Freethought San Marcos: A Column
By LAMAR HANKINS
Longtime San Marcos-area developer Robert McDonald III is not pleased with the San Marcos City Council’s award of an additional $4 million in development incentives to Stone Creek Crossing, the project on Interstate-35 near McCarty Lane that will include the relocated J. C. Penney’s, Bealls, and Target stores, along with some new, smaller additions to the San Marcos retail and fast-food mix. Total development incentives for the project are up to $6 million in property and sales tax rebates, money that would otherwise be paid to the city.
The strongest objection made by McDonald is that once construction has begun on a project, giving the project additional tax rebates is no longer an incentive, but “a bailout.”
To be sure, Mayor Susan Narvaiz has her reasons for pushing for the additional “incentives,” which were approved on a narrow vote of 4-3 by the council on Oct. 21. She cited increased development costs for solving drainage problems at the site and other “improvements” to the project, most of which were requested by city council members, such as a hike and bike trail, reversal of an Interstate-35 ramp in front of the project site, a rock wall, and promises by the developer to seek an “entertainment venue” at the project.
The entertainment venue addition means that we could get another movie theater, arcade, carnival, amusement park, or bowling alley, or perhaps something a bit more upscale, like a museum, concert hall, or live performance theater. While the developer agrees to “diligently pursue” an entertainment venue using “commercially reasonable efforts,” there is no promise to provide such an attraction.
I have to wonder whether giving money that should be flowing into the public coffers for such whims is either wise or responsible. If San Marcos needs another entertainment venue, won’t the market provide it for us? If there is a viable opportunity to make money from entertainment or any other business activity, the market will respond. The real chance to make money is the force that drives the market. There are lots of businesses I would like to have in San Marcos, but they aren’t here because the market for them is not right. No amount of pushing our wishes on developers will change the market potential for any type of business.
The mayor held a meeting for interested citizens at the Price Seniors Center Monday evening, Nov. 24, to discuss this project and explain why the additional tax rebates were given to Stone Creek Crossing. At that meeting, she promised to send me the figures which show how much sales tax revenue is now being generated by the three stores that will be relocating to the new project and how much is expected to be generated at their new location. To date, I have not received that information.
McDonald raises this very issue in a letter to the mayor, objecting to the increase in development benefits to the project:
“This development brought nothing new to San Marcos,” the letter says. “They have three tenants, all of which are currently doing business in town. What is the economic benefit to the community? I believe that all of these retailers would all have expanded their operations regardless of this development or incentive … We are giving up what would have been generated by these retailers anyway, and I believe it highly unlikely that a penny of the sales tax rebates go into any pocket other than the developers.”
Whether one agrees with development incentives at all, if we are going to have them, they should be given out through a fair process. McDonald questioned whether the regular process had been followed in this case. He noted that the city’s economic development staff and a related committee did not review the proposed increase in tax rebates given to Stone Creek Crossing. The mayor did not address this issue during her Monday meeting, but it appears that discussions to grant additional tax rebates or other development incentives do not normally result in further consideration by economic development staff or review committees. Apparently, such matters are left to the impulses of council members.
At the Nov. 21 meeting, the mayor explained that additional tax rebates for this project had been discussed by council members over several months, beginning on July 28. The council discussed the additional rebates during an Executive Session on Aug. 5, councilmembers were asked their opinions about the direction the city staff was moving in negotiating additional rebates. During this closed meeting, council members expressed their views, apparently to the city manager and the city attorney, concerning additional tax rebates for Stone Creek Crossing. Had the result of this discussion been mentioned when the council went back into regular session, citizens would have been alerted to the plans to increase the tax abatements for the project, and would have had time to respond.
As it happened, the agenda item posted for the Oct. 21 meeting did not include any amounts of new tax rebates that were to be considered. The mayor pointed out that a copy of the agreement to be voted on could be viewed on-line by those who wanted to explore the matter more deeply. However, as a practical matter, unless one is alerted that increased tax rebates are being considered, it is doubtful that most people would take the extra time to carefully explore all of the back-up materials that accompany a council agenda.
While the city council may legally deal with the public’s business by writing less than fully informative agenda descriptions, this practice demonstrates a willingness to be less than transparent. Most of the recent city charter amendments amply demonstrate this tendency. The spare wording found on the recent ballot made it nearly impossible to know exactly what one’s vote meant.
Because of his extensive experience in development in the San Marcos area, McDonald’s opinions on these development incentives for Stone Creek Crossing should be given greater weight than those of the average person. He understands the financial problems that can affect a project. He has experienced most of them himself and has never been bailed out by the city when circumstances changed or he has run short of funds.
McDonald wrote, “Cost increases are a common problem with any development or construction activity. It is an issue to be addressed between the developer, the lender, and the tenants. The developers of this project are financially capable of solving their own problems. They simply would rather use your money to solve those problems than their own! In the event they are not able to resolve the problems with their development, another developer will not be far behind, ready to inject new capital and resurrect the deal. Do you really want to set a precedent of coming to the City to bail out projects that are having financial problems? If so, where does the line form?”
The desire for new development in San Marcos needs to be tempered by members of the city council. The Santa Claus mentality about development incentives that has pervaded city councils for the last 20 years needs to be closely examined and changes should be made. One of the best changes would be to seek advice from those critical of such giveaways, rather than take advice only from proponents of development incentives.
While it is comfortable to have unanimity on all decisions, this seldom results in the best decisions. Reaching out to opponents of development incentives, critics of some incentive decisions, and skeptics might bring the consideration of such activities into greater balance.