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HomeMy WebLinkAboutIDC 1989-01-19 Minutes · ~.........., -">·_~'~~_~'"··<_."__._N_~~_~_"_." DATE: January 19, 1989 PLACE: Pre Council Chambers City of North Richland Hills TIM E : '?J AM PRESENT: Charles Brinkley, President James Walker· Clff Stevens Char·l es Owens F~ober·t Harr·i son Sandy Bartek, secretary BUSINESS: C. A. Sanford introduced Mr. Jay Kayne, KAYNE & ASSOCIATES, for a presentation on tax abatement policies (copy attached). Recommendations by North Commission to be forwarded ar·e as follows: Richland Hills Economic Development to North Richland Hills City Council 1) 500% - adjustable within parameters 2) Term and value not to exceed one half of life 3) Balance abatement and infra structure a) 3 million for new construction b) 1.5 million for expansion c) 5 million for retail d) Encourage lessees by incentives These recommendations were put into motion form by Charles Brinkley with a second by James Walker. The resolution sent to Council: To develop an abatement policy for North Richland Hills. Discussion: To aske for and seek school Board participation in tax abatement policies. Adjourn at 10:15 AM. ~ectfully submitted, -....:.-. ..' 1// ~~.P' t'~-- :andy Ba¡-·tek 2) ___.,.r~ ",-".,- ~._._~-"~~-----~~-~.~._._----~--- ( Preliminary Report on Tax Abatement Policy Prepared for: City of North Richland Hillst Texas Prepared by: Kayne and Associates December 2t 1988 The following is the result of discussions with City Manager Roger Linet Economic Development Director C. A. Sanfordt Birdville School Superintendent Joe Bill Fox and local developer Burk Collins. Additional information was gleaned from a review of tax abatement policies for neighboring jurisdictions made available through the North Central Texas Council of Governments. Observations The City of North Richland Hills, the third largest city in Tarrant County, is strategically located between the City of FortWorth and DFW Airport and in proximity to the recently completed Alliance Airpark. Adjacent jurisdictions (Hurst, Eulisst and Bedford) are largely developed; thereforet North Richland Hills with its remaining large parcels of industrial land represents the best opportunity for the location of business and mdustry in the area. Creation of a "reinvestment zone/' for purposes of tax abatementt will clearly delineate property that is considered prime for industrial expansion. The City Council is supportive of a pro-active economic development effort that they believe will further improve the "quality of life" for current residents. Council knows that there will be residential growth regardless of City policies and desires industrial growth to offset revenue requirements for additional public service demands. New investment in the City will ~enerate revenues that will allow the City to provide more amenities without an increase m residential property taxes. The City is responsible for water and wastewater distribution and collection system, not supply and treatment. Current water and sewer lines would serve available industrial land; thereforet the City would not anticipate additionalt major infrastructure expense associated with new business development. Jurisdictions within the region are very competitive for the attraction of major retail establishments (e.g.t HyperMart) since the sales tax revenues from such projects represent an additional source of new revenues. '. Land and construction costs in North Richland Hills are not significantly higher than those for outlying communities (e.g., Planot Mansfield) and need not be a factor in determining the value and term provisions of a local tax abatement policy. (Conversation with Burk Collins) Initial interest in local tax abatement policy was demonstrated a couple of months ago, but no action was taken. Current interest was precipitated by a call from Burk Collins concerning the potential location of a 100,000 s~uare foot manufacturing facility. Although the immediacy of establishing abatement guidelmes and criteriat the City is interested in a ."... ,- .~...,~" ·--·'''.~_·_'.''~--'--'"_k_~'~~··~__~~'_'_"''_'''~'__h.'~_.~~____ policy that represents the long-term interest of the CitYt not one that is tailored to this current prospect. The City would like to adopt a policy under which the Birdville ISD will participate in abatement agreements; therefore, the school board will be brought into a Council working session to consider abatement options. Tax abatement policies adopted by neighboring jurisdictions can best be described as "non-policies/' as they provide the governing body with almost total flexibility as to the type of facility eligible and the terms and value of each individual abatement agreement. (See the companion piece "Comparison of Tax Abatement Policies Adopted by Neighboring Jurisdictions/' for a full discussion of other policies adopted by localities in the region.) Options for a City of North Richland Hills Abatement Policy The following questions should be addressed by the City Council and the School Board at its upcoming working