San Marcos Mercury | Local News from San Marcos and Hays County, Texas
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May 22nd, 2009
Huge sales tax increase hits Kyle


The March opening of a Kohl’s department store in Kyle spurred the city to a near-record sales tax haul for that month, according to May allocations reported by the state comptroller’s office.

Kyle raked in $291,3567.38 in sales tax allocations in May. The May numbers represent March sales, which are reported to the comptroller’s office in April.

Kohl’s opened in Kyle the first week in March. The May sales tax allocation for Kyle represents an increase of 30.70 percent from May 2008, when the city brought in $222,904.93. In April 2009, Kyle reached only $175,688.51 in sales taxes.

The May number in Kyle was barely short of the city’s record, which is $293,719.67 in November 2008.

For the year to date, Kyle has brought in $1,069,309.96, up 17.86 from last year’s mark of $907,232.86 through May 2008.

Kyle city manager Tom Mattis told the city council Tuesday night that sales taxes are 9.6 above projections on the present fiscal year budget.

Kyle exceeded Buda’s sales tax collection for only the second time since August 2002.

However, Buda also saw a year-to-year sales tax increase in May, bringing in $290,876.37, up 6.17 percent from the May 2008 total of 273,972.06. Buda remains down 2.18 percent from its sales tax take to this point in 2009, totalling $1,385,949.97 against the May 2008 cumulative total of $1,416,916.42.

San Marcos took a precipitous dip in its sales tax collections this May, receiving a check for $1,466,227.13 from the comptroller, down 14.62 percent from $1,717,419.04 in May 2008. For the year, San Marcos is down 4.37 percent in sales tax revenues, taking in $7,694,687.68 to date. Through May 2008, the city received $8,046,975.17.

San Marcos has not had an annual drop in sales tax revenue since 1987, when it’s pre-outlet mall haul of $1,631,744,30 represented a decrease of nearly $200,000 from a year earlier. Since then, the city’s sales tax base has increased more than ten-fold, reaching a record $18,382,874.13 in 2008.

In total, the ten Hays County municipalities brought in $2,191,4976.46 in May 2009, down 7.07 percent from the May 2008 total of $2,358,463.64. For the year, Hays County towns have collected $10,761,221.63 in sales taxes, down 1.48 percent from $10,923,158.62 through May 2008.

Across Texas, cities collected $367,111,165.59 in sales taxes on the May 2009 allocation, down 2.82 percent from $377,780,959.62 in May 2008. The May slump put Texas slightly behind last year’s sales tax pace. Through May, cities have collected $1,689,174,130.30 in sales taxes in 2009, down 0.03 percent from $1,689,682,936.01 collected through May 2008.

The state of Texas as not endured a sales tax decrease over an entire year since 1987, when $850,799,440.83 came in about $16 million short of 1986. The state’s retail economy has grown more than four-fold since then, with sales tax receipts in Texas reaching $4,039,196,013.06 in 2008.

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0 thoughts on “Huge sales tax increase hits Kyle

  1. How much of our sales tax decline comes in the form of abatements? What incentives (if any) did Kyle need to offer Kohl’s in order to bring them to town?

  2. Ted,

    Good question, as always. I note that you raised the question about Kyle incentives before in another story about Kohl’s.

    Here’s what I have, from reporting on this last June, when the city struck the deal with the developer, David Berndt Interests.

    It’s a Chapter 380 development agreement on a property that also will include a 132,000-square-foot Target, a 45,000-square-foot City Lights movie theater, the Kohl’s (87,000 square feet) and another 740,000 square feet of retail space at Kyle Parkway and Interstate-35. I believe a small number of apartments are in the mix, too.

    Berndt fronts the costs for infrastructure, including three public streets in and around the shopping complex. In return, Kyle will reimburse Berndt 50 percent of the sales tax generated by the property until it has paid off up to $7 million. The clock will run for ten years, starting in January 2010.

    By March 2010, Berndt must develop $25 million of taxable value, the project’s anchor store (the Target) must open and the property must generate at least 200 full-time equivalent jobs, or Berndt will lose the reimbursement. Kyle City Manager Tom Mattis called the deal “a no-risk proposition for the city.”

    When the city made the deal, Mattis and Mayor Mike Gonzalez declared that the days of Kyle offering economic incentives for developers coming into the city were all but dead. Kyle is abating two-thirds of its sales taxes from the Seton (hospital and retail) development across Interstate-35 from 2010 through 2012, then one-third from 2013 through 2024. If I recall, the county is abating some similar portion of sales tax for the same period.

    Before all that, Kyle also made a land for jobs deal with RSI, a manufacturer of rugged technology equipment, giving the company an operating site in exchange for a minimum number of jobs for Kyle residents.

