Main Street Incentives
COMMERCIAL BUILDING TAX ABATEMENT PROGRAM
CITY OF KAUFMAN GUIDELINES & POLICY STATEMENT
As the City of Kaufman is committed to the promotion and development of the Washington Street Corridor and Downtown Central Business District, and the ongoing improvement of the quality of life for its citizens, it seeks to offer programs that help attract investment to the area. Insofar as these goals are served by the enhancement of the city's tax base and the expansion of the local economy, the City of Kaufman will give consideration to providing a real and/or personal property tax abatement for building renovations and expansions in the Washington Street Corridor and/or the Central Business District. The Commercial Building Tax Abatement Program is an economic development incentive created to encourage the restoration and improvement of existing commercial structures.
- Abatement: full or partial exemption for ad valorem taxes of eligible properties in a reinvestment zone designated as such for economic development purposes.
- Agreement: a contractual agreement between a property owner or lessee and a taxing jurisdiction for the purpose of a tax abatement.
- Base Year Value: the assessed value of either the applicant's real property and improvements located in a designated reinvestment zone on January 1 of the year prior to the execution of the agreement plus the agreed upon value of any property improvements made after January 1 of that year but before the execution of the agreement, and/or the assessed value of any tangible personal property located on the owner's real property on January 1 of the year prior to the abatement period covered by the agreement.
- Economic Life: the number of years a property improvement is expected to be in service in a facility; provided, however, in no event shall the number of years exceed the depreciation allowance specified in the Federal Internal Revenue Service Code
- Facility: property improvements completed or in the process of construction which together comprise an integral whole.
- Modernization: replacement and upgrading of existing facilities which increase the productive input or output, updates the technology, or substantially lowers the unit cost of operation, and extends the economic life of the facility. Modernization may result from the construction, alteration, or installation of buildings, structures, fixed machinery, or equipment.
- Personal Property: equipment and/or tools used, or for use, in the operation of the business applying for tax abatement, other than that which was located on the real property at any time before the period covered by the tax abatement agreement, and other than inventory, supplies, and/or office equipment.
- Real Property: area of land defined by legal description as being owned by the business applying for a tax abatement, including any improvements thereto, which is to be improved and valued for property tax purposes, and which is to be included in the reinvestment zone.
- Reinvestment Zone: or a tax abatement district is an area designated as such for the purpose of a tax abatement as authorized by the City of Kaufman in accordance with Texas Tax Code Annotated Section 312.201 (Vernon 1992) as amended.
It is the policy of the City of Kaufman that consideration will be provided in accordance with the guidelines, criteria and procedures outlined in this document. This policy applies to the owners or lessees of real and personal property. Project consideration will include the potential impact of the reinvestment project on the immediate and surrounding area.
- Authorized Facility: a tax abatement may be granted for the modernization and occupancy of an existing facility which contributes to the retention or expansion of a major employer or the attraction of a major investment which offers a significant contribution to the target area's tax base. The economic life of the facility and its improvements must exceed the life of the abatement agreement. Projects eligible to apply for a tax abatement under this policy include: all uses allowed in the Washington Street Corridor Overlay Zone and the Downtown Business District except single family use and any Non-conforming use.
- Eligible Property: a tax abatement may be granted for improvements to real and personal property to the extent allowed by state law. No abatements will be granted for inventory or supplies, including office equipment.
- Value of Abatement: authorized facilities may be granted an abatement on all or a portion of the increased taxable value of eligible property over the base year value for a period not to exceed 7 years for real property and qualified personal property.
Each applicant for tax abatement must comply with project impact data requests for information by endeavoring to provide the most accurate estimates possible.
