2022-055 2021 Property Tax Abatements Rebates SummaryDate: September 2, 2022 Report No. 2022-055
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
2021 City of Denton Economic Development property tax (ad valorem) incentive agreements
including tax abatements and rebates
EXECUTIVE SUMMARY:
In tax year 2021, the City of Denton had six active property tax incentive agreements. This
includes four Chapter 380 property tax rebate agreements and two property tax abatement
agreements. In total, the value of the rebates and abatements for tax year 2021 is $768,732. The
associated properties have a total valuation of more than $325,995,831 and generate $1,160,475
in net property tax revenue for the City.
BACKGROUND:
The City of Denton provides economic development incentives in accordance with the City’s Tax
Abatement and Incentive Policy to stimulate private development and redevelopment, expand the
tax base, generate jobs, and enhance the local economy. The City currently has two active property
tax abatement agreements and five active Chapter 380 property tax rebate agreements. The
property tax rebates are paid annually based on the terms in the individual grants.
The City is authorized under various regulations and through its adopted policies to offer property
tax abatements and property tax rebates.
Tax Abatements allow local governments to exempt all or a portion of the valuation
increase of real and personal property taxes from a new or expanded business development
for a period of up to 10 years. The statutes regulating tax abatements can be found in
Chapter 312 of the Texas Property Tax Code.
Tax Increment Reinvestment Zones (TIRZ) allow local governments to finance
improvements and infrastructure within a defined area in order to stimulate private
development and redevelopment. A property tax valuation base is established in the first
year, and the revenue from the increased valuation from subsequent years is allocated to
development within the TIRZ. The statutes that regulate tax increment financing and the
related zones are in Chapter 311 of the Texas Property Tax Code, also known as the Tax
Increment Financing Act.
Chapter 380 of the Texas Local Government Code 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.
Freeport Exemptions are an exemption from property tax on goods that have been held
in the state for 175 days or less for the purpose of assembly, storage, manufacturing,
processing or fabrication. The exemption applies throughout the entire taxing jurisdiction.
Date: September 2, 2022 Report No. 2022-055
A triple freeport exemption means that the three taxing jurisdictions, city, county, and
school district, participate.
The City uses these tools to facilitate performance-based property tax incentives, taking the form
of either a property tax abatement (reduction in property tax payment) or a property tax rebate
(reimbursement of a portion of property taxes paid). Chapter 380 agreements may also include an
expansion or relocation cash grant, TIRZ grant, or job-based grant that incentivizes high-wage or
knowledge-based jobs.
Each year, once values are received and property tax payments are due, calculations are performed
by the Denton Central Appraisal District (DCAD) and Economic Development staff. For
abatements, DCAD determines the amount of abatement for active agreements by applying the
terms of the approved abatement. The corresponding company will then see a reduction in their
tax bill. For property tax rebate agreements, Economic Development staff review property tax
values and payments made, then calculate the amount of the rebate by applying the terms of the
approved agreement. The corresponding company then receives a rebate directly from the City.
For all agreements, specific valuation, job, and wage threshold requirements in the agreements are
verified using a certificate of compliance, third-party verification from the DCAD, and IRS
documentation. The valuation, revenue, job, and incentive information is captured in the annual
Net Revenue Report and tracked over time to determine the net benefits to Denton.
Summary memos of the 2021 active property tax abatement agreements and property tax Chapter
380 agreements are attached. The memos include breakdowns of property valuation, including
taxable values that may be ineligible under the specific terms of the applicable agreement. Because
the terms vary by agreement, each payment/abatement is calculated and reviewed individually.
ATTACHMENT(S): 2021 property tax abatement and rebate summary memos.
STAFF CONTACT:
Erica Sullivan
Economic Development Program Administrator
Erica.Sullivan@cityofdenton.com
(940) 349-7731
Jason Westmoreland
Economic Development Analyst
Jason.Westmoreland@cityofdenton.com
(940)-349-7771
REQUESTOR: Staff initiated
PARTICIPTAING DEPARTMENTS: Economic Development
STAFF TIME TO COMPLETE REPORT: 2 hours
Economic Development Department
215 E. McKinney St., Denton, TX 76201 (940) 349-7776
DATE: June 23, 2022
TO: Mayor and City Council Members Sara Hensley, City Manager David Gaines, Deputy City Manager Cassandra Ogden, Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator SUBJECT: O’Reilly Hotel Partners Denton Chapter 380 Grant for 2021
This is the fourth year of the twenty-five-year agreement for O’Reilly Hotel Partners Denton (OHPD).
