2019-139 Economic Development Incentive FundDate: July 5, 2019 Report No. 2019-139
INFORMAL STAFF REPORT TO MAYOR AND CITY COUNCIL SUBJECT: Economic Development Investment Fund EXECUTIVE SUMMARY: The City Council created the Economic Development Investment Fund in 2016 to increase the City’s competitiveness in the recruitment and retention of large or targeted companies. Currently, $150,000 of mixed beverage tax revenue serves as the dedicated funding source, and the Fund is
projected to have a fund balance of $619,682 at the end of the current fiscal year.
BACKGROUND: The concept of an economic development fund was discussed as early as 2014 during a joint
meeting of the Economic Development Partnership Board (EDPB) and City Council. Following
that discussion, staff brought forward additional information and accounting standards in 2015. In 2015, an Investment Action Team was formed to implement the Denton Rising: An Economic Development Action Agenda, prepared by DADCO Consulting, with one of the designated goals being to make a recommendation regarding an investment fund. Based on the feedback from the
Action Team, the EDPB made a formal recommendation to City Council to create the Economic
Development Investment Fund in the next fiscal year with a $1 million fund balance and with a goal to achieve a $2 million dollar fund balance within two years on August 25, 2015. While the Fund was eventually created, these parameters were not included in the authorizing ordinance.
As part of the FY 2015-16 budget, the City Council approved an allocation of $150,000 for the
Economic Development Investment Fund. Council chose to dedicate funding through mixed beverage tax revenue that was previously accounted for in the General Fund. At the time, the Council asked for guidelines for the Investment Fund and additional information to be brought back in 2016.
The Economic Development Investment Fund was formally created by City Council on August 16, 2016, by Ordinance No. 2016-229 (attached as Exhibit 1). The Investment Fund is designed to provide a cash grant program to increase Denton’s ability to compete for large or targeted economic development projects, and the creation of the Fund established a dedicated source of
revenue through which to fund those grants. The Fund is considered a tool to help accomplish Denton’s objective of locating targeted, new economic development projects in the community. Starting with FY 2015-16, the City Council authorized an annual allocation of $150,000 of mixed beverage tax revenue that flows into the Fund each year. The Fund was set up in
accordance with Governmental Accounting Standards Board (GASB) Statement 54 as a Special
Revenue Fund to account for specific revenue sources that are restricted or committed to expenditures for purposes other than debt service or capital projects. As a Special Revenue Fund,
Date: July 5, 2019 Report No. 2019-139
any dollars not expended from the Investment Fund are rolled over and accumulated as fund balance. Table 1 summarizes the flow of funds into the Economic Development Investment Fund since its creation. As a Special Revenue Fund, the Investment Fund is included in the City’s
annual budget, but is separate from the Economic Development department budget (which is funded through the General Fund). Table 1: Economic Development Investment Fund Summary
Fiscal Year Revenue Expenditures Ending Fund Balance
Mixed Bev. Tax Interest Income
2015-16 $150,000 $223 $0 $150,223 2016-17 $150,000 $1,867 $0 $302,090
2017-18 $150,000 $5,857 $0 $457,947
2018-191 $150,000 $11,735 (est.) $0 $619,682 (est.) 2019-202 $150,000 $5,000 (est.) $0 $774,682 (est.)
To date, the City has received one application for a cash grant through the Investment Fund, but the application was withdrawn from consideration. The criteria to use the Investment Fund were established in both its authorizing ordinance
(Ordinance No. 2016-229) and incorporated in the Denton Policy for Tax Abatement and Incentives (adopted by Resolution No. 18-148 and attached as Exhibit 2). According to both policies, in order to be eligible to receive a grant under this program, a company must meet at least two of the following criteria:
• Provide higher-wage3 or knowledge-based jobs4;
• Make a substantial capital investment5; and
• Address a recruitment or supplier target6.
In order to administer the grant, the City requires that grants be performance-based and made via a City Council approved Chapter 380 agreement.
1 With no planned expenditures in FY 2018-19, the estimated fund balance at the end of the current fiscal year will
be $619,682. 2 Staff have included the $150,000 allocation in the proposed FY 2019-20 budget and have not proposed any
expenditures at this time. Staff estimates a fund balance of $774,682 by the end of the fiscal year. 3 Higher-wage jobs are defined as having an average annual wage of $55,000 or greater for all positions or at least 25% of the positions have an annual wage of $65,000 or greater. 4 Knowledge-based jobs are defined as occupations which: require specialized and theoretical knowledge, usually
acquired through a college education or through work experience or other training which provides comparable knowledge; require some research, analysis, report writing, and presentations; and, require special licensing,
certification, or registration to perform the job task. 5 Substantial capital investment is defined as a minimum of $15 million.