The eligibility requirements for REAL property tax abatements are as follows:
Investment in a Structure: Abatement Per Year: Max # of Years:*
$250,000 & up 80% 7
$200,000 - $249,999.99 60% 5
$150,000 - $199,999.99 50% 5
$100,000 - $149,999.99 40% 4
$ 50,000 - $ 99,999.99 30% 3
The requirements for PERSONAL property tax abatements are as follows*:
Projects that invest a minimum of $75,000 in a structure used for a business is eligible for a five (5) year tax abatement in the following manner:
Projects that invest between $45,000 - $74,999.99 in a structure used for a business is eligible for a four (4) year tax abatement in the following manner:
Projects that invest between $20,000 - $44,999.99 in a structure used for a business is eligible for a three (3) year tax abatement in the following manner:
* Length of abatement period is commensurate with the length of lease/occupancy terms, but shall not exceed maximum number of years listed.
The final valuation determined by the Kaufman County Appraisal District will be used to determine the actual yearly tax abatement exemption.
The figure set forth in the application (value of improvements), shall become the qualification figure that shall be placed in the tax abatement agreement and shall be the figure that the applicant must certify to the City of Kaufman for the yearly tax abatement to be effective. Said numbers shall never be less than those set forth in these guidelines.
The tax abatement shall be granted to the owner or lessee of the property.
No tax abatement exemption shall be effective until the applicant has met all of the eligibility requirements contained in the guidelines and policies, state law, and City of Kaufman codes.
There shall be no retroactive tax abatement exemptions - all tax abatement exemptions become effective only on or after the date the City Council approves the tax abatement agreement.
The applicant shall agree to hold the City of Kaufman, its agents, employees and public officials harmless and pay all attorney's fees that are generated by any dispute regarding the tax abatement agreement.
Personal property that was located on the real property at any time before the period covered by the abatement agreement will not be eligible for abatement.
Personal property abatements cannot be combined with real property abatements unless specifically directed to do so by the City of Kaufman City Council.
No abatement will be approved that has a negative effect on the City of Kaufman's municipal bond rating.
The City Council may place a requirement in a tax abatement agreement that the applicant secure a bank letter of credit in favor of the City to guarantee funds are available should the applicant fail to honor the commitment set forth in the tax abatement agreement and/or this document.
Any person, partnership, organization, corporation or other entity desiring that the City of Kaufman consider providing a tax abatement to encourage the renovation of property and/or the location, relocation or expansion of operations within the identified target area shall be required to comply with the following procedural guidelines. No representations made herein shall be considered binding unless and until approved by the City of Kaufman City Council.
Preliminary Application Steps:
Applicants shall submit an application and pay a filing fee to cover the review and processing of the application (including notice publication costs). The cost for filing an application for a tax abatement is $100. An application will not be processed without the total amount of the filing fee being paid in advance. Only complete applications will be processed for Council consideration.
Revisions to the original application prior to approval of an agreement which will reduce the project's value by 10% or greater will require the applicant to pay a second application fee to cover administrative changes.
Applicants shall address all criteria questions outlined under the Section titled "Project Impact Data".
A complete legal description of the property shall be provided.
The applicant shall provide a site plan showing the precise location of the property; all roadways within 500 feet of the site; all existing land uses and zoning within 500 feet of the site; and the kind, number and location of all proposed improvements.
The City may request that an applicant provide substantial proof of the economic feasibility of the overall project to assist in determining the long-term benefit to the City.
The applicant shall submit all information detailed in this policy to the City Manager, City of Kaufman, 209 South Washington Street, Kaufman, Texas 75142.
All information in the application package will be reviewed for completeness and accuracy. The application will be distributed to the appropriate City departments for internal review and comments. Additional information may be requested as needed.
Copies of the application package and staff comments will be provided to the City Council.
Consideration of the Application:
The City Council will consider the tax incentive request at meetings conducted pursuant to the Open Meetings Act and Chapter 312 of the Texas Tax Code. Additional information may be requested as needed.
The City Council may consider a resolution calling a public hearing to consider the establishment of a reinvestment zone. If the subject property is in an existing reinvestment zone, no public hearing is necessary.
The City Council may hold the public hearing and determine whether the project is feasible and practical and would be of benefit for the land to be included in the zone and to the City after expiration of the tax abatement agreement.
The City Council may consider adoption of an ordinance designating the area described in the legal description of the proposed project as a tax abatement reinvestment zone.
