San Marcos Mercury | Local News from San Marcos and Hays County, Texas

July 3rd, 2009
Council looks at loan for entertainment venue

Economic Development San Marcos (EDSM) Executive Director Amy Madison said she couldn’t reveal the board’s recommendation to city council regarding a proposed $5 million city loan to set up an entertainment district at Springtown Center. Photo by Andy Sevilla.

Associate Editor

The San Marcos City Council will discuss a redevelopment deal for the Springtown Center next Tuesday night, though city staff is keeping quiet on its recommendation.

In an emergency meeting of Economic Development San Marcos (EDSM) Tuesday, board members discussed at length in executive session the developer’s requests from the city in efforts to move forward with a proposed entertainment venue project for the Springtown Center.

The developers are asking for up to $5 million dollars in interest free loans, to be repaid through two decades. The first installment of $3.2 million is asked to be advanced concurrently with the developer’s purchase of the Target site, on which the city will obtain a first lien position. The developer also is requesting up to an additional $1.8 million to fund construction and installation of furniture, fixtures and equipment for a proposed Alamo Draft House, should the lease be executed. The city would also obtain a first lien on the theatre’s furniture, fixtures and equipment.

The developers proposed that the $5 million dollar loan would be interest free for a 20-year term, with monthly payments beginning three years after the initial loan funds are disbursed.

The EDSM didn’t publicly state its recommendation, leaving San Marcos residents in the dark about the board’s position, even though taxpayers may have to foot the bill, depending on what council decides.

“It came out of executive session,” said Amy Madison, executive director of EDSM, when asked about the board’s proposal to the city council. “It’s not a public matter at this time. It was a consensus that staff take a recommendation to council, but I cannot discuss what it is at this time.”

The developer is asking the city for a loan in efforts to purchase the Target site. Target has an Operating Easement Agreement (OEA) on the site prohibiting theatres, bowling alleys, night clubs and various other retail uses from developing on or near the property. The city has provided $6 million dollars in incentives for Target, J.C. Penny and Bealls to relocate to the newly built Stone Creek Center. For those tax abatements, the city was unable remove the development restrictions Target has in place at the Springtown Center.

“Here we are incentivizing Target to their new place, but they’re leaving us tied-up at Springtown,” said Councilmember John Thomaides, who also is an EDSM boardmember. “This is a very serious game. We’re talking about the taxpayers’ dollars.”

Thomaides said there was never a discussion of Target having an OEA and its restrictions on development at the Springtown Center when incentives for Stone Creek Crossing were discussed in council. Ultimately, he said, “the responsibility lies on the shoulders of the council.” Thomaides said he has advocated hiring an independent firm to fully evaluate these sorts of dealings, adding that in doing so these “mistakes” will not go overlooked.

“If we’re going to spend millions of dollars in incentives, why not spend $10,000 on a firm and have people that are experts look at the deal?” Thomaides asked.

Added Thomaides, “This is the failure of that Stone Creek deal. To not know that this OEA was in place (at the Springtown Center), and essentially being blackmailed.”

City Manager Rick Menchaca said he could not forecast the city loss in interest dollars on the requested loan.

“We didn’t run those numbers because we were waiting to see the recommendation the (EDSM) board was going to make to council,” Menchaca said two days after the EDSM board came up with its recommendation.

The city council will take up the matter at its July 7 meeting. Menchaca said it is on the council agenda as a discussion, consideration, and possible approval of incentives for redevelopment of the Springtown Center, although it was initially on the council agenda as a consent item.

Menchaca said the redevelopment proposal is not being rushed through council and is following normal procedure. He said that when the EDSM board reviews and considers a development proposal, it appears on the agenda at the following city council meeting.

“We’ve been discussing this for seven or eight months now, since it was initially presented to the city,” Menchaca said.

About 180,000 square feet of Springtown Center’s  210,000 square feet are vacant. The developer has suggested a movie theatre, bowling alley/entertainment center, family entertainment venues, sports bar/nightclub, and restaurants as possible uses for the Springtown Center. The developers aim to establish the existing center into an entertainment-focused venue with a variety of mixed use tenants. In a presentation, the developer articulated the need for a venue supporting the adjacency to the Texas State playing fields and game day crowds.

Menchaca said the proposal does not discourage entertainment development throughout the city.

“The downtown master plan does not preclude other areas (in San Marcos) from being entertainment venues,” Menchaca said.