6 Recruitment or supplier target includes aviation; advanced manufacturing; renewable energy; research and development; information technology; supply chain logistics and distribution; large consumers of municipal utilities.
Date: July 5, 2019 Report No. 2019-139
DISCUSSION: Although the Investment Fund has been established and is operating as designed in terms of
securing a dedicated source of revenue to be available for cash incentives, there are some
additional policy considerations that Council may wish to consider moving forward. During a review of the Investment Fund history above, staff noted that the original EDPB recommendation included a targeted fund balance but the approved design of the Fund did not
include that requirement. At a recent EDPB meeting, board members requested to possibly reconsider including parameters related to a minimum or targeted maximum threshold for dollars to be held in the Fund. For example, currently there is no limit of how much fund balance can be accumulated, and, should an amount of funds be granted to a company, there is no required minimum balance that the Fund must maintain. The EDPB asked that further discussion be had
regarding those parameters. Also, during the June 12, 2019 Economic Development Partnership Board meeting, board members requested an assessment to determine if the current $150,000 per year funding dedication was sufficient to give the City the funds needed to be competitive. The EDPB board
requested additional discussions about the possibility of increasing the funding and ensuring that a stable revenue source was identified and secured to replenish the Fund if expenditures are made. Staff plans to bring back a discussion of the Fund to the EDPB at a future meeting. If the EDPB or Council want to consider increasing the amount of dedicated funding per year, a supplemental request would need to be added for the FY 2019-20 proposed budget for
consideration. One alternative funding mechanism that has been considered is dedicating dollars from incentives as they terminate. Staff conducted a 10-year analysis of expiring incentives detailed in Exhibit 3. If this method of funding was used, expiring Chapter 380 incentives (including sales
tax, construction sales and use tax, and property tax) would generate $8.2 million for the fund over a 10-year period. In addition, if expiring tax abatements and TIRZ funds were included, the total would be $10.8 million. If the EDPB or Council wanted to consider amending the Investment Fund, both the Investment
Fund ordinance and the Tax Abatement and Incentive Policy would need to be amended. Pursuant to the Texas Tax Code Section 312.002(c), the City’s Tax Abatement and Incentive Policy is effective for two years from the date of adoption. During that period, the guidelines and criteria may be amended or repealed by a vote of three-fourths of the members of the governing body. Since the current Policy was adopted on March 20, 2018, the Policy will need to be
reviewed and possibly amended in early 2020. If EDPB or City Council would like to amend the section guiding the use of the Incentive Fund, staff can bring back that discussion either prior to or during the Incentive Policy review.
Date: July 5, 2019 Report No. 2019-139
ATTACHMENT(S): Exhibit 1 – Ordinance No. 2016-229 Creating Economic Development Investment Fund
Exhibit 2 – Resolution 18-148 Denton Policy for Tax Abatements and Incentives
Exhibit 3 – Expiring Incentive Analysis
STAFF CONTACT:
Jessica Rogers Director of Economic Development (940) 349-7531Jessica.Rogers@cityofdenton.com
Erica Sullivan
Economic Development Analyst (940) 349-7731Erica.Sullivan@cityfodenton.com
REQUESTOR: Council Member Briggs
PARTICIPATING DEPARTMENTS: Economic Development, Finance (Accounting and
Budget)
STAFF TIME TO COMPLETE REPORT: 5 hours
sAlegal\our d0CUments\ordinances\1 6\ed investment fund ord 05 191 6.doex
ORDINANCE No. 2016-229,
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS,
ESTABLISHING AN ECONOMIC DEVELOPMENT INVESTMENT FUND; DEFINING AND
COMMITTING CERTAIN REVENUES OF THE CITY; PROVIDING A SEVERABILITY
CLAUSE; AND PROVIDING AN EFFECTIVE D.
WHEREAS, the City Council of the City of Denton elects to establish a Special Revenue
Fund to be called the Economic Development Investment Fund; and
WHEREAS, the Governmental Accounting Standards Board ("GASB") has adopted
Statement 54, which states that Special Revenue Funds are used to account for and report the
proceeds of specific revenue sources that are restricted or committed to expenditures for specified
purposes other than debt service or capital projects; and
WHEREAS, the City Council of the City of Denton elects to commit $150,000 annually of
the mixed beverage taxes previously accounted for in the General Fund for Economic Development
activities beginning with fiscal year ending September 30, 2016; and
WHEREAS, the City Council of the City of Denton approved a budget of $150,000 for FY
2015-16 for Economic Development activities; and
WHEREAS, the City Council of the City of Denton elects to establish the Economic
Development Investment Fund in conjunction with its financial statements beginning with fiscal year
ending September 30, 2016; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1. The City Council hereby creates the Economic Development Investment Fund,
an official fund ofthe City of Denton, Texas.
