Title
Consider/Discuss/Act on an Amendment to Chapter 98 (Taxation) of the City of McKinney, Texas, Code of Ordinances Modifying the Program Requirements and Annual Aggregate Cap for the Historic Neighborhood Improvement Zone Incentive Program and Relocating the Program Requirements for the Neighborhood Empowerment Zone; and Accompanying Ordinance
Summary
COUNCIL GOAL: Enhance the Quality in McKinney
(5D: Promote reinvestment activities and ordinance changes in McKinney's historic downtown that balance preservation of historic character and current market needs)
MEETING DATE: March 15, 2022
DEPARTMENT: Development Services - Planning Department
CONTACT: Paula Nasta, AIA, Planning Manager
Jennifer Arnold, AICP, Director of Planning
RECOMMENDED COUNCIL ACTION:
• Staff recommends approval of the proposed ordinance.
ITEM SUMMARY:
• Staff is proposing amendments to Section 98-84 (Historic Neighborhood Improvement Zone) to update the program requirements and annual aggregate cap.
• Staff is also proposing a non-substantive amendment to Section 98-84 (Historic Neighborhood Improvement Zone) and 98-85 (Neighborhood Empowerment Zone, NEZ) in order to relocate the program requirements for the NEZ Program into the associated section of the code.
• In late 2021, Planning Staff presented an informational update regarding the Historic Neighborhood Improvement Zone Program (HNIZ Program) to a joint work session of the Historic Preservation Advisory Board (HPAB) and City Council seeking direction on possible program improvements.
• Following these discussions, Staff has drafted proposed amendments and is please to present them to the City Council for consideration at tonight’s meeting. These proposed amendments were presented to the HPAB at the March 3, 2022 meeting. The HPAB was generally supportive of the changes.
• Following Council consideration tonight, Staff hopes to begin accepting HNIZ tax exemption applications again immediately.
PROPOSED AMENDMENTS:
• The proposed amendments to the HNIZ ordinance include the following:
o Increase aggregate cap to $500,000 annually.
o Adding a program requirement that eligible properties be owner-occupied.
o Establishing a new minimum investment requirement of $10,000 for Level 1 (100%) tax exemptions. The current minimum investments for Level 2 & 3 will not change.
o Adding a new program requirement for Level 2 and Level 3 exemptions stating that eligible houses must be a minimum of 40 years old. The Level 1 minimum age requirement will remain 50 years.
o Modify the exemption period for each incentive level from a mix of 7 or 15 years to a consistent 10 years for all incentive levels. Homes with existing exemptions would remain the same.
o The proposed amendment also moves the program requirements for the Neighborhood Empowerment Zone (NEZ) program out from Section 98-84 to into its own section, Section 98-85. No other changes are proposed for the NEZ program.
BACKGROUND INFORMATION:
• The 2007 City Council worked through committee to create a program to support investment in the diverse housing mix in historic McKinney.
• In 2008, Council approved the three-tiered time limited HNIZ tax exemption program offering ad valorem tax exemptions for residential properties owners that invested in maintenance and/or rehabilitation.
• The City established an aggregate cap of $50,000 of the total amount of City property taxes which could be exempted in any budget year was established to limit potential budgetary concerns. The annual cap would be reached on a “first come, first served” basis. The program could also be suspended for budgetary considerations.
• In 2013, 2015, and 2018 the City Council approved amendments raising the aggregate cap to $250,000 and reducing the number of years for the 100% Level 1 exemption from 15 years to 7 years for any new Level 1 exemption.
• The program has grown from 3 homes in 2008 to 137 properties today. On average, the program, has added 10 houses per year.
FINANCIAL SUMMARY:
• The proposed amendments would increase the aggregate cap on foregone taxes for the HNIZ Program from the existing cap of $250,000 to an annual aggregate cap of $500,000.
BOARD RECOMMENDATION:
• On March 3, 2022, Staff presented the proposed amendments to the Historic Preservation Advisory Board and received favorable feedback.