2018-175 2017 Net Revenue on Economic Development IncentivesDate: December 7, 2018 Report No. 2018-175
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
2017 Net Revenue Report on Economic Development Incentives
EXECUTIVE SUMMARY:
Each year since 2009, the Department of Economic Development has prepared a report on the
fiscal impact to the City of Denton made by businesses that have received tax incentives. The
City has invested $16.5 million in tax-related incentives since 1999, and in return, has benefited
from a net increase in property and sales tax revenues in the amount of $62.4 million. The total
rate of return for incentives awarded is 327%, and there have been a total of 7,536 jobs created or
retained by incentivized projects.
BACKGROUND:
A tax abatement (Tax Code, Chapter 312) is a local agreement between a taxpayer and a taxing
unit that exempts from taxation all or part of the increase in the value of real property or business
personal property. Chapter 380 of the Local Government Code gives cities the authority to
provide grants or loans of city funds or services in order to promote economic development; the
City of Denton structures its Chapter 380 agreements as tax rebates based on performance in
generating property tax or sales tax.
The purpose of tax abatements and Chapter 380 agreements is to assist cities in attracting new
industries, encourage the retention and expansion of existing businesses, and promote capital
investment by easing the tax burden on projects for a set period of time.
The City of Denton developed its original Tax Abatement Policy in 1989. The policy has been
updated and approved by Council 11 times since the original, most recently in March 2018.
In 2009, the Department of Economic Development created the initial “Return on Investment
Report” to examine the fiscal impact to the City made by the businesses that have received
property and sales tax incentives, evaluate the efficiency of the public investment, and to guide
future policy decisions. The following changes have been made to the report over the years:
2010: State of Texas and Denton County Transportation Authority sales tax revenue was
added.
2013: The report was expanded to include the ad valorem revenue for Denton County,
which includes both the incentives in which the County has partnered with the City, as
well as the revenue from the incentives that the County did not invest in.
2015: Inclusion of Denton Independent School District (DISD) information.
Date: December 7, 2018 Report No. 2018-175
2016: The report was retitled “Economic Development Incentivized Projects Net
Revenue Report” to accurately reflect the calculation method used, which is tax revenue
received less tax revenue foregone and does not include costs to the City for the projects.
The attached 2017 Net Revenue Report is the sixth update of the report, which provides an
overall look at what the City of Denton received in the way of direct benefits (property and sales
tax revenues) as well as the indirect benefit of new jobs created or existing jobs retained by those
companies and developments that received incentives.
The report provides information through 2017 and includes the following:
The date the agreement was approved
The term of the agreement (years incentives are applied)
Property valuation (cumulative since year agreement approved, excluding base year)
Property tax generated (cumulative since year agreement approved, excluding base year)
Sales tax generated – if applicable (cumulative from initiation of sales tax monitoring)
Net property and sales tax revenues (total revenues less incentives)
Cost/benefit Percentage (net revenue divided by the incentive and multiplied by 100)
Ratio of Return (net revenue less incentive, then divided by the incentive)
New jobs created by project
Standard economic development practice for impact analysis is 10 years, so the incentives in the
report are tracked for 10 years regardless of the term. For example, an incentive with a term of
seven years is tracked for an additional three years until the 10-year period is reached. An
incentive is not deducted for the remaining three years following the term. This practice allows
for “apples to apples” comparisons between incentives.
Incentives for expansion projects such as Jostens, Peterbilt Motors, and Flowers Foods are based
only on the new value created by the project. The existing valuation that was relative to each of
these projects was not included in the calculations.
FISCAL INFORMATION:
The City of Denton has awarded a total of 28 incentives to foster development in the community.
Eighteen are represented in the report. The remaining were not initiated as of 2017. The City has
invested $16.5 million in tax-related incentives, and in return, has benefited from a net increase
in property and sales tax revenues in the amount of $62.4 million since the inception of the
incentive program in 1999. The rate of return for all of the incentives awarded is 327%. There
have been a total of 7,536 jobs created or retained by incentivized projects. The table, which
follows, provides the net revenue summary for the City, County and school district.
Date: December 7, 2018 Report No. 2018-175
Denton County has participated in a total of six Denton incentives, and Denton Independent
School District has participated in two Denton incentives. Texas school districts were at one time
able to offer tax abatements similar to those of cities and counties, but that authority was
repealed by the Texas Legislature. (Note: School finance involves a complex funding formula
from a number of different federal, state and local funding sources. It is important to note that
the report uses the entire DISD tax rate, which includes the Maintenance and Operations
(M&O) and Interest and Sinking (I&S) tax rates. The M&O portion of the tax rate is used for
salaries, utilities, supplies etc. The I&S portion of the tax rate is used to fund payments on debt
service for facilities and is the only portion of the DISD tax rate that is not affected by funding
from the State of Texas.)
City, County and DISD Net Revenue Summaries
Total of all Incentives City of Denton Denton County Denton ISD
Cumulative Property Valuation $6,145,095,049 $2,982,617,949 $3,372,276,231
Cumulative Property Tax
Generated $41,069,579 $7,607,273 $51,116,298
Cumulative Sales Tax Generated $40,399,711 $0 $0
Cumulative Property & Sales Tax $81,469,290 $7,607,273 $51,116,298
Less Incentives $19,058,067 $1,063,616 $622,252
Net Property and Sales Tax
Revenue $62,411,223 $6,543,657 $50,494,046
Cost/benefit Percentage 327% 615% 8,115%
Ratio of Return 3.3 6.2 81.1
CONCLUSION:
Incentives are an important tool that can be used to attract or retain private investment in Denton.
Since the incentive options available to Denton are tax based, tracking and reporting on the
cost/benefit of the incentives awarded by City Council enhances transparency, supports fiscal
responsibility, and aids in future decision-making regarding incentives.
ATTACHMENT(S):
2017 Net Revenue Report
Date: December 7, 2018 Report No. 2018-175
STAFF CONTACT:
Caroline Booth
Director of Economic Development
(940) 349-7751
Caroline.Booth@cityofdenton.com
2017
Economic Development
Incentivized Projects
Net Revenue Report
City of Denton
Department of Economic Development
City of Denton Net Revenue Report Published October 2018
1
Table of Contents
List of Charts, Graphs, and Tables …………………………………………………………………………………...2
Executive Summary .......................................................................................................... 3
Introduction and Purpose................................................................................................. 4
City of Denton Revenue ................................................................................................... 5
Property Tax Abatements ...................................................................................................... 5
Chapter 380 Grant Agreements ............................................................................................. 6
Chapter 380 Grants Based on Property Tax Performance ................................................ 6
Chapter 380 Grants Based on Sales Tax Performance ...................................................... 6
Property and Sales Tax Summary .......................................................................................... 8
Property Tax Summary ...................................................................................................... 8
Property and Sales Tax Summary ...................................................................................... 8
Direct and Indirect Impacts.................................................................................................... 9
Chapter 380 Grants on Combined Tax Performance and Development Tools ................... 10
State and Local Revenues ............................................................................................... 11
City, State, and DCTA Sales Taxes ........................................................................................ 11
Denton County Property Tax Generation ........................................................................ 12
Property Tax Abatements .................................................................................................... 12
Chapter 380/381 Agreements ............................................................................................. 13
Property Tax Summary ....................................................................................................... 13
Denton Independent School District Property Tax Generation ........................................ 14
Property Tax Abatements .................................................................................................... 15
Chapter 380 Agreements ..................................................................................................... 16
Property Tax Summary ...................................................................................................... …16
Appendix A: Incentive Projects ....................................................................................... 17
Appendix B: General Methodology ................................................................................. 28
City of Denton Net Revenue Report Published October 2018
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List of Charts, Graphs, and Tables
Charts
Chart 1: Sales Tax Generated and Rebated ........................................................................... 7
Chart 2: Sales Tax Composition ........................................................................................... 12
Graphs
Graph 1: Property Tax Generated and Abated/Rebated ....................................................... 8
Graph 2: New Value Created in Denton ................................................................................ 9
Graph 3: New Jobs Created in Denton ................................................................................ 10
Graph 4: City and County Property Tax Agreements ........................................................... 14
Graph 5: DISD Property Tax Abatements ............................................................................ 15
Tables
Table 1: City of Denton Summary .......................................................................................... 3
Table 2: City, County and DISD Summaries ........................................................................... 4
Table 3: City of Denton Tax Abatements ............................................................................... 5
Table 4: City of Denton Chapter 380 Property Tax Agreements ........................................... 6
Table 5: City of Denton Chapter 380 Sales Tax Agreements ................................................. 7
Table 6: City of Denton Tax Abatements and Chapter 380 Property Tax Agreements ......... 8
Table 7: City of Denton Return Summary .............................................................................. 9
Table 8: Combined Tax Tool Incentive Summary ................................................................ 10
Table 9: City, State, and DCTA Sales Tax Composition ........................................................ 11
Table 10: Total City, State and Local Sales Taxes Cost/benefit ........................................... 11
Table 11: Denton County Property Tax Abatements ........................................................... 12
Table 12: Denton County Property Tax Chapter 381 Rebates ............................................. 13
Table 13: Denton County Return from Property Tax Abatements
and Chapter 380/381 Rebates ......................................................................................... 13
Table 14: Denton County Return Summary ........................................................................ 14
Table 15: DISD Property Tax Abatements ............................................................................ 15
Table 16: DISD Return from City and DISD Agreements ...................................................... 15
Table 17: DISD Return Summary .......................................................................................... 16
City of Denton Net Revenue Report Published October 2018
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EXECUTIVE SUMMARY
The City of Denton promotes high-quality development that improves the quality of life for its residents. The City
has provided economic development incentives to stimulate private development and redevelopment, expand the
tax base, generate jobs, and enhance the local economy.