SECTION 2. In order to be eligible to receive a grant under this program, a company must
meet at least two of the following criteria:
1) providing higher -wage or knowledge-based jobs;
2) making a substantial capital investment; and
3) addressing a recruitment or supplier target.
Higher -wage jobs are defined as having an average annual wage of $55,000 or greater for all
positions or at least 25% of the positions have an annual wage of $65,000 or greater.
sAlegahour documents\ordinances\16\ed investment fund ord 051916.doex
Knowledge-based jobs are defined as occupations which:
Require specialized and theoretical knowledge, usually acquired through a college
education or through work experience or other training which provides comparable
knowledge;
Require some research, analysis, report writing and presentations; and
e Require special licensing, certification, or registration to perform the job task.
Substantial capital investment under the Economic Development Investment Fund is a minimum
of $15 million.
Recruitment or supplier targets include aviation; advanced manufacturing; renewable energy;
research and development; information technology; supply chain logistics and distribution, and
large consumers of municipal utilities.
SECTION 3. If any section, subsection, paragraph, sentence, clause, phrase or word in this
ordinance, or application thereof to any person or circumstances is held invalid by any court of
competent jurisdiction, such holding shall not affect the validity of the remaining portions of this
ordinance, and the City Council of the City of Denton, Texas hereby declares it would have enacted
such remaining portions despite any such validity.
SECTION 4. This Ordinance shall become effective immediately upon its passage and
approval.
PASSED AND APPROVED this the—A tO _day of& _72016.
41T, —A RCHRIS
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
r\
W 4BY: mA )
Al l7 AS LEGAL FORM:
BY -
all
111
Page 2
RESOLUTION NO. 18-148
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS,
AMENDING A POLICY FOR TAX ABATEMENT FOR THE CITY OF DENTON TO
ESTABLISH POLICIES, GUIDELINES AND CRITERIA GOVERNING TAX ABATEMENTS
AND INCENTIVES WHICH WILL BE KNOWN AS "DENTON POLICY FOR TAX
ABATEMENTS AND INCENTIVES"; REPEALING RESOLUTION R2015-042; AND
DECLARING AN EFFECTIVE DATE.
WHEREAS, on June 6, 2000, the City Council approved guidelines and criteria, lcnown as
the Denton Policy for Tax Abatement ("Policy"), by passing Resolution No. R2000-28; and
WHEREAS, on May 1, 2001, the City Council amended the Policy to allow waiver of the
five million dollar threshold and the maximum tax abatement percentage; to define professional
positions; and, to make other changes as set forth in the amended Policy; and
years;
WHEREAS, the Texas Tax Code requires the tax abatement policies be adopted every two
WHEREAS, on August 19, 2003, the City Council amended and adopted the Policy; and
WHEREAS, on December 6, 2005, the City Council amended and adopted the Policy; and
WHEREAS, on December 5, 2008, the City Council adopted the Policy; and
WHEREAS, on Apri120, 2010, the City Council amended and adopted the Policy; and
WHEREAS, on April 17, 2012, the City Council amended and adopted the Policy; and
WHEREAS, on May 6, 2014, the City Council amended and adopted the Policy; and
WHEREAS, on November 3, 2015, the City Council adopted Resolution R2015-042
approving a policy specifically for aircraft tax abatement and establishing guidelines and criteria
governing such agreements; and
WHEREAS, on April 5, 2016, the City Council amended and adopted the Policy; and
WHEREAS, the Policy expires on Apri15, 2018; and
WHEREAS, the City Council desires to promote economic development within Denton;
and
WHEREAS, providing tax abatements and incentives within the City or its extraterritorial
jurisdiction will likely contribute to the economic development of Denton by encouraging major
investment, the creation of jobs, and other economic development benefts; and
WHEREAS, the Property Development and Tax Abatement Act, Chapter 312, Texas Tax
Code, allows the City to establish its own criteria for tax abatements which the City had previously
adopted guidelines for tax abatement by passing Resolution Nos. R90-18, R98-004, R2000-028,
R2001-020, R2003-021, R2005-057, R2008-003, R2010-009, R2012-009, R2014-016, R2015-
042, and R2016-009; and
WHEREAS, the City Council deems it in the public interest to repeal Resolution R2015-
042 approving a policy specifically for aircraft tax abatement and instead address such cases under
the Policy; and
WHEREAS, the City Council deems it in the public interest to continue to be eligible for
participation in tax abatements and incentives and to adopt policies, guidelines, and criteria for tax
abatement and incentives which will be known collectively as the "Denton Policy for Tax
Abatements and Incentives"; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES:
SECTION 1. The policies, guidelines, and criteria, set forth in the attached as Exhibit
which is made a part of this Resolution and incorporated herein for all purposes, is approved, and
adopted and shall be known as the "Denton Policy for Tax Abatements and Incentives".
