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

March 5th, 2010
Second crack yields $610K apartment incentive

030510vistasThe Balcones Apartments, which will be torn down now that the San Marcos City Council has approved $610,000 of incentives for their replacement. Photo by Andy Sevilla.

By ANDY SEVILLA
Associate Editor

Taking a second crack at giving up to $610,000 of incentives for a multi-family apartment complex on the edge of downtown, a split San Marcos city council approved the proposal with a 4-3 vote Tuesday night.

The council deadlocked, 3-3, on the incentives during its Feb. 16 meeting. The difference this time was Councilmember Chris Jones, who abstained in February and voted with the slim majority Tuesday night.

The $28.5 million apartment project will involve tearing down the Balcones Apartments at 401 North Fredericksburg Street and replacing them with The Vistas at San Marcos, a 200,000-square-foot project that will include 593 beds in 257 units.

The Chapter 380 agreement is based on a maximum amount of $610,000 through five years. The apartment complex is scheduled to be completed on or before Aug. 15, 2011. Starting in 2012, the developer is eligible to apply for grant payments amounting to $122,000 per year during a five-year period. The grant money would come from the increased property taxes to the city resulting from the property improvements.

The incentives negotiated would come from the increase over the reported property tax intake in 2009.

During the Feb. 16 vote, Jones said he would have to abstain because of a possible conflict-of-interest, given that the proposed development is within 200-feet of a parking space he owns. But Jones changed his mind Tuesday, pushing the proposal over the top.

“I’m not voting for this so that I have any economic benefit,” Jones said. “This is a great project for San Marcos and for the downtown.”

Jones said he felt comfortable voting Tuesday after discovering that “impropriety” in his vote would result only if the property under discussion were within 200 feet of property he owned, and that would matter only in the case of zoning decisions, as opposed to economic development agreements.

Councilmember Ryan Thomason, who pulled the item from the consent agenda for open discussion on Feb. 16, again pulled the item for open discussion Tuesday night.

“I’m not supportive of incentivizing, with tax dollars, an apartment complex,” Thomason said, adding that moving forward on the deal would “set a precedent” and “create an economic disadvantage” for nearby proposed developments, including Concho Commons. The Concho Commons apartment project near Concho Street and LBJ Drive is receiving no city incentives.

Thomason said the incentives for Vistas at San Marcos would “serve competitive disadvantage” and open floodgates for developers to feed off taxpayers.

“This is a no-brainer,” said Councilmember John Thomaides. “This will be built with or without us (providing $610,000 in tax incentives). I truly believe that this will be built without our dollars.”

Jones, on the counter-attack, said moving forward with the deal is “not setting a precedent” because, he said, he would personally vote up or down for all incoming projects based on merit.

“I’m getting frustrated with this Tea Party notion that has flooded our budget process,” an agitated Jones said.

According to TeaPartyPatriots.org, “The impetus of the Tea Party movement is excessive government spending and taxation. Our mission is to attract, educate, organize, and mobilize our fellow citizens to secure public policy consistent with our three core values of, fiscal responsibility, constitutionally limited government, and free markets.”

Councilmember Gaylord Bose, who voted with Thomaides and Thomason in opposition, agreed with Thomason that the $610,000 tax incentive is setting the wrong precedent.

“As a nation, Texas isn’t there now, but as a nation we’re walking a dangerous track,” Bose said adding that he would like to see the developers “step up.”

Stephen Haug of Skyline Commercial Inc., which is involved in the development, said incentive opponents have legitimate concerns. However, Haug said he was “glad we’ve gotten past it.”

“(Bose, Thomaides, and Thomason) are looking out for the constituents,” Haug said. “They’re doing the job they were elected to do.”

Haug said, though, that council denial of the incentives would have “almost certainly” hindered the project from moving forward.

Asked to specify why a project worth almost $30 million would have stalled without $610,000 in tax incentives, Haug said, “It’s too complicated.” Pressed further for a key reason why the project would have stalled without the incentives, Haug said, “It’s too complicated.”

San Marcos Mayor Susan Narvaiz said the incentive is performance based and will not result in city budget reductions or force the city to issue debt. Councilmember Kim Porterfield, who also voted in support of the incentives, said the proposed project would do away with “blight.”

The agreement between the city and the developer says the project would have to be certified by specifications approved by the city according to Leadership in Energy and Environmental Design (LEED) by Aug. 15, 2013, at the latest.

“Introducing a LEED building in San Marcos is important,” Jones said.

Echoing Jones, Porterfield said, “Hopefully, this will be a model project.”