Denton is home to several corporate, regional, and international headquarters, as well as central distribution and
maintenance facilities. The City facilitated a number of these projects by granting incentives to make the project
feasible and to reimburse the costs of required public infrastructure.
In 2009, the City’s department of Economic Development created the initial “Return on Investment Report” to
provide a comprehensive look at the fiscal impact made by the businesses that have received property and sales
tax incentives from the City and to evaluate the efficiency of the public investment. In 2016, the report was retitled
the “Report on Net Revenue from Incentivized Economic Development Projects” to accurately reflect the
methodology used, which is revenue received less revenue foregone. It does not include costs to the City for the
projects.
The City of Denton has awarded a total of 28 incentives to foster development in the community. Eighteen are
represented in the report. The remaining were not initiated as of 2017. The City has invested $16.5 million in tax-
related incentives, and in return, has benefited from a net increase in property and sales tax revenues in the
amount of $62.4 million since the inception of the incentive program in 1999. The rate of return for all of the
incentives awarded is 327%. Sales tax incentives represented the highest rate of return at 389% followed by
Chapter 380 property tax rebates and property tax abatements at 399% and 154%, respectively. There have been a
total of 7,536 jobs created or retained by incentivized projects.
7,536 327% $6.1B $62.4M
New Jobs Benefit Property Valuation Net Revenue
Table 1: City of Denton Summary
Total of all Incentives
Totals for
Property Projects
Totals for
Sales Tax Projects Total
Cumulative Property Valuation $2,982,617,949 $3,162,477,100 $6,145,095,049
Cumulative Property Tax Generated $19,704,068 $21,365,511 $41,069,579
Cumulative Sales Tax Generated $0 $40,399,711 $40,399,711
Cumulative Property & Sales Tax $19,704,068 $61,765,222 $81,469,290
Less Incentives $6,435,518 $12,622,549 $19,058,067
Net Property and Sales Tax Revenue $13,268,550 $49,142,673 $62,411,223
Cost/benefit Percentage 205% 389% 327%
Jobs Created/Retained 3,980 3,556 7,536
City of Denton Net Revenue Report Published October 2018
4
The report is divided into the following four main sections illustrating the cost/benefit of the public
investment of resources for each taxing entity:
City of Denton Revenues
State and Local Revenues
Denton County Property Tax Generation
Denton Independent School District Revenue
Project Narratives
Methodology
The cost/benefit from each of the three jurisdictions is included below as a ratio of the net revenue to
investment. See appendix for additional information on the methodology for this report.
3.3 6.2 81.1
City of Denton Denton County Denton ISD
Table 2: City, County and DISD Summaries
Total of all Property Incentives Ratio
of Return City of Denton Denton County Denton ISD
Cumulative Property Valuation $6,145,095,049 $2,982,617,949 $3,372,276,231
Cumulative Property Tax Generated $41,069,579 $7,607,273 $51,116,298
Cumulative Sales Tax Generated $40,399,711 $0 $0
Cumulative Property & Sales Tax $81,469,290 $7,607,273 $51,116,298
Less Incentives $19,058,067 $1,063,616 $622,252
Net Property and Sales Tax Revenue $62,411,223 $6,543,657 $50,494,046
Cost/benefit Percentage 327% 615% 8,115%
Ratio of Return 3.3 6.2 81.1
INTRODUCTION AND PURPOSE
This is the sixth update and redesign of the report, which provides a comprehensive look at the fiscal impact made
by the businesses that have received property and/or sales tax incentives from the City and evaluates the efficiency
of the public investment. A brief description of the types of tax incentives offered, the total incentive received by
the company, the City tax revenues generated since the agreement was initiated and the cost/benefit of the
projects are provided. In addition, the report includes information regarding state, Denton County Transportation
Authority (DCTA), Denton County and Denton Independent School District (DISD) ad valorem and sales tax
revenues created by these developments.
In 2009, the City of Denton Economic Development Department created the initial Return on Investment Report to
examine the fiscal impact made by the businesses that have received property and sales tax incentives from the
City, evaluate the efficiency of the public investment and to guide future policy decisions. State and DCTA sales tax
revenue were added in 2010. In 2013, the report was expanded to include the ad valorem revenue for Denton
City of Denton Net Revenue Report Published October 2018
5
County, which includes both the incentives in which the County has partnered with the City, as well as the revenue
from the incentives that the County did not invest in. The report comprised all of the taxing entities with the
inclusion of Denton Independent School District (DISD) in 2015. Last year, the report was redesigned.
CITY OF DENTON REVENUE
Property Tax Abatements
Since 1999, the City of Denton has granted abatements of City ad valorem taxes from new and expanded capital
investment resulting in $5.1 million in property related tax incentives, and in return, has benefited from a net
increase in property tax revenues of $7.8 million.
City of Denton tax abatement agreements obligate the company to meet certain threshold requirements of
property valuation in order to receive a tax abatement. In some cases, the number of jobs created and the average
wage for these positions are also thresholds of performance. Chapter 312 of the Local Government Code allows
cities to provide up to 100% abatement on new valuation and limits the term of tax abatements to 10 years. The
following table represents the eight active tax abatements awarded and initiated through 2017. The following five
tax abatements have been completed: United Copper, Peterbilt, Flowers Foods, Fastenal, and Aldi. 2017 was also
the fifth and final year of the tax abatement for Target Corporation. The next tax abatement scheduled to come
online is a Peterbilt Motors expansion.
Table 3: City of Denton Tax Abatements
United
Copper
Peterbilt
Motors
Flowers
Foods Fastenal Aldi Foods Target Peerless Tetra Pak Totals
Year Approved 1998 2001 2004 2008 2008 2010 2011 2013
Incentive Term
1999-2004
2002-
2011 2005-2011 2009-2013 2010-2016 2013-2017
2014-
2018)1
(2015-
2018)
Cumulative
Property
Valuation
$422,085,76
5
$39,091,29
6
$329,264,60
9
$183,476,60
1
$372,994,88
4
$560,892,20
7
$41,102,53
5
$26,384,48
1
$1,975,292,3
78
Cumulative
Property Tax
Generated $2,508,486 $248,933 $2,211,802 $1,247,050 $2,545,235 $3,802,550 $279,385 $176,559 $13,020,000
Less Property
Tax Abatement $137,032 $144,914 $363,359 $87,821 $2,152,379 $2,074,169 $34,740 $100,889 $5,095,303
Net Property
Tax Revenue $2,371,454 $104,019 $1,848,443 $1,159,229 $392,856 $1,728,381 $244,645 $75,670 $7,849,027
Cost/benefit
Percentage 1,731% 72% 509% 1,320% 18% 83% 704% 75% 154%
Jobs
Created/Retain
ed 265 35 480 208 150 160 96 375 1,769
1Note: Peerless was terminated after one year due to the sale of the property
City of Denton Net Revenue Report Published October 2018
6
Chapter 380 Agreements
Chapter 380 of the Local Government Code gives cities the authority to provide grants or loans of city funds or
services in order to promote economic development. The City of Denton has entered into 17 Chapter 380 grant
agreements in which it has authorized a grant equal to either a portion of the property tax or sales tax generated
by the project.