SECTION 2. From and after the effective date of this Resolution, the attached Denton
Policy for Tax Abatements and Incentives shall constitute the policies, guidelines and criteria for
tax abatement and other incentive agreements for the City of Denton in accordance with Chapter
312 of the Texas Tax Code.
SECTION 3. Resolution R2015-042 is hereby repealed.
SECTION 4. Pursuant to Texas Tax Code Section 312.002(c), the Denton Policy for Tax
Abatements and Incentives approved herein shall be effective for two (2) years from the date of
approval of this Resolution, during which time may be amended or repealed by a vote of 3/4 of the
members of the Council.
SECTION 5. The City Council reasserts its decision to become eligible to participate in
tax abatement and other incentives. The City Council provides certain tax abatements and
incentives applicable to business enterprises in various reinvestment zones which are established
in the City in accordance with the applicable provisions of Chapter 312 of the Texas Tax Code and
in accordance with the Denton Policy for Tax Abatements and Incentives.
SECTION 6. The Denton Policy for Tax Abatements and Incentives shall be filed in the
official records with the City Secretary.
SECTION 7. This resolution shall become effective immediately upon its passage and
approval.
PASSED AND APPROVED this the """_ day of ' f "y ' 2018.
a ° '
CHRIS WATTS, MAYOR
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
AS "I) LEGAL FORM:
I C)'C LEAL, CITY ATTORNEY
Tyw
BY: _ , ....
EXHIBIT A
1',
1 .
A. Denton's central location on the I-35 transportation corridor, educated population,
skilled workforce, and friendly business clirnate make it a natural place for business and
industry success. As the county seat of Denton County, Denton is a well-established city that is
currently enjoying rapid growth as companies and individuals are drawn to the opportunities
found here. The provisions of this policy apply in the city limits of the City of Denton, Texas,
City) and any applicable extraterritorial jurisdiction of the City.
B. The City is cornmitted to promoting economic growth and redevelopment that
expands and diversifes the tax base; creates quality jobs; enhances the quality of life for
residents; protects human health and the environment, and secures new customers for
rnunicipal utilities. The City is a national model for public power through Denton Municipal
Electric, which currently incorporates at least 40 percent renewable energy into its portfolio
and has committed to obtaining 100% renewable energy by 2020. Local economic
development incentives serve as a tool for the City to use in accomplishing these objectives.
To provide a framework for the consideration of the use of public resources to stimulate
economic activity, the City has established this policy to align the use of incentives with the
City's strategic key focus areas and ensure a positive return on investment for the community,
Tax incentives, as described herein, are governed by Section 312 of the Texas Property Tax
Code and Chapter 380 of the Texas Local Government Code.
C. While this policy is used to outline the procedures and criteria for granting
incentives, nothing in this document implies that the City is under any obligation to provide an
incentive to any applicant. Further, though this policy provides a framework for evaluation of
incentive applications, every project will be considered on a case-by-case basis by the
Economic Development Partnership Board (EDPB) and the City Council. Incentives will not
be considered if a building permit for new construction has been issued, a permit for
commercial alterations has been issued, or purchase of an existing building has been executed
excluding existing businesses seeking to expand).
D. The City has target industry sectors for recruitment that will be given priority
consideration: aviation/aerospace; advanced manufacturing; renewable energy; research and
development; information technology; supply chain for existing primary employers, and
significant consumers of municipal utilities. While these sectors will be given priority
consideration, not being in a target industry does not disqualify a business from applying for an
incentive if it meets other requirements under the policy.
E. Priority consideration may also be given for projects that further the following
City economic goals and objectives:
Promoting business and community investment
Expanding and diversifying the tax base
Promoting public-private partnerships in investment
Increasing jobs with wages above Denton County's median wage
l
Increasing the percentage ofjobs paying $75,000 per year or more from 10 to 14 percent
by 2020
Encouraging higher-skilled and knowledge-based jobs
Causing inf ll redevelopment to reduce urban sprawl or to encourage other desirable
development
Encouraging start-up and small businesses to promote entrepreneurship and innovation
Generating new customers for municipal utilities
Engaging in sustainable practices or activities
F. Only retail projects (retail stores, restaurants, shopping centers, or malls) that
offer unique goods, services, or a brand that is not currently offered in the Denton city limits
may be considered for incentives. This consideration is designed to help address unmet
demand and minimize retail leakage from the City into the surrounding trade area. A minimum
of $15 million in annual taxable sales generated is required in order to be eligible for
consideration of a rebate of sales taxes. The City may rebate a portion of the sales taxes
generated not to exceed 50% of the sales tax receipts.
G. This policy is adopted under the authority of the Constitution and Laws of the
State of Texas and the City Charter of the City of Denton, Texas.
H. Applicants requesting incentives in Denton will be considered under the
provisions of this policy. Projects are evaluated with regard to their return on investment and
public benefit. This could include addition of ad valorem tax value, sales tax, quality jobs, or
other significant public benefit.
