From
Marty Wieder, Economic Development Director
Title
Resolution granting 380 Incentive Agreement with First Texas Homes granting a partial rebate on use tax revenue
Presenter
Marty Wieder, Economic Development Director
Recommended Action
Approve
Analysis
Doug Duffie, CPA contacted staff on behalf of client First Texas Homes, which is building in the Mira Lagos subdivision. Mr. Duffie noted that First Texas Homes proposes a Chapter 380 Agreement with the City to share his client’s use tax revenues paid for materials used in home construction. This would be similar to how the City has granted situs construction sales tax rebates in association with commercial development projects.
The use tax agreement is based on the volume of materials used and local use taxes paid to build homes, as numerous other Cities in North Texas have approved with First Texas Homes. All of the Agreements have 10-year terms and are based on 80% of a city’s 1% general city use tax. Any portion of a City’s use tax above the 1% general city tax is not involved in the grant, so the City retains 100% of all other sales tax revenues (i.e. Crime Control District, the Sports Corporation, Senior Center, Parks and Street Maintenance).
If approved, First Texas Homes would then apply to the State of Texas for a Texas Direct Payment Permit to generate a use tax in Mira Lagos. And once the permit was approved, First Texas Homes would begin to account for, report and pay taxes directly to the State on a monthly basis, rather than sales taxes to the vendor where they purchased the materials. Therefore, First Texas will incur the monthly accounting and reporting costs. Payments would be made by the State to Grand Prairie every six months. And upon staff confirmation of these amounts, the City will rebate the appropriate percentage with First Texas Homes.
First Texas Homes has an estimated 354 undeveloped lots in Mira Lagos. Mr. Duffie projects that the City of Grand Prairie will realize anywhere from $275,270 to $412,767 in combined use taxes over the 10 year agreement (should all 354 lots be developed during that time), depending upon the cost of building materials.
Financial Consideration
Projected - Net Added Use Tax Revenue: $275,270 (over 10 years, with build out)
Projected - Use Tax Amount Rebated: $183,513.60 (over 10 years, with build out)
Body
A RESOLUTION OF THE CITY OF GRAND PRAIRIE, TEXAS, TO ENTER into a Chapter 380 Program Agreement for Economic Development Incentives with FIRST TEXAS HOMES granting a rebate
Whereas, First Texas Homes is building homes in the Mira Lagos subdivision in Grand Prairie; and
Whereas, First Texas Homes still has approximately 354 undeveloped lots in the Mira Lagos and desires a 10-year Chapter 380 Agreement with the City to apply for and share applicable use tax revenue with the City, as allowed by the State of Texas thorough a Texas Direct Payment Permit; and
Whereas, the City of Grand Prairie will realize anywhere from $275,270 to $412,767 in combined use taxes over the 10 year agreement (should all 354 lots be developed during that time), depending upon the cost of building materials; and
Whereas, the City Council has determined that it is in the public interest to enter into a Chapter 380 Program Agreement for Economic Development Incentives and partially rebate certain use tax revenue.
NOW THEREFORE, BE IT RESOLVED, by the City Council of the City of GRAND PRAIRIE, Texas that:
Section 1. THAT the granting of an incentive through a Chapter 380 incentive agreement is approved and the City Manager is hereby authorized to execute contracts to effectuate this approval.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAND PRAIRIE, TEXAS, ON THIS THE 11TH DAY OF OCTOBER, 2016.