Chapter 380 Grants Based on Property Tax Performance
Table 4 below provides data through 2017 on economic development agreements that provided grants based on a
percentage of the property tax generated by the project. The City has awarded six Chapter 380 Property Tax
Agreements. Sally Beauty, Jostens, and Labinal/Safran have expired. Labinal and Jostens will continue to be tracked
for 10 years, while Sally Beauty will not due to the fact that the incentive had a 10-year term. This is the first report
that that includes West Gate Business Park (WGBP). Business Air, U.S. Aviation Group and Victor Technologies were
granted Chapter 380 Property Tax grants in 2015, but were terminated in 2017 for the sale of the FBO (Business
Air) and not meeting the valuation threshold requirements (USAG and Victor). O’Reilly Hotel and Convention
Center and WinCo Foods also received Chapter 380 Property Tax Agreements in 2015 and will appear in the 2018
report. Sally Beauty received another incentive in 2016 and will be included in the 2018 report.
Although a number of the ad valorem projects generate sales taxes, that would not have been generated in Denton
if the business had not located in this community, this study does not include the sales taxes for the ad valorem
only incentives.
Table 4: City of Denton Chapter 380 Property Tax Agreements
Business
Sally Beauty
Company
Granite/
Schlumberger
Jostens,
Inc.
Labinal/
Safran Mayday
West Gate
Business
Park Totals
Base Year of
Agreement 2004 2006/2011 2008 2011 2012 2015
Incentive Term 2005-2014 2012-2018 2009-2013 2012-2014 2014-2023 2016-2021
Cumulative
Property Valuation $295,714,200 $628,358,362 $7,659,050 $32,975,885 $25,866,530 $16,751,544 $1,007,325,571
Cumulative
Property Tax
Generated $1,972,313 $4,129,695 $70,288 $227,091 $174,062 $110,619 $6,684,068
Less Property Tax
Incentive $662,729 $371,437 $17,544 $60,978 $104,972 $122,555 $1,340,215
Net New Property
Tax Revenue $1,309,584 $3,758,258 $52,744 $166,113 $69,090 ($11,936) $5,343,853
Cost/benefit
Percentage 198% 1,012% 301% 272% 66% -10% 399%
Jobs
Created/Retained 450 147 600 750 245 19 2,211
1 West Gate Business Park received a one-time grant in the amount of $50,000 in addition to the ad valorem rebate for 2016, which makes the net negative
Chapter 380 Grants Based on Sales Tax Performance
Table 5, which follows, details information through 2017 on economic development agreements that provided
grants based on a percentage of the sales tax generated by the project. Four mixed-use developments have
received sales tax incentives from the City. Golden Triangle Mall initiated its incentive in 2016. Construction is
underway for the Buc-ee’s Travel Center, which is estimated to come online in 2018.
City of Denton Net Revenue Report Published October 2018
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Table 5: City of Denton Chapter 380 Sales Tax Agreements
Development Denton Crossing Rayzor Ranch Unicorn Lake
Golden
Triangle Mall Totals
Base Year of Agreement 2003 2007 2004 2010
Incentive Term 2005-2019 2012-2032 2009-2023 2016-2035
Cumulative Property Valuation $1,074,723,599 $803,336,673 $874,015,924 $410,400,904 $3,162,477,100
Cumulative Property Tax Generated $7,156,231 $5,524,752 $5,914,633 $2,769,895 $21,365,511
Cumulative Sales Tax Generated $19,196,174 $13,305,225 $1,384,194 $6,514,118 $40,399,711
Total Cumulative Property & Sales Tax $26,352,405 $18,829,977 $7,298,827 $9,284,013 $61,765,222
Less Sales Tax Incentive $6,398,724 $5,586,253 $461,398 $176,174 $12,622,549
Net Property and Sales Tax Revenue $19,953,681 $13,243,724 $6,837,429 $9,107,839 $49,142,673
Cost/benefit Percentage 312% 237% 1,482% 5,170% 389%
Jobs Created/Retained 973 1,265 318 1,000 3,556
Chart 1 below provides the sales taxes generated from the four developments and the rebate provided per the
Chapter 380 Agreement. It is important to note that Golden Triangle Mall received an incentive for the renovations
to the existing 1980 mall. GTM Development receives 50% of monthly sales tax receipts, less a monthly mall
baseline amount established as $95,898. The incentive was initiated in the summer of 2016, so only half of a year
of rebates were included in the report in 2016. 2017 represents the first full year of payments for GTM
Development.
Chart 1: Sales Tax Generated and Rebated
76%
24%
Sales Tax Generated Sales Tax Rebate
City of Denton Net Revenue Report Published October 2018
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Property and Sales Tax Summary
Property Tax Summary
The cost/benefit for all incentives based on property tax performance, tax abatement and Chapter 380
Agreements, is provided in Table 6 below. Results indicate that since 1999, the City of Denton has awarded $6.4
million in property related tax incentives, and in return, has benefited from a net increase in property tax revenues
of $13.3 million. Over 3,980 jobs have been added as a result of these property-based incentives.
Table 6: City of Denton Tax Abatements and Chapter 380 Property Tax Agreements
Total of all Property Incentives Property Totals
Cumulative Property Valuation $2,982,617,949
Cumulative Property Tax Generated $19,704,068
Cumulative Sales Tax Generated $0
Cumulative Property & Sales Tax $19,704,068
Less Incentives $6,435,518
Net Property and Sales Tax Revenue $13,268,550
Cost/benefit Percentage 205%
Jobs Created/Retained 3,980
Graph 1: Property Tax Generated and Abated/Rebated
Chapter 380 Property Tax Tax Abatements
$6,684,068
$13,020,000 $1,340,215
$5,095,303
Property Tax Generated Property Tax Incentive
Property and Sales Tax Summary
The City of Denton has awarded a total of 28 incentives to foster development in the community. Eighteen are
represented in the report. The remaining awards were terminated or not initiated in 2017. The City has invested
$19.1 million in tax-related incentives, and in return, has benefited from a net increase in property and sales tax
revenues in the amount of 62.4 million since the inception of the incentive program in 1999. The cost/benefit for
City of Denton Net Revenue Report Published October 2018
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all of the incentives awarded is 327%. Sales tax incentives represented the highest rate of return on investment at
389% followed by Chapter 380 property tax rebates and property tax abatements at 399% and 154%, respectively.
Table 7: City of Denton Return Summary
Total of all Property Incentives Property Totals Sales Tax Total Total
Cumulative Property Valuation $2,982,617,949 $3,162,477,100 $6,145,095,049
Cumulative Property Tax Generated $19,704,068 $21,365,511 $41,069,579
Cumulative Sales Tax Generated $0 $40,399,711 $40,399,711
Cumulative Property & Sales Tax $19,704,068 $61,765,222 $81,469,290
Less Incentives $6,435,518 $12,622,549 $19,058,067
Net Property and Sales Tax Revenue $13,268,550 $49,142,673 $62,411,223
Cost/benefit Percentage 205% 389% 327%
Jobs Created/Retained 3,980 3,556 7,536
Direct and Indirect Impacts
Graph 2: New Value Created in Denton
$-
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
Chapter 380
Property Tax
Chapter 380 Sales
Tax
Property Tax
Abatements
$1,007,325,571
$3,162,477,100
$1,975,292,378
Valuation
City of Denton Net Revenue Report Published October 2018
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Graph 3: New Jobs Created in Denton
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Chapter 380
Property Tax
Chapter 380
Sales Tax
Tax
Abatements
2,211
3,556
1,769
Jobs
Chapter 380 Grants Based on Combined Tax Performance and Development Tools
The Department of Economic Development employs a number of economic development tools to drive economic
growth in the community. Most recently, the City has utilized development districts; sales and use tax rebates;
infrastructure programs; and hotel occupancy tax to finance public improvements and developments. This report
will provide a brief description of the types of tax incentives offered, terms, thresholds required, and the incentive
received by the company. 2015 represented one of the most active years of incentive investment and the use of
multiple economic development tools to support projects.
Table 8: Combined Tax Tool Incentive Summary
Project Incentive Tools
WinCo Foods Distribution Infrastructure grant, sales and use tax for construction, property tax rebate and
Westpark TIRZ 2 grant
O'Reilly Hotel and Convention Center Infrastructure grant, sales and use tax for construction, property tax rebate and
hotel occupancy tax grant
Rayzor Ranch Development Sales tax and a Public Improvement District (PID)
Railyard Downtown TIRZ 1 grant and lease
Tax increment financing is a tool that local governments can use to publicly finance needed structural
improvements and enhance infrastructure within a defined area (a Tax Increment Reinvestment Zone, or TIRZ) in
order to stimulate private development and redevelopment. An ad valorem valuation base is established in the
first year, and the revenue from the increased valuation from subsequent years is allocated to TIRZ development.
