SUBJECT: An Ordinance amending Article IV of Chapter 44 of the Code of Ordinances, Houston, Texas, relating to tax abatement; reauthorizing guidelines and criteria governing tax abatement agreements; containing findings and other provisions relating to the foregoing subject; providing for an effective date; providing for severability; and containing a savings clause
RECOMMENDATION: (Summary)
Approve an Ordinance amending Article IV of Chapter 44 of the Code of Ordinances, Houston, Texas, relating to tax abatement; reauthorizing guidelines and criteria governing tax abatement agreements; containing findings and other provisions relating to the foregoing subject; providing for an effective date; providing for severability; and containing a savings clause.
SPECIFIC EXPLANATION:
Before entering into tax abatement agreements, Texas Tax Code Section 312.002(a) requires cities to adopt tax abatement guidelines and criteria and elect to become eligible to participate in tax abatement. Each approved abatement agreement must meet those guidelines. City Council last adopted tax abatement guidelines and criteria on May 4, 2022, which became effective on May 19, 2022, by Ordinance No. 2022-344, as codified in Article IV of Chapter 44 of the Code of Ordinances, Houston, Texas (“Tax Abatement Ordinance”), and those guidelines and criteria expired on May 19, 2024.
Proposed amendments to the tax abatement guidelines and criteria include changes to Sections 44-121, 44-126, 44-132, and 44-138 of the Code of Ordinances, Houston, Texas. First, the Administration proposes amending the definition of “total green stormwater infrastructure cost” in Section 44-121 to increase the value of tax abatement for green stormwater infrastructure. The definition of “total green stormwater infrastructure cost” will be amended to include the financing costs associated with the capital needed to construct the green stormwater infrastructure improvements. The inclusion of financing costs better aligns with a developer’s cost of being made whole for one-time expenditures over a multi-year term. Additionally, an increase of eligible abated maintenance costs from two years of maintenance involving urban forestry and native ecosystem restoration through the planting of certain trees or shrubs to five years of maintenance for such improvements under this definition better aligns with the development costs associated with green stormwater infrastructure in retail developments.
Second, the Administration proposes amending Section 44-126 to align the type of newspaper publishing requirements with Chapter 312 of the Texas Tax Code and to include requirements for tax abatement public notices to be posted on the City’s website. Third, the Administration proposes amending Section 44-132 to reduce the minimum expected total project cost from $3 Million to $735,000 and reduce the minimum required total green stormwater infrastructure cost from $100,000 to $35,000 for a project to be eligible for the green stormwater infrastructure tax abatement incentive. The reduced investment thresholds allow for smaller projects to qualify for the incentive while still ensuring that the development will likely generate enough taxable value for an effective abatement on the project’s total green stormwater infrastructure costs.
Fourth, the Administration proposes amending the sunset provision under Section 44-138 to update the expiration date of the guidelines and criteria, to include language consistent with Tax Code Chapter 312 relating to public hearing requirements for future tax abatement ordinance readoptions, amendments, repeals, and reauthorizations, and to align notice thereof with the proposed amendments for Section 44-126.
These proposed amendments aim to increase the transparency of the City’s tax abatement program as a whole and increase the utility of the green stormwater infrastructure tax abatement incentive.
A public hearing on these proposed amendments is scheduled to be held on August 21, 2024.
The Mayor’s Office of Economic Development recommends amending the tax abatement guidelines and criteria, adopting the amended tax abatement guidelines and criteria effective for 2 years, and electing to continue the City’s eligibility to participate in tax abatement.
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Gwendolyn Tillotson-Bell
Chief Economic Development Officer