Jones made an amendment to the proposal, which passed unanimously, stipulating that 20 percent of the project’s construction must be awarded to local businesses. Jones said the project would thereby be “putting people to work.”

The property presently generates $12,194 in annual property tax. City staff said the property would produce $29,107 annually in taxes with improvements and after the rebate. In five years without improvements, the property would generate $60,970 in city property taxes, while it would produce $145,535 in five years with improvements and after the rebate.

The agreement also stipulates that the project will employ five San Marcos residents full-time at an annual payroll of $208,000. The developer also is to spend $775,000 for improvements to redevelop the street block to include parkland, off-site storm drainage, underground SMEU transformers for electrical, phone and cable, bike lane land dedication, new sidewalks to include curb and gutter, new on-street parking improvements, trees, landscaping, irrigation, planters and benches.

Once the project is completed, the land and improvements are expected to attain a Hays County Appraisal District tax assessed value of at least $27 million. Also, the city will not be required to remit the first grant payment to the developers unless the project has received LEED certification.

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20 thoughts on “Second crack yields $610K apartment incentive

  1. Chris is right. This does not set a precedent. The precedent was set years ago. Anyone smart enough to ask for money, gets it.

  2. I’d love to see the list of businesses that have been denied (from start to finish) economic incentives, “based on merit.”

  3. Cui bono
    Etymology: Latin, to whose advantage?
    Date: 1604
    1 : a principle that probable responsibility for an act or event lies with one having something to gain

    Asked to specify why a project worth almost $30 million would have stalled without $610,000 in tax incentives, Haug said, “It’s too complicated.” Pressed further for a key reason why the project would have stalled without the incentives, Haug said, “It’s too complicated.”
    ONCE AGAIN: Cui bono
    This is not Free Market Capitalism. This is more like CORPORATE WELFARE. Which has been going on for over 100 years. “Those who know not their history are bound to repeat it”. and we as a society repeat it, repeat it, repeat it; still thinking we will get a different outcome. All we get is greater centralized power and taxation. One of the definitions of INSANITY is ” doing the same thing over and over again expecting a different outcome”.

    Chris Jones:

    “I’m getting frustrated with this Tea Party notion that has flooded our budget process,” an agitated Jones said.
    I am not a Tea Party person, but I do think I know what is fair and equitable.

  4. “It’s too complicated…..”
    Says it all. We citizens should just stay out of it I guess, and not challenge the actions of our elected representatives, or those coming with a tin can in hand to the city.

    At least we are forcing some fast PR moves for “educational” sessions on the projects. Please make sure you and your neighbors attend to ask the hard questions on the Springtown and other upcoming projects that will get similar incentives.

    Personally, I am getting tired of our elected representatives FIGHTING this TEA Party notion of fiscal restraint, and living within a budget.

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  6. Maybe we need a majority and minority position paper on any major economic incentive packages. This would help us “regular citizens” understand more of the picture. For example, maybe this particular project has the developer spending money on things the City Council asked for (above and beyond zoning requirements), and the $610,000 is simply “cost-sharing” on community infrastructure improvements. I do not know all the details, none of us “regular citizens” would at this point, because a lot of “stuff” was probably discussed during closed executive sessions.

  7. Steve just hit the nail on the head.

    It’s been reported that the new building will be LEED certified. It’s also been reported that this was something the City was interested in. If the City wants a LEED certified building here, is it completely unreasonable to ask them for a little help in financing that certification? I think not.

    It’s also been reported that the developer has agreed to $775K for infrastructure improvements. Doesn’t the developer have a right to ask the City to chip in when they will be improving streets, drainage, curbs, parking, gutters, greenspace, etc for the City? I think they do.

    All of this is to say nothing of the increase in property tax revenue to be generated by the property. After the abatement period ends, that’s a lot of extra tax money for our City each year.

    This is why naysayers need to do their homework before they go railing against City incentive money for “private” projects. I’m not saying every project is deserving of City incentives, but this one seems to be the type of development that we should be cheering for, not deriding our officials for making it happen.

  8. dano,
    That was CLEARLY explained at the meeting last sat with the mayor. So lets give the city props on this one. They are getting the developer to pay for things that the city wanted in the first place!

  9. “Asked to specify why a project worth almost $30 million would have stalled without $610,000 in tax incentives, Haug said, “It’s too complicated.” Pressed further for a key reason why the project would have stalled without the incentives, Haug said, “It’s too complicated.” ”

    Too complicated? Too corrupt? Too politically detrimental?, Or just too embarrassing to reveal that our Council got suckered (YET again)?

  10. It looks to me that what is really being said here is that the City has to give Alamo Draughthouse 600K, so they can still be competitive after absorbing the cost of the City’s LEED program.

