPARTMENTAL CLEARANCES:
This item has been reviewed by the Legal and Finance staff.
ATTACHED SUPPORTING DOCUMENTS:
Guidelines and Criteria for Tax Abatement - Redlined
Guidelines and Criteria for Tax Abatement - Clean
Presentation