I. Every incentive agreement the City enters into is an investment for the
public benefit, and each project is considered with regard to its merit to the community
at large. Performance measures will be established for each project, and annual
compliance reporting must be completed by incentive recipients prior to receipt of
incentives.
J. Projects that do not meet performance measures are subject to recapture of a
portion or all of the incentive value. Should an incentive recipient fail to meet
performance measures and to perform under the prescribed cures, incentives are subject
to repayment to the City of Denton.
K. The Denton County Tax Abatement Policy states that applicants whose
projects will be located in or are currently located in a municipality within the county
must have an approved and executed Tax Abatement Agreement with that municipality
prior to applying for a Denton County tax abatement. Denton County will not utilize
Chapter 381 of the Texas Local Government Code to administer a community and
economic development program to provide grants as a form of economic development.
1 ,1
Agreement" means a contract between an Incentive recipient and the City clarifying the terms,
performance measures, and obligations of the parties.
66Assessed Taxable Value" means the value of the real and business personal property, as appraised
by the Denton Central Appraisal District (66DCAD99/or "District99), after any exemptions have been
applied.
Base Year Value" means the Assessed Taxable Value as of January 1 preceding the execution of
the agreement, excluding land value, inventory, vehicles and supplies, as determined by the DCAD,
Business Park" is defined as a multi-building, multi-tenant, master planned complex of
approximately one million square feet or more under roof, constructed to house manufacturing,
distribution, assembly, and office facilities.
Business Personal Property99 means property associated with a Project other than Real Property
and excluding inventory, vehicles and supplies.
66Capital Investment99 means the total actual capital cost to grantee for the acquisition of land,
development, and construction of the Project, including a reasonable capital operating reserve,
and the furniture and equipment installed at the Project.
City" means the City of Denton, Texas, and its governing and operating bodies.
City HOT Returns" means City of Denton Hotel/Motel Occupancy Tax Reports on which the
grantee or other persons report and remit City of Denton hotel occupancy taxes imposed under
Chapter 351 of the Texas Tax Code on amounts paid for hotel rooms in the Project.
Community Support and Involvement99 may include but is not limited to monetary or active
investment in local nonprofits, public institutions or community organizations.
Council" is the City Council of the City of Denton, Texas.
Default" is an event in which a party to an Agreement has failed to meet Performance Measures
and to perform under prescribed cures.
Expansion" means an investment in fixed assets that will result in an increase in occupied building
areas, increased employment, or higher Assessed Value of Real Property or Business Personal
Property by a frm already located in the City.
Facility99 means combined Real and Business Personal Property Improvements that house an
economically purposeful activity.
Higher wage" means having an average annual wage of $55,000 or greater for all positions or at
least 25% of the positions have an annual wage of $65,000 or greater.
lmprovement" means a building, structure, or fixture erected on or affixed to land.
lncentive" means any inducement for economic activity given by the City such as a tax abatement
or rebate or any other incentives not prohibited by state or federal law.
66Job99 means a permanent, full-time employment position that has provided or will result in
employment of at least 2,080 hours per position per year. Part-time positions may be aggregated to
create a full-time position for consideration in this policy.
Knowledge-based jobs" are defined as occupations which require specialized and theoretical
knowledge, usually acquired through a college education or through work experience or other
training which provides comparable knowledge; require some research, analysis, report writing
and presentations; or require special licensing, certification, or registration to perform the job
task.
Leadership in Energy and Environmental Design" (LEED) certification is a
voluntary internationally recognized green building certification system, with verification by a
third party that a building or community was designed and built using strategies aimed at
improving performance across the following metrics: energy savings, water efficiency, COZ
emissions reduction, improved indoor environmental quality, and stewardship of resources.
Local Contractors°' and "Local Sub-Contractors" refers to vendors that have their "principal
office or place of business," as reported to the Texas Secretary of State Office, located within
Denton City Limits or Extraterritorial Jurisdiction (ETJ).
Modernization" means the replacement and upgrading of existing facilities which increases 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.
66performance Measures" are the performance indicators for a Project established by Agreement and
reported to the City annually using a certificate of compliance provided in the Agreement or as
otherwise prescribed by the Agreement.
Primary Employer" refers to employers that produce products or services which are sold outside of
the community or region.
66project" means the combination of proposed investment, improvements, and economic activity
that is submitted in an application for an economic incentive.
Real Property" means land or an improvement affixed thereto.
Retai199 means the selling of consumer goods or services to customers.
Retail Leakage" means that local residents are spending more for products or services than local
businesses capture and indicates there is an unmet demand in the community for certain types of
products. Keeping sales tax dollars in the City is the goal of minimizing retail leakage.