The statutes that regulate tax increment financing are located in Chapter 311 of the Texas Tax Code, also known as
the Tax Increment Financing Act.
A Public Improvement District (PID) is a defined area where public improvements may be financed through the use
of special assessments to property owners. The funds from the assessment can be used to maintain those
improvements. The regulations for PIDs can be found under Chapter 372 of the Local Government Code.
City of Denton Net Revenue Report Published October 2018
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A Sales and Use Tax rebate for construction is accomplished through a Texas Direct Payment Permit. This incentive
involves a rebate of all or a portion of the sales and use taxes for the purchase of construction materials that would
generate additional local use taxes that the City of Denton would not otherwise receive. The permit allows for
storage of materials without the payment of taxes until the location is determined, so they are not taxed when
holding the goods. This program is regulated by the Texas Administrative Code (TAC) Title 34, Chapter 3,
Subchapter O, Rule 3.28 and Tax Code Title 2, Subtitle E, Chapter 151.
STATE AND LOCAL REVENUES
City, State, and DCTA Sales Taxes
Table 9, which follows, provides the breakdown of the total revenue to City, State, and the Denton County
Transportation Authority (DCTA) from sales taxes generated at the major retail developments that have received
incentives from the City of Denton. The State of Texas collects sales and use taxes from all retail sales and taxable
services. The State has directly benefited from the incentives awarded for these mixed-use developments. Since
2005, the State of Texas has received a total of $168.3 million in additional sales tax revenues as a result of the
incentives awarded by the City. The state revenues comprise 76% of the total sales taxes generated by these
mixed-use centers.
Table 9: City, State, and DCTA Sales Tax Composition
Denton
Crossing
Rayzor
Ranch
Unicorn
Lake
Golden
Triangle Mall Rates Totals
Base Year of Agreement 2003 2007 2004 2010
Incentive Term 2005-2019 2012-2032 2009-2023 2016-2035
Total Sales $1,279,744,933 $887,015,000 $92,279,600 $434,274,533 $2,693,314,067
Total City Sales Tax
Generated $19,196,174 $13,305,225 $1,384,194 $6,514,118 $0.0150 $40,399,711
Total State Sales Tax
Generated $79,984,058 $55,438,438 $5,767,475 $27,142,158 $0.0625 $168,332,129
Total DCTA Sales Tax
Generated $6,398,725 $4,435,075 $461,398 $2,171,373 $0.0050 $13,466,570
Total Sales Tax
Generated $105,578,957 $73,178,738 $7,613,067 $35,827,649 $0.0825 $222,198,411
Table 10: Total City, State, and Local Sales Tax Cost/benefit
Development
Denton
Crossing
Rayzor
Ranch
Unicorn
Lake
Golden
Triangle Mall Rates Totals
Base Year of Agreement 2003 2007 2004 2010
Incentive Term 2005-2019 2012-2032 2009-2023 2016-2035
Sales Tax Generated $105,578,957 $73,178,738 $7,613,067 $35,827,649 $0.0825 $222,198,411
Less Sales Tax Incentive $6,398,724 $5,586,253 $461,398 $176,174 $12,622,549
Total Net Revenue $99,180,233 $67,592,485 $7,151,669 $35,651,475 $209,575,862
Cost/benefit Percentage 1,550% 1,210% 1,550% 20,237% 1,660%
City of Denton Net Revenue Report Published October 2018
12
Chart 2: Sales Tax Composition
18%
76%
6%
Total City Sales Tax Total State Sales Tax Total DCTA Sales Tax
DENTON COUNTY PROPERTY TAX GENERATION
The 2017 report provides the ad valorem revenue that Denton County received from all of the incentives awarded
by the City of Denton. The cost/benefit is also provided for the four Tax Abatements and the two Chapter 380
Agreements in which the County jointly participated with the City to stimulate economic growth. Chapter 311 and
312 of the Texas Property Tax Code authorize taxing entities to provide tax abatements. Chapter 381 of the Local
Government Code authorizes counties to provide loans or grants to support economic development activities.
Property Tax Abatements
Table 11: Denton County Property Tax Abatements
Peterbilt
Motors Flowers Foods Aldi Foods Target Totals
Year Abatement Approved 2001 2004 2008 2010
Incentive Term 10 Years 5 Years 7 Years 5 Years
Abatement/Rebate 100% 30% 35% 60%
Cumulative Property Valuation $39,091,296 $329,264,609 $372,994,884 $560,892,207 $1,302,242,996
County Cumulative Property Tax
Generated $97,965 $856,180 $1,001,183 $1,472,039 $3,427,367
Less County Property Tax
Abatement $56,774 $110,244 $316,661 $439,768 $923,447
County Net Property Tax Revenue
$41,191 $745,936 $684,522 $1,032,271 $2,503,920
Cost/benefit Percentage
73% 677% 216% 235% 271%
New Jobs Created 35 480 150 160 825
City of Denton Net Revenue Report Published October 2018
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Chapter 380/381 Agreements
Table 12: Denton County Property Tax Chapter 381 Rebates
Business
Sally Beauty
Company
Granite/Schlumberger
Properties Totals
Incentive Term 5 Years 5 Years
Abatement/Rebate 40% 25%
Cumulative Property Valuation $295,714,200 $628,358,362 $924,072,562
Cumulative Property Tax
Generated $764,167 $1,540,790 $2,304,957
Less Property Tax Incentive $125,516 $14,653 $140,169
Net New Property Tax Revenue $638,651 $1,526,137 $2,164,788
Return on Investment
Percentage 509% 10,415% 1,544%
Jobs Created/Retained 450 147 597
Property Tax Summary
Table 13: Denton County Return from Property Tax Abatements and Chapter 380/381 Rebates
Joint Participation City Participation Property Totals
Cumulative Property
Valuation $2,226,315,558 $756,302,391 $2,982,617,949
County Cumulative
Property Tax Generated $5,732,324 $1,874,949 $7,607,273
Less County Property
Tax Abatement $1,063,616 $0 $1,063,616
County Net Property Tax
Revenue $4,668,708 $1,874,949 $6,543,657
Cost/benefit Percentage 439% 0 615%
New Jobs Created 1,422 2,558 3,980
City of Denton Net Revenue Report Published October 2018
14
Graph 4: City/County Property Tax Agreements
Table 14: Denton County Return Summary
Total of all Property Incentives Property Totals
Cumulative Property Valuation $2,982,617,949
Cumulative Property Tax Generated $7,607,273
Less Incentives $1,063,616
Net Property Tax Revenue $6,543,657
Cost/benefit Percentage 615%
New Jobs Created 3,980
Denton County has participated in a total of six Denton incentives to promote development in the local
community. The County has invested a total of $1.1 million in tax related incentives, and in return, has benefited
from a net increase in property tax revenues in the amount of $6.5 million since the inception of the incentive
program in 1999. The cost/benefit for all of the incentives awarded (joint and City only) is 615%. The cost/benefit
from all of the tax abatements and Chapter 380/381 property tax incentives was 450% and 1,703%, respectively.
DENTON INDEPENDENT SCHOOL DISTRICT PROPERTY TAX GENERATION
The Return on Investment Report was expanded in 2015 to include the ad valorem revenue that Denton
Independent School District (DISD) has received from all the incentives awarded by the City of Denton. The
cost/benefit is also provided for the two tax abatements in which DISD jointly participated with the City to
stimulate economic growth. (Note: Texas school districts were at one time able to offer tax abatements similar to
those of cities and counties, but that authority was repealed by the Texas Legislature). It is also important to note
that the report uses the entire DISD tax rate, which includes the maintenance and operations and interest and
sinking portions of the tax rate.
