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City Council |
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Agenda Request |
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Agenda Of: |
01/02/08 |
Agenda Request
No: |
V A |
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Initiated By: |
regina morales |
Responsible
Department: |
economic
development |
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Presented By: |
regina morales |
Department
Head: |
regina morales, director of
economic development |
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Additional
Department. Head (s): |
n/a |
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Subject /
Proceeding: |
consideration of
tax abatement agreement between the city of sugar land and he sugar land
buildings, lp. |
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Exhibits: |
standard tax
abatement agreement between the city of sugar land and he sugar land
buildings, lp. |
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Clearances |
Approval |
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Legal: |
eugenia
cano, assistant city attorney
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Executive
Director: |
joe esch, bus. & intergov. relations |
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Purchasing: |
n/a |
Asst. City
Manager: |
n/a/ |
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Budget: |
n/a |
City Manager: |
Allen Bogard |
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Budget |
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Expenditure
Required: $ |
n/a |
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Amount
Budgeted/Reallocation: $ |
n/a |
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Additional
Appropriation: $ |
n/a |
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Recommended
Action |
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Approve Tax Abatement Agreement between City of Sugar Land and HE Sugar Land Buildings, LP. |
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Executive
Summary |
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The former Unocal building or officially known as One Sugar Creek Place has been purchased by the Ellman Companies. The Sugar Land acquisition is the Ellman Companies’ first investment in the Texas market. Ellman Companies has development projects in Phoenix, AZ, Washington DC, Toronto, Canada and Denver, Colorado. The building is over 25 years old and because of its age and other factors, its value has declined over the last few years. The appraised value has declined from 2003 to 2007 by -40.85% or $27,901,000 of value losses. The City will receive $96,002 in 2007 for real property taxes on the existing land and building which is currently assessed at $32 million. This equates to a decrease of $83,703 in tax revenues to the City based on 2007 tax rates. To be competitive in the marketplace it is in need of significant capital investment to upgrade the property if it is to be marketed as a Class A office product. The Ellman Companies has purchased the property with the desire to make the needed upgrades. At present their proposed upgrades include HVAC improvements, renovated elevators, reconfigured interior entrance, and expansion of parking garage to increase parking. Currently, the building is leased to Chevron through March 2010 and Fluor has subleased space from Chevron. Tenant improvements cannot occur until after Chevron’s lease expires. They are requesting that the abatement requirements be phased with this schedule. A revised phased and scaled abatement schedule was reviewed with the Business Incentive Committee to accommodate the developer’s renovation schedule. Staff is recommending ten year tax abatement up to 700% upon completion of all phases for new improvements only. The Company will receive 600 % abatement for $5million in improvements completed by January 1, 2010 and an additional 100% abatement if they complete $8 million in improvements by January 2012. The agreement awards the abatements at the end of the 10-year period with the first 100% being provided in 2012 if the company completes $8 million and beginning in 2013 if they complete $5million by the stated deadlines. This insures that the incentive is passed through to the new tenants once Chevron vacates the property in 2010. The existing property value will not receive tax abatement and will continue to be taxed at its 2007 certified assessed value. This recommendation is consistent with the City’s tax abatement guidelines and tax abatement ranking system. The Business Incentive Committee has reviewed and concurs with staff recommendation of scaled and phased tax abatement for The Ellman Companies at One Sugar Creek Place. |
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Exhibits |
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STANDARD TAX ABATEMENT AGREEMENT BETWEEN THE
CITY OF SUGAR LAND, TEXAS, AND HE SUGAR LAND BUILDINGS, LP
(Revised form 3/30/05)
This tax abatement agreement is made between the CITY OF SUGAR LAND, TEXAS, a municipal corporation of the State of Texas, and HE SUGAR LAND BUILDINGS, LP, as Owner.
1. Authorization and Findings. This Agreement complies with and is authorized by the Property Redevelopment and Tax Abatement Act, codified as Chapter 312 of the Texas Tax Code, as amended. The City’s city council finds that:
(a) The City has adopted Guidelines and Criteria for Granting Tax Abatement in Reinvestment Zones as required by law and the applicant's request for tax abatement conforms to those Guidelines and Criteria;
(b) The City has created Reinvestment Zone No. 2007-02, in which the property subject to tax abatement will be located;
(c) The property for which abatement is granted in this Agreement is not owned or leased by a member of the City’s city council or the planning and zoning commission; and
(d) The City’s city council approved this Agreement by an affirmative vote of a majority of its members at a regularly scheduled council meeting.
