by SEAN BATURA
Developers of a $28.5 million apartment complex project in downtown San Marcos may receive a one-year extension on an economic development agreement with the city, and thereby remain eligible to receive up to $610,000 in forgiven property tax.
Called the Vistas at San Marcos, the multi-family housing project would redevelop nearly a whole block between Comanche and Fredericksburg streets north of Pat Garrison street as a 200,000-square-foot building to include 257 living units and 593 beds. The six-floor building would replace the aging Balcones, Carlyle and Pat Garrison apartments and a rental house at 418 Comanche Street.
Stephen Haug, president of the holding company that owns the properties, says his development arm has secured financing to get the project going but that it can’t meet an August 2012 deadline for the building to completed. Haug requests a new deadline of July 2013.
“We now have the equity and financing committed that will be required to complete the project,” Haug said in a Sept. 13 letter to the city’s economic development director, Amy Madison. “However, that equity and financial restructuring has all been underwritten based on having a 380 agreement with the City of San Marcos in place that extends the project completion date to July of 2013.”
On Sept. 15, the City of San Marcos Economic Development Board voted 11-1 to advise city council members of the extension’s merit. However, the board recommended conditions designed to ensure the existing 1960s-era structures are demolished and the land re-planted, even if the project does not make a new deadline. City council members are expected to consider an extension at a future meeting.
Two out of three council members who voted against the 380 agreement in March 2010 no longer sit on the council. Three out of four council members who voted for the agreement still sit on the council. San Marcos City Council Place 5 member Ryan Thomason, the remaining opponent of the agreement on the council, also sits on the economic development board. Thomason cast the sole vote on Sept. 15 against recommending an extension of the 380 agreement.
Thomason, repeating his previous arguments against the agreement, said the Vistas at San Marcos is too large a project to hinge on a $610,000 tax rebate.
“I think there’s a competitive disadvantage created for the Darren Caseys and the Larry Peels of the world that have similar obstacles and similar contracts,” Thomason said. “You’re going to start site selecting who you’re going to give economic development incentives to.”
Thomason said Austin developer Peel’s $24 million Purgatory Creek Apartments had no help from the City of San Marcos, which agreed to rezone 22.5 acres for the project only if Peel could secure the timely permission from the Texas Department of a curb cut to the property and finalize construction plans for a turn lane and deceleration late on Hunter Road.
“And then (Peel) had to buy five acres to connect to our nature trail at probably, who knows, over $500,000,” Thomason said.
Economic Development board members Ed Bolten and Bruce Tifft were among the strongest supporters of the 380 agreement’s deadline extension. Bolton, expressing optimism about the project, said he thinks construction costs will decrease from the estimated amount. Bolten said Peel is “loaded” and did not need to ask for an incentive for Purgatory Creek Apartments.
“Darren Casey’s loaded also,” Thomason said. “His name’s on the side of a building on (the Texas State) campus. It was expensive. He’s already saying he’s going to come in (and ask for incentives). And that’s fine, (we can) evaluate that.”
According to Madison, the Vista’s developers requested the 380 agreement rebates because market conditions were such that lenders and equity investors saw the project as not viable without additional cost savings to offset high capitalization rates and high construction costs.
Tifft said the 380 agreement is ideal because it would enable more housing closer to the university. Additionally, Tifft said the agreement presents a good opportunity to remedy the “ugly looking spot” proposed for redevelopment. The Balcones Apartments now stand on the block proposed for the Vistas. Madison said the apartments on the block proposed for demolition are empty of tenants.
San Marcos City Manager Jim Nuse, who sits on the economic development board, originated the idea of securing a guarantee from Haug that the old structures will be demolished and the area re-vegetated as a condition of granting the extension request.
Pursuant to the 380 agreement, Haug’s LLC will be eligible to apply for grant payments from the city of no more than $122,000 per year during a five-year period — after the project is completed. The payments would be calculated from the increased property taxes to the city resulting from land improvements.
According to the 380 agreement, if the actual gross revenues of Haug’s LLC exceed the projected gross revenues for the same year, then the maximum grant payment will be reduced by the same percentage that actual gross revenues exceed the projected gross revenues.
According to Madison, the Vistas project is expected to create 10 jobs with a total payroll of $251,000, and to generate annual property tax revenue of $151,107. The property currently generates about $12,194 in property taxes, according to Madison.
The Vistas is proposed to include the area bounded by Comanche Street, Pat Garrison Street, North Fredericksburg Street and Lindsey Street.