Under the Chapter 380 Agreement, OHPD will pay 100% of the property taxes owed to the City and will receive a grant equal to 100% of the building and equipment valuation of the hotel and convention center (excluding inventory, vehicles and supplies).
OHPD will receive 100% of the ad valorem tax, hotel occupancy tax, and sales tax generated by the
project for a maximum of 25 years or until the combined principal amount of $28 million and interest payment of $26 million, for a total aggregate amount of $54 million, is reached, whichever comes first. The incentive is capped at $54 million.
The ad valorem grant payment calculation is based on the following:
Description Valuation Not Eligible Eligible
Building/Improvements $23,502,973 $0 $23,502,973
Land $6,247,027 $6,247,027 $0
Equipment $2,884,350 $32,463 $2,851,887
Totals $32,634,350 $6,279,490 $26,354,860
The Agreement thresholds require an investment of $80 and $20 million in real property improvements and business personal property value. Since OHPD met their threshold requirements, they will receive an ad valorem grant payment equal to 100% of the eligible amount Once they have paid their property taxes, the City will issue an incentive grant payment in the amount of $149,122. OHPD’s net property tax payment to the City less the rebate for 2020 is $43,569.
If you have any questions, please do not hesitate to contact me at 349-7776. cc: Dustin Vernor, Denton Central Appraisal District Courtney Brown, O’Reilly Hospitality Management
Economic Development Department
401 N. Elm St., Denton, TX 76201 (940) 349-7776
OUR CORE VALUES
Integrity Fiscal Responsibility Inclusion Transparency Outstanding Customer Service
MEMORANDUM
DATE: June 23, 2022
TO: The Honorable Mayor Hudspeth and Council Members Sara Hensley, City Manager David Gaines, Deputy City Manager Cassandra Ogden, Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2021 Mayday Manufacturing Tax Rebate
This is the eighth year of the ten-year agreement with Mayday Manufacturing. Under the Chapter 380 Agreement, the company will pay 100% of the property taxes owed to the City and will receive a grant equal to 75% of the increase in valuation for the building and equipment resulting from the improvements to the facility located at 3100 Jim Christal. The difference between the property tax
improvements over the taxes of the 2012 base year valuation is eligible for the incentive and is deducted
from the total valuation. The grant payment calculation is based on the following:
Description Valuation Not Eligible Eligible
Building/Improvements $6,530,497 $1,579,926 $4,950,571
Land $1,380,111 $1,380,111 $0
Equipment $6,981,636 $3,038,420 $3,943,216
Inventory Less Freeport $2,403,141 $2,403,141 $0
Totals $17,295,385 $8,401,598 $8,893,787
Since Mayday Manufacturing and American Realty Capital Properties (ARCP) met the $5 million
threshold of the grant agreement, once they have paid their property taxes, the City will issue a grant payment in the amount of $49,871. The net property tax payment to the City will equal $47,990. If you have any questions, please do not hesitate to contact me at 349-7731.
cc: Dustin Vernor, Denton Central Appraisal District Tom Shaw, Mayday Manufacturing Torry Peoples, Mayday Manufacturing
Economic Development Department
401 N. Elm St., Denton, TX 76201 (940) 349-7776
OUR CORE VALUES
Integrity Fiscal Responsibility Inclusion Transparency Outstanding Customer Service
MEMORANDUM
DATE: June 13, 2022
TO: The Honorable Mayor Hudspeth and Council Members Sara Hensley, City Manager David Gaines, Deputy City Manager Cassandra Ogden, Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2021 West Gate Business Park Chapter 380 Grant
This is the sixth year of the City of Denton’s ten-year Chapter 380 agreement with West Gate Business
Park (WGBP). The Agreement provides a 70% rebate on the valuation of the real property improvements for building/Lot 1.