City of Denton Net Revenue Report Published October 2018
15
Property Tax Abatements
Table 15: DISD Property Tax Abatements
United Copper Peterbilt Motors Totals
Year Abatement Approved 1998 2001
Incentive Term 5 years 10 Years
Abatement/Rebate 15% 100%
Cumulative Property Valuation $422,085,765 $39,091,296 $461,177,061
DISD Cumulative Property Tax Generated $7,320,320 $644,587 $7,964,907
Less DISD Property Tax Abatement $250,680 $371,572 $622,252
DISD Net Property Tax Revenue $7,069,640 $273,015 $7,342,655
DISD Cost/benefit Percentage 2,820% 73% 1,180%
New Jobs Created 265 35 300
Graph 5: DISD Property Tax Abatements
Table 16: DISD Return from City and DISD Agreements
Joint Participation City Only Participation Property Totals
Cumulative Property Valuation $461,177,061 $2,911,099,170 $3,372,276,231
DISD Cumulative Property Tax Generated $7,964,907 $43,151,391 $51,116,298
Less DISD Property Tax Abatement $622,252 $0 $622,252
DISD Net Property Tax Revenue $7,342,655 $43,151,391 $50,494,046
DISD Return on Investment Percentage 1180% N/A 8115%
New Jobs Created 300 3,680 3,980
City of Denton Net Revenue Report Published October 2018
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Chapter 380 Agreements
DISD did not participate with the City of Denton’s Chapter 380 Property Tax Agreements.
Property Tax Summary
Table 17: DISD Return Summary
Total of all Property Incentives Property Totals
Cumulative Property Valuation $3,372,276,231
Cumulative Property Tax Generated $51,116,298
Less Incentives $622,252
Net Property Tax Revenue $50,494,046
Return on Investment Percentage 8,115%
New Jobs Created 3,980
Denton Independent School District has participated in two Denton tax abatement incentives to stimulate
economic growth in the local community. DISD has invested a total of $622,252 in tax related incentives, and in
return, has benefited from a net increase in property tax revenues in the amount of $50.5 million since the
inception of the incentive program in 1999. The return on investment from all of the tax abatements alone was
5,601%. The cost/benefit from all of the incentives awarded is 8,115%.
School finance involves a complex funding formula from a number of different federal, state and local funding
sources. As aforementioned, the report uses the entire DISD tax rate, which includes the Maintenance and
Operations (M&O) and Interest and Sinking (I&S) tax rates. The M&O portion of the tax rate is used for salaries,
utilities, supplies etc. The I&S portion of the tax rate is used to fund payments on debt service for facilities and is
the only portion of the DISD tax rate that is not affected by funding from the State of Texas.
The two Denton tax abatement incentives represented in Table 15, that the ISD has participated in, include a
complete 10-year history. DISD invested a total of $622,252 in tax related incentives, and in return, has benefited
from a net increase in property tax revenues in the amount of $7.3 million from the two companies that received
abatements. The return on investment from these tax abatements was 1,180%.
City of Denton Net Revenue Report Published October 2018
17
APPENDIX A
Appendix A: Incentive Projects
Tax Abatements
United Copper received the City of Denton’s first tax abatement. Three thresholds were set for the company to
meet in order to receive a 25% abatement over a six-year term. The company did not reach the employment
threshold in the Agreement and therefore did not receive the full 25% abatement. The percentage was reduced by
the ratio that the threshold was missed. The figures represent ten years of economic impact. Although the tax
abatement had a six-year term, standard economic development practice for impact analysis is ten years.
Peterbilt Motors agreement was an incentive for the expansion of the headquarters office and consolidation of
regional sales and financing offices in the Metroplex. The agreement provided a 100% abatement on the increase
in valuation over the 2001 valuation on the building located at 1700 Woodbrook. The base year valuation of the
building in the amount of $1,933,540 was deducted from the calculations.
Peterbilt received a 70% tax abatement for a term of eight years for a 17,500-square-foot expansion of their
current manufacturing facility to improve material flow from trucks into the expanded metering center in 2015
(Phase I). Their growth in 2014 resulted in a 20% increase in employment and a 32% increase in production levels.
These increases have also been the driving force behind similar growth of other businesses in Denton that support
Peterbilt. This project was completed in 2016. The Company requested an amendment to its Agreement to include
the construction and equipping of a new stand-alone 102,000-square-foot building north of the existing plant in
2016 (Phase II). The terms of the amendment for the new building are 70% for seven years (remainder of term).
Peterbilt is Denton’s largest private employer, with approximately 2,100 employees. Peterbilt did not meet the
$18.5 million threshold, therefore; the abatement was not granted for tax year 2017.
Flowers Foods purchased the former Andrew Corporation plant. The incentive is based on the increase in valuation
over the existing valuation of the base year. Therefore, the 2004 building valuation of $1,920,009 was deducted
from the calculations. Flowers Foods abatement was terminated after 2010 when they did not meet the threshold
Name United Copper
Year Applied 1998
Terms 25% for 6 years
Threshold(s) $35 M, 250 jobs, $34K Average Wage
Name Peterbilt
Year Applied 2001
Terms 100% for 10 years
Threshold(s) $5M, increment of building only
Name Peterbilt
Year Applied 2016
Terms 70% for 8 years
Threshold(s) $18.5 M above base
Name Flowers Foods
Year Applied 2003
Terms 35% for 5 years
Threshold(s) PI: $5M, PII:$20M, PIII:$30M above base
City of Denton Net Revenue Report Published October 2018
18
requirement, but this report continued to track the valuation for a 10-year period. Flowers Foods is one of
Denton’s top 10 private employers, with approximately 480 employees.
Fastenal completed a 200,000-square-foot regional headquarters/distribution center near the Denton Enterprise
Airport in the fall of 2008. The tax abatement agreement requires a minimum threshold of $5,000,000 in valuation.
2013 was the final year of Fastenal’s five-year agreement that provided a 35% abatement on the valuation of the
building improvements and equipment. Fastenal employs 208.
Name Aldi
Year Applied 2007
Terms 100% for 5-7 years based on $2.5 infrastructure reimbursement
Threshold(s) $25M
Aldi’s 500,000-square-foot distribution center was completed in 2009. The project required that Aldi construct a
$2.5 million road that also services the Denton Enterprise Airport. Aldi received 100 percent tax abatement on all
new valuation, except land, until they were reimbursed for the construction of the road or for a term of seven
years. This is the only incentive that includes the abatement of inventory. Aldi employs 150 and services more than
25 Aldi grocery stores in the North Texas area. The first Denton Aldi grocery store opened in the summer of 2013.
Target Corporation’s 400,000-square-foot refrigerated/frozen food distribution center was constructed in 2012.
This $100 million project received a 65% tax abatement for five years from the City to help offset costs to improve
Airport and Corbin Roads. This facility services over 240 stores in nine states with frozen and perishable food
products. Target opened in March 2013 and employs 160 area residents.
Name Peerless
Year Applied 2011
Terms 40% for 5 years
Threshold(s) $5M, 85 jobs with an Average Wage of $50,000
Peerless Manufacturing selected Denton to expand and consolidate their Texas operations. The company designs,
engineers, and manufactures highly specialized filtration, separation equipment, industrial silencers, heat
exchangers, and air pollution reduction systems to energy industry customers involved in gas and oil production,
processing, and power generating. They constructed an 80,000 square foot manufacturing facility in 2013. The
company received a five-year, 40% tax abatement from the City for the new facility. The Agreement was
terminated when the property was sold and made the company ineligible for a tax abatement.
Name Fastenal
Year Applied 2004
Terms 35% for 5 years
Threshold(s) $5M
Name Target
Year Applied 2010
Terms 65% for 5 years
Threshold(s) $40 M
City of Denton Net Revenue Report Published October 2018
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Name Tetra Pak
Year Applied 2013
Terms 65% for 4 years
Threshold(s) $5M above base
Tetra Pak Materials manufactures, processes, packages and distributes liquid foods all over the globe. The aseptic
packaging process removes air and bacteria, which allows for a product shelf life of a minimum of six months. In
2000, the company added the Americas Global Information Management hub, a pilot research and development
center, and relocated the U.S. Technical Service Center to Denton. In 2013, the company received a four-year 65%
tax abatement for expanding their facility and relocating their corporate headquarters operations from Chicago to
Denton. The increase in real and business personal property valuation of the project 32,000-square-foot expansion
was $8.9 million, and Tetra Pak created a total of thirty-two new jobs with this expansion. The incentive initiated in
2015. Tetra Pak currently employs 375.
West Gate Business Park received a ten-year 60% tax abatement in 2016 on improvements only to include
Buildings 2 and 3 in the business park, which brings new Class A industrial/manufacturing space to Denton. West
Gate Business Park could receive 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%.
The abatement will initiate the year following the year in which Building 2 receives a CO. A permit was issued for
Building 2 in January 2018. It is anticipated that the abatement will be included in the 2019 or 2020 Net Revenue
Report.