The City Council may consider adoption of a resolution that approves the terms and conditions of an agreement between the City and the applicant, and governs the provision of the tax abatement.
The governing bodies of Trinity Valley Community College District and Kaufman County may consider ratification of a tax agreement with the applicant. The City's action in offering and entering into a tax abatement agreement with the applicant does not guarantee that any of the aforementioned taxing entities will enter into a tax abatement agreement with the applicant also.
When possible, the historical architecture of the area should be preserved in the redevelopment process. The integrity of each building should be maintained through the repair or reconstruction of original architectural features such as doors, windows, canopies, etc. Original exteriors should be retained and restored when possible. When refinishing of the exterior walls is unavoidable, new exterior finishes should be compatible with the original in color, texture and scale.
Consideration should be given to the removal of contemporary materials covering original facades. Signage should blend with and enhance the character of the area.
Exterior Building Repairs
All abandoned electrical, plumbing, drainage, and other mechanical equipment should be removed from the building. New mechanical systems and utility service should be installed so as not to detract from the appearance of the building. Leave openings intact, where possible. The blocking or boarding of window and doors should be avoided. Attractive rear entrances utilizing awnings, lighting, landscaping, and appropriate signage are encouraged. Lighting and landscaping should be carefully designed and located so as to create an aesthetically pleasing and safe environment. Landscaping and signage shall conform to specifications set out in the City of Kaufman zoning ordinance.
INSPECTION OF THE PROJECT:
During the term of such agreement, the City of Kaufman will have the right to inspect the project facility during regular business hours to ensure compliance with the agreement and accuracy of the owner certification.
PROJECT IMPACT DATA:
In responding to the following questions, the applicant should indicate the appropriate timeframes in which the proposed events and/or resulting impacts will occur, where applicable. It is understood that the responses to these questions will be, out of necessity, estimates only. However, the applicant should endeavor to provide the most accurate estimates possible based upon available information. The applicant may be requested by the City to describe the methodologies utilized to respond to the questions and supply supporting documentation.
Identify and describe the kind, number and location of all proposed real or personal property improvements/additions and discuss the project's development schedule. What infrastructure construction will be required to serve the proposed project? What is the cost of this construction?
How much real and personal property value will be added to the tax roll by the end of the abatement period? Will the project generate any sales tax? How will this proposed project affect existing business and/or office facilities? What will be the cost to the City of Kaufman to provide municipal services to the proposed project? What will be the estimated fiscal impact on the local school district? County government? Other taxing entities?
What affect (approximately) will the proposed project have on the area's residential community? Local housing market? What environmental impact, if any, will be created by the project? Is the proposed project compatible with the City's Comprehensive Plan and Zoning Ordinance? Washington Street corridor goals? Will rezoning and platting/re-platting be required? The criteria outlined in this section, along with any other relevant requested information, will be used to determine whether or not it is in the best interest of the City to offer a tax abatement to a particular applicant. Specific considerations will include the degree to which the individual project furthers the goals and objectives of the target area, as well as the relative impact of the project on the community.
If a project is not completed as specified, or if the terms of the tax abatement agreement are not met, the City has the right to cancel or amend the abatement agreement and abated taxes shall become due to the City and other affected taxing units as provided by law. 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 effective for the period of time during which the project is not operating or is not in conformance. If a project that is granted a tax abatement fails or refuses to meet its obligations and commitments under the agreement, it shall be responsible and obligated to repay to the City the incentives, including the value of in-kind incentives, received from the City. Repayment of incentives shall be made by the project upon 60 days demand by the City. Repayment of the incentives shall be made on a pro-rata basis based on the percentage of non-compliance by the project. All tax abatement agreements shall contain a provision calling for repayment of the taxes previously abated, in a pro rata amount, in the event of breach of the terms of the agreement.
EFFECT OF SALE, ASSIGNMENT OR LEASE OF PROPERTY:
No tax abatement rights may be sold or assigned without the approval of the City Council. Any sale, assignment or lease of the property may result in forfeiture of all tax abatement rights and subject the tax abatement recipient to repayment of all or part of the amount of taxes previously abated.