Title
Consider a memorandum/resolution for the adoption of guidelines and criteria for tax abatement.
Summary
DATE: October 18, 2022
TO: Kent Cagle, City Manager
FROM: Edwin Revell, Executive Director of Development Services
SUBJECT: Adoption of guidelines and criteria for tax abatement
BACKGROUND AND FINDINGS:
Enterprise and reinvestment zones are economic development tools which seek to encourage job creation and capital investment. The City of Killeen currently includes areas within enterprise zones according to the Economic Development and Tourism Division of the Governor's Office. The enterprise zone program allows a community to partner with the state to offer local and state tax and regulatory benefits to a new or an expanding business in the designated distressed areas. The governing body of a municipality by ordinance may designate an area as a reinvestment zone when such designation is likely to attract major investment in the zone. Tax abatement is one of the tax incentives available in an enterprise or reinvestment zone.
In order to offer tax abatement, the City is required to establish guidelines and criteria governing tax abatement (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 were adopted every two years since then, but they have been modified to stay current with state law. There is a minor change to the Guidelines and Criteria for this adoption, including updating the definition of Abatement to include real property or tangible personal property located on the real property, or both. This language more closely mirrors the state tax code.
THE ALTERNATIVES CONSIDERED:
The City Council has two (2) alternatives. The Council may:
§ Disapprove continuing the City’s eligibility under state law to participate in tax abatement and not adopt the Tax Abatement Guidelines and Criteria; or
§ Approve continuing the City’s eligibility under state law to participate in tax abatement and adopt the Tax Abatement Guidelines and Criteria.
Which alternative is recommended? Why?
Staff recommends that the City Council adopt the Tax Abatement Guidelines and Criteria as presented.
Staff does not recommend any alternative in lieu of this tool, which has been useful for economic development purposes.
CONFORMITY TO CITY POLICY:
The re-adoption of the guidelines and criteria governing tax abatement conforms to city policy and comprehensive plan implementation recommendation DT 5.6.
FINANCIAL IMPACT:
What is the amount of the expenditure in the current fiscal year? For future years?
The adoption of the Guidelines and Criteria for Tax Abatements will not have a direct impact on the City of Killeen fiscally. 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 expenditure?
It is anticipated that tax abatement requests will be evaluated on a recurring basis.
Is this expenditure budgeted?
This expenditure is not budgeted as a line item.
If not, where will the money come from?
This is not applicable.
Is there a sufficient amount in the budgeted line-item for this expenditure?
This is not applicable.
RECOMMENDATION:
Staff recommends that the City Council adopt the Tax Abatement Guidelines and Criteria as presented.
DEPARTMENTAL CLEARANCES:
This item has been reviewed by the Legal and Finance staff.
ATTACHED SUPPORTING DOCUMENTS:
Tax Abatement Guidelines and Criteria