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

February 28th, 2010
Mayor discusses Springtown Mall with full city council chamber

022810meetingSan Marcos Mayor Susan Narvaiz, far right, talks with a city council chamber full of citizens about the issues surrounding Springtown Mall. Photo by Sean Batura.

News Reporter

San Marcos Mayor Susan Narvaiz told a packed city council chamber Saturday morning that the city isn’t necessarily willing to offer $2.5 million to locate an Alamo Drafthouse Cinema in the old Best Buy building at Springtown Mall, but the city is willing to offer $2.5 million for the re-development of the largely abandoned shopping center.

Narvaiz said the exact form of the incentive is a matter being worked out by the city staff and the Springtown stakeholders. City Manager Rick Menchaca will staff will offer a proposal and staff recommendations to the city council on March 2 in closed executive session. Narvaiz said the proposal may be made public before the council votes on the matter on March 23.

Said Narvaiz, “I can tell you what the council said was that we were willing to do $2.5 million in some form with a sales tax rebate in the same way we’ve done the other things — where we’re not writing an upfront check — and go back and get everybody in the room and find out what we can do to make that happen.”

Current Springtown Mall business and other businesses nearby say they have faced increased burglaries, declining revenues and possibly a larger transient population since three anchor tenants — Target, Bealls and JC Penny — followed $6 million in city incentives to develop StoneCreek Plaza on the south end of the city.

Narvaiz said the council instructed city staff to negotiate a redevelopment incentive proposal with input from the Springtown Mall owners, Thrivent Financial for Lutherans, and Target Corporation.

Springtown Mall, owned by Lamy-Springtown Mall, Ltd., is listed for foreclosure in the March 2 auction on two parcels. One of the parcels includes the property proposed for the Alamo Drafthouse. The Springtown Mall owners are in default to Thrivent Financial for Lutherans by nearly $10 million, though Hays County has appraised those parcels at almost $8 million, entailing approximately $2 million in negative equity. Narvaiz said Target Stores still owns the building it vacated at Springtown.

On Feb. 16, the San Marcos City Council tabled action and open discussion on a proposed $2.5 million interest-free loan to Triple Tap Ventures, LLC, for the redevelopment of the old Best Buy building to bring the Alamo Drafthouse to San Marcos. The ten-year loan for the six-screen, 23,250-square-foot theater may have been repaid in nine years with the attendant increases in city sales and property taxes above current levels.

At Saturday’s forum, Narvaiz gave audience members an overview of the types of economic development incentives the city has used in the past. Narvaiz said the economic development incentive tools the city council may opt to use for the redevelopment of Springtown include the sales tax rebate and the property tax abatement.

In response to an audience member’s concern that whatever incentive offered to redevelop Springtown might not solve the problem, and might be a slippery slope requiring even more incentives on top of those already given, said Narvaiz: “I think that if you went back and looked like any of the development agreements done since 1998, whoever has been sitting up there (on the council dais) has projected accurately and conservatively, and they have more than gotten a return on the investment that any private business would be glad to have, and we’ve been financially responsible, and they haven’t failed.”

An audience member asked Narvaiz why the city should interfere in the free market and not let Springtown’s owners go to foreclosure. Narvaiz replied that the small businesses might not be able to hang on while the foreclosure process runs its course, and the area may remain in a blighted state for longer than it should. Narvaiz said the city also would not have as much control over the outcome if it does not intervene.

“I guess the big concern there is the process might take a year to a year and a half with foreclosure, and the (lender) is a non-profit, and we’re banking somewhere in the area of $64,000 in property taxes — or sales tax — well, property tax, I think,” Narvaiz said. “And that income would go away. So we are thinking about those things.”

An audience member said his business has been in San Marcos for more than 50 years and said he never received any help from the city even during his struggles. The same audience member said it would not be fair for only new businesses to receive help. Narvaiz replied that the city has not done a good enough job of retaining existing businesses and jobs, but it has turned over a new leaf. Narvaiz said the city’s economic development board launched the Grow One San Marcos project to survey existing businesses and introduce incentive opportunities for them.

Hays County Precinct 3 Commissioner Will Conley (R-Wimberley) was at the meeting on Saturday, and spoke in favor of government intervention to redevelop Springtown, though he did not endorse a specific approach. Conley’s business, Conley Car Wash, Detail & Express Lube, is located near Springtown on Thorpe Lane.

“Over last 12-18 month period, in different portions of my business, I’ve seen a 20 to 30 percent drop,” Conley said. “There’s a lot of elements to that — it’s not any one thing. Springtown, for us, has had a tremendous impact on our business leaving.”

Narvaiz said the Sylvan Learning Center at Springtown emailed to her and Councilmember Kim Porterfield to request that the city do something to redevelop Springtown. The writer said three break-ins at Radio Shack and the sudden presence of a transient population was beginning to dissuade parents from sending their children there. Narvaiz said employees of San Marcos Flower Company at Springtown fear to work in their store alone. Saturday forum audience member Griffin Spell said he interviewed the remaining businesses at Springtown and learned that employees of Marble Slab Creamery, which they said just began closing at 10:30 p.m., are afraid to walk to their cars at night in the dark.

Conley said there have been three attempted robberies at his business in the last 90 days, an increase from one attempted robbery in nine years.