CHAPTER 380 GRANTS
Chapter 380 Grants Based on Property Tax Performance
Sally Beauty Company received a grant equal to 40% of the property tax paid on new valuation created by the
construction and equipping of a new international headquarters facility at Colorado Boulevard for a ten-year
period. Valuation at the existing facility located at 3900 Morse was not eligible for consideration. The final tax year
of the agreement with Sally Beauty was 2014. Sally Beauty is one of Denton’s top 10 private employers, with
approximately 950 employees.
In 2016, Sally Beauty received a grant equal to 50% of the property tax paid on new valuation created by the
complete interior remodel of its Morse property for a three-year period. Sally Beauty will continue to own and
Name West Gate Business Park (WGBP)
Year Applied 2015, 2016 Tax Abatement
Terms 60% > for HQ and major employer, 10 yrs.
Threshold(s) $3M
Name Sally Beauty:
Headquarters
Year Applied 2003
Terms 40% for 10 years
Threshold(s) $20 M
Name Sally Beauty: Morse St.
Year Applied 2016
Terms 50% for 3 years
Threshold(s) $28.6 M, 250 jobs, Avg. Wage
%51,800
City of Denton Net Revenue Report Published October 2018
20
occupy both the Morse and Colorado properties in Denton. They are currently at capacity and will be transferring
employees from their acquisitions of other companies and plan to add an additional 80 employees in the next two
years. Sally Beauty should appear in the 2018 report.
Granite Properties received a seven-year, 50 percent incentive on buildings and equipment. However, after three
years of incentive payments, Granite Properties requested permission to sell a portion of their land and one
building to Grand Mesa. The City of Denton entered into an agreement with Grand Mesa for the renovation of a
152,000-square-foot building and 36 acres of land at the Granite Point Business Park. The renovation and
equipping of the building were performed for Schlumberger Technology Corporation. Grand Mesa assigned the
incentive to Schlumberger in 2012.
Name Schlumberger
Year Applied 2012
Terms 50% for 7 years
Threshold(s) $5 M, 80 jobs, $45K Average Wage
Schlumberger, a Fortune 500, French-owned oilfield service company, held a grand opening in 2011 for their
150,000-square-foot regional maintenance facility at the Granite Point Industrial Park. Renovation of the building
increased the value by roughly $10 million. A Chapter 380 grant previously awarded to Granite Properties/Grand
Mesa was transferred to the company as an incentive for the Denton location. Schlumberger employed 184
in 2016.
Jostens’ incentive was based on the increased property tax on the building and equipment resulting from the
expansion of an existing facility. Dollar amounts shown in this report reflect the deduction of Jostens’ base year
valuation of $11,569,410. Work on the Jostens project was completed in 2008, establishing 2009 as the first year of
the incentive. Although the company met the contractual threshold of constructing the expansion and purchasing
and/or moving more than $2 million in equipment to the facility, a significant amount of old equipment was
removed, creating an overall reduction in the valuation for 2009. The 2010 valuation rose, showing an increase
over the base year, but less than the 2009 decrease. Jostens is one of Denton’s top 10 private employers, with
approximately 450 employees.
Name Granite Properties
Year Applied 2010
Terms 50% for 7 years
Threshold(s) PI: 250K Square Feet, PII: 50K Square Feet
Name Jostens
Year Applied 2008
Terms 75% for 7 years
Threshold(s) $5 M over base
City of Denton Net Revenue Report Published October 2018
21
Name Safran/Labinal
Year Applied 2011
Terms 50% for 3 years
Threshold(s) $5 M over base
Labinal/Safran relocated and expanded their North American Wiring and Services Division headquarters and
relocated over 700 employees to Denton and has invested nearly $5.8 million in building, site, and other
improvements to the property located on Russell Newman Boulevard. They have also moved equipment and other
business personal property to Denton that is valued at $6 million. The grant agreement provided a grant equal to
50% on the increment from the increase from the base valuation for a period of three years. Labinal/Safran is one
of Denton’s top 10 private employers, with approximately 727 employees.
Name Mayday
Year Applied 2012
Terms 75% for 10 years
Threshold(s) $3 M over base
Mayday Manufacturing/Tailwind Technologies manufactures precision bushings, sleeves, pins, and other
machine parts used in the aerospace industry. Mayday Manufacturing was acquired by Ohio-based Tailwind
Technologies in June 2009. Mayday provides just-in-time delivery of aerospace parts and operates the plant 24
hours a day, seven days a week to accomplish this goal. High Tech Metal Refinishing is a subcontractor that
performs the anodizing, cadmium platings, chemical film, black oxide, hard foam, liquid penetrant inspection,
magnetic particle inspection, priming, painting, passivation and thermal processing of PH seals. The company is co-
located with Mayday providing for more efficient production and delivery capability. The agreement requires a
minimum investment of $3 million in building, site and other improvements. The agreement stipulates that no
valuation on the existing business personal property of Mayday Manufacturing and Hi-Tech Metal Refinishing will
be included in this incentive. The contract provides a grant equal to 75% on the increment above the base
valuation for a period of ten years. The company purchased an 80,000 square foot facility in 2012 and completed
the 15,000 square foot expansion of the facility at the close of 2013. Mayday employs approximately 245. In 2017,
Mayday received a Texas Enterprise Zone grant from the State of Texas for a 15,000 square-foot building
expansion for additional production capacity and consolidation of shipping and inspection departments, as well as
additional machinery and equipment spread over five years, primarily driven by production capacity associated
with the expanded building footprint.
US Aviation Group (USAG), which is headquartered at the Denton Enterprise Airport, trains pilots from the United
States and around the globe. Demand for USAG’s commercial flight training is booming, and the company is
expanding its existing flight simulation training facilities and has purchased additional simulation equipment and
aircraft. This expansion will create 16 new jobs. USAG was awarded a 70% tax rebate for three years on their new
capital investment of $10.7 million. Business Air assigned its airport lease to US Aviation in 2017, making USAG the
sole Fixed Based Operator (FBO) at the Denton Enterprise Airport. USAG has over 150 employees. The grantee did
not meet the required threshold for tax year 2017 and the Chapter 380 Agreement was terminated. No grant
payments were made prior to termination.
Name U.S. Aviation
Year Applied 2015
Terms 75% for 3 years
Threshold(s) $5 M over base
City of Denton Net Revenue Report Published October 2018
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In 2015, an incentive was granted to Westgate Business Park (WGBP). The industrial development received a
minimum of 60% with an additional 5% for a national headquarters and/or ten percent for support of major
employers not to exceed 75% of City ad valorem taxes attributable to improvements for a period of 10 years.
WGBP includes three multi-tenant buildings totalling 413,000 square feet of new industrial/manufacturing space in
Denton.
In 2016, the Chapter 380 Agreement was amended to include a 70 percent rebate on Building 1 improvements
(excluding land and business personal property) and to add a one-time grant payment in the amount of $50,000. A
separate Tax Abatement Agreement for Buildings 2 and 3 was also approved so that WGBP could be eligible to
apply for a tax abatement from Denton County. The terms of the abatement are: a 60 percent abatement of City ad
valorem taxes attributable to new capital investments resulting in an increase of assessed value of real property
improvements; the amount of the abatement may be increased by an additional 5 percent for a national
headquarters and/or 10 percent for a supplier in support of major employers in Denton. Quality Industries leased a
86,500 square foot building for their metal fabrication operations at the industrial park and received their
Certificate of Occupancy in 2017. They are also a supplier for a Denton major employer.
In 2015, a grant agreement was awarded to Business Air Manufacturing (BAM). The grant is equal to 70% of the
increase in property tax revenues on the improvements to the building and new business personal property up to a
maximum of $9,500,000 in increased valuation for a period of two years. The company may extend the length of
this grant by attracting additional investment in the form business aircraft based at its facilities at the Denton
Enterprise Airport by the specified date and investment level thresholds. In addition to a grant extension, Business
Air would receive five percent of the increase in taxable valuation attributable to these new business aircraft for
the duration of the grant extension. The company is expanding with plans to build a new 24,000-square-foot
hangar with an additional 4,000 square feet of office space. The hangar space should allow the addition of 10
corporate aircraft with values ranging from $1.5 to $10 million per aircraft. In addition to the hangar, Business Air
will be purchasing a corporate aircraft to be based at the airport for the exclusive use of providing air taxi service to
the area. The incentive should begin in 2017. Business Air assigned its airport lease to US Aviation in 2017. Business
Air was purchased by US Aviation Group in 2017 and was no longer operating or occupying property at 5007 and
4777 Airport Road, so the City terminated the grant. No payments were made to Business Air prior to termination.
Name West Gate Business Park (WGBP)
Year Applied 2015, 2016 Chapter 380 Agmt.
