Another incentive deal has been hovering under the radar; at $610,000, it is not especially glamorous. However, it is unique in that this is the first economic development incentive tied to revitalization rather than job creation. It has received a fair amount of criticism, having passed only on a 4-3 vote. This project will be the second major urban residential project in the downtown area, placing about 257 new residential units in downtown. Some have questioned whether this project would have been built on its own without assistance. I must admit that I have trouble understanding how $610,000 could make/break a nearly $29 million project, but real estate finance is a mess right now and the developer may have gotten surprised by a lender requirement for increased capitalization. I know this took out the initial developer of the project two years ago, so the developer may be on target with his request. Some folks are simply philosophically opposed to multifamily incentives. Regardless, I am actually supportive of this incentive for several reasons:

• It will replace the derelict Balcones Apartments with a new project more consistent with the type of urban development appropriate for the downtown/west campus area, increasing the property value by about 2.5 times.
• The project includes reconstruction of all of the surrounding roads, which are all currently in poor condition with significant drainage issues, including extension of bicycle facilities.
• The project includes enhanced streetscape/sidewalks and underground utilities that will compliment efforts San Marcos is undertaking elsewhere in the downtown area, saving the city capital costs down the road.
• The project ‘recycles’ land—the cost to redevelop a piece of property is significantly higher than purchasing unimproved property further from downtown, but it reduces sprawl.
• The project puts the students where they SHOULD be, near the university. So much of the traffic problem in San Marcos comes from off-campus student housing being located so far from the campus.
• This will be the first LEED-certified (green building standard) multifamily or commercial building in San Marcos.
• The project is well-designed, reflecting the principles of new urbanist development.
• The ground level portions of the building are designed to convert to commercial space with demand.
• The project adds 257 residential units to the downtown area, which helps increase the vitality of downtown
• The project is the first major private development proposed in downtown expected to break ground that meets a substantial number of the Downtown Master Plan’s recommendations.

In my opinion, the city is trading a small sum–$ 610,000—for millions of dollars invested in a project to make it vastly superior to San Marcos’ minimum codes and the existing development.  While it is indeed possible that this project would have occurred without help, enacting these incentives sends a clear message to the private development sector that San Marcos means business when it comes to enhancing the downtown and expecting higher-quality development. The best part is, the project has good performance measures between the incentive agreement and the Planned Development District regulations it has to operate under.

Before I go, I need to address a comment I received via email. Apparently some think that I’m not as impartial as I say regarding local politicians. The truth is, I’m pretty equal opportunity and that opportunity to ding ‘the other side’ just simply hasn’t come up on a topic that I think is interesting to write about (until today). In particular, someone asked whether I was targeting Mayor Narvaiz. The simple answer to that is no. In fact, Mayor Narvaiz and I get along quite well and had a positive working relationship. Sure, I have some policy disagreements with her and don’t always like her approach, just like I do with