Tax Abatement99 means the full or partial exemption of ad valorem taXes for eligible properties in a
reinvestment zone designated as such for economic development purposes for new or expanded
business development for a period of up to 10 years. Abatement may be granted for real property
improvements and/or business personal property.
Tax Rebate" means the full or partial refund of municipally imposed tax liability.
Reinvestment Zone" is a geographic area designated as blighted and in need of revitalization for
the purpose of granting incentives as authorized by law.
Sales Tax" means the 1% general municipal sales and use taxes imposed by the City of Denton
pursuant to Section 321.103(a) of Texas Tax Code and 0.5% additional municipal sales and use
tax imposed by the City of Denton from property tax reduction pursuant to Section 321.103(b) of
4
the Texas Tax Code and arising (i) from any person's collection of sales taxes as a result of sales
of taxable items consummated at the Project during the term of this Agreement, (ii) from any
person's payments to vendors or directly to the Texas Comptroller of Public Accounts of City
Sales Taxes on purchases of taxable items consummated at the Project during the term of this
Agreement, and (iii) from City Sales Taxes paid by any person in connection with the
construction or equipping of the Project.
Sustainable materials" or products related to manufacturing may include but are not limited to:
biobased; recyclable; pollution reduction equipment or systems; and reclaimed goods.
66Texas Comptroller of Public Accounts' Monthly Sales Tax Report99 means reports from the
Comptroller to the City as provided in Section 321.3022 of the Texas Tax Code that identify
amounts paid from the Comptroller to the City, by period, of Sales Taxes. If during the term of
this Agreement, due to a change in law or policy the Comptroller ceases providing such reports
with respect to the Sales Taxes, "Texas Comptroller of Public Accounts' Monthly Sales Tax
Report" means alternative documentation that the Parties agree establishes the amounts of Sales
Taxes received by the City.
66Construction Sales and Use Tax Grant99 This incentive involves a rebate of a portion of the local
sales and use taxes for the purchase of construction materials and furniture/fixtures/equipment
that would generate additional tax revenue that the City of Denton would not otherwise receive.
Texas Direct Payment Permit" means that permit issued by the State of Texas authorizing
Grantee to self-assess and pay applicable state and local use taxes directly to the State of Texas
related to selected portions of Grantee's taxable purchases.
Texas Sales and Use Tax Return" means a return or other statement in a form acceptable to the
City setting forth the Grantee's collection of use tax imposed by the City and received by the
City from the State of Texas, for the use of taxable items by Grantee at the Property for the
applicable grant period which are to be used to determine Grantee's eligibility for a Grant,
together with such supporting documentation required herein, and as the City may reasonably
request.
A. To ensure fairness, accountability, and compliance with all applicable regulations,
every incentive request must proceed through a uniform application process. Nothing within
these guidelines implies or suggests that the City is under any obligation to provide an incentive
to any applicant.
a. Applicant shall complete the attached Incentive Application (Exhibit A). The
application will not be considered until it is administratively complete.
b. Applicant shall prepare a map or other documents providing the following: precise
location of the property and all roadways within 500 feet of the site; existing uses
and conditions of real property; proposed improvements and uses; any proposed
changes in zoning; compatibility with the Denton 2030 Plan and applicable
building codes and City ordinances; a complete legal description.
c. Applicant shall complete all forms and information detailed in the Incentive
Application and submit all information to the Economic Development Department,
City of Denton, 215 E. McKinney, Denton, TX 76201.
d. All information in the application package detailed above will be reviewed for
completeness and accuracy. Additional information may be requested as needed.
e. The application will be distributed to the appropriate City departments for
internal review and comments. Additional information may be requested as
needed.
Fiscal agents of the City may review the application for comment and
recommendation. Additional information may be requested as needed.
g. The Denton Economic Development Partnership board (EDPB) serves as an
advisory body, which makes recommendations to the City Council regarding
whether economic development incentives should be offered in each individual
case. Its recommendation shall be based upon an evaluation of information
submitted in the incentive application and any additional information requested by
the EDPB or presented to the EDPB. The EDPB will consider the application
at a regular or special-called meeting(s). All meetings of the EDPB shall be
held in compliance with the Texas Open Meetings Act, Chapter 551 of the Texas
Government Code. Additional information may be requested as needed. The
recomrnendation of the EDPB will be forwarded, with all relevant materials, to the
City Council.
h. If the City Council decides to grant a tax abatement, it shall call a public hearing to
consider establishment of a tax reinvestment zone in accordance with Section
312.201 of the Tax Code. The reinvestment zone rnust rneet one or more of the
criteria of Section 312.202 of the Tax Code.
i. The City Council may consider adoption of an ordinance or resolution approving
the terms and conditions of a contract between the City and the applicant
governing the provision of the tax abatement or incentive and the commitments of
the applicant, including all the terms required by Section 312.205 of the Tax Code
and such other terms and conditions as the City Council may require.
j. The City reserves the authority to enter into tax abatement agreernents at differing
percentages and/or terms as set forth in the guidelines of this Policy, consistent
with the requirements of Chapter 312 of the Texas Tax Code. The City also
reserves the authority to enter into incentive agreements under Chapter 380 of the
Texas Local Governrnent Code.
