By the San Marcos Local News Editorial Board
The Carma Development people are professionals. They first came before the San Marcos City Council four or five years ago, just to say that all of their market research, the work of a thousand land scouts and statistics crunchers, found right here, in San Marcos, the ideal location for residential development.
In 2007, Carma opened Blanco Vista, site of 2,000 future homes, on the north end of San Marcos. Then, the housing crash hit. Not the city’s fault, said Carma. By the December 2008, Carma was pushing a new vision, Paso Robles, before the San Marcos Planning and Zoning Commission (P&Z).
“We’re in for the long haul,” Carma Austin General Manager Shaun Cranston said that night. “We think, overall, the fundamentals are in place for growth in San Marcos and Central Texas.”
Lucky for Carma, that’s not all that was in place. Or, we should say, out of place.
The Carma people are professionals. They develop land for a living. They generate enough money to pour $700 million into Paso Robles. They employ planners, accountants, tax experts and, as they’re called, “consultants,” generally former government employees who cross over to the private side for more fortune and less politics.
After going to the city council and bragging that San Marcos is the future, then opening a development in town that met a housing crash, then coming back with an even larger development proposal — in other words, after giving every indication of courting San Marcos through thick and thin just to avail themselves of our promising market because it is so valuable — Carma now has San Marcos officials acting as though “the numbers just won’t work,” unless the city kicks in a $20 million tax abatement for a $700 million project about five miles out of the city’s development area.
Of course, it doesn’t sound like a tax abatement, even if it is one. Carma is proposing a Tax Increment Refinancing Zone (TIRZ), a mechanism allowed by the state for re-developing blight. Under the proposal, Carma would pay for the infrastructure up front. It’s Carma’s responsibility to pay for the infrastructure, period, but the city isn’t stopping there. No, the city would pay Carma back $20 million from the increased property taxes resulting from the improved property values within the zone.
We might concede that city should pay for some amount of over-sizing if the city needs some amount of infrastructure beyond the needs of the development. But that’s not going to be $20 million. The true amount is unknown, because the city hasn’t broken it down to that level of detail. The question seems to not even arise, though it’s precisely the kind of question the city should raise before giving taxpayer money to wealthy interests from out of town.
What this amounts to, of course, is that the city is out $20 million in property taxes on land Carma would develop whether it gets the TIRZ or not. Our city leadership would have us think that Carma is lending money to the city.
It’s because the Carma people are pros, and our city government, right now, isn’t real high on professional advice. As pros, the Carma people know a patsy when they see one. And they’ve found one.
We like amateur city government, when it works like it is supposed to work. That is, citizens are elected from the body politic to set city policy. To safeguard the city from predators, and to run the operation smoothly, cities across the country typically hire professional city management, people who know the ropes, understand the laws by which cities are constrained and know the game, the players, the tricks. With professional city management, the city can meet pros with pros.
Without professional city management, a city might be taken in, if its wits begin and end with a go-along-to-get-along city council led by a big-spending mayor who is on her way out of office. One imagines it would be easy for a big developer to squeeze a sweet deal out of a city with such defective leadership.
As if to mock the city’s regression in the last few months, it turns out that the defect is in the design. The Carma problem not only is, we believe, the real reason the mayor wanted Rick Menchaca out of the city manager’s office, but it also illustrates precisely why the city needs the kind of professional management Menchaca or his like would provide. Be assured that Menchaca was having nothing to do with a $20 million incentive for a residential development. No self-respecting city manager would. Menchaca was standing in the way. He had to go.
And, as if to further mock our deterioration, the search for a new city manager is being conducted by a rookie consultant who is charged with finding, before October, a winning candidate who isn’t required to have city management experience. No councilmember has ever said, not even under direct questioning, why the city council finds it imperative to cut the general timeline for finding a city manager in half so the person can be in place just before the mayor leaves office and voters decide four council seats in November. The new city manager would work with a council that didn’t hire him. Who benefits from such frenetic foolishness, and how?
In the final months of the mayor’s administration, San Marcos is on a frantic, downward spiral towards being the laughing stock of the corridor. Urbofiles from Austin to San Antonio ask how one city can be so disheveled, so desperately inept.
