DALLAS COUNTY COMMISSIONERS COURT DEPARTMENT OF PLANNING & DEVELOPMENT December 17, 2019 TO: Commissioners Court FROM: Rick Loessberg, Director of Planning & Development /lllf..--. SUBJECT: 2019 Tax Abatement Report BACKGROUND Please find attached a report that lists the status of each of the ninety-nine tax abatements that the County has authorized since it first began providing such assistance in 1988. The format of this report is similar to what has been used in the past and only includes those abatements that have formally been authorized with a court order. DESCRIPTION OF TAX ABATEMENT ACTIVITY The County formally approved the provision of two additional abatements in 2019. Such a number is consistent with the two-to-four new abatements that the County typically authorizes every year. The ninety-nine abatements that have been authorized since 1988 have been for projects located in the following twelve cities: ABATEMENTS BY CITY City #Abatement City #Abatement Projects Projects Dallas 65 DeSoto 1 lrvinQ 1 1 Carrollton 1 Richardson 6 Hutchins 1 Farmers Branch 3 Mesquite 2 Wilmer 3 Grand Prairie* 1 Coppell 3 *denotes project also located in Dallas Garland 2 Even though the County's abatement policy offers special consideration for projects located in "priority" or "strategic" areas that historically have not seen as much as growth as other parts, about three-fourths of the authorized abatements have been provided for projects located in or near what are considered to be three of the County's 411 Elm Street, 3'd Floor, Room 313 Dallas , Texas 75202-3301 Telephone: (214) 653-7601 Dallas County Administration Building email : [email protected] Fax: (214) 653-6517 major economic centers-downtown Dallas, Las Colinas, and the Telecom Corridor. There also has been a grouping of abatements (six) provided to projects in the emerging inland port area. Such activity would seem to confirm what existing research conducted elsewhere has indicated-that although tax incentives can influence location decisions among comparable sites, they are generally not sufficient enough to offset a location with poor infrastructure, an inadequate school system, a lack of access, a shortage of skilled labor, etc. Sixty-three of the ninety-nine provided abatements have been for what are considered to be "economic development" projects under the County's abatement policy (i.e., they involve the expansion, construction, or relocation of buildings, facilities, or offices and the creation of new jobs). Of these sixty-one projects, fifteen have been for firms in the telecom, software, or semi-conductor industry, and eleven have been for firms in the financial sector; the other thirty-nine projects have been associated with hotel renovation/conversion, distribution centers, manufacturing, and other industries/activities. ABATEMENT PROJECTS BY TYPE TYPE OF ABATEMENT #PROJECTS % TOTAL PROJECT PROJECTS Economic Development • Telecom/hi-tech 15 15.2% • Financial sector 11 11.1% • Hotels 4 4.0% • Distribution centers 14 14.1% • Manufacturing 13 13.1% • Other 6 6.1% Housing (non-historic 7 7.1% preservation) Housing (with historic 16 16.2% preservation) Other Historic 11 11.1% Preservation Educational Facilities 1 1.0% Totals 99 100% The thirty-six abatement projects that do not fit into the "economic development" category have been for projects involving the construction of new housing/the conversion of existing buildings into housing, the renovation/preservation of historic buildings, and the construction of higher education facilities. 2 Twenty-five (25%) of the ninety-nine authorized abatements have been for projects located south of 1-30, twenty-four (24%) have been for projects located in downtown Dallas, and forty-seven (47%) have been located for projects within either downtown or about one mile of it. These forty-seven downtown-area abatement projects have involved the renovation/conversion of non-historic structures into hotels (four), the relocation of corporate offices (four), the construction of new offices (three), the establishment of a regional data center (one), the construction of new housing/the conversion of non-historic buildings into housing (seven), the conversion of historic buildings into housing (twenty-one), and the renovation/conversion of historic buildings into retail, offices, or hotels (seven). Eighty-two (82%) of the ninety-nine abatement projects have been fully constructed/completed. Of the seventeen projects that have not been fully completed, six are presently being implemented in some manner and have not yet reached their required effective date (UPS, Nutribiotech, Uber, Vista Print, Equinix, and the Knights of Pythias/Epic Hotel). The remaining eleven projects have not materialized and are no longer expected to occur. IMPACT ON FINANCE To date, the completed projects