  3. The hospital and RSI are understandable (to me). They bring real jobs to Kyle. Incentives for retailers do not make sense.

    I guess the “good” news is that Kyle had to make a similar deal to ours. Of course, I don’t think Stone Creek will be as big as the development in Kyle. In fact, I think it might be right around half the size of the Kyle development.

  4. Kyle better enjoy the increased sales tax while they can. Come reckoning day on Jan 1, 2010 – they will have to start giving a big proportion of it back for a decade.

    The HEB development and the Kohl’s shopping center are also part of a TIF – so the increase in property taxes will be paying off the cost of construction of FM 1626.

    The drumbeat for increased commercial development was to raise sales taxes and offset residential property taxes. I’m not certain that has really been accomplished.

    Does anybody know the expected lifespan of this type of development? (I.e., a shopping center with a couple of big box stores).

  5. The lifespan for a box store power center is about 20 years, 25 on the outside. Springtown Mall in San Marcos is a pretty good example of a big box center lifecycle. It is heavily influenced by how well the property managers maintain the development and market it. Most of the property management firms for these developments are fairly lazy, causing shortened lifecycles.

    380 agreements are beginning to show weaknesses, particularly when used for retail. They were never intended for retail development, just as tax increment reinvestment zones were never intended for greenfield development (they were supposed to be a redevelopment tool).

    As far as estimated retail/restaurant square footage, StoneCreek and the Kyle development are about the same size, and also similar to Creekside in New Braunfels. The Kyle project consumes more acres and the shape/site plan of the property create a perception that it is larger. Both of these are tier-2 power centers. The next step up is something along the lines of The Domain (Austin), South Park Meadows (austin) or The Forum (San Antonio).

  6. The development on all four corners at IH 35 and 1626 in Kyle seems different than all the others mentioned as it will have abt 2.5 million sq ft of retail space with a major supermarket (HEB-plus),a 210 bed hospital and two medical towers. Maybe we should include the life span of a regional hospital and the largest supermarket (80,000 sq ft) between Austin and San Antonio?

  7. Thanks for the information. I appreciate it.

    The supermarket is great. As long as a Walmart doesn’t come along and take away its patrons. And the hospital will employ people at above minimum wage – which is what Kyle really needs. But the hospital is tax-exempt. It will probably attract some medical offices, which will pay property taxes. But when was the last time you paid sales tax on medical services?

    As for length of service – hospitals do close from time to time. If there aren’t enough people in the area using their services, it will go away. Hospitals are becoming just as competitive as other types of services.

    I don’t know if these developments would have come without the tax incentives or not. But I guess we will never know. People were screaming for commercial development in Kyle, so perhaps city hall was just responding to what the people wanted.

    These 3 developments have huge parking lots. Especially the two most recent ones. It will be interesting to see to what extent they are filled most of the time. The last 2 have all received variances on landscaping requirements. I’m not certain about HEB.

  8. I think you are right about tax on medical services but I am not an expert. I forgot to mention that what is happening in Kyle is larger than either of the New Braunfels and San Marcos developments. I also think South Park Meadows is 1.7 Million Sq Ft of retail space which would be about 1/3 smaller than IH35 and 1626 and that does not include the hospital. Also, a medical office tower broke ground on the Seton/SCC site about two weeks ago with another one planned.

  9. You may be right. But South Park Meadows is HUGE. I find it hard to believe that even all 3 developments in Kyle put together are larger than the Meadows. I get lost every time I go in there. And yeah – I sometimes shop in Austin…

    Is it 2.5 million sq ft of retail OR is it 2.5 million sq ft. Total – counting the high-rise hospital and medical offices? The city manager tends to exaggerate.

  10. once an area has about 1 million sq ft of retail space, ample affordable housing for workers and high end housing for the executive class there is a strong tendency to develop into a node with high rise towers comming in shortly there after. It will be interesting to watch what happens in the Kyle/Buda area in the next few years. Anyone who has watched the degradation of Austin thru traffic conditions and is a bit familar with what has developed to the north of that town will not need a crystal ball to know what is comming. since Onion Creek drains to the Colorado River shouldnt LCRA be on the hook to provide the water ? Not the Barton springs portion of the Edwards Aquifer ?

  11. The sign on the SCC Development site which is on the eastside states 900,000 sq ft of retail space and that side is the smaller of the two sides of retail development at that intersection. I doubt they are counting Seton-Hays and the two medical towers as retail.

    Anyway, have a good night as it is time to get ready to go have dinner and catch the game at Sean Patrick’s.

  12. I would like to see an area like South Park Meadows for kids to play at, with restaruants surrounding it, with outside sitting areas, and maybe a stage for music, movie, comedy, theater show, for kids and adults. A small venue stage.

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