2023-061 Property Tax Abatement Rebates Date: September 8,2023 Report No. 2023-061
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
2022 City of Denton Economic Development property tax (ad valorem) incentive agreements
including tax abatements and rebates
EXECUTIVE SUMMARY:
In tax year 2022,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 2022 is $655,408. The associated
properties have a total valuation of$297,733,412 and generated $1,251,951 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 Chapter 380 Policies 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 four 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
(base) 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 8,2023 Report No. 2023-061
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 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 an 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 2022 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):
2022 property tax abatement and rebate summary memos
STAFF CONTACTS:
Erica Sullivan
Economic Development Program Administrator
Erica.Sullivan(a),cityofdenton.com
(940) 349-7731
Emilio Montalvo
Economic Development Analyst
Emilio.Montalvokcityofdenton.com
(940)-349-7771 -
REOUESTOR: Staff initiated
PARTICIPTAING DEPARTMENTS: Economic Development
STAFF TIME TO COMPLETE REPORT: 2 hours
"Ft" Economic Development Department
OF P P
DENTON 401 N. Elm St., Denton, TX 76201 • (940) 349-7776
MEMORANDUM
DATE: September 8,2023
TO: The Honorable Mayor Hudspeth and Council Members
Sara Hensley, City Manager
Christine Taylor,Assistant City Manager
Aimee Kaslik,Interim Director of Finance
FROM: Erica Sullivan,Economic Development Program Administrator
SUBJECT: Tax Year 2022 West Gate Business Park Chapter 380 Grant
This is the seventh 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 $9,075,631 $0 $9,075,631
Land $1,676,189 $1,676,189 $0
Equipment $0 $0 $0
Inventory less Freeport $0 $0 $0
Totals $10,751,820 $1,676,189 $9,075,631
Since WGBP met their $3 million threshold, they will receive the full 70% rebate in the amount of
$35,620.Net City ad valorem taxes owed by WGBP(total less the rebate)is$24,668.
If you have any questions,please do not hesitate to contact me at 349-7731.
cc: Brandon Martino,WGBP Investments,LTD.
OUR CORE VALUES
Integrity• Fiscal Responsibility•Inclusion• Transparency• Outstanding Customer Service
crry
(W
DE NT O N Economic Development Department
215 E. McKinney St., Denton, TX 76201 • (940) 349-7776
DATE: September 8,2023
TO: Mayor and City Council Members
Sara Hensley, City Manager
Christine Taylor,Assistant City Manager
Aimee Kaslik,Interim Director of Finance
FROM: Erica Sullivan,Economic Development Program Administrator
SUBJECT: O'Reilly Hotel Partners Denton Chapter 380 Grant for 2022
This is the fifth 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 $29,668,537 $0 $29,668,537
Land $6,247,027 $6,247,027 $0
Equipment $4,137,997 $51,000 $4,086,997
Totals $40,053,561 $6,298,027 $33,755,534
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 $189,261. OHPD's net property tax
payment to the City less the rebate for 2022 is$35,312.
If you have any questions,please do not hesitate to contact me at 349-7776
cc: Courtney Brown,O'Reilly Hospitality Management
"Ft" Economic Development Department
OF p P
DENTON 401 N. Elm St., Denton, TX 76201 • (940) 349-7776
MEMORANDUM
DATE: September 8, 2023
TO: The Honorable Mayor Hudspeth and Council Members
Sara Hensley, City Manager
Christine Taylor, Assistant City Manager
Aimee Kaslik, Interim Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2022 West Gate Business Park Tax Abatement
This is the fourth 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 $9,309,616 $0 9,309,616
Land 1,944,954 1,944,954 0
Equipment 0 0 0
Inventory less Freeport 0 0 0
Totals $11,254,570 $1,944,954 $9,309,616
Since WGBP met their$3 million threshold and did not have a tenant that is a supplier to an existing
primary industry and/or a national headquarters,they will receive a 60%abatement in the amount of$
31,318.Net City ad valorem taxes owed by WGBP(total less the abatement)is$31,718.
If you have any questions,please do not hesitate to contact me at 349-7731.
cc: Jake Clerihew,Denton Central Appraisal District
Brandon Martino,WGBP Investments,LTD.