Description Valuation Not Eligible Eligible
Building/Improvements $8,982,466 $0 $8,982,466
Land $838,094 $838,094 $0
Equipment $0 $0 $0
Inventory less Freeport $0 $0 $0
Totals $9,820,560 $838,094 $8,982,466
Since WGBP met their $3 million threshold, they will receive the full 70% rebate in the amount of
$35,577. Net City ad valorem taxes owed by WGBP (total less the rebate) is $19,990. If you have any questions, please do not hesitate to contact me at 349-7731. cc: Dusin Varner, Denton Central Appraisal District
Brandon Martino, WGBP Investments, LTD.
Economic Development Department
401 N. Elm St., Denton, TX 76201 (940) 349-7776
OUR CORE VALUES
Integrity Fiscal Responsibility Inclusion Transparency Outstanding Customer Service
MEMORANDUM
DATE: June 13, 2022
TO: The Honorable Mayor Hudspeth and Council Members Sara Hensley, City Manager David Gaines, Deputy City Manager Cassandra Ogden, Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2021 West Gate Business Park Tax Abatement
This is the third year of the City of Denton’s ten-year tax abatement agreement with West Gate Business
Park (WGBP). The Agreement provides a 60% abatement on the valuation of the real property improvements for buildings 2/Lot 2 and 3/Lot 3 in the business park. The agreement provides an additional 10% abatement for the location of a supplier to an existing primary industry and/or an additional 5% for the location of a national headquarters for a total abatement of up to 75%.
Description Valuation Not Eligible Eligible
Building/Improvements $9,104,708 $0 9,104,708 Land 1,119,492 1,119,492 0
Equipment 0 0 0
Inventory less Freeport 0 0 0 Totals $10,224,200 $1,119,492 $9,104,708
Since WGBP met their $3 million threshold and did not have a tenant that is a supplier to an existing primary industry and/or a national headquarters, they will receive a 60% abatement in the amount of $30,910. Net City ad valorem taxes owed by WGBP (total less the abatement) is $26,941.
If you have any questions, please do not hesitate to contact me at 349-7731.
cc: Dustin Vernor, Denton Central Appraisal District Brandon Martino, WGBP Investments, LTD.
Economic Development Department
401 N. Elm St., Denton, TX 76201 (940) 349-7776
OUR CORE VALUES
Integrity Fiscal Responsibility Inclusion Transparency Outstanding Customer Service
MEMORANDUM
DATE: June 24, 2022
TO: The Honorable Mayor Hudspeth and Council Members Sara Hensley, City Manager David Gaines, Deputy City Manager Cassandra Ogden, Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2021 WinCo Foods Chapter 380 Grant
This is the fourth year of the agreement for WinCo Foods. Under the Chapter 380 Agreement, WinCo Foods will pay 100% of City property taxes and will receive a grant equal to 60% of the building and equipment valuation of the distribution center (excluding inventory, vehicles and supplies). WinCo will receive 60% of the ad valorem tax, 40% of the ad valorem contribution into Tax Increment
Reinvestment Zone No. Two by the project until the construction costs for Phase I public improvements have been reimbursed. It is anticipated that full reimbursement will occur in approximately eleven years, depending on how the zone develops. The first year after full reimbursement, the second term of the grant
agreement shall commence, and will include a 60% rebate of the City’s ad valorem revenue for a period of
four years. The ad valorem grant payment calculation is based on the following:
Description Valuation Not Eligible Eligible
Building/Improvements $54,983,291 $0 $54,983,291
Land $6,726,709 $6,726,709 $0
Equipment $19,734,555 $3,847,883 $15,886,672
Inventory Less Freeport $21,687,972 $21,687,972 $0
Totals $103,132,527 $32,262,564 $70,869,963
The Agreement thresholds require a minimum valuation of $50 million in real property improvements
and business personal property value. Since WinCo met their threshold requirements, they will receive an ad valorem grant payment equal to 60% of the eligible amount. The total project costs for Phase I amounted to $7,154,641.55. Once WinCo has paid their property taxes, the City will issue a payment in the amount of $240,599. WinCo Foods’ net payment to the City less the rebate was $342,948.