2. Definitions. In this Agreement:
City means the City of Sugar Land, Texas.
City manager means the City’s city manager or any person designated or authorized to act for the city manager.
District means the Fort Bend County Central Appraisal District.
Existing
Building means the building currently located on the Land that consists of
approximately 528,000 square feet used for offices and ancillary uses.
Improvements means the improvements to the Existing Building and any related real property improvements constructed to serve the Existing Building, including sidewalks, parking garages, outdoor lighting, and landscaping, constructed after the effective date of this Agreement.
Land means the real property as described in Ordinance No. 1672, which created Reinvestment Zone No. 2007-02.
Owner means HE Sugar Land Buildings, LP, the person or entity that owns the real property on the date taxes are abated under this Agreement or any other person or entity to which this Agreement is assigned in accordance with this Agreement.
Value means the appraised value shown on the records of the District.
3. Tax Abatement.
(a) Abatement Years and Amount. In consideration of the Owner constructing the Improvements and complying with all other conditions of this Agreement, the City grants the following property tax abatement on the Value of the Improvements, if, on January 1, 2010, the Value of the Improvements is at least $4,000,000 or the cost of the Improvements is at least $5,000,000:
Tax
Year Percentage
Abatement
2013 100%
2014 100%
2015 100%
2016 100%
2017 100%
2018 100%
(b) Additional Abatement. If tax abatement is granted under paragraph 3(a) and the Owner complies with all other conditions of this Agreement, the City grants an additional tax abatement of 100% for Tax Year 2012 if, on January 1, 2012, the Value of the Improvements is at least $8,000,001 or the cost of the Improvements is at least $8,000,001.
(c) Abatement Exclusions. The tax abatement granted does not apply to the Value of the Land, increases in the Value of the Land, the January 1, 2008 Certified District Value of the Existing Building (with its improvements) or to inventory or supplies.
(d) District Values. The District's determination of Value of the property subject to this Agreement applies. If the Owner protests the District's Value placed on the property, the Value placed on the property after the protest is resolved under State law applies.
(e) Freeport Exemption. Article 8, Section 1-j of the Texas Constitution allows a city to exempt from taxation inventory (freeport goods), which is transported beyond the State within a specified time. As of the date of this Agreement, the City does not exempt freeport goods from taxation. Should the City exempt freeport goods from taxation during the term of this Agreement, the amount of taxes abated under this Agreement will automatically decrease in an amount equal to the taxes that would have been paid on freeport goods, if any, without the exemption on freeport goods.
4. Responsibilities of Owner. In consideration of receiving the tax abatement granted herein, the Owner agrees that:
(a) Improvements: The Improvements will be constructed in
compliance with the City’s ordinances.
(b) Separated Contracts. The Owner will provide in any contract for the construction of the Improvements that the contract be a separated contract (under section 151.056 (b) of the Texas Tax Code and Comptroller’s Rule 3 TAC, section 291, or as the referenced law or regulation is amended, recodified, or redesignated), so that there is imposed and the contractor will be required to collect from the Owner the City’s municipal sales tax on the sales price of the materials incorporated into the Improvements. The Owner will provide, if requested by the City, documentation that verifies to the satisfaction of the City that the Owner has complied with the provisions of this paragraph.
(c) District Filing. THE OWNER IS
RESPONSIBLE FOR NOTIFYING THE DISTRICT OF THE ABATEMENT, INCLUDING FILING WITH
THE DISTRICT ANY APPLICATION OR OTHER FORMS NECESSARY TO QUALIFY FOR OR RECEIVE
THE ABATEMENT GRANTED.
(d) Owner Certification and Reports. On or before May 1 of each year of this Agreement, the Owner will certify in writing to the City's city council that the Owner is in compliance with this Agreement and that the Owner will provide, upon the City’s request, any information reasonably necessary for the City to determine if the Owner has complied with the Agreement
(e) City Access. The Owner will allow the City's employees access to the Improvements during regular business hours with a 24-hour notice.
