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Item 6BCity of Southlake, Texas M E M O R A N D U M TO: Shana Yelverton, City Manager FROM: Sharen Jackson, Director of Finance AN ORDINANCE OF THE CITY OF SOUTHLAKE, TEXAS, PROVIDING SUBJECT: FOR THE TAXATION OF GOODS-IN-TRANSIT EXEMPT UNDER SECTION 11.253 OF THE TEXAS TAX CODE; PROVIDING A REPEALER CLAUSE; PROVIDING A SEVERABILITY CLAUSE; AND PROVIDING FOR SAID ORDINANCE TO TAKE IMMEDIATE EFFECT. __________________________________________________________________________ Action Requested: Approval of Ordinance No. 919 providing for the taxation of goods-in-transit exempt under Section 11.253 of the Texas Tax Code. Background Information: In 2001, the Texas Legislature approved Senate Joint Resolution 6, which was subsequently approved by the eligible voters of the State of Texas authorizing a “super freeport” property tax exemption for certain tangible personal th property. The 80 Legislative Session approved House Bill 621 “HB 621” as the enabling statue for the super freeport property tax exemption approved by the voters in 2001. Super Freeport is a property tax exemption for goods that reside temporarily in warehouses within a city while awaiting shipment to other locations within or outside of Texas (as contrasted with the current-law Freeport exemption, which covers only goods shipped outside of Texas). The super freeport exemption is best described as a local option property tax exemption of the “opt-out” variety. The exemption automatically applies to a unlessno later than citythe city does each of the following two things December 31, 2007 : (1) holds a hearing at which members of the public are allowed to speak for or against the taxation of super Freeport goods; and (2) adopts an ordinance stating it wishes to continue taxing super Freeport goods for tax year 2008. The hearing must take place prior to the adoption of such ordinance. Financial Considerations: The debt will be repaid through the Tax Increment Financing Zone. Citizen Input/ thth Board Review: Public Hearing is scheduled for November 6 and 20, 2007. Legal Review: City attorney reviewed the attached ordinance. Alternatives: Deny Supporting Documents: Ordinance No. 919 Staff Recommendation: Approval of Ordinance No. 919 ORDINANCE 919 AN ORDINANCE OF THE CITY OF SOUTHLAKE, TEXAS, PROVIDING FOR THE TAXATION OF GOODS-IN-TRANSIT EXEMPT UNDER SECTION 11.253 OF THE TEXAS TAX CODE; PROVIDING A REPEALER CLAUSE; PROVIDING A SEVERABILITY CLAUSE; AND PROVIDING FOR SAID ORDINANCE TO TAKE IMMEDIATE EFFECT. WHEREAS, in 2001, the Texas Legislature approved Senate Joint Resolution 6, which was subsequently approved by the eligible voters of the State of Texas authorizing a “super freeport” property tax exemption for certain tangible personal property; and th WHEREAS, the Texas Legislature in the 80 Legislative Session approved House Bill 621 (hereinafter referred to as “HB 621”), as the enabling statute for the “super freeport” property tax exemption approved by the voters in 2001; and WHEREAS, HB 621 adds section 11.253 to the Texas Tax Code and exempts from property taxes any tangible personal property (other than oil and gas, aircraft, dealer’s motor vehicle inventory, dealer’s boat inventory, dealer’s heavy equipment inventory, and retail manufactured housing) that is located at a site for less than 175 days and is not under the control of the property owner; and WHEREAS, Section 11.253(j) of the Texas Tax Code provides that the City Council of the City of Southlake, Texas, may in the manner required for official action by the governing body, provide for the taxation of goods-in-transit exempt provided for pursuant to Section 11.253(b) of the Texas Tax Code, and not exempt under other law. Moreover, the official action to tax the goods-in- transit must be taken before January 1 of the first tax year in which the City Council of the City of Southlake, Texas, proposes to tax goods-in-transit; and WHEREAS, Section 11.253(j) of the Texas Tax Code also provides that “before acting to tax the exempt property, the governing body of the taxing unit must conduct a public hearing as required by Section 1-n(d), Article VIII, Texas Constitution. If the governing body of a taxing unit provides for the taxation of the goods-in-transit as provided by this subsection, the exemption prescribed by Subsection (b) does not apply to that unit. The goods-in-transit remain subject to taxation by the taxing unit until the governing body of the taxing unit, in the manner required for official action, rescinds or repeals its previous action to tax goods-in-transit, or otherwise determines that the exemption prescribed by Subsection (b) will apply to that taxing unit”; and WHEREAS, Section 11.253 (j) of the Texas Tax Code also provides that a decision to continue taxing super freeport goods can be reversed for a future tax year; and WHEREAS, the City Council of the City of Southlake, Texas, held a public hearing prior to the passage of this Ordinance, consistent with HB 621 and Section 11.253 of the Texas Tax Code; and WHEREAS, the City Council of the City of Southlake, Texas, find and determines that the super freeport exemption as authorized by Section 11.253 of the Texas Tax Code is not in the best interest of the City of Southlake, Texas. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS: SECTION 1. The findings set forth above are incorporated into the body of this Ordinance as if fully set forth herein. SECTION 2. It is hereby declared to be the intention of the City Council that the phrases, clauses, sentences, paragraphs and sections of this ordinance are severable, and if any phrase, clause, sentence, paragraph or section of this ordinance shall be declared unconstitutional by the valid judgment or decree of any court of competent jurisdiction, such unconstitutionality shall not affect any of the remaining phrases, clauses, sentences, paragraphs and sections of this ordinance, since the same would have been enacted by the City Council without the incorporation of this ordinance of any such unconstitutional phrase, clause, sentence, paragraph or section. SECTION 3. Any provision of any prior ordinance of the City whether codified or unmodified, which are in conflict with any provision of the Ordinance, are hereby repealed to the extent of the conflict, but all other provisions of the ordinances of the City whether codified or uncodifided, which are not in conflict with the provisions of this Ordinance, shall remain in full force and effect. SECTION 4. This Ordinance shall take effect immediately from and after its passage and the publication of the caption, as the law in such cases provides. 2 TH PASSED AND APPROVED ON FIRST READING ON THE 6 DAY OF NOVEMBER, 2007. __________________________ MAYOR ATTEST __________________________ CITY SECRETARY TH PASSED AND APPROVED ON SECOND READING ON THE 20 DAY OF NOVEMBER, 2007. __________________________ MAYOR ATTEST __________________________ CITY SECRETARY APPROVED AS TO FORM _____________________________ CITY ATTORNEY 3