§ 44-120. Preamble—General policy and program requirements.
(a)
The City of Houston Tax Abatement Program is created to encourage new development and the growth of existing development and to stimulate new job growth and investment in the city. The tax abatement program and other forms of economic development incentives are available to many types of businesses to address the city's economic development needs and objectives stated in this general policy and pursuant to the provisions of this article.
The city's principal economic development tools should be maintenance of the city's natural competitive advantages and provision of detailed information concerning the city's advantages compared to those of other cities for potential relocation of all or substantial portions of various businesses. For a wide variety of businesses and professional firms, Houston rarely should be at a cost disadvantage relative to large urban centers, particularly those outside of Texas.
The city and its metropolitan area offer significant competitive advantages and cost savings to businesses seeking to locate or expand in our region. These advantages include:
(1)
A large, growing workforce with abundant skills appropriate for all levels of an organization;
(2)
An affordable cost of living, which makes Houston attractive to workers and makes our personnel costs more competitive than most major urban areas;
(3)
An abundance of buildable sites and relatively low cost of occupancy compared to other major urban centers in the United States, especially those outside of Texas; and
(4)
A superb transportation infrastructure, including the Port of Houston, the Houston Airport System, and central locations for distribution by truck, rail, and water.
The city, however, will from time to time consider appropriate economic incentives for the relocation, expansion or retention of businesses, whether intellectual capital or fixed asset-based, to the extent these incentives would be the critical element that would govern a decision to relocate or expand a business here. Incentives might include tax abatements, as described in these guidelines and criteria, or another appropriate form of incentive, such as expedited permitting for a development project or investment in infrastructure that would be useful in developing a particular site, which could include investments enhancing transportation, water and sewer services or other public infrastructure. Such improvements benefit not only the affected business but also the larger community.
Incentives other than tax abatement might be funded through accelerated capital improvements plan action or special district financing such as tax increment financing, special assessment financing, or in-city municipal utility districts. The city could also consider beneficial land exchanges, right-of-way abandonment, or below-market financing or leases on public property that could provide mutual benefit to the city and the proposed development. Any offer of such an incentive would be reviewed case-by-case to determine eligibility and compliance with all applicable laws.
To assist the city in obtaining an equitable portion of state economic development funds, the city will consider applications for tax abatements that trigger some level of state economic development assistance. The Houston region contributes about one-quarter of the funds to the State of Texas' general revenues. In turn, a proportionate share of the state's economic development budget is attributable to the Houston region. If allocated over time equitably among the regions of the state in proportion to the employment and financial contributions to state revenues, these funds should provide funding for economic incentives for corporate relocations and expansions in our region, when combined with the other substantial advantages for economic growth in our region.
It is the goal of the city that local taxing jurisdictions in our region should not use ad valorem tax abatement to compete against each other for business relocations or expansions. It should be recognized that the attraction of new businesses to any part of our region strengthens our overall region and the people in it.
Officials at the city, at the most senior level, will meet at any time with the person who is ultimately responsible for making a decision to relocate or to expand to address specific economic or other issues that would be decisive in corporate location. The city would negotiate in a business-like manner on a case-by-case basis. There is no "standard" tax abatement, and no entity or individual other than a designated city official is authorized to negotiate with respect to any tax abatement proposal or incentive that might be available on a case-by-case basis.
Typically, city officials would want to see pro forma financial information to assist in making judgments concerning the role of property tax costs in the economics of the relocation. The city understands that for many businesses some incremental amount of ad valorem taxes would not represent a substantial percentage of the cost of goods sold. Other incentives, as referenced above, may be discussed with city officials.
(b)
Tax abatements may be used in special situations, subject to the guidelines and criteria described herein. Examples of special situations include:
(1)
The location of a high-employment facility in a particularly distressed or neglected part of the city, where increased job opportunities could contribute significantly to a reduction in crime or cascading redevelopment of other sites, which would more than offset the loss of the tax benefit;
(2)
A substantial equity investment in real estate development serving an important public purpose, such as providing affordable housing that could lead to redevelopment of a blighted area or attracting additional development;
(3)
A case in which a company could not and would not remain, expand or locate in Houston, because of another viable option that took into account all significant costs. Any representation by the company would need to be supported by credible economic analysis in a direct communication between the mayor or other appropriate senior official and the private sector decision maker; or
(4)
The property, if abated, will be reasonably likely to contribute to the retention or expansion of primary employment or to attract major investment that would be a benefit to the property and the larger community and that would contribute to the economic development of the city.