OUR CORE VALUES
Integrity• Fiscal Responsibility•Inclusion• Transparency• Outstanding Customer Service
"Ft" Economic Development Department
OF p P
DENTON 401 N. Elm St., Denton, TX 76201 • (940) 349-7776
MEMORANDUM
DATE: September 8, 2023
TO: The Honorable Mayor Hudspeth and Council Members
Sara Hensley, City Manager
Christine Taylor, Assistant City Manager
Aimee Kaslik, Interim Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2022 Mayday Manufacturing Chapter 380 Grant
This is the ninth 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 $7,119,889 $0 $7,119,889
Land $1,380,111 $1,380,111 $0
Equipment $6,114,572 $2,984,720 $3,129,852
Inventory Less Freeport $2,445,696 $2,445,696 $0
Totals $17,060,268 $6,810,527 $10,249,741
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$36,458. The net property tax payment to the City will equal$59,196.
If you have any questions,please do not hesitate to contact me at 349-7731.
cc: Tom Shaw,Mayday Manufacturing
Torry Peoples,Mayday Manufacturing
OUR CORE VALUES
Integrity• Fiscal Responsibility•Inclusion• Transparency• Outstanding Customer Service
"Ft" Economic Development Department
OF p P
DENTON 401 N. Elm St., Denton, TX 76201 • (940) 349-7776
MEMORANDUM
DATE: September 8, 2023
TO: The Honorable Mayor Hudspeth and Council Members
Sara Hensley, City Manager
Christine Taylor, Assistant City Manager
Aimee Kaslik, Interim Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2022 Peterbilt Tax Abatement
This is the sixth 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.
Peterbilt did not meet the$18,500,000 required threshold for tax year 2022. The total eligible valuation
less the 2015 base value amounted to $16,979,279, which is $1,520,721 less than the required
$18,500,000 threshold.
Description Valuation Not Eligible Eligible
Building/Improvements $22,766,000 $15,644,000 $7,122,000
Land $6,534,000 $6,534,000 $0
Equipment 73,486,630 $63,629,351 $9,857,279
Inventory Less Freeport $14,154,763 $14,154,763 $0
Totals $116,941,393 $99,962,114 $16,979,279
After a meeting with and additional infomration provided by the Denton Central Appraisal District
(DCAD), staff found that DCAD has not been administering the abatement correctly for tax years 2018
through 2022. The total abatement over the period was supposed to be $132,920. Actual abatements
amounted to$150,546 The difference amounted to$17,637 over what should have been abated for the
period. Both parties are working on the best method to correct this error.
If you have any questions,please do not hesitate to contact me at 349-7731.
cc: Lynn Hatter,Denton Central Appraisal District
Brian Roberts,Peterbilt Motors
OUR CORE VALUES
Integrity•Fiscal Responsibility•Inclusion• Transparency• Outstanding Customer Service
"Ft" Economic Development Department
OF p P
DENTON 401 N. Elm St., Denton, TX 76201 • (940) 349-7776
MEMORANDUM
DATE: September 8, 2023
TO: The Honorable Mayor Hudspeth and Council Members
Sara Hensley, City Manager
Christine Taylor, Assistant City Manager
Aimee Kaslik, Interim Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2022 WinCo Foods Chapter 380 Grant
This is the fifth 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(TIRZ)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 ten 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 $53,409,936 $0 $53,409,936
Land $10,090,064 $10,090,064 $0
Equipment $17,683,239 $5,596,050 $12,087,189
Inventory Less Freeport $20,488,561 $20,488,561 $0
Totals $101,671,800 $36,174,675 $65,497,125
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 $7,153,098.26. Once WinCo has paid their property taxes, the City will issue a payment
in the amount of$220,338.WinCo Foods' net payment to the City less the rebate was$349,717.
If you have any questions,please do not hesitate to contact me at 349-7776.
OUR CORE VALUES
Integrity• Fiscal Responsibility•Inclusion• Transparency• Outstanding Customer Service
cc: Lori Gilbertson,WinCo Foods
2
"Ft" Economic Development Department
OF p P
DENTON 401 N. Elm St., Denton, TX 76201 • (940) 349-7776
MEMORANDUM
DATE: September 8, 2023
TO: The Honorable Mayor Hudspeth and Council Members
Sara Hensley, City Manager
Christine Taylor, Assistant City Manager
Aimee Kaslik, Interim Director of Finance
FROM: Erica Sullivan, Economic Development Program Administrator
SUBJECT: Tax Year 2022 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 ten 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 $53,409,936 $0 $53,409,936
Land $10,090,064 $0 $10,090,064
Equipment $17,683,239 $17,683,239 $0
Inventory Less Freeport $20,488,561 $20,488,561 $0
Totals $101,671,800 $38,171,800 $63,500,000
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$197,669. WinCo Foods' net property tax
payment to the City less the rebate was$85,609.
OUR CORE VALUES
Integrity• Fiscal Responsibility•Inclusion• Transparency• Outstanding Customer Service
If you have any questions,please do not hesitate to contact me at 349-7776.
cc: Lori Gilbertson,WinCo Foods
2