If you have any questions, please do not hesitate to contact me at 349-7776. cc: Dustin Vernor, Denton Central Appraisal District Lori Gilbertson, WinCo Foods
Economic Development Department
401 N. Elm St., Denton, TX 76201 (940) 349-7776
OUR CORE VALUES
Integrity Fiscal Responsibility Inclusion Transparency Outstanding Customer Service
MEMORANDUM
DATE: June 29, 2022
TO: The Honorable Mayor Hudspeth and Council Members Sara Hensley, City Manager David Gaines, Deputy City Manager Cassandra Ogden, Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2021 WinCo Foods Chapter 380 TIRZ No. Two Grant
This is the fourth year of the agreement for WinCo Foods. Under the Chapter 380 Agreement, WinCo
Foods will pay 100% of the property taxes owed to the City and County and will receive a grant equal to 40% of the contribution of the City and County into the Tax Increment Fund (land and improvements) from the distribution center. Both entities participate in Tax Increment Reinvestment Zone (TIRZ) at a rate of 40%. Business personal property (equipment) is not included in the TIRZ contribution.
WinCo will receive 40% of the ad valorem tax contribution (land and improvements) into the Tax Increment Fund from the City and County, 60% of the City’s portion of the ad valorem by the project (excluding land, inventory, vehicles and supplies) until the construction costs for Phase I public improvements are reimbursed. The anticipated full reimbursement will occur in
approximately eleven years, depending on how the zone develops. The first year after full
reimbursement, the second term of the grant agreement shall commence, and will include only the 60% rebate of the City’s ad valorem revenue for a period of four years. The ad valorem TIRZ grant payment calculation is based on the following:
Description Valuation Not Eligible Eligible
Building/Improvements $54,983,291 $0 $54,983,291
Land $6,726,709 $0 $6,726,709
Equipment $19,734,555 $19,734,555 $0
Inventory Less Freeport $21,687,972 $21,687,972 $0
Totals $103,132,527 $41,422,527 $61,710,000
2
The Agreement thresholds require a minimum valuation of $50 million in real property improvements and business personal property value. Since WinCo Foods met their threshold requirements, they will
receive an ad valorem grant payment equal to 40% of the eligible amount. The total project costs for
Phase I amounted to $7,154,641.55. Once WinCo has paid their City and County property taxes, the City will issue an incentive grant payment in the amount of $197,203. WinCo Foods’ net property tax payment to the City less the rebate was $93,751.
If you have any questions, please do not hesitate to contact me at 349-7776.
cc: Dustin Vernor, Denton Central Appraisal District Lori Gilbertson, WinCo Foods
Economic Development Department
401 N. Elm St., Denton, TX 76201 (940) 349-7776
OUR CORE VALUES
Integrity Fiscal Responsibility Inclusion Transparency Outstanding Customer Service
MEMORANDUM
DATE: June 30, 2022
TO: The Honorable Mayor Hudspeth and Council Members Sara Hensley, City Manager David Gaines, Deputy City Manager Cassandra Ogden, Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2021 Peterbilt Tax Abatement
This is the fifth year in the City of Denton’s eight-year tax abatement with Peterbilt Motors. The
Agreement provides a 70% abatement on the valuation of the building and equipment resulting from the expansion improvements to the existing facility building, new stand alone building, and on eligible personal property. The difference between the property tax improvements over the taxes of the 2015 base year valuation is eligible for the incentive and is deducted from the total valuation. The grant
payment calculation is based on the following:
Description Valuation Not Eligible Eligible Building/Improvements $22,144,000 $15,644,000 $6,500,000 Land $4,356,000 $4,356,000 $0 Equipment 114,477,526 $61,691,150 $52,786,376 Inventory Less Freeport $11,911,283 $11,911,283 $0 Totals $152,888,809 $93,602,433 $59,286,376
Since Peterbilt Motors met the $18.5 million threshold of the grant agreement, they should have received the full 70% abatement amount of $122,985 Net City ad valorem taxes owed by Peterbilt (total less abatement) is $585,286. In a meeting with DCAD about Peterbilt, staff found that DCAD has not been
granting an abatement on Business Personal Property (BPP) in 2019 through 2021. Real property has
been abated correctly over the same period. The total abatement over the period was supposed to be $434,240. Actual abatements amounted to $72,137. The difference amounted to $362,104 over the period. An adjustment will be made to correct the error.
If you have any questions, please do not hesitate to contact me at 349-7731.
cc: Dustin Vernor, Denton Central Appraisal District Brian Roberts, Peterbilt Motors