HomeMy WebLinkAboutOrdinance 21216-04-2014 ORDINANCE NO. 21216-04-2014
AN ORDINANCE EXPANDING THE EXEMPTION FROM AD
VALOREM TAXATION OF FREEPORT GOODS THAT ARE
AIRCRAFT PARTS, AS AUTHORIZED BY ARTICLE 8, SECTION
14 OF THE TEXAS CONSTITUTION AND TEXAS TAX CODE,
SECTION 11.251(1); PROVIDING THAT THIS ORDINANCE IS
CUMULATIVE; PROVIDING FOR SEVERABILITY; AND
PROVING AN EFFECTIVE DATE.
WHEREAS, as authorized by Article 8, Section 1-j of the Texas Constitution, the
City offers an exemption from ad valorem taxation on certain tangible personal property
that is commonly referred to as "Freeport Goods" (a "Freeport Exemption"); and
WHEREAS, "Freeport Goods" includes various types of goods, wares,
merchandise and other tangible personal property that are located or detained in the State
of Texas for 175 days or less and then transported outside the State, as more specifically
defined in Article 8, Section 1.-j of the Texas Constitution ("Freeport Goods"); and
WHEREAS, pursuant to House Bill 31.21, adopted by the 83rd Texas Legislature,
the Texas Tax Code was amended as of January 1, 2014 following the passage by the
voters on November 5, 201.3 of Proposition 3, which amended the Texas Constitution as
set forth in H.J.R. 133 to add, among other things, Section 11.251(1) of the Texas Tax
Code, thus allowing the governing body of a taxing unit to extend the date by which
Freeport Goods that are aircraft parts must be transported outside the State of Texas from
175 days to up to 730 days after the date on which those particular Freeport Goods were
acquired in or imported into the State; and
WHEREAS, in order to expand the Freeport Exemption on Freeport Goods that
are aircraft parts in the manner authorized by Article 8, Section 1-j of the Texas
Ordinance Providing for Expansion of Freeport Exemption
on Aircraft Parts(Tax Code§ 1 1.25 1(1); HB 3121, 83R Tex,Leg,) Ordinance No. 21216-04-2014
Page 1 of 3
Constitution and Section 11.251(1) of the Texas Tax Code, the City Council must
affirmatively take official action to do so; and
WHEREAS, the City Council believes that an expansion of the Freeport
Exemption on Freeport Goods that are aircraft parts by extending the date on which those
Freeport Goods must be transported outside the State of Texas from 175 days to 730 days
after the date on which those particular Freeport Goods were acquired in or imported into
the State will lead to increased economic development activity associated with expanding
or relocating aviation-related businesses and a net positive impact to the local tax base
and economy; and
WHEREAS, once effective, this expanded Freeport Exemption on Freeport
Goods that are aircraft parts will apply to the 2014 tax year and each subsequent tax year;
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF
THE CITY OF FORT WORTH, TEXAS:
Section L
EXPANSION OF FREEPORT EXEMPTION ON AIRCRAFT PARTS.
That, in accordance with and as permitted by Article 8, Section 1-j of the Texas
Constitution and Section 11.251(1) of the Texas Tax Code, the City Council hereby
expands the Freeport Exemption by extending the date by which Freeport Goods that are
aircraft parts must be transported outside the State of Texas from 175 days to 730 days
after the date on which those particular Freeport Goods were acquired in or imported into
the State.
Ordinance Providing for Expansion of Freeport Exemption
on Aircraft Parts(Tax Code§ 1.1.25)(1);HB 3121,83R Tex. Ug-) Ordinance No. 2 1 2 1 6-04-20 1 4
Page 2of 3
Section 2.
CUMULATIVE NATURE.
That this Ordinance shall be cumulative of all ordinances of the City, except
where the provisions of this Ordinance are in direct conflict with the provisions of such
other ordinances, in which case the conflicting provisions of such other ordinances are
hereby repealed.
Section 3.
SEVERABILITY.
That if any portion, section or part of a section of this Ordinance is subsequently
declared invalid, inoperative or void for any reason by a court of competent jurisdiction,
the remaining portions, sections or parts of sections of this Ordinance shall be and remain
in full force and effect and shall not in any way be impaired or affected by such decision,
opinion or judgment.
Section 4.
IMMEDIATE EFFECT.
That this Ordinance shall take effect immediately upon its adoption.
AND IT IS SO ORDAINED.
