January 20th, 2011
Stone Creek foreclosure may cost taxpayers ‘not a penny,’ officials say

by BRAD ROLLINS

Responding to simmering popular indignation over an economic development subsidy for a major shopping center now in foreclosure, San Marcos officials on Thursday said the property’s owners have received “not a penny” in taxpayer money to-date and may never be eligible for any.

Anchored by Target, JCPenney and Academy, the Stone Creek Crossing development on Interstate 35 at McCarty Lane is listed for sale in the February foreclosure auction after its owner defaulted on a $38.6 million loan from Houston-based Amegy Bank National Association.

Under an economic development agreement adopted in September 2007 and amended in November 2008, the San Marcos City Council granted owner Stone Creek Crossing LP up to $6 million in forgiven sales and property taxes over five years.

Since the first stores opened there in 2009, they have not collectively generated enough sales tax to quality the owner to receive rebates on that portion of the deal, although city officials conceded the outside chance that sales from the last quarter of 2010 might nudge them over that threshold.

Under the agreement, the first $500,000 in sales tax generated each year by stores and restaurants in the shopping center go to city coffers just as they would for any other business. The city agreed to rebate to Stone Creek Crossing LP the second $500,000 in annual receipts; the city and property owner evenly split everything over $1 million.

“Alot of parameters were put in place to protect the city and its taxpayers,” said Mayor Daniel Guerrero, who as a city council member voted for the original $2 million package in potential incentives and later an increase to $6 million.

“We were very cognizant of trying to ensure that overall integrity of city dollars and that we were putting them in the right place. The whole council really did our due diligence in conducting the city’s business,” the mayor said.

It is not immediately clear if Stone Creek LP is due any benefit from the property tax portion of the agreement which rebated up to 80 percent of ad valorem tax for five years on increases to the property value caused by the 95-acre tract’s development.

City attorneys are researching how foreclosure affects the city’s liabilities including whether the agreement is transferable to a new owner, city officials said.

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» Stone Creek Chapter 380 agreement [pdf]