In the EDSM presentation, the developer said there are several benefits to the project:

– It creates a development that brings a new mix of retailer/users to an older, declining shopping center;
– It increases tax revenue for San Marcos and San Marcos CISD;
– It creates an entertainment destination that appeals to the local community, Texas State’s student body, and visitors; and
– It benefits neighboring businesses that have seen a decline in business since Target and other tenants have vacated.

The developers said they will provide an outdoor pavilion or gathering area at the Springtown Center within three years after the effective date of the loan. The area would be privately owned, but made available for periodic public use. The developer has also agreed to hire local businesses in assisting with the renovation and redevelopment, as well as to continue leasing to current tenants during and after the renovations. It has also been agreed that 50,000 square feet of the center will have entered into initial leases for entertainment uses within five years after the effective date of the loan.

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0 thoughts on “Council looks at loan for entertainment venue

  1. I’m not saying this is a bad idea but curious to know the cost, I ran the numbers. A 20 year loan of $5 million at 4% interest would pay $2,271,763 in interest over the life of the loan.

    Not sure what interest rate the city pays for its money but this seems like an expensive gamble.

  2. The City of San Marcos should not loan out-of-town developers $5 Million, interest-free. Our unpaid City Council does not have the expertise to do business with developers and their dealmakers. Thomaides openly admits that the Council got taken for a ride with Target and Stone Creek, leaving us with a crippled Springtown Mall. It doesn’t take an M.B.A. to understand that, if Springtown is really worth the investment that the developers say it is, then it will get developed even without our City’s hard earned cash. The city gets nothing out of this deal, the developers are in a no-lose position. The EDSM/City Council has fallen for some slick presentations and sales pitches; and perhaps their own hubris.

    Why did the EDSM need to meet in an emergency meeting?

    City Manager Mike Menchaca will not “run the numbers” on the City’s loss in interest revenue (stated at over $2 million above, at a reasonable rate) until AFTER the EDSM makes their recommendation to Council. How is the EDSM supposed to make an informed decision without an estimate of our loss. Shouldn’t the ECONOMIC DEVELOPMENT board be asking for cost/benefit analyses of the city’s potential tax stream from the proposed Springtown versus the loss in interest on the principal loan? They need to be doing due diligence on the proposal; lack of due diligence is how we got taken by Target and Stone Creek.

    Thomaides is already talking about spending $10,000 on a consultant, but of course, the consultant will sweet talk it into becoming a $30,000 fee, just like the developers are sweet-talking us out of $5 Million. There is a cheaper alternative, don’t loan any big developers any money. Here’s an idea, set up a Small Business ED, that’s what our elected officials should be promoting, small, LOCAL business owners, thats how revitalization of city’s interior neighborhoods, entertainment districts, and retail areas will be accomplished.

    It would be fantastic to have an Alamo Drafthouse in Springtown; its easy to imagine how popular that shopping center could be with the right amount of encouragement. But we did not elect our officials to turn our coffers into an interest-free bank, reserved only for wealthy non-resident developers. We should encourage such a development, but not fund it. We should provide it with no more incentives than we would give a local small business owner.

  3. I was under the impression that an entertainment area would be set up at the Stone Creek site. No money should be given to this new developer for work that might not get done. The city had to give more money to finish out the current buildings out at Stone Creek. It’s time for the city council, mayor and city manager to open their eyes and see all the bad they will eventually do. They can’t even read the fine print from an old document at the old Target. This is a sign of change that needs to happen in San Marcos politics.

  4. Everybody needs to calm down. What is wrong with have competition throughout our city? Why are we suggesting that the downtown should monopolize entertainment. I think this is a stupendous idea, I do however disagree with the loans term. If the city is going to have to loan 5 million dollars, then the city should have the right and demand interest on that money. Also, I think Thomaides is right in saying that a firm where experts knowledgeable on these matters should have been solicited when the council gave away a 6 million dollar present to Stone Creek. Why not spend the extra 10,000 dollars that would have saved the city the embarrassment and stupidity of what Target was doing.
    Target and business like that are survive from bending dumb cities over and giving it to them quite aggressively. First of all, what the hell was the council thinking it providing them with 6 million dollar incentives? and secondly, this council is super stupid and city staff is super incompetent in allowing these restrictions to remain in place after what the city did for Target. Where was the city attorney? Where was the City Manager? Where was the “all knowing” city Mayor? when these negotiations were taking place for Stone Creek and leaving Springtown crippled.
    This is all ludicrous!

  5. After speaking my mind on the matter, I still do have to say that this redevelopment is a good idea. Business competition should never be stifled. I only disagree with the city’s 5 million dollar loan to the developer. BUT if the loan is absolutely unquestionable, then the city MUST collect interest on said loan. It’s time our council act appropriately. Several of these council members will be up for reelection soon, either this year or the next or the next, vote them out people. If you do not like what they’re doing, then vote them out. Or just shut up and vote the Mayor in for yet another term, like we all seem to do so carelessly.
    Everyone have a blessed day!

  6. As many know, I was an opposed to the Direct Development/Stone Creek development incentive #2 deal, and warned at that time that the Springtown redevelopment would require development incentives. I believed then and now, that factor should have played a major consideration in Council action related to to the Direct Development incentive package.

    Let me say first, that I have had discussions with the developers of the Springtown redevelopment project and that there are many facts in this story that are incorrect as to the current incentive proposal on the table. I’m certain that the developer presentation on Tuesday night will clear up many of the misconceptions.

    I believe that the proposed redevelopment is a unique and impressive concept that warrants participation by the City at a reasonable level. Springtown is a central and highly visible feature of our community, and deserves the opportunity to be upgraded and become home to many new retailers, restaurants, and entertainment venues. I think it is important to bear in mind that ALL of the proposed tenants that the developer is currently working with are NEW businesses coming to San Marcos. That in itself is more that the Direct Development deal got us.

  7. Interesting what Robert McDonald is alleging, I actually spoke with one of the members of the EDSM (name not important) after reading this article, and it seems as if the presentation provided to them on Tuesday was accurately captured in this article. I understand the skewing some developers may verbally present to citizens in order to garner support, but I think the facts presented to the EDSM may differ from what this guy, Robert McDonald, may have been told by the developers.
    At any rate, this is all moving swiftly and behind closed doors. Only a few, very few, know the recommendation forwarded to council, and even then the matter will be taken up in executive session at council, so we may never know what the EDSM recommendation actually was.
    This redevelopment is very very fishy. The loan requested is ridiculous, and the city should not subsidize it. This property is in a strategic location and will get developed well without the money of the tax payers.

  8. I bet Robert McDonald was not present at the EDSM board meeting. This meeting was an emergency meeting and most of the discussions were closed to the public.

  9. I really don’t understand why we would offer any incentives to businesses that will lower the per capita income in San Marcos. All these millions of dollars we piss away on Target and JCP and Dave and Buster’s (or whatever it is that they are going to put at Springtown), could fund a staff of experts pursuing high-tech businesses (or whatever we decide would be a good fit for the city and the university), with plenty of incentive money left over to seal the deal when the *right* opportunity came along.

    This city does not need any more waitress and busboy jobs.

  10. Also, how did this issue, which everyone in San Marcos has been aware of for as long as I can remember, require an “emergency meeting”?

    Per Texas Government Code 551.045,

    “(b) An emergency or an urgent public necessity exists only if immediate action is required of a governmental body because of:
    (1) an imminent threat to public health and safety; or
    (2) a reasonably unforeseeable situation.”

    This does not seem to be a reasonably unforeseeable situation and it certainly does not sound like an imminent threat to public health and safety.

  11. Is the city counsel on drugs?? Let’s give a large, out of town developer 5 million dollars interest free for 20 years?! That is plain stupid.

    The location is prime and if the developer want’s it bad enough, they will come up with the money themselves… after all, they are a big developer, right? Why fund them with our money?

    If the city is hell bent on giving money away for an Alamo Draft House (Great Idea, by the way), why not give the money to a local entrepreneur to develop the idea… perhaps the old Gordos theater on the square would be a better location for an Alamo Draft House anyway. Hello, it’s already a theater AND it’s already located in an entertainment district. Ohhh and it’s empty and currently very ugly.

    Just my two cents

  12. Its very difficult to give much credence to comments made by those unwilling or afraid to sign their name to their comments, Hmm.

    Again, the most recent proposal is not accurately reflected in the article. I have seen the latest proposal from the developer, so I am not speculating in that regard. I have no reason to believe the developer is trying to “hide” the terms. There has been an ongoing negotiation related to this development incentive for several months. I would simply suggest you show up at the Council meeting and see what presentation is made.

    Until you are aware of the correct terms of the loan proposed, to term it ridiculous is irresponsible.

  13. Incentives for jobs that don’t pay a living wage is ridiculous. The terms are irrelevant.

    The fact that there have been negotiations going on for months reinforces my position that an emergency meeting was unwarranted.

    Whether people use their real names on here is immaterial to the points they are making and I am not aware of anyone doing any validation to ensure that the names that sound real actually are, or that the people posting under real names are actually those people.

    Some of the comments by “Hmmm” would carry more weight with a name, but most of his/her comments and those made by people using only their first names, stand up just fine on their own, names or no names.

  14. So, McDonald, we’ve got a Newstreamz reporter, an editorial and another poster saying the incentive is $5 million in interst-free loans – $3.2 million to buy the Target building and $1.8 million for FF&E on the Alamo Draft House. You say the proposal is “not accurately reflected in the article.” Are you suggesting that the developer is hitting up the city for even more incentives? Remember, the opening of Alamo Draft House or Dave and Buster’s is not an incentive. An incentive is a giveaway the city is willing to make. It appears you’re suggesting that the city is even more foolish than this article suggests. Since you’re so well informed, why don’t you man up and cough out what else the city is giving away, rather than drop these weasley hints that the deal isn’t “accurately reflected?” Say something specific to make a constructive contribution to the conversation, rather than just glittering with vague generalities that lack specific content. I have no doubt that Newstreamz has reported this accurately, and you have offered no concrete evidence, just weasley hints, that they haven’t.

  15. I’m not aware that the City has agreed to “give away” anything and have at no time have implied such. I’m simply aware that the most recent proposed terms from the developer are not accurately reflected in the article. I have no idea what incentive the Council is willing to make. I will simply attend the meeting as I have suggested other interested parties do.

    It is not my place to present the developers proposal to the public, however I certainly did not imply that their request was in excess of the terms the reporter referenced because it is not.

    There seem to be a number of people, Newstreamz staff included, that want to make this out to be “downtown” versus the world. I don’t see it that way. Space and parking limitations downtown would keep many business owners from considering a downtown location…..not to mention that most of the buildings appear to be well occupied.

    I agree that there is a need for better job opportunities in San Marcos, but part of a dynamic community is its entertainment sector, along with its downtown district, housing opportunities, education system, infrastructure, etc., etc., and those are certainly a consideration to companies considering relocation or expansion into San Marcos. I see all as part of the puzzle.

    But Nick…you just continue to believe that what you read in the news is always accurate.

  16. Given that we have two movie theaters, MANY restaurants and MANY bars, I do not believe what is keeping good jobs out of San Marcos is a deficiency in our entertainment sector.

    Infrastructure, maybe. Education system, almost certainly. Housing opportunities, yes (in the way that neighborhoods are unprotected).

    We have no shortage of entertainment venues and our tax dollars do not need to be used to bring them to town. That money (millions upon millions for all aspects of the Target deal)) could be spent on a high-powered program to find and attract good jobs to San Marcos.

  17. Exactly, Ted. We don’t need to encourage any more retail. We need real jobs here. Council needs to work one increasing the quality of life here (more parks and recreation, and better parks maintenance). If we can pitch San Marcos as a less crowded, small town version of Austin, we have a chance at luring a tech company, etc., to move down here and bring real JOBS. The council (and our water hog residents) also need to appreciate that no one will move here (and many will move away) when the river dries up.

  18. I’m disappointed there has been no pitch from the folks supporting this. They must have a good reason for thinking this is worth the investment. I’d like to know what it is.

  19. Since when did the Downtown Association become responsible for economic development in San Marcos? Why should a few nervous bar owners be allowed to dictate what to do with a functionally obsolete albatros, sitting vacant in the worst economic times since the great depression?
    Why not let a process play out which may very well create hundreds of jobs for construction crews to transition this valuable property from disaster to something valuable again. Then hundreds more jobs to provide goods and services to the millions of tourists who pass through our town every year.

    It would be great to see that parking lot full again with cars that need fuel, service and car washes, and customers that need food, beverages and entertainment.

    Why not do something that will benefit the entire community, even, believe it or not, the downtown nervous nellies.

  20. Hey Bob I think your point is very well made, and Im am fully in support of having the “vacant” Springtown Center full and running. But I do take opposition towards having the city (tax payers) provide the developer with an interest free loan of 5 million dollars. This piece of property is prime. Anyone would be lucky to grab it and redevelop it. If the city would wisely not provide this incentive, I know that the developers will not back down and find either another partner, or get a loan from a bank or back it with any assets they already possess. Nobody is against the development, what everybody is against is having the city subsidize the redevelopment. That is very irresponsible and ludicrous, and should not be tolerated or encouraged!