ADOPTED AND EFFECTIVE: April 22, 2014
APPROVED AS TO FORM AND LEGALITY:
By:
A
I/C -
Peter Vaky, Deputy 51h Attorney Mary J. Ka r, Ity Secretary
M&C: G-181.)3
Ordinance Providing for Expansion of Freeport Exemption
on Aircraft Parts(Tax Code§ 11.251(1);HB 3121, 83R Tex. Leg.) Ordinatice No.21216-04-2014
Page 3of 3
City of Fort Worth, Texas
Mayor and Council Communication
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COUNCIL ACTION: Approved on 412212014 - Ordinance No. 21216-04-2014
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DATE: Tuesday, April 22, 2014 REFERENCE NO.: G-18193
LOG NAME: 17FREEPORTEXMPT
SUBJECT:
Adopt Ordinance Expanding the Freeport Tax Exemption from Ad Valorem Taxation of Freeport Goods that
are Aircraft Parts (ALL COUNCIL DISTRICTS)
RECOMMENDATION:
It is recommended that the City Council adopt the attached Ordinance expanding the exemption from ad
valorem taxation of Freeport Goods that are aircraft parts by extending the date on which those goods
must be transported outside the State of Texas from 175 to 730 days after acquisition in or importation
into the State.
DISCUSSION:
Since 1990, the City of Fort Worth has exempted certain tangible personal property commonly referred to
as Freeport Goods from ad valorem taxation. Generally speaking, Freeport Goods are goods, wares,
merchandise and other tangible personal property that are located or detained in the State of Texas for
175 days or less and then transported outside the State. This Freeport Exemption was first permitted
through an amendment to the Texas Constitution in 1989. Once a taxing unit chooses to offer a Freeport
Exemption, the exemption cannot be repealed later. In other words, once Freeport Goods are exempt,
they remain exempt from taxation by that taxing unit forever.
On November 5, 2013, the voters of Texas passed Proposition 3 allowing for the amendment to Article 8,
Section 1-j of the Texas Constitution to allow taxing units to expand the Freeport Exemption on aircraft
parts by extending the date by which those goods must be transported outside the State of Texas from
175 to up to 730 days. House Bill 3121 was companion legislation that amended Section 11.251 of the
Texas Tax Code to provide for the same action. In order to extend the time frame in which those aircraft
parts may remain in Texas and still be subject to the Freeport Exemption, the governing body of the taxing
unit must affirmatively take official action to do so. This expansion applies only to Freeport Goods that are
aircraft parts. All other Freeport Goods must be shipped outside the State of Texas within 175 days from
the date they were acquired in or imported into the State in order to qualify for the exemption.
Analysis was conducted by Impact DataSource, LLC, that identified that within the City of Fort Worth, 26
aviation related business accounts exist. All 26 of the accounts report inventories with a total value of
$179,736,607. Of the 26 business accounts, 6 currently qualify for Freeport Exemption under the current
175 day time period. The current value of Freeport Exempted aviation inventories is $13,456,834.00,
leaving the amount of$166,279,773.00 as taxable aviation inventories.
Extending the qualifying Freeport Exemption period to 730 days for aircraft parts may enable the
additional 20 identified business accounts to qualify for the Freeport Exemption. Under the most
conservative analysis, approximately 71 percent of the currently non-qualifying value could potentially
qualify for the exemption if the qualifying period were extended. The estimated cost in existing lost
taxable value to the City of Fort Worth would be in the amount of $119.2 million or approximately $1.0
Logname: 1.7FREEPORTEXMPT Page 1 of 2
million in property tax revenue per yeor. This orDOUnt equates to approximately 0.277 percent of the total
estimated property tax revenue currently collected by the City.
The purpose of the pR]pnSod time extension now permitted by the Texas Constitution and the Texas Tax
Code is to promote 8COnonniC development. Although on extension of the QUo|ifviDg period would impact
the general fund Deg@tiv9|y. Staff believes the lost taxable value will be offset to G net positive pO8iUOD
over time by increased economic development activity associated with expanding or relocating aviation
related businesses. Consequently, Staff recommends approval of the attached Ordinance.
|D order for the expanded Freeport Exemption On aircraft parts tobe applied for the 2014 tax year, the City
Council must take official action by June 1' 2O14. The City Council can take this action after June 1' 2O14.
but the expanded Freeport Exemption vvOW|d not be available uDh| the next authorized tax yea[. The
recent amendments to the Texas Constitution and the Texas Tax Code do not address whether the City
Council o0V|d, after adoption of this {}ndiD8nme. later take action to then reduce the number Ofdays by
which aircraft pads are a||ovvmd LO remain in the State of Texas in order to qualify for the City's Freeport
Exemption. However, because the Freeport Exemption itself is permanent ODCe offered, the City Council
should be prepared for the extension authorized by this proposed Ordinance to he permanent as Vve|l'
unless there is a judicial [U|iUg or subsequent amendment tothe Texas Constitution or state law that
provides otherwise. If the City CDuOd} fails to adopt the attached Ordinance, the Freeport Exemption will
continue to apply to Freeport Goods, including aircraft parts, that are located in Texas for 175 days or
less.
FISCAL INFORMATION CERTIFICATION:
The Financial Management Services Director certifies that this action will not increase the total
appropriations of City funds,
FUND CENTERS:
CERTIFICATIONS:Submitted for City Manager's Office by:
Fernando Costa (6122)
Originating Department Head: Jesus Chapa (5804)
RobedSturnS (212-2663)
Additional Information Contact: Ana Alvarado (212-2680)