have generated an increase of about $3.79 billion in the County's tax base. This figure is largely unchanged from 2018 because the 2019 value of a previously completed Tl project (whose value has always fluctuated greatly) declined by about $200 million. Of the $3.79 billion that has been generated by the completed projects, $617.1 million (which is about $15 million greater than in 2018) is presently being generated by eight projects with active abatements. Approximately $402.1 million (or 65%) of the $617.1 million that is generated from the projects with active abatements is abated. This 65% figure is less than the 73% figure from last year and is substantially lower than a 79.6% abatement figure from 2014. Overall, the total amount of assessed value that was abated in 2019 is equivalent to about 0.15% of the County's tax base; this figure is slightly lower than the 0.18% from 2018, and it continues to be much lower than the 1% figure that existed in 2006 when eighteen abatements, all of which have since expired, were active. ABATEMENT UTILIZATION For the eighty-two projects that have been completed, the authorized abatement has actually been utilized in fifty-five (67%) of them. That about one-third of the abatements for completed projects have never been used is not unusual; staff has seen 3 studies where between one-fifth and one-third of the abatements in other areas go unused. Of the fifty-five projects where an abatement has been utilized, thirty-seven (or 67% of the fifty-five) fully used its abatement until it expired, and ten used the abatement for at least one year before its use was discontinued either because of ineligibility or some other issue. The remaining eight abatements are still being used . CONCLUSION Based on the analysis conducted for this report, it appears that the County's tax abatements continue to be successful in facilitating an increase in the County's tax base, that the percentage of new value generated from active projects that is abated continues to decline, and that the percentage of the County's tax base associated with active abatements has generally remained stable for the past several years and is less than what it was in 2006. Staff will continue to monitor the performance of the County's tax abatements and to keep the Court apprised as to the status and impact of these incentives. Please advise if any additional information is needed. attachment cc: Ryan Brown, Budget Officer Darryl Thomas, Auditor John Ames, Tax Assessor/Collector Joe Mayer, Hospital District 4 STATUS OF DALLAS COUNTY TAX ABATEMENT PROJECTS December 2019 YR CITY DIST PROJECT REQUIRED REQUIRED INITIALLY ACTUAL TYPE EFFEC- STATUS #HOUSING #JOBS/ REQUIRED TAX BASE OF TIVE UNITS PAYROLL TAX BASE INCREASE ABATE- DATE INCREASE INCREASE/ AS OF 1/2019 MENT INVESTMENT* 1988 Irving 4 GTE Relocation n/a 1000 $100 million* $70.7 million 25%-50% 111 / 1992 Project completed; real fu lfilled requirements. Abatement ended in 2006. 1989 Richardson 2 MCI Expansion n/a 700 $20 million $34.6 million 25% real 1/1 / 1991 Project completed; fulfilled requirements. Abatement ended in 1994. 1993 Dallas 3 Dallas Education n/a 50 $4 million n/a 100% real 111 / 1995 Renovations completed; Center faci lity became tax- exempt when acquired by DCCCD and then UNT. 1994 Dallas 3 2220 Canton 49 n/a $6 mi ll ion * $ 14.4 mi ll ion 100% real 1/l/ 1995 Renovations completed; abatement ended in 2004. 1994 Dall as 3 Gaston Yards 400 n/a $25 million $64.4 mill ion 100% real 1/ 1/ 1997 Construction completed; abatement ended in 2006. .., 1995 Dallas .) Deep Ell um Lofts 140 n/a $7.8 mill ion * $11.6 mi llion 100% real 1/ 1/1 997 Renovations completed; fulfilled initial invest- ment requirement. Abatement ended in 2006. 1995 Dallas 3 Joske's Building 127 n/a $7 million* $20.2 million 100% real 111 11996 Renovations completed; abatement ended in 2005. 1995 Dallas 3 Convention n/a 600 $70 million n/a 100% real 1/J/1 998 Project did not ever Center Hotel materialize. 1 YR CITY DIST PROJECT REQUIRED REQUIRED INITIALLY ACTUAL TYPE EFFEC- STATUS # HOUSING # JOBS/ REQUIRED TAX BASE OF TIVE UNITS PAYROLL TAX BASE INCREASE ABATE- DATE INCREASE INCREASE/ AS OF 1/2019 MENT INVESTMENT* 1995 Irving 4 Hitachi n/a 2 15 $100 mill ion $ 137.9 mill ion 35%-50% 1/1/1997 Renovations completed, BPP but facility never became operational/abatement never utilized. Facility fist sold to Atmel and then sold to another party. .., 1995 Dallas .) Harwood Pacific n/a 100 $19.5 million $96.9 million 100% real 1/ 1/ 1996 Construction completed; International Ctr abatement ended in 2005. 1995 Dallas 3 North End 500 n/a $29 million $73.4 mi ll ion 100% real 11111999 Construction completed; abatement ended in 2008. 1995 Dallas 3 Centex n/a 50 $2.5 mill ion -0- 75% BPP 1/1/1997 Relocation completed; Relocation abatement ended in 2006.