  21. I’ve heard through the grape-vine that Kim Porterfield and John Thomaides are planning on running for the Mayor’s seat in 2010. Everyone pay close ATTENTION to their vote, and come 2010 vote for a conscientious council. Also, pay close attention to how Pam Couch and again John Thomaides vote, their seats expire in 4 months, if you like what they do, vote for them, if not, vote them and their allies out!

  22. I visited with the developers this morning, and can clarify that their proposal is for a 5 million dollar loan, with a 20 year amortization and due in full with interest on or before 7 years. To many, that will make no difference, but the reality is that this redevelopment will be a regional draw bringing in outside sales tax dollars for decades.

    The City and its taxpayers benefit from those sales tax dollars.

    Job growth is good, even when it is “just” service industry jobs.

    And unlike the Stone Creek deal, these are new jobs.

    The terms of this (and most) development incentive deals change daily. Whether all believe it or not, the citizens have representation working hard to make the best deal for the community.

  23. What is the interest rate? If it is a competitive interest rate, above what we pay to borrow, then that is a different story. Still, it takes money off the table for other possible projects.

    I am not clear why they need a loan from the city, particularly if it is a loan at a competitive interest rate, unless they are having credit problems. I believe the company is losing money and sales are off. Information is hard to come by, since they were taken private a few years ago, but they still file with the SEC. Perhaps credit issues are behind the loan request. I have no idea.

  24. Again, the developers and council should provide hard numbers. Supporters of this (and other) incentives for retailers are always speaking of the “benefit of those tax dollars” and their potential as “a regional draw bringing in outside sales dollars for decades”. I’d like to know just how much tax revenue the new Springtown is supposed to generate over the next 20 years. And I’d like to see the Council/City Manager have an independent source review such data. When cities talk about bringing in attractions/entertain/recreation as a means of increasing tax revenue, they’re usually talking about activities that keep people in town, spending on hotel rooms and incidentals. I doubt that anyone would stay in San Marcos an extra day because of Springtown, regardless of what gets put in it.

  25. It is my understanding that the agenda item has been pulled for tomorrow night, to allow opportunity for all involved to continue to work on a plan.

    I think the exchange of comments has been productive, and I’m certain all will have an opportunity to voice their opinions again soon.

    For what its worth, I think your elected officials are listening more than you think !

  26. I’m frustrated I’ll be out of town tomorrow and unable to attend the meeting to see if the folks in the know can sell me on this project. I’m an open minded guy but I’m not hearing the other side of this issue – just chatter from folks with part of the story. I can’t believe there’s not a council or EDSM person willing to submit a piece in support. I must conclude the project is damned by faint praise.

  27. If the item has been pulled then there will be no discussion of it from our city leaders. Everyone in San Marcos can show up to show their opposition to this redevelopment subsidy, but if our elected officials are keeping mum then we remain in the dark. This is a public policy issue, and our elected officials need to speak with the public on such matters. Enough of the clandestine behind-the-scenes deals brokered by those that dont seem to have the publics interest at heart. Transparency is necessary and much needed in San Marcos. These back door deals are detrimental to the public and more light needs to be shed.

  28. Why havent any of the elected officials spoke out on this issue? I know for a fact that most of the council members read Newstreamz and yet have said nothing. The EDSM knows Newstreamz has written articles about this and not one board member has said nothing. Why is imperative to keep this so secretive, afterall it is OUR tax dollars that are being spent and we should know what the hell is going on!

  29. Typical political tactic. Heat and pressure rises so pull the item to a different meeting. Citizens with lives and jobs and families will forget or be discouraged by the delay in a decision. Developers with time and money can wait the citizens out.

  30. Robert,

    Your comment about the ‘exchange of comments’ being productive puts me in mind of how the Delphi Technique works. This is a communist tactic to get the People talking about their ‘concerns’ and to make the people believe they have real input that can direct the decisions of govt. In many cases, discussion topics are primarily determined by those who called the meeting. There are people planted in the groups to difuse anyone who has a concern that is ‘off topic’ . Very effective. Happens a lot in these type forums online, too.

    The people who spill their guts in such meetings, discussing their specific concerns are merely providing all the information that will later be countered with the ‘appropriate’ brush-off statement, and then the opposing side will just be ignored.

    The Delphi Technique. Control the meeting topics, let the people talk, gather their information, create justification statements, and of course then proceed with the original plans… regardless of how many people are in opposition.

    We the People are on to this technique now and are refusing to discuss much of anything anymore, except to give a clear definition of a tyrant, and to give our flat refusal to the government servants.

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