    I still can’t believe we are paying to bring in Alamo, when similar projects are being promoted/ developed locally without any corporate welfare.

  11. The latest turn of events on Alamo Drafthouse has the incentive increasing beyond $2.5 million dollars. Now it is being proposed for the developer rather than Alamo Drafthouse directly, too. This apartment project simply happened to come back onto the public radar screen around the same time as all the most recent hubbub on Springtown Mall.

  12. I thought that the details given should have made people think twice about their opposition to this. It seems I was wrong though. I am becoming ever more convinced that there is a contingent here in SM that will flatly oppose any growth….or at the very least, any efforts by our leaders to promote growth. It seems that there are some who would prefer that San Marcos be a “small town” forever. The reality, though, is that we WILL grow. The question is whether we want it to happen because of us or in spite of us .

  13. Dano,

    The days of no-growth politics are gone. You don’t see anyone protesting building an apartment complex; the fight is over how much taxpayer money should be given away for the project. In the city’s swing away from no-growth I, and many others, feel we may have swung too far. We have become a city of easy money. We have become a city where every developer feels they deserve a slice of the city’s coffers. That has to stop.

    There are good projects where we can come together and agree with incentives. Grifols is a prime example. The cost to the city will be less than 2 million dollars. In exchange we will be getting clear, tangible benefits from a company that otherwise would not have come to San Marcos. Compare that to the apartments and Alamo Drafthouse. Both those projects are clearly for San Marcos. The franchise owners want to put an Alamo Drafthouse here, and in that location. The apartment permits have already been filed.

    Look at the arguments from the pro-incentive group. Even the developers admit there are legitimate concerns with the incentives. Kim Porterfield’s blight comment feels like it came out of left field. And if this is supposed to be a “model project”, then we are setting a precedent, regardless of what Chris Jones thinks. Although I think Ted Marchut might be on to something, the precedent was set years ago.

    When pressed on why the money is needed, the developer said that it’s just too complicated for us to understand. I’ve heard that attitude before, at the first “educational meeting”. Apparently, we just don’t understand, and if we did we would be gung-ho on spending our way to success. The council is supposed to work for us, not try to convince us we’re wrong. Keep your ears open and your attitude at home.

    I’ll close on a brighter note: Ryan Thomason has kept his word on fiscal responsibility. Keep up the good work.

    -Griffin Spell

  14. I agree. One does not need to be a member of the Tea Party, or anti-growth, to think this is a horrible use of our money.

    I was in favor of the road bonds. I was in favor of the Grifols deal (which Dano, interestingly, opposed). I’d love to see more of the same, to bring some growth in areas where we currently fall short.

    I am not anti-growth. I just don’t see a shortage of minimum wage jobs and apartment complexes today, so I don’t really consider the addition of more apartments and minimum wage jobs to be a high priority. I’m not even sure I call it growth.

    It certainly does seem like a stretch to say that this project eliminates blight.

  15. One way to put the brakes on extra spending is to convince our city leaders that we do not want to keep getting more and more in debt. Right now, based on what was said at the public dialog session on economic development recently, our city leaders feel they have plenty more debt capacity to tap for any number of projects. It was stated that our long-term debt is at 2.5% of taxable property base, and the City Council currently has set a limit of 5%, and that the State of Texas recommends no more than 10%.

    Well, I know plenty of folks (myself included) who believe we should not have doubled our long-term debt in just a three year recent period, and that we (the City of San Marcos) need to stop spending so far beyond our means. How many of us personally have doubled our long-term debt recently? None that I know of, and most would agree now is the time to be more careful in how we spend taxpayer dollars.

  16. I remember when I was young, five or six, I started getting an allowance from my father, for doing various chores. For quite some time, I would spend every penny about as soon as I got it and my father would marvel at some of the crap I would buy at the 5 and 10 (yes, I’m old enough to have spent my money at the 5 and 10, but it was a small town and in a bit of a time warp).

    “Boy,” he would say “they must have seen you coming, with that money burning a hole in your pocket.” Eventually, I learned that not everything was worth my money and often times it was better to hold onto that money, until something really good came along.

    Just because we have the money (or could borrow it), does not mean that everything that anyone offers to sell us is actually worth our money.

  17. For the record, I never claimed to be against Grifols. I just wondered what it was about them that brought out the seal of approval where so many others have gotten the fifth degree. I am all for them being here.

  18. I am with Griffin and Ted on this one. What made Grifols special is that it brings good paying jobs to this city, as well as an industry that is not currently here. The apartments and Alamo Draft House do neither of those things.

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