(c)
Subject to this general policy, when tax abatements are available, they would be offered as described in the guidelines and criteria set forth in this article, with the following general limits and guidelines:
(1)
For typical commercial and industrial tax abatements, the city would negotiate an abatement scale and duration based primarily on investment level, rather than jobs. Each project would be evaluated and the incentive tailored to an analysis based on factors such as industry competitive disadvantages, quantifiable economic impacts, and furthering other public purposes in unique ways. An applicant would be required to submit an economic impact analysis from reliable modeling tools. Depending on an analysis of such factors and data, the city would evaluate the appropriate level and duration of abatement;
(2)
Reduced investment requirements and flexible abatement scales could be available for tax abatements within state enterprise zones, or eligible new markets tax credits census tracts, bank finance districts, and other non-city incentives that require local matching. This aspect of the program would emphasize encouraging access to other local, state and federal incentives to leverage the city abatement incentive;
(3)
The city will require applicants to commit to providing enhanced community benefits as a condition to tax abatement incentive benefit. The enhanced community benefit may include employment and development of programs that strengthen local communities, such as the city's Minority and Women-Owned and Disadvantaged Business Enterprise Programs, local purchasing, construction and redevelopment within underserved communities or other identified areas that would see a greater benefit or return on investment in the area, the creation of permanent employment and full-time job opportunities within those defined areas, jobs that include employee health care benefits, and other endeavors that can be shown to bring a wider reaching, long-term economic benefit to the communities where the activity or enterprise will be located, and to the city overall. Table 44-1 below includes the types of activities and benefits the city will give the most weight to, though others not on the list may be considered by the Mayor's Office of Economic Development. Applications for tax abatement must include one or more of the items listed in Table 44-1.
Table 44-1
1 Local, Community Job Recruitment 2 Non-Business Benefitting Public Improvements 3 Crime Prevention Through Environmental Design (CPTED) 4 Affordable Housing 5 Workforce Housing 6 Job Training for Entry or Mid-Skill Level Jobs 7 Participation in Job Reentry Programs (other than the City of Houston's Community Re-Entry Network Program) 8 Paid Internships for Low Income Students (4)
In addition, the city will require applicants to provide evidence they will:
a.
Advertise new job postings with the City of Houston's Community Re-Entry Network Program;
b.
Provide construction workers with a minimum of ten-hours of OSHA-approved safety training;
c.
Require general contractors to employ a safety representative with a minimum of 30 hours of OSHA-approved supervisor safety training on each construction site;
d.
Make good faith efforts to ensure that a minimum of 25 percent of the total labor force for construction and non-construction job requirements is obtained by hiring individuals who live in a census tract with an average income lower than that of the city average, based on the most recent five-year American Community Survey estimate;
e.
Make good faith efforts to ensure that a minimum of 25 percent of the total labor force for construction and non-construction job requirements is obtained by hiring individuals who live in the same census tract as the project, or who live in an adjacent census tract, for a tax abatement agreement described in subsection (c)(8) of this section where the project is located in, or adjacent to, a census tract described in subsection (c)(4)d above; and
f.
Make good faith efforts to hire and employ a minimum of 30 percent of its construction workforce from local Department of Labor-certified apprenticeship programs.
(5)
All contracts and subcontracts for public infrastructure, or for other public improvements that are to be conveyed to the city upon completion, shall contain requirements for compliance with governing statutes and local requirements on labor classification of wage scales for each craft or type of laborer, worker, or mechanic.
(6)
Contractors and subcontractors will be subject to audits and inspections of payroll records to ensure compliance with the requirements of this chapter.
(7)
Qualifying residential projects or projects with a qualifying residential component will be required to develop and commit 20% or more of the project residential units for residents with income levels between 30% and 120% of area median income for the duration of the tax abatement agreement.
(8)
An enhanced abatement for no more than ten years and up to 90% may be considered for:
a.
Targeted industry clusters specifically targeted for future growth, for example, aviation, biotechnology, information technology, aerospace, energy, or other industries that the city from time to time determines to have a particular beneficial impact on the regional economy;
b.
New or expanding businesses (for example, retail, industrial, commercial) in neighborhood areas targeted for revitalization (for example, Houston Hope areas or other distressed or neglected parts of the city); and
c.
Transit-oriented development within 1,500 feet of transportation corridors, such as existing and planned Metro rail stops, multi-modal centers, and bus transfer stations.
(Ord. No. 2018-391 , § 2(Exh. A), 5-16-2018)