“I got a call from law enforcement officers at about eleven o’clock at night on Christmas Day and had to get out of bed and drive down here (from Wimberley),” Conley said. “It’s cost me about a thousand dollars in property damage. So there’s been a significant impact, not only on my business, but others in the area. If that had happened strictly along pure, private investment lines — what I call the free market — hey, that’s business. We’ve all been there, and that’s what we deal with every day. But because of what I consider was significant involvement from the public sector, whether city, state, a hybrid of both, now we are put into a situation in which we are struggling, in which our values are going to decline if this continues and goes on for a long period … What I’m supportive of is the city doing something that’s responsible, and that the details are gone through thoroughly to help the redevelopment of Springtown.”

In 2007, the city council offered $2 million in tax rebates to StoneCreek developers. Late in 2008, the council added $4 million to those incentives, enabling the three big box stores at Springtown to relocate to their current location across town. The three former Springtown tenants moved to their current location after the Texas General Land Office (GLO), a state agency, bought StoneCreek Crossing in 2006 as part of its effort to turn profits for deposit in the Texas Permanent School Fund.

“They were coming into our market where we have done a great job on retail, and they were moving existing retail off of taxable property onto non-taxable property, which the bigger implication of that is, that now their land and their building costs would be cheaper because they didn’t have to charge tax,” Narvaiz said. “So now they were disrupting our whole marketplace, where everybody else had invested property up and down I-35, all the competing, different groups.”

GLO still owns property near Cfan Co. and Goodrich near Interstate-35.

“When we got involved in June of 2006, we passed a resolution that said, ‘The General Land Office shouldn’t be allowed to go into any community in our state and buy property, take it off the tax rolls and then plan to do vertical development that would allow (cities) to tax certain parts of the development, but still come into your community and mess with your local free market without having a conversation with the local leaders,'” Narvaiz said.

The city was successful in getting the GLO to play ball, and was able to negotiate terms in a Chapter 380 agreement in 2007 with the StoneCreek developers. The terms included the city offering incentives only when sales tax revenues increased to a certain point and capping them, and guarantees of improvements to the nearby exit ramps, the access road and drainage. The StoneCreek Crossing location was riddled with drainage problems that Narvaiz said would have cost any prospective developer $4-6 million to fix.

Narvaiz said that in November 2008, developers of Springtown came to City Hall with a proposal that entailed “totally remaking the area” and improving pedestrian ways on Thorpe Lane. Narvaiz said the council asked the developers to communicate with the city’s economic development board and offer a presentation at a public meeting.

“And that happened in February of 2009,” Narvaiz said. “It was embraced by the public.”

Narvaiz said residents, not the developers, suggested the possibility of getting an Alamo Drafthouse at Springtown. Narvaiz said that during a June executive session, the developers requested a “$5 million giveaway.” The request was for a $5 million, interest free loan to be paid in 23 years.

“The ask was made,” Narvaiz said. “There isn’t a good business person out there that would say, not ask. But we said ‘no.'”

The city council then gave staff incentive parameters, and let the economic development board conduct discussions and negotiations. At the end of that process, the council was to consider a $3.9 million loan to Springtown developers over five years at a maximum interest rate of six percent. The city would have rebated 50 percent of the project’s generated city sales tax above present Springtown levels. That money would have defrayed the developers’ interest payments and provided as much as $600,000 for architectural enhancements.

“But that went down, and that went down because, politically, there was so much misunderstanding about what was happening there, and we said ‘no,'” Narvaiz said.

Near the end of Saturday’s forum, an audience member said that the city’s efforts thus far to incentivize the redevelopment of Springtown had been “shrouded in secrecy.” Narvaiz said the process has been open since February 2009, when “it started in the public.”

“So whatever was said in (the past), today was a great step on open dialogue,” said another audience member.

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0 thoughts on “Mayor discusses Springtown Mall with full city council chamber

  1. Past behavior by the City Council leads us to believe they will grant further incentives to Springtown over time. The city gave $2 million incentive to Stone Creek Crossing, and then the following year the developers come back with “hat in hand” saying they encountered unexpected expenses, and they absolutely must hae another $4 million in incentive, otherwise the entire project is in jeapordy. What do we do? Hastily give them another $4 million as they requested. That is one example of why citizens are concerned about the slippery slope here.

  2. Thought I would never hear myself, even in partial jest, “Hurrah for the virtues of the free market, unimpeded by government, using courage and tenacity and toughness to rise to independent success–at running the ‘invisible hand of the marketplace’ up under our knickers.” Hell, after these last few maneuvers, I MIGHT just turn Republican! These wonderfully innovated deals may be oddly focused (Please tell me it isn’t just me!), but they have had wonderful takeoffs–well, maybe I’ll wait to judge until after the landing, on second thought. Don’t want to jump in ungracefully, drink the toasts too soon and look like a ninny down the road, assuming no more economic disasters.

    Anybody know anything about the big new shopping center/mall on I-35 just south of New Braunfels? Supposedly anchored by a brand new Beall’s, Best Buy, Target and Penney’s. Wonder if New Braunfels got nearly the deal we did in helping them move toward their higher profile customer base?

    Should contracts be made with owners of bankrupt properties? Should City taxes ALWAYS pick up the tab? How does one decide and nail down such terms to avoid future problems?

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