Terms 70% for 10 years
Threshold(s) $3M
Name Business Air Manufacturing (BAM)
Year Applied 2015
Terms 70% up to $9.5M plus 5% for extension 2-9 years
Threshold(s) PI: $15M, PII: $50M, PIII:$80M
City of Denton Net Revenue Report Published October 2018
23
Victor Technologies is a global manufacturer dedicated to developing innovative advanced cutting, gas control, and
specialty welding solutions. Founded in 1913, the original San Francisco manufacturing operations were relocated
to their new headquarters in Denton in the mid-1960s. Victor Technologies is expanding the existing facility.
Improvements to the existing operation will create approximately 30,000 square feet of Research and
Development space. A new 185,400-square-foot warehouse and remodelled parking lots completed the
renovations.
The current operation employs 414 full time employees. Victor has a distribution center in DFW that employs
about 100 people that will be transferred to the new facility in Denton. Over the next three years, Victor will create
an additional 100 new jobs. Victor Technologies received an incentive equal to 65% of the increase in the City’s ad
valorem taxes for seven years while maintaining a minimum of 85 percent of new jobs created with an average
wage of 28.81 per hour. It is anticipated that Victor’s incentive will start in 2017. Victor did not meet the required
threshold to receive the incentive and was terminated in 2017. No grant payments were made prior to
termination.
Chapter 380 Grants Based on Sales Tax Performance
Denton Crossing is a 52-acre retail development that is comprised of 500,000 square feet of retail and commercial
tenants. The incentive reimburses infrastructure costs for Spencer Road improvements. The development is home
to: Best Buy, Kroger, Old Navy, Famous Footwear, Ulta, and Total Wine & More, to name a few. The City of Denton
granted its first-ever sales tax incentive rebate of one-third of the sales tax generated by the project for a period of
15 years. A Home Goods was constructed in 2018.
Unicorn Lake is a master-planned 134-acre mixed-use center that incorporates the urban style development of
residential over retail along the lake. The City granted a rebate of one-third of the sales tax generated by the
project for 15 years. The incentive reimburses infrastructure costs in return for the creation of an urban-style
development, a roadway to provide needed access, and associated hardscape to create the desired pedestrian
connectivity. The Villas of Tuscan Hills, a 116 lot residential community that overlooks the lake, provides luxury
homes. BJ’s Brewhouse, Blue Ginger Japanese Bistro, Dogwood Estates (an independent living community), the
Brick House Gym, Cinemark, Hilton Homewood Suites, Washington Federal Savings and Loan, Towne Center Bank,
and several medical offices represent some of the businesses that have located in the development.
Name Victor Technologies
Year Applied 2015
Terms 65% for 7 years
Threshold(s) $6.5M above base, 85 jobs with Average Wage of $28.81/hr.
Name Denton Crossing
Year Applied 2005
Terms One-third of sales taxes from development for 15 years
Threshold(s) 450K Square feet of retail
Name Unicorn Lake
Year Applied 2004
Terms One-third of sales taxes from development for 15 years
Threshold(s) 35K Square Feet of retail
Denton
Crossing
City of Denton Net Revenue Report Published October 2018
24
The Rayzor Ranch agreement provides for a 50% share in the City’s sales tax revenue generated by the project for
a period of 25 years. Rayzor Ranch Marketplace completed over 582,000 square feet of retail and commercial
space. Sam’s and Wal-Mart anchor the Market Place with 137,381 and 189,929 square feet, respectively. Staff
began tracking property tax revenues in 2009 and sales tax revenues in 2010 when these large retail boxes opened.
Some of the new stores in the development include: Academy Sports and Outdoors, Taco Cabana, Kohl’s, DK Foot
and Casual, and Guitar Center. A Tuesday Morning and Marshalls are under construction at the development.
The Rayzor Ranch Town Center located on the south side of the development will initiate in 2018. Heritage Trail
Boulevard has been constructed to allow access to the next phases. Chili’s, Raising Cane’s, WinCo Foods, In-N-Out
Burger, Chipotle, and Firehouse Subs are now open. An 11-story, 318-room Embassy Suites hotel and 70,000
square-foot Convention Center are planned to open in October 2017. An additional 15% sales tax rebate on the
Rayzor Ranch Town Center and Marketplace have been added to offset the hotel and convention center until $5
million is reached.
The Rayzor Ranch Public Improvement District (PID) was created in May of 2014 and includes approximately 230
acres owned by Allegiance Hillview, L.P. and DB Denton II, LLC (“Owners”) located in the southeast quadrant of the
intersection of West University Drive (U.S. Highway 380) and Interstate Highway 35.
The property is being developed for commercial/retail and multi-family uses comparable in quality to the Rayzor
Ranch project north of West University Drive, and will be unique and exceed the standards in the Denton
Development Code. The required public improvements will be financed, in part, from the proceeds of District
bonds issued by the City and secured solely by assessments levied against the property on a per-acre basis that
takes into consideration permitted uses.
Assessments will be secured by a lien on the property that is senior to private financing but junior to the lien for ad
valorem taxes. No single-family uses will be assessed. No City property will be assessed, and the City will not
otherwise have any liability to pay assessments. All costs of the collection and administration of the district will be
paid by property owners as part of the annual instalments of assessments.
Golden Triangle Mall was purchased by the M.G. Herring Group and the Weitzman Group. The partnership has
made renovations to the mall, including: the addition of restaurants and stores; improving the building façade;
creating a food court; and improving the parking lot and landscaping. Both phases of the renovations are now
complete and include: the installation of energy efficient lighting, interior landscaping and updated finishes. The
Golden Triangle Mall’s J.C. Penney was one of the sites selected to include a Sephora and the Disney Store within
the department store. Two restaurant pad sites for Taco Cabana and Corner Bakery have also recently opened at
the mall. An international retailer, H and M, opened in August 2015. Francesca’s also opened in 2016. The incentive
is based on the increase in sales tax above the 2010 base sales tax generated for the development.
Name Rayzor Ranch
Year Applied 2007
Terms One-half of sales taxes from development for 25 years
Threshold(s) PI: 400K Sq. Ft., PII: 270K (90%) 4-1/18 300K Sq. Ft. of retail 7/1/18
Name Golden Triangle Mall
Year Applied 2011
Terms One-half of sales taxes above base from development for 15 years
Threshold(s) $9.5M GTM, 45-60M by GTM & tenants
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Buc-ee’s Travel Center is a commercial development that will include an approximately 53,000-square-foot retail
store, fuel sales, a car wash, and peripheral development along I-35E for future development. The main retail store
and the associated fuel sales will be open 24 hours a day, seven days a week. The incentive reimburses the
developer for public infrastructure improvements and other neighborhood/public amenities.
The proposed development has resulted in the Texas Department of Transportation (TxDOT) advancing several
mobility improvements to the intersections of Loop 288/Lillian Miller and I-35E, Mayhill Road and I-35E, and
Brinker Road and I-35E. In order to facilitate these improvements, TxDOT requires a local funding match of $2
million. The developer funded the $2 million, to be reimbursed as a part of the incentive agreement.
Additionally, the developer will incur approximately $5.2 million in public infrastructure costs, including water,
wastewater, storm sewer, right-of-way dedication, and constructing a new city street. The City has granted an
incentive of 50% sales tax rebate for 25 years, on the Buc-ee’s parcel as well as the outparcels. The first phase
consists of 50% for 5 years for infrastructure improvements. The second phase grants a 50% sales tax rebate for
the Buc-ee's travel center, retail and sit down restaurants; and 25% on remaining fast food and service. The project
is currently under construction and is anticipated to come online in 2019.
Chapter 380 Grants Based on Combined Tax Performance and
Development Tools
WinCo Foods acquired approximately 77 acres in the Westpark Tax Increment Reinvestment Zone Number Two
(TIRZ 2) area to develop a regional, multi-state distribution facility for consumer products. The 800,000+/- square
foot distribution facility located on the west side of Western Boulevard, just north of Airport Road. WinCo is a
regional retailer with multiple distribution facilities across the United States. This particular project includes
approximately $130 million in capital investment and will create 165 jobs with an annual payroll of around $7.2
million.