5. Term. This Agreement is effective on the latest date of the dates executed by the City and the Owner.
6. Termination.
(a) This Agreement terminates on the completion of the abatement period, unless earlier terminated as provided herein.
(b) The city manager may terminate this Agreement at any time during its term as provided in subsection 6(c) below if the Owner:
(1) Fails to comply with any term of this Agreement;
(2) Allows ad valorem taxes on the Land or any property located thereon to become delinquent, or
(3) Fails to timely pay any undisputed debt owed to the City.
(c) The City will notify the Owner of the default in writing specifying the default. If the Owner fails to cure the default within 30 days from the date of the notice to cure, the city manager may terminate this Agreement by written notice to the Owner specifying the date of termination. If the city manager terminates this Agreement as provided in this Agreement, the Owner is liable for and will pay the City within 30 days following the date of termination of this Agreement:
(1) The amount of all property taxes abated under this Agreement;
(2) Interest on the abated amount at the rate provided for in the Tax Code for delinquent taxes; and
(3) Penalties on the amount abated in the year of default, at the rate provided for in the Tax Code for delinquent taxes; and
(4) Any money owed the City for the Owner’s failure to make payments in lieu of taxes on inventory, plus interest thereon at the same rate imposed on delinquent taxes.
(d) The Owner's obligation upon termination to pay to the City monies owed for taxes abated, interest and penalties thereon, and money in lieu of taxes on inventory, survives termination and the City has a lien against the Owner's Land and Improvements for the monies owed beginning on the date of termination and continuing until paid.
7. Notice. All notices will be in writing and may be delivered by mail, in person, or by nationally recognized overnight delivery service. Mailed notice is deemed received three business days after the date of deposit in the United States mail, postage prepaid, registered or certified mail with return receipt requested. Unless otherwise provided in this Agreement, all notices will be delivered to the following addresses:
To the Owner: Robert Coulter, Executive VP
2850 E. Camelback Road, Suite 110
Phoenix, Arizona 85018
With a copy to: Dean A. Hrbacek, Esq.
130 Industrial Blvd., Suite 110
Sugar Land, Texas 77478
With a copy to: Ty Fields, General Counsel
2850 E. Camelback Road, Suite 110
Phoenix, Arizona 85018
To the City: City Manager
City of Sugar Land
P. O. Box 110
Sugar Land, Texas 77487-0110
Any party may designate a different address by giving the other party 10 days written notice in the manner prescribed above.
8. Force Majeure. If the Owner gives written notice to the City that Owner cannot perform one or more of the Owner’s obligations because of force majeure within ten days of the force majeure, the city manager may, by written notice to the Owner, suspend one or more of the Owner’s obligations in whole or in part for the time and to the extent necessary to allow the Owner to overcome the force majeure and resume performance thereof. The city manager may also adjust the time period to which tax abatement benefits apply to this Agreement if necessary to provide the Owner the tax abatement benefits the Owner would have received in the absence of the force majeure, so long as the adjusted time period of exemption does not exceed ten years. For purposes of this provision, "force majeure" means lightning, earthquakes, hurricanes, storms, floods, or other natural occurrence; strikes, lockouts, riots, wars, or other civil disturbances; or explosions, fires, or similar accidents not reasonably within the control of the Owner or Owner’s agents or contractors.
9. Entire Agreement. This Agreement contains the entire agreement between the parties and supersedes all other negotiations and agreements, whether written or oral.
10. Assignment. If the Owner assigns this Agreement, Owner will give the City written notice of the assignment within 30 days of the date of the assignment.
CITY OF SUGAR LAND HE SUGAR LAND BUILDINGS, LP,
a Texaslimited partnership
By: HE Sugar Land Holdings GP, LLC, a Texas
______________________ limited liability company
Allen Bogard, City Manager Its: General Partner
ATTEST: By: HE Sugar Land Project, LLC, a Delaware limited liability company
Its: Member Manager
______________________
Glenda Gundermann, By: Ellman Management Group, Inc., an
City Secretary Arizona corporation
Its: Manager
__________________________
By Robert Coulter, Executive Vice President
Date: _____________________
Reviewed for Legal Compliance:
