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os POLICY PROPOSAL
DATE FILE NUMBER SUBJECT Resolution Supporting Passage of PAGE 1 OF 2
10/28/8 CP-90 Proposition No. 1 on November 3, 1981
PROPOSAL PROPOSED BY: YW MANAGER' ' REV I W
Councilman Bob Bolen
Voter approval of Proposition No. 1 on November 3, 1981, would amend the Texas Consti-
tuion ". . . to authorize cities, towns, and other taxing units to encourage the
improvement, development, or redevelopment of certain areas through property tax
relief and the issuance of bonds and notes".
Two acts passed by the 1981 Legislature during the Special Session, the Texas Tax
Increment Financing Act of 1981 (SB 16) , and the Property Redevelopment and Tax
Abatement Act (SB 17) , will become effective only upon passage of Proposition No. 1.
The amendment would add these two statutes to existing exceptions to the "equal and
uniform" constitutional requirement for property taxation.
The areas within a city which would be eligible to participate in either tax increment
financing or property tax abatement would first be designated as "reinvestment zones
by the City Council. An ordinance designating such zones for deteriorated and/or open
land would be based on statutory requirements - essentially, that the property impairs
the city's sound growth, retards the provision of housing accommodations, or constitutes
an economic or social liability. The designation must specify the type of financing,
either residential property tax abatement or commercial/industrial abatement.
Under tax increment financing, after approving a project plan, the city sells tax
increment bonds (special bonds which are not a debt obligation of the city) to finance
improvements to public property within the zone. These public improvements enhance
the area, making it more desirable for commercial and industrial activity. Tax revenues
to the city and all other taxing units are frozen at the base year level for the
repayment period of the bonds (a maximum of 20 years). Only the additional tax income
resulting from increases in assessments in the zone above the base year level, are
pledged to repay the bonds.
As a practical matter, there would be no market for tax increment bonds until prospectiv
buyers are assured that revenues from tax increments are sufficient to retire the
indebtedness. In many instances this could require that owner's of property within
reinvestment zones execute binding reinvestment agreements to coincide with the instal-
lation of bond financed public improvements.
Under property tax abatement, the city would offer written agreements to all landowners
within a designated reinvestment zone, offering a partial or total exemption from ad
valorem taxes levied by all taxing units for a period of up to 15 years, in return for
specified improvements. These private improvements would raise the appraised value of
LEGALITY Q
FISCAL NOTE (�
CITY MANAGER'S COMMENTS
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POLICY PROPOSAL (cont'd) PAGE z OF 2
the property, resulting in a permanent increase in property tax revenues to all taxing
units upon expiration of the term of the tax abatement.
Taxing units other than the city creating the zone may execute similar agreements with
property owners. Such agreements must contain terms identical to those in the
city's agreement. If other taxing units fail to execute similar agreements, the value
of property within the zone for their taxing purposes is frozen at the same level at
which the property was taxed in the year preceding the city's agreements, for a period
of time equal to twice the duration of the city's agreements.
Support for Amendment
The Texas Municipal League's Board of Directors, at the September meeting, voted
as League policy, to support passage of Proposition No. 1 on the November 3, 1981,
ballot.
Legality
Not applicable
Fiscal Note
Not applicable
C t ?tanager's Comments
The City Manager supports Proposition No. 1.
Recommendations
It is recommended that the City Council:
1. Adopt the attached resolution supporting passage of Proposition No. 1 at the
special election on November 3, 1981; and
2. Authorize distribution of the resolution to the news media.
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CITY OF FORT WORTH