The agreement with WinCo accomplishes two objectives: (1) full reimbursement of the cost of Phase 1 TIRZ 2
improvements using a combination of funding mechanisms; and (2) an economic development incentive of 60% of
the City’s ad valorem tax revenue for a period of four years following full reimbursement of Phase 1 improvements.
The first term of the grant agreement ends when full reimbursement has occurred, and includes the following
forms of reimbursement: up to $1 million for water lines, utilizing the City’s Water Development Plan Line Fund; up
Name Buc-ee's Travel Center
Year Applied 2015
Terms One-half of sales from retail & sit down, 25% for fast food & service for 25 years
Threshold(s) $25M travel center
Name WinCo Foods
Year
Applied
2015
Terms Infra. $1M & $860K water & wastewater; construction sales & use taxes; 100% of
the tax increment until costs of public impr. reimbursed, City 1: 60% until project
costs paid; City 2: additional 4 years of ad valorem
Threshold(s) $50M, $850K sales tax for construction
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to $865,000 in reimbursement for the sewer lines, utilizing the City’s Wastewater Development Plan Line Fund;
100% of the Sales and Use Tax for construction materials, furniture, fixtures, and equipment for the construction of
the project; 100% of the tax increment collected in the TIRZ 2 fund associated directly with WinCo, until full
reimbursement occurs. This includes the City and County’s 40% contribution to the TIRZ 2 Fund annually. WinCo
will receive the City’s remaining 60% of ad valorem revenue until full reimbursement occurs. It is anticipated that
full reimbursement will occur in approximately four years and will be approximately $6.5 million. The first year
after full reimbursement, the second term of the grant agreement initiates and will include the following: a 60%
rebate of the City’s ad valorem revenue for a period of four years, for an estimated total incentive of $1.7 million.
The $1,865,000 grant for infrastructure improvements was completed. The local sales and use tax collected by
the City on construction materials, furniture, fixtures, and equipment purchases for the development of the
property was also completed. The TIRZ and ad valorem grants will begin in 2018.
The Railyard downtown project is located in the Tax Increment Reinvestment Zone Number One (TIRZ 1),
Downtown Implementation Plan (DTIP) and Transit Oriented Development (TOD) areas. Rail Yard Partners, LTD.,
renovated an existing 28,000-square-foot building as a part of a larger transit-oriented catalyst project. They
invested an initial $12 million in the co-working and mixed-use space. The City leases 9,216 square feet for a
collaborative working space. Hickory & Rail Ventures took over the management of the co-working space in 2018.
The Agreement with Rail Yard Partners, LTD., involves an annual grant of $76,000 for five years, for a total incentive
of $380,000. The Commercial Lease Agreement for the co-working space is a five year lease at $9.75 per square
foot for year one, with an approximate 3.7 % increase in the cost annually thereafter, in addition to operating
expenses including the City’s pro rata share of real estate taxes, insurance, common area maintenance, and
operating expenses.
O’Reilly Hotel Partners Denton convention center and hotel development in the Rayzor Ranch Town Center
includes a 300-room, full service Embassy Suites hotel, a 70,000-square-foot convention center, and a Houlihan’s
restaurant. The convention center meeting space can accommodate conventions of up to 650 participants and the
grand banquet room can host events with up to 1,750 people. It is a major anchor for the Rayzor Ranch Town
Center and capitalizes on the synergy from nearby shopping, entertainment, and dining.
The Chapter 380 Agreement includes a 100% rebate of the ad valorem tax, hotel occupancy tax, and sales tax
generated by the project. The term is 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; however, staff estimates that the actual incentive to be
Name Railyard
Year Applied 2015
Terms TIRZ No. 1 grant for $76,000 for 5 years, commercial lease at $9.75 /Sq. Ft year 1 &
3.7% increase after
Threshold(s) TIRZ grant requires commercial lease to remain in effect, improvements in accordance
with Agrmt.
Name O'Reilly
Year Applied 2015
Terms 100% of property, HOT & construction sales taxes generated by the project,
cap is $54M, construction sales taxes reduced to 50% after threshold, 25 years
Threshold(s) $80M investment and $20M increase above base, $850K sales tax for
construction
THE
RAILYARD
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between $30-$35 million. The incentive also includes 100% of the construction sales and use tax up to $850,000, at
which time the grant will be reduced to 50%. The sales tax, Hotel Occupancy Tax, ad valorem and sales and
use tax rebate for the construction and equipping of the facility will initiate in 2018.
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APPENDIX B
Appendix B: Methodology
In 2009, the City of Denton’ Department of Economic Development created the initial Return on Investment Report
to examine the fiscal impact made by the businesses that have received tax incentives from the City, evaluate the
efficiency of the public investment, and guide future policy decisions. State and local sales tax revenues created by
the sales tax incentives were added to the study in 2010. In 2013, the report was expanded to include the ad
valorem revenue for Denton County, which includes both the incentives in which the County has partnered with
the City, as well as the revenue from the incentives that the County did not invest in. The final taxing entity Denton
Independent School District (DISD), was added in 2015. The report was redesigned in 2016. This report represents
the sixth update of the report prepared eight years after the original report was created.
The incentives are tracked for ten years regardless of the term. Standard economic development practice for
impact analysis is ten years. For example, an incentive with a term for seven years is tracked for an additional three
years until the ten-year period is reached. An incentive is not deducted for the remaining three years following the
term. This is standard practice and also allows for more commensurable comparisons between incentives.
The ad valorem or property tax valuation is based on the values that are released by the Denton Central Appraisal
District (DCAD) for the previous tax year. The certified valuations, released in July, are compiled from the DCAD
website and sent out on a City of Denton Verification Form to the appraisal district. This form also includes a
request for the breakdown of the Business Personal Property (BPP) that is not available on the website and a
section that notifies the City if the property is being contested. The incentive calculations occur for the
uncontested properties following the receipt of the forms from DCAD. The City notifies DCAD if the threshold have
been met by companies for all of the tax abatements. The tax bills are distributed from DCAD in October. The
calculations for the contested properties are prepared upon receipt of the Verification Form from the appraisal
district, which occurs sometime after October until the early part of the following year.
Sales tax is collected by calendar year and is based on the allocation month that the sales tax report from the Texas
Comptroller of Public Accounts is received. Sales tax is generated two months prior to the receipt of the reports
from the state comptroller. Sales tax generated in December 2016 is reported to the City in February of 2017, for
example. Historical tax rates for Denton County and DISD, dating back to 1999, were gathered for this study from
DCAD, Denton County, and DISD. The terms for the incentives were provided by Denton County and DISD, as a
number of the agreement terms and investment percentages differ from the terms of the City.
Property tax is included from the base year of the economic development agreements or the first tax year that was
available from DCAD when the initial report was compiled. Sales tax revenue reflects the revenues received since
the initial tracking began or the grant payments were initiated. For example, the Unicorn Lake Agreement was
approved in 2004; however, the first grant payment was made in 2009 after the thresholds were met. Property
valuation for Unicorn Lake is cumulative since 2006 and sales tax is provided beginning in 2009. Sales tax
monitoring for Rayzor Ranch began in 2010 prior to the receipt of the first payment in July 2012 to assist the City
with preparing the 5-year forecast during the budgeting process. The incentive for Golden Triangle mall was
initiated in the summer of 2016, so only half of a year of rebates are included in the report. Tracking for the
development began in 2013.
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This study seeks to aid in the decision making process by providing the net revenue from the incentivized projects.
The calculations for the net revenue and cost/benefit are included below.
Net Revenue = Revenues (property only and or sales tax generated) - incentive
The report carries these calculations a step further to obtain the Cost/benefit of the incentive projects.
Cost/benefit Percentage = Net revenue/incentive X 100
It is important to note that the report only gathers the sales tax generated from the projects which received a sales
tax incentive. These include: Denton Crossing, Unicorn Lake, Rayzor Ranch and Golden Triangle Mall. Other
projects, such as Schlumberger, generates sales taxes that would not have been generated in Denton if the
business had not located in this community. This study takes a more conservative approach and does not include
the sales taxes for the ad valorem only incentives.
The rate of return provides the net revenue of the taxes generated relative to the cost of the incentive, as a ratio.
The ratio of return for the City in 2016, for example, is 3:1. Another way of putting this is that the City received 3
times the revenue of the incentive foregone. The formula is presented below.
Ratio of Return = Net Revenue (property only and or sales tax generated-incentive)/incentive
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2017 Update Prepared by:
Erica Sullivan, Economic Development Analyst
City of Denton
215 E. McKinney
Denton, Texas 76201
940-349-7776