Item 6CM E M O R A N D U M
November 30, 2011
To:
Shana Yelverton, City Manager
From:
Sharen Jackson, Finance Director
Subject: 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 AN EFFECTIVE
DATE.
Action
Requested:
Approval of Ordinance No. 1018.
Background
Information:
In 2007 session, the Texas Legislature passed Tax Code
Section 11.253 or the “Goods-in-Transit” exemption as it is
more commonly known. This legislation implemented a
constitutional amendment that was passed in 2001. This
legislation was very similar to the “freeport exemption”
passed many years ago, but it had a potentially larger impact
as time passed. On November 20, 2007, City Council
approved Ordinance 919 to tax tangible personal property in
transit (goods-in-transit) which would otherwise be exempt
pursuant to Texas Tax Code, Section 11.253.
During the 2011 special session, Legislature enacted Senate
Bill 1, a comprehensive budget bill. Within this bill, there was
language that amended the Property Tax Code specific to
the goods-in-transit exemption (section 11.253). This
exemption now applies only to goods that are stored in a
public warehouse owned by someone other than the owner
of the goods. The law no longer exempts goods that are in a
location for assembly, manufacturing, fabrication or
processing, as was the case under the law passed in 2007.
This update to the law requires that the City act within a
narrow window of time to continue to tax these goods for
2012. The update provides the City must take action after
October 1, 2011 but before December 31, 2011, to continue
to tax such goods in 2012.
The Super Freeport exemption is best described as a local
option property tax exemption of the “opt-out” variety. The
unless
exemption automatically applies to a city the city
no later than
does each of the following two things
December 31, 2011
: (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 2012. The hearing must take place prior to the
adoption of such ordinance.
Financial
Considerations:
Reduction in property tax revenue of approximately
$129,000
Strategic Link:
F1 Adhere to financial management principles and budget
Citizen Input/
Board Review:
Public Hearing scheduled for December 6, 2011.
Legal Review:
City attorney
Alternatives:
Deny Ordinance
Supporting
Documents:
Ordinance No. 1018
Staff
Recommendation:
Approve Ordinance No. 1018
ORDINANCE NO. 1018
AN ORDINANCE OF THE CITY OF SOUTHLAKE PROVIDING FOR THE
TAXATION OF GOODS-IN-TRANSIT EXEMPT UNDER SECTION 11.253
OF THE TEXAS TAX CODE; AND PROVIDING A REPEALER CLAUSE;
PROVIDING A SEVERABILITY CLAUSE; 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,
WHEREAS,
the Texas Legislature in the 80th 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,
Section 11.253(j) of the Texas Tax Code provided that
municipalities, may in the manner required for official action by the governing body,
provide for the taxation of goods-in-transit otherwise exempt pursuant to Section
11.253(b) of the Texas Tax Code, and not exempt under other law, which provision was
approved by passage of Ordinance 919 in November 2007; and,
WHEREAS,
the Texas Legislature in the 82nd first special session passed
Senate Bill 1 which amended Section 11.253 of the Texas Tax Code to redefine and
again exempt goods in transit from taxation unless municipalities, pursuant to new
Section j-1 of Section 11.253 of the Tax Code, again enact measures taxing such goods
in transit by an ordinance passed between October 1, 2011 and before December 31,
2011 after a public hearing thereon; and,
WHEREAS,
the City Council held a public hearing prior to the passage of this
Ordinance, consistent with Senate Bill 1 and Section 11.253 of the Texas Tax Code;
and,
WHEREAS,
the City Council finds 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.
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SECTION 2.
The City Council of Southlake, Texas hereby provides for the
taxation of goods-in-transit personal property as defined by amendments to Texas Tax
Code §11.253 under Senate Bill 1, shall be, and are hereby declared to be, taxable for
tax year 2012 and for every year thereafter, all as provided for and in accordance with
Texas Tax Code §11.253.
.
SECTION 3It 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 4.
Any provision of any prior ordinance of the City whether
codified or uncodified, 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 5.
This Ordinance shall take effect immediately upon its
passage.
th
PASSED AND APPROVED ON FIRST READING ON THE 15 DAY OF NOVEMBER,
2011.
__________________________
John Terrell
Mayor
ATTEST:
__________________________
Alicia Richardson, TRMC
City Secretary
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th
PASSED AND APPROVED ON SECOND READING ON THE 6 DAY OF
DECEMBER, 2011.
__________________________
John Terrell
Mayor
ATTEST:
__________________________
Alicia Richardson, TRMC
City Secretary
APPROVED AS TO FORM
_____________________________
CITY ATTORNEY
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