What Projects Qualify for Abatements?
A developer would require an abatement to remain, expand, locate or redevelop in Houston, especially if the project is in a declining part of the city and results in strengthening of the local job and economy.
HOUSTON—There are situations when a developer requires an abatement to remain, expand, locate or redevelop in Houston. This type of project may result in strengthening of the local job and economic market as a result of the developer’s presence, especially if it is located in a declining part of Houston.
Such an investment could provide affordable housing, rejuvenate a blighted area or reduce poverty. In other words, a project that serves the public good would fall into that category.
What types of project costs qualify for an abatement? Some examples include when a developer-owner improves its building or equipment or improves/modernizes its site. Moreover, if a property is deteriorated or demolished, it would qualify under section 44-132 of ordinance 2014-0245, GlobeSt.com learns.
Conversely, some project costs are unqualified for abatements. This would include a property that receives a historic-site exemption or land, inventory, supplies, tools, vehicles, vessels and aircrafts.
In addition, improvements that generate electrical energy not entirely consumed by the new development would not qualify. Finally, any improvements, including those to produce, store or distribute natural gas, fluids or gases that are not integral to the operation of the facility would not be included in the abatement category.
A few other issues must be kept in mind about abatements. The lessor must be part of the abatement agreement if it involves leased property. And, the city is extremely interested in projects that also receive state economic or federal development funds, GlobeSt.com learns. Senior economic development officials would meet with developers of these projects to discuss the abatement offer in the final stages of the abatement process.
Moreover, certain requirements must be met to receive an abatement. The city must receive a detailed financial pro forma from the developer that explains all costs and projected revenue in line-item detail.
A project must increase the value of a taxable property by at least $1 million for deteriorated/demolished property or $5 million for other development. In addition, a project must retain or create at least 25 permanent jobs at the beginning of the abatement, continuing throughout the remaining years of the agreement. If the project site is located within a Texas Enterprise Zone, the minimum investment requirement is $500,000 and the project must create five permanent jobs.
The city decides how many years an abatement should last based on the impact the project creates for the city. If the developer doesn’t meet the abatement terms, the city will recapture taxes abated if the developer defaults on the agreement, GlobeSt.com learns.