Pros simply can’t believe that a city would give a tax incentive for a residential development, which are tax-base weaklings that can’t possibly possibly be worthwhile even if every home is valued at $300,000. Tax incentives for residential development are a sign of extreme gullibility, if not worse.
A city might be wise to give tax incentives for commercial development, which doesn’t shove kids into the local school system, pays back with exponentially higher land values and creates bread-winner jobs that turn into homeownership and local sales tax receipts. But cities should do that only for huge commercial projects. Tax incentives are a tool to be wielded wisely and selectively. Start handing them out to residential developments and you’ll never get business locating here without incentives.
Cities and their taxpayers should always hold the local school district foremost in mind when considering property tax incentives, because those incentives always have implications for local school districts, and the local school district is the largest taxing entity. Towards keeping school taxes low, a community is best served by commercial property, which makes large payments without burdening the schools with expenses.
Residential development generates less school money while generating more school students. Because public education is so expensive, residential development is a drain on the property tax base. It makes absolutely no sense to offer property tax incentives for residential development that is going to strain the property tax base.
If a family with two children in school moves into a $200,000 house, that family is paying San Marcos CISD $2,700 next year, based on the school district’s proposed rate of $1.35 per $100 of taxable value. While making that $2,700 property tax contribution to the schools, though, that same household puts a $19,056 drain on the school district, based on a cost of $9,528 per student in public school. That cost comes from dividing San Marcos CISD’s enrollment of 7,434 students into the district’s proposed budget of $70,838,696. Notice that a business with $200,000 of property makes the same $2,700 property tax contribution to the schools, but costs the schools nothing.
We hear that Paso Robles won’t cause trouble for the school district, because the development will consist of $300,000 homes, 60 percent of which are to include at least one resident 55 or older and no residents younger than 18. Suppose that’s true. And suppose, feasibly, that the other 40 percent of the Paso Robles homes will have an average of two kids in school. So, 3,427 homes valued at $300,000 and paying $1.35 per $100 of taxable value to San Marcos CISD will generate $13,879,350 for the school district. Sounds great. But now consider that 40 percent of the homes, 1,371 of them, have an average of two kids in school. That’s 2,742 kids at a rate of $9,528 per kid in the cost to the school district. Thus, the cost to the school district is $26,127,452. Looks like the school district has to close a gap of nearly $13 million per year. We can hope that state funding will cover most of the difference, except that San Marcos CISD is in a bind already when it comes to state funding.
The school district is considered property rich, but not property rich enough to pay into Robin Hood, the state’s program for funding school equalization. One factor that would require San Marcos CISD to pay into Robin Hood would be a tax rate of $1.06 on the maintenance and operations (M&O) side. The school district presently taxes $1.04. But if school officials face $13 million operating deficits, that tax rate is going up. And if it goes up just two cents, then the state will get part of it, anyway.
We’re not saying the city should turn its nose up at Paso Robles. We’re not saying San Marcos CISD would be out of the woods if Paso Robles goes away. We’re not even talking about the very idea that the city thinks it’s fine to greywater a golf course in a development with seven karst features over the Edwards Aquifer. That’s another whole problem. All we’re saying right now is that it’s silly for the city to incentivize trouble for the property tax base.
Further, we’re saying that the city is on the verge of incentivizing trouble because the lead professionals have gone away, the remaining professionals are silenced, and no one stands in the way of amateurs who simply do not understand what they are doing, who are this loose with property tax incentives. The Paso Robles incentive is every bit as poorly considered as the mayor’s drive to give breaks for Springtown Mall development, which would support minimum wage jobs while subsidizing competition for existing businesses. City residents have slowed down Springtown. But the Carma operation is much more formidable.
We can attract high quality housing to San Marcos without giving up city money. The Carma people will build here without city money. They’re putting $700 million into Paso Robles. We’re supposed to believe they would walk away over $20 million?
We understand that people are excited that anyone would talk about housing development in this economy. But we need much better control over our emotions and our purse strings. Come November, we need a city council that will exert that kind of composure by making reasonable policy decisions and well considered choices about the city’s professional management. Until then, we’d be happy just to minimize the damage to come.Email | Print