B. Section 312.003 of the Texas Tax Code makes confdential information provided
to the City as a part of this application that describes the specific processes or business activities
to be conducted or the equipment or other property to be located on the property. This
information is not subject to public disclosure until the incentive agreement is executed. Section
522.131 of the Texas Government Code (Texas Public Information Act) makes confidential
information which relates to economic development negotiations between the City and a
business prospect that the City seeks to have locate, stay or expand in or near the territory of
the City. The inforrnation must relate to a trade secret of the business prospect, commercial or
financial information which the business prospect can demonstrate based on specifc factual
evidence that disclosure would cause substantial competitive harm to the person from whom the
information was obtained or information about a fnancial or other incentive being offered to
the business prospect by the City or by another person. Information about a financial or other
incentive being offered to the business prospect is required to be disclosed when an agreement
is rnade with a business prospect. The City will respond to requests for disclosure as required
by law and will assert exceptions to disclosure as it deems relevant. The City will make
reasonable attempts to notify the applicant of the request so it may assert its own objections to
the Attorney General.
C. Any incentive agreement will address various issues, including but not limited to,
the following:
a. General description of the project
b. Amount of the incentive and percent of value to be abated or rebated each year
c. Method of calculating the value of the abatement
d. Duration ofthe abatement, including commencement date and termination date
e. Legal description of the property
Kind, number, location and timetable of planned improvements
g. Specific terms and conditions to be met by applicant, which will be based on the
information submitted by the applicant in the Incentive Application and/or other
appropriate criteria
h. The proposed use of the facility and nature of construction
i. Contractual obligations in the event of default, violation of terms or conditions,
delinquent taxes, recapture, any decrease in valuation, administration and
assignment
D. Businesses receiving an incentive are asked to use diligent efforts to purchase all
goods and services from Denton businesses whenever such goods and services are comparable
in availability, quality and price. The City of Denton also encourages the use, if applicable, of
qualified contractors, subcontractors and suppliers who are historically underutilized
businesses based on information provided by the General Services Commission pursuant to
Chapter 2161 of the Government Code.
E. Businesses receiving an incentive are encouraged to use diligent efforts to hire
local contractors and local subcontractors where possible during construction of the project.
F. Businesses receiving incentives are asked to endeavor to make available, or
endeavor to cause lessees or assignees to make available full-time or part-time employment for
Denton residents. In this effort, the business, lessee or assignee is encouraged to recruit from
the low-moderate income Census tracts as further defined by the U.S. Department of Housing
and Urban Development's (HUD) Qualified Census Tracts (QCT) map shown in Figure 1.
HUD defines QCTs as "census tracts in which one-half or more of the households have
incomes below 60 percent of the area median income or the poverty rate is 25 percent of [or]
higher.
FIGURE 1: DENTON, TEXAS
2014-2015 Qualified Census Tracts
IV.
INCENTIVE TOOLS
A. Tax Abatement: New, expanding, and modernizing businesses may be considered for
a tax abatement if a minimum threshold of $5 million in ad valorem value will be created by the
project. To yualify, companies must meet the minimum threshold in the first 24 months from the
execution of the agreement or as specified in the tax abatement agreement.
If, upon initial application, a project qualifies for tax abatement under the guidelines set forth in
this Policy, the City may consider the following factors in evaluating its public benefit:
The project will occupy a building that has been vacant for at least two years;
The project will create knowledge based, high-skilled o r higher-paying jobs as
documented by the applicant (An average wage that is above the median wage in Denton
County or at least 25 percent of jobs requiring a college bachelor's degree at entry level
will be used to determine eligibility);
The project will involve a significant relationship with one ofthe two universities in
Denton;
The project will create improvements to the Denton Downtown Implementation Plan area;
The project is an international or national headquarters facility;
Renewable energy will be generated, stored, or utilized for the project or the project
incorporates signifcant environmentally sustainable practices that include:
Leadership in Energy and Environmental Design (LEED) certification, recycling
initiatives, the manufacture of sustainable materials or products that support sustainable
industries, or the incorporation of clean technology;
The applicant is committed to actively supporting the Denton community through non-profit
organizations, donations to public schools and/or public art
25% of local contractors used in construction or 25% of new jobs f lled by Denton
residents
All abatements are subject to final approval of the City Council. Even though a project may
meet the criteria as set forth in this Policy, an application may be denied at the discretion of the
City. The incentive shall not apply to any portion of the land value of the project.