session. Responses will provide the basis for an initial draft of the tax abatement ordinance to be presented to the City Council and School Board. Comments and recommendations by Kayne and Associates are provided in italics. Qualifying Facilities What categories of businesses should be eligible to apply for tax abatement under the City policy? The primary reason why a locality provides financial incentives is to induce a decision that would not otherWise occur. For example, a City may offer a tax incentive to compensate for the relative cost of doing business in that locality. The location must, however, still be a good site for the business based on markets, transportation, labor and other factors of operations. I am concerned that there is so much emphasis on commercial and retail investment within the region, as evidenced by the discussion at the NCTCOG workshop in November. From a regional viewpoint, these businesses are going to locate within the Metroplex because there is the consumer market or the demand for the goods they sell or services they offer. If you accept this point of view, eligibility should be limited to basic industries, those companies that produce goods or services that are marketed to a regional, national or international market. In this way, the focus is on businesses that bring new dollars into the local economy rather than merely redistributing existing consumer income. To clarify which businesses would satisfy the "basic activity" requirement, the City would need to define what constitutes the 'Tocal consumer market." I recommend that the market boundaries be existing natural or political divisions. For example, it may be defined simply as City of North Richland Hills or it might be extended to include all of Tan-ant County or the Metroplex. In the case of North Richland Hills, I believe that Tan-ant County represents a reasonable definition for local consumer market. A basic (or export) industry could then be defined as any business providing goods or services, of which more than 50 percent are consumed outside the "local consumer market. " Under this definition, almost all manu act ,., rs would qualify. Additionally, service, distribution, entertainment, a or tourism facilities could qualify. The burden of proof (in borderline cases) would be on the business and could be documented through invoices, charges account receipts, etc. -2- There is a parochial interest in attracting major retail establishments to locate within the City limits largely because of the local option sales tax revenues that would otherwise be lost if the project located in a neighboring jurisdictions. This local perspective is understandable. If the City elects to include commercial and retail projects as eligible facilities, the Council opens itself up to a preponderance of applications from such businesses. This can be addressed in several ways. First, a retail project might have a higher investment minimum than the requirement for a purely manufacturing activity. Second, the City might apply a lower percentage abatement to retail projects or a shorter term. In this way, the City could provide some incentive for major retail projects to locate within the corporate limits, but would still send a clear message that "basic industrial activity" is the primary goal of the local development effort. Third, since the retail establishment does represent a source of additional revenues (i.e., the local sales tax option), eligibility might be based on a minimum level of projected sales tax revenue that the City would receive during the abatement period. For example, if the City abated taxes on 50 percent of the value of $5.0 million worth of improvements for a retail project, the foregone revenues (using a hypothetical City tax rate of 50 cents per 100 dollars of valuation) would be $125,000 per year during the term of the abatement agreement. If the same project generated $10 million is sales annually, the locality would realize $100,000 in local sales tax. In this example, the City would barely feel the impact of the foregone revenues. The City abatement guidelines might limit retail projects to those that generate a minimum of $100,000 in local sales tax. This would certainly eliminate most restaurants, convenience stores and other smaller projects from consideration. The best of all possible worlds would be an agreement by all jurisdictions within the region to exclude retail and commercial projects from eligibility for tax abatement. Localities (from a macro-economic perspective) are providing incentives that violate the principle that such incentives should be reserved to influence an investment decision that is otherwise unlikely to occur. In the absence of such a regional agreement, the City can justify including retail and commercial projects within certain limits as suggested, above. Agriculture and energy production (i.e., generation of electricity for re-sale) do not appear to be development potentials within the City, and therefore, may be excluded from consideration with the policy. Minimum Investment Requirements What should