Industrial Districts

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Industrial districts are formed by an agreement between a city government and industrial firms lying outside city limits. The industrial district contractually protects the industrial venture from annexation and subsequent city regulations, and allows the city and industry to negotiate a payment to the municipality in lieu of taxes. The districts were first allowed by the state under the 1963 Municipal Annexation Act, giving cities a way to expand their tax base while still providing important business incentives - lower taxes and protection from city regulation. The industrial district lies within the city's extraterritorial jurisdiction, but remains outside city limits.

Over the years, industrial district agreements in Texas have been limited in use to areas along the Texas Gulf Coast, including Beaumont, Houston, Port Arthur, Orange and Corpus Christi. The length of the agreements was statutorily limited to seven years until 1993, when the state allowed 15 years. But unlike tax abatement agreements which cannot be renewed, industrial district agreements can be renewed as long as it is mutually agreeable between the city and industry.

The city of Corpus Christi first became involved in industrial districts in 1981-1982 when the city council and certain industries, principally along the port, negotiated a master industrial district agreement. At that time there was considerable interest by some local groups in moving forward with annexation of the industrial areas that, while contiguous to the city, had never paid any city taxes. During discussions it was agreed that the industries, while being valuable to the city in providing a major economic impetus, would be protected through industrial district agreements. At that time, the phase-in provision (five percent per year) for new improvements was specifically designed to encourage expansion while the maximum cap (50 percent) on existing improvements was designed to provide a competitive advantage for the local industries. The original 1981-1982 contracts contained the following major elements, which have remained constant with each renewal:

1. Industry was protected from annexation for seven years.

2. No zoning, building inspection or platting requirement were enforced against the industry (although a plan for water, sewer and drainage was required).

3. Industry would pay in lieu of city ad valorem taxes 100 percent of taxes due for land and five percent of taxes due on improvements the first year increasing by five percent each year with a maximum of 50 percent in ten years.

4. The industry must be a member of the Terminal Refinery Fire Company or make an
additional payment to the city for fire protection.

5. The industry pays for city utilities at outside city limit rates (this is almost exclusively water and sewer, with water charges predominantly). Water and sewer services are provided by the city to the industrial districts at standard outside city rates. This has resulted in higher rates than if the companies were in the city. These utility rates are common to other industrial districts in other cities where water and sewer services are provided.

In 1984-1985, the industries approached the city with a request for renewal of their contract to extend the contract for a full seven years. After discussion, contracts were again renewed, making the new termination date of the contract 1992.

Four years later in 1988 through 1989, the industries again sought a seven-year renewal of their contract. During that negotiation, city staff held the position that there should be a move toward an increase in both the cap and the phase-in provisions. After discussions, city staff recommended to the council the contracts be extended for seven years (through 1995) with the same terms as previously adopted.

From 1992 through 1994, discussions continued regarding renewal of the industrial district contracts, and specifically on the appropriate amount of increase in the cap and the phase-in provisions.

Industrial district contracts that became effective January 1, 1995 had the following major provisions:

1. Cap - The current 100 percent cap of land values is maintained, and the cap on improvements is increased from 50 percent to 60 percent.

2. Phase-in - The current five percent per year 10-year phase-in on new improvements is substantially increased to a sliding scale phase-in as follows:

six percent - Year one and two
seven percent - Year three and four
eight percent per year following, up to the cap of
60 percent.

This provision also allowed substantially more revenues to the city while maintaining a comparative advantage for the industries over other locations for expansion of plant or industry capacity.

3. Term - The term of the contract increased from seven years to ten years. While state law now allows a 15-year contract, a maximum term of ten years allows the industries substantial stability. By making the new contract effective Jan. 1, 1995, one year has been eliminated from the previous contract term.

4. Buy local - The contracts contained a new provision which required the industries in all of its procurements to use its best efforts to procure services, equipment, etc. from businesses located within the Corpus Christi area unless they are unavailable within the area.

5. Industrial use - The new contract specifically prohibited the use of land for other than the standard industrial, heavy industry, or related service providers (or the holding of land for such uses). If an area within an industrial district was used for some type of retail sales to the general public or other non-industrial use, there would be an immediate roll-back of the payment in lieu to equal 100 percent of the improvements and land as if it were in the city limits at the original date of the contract. In addition, the city was given the right to file an injunction against the use and the right to immediately annex the land.

6. Contamination clean-up and buffer zone - In order to participate in a contract, an industry located in an area of contamination monitored by the Texas Commission on Environmental Quality had to agree to remediate their contamination
in accordance with all applicable laws, and the industry had to agree to participate in an equitable program of land acquisition agreed to by owners of industries on a majority of the assessed value of property within the industrial
district if such buffer acquisition program was proposed.

7. Form of contract - In the past, there have been two forms that have been used for the industrial district agreements. During this period, the agreements were consolidated into one form.

8. Emission control equipment - The contract stipulated that the calculations of payment in lieu shall be made without reference to the exemption for pollution control property in Sec. 11.31 of the Texas Property Tax Code and Art. VIII, Sec. 1-1, Texas Constitution.

The City Council adopted a uniform contract in 2004 for contracts executed 2005-2014. The Industrial District contracts that became effective January 1, 2005 had the following changes made to the 10-year phase-in on new improvements:

Yr. of use - %
1st yr ? 6%
2nd yr ? 12%
3rd yr ? 19%
4th yr ? 26%
5th yr ? 34%
6th yr ? 42%
7th yr ? 50%
8th yr ? 58%
9th yr ? 60%
10th yr ? 60%



Contacts

Oscar Martinez
Assistant City Manager - Administrative Services
1201 Leopard St.
Corpus Christi, TX 78401
Work: 361-826-3897
Fax: 361-826-3845
Email: OscarM@cctexas.com

Organizational Charts

Click Here for Corpus Christi Industrial District Map



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