The City may consider the use of incentives to retain existing businesses, which propose to
improve or redevelop property within the City limits. The City may also take into consideration
the expansion/redevelopment of existing businesses that create new or additional higher wage or
knowledge-based jobs. The incentive will only apply to the increased valuation of the
improvements over the appraised value of the property prior to such improvements as same is
established by the Denton Central Appraisal District the year in which the tax abatement
agreement is executed. The City may also consider other tax incentives authorized by law.
B. Chapter 380 Grants or Loans: The City may consider incentives to businesses
utilizing its authority under Chapter 380 of the Texas Local Government Code (hereinafter referred
to as "Chapter 380"). Chapter 380 states that a municipality may establish and provide for the
administration of one or more programs for making loans and grants of public money and
providing personnel and services of the municipality, to promote state or local economic
development and to stimulate business and commercial activity in the municipality. The City of
Denton rnay consider the use of grants and loans as incentives to accomplish one or more of the
following economic development purposes:
0
Targeted industry cluster or supply chain recruitment initiatives
Capital grants or loans for start-up and small businesses to promote entrepreneurship
Grants to offset costs associated with public infrastructure improvements or impact fees
Cash incentives to gain a competitive position when in direct competition for a project
Increase the percentage ofjobs paying $75,000 per year or more from 10 to 14 percent by
2020
Chapter 380 incentives will be considered on a case-by-case basis, and may be considered for
one or more of the following criteria:
Net new jobs with wages above Denton County's median wage
The relocation of a company that promotes the growth of targeted industry sectors listed
in Section I.D.
Incentives for businesses that cause infill redevelopment or other desirable development
objectives;
Any other activity which the City Council determines meets a specific public purpose for
economic development.
When the City determines that incentives are required to retain existing businesses that propose to
improve or redevelop property within the City limits, the City Council may consider, on a case-
by-case basis, and reserve the right to waive the minimum threshold and/or exceed the percentage
and term included in Table 1 for a grant.
The City of Denton may also take into consideration the expansion/redevelopment of existing
businesses that create new or additional higher wage or knowledge-based jobs. Ad valorem
rebates will only apply to the increased valuation of the improvements over the appraised value of
the property prior to such improvements as same is established by the Denton Central Appraisal
District the year in which the grant agreement is executed.
Job-based grants may be considered for businesses creating higher-wage or knowledge-based
jobs.
The City may also consider other tax incentives authorized by law.
C. Economic Development Investment Fund: The City may offer cash incentives and
grants from the Economic Development Investment Fund (established by Ordinance No. 2016-
229) when appropriate and necessary. Such incentives require EDPB and Council approval
through a Chapter 380 Agreement. To be eligible for consideration, the company must meet at
least two of the following criteria:
higher wage or knowledge-based jobs;
substantial capital investment (minimum of $15 million);
recruitment of industry sector targets, including aviation/aerospace, advanced
manufacturing, renewable energy, research and development, information technology,
supply chain for primary employers, or significant consumers of municipal utilities.
D. Based Aircraft Incentive: Specific considerations for a based aircraft incentive will
include expansion of the tax base, annual fuel consumption, and contribution to the growth and
development of Denton Enterprise Airport (DTO). Newly based aircraft may be eligible for an
incentive if a minimum of $1 million in ad valorem value will be created by the aircraft. Aircraft
must be operational, air worthy, and based at DTO for a majority of the year; values may not be
combined to reach the $1 million minimum.
Expiring Incentive Forecast
Ad Valorem Grant Payment Forecast 1 2 3 4 5 6 7 8 9 10
FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Expiring
Total
Tax Year 19 20 21 22 22 23 24 25 26 27
Total Ad Valorem $0 $0 $0 $0 $38,098 $39,241 $40,418 $89,691 $487,408 $502,031 $1,537,223
6 7 8 9 10
FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Expiring
Total
Total Sales Tax $0 $608,940 $627,208 $646,024 $665,405 $779,353 $802,734 $826,816 $851,620 $877,169 $6,685,271
Inside Budget
Expiring
Total
$8,222,494
Expires Outside Budget
Expiring
Total
Schlumberger (Property Tax)FY 19-20 Tax Abatements $1,101,776
Denton Crossing (Sales Tax)FY 20-21 TIRZ $1,462,415
Mayday Manufacturing (Property Tax)FY 23-24 Total All Incentives in and Outside Budget $10,786,684
Unicorn Lake (Sales Tax)FY 24-25
West Gate Business Park (Property Tax)FY 26-27
WinCo Distribution (Property Tax)FY 27-28
Ad Valorem and Sales Tax Total
Sales Tax and Sales and Use Tax for Construction Grant Payment Forecast
Growth rate, beyond 5-year forecast, is set at 3%, unless noted
Chapter 380s Expiring in 10-Year Period