be the minimum investment requirement (increase in appraised value following improvements) by a company in order to apply for tax abatement? Should there be a minimum job creation and/or new payroll requirement? The primary reason for establishing an investment minimum is to keep the program manageable (i.e., so that the localities are not faced with executing an agreement for every single business expansion). Policies adopted by neighboring localities range from a low of $50,000 (Corsicana) to a high of $10.0 million (Lewisville). As suggested above, you might consider different minimum investments for manufacturing versus retail/commercial projects. For example, a $1.0 million expansion of a manufacturing with its primary employment (generally carrying higher wages per employee) and higher multiplier effect on the local economy might be as important to the City as luring a $5.0 -3- million retail project. A lower minimum for manufacturing expansion (e.g., $1.0 million) is important because a business (even a relatively small one) may begin to look at the relative costs and benefits of relocation into another community offering tax incentives versus an expansion at its current location. It is, therefore, essential that the policy protect your ability to retain the existing industrial base. Ifyou are intent on including retail/commercial projects, I recommef.ld that they have a higher minimum investment requirement (e.g., three to five million dollars) or by establishing a minimum project sales level (which translates into local sales tax revenue) to ensure that you are dealing with only projects that will have major revenue implications as a result of the local sales tax generated. A job creation/retention or new payroll requirement is more of a political issue than a legal one. Technically, the law allows abatement in return for some economic benefit; however, the definition of "benefit received" is up to the locality. It is not unreasonable to have the company commit to some minimum job creation requirement (e.g., 10 jobs) or increased payroll. Additionally, an increase in employment or payroll generally ensures that the investment will result in a net increase in economic activity in the City. If a minimum job requirement is included in the policy, credit for job creation should not be given in the event employees are transferred from an existing facility within the City to the new facility. Term and Value of Abatement What should be the maximum term of abatement? Should the company receive full or partial abatement? Should the abatementt at whatever levelt be straight-line or declining? Under the Tax Abatement and Property Redevelopment Act the locality can legally exempt the total value of all improvements made following the execution of the agreement for a period of up to 15 years. North Richland Hills faces two options. Either it can establish a given value and term of the abatement that is applied equally to an eligible facility or, as many jurisdictions in the region have done, establish maximums giving the governing board discretion on each project on a case-by-case basis. I would argue that if the primary objective is to attract new investment, the City should adopt the simplest policy that is easily understandable to the potential investor. If the guidelines have broad discretion, it puts the City in the position of acting as a "wheeler-dealer," trying to cut the best deal. I find it easier to say to the potential investor, ''We believe that our City is a good location for you. We are encouraging companies like yours to take advantage of a location in North Richland Hills by offering property tax abatement to companies that qualify, which you do. Under our policy you will receive xx percentage abatement for xx number of years. " Compare this straightforward approach with the community that, based on its more flexible policy, says, "We would like you to locate here, and to encourage you to do so, we can offer property tax abatement. The level and duration will depend on how your project scores on a system we use to determine the impact of your project on the community. City Council will establish the final level following a public hearing." The company, which surely has researched the maximum benefits it could receive (since the guidelines are public information), is put in an uncomfortable position. First, it feels its has to defend its investment to achieve the minimum. -4- "',- - -' '"' ___'_~"~______'~~_,.,w_____~~,_.__,__ S~cond., until the Council acts (which may be too late.from a corp'orat~ planning point of View), It, doe~ not know the amount of tax benefits to mcorporate mto Its bottom-line analysis of competmg sites. The bottom-line for the community is "Keep it simple!!" Existing policies range from a low of 25 percent for 15 years (Plano) (0 a high of the maximuf!l allowed under state law, 100 percent for 15 years (Mesquite). In all cases, the policies state that the locality may authorize up to the stated maximums. Keep in mind that tax abatement is a ''closing too~ " not a marketing tool. Therefore, the ability to attract industry to North Richland Hills depends as much of factors such as labor force, available land, transportation, public services, and a sound public education system. I believe that you can be competitive with those jurisdictions with which you are competing by adopting a policy that offers 50 percent abatement for a period of ten years. You might wish to leave yourself room to negotiate with a company as long the total benefit to the company does not change. For example, the policy recommended, above, totals 500 percent abatement during the period of the agreement (i.e., 50 percent times ten years). Some companies may feel a sliding scale is more advantageous. For example, one company might prefer 75 percent for three years, 50 percent for the next four years, and 25 percent for the last three years. The total benefit is still 500 percent. The guidelines could be drafted in such a way that any combination totalling 500 percent would be acceptable under the policy. This would allow you to easily explain the level of benefit to a potential investor, yet still tailor a package to the business' needs. Attraction versus Expansion of Existing Businesses Should the City policy cover only the attraction of new investment to the City? Retention or expansion of existing business? Both? Although the primary objective of the policy is to make the City competitive in its efforts to attract new industryt I would strongly recommend that it cover both new and existing business. Failure to include existing businesses might result in their being lured to other communities where they would receive the benefits of an abatement program. Plant Modernization Should improvements associated with plant modernization be eligible for tax abatement? Yes, under certain conditions. If the business is seeking abatement on the basis of job retention, the burden of proof should be on the business to demonstrate that without the modernization, the plant will cease or reduce operations. The business is still subject to all other qualifying requirements, above. The value of improvements subject to tax abatement would be equal to the value of the modernized facility less the value of the old facility. Ineligible Property Should the policy be more restrictive on classes of property that are eligible for abatement than allowed under the law? -5- _··"'"'·-~---~"---~"<~'_'__~M__'__,-,__",,_ ~rovisions related to ineligible properfJ!, included in thepo.ficif!s adopted by neighboring countzes, are generally for purposes of restatzng the statutory lzmltatlOns. The one exception m~g/~t be ''r~s~dentil!l'' properfJ!, whicl~ is allowed. und~r the law, blft 0cluded by several of the exlStzng polzczes. Sznce there lS a feelzng that reSldential growth wlt/un the City limits is inevitable, I would suggest that no further inducement is required. Also, to also abate taxes on certain residential properties might put an excessive burden on those residences that are cu"ently on the tax rolls. Leased Property Should the policy cover eligible property that is leased by an owner/developer to an eligible business? Yes, under certain circumstances. This provision gives the City additional flexibility in developing an incentive package. For example, a prospect may be interested in an existing building that the owner wishes to lease rather than sell outright. Tax abatement on improvements will allow the owner to offer a more competitive leasing rate. Since any job creation or increased payroll requirement would be the responsibility of the tenant, the policy should include procedures for execution of a tri-party abatement agreement that ensures that tax savings associated with the abatement will be Eassed on to the tenant and that the tenant understands that tax benefits are contingent on his/her commitment to satisfy the minimum employment or payroll requirements. Application Window When may a business apply for tax abatement under the City abatement policy? Since the commencement of construction is the clearest evidence of a commitment by the business to locate at a given site, the business should be allowed to apply for abatement at any time as long as the abatement agreement is executed prior to the commencement of construction. Variances Should the policy include a provision for variances? How broad should the variance provision be? Should it cover all or a portion of the provisions of the policy? Certain unexpected development opportunities may arise that require a variance from the abatement policy. However, local officials need to keep in mind that a prospect will exploit any opening to maximize its benefit under an ilJ.centive package. Therefore, while the City may wish to reconsider certain eligibility factors on a case-by-case basis, it may not want to open up the issue of the tenns or value of the abatement. If the City decides to include a variance provision, I would strongly recommend that approval of the variance require at least a three-quarters majority of the governing body. Also, keep in mind that, if wa"anted, the guidelines may be revised by a two-thirds vote of the governing body. However, a revision of the guidelines requires that the governing body go through the same public hearing process required for the initial approval of the ordinance. -6- Application Fee Should an applicant business be required to reimburse the City for expenses associated with reVIew and approval of an application for tax abatement? Since the Act requires the local governing body to make certain determinations related to the fiscal impact of an abatement agreement, there may be some cost to the. locality for the gathering and review of information necessary to made the determinations. There is some statewide precedence (e.g., Calhoun County in Southeast Texas) for recapturing from the applicant costs associated with the feasibility study. In a competitive situation, the fee may be viewed as a negative. On the other hand, a fee does reduce the number of frivolous applications that may be submitted if the locality is concerned that the minimum investment requirements, alone, do not constitute a sufficient screening mechanism. Other Provisions to be Included in the Policy The following is a list of additional provisionst generally non-controversialt that should be considered for inclusion in the policy. Requirements for financial statements or other evidence of credit worthiness from applicants with whom the governing body is unfamiliar. Time frame for review and approval of application (generally 60 days from receipt of a complete application with all required attachments. Recapture provisions in the event the company is out of compliance with any provision of the abatement agreement. This is boilerplate that can be included in the final guidelines. Assignment of administration. GenerallYt determination of the value of improvements and abatement are assigned to the Chief Appraiser as part of his/her normal responsibilities. Review of the application for eligibility would be assigned to the City economic development office. Assignment of the abatement agreement to a new owner or lessee of the property as long as all other requirements and provisions of the agreement are satisfied. Again, boilerplate. Sunset provision. Most policies have called for a review at the end of a two year period. Even if the policy is revised or eliminatedt all agreements remain in effect until their termination date. -7- ^_ h___ _.__,__~.___~__,,_____,,____~~,-___~^~_~~__,,_~,,_,~,"~"_____~~~___ Comparison of Tax Abatement Policies Adopted by Neighboring Jurisdictions Prepared for: North Richland Hills, Texas Prepared by: Kayne and Associates December 2, 1988 The following is a brief description of the key elements of the tax abatement policies that are in place in neighboring jurisdictions against which North Richland Hills is expected to be in competition for new business investment. Copies of tax abatement policies were obtained for Corsican a, Garland, Lewisville, and Mesquite. Limited information on policies in Forest Hills, Lancaster, Mansfield, PIano, and Waxahachie was also available through a North Central Texas Council of Governments survey of economic development programs in the region. Commentary by Kayne and Associates on the development impacts and consequences of various aspects of these policies is provided in italics. Overview Unlike other regions of the State of Texas, jurisdictions within the North Central Texas Region have adopted tax abatement policies which can best be described as "non-policies," in the sense that the governing body of the jurisdiction is given considerable latitude (within some general restrictions) for determining the value and term of the abatement at the time of application. Such policies place the jurisdiction in the position of ''bargaining'' with the applicant. One has to assume that the applicant is familiar with the policy in the jurisdiction, and is therefore in a position to request the maximum. Giving anything less than the maximum may be a sign to a potential prospect that their investment potential is not as valued as other businesses. Additionally, at least two jurisdictions have scoring systems to determine the eligibility of an applicant and the term and value of the abatement. Since the value of the abatement is tied to a specific level of employment and investment, the locality's administration of the project becomes more cumbersome since the annual exemption of property value is figured on the precise level of investment and employment rather than a threshold (e.g., $1.0 million in investment and 10 new jobs). Finally, jurisdictions in this region demonstrate a propensity of providing abatement for both commercial office space and major retail establishments. One can argue that such abatement is counter-productive since the siting of these facilities are based largely on the local consumer market. Of course, individual localities within the region are in competion to receive the long-tenn property tax benefits and (in the case of retail) the sales tax revenues from these projects. An ideal situation would be if all jurisdictions would agree to exclude such projects from tax abatement, relying instead on the provision of public services and improvements as the inducement for location of commercial facilities. In the absence of such a policy, a jurisdiction must decide how important commercial activity is to its long-range economic goals before adopting its abatement guidelines and criteria. Facilities Qualifying for Tax Abatement Corsicana "...on a case-by-case basis, (to projects that) enhance and expand the local economy." ,,- --'''~._~----_._-~ Garland Projects that meet the goals of "...job creation, increased property tax valuation, new retail sales tax revenue, and higher development standards." "Warehouse and distribution facilities will not be eligible for tax abatement, unless ancillary to manufacturing or production processes, or can be demonstrated to achieve other priority goals." Lewisville Projects that promote "...an improvement in the quality of industrial/business development in all parts of the City and to the ongoing improvement in the quality of life of its citizens." Mesquite Projects that "...contribute to the retention or expansion of primary employment...or to the economic development of the City of Mesquite." Excludes facilities intended primarily to provide goods or services to local residents or businesses (e.g., restaurants and retail establishments). Specifically, lists hotels and office buildings as eligible. Minimum Investment and Job Creation Requirements Corsican a Project must create at least 10 jobs and result in at least $50,000 of real property improvements. Garland Must meet at least two of the following: Minimum increase in property value of 300 percent for new projects; 50 percent for expansions, or $5.0 million investment in taxable assets. Make a substantial contribution to redevelopment efforts. High visibility, image impact or higher level of development quality. In an area "which might not otherwise be developed because of topography, ownership, site configurations, etc," Serves as a prototype for other development in the area. Stimulates concentrations of employment and/or commerical activity. Generates greater employment than would otherwise be achieved. - 2- Lewisville Must meet the fIrst three and at least two more of the following: At least $10.0 million increase in taxable assets. Does not have negative environmental impacts. Is not relocating from elsewhere in the Metroplex. Is an example of a higher standard of development. Makes a substantial contribution to redevelopment of older portions of the City. Stimulates local employment without competing with existing businesses. Serves as a catalyst to attract other high quality industrialfbusiness activity. Mesquite Minimum $2.0 million increase in property value following the duration of the abatement agreement. Corsicana and Garland policy provisions are so vague that literally any project might qualify leaving total discretion to the goveming body. Opens the possibility of receiving applications for projects (particularly smaller ones) that were not the intended targets of the abatement policy. High investment minimums in Lewisville and Mesquite may discourage expansions by existing small and medium size businesses that may provide the bulk of new job opportunities. Value and Term of Abatement Corsican a Up to 50 percent for 15 years. Forest Hills Up to 40 percent for three years. Garland Generally, maximum of 50 percent for up to fIve years. Total amount may not exceed the estimated costs to the City of supporting the project. Provision of higher abatement for projects that achieve a score of 400+ on objective scoring system. Lancaster Up to 50 percent for 10 years. Lewisville Maximum of 30 percent for 15 years. The policy allows for a sliding scale for the percentage of property subject to abatement as long as the total of the percentages does not exceed that which is available under a straight line formula. - 3- · "' "'--"<'--'~-~----~ -'"~~'_~__'__~N_"'" Mesquite No maximum except those provided under the State law, up to 100 percent for 15 years. PIano Varies by level of investment up to a maximum of 25 percent for 15 years. Waxahachie Maximum of 60 percent up to seven years. As noted in the introduction, there is tremendous lattitude within the written policies. Only Lewisvi//e addresses the issue of a sliding scale versus straight-line abatement. Many businesses prefer the sliding scale because there is greater benefit in the earlier years when revenues generated by the business are minimal, or in some cases, non-existent during the constrnction period. Vze benefit to the City of a sliding scale is that the higher percentage, particularly for a project with massive construction, is applied to a lower base during the constnlction period. All of the policies refer to a time-frame in tenns of years. In other regions of the State, localities have included provisions that the tenn may not exceed the stated maximum or one-half (1/2) the estimated life of the improvements, whichever is less. This provision ensures that property has some remaining value when it becomes subject to taxation following the abatement period. Other Key Elements In addition to provisions related to qualified facilities, minimum investment and job creation, and value and term of abatement, several of the abatement policies contain key elements that should be considered for inclusion in the North Richland Hills policy. New and Existing Facilities Virtually all of the tax abatement policies consider both new construction and improvements to existing facilities for the purposes of modernization or expansion. Eligible Property Only the Mesquite policy specific refers to "buildings, structures and fixed machinery and equipment as eligible property." One must assume therefore that other jurisdictions look to the State law for guidance concerning eligible and ineligible property. Ineligible Property The Texas Supreme Court has ruled that the only classes of property that may be exempt from ad valorem taxes are those specifically delineated in the State Constitution. At the present time these classes of property include only improvements to real property and fixed machinery and equipment. None of the available policies make reference to restrictions beyond those provided under State law. - 4- Generally tax exempt property (i.e., facilities owned by the United State governmellt, State of Texas or a political subdivision or a religious organization) would fall outside the tax abatement policy. Though not included in any of the available policies, the City might want to protect itself by clearly stating that 110 property associated with an activity that is a violation of federal, state or local law is eligible for tax abatement. Leased Property Most of the available policies include provisions for tax abatement in situations where the company requesting the abatement is leasing a facility. In these instances, the abatement agreement is a tri-party arrangement to ensure that the eligible business receives the benefit of the abatement (e.g., in the form of lower lease payments). Application Window All of the available policies are silent on the timing of an application. There are basically two options for detemzining the window for an individual business to apply for tax abatement. The first is tied to the "commencement of constmction, alternation, or installation of improvements, "for which the company is requesting abatement. 17ze second is tied to the "fonnal announcement" of the company to make certain investments in the county. An annoztncement of intent, no matter how fonnal, does not represent a final commitment to invest in the County. Only the commencement of improvements confimls the decision by the company. In the latter instance, the County is also put in the position of detennining what constitutes a fonnal announcement. Variances Unlike policies in other regions of the State, none of the policies provide for variances from the guidelines and criteria by the governing body. Generally, the only exception to variance are the tenl1 and value of the abatement agreement cannot be extended beyond those provided for in the guidelines. The burden of justifying the need for a variance lies with the applicant, who must request the variance (including the circumstances that warrant consideration of a variance), in writing, to a member of the governing body. Variances generally require a three-fourths (3/4) vote of the goveming body. Scoring Systems Both Garland and Lewisville have scoring systems for determining the eligibility and value of abatement for proposed projects. Scoring factors include objective criteria such as amount of investment and number of jobs created and subjective factors such as the extent to which the project supports local development objectives and the "quality of the development." In Garland a project must have a minimum score of 100 points to be considered for abatement. A project that scores over 400 points is eligible for a higher level of incentives. Lewisville provides for maximum benefit for projects with a score of 2,000 points or more. Applications with scores between 100 and 2,000 points are eligible for abatement at a proportionate level. Projects with scores below 100 are eligible "only if they contribute significantly to specific economic development goals." 17ze scoring systems appear to create a large administrative burden on the locality, 17ze nature of the subjective scoring factors also appear to open up the potential for challenges by applicants to argue that the policies are applied "arbitratily and capriciously." -5- Site Improvements versus Tax Abatement The City of Mansfield currently does not have a tax abatement policy. They have determined that it is in their and the business' interest to dedicate the additional revenues from a business expansion to the payment of debt service on site improvements, thus lowering the development costs to the business. 17!Ís represents a kind of infonnal "tax increment financbzg" scheme and can be effective, particularly when a business is seeking a short-tenn reduction instart-up expenses versus the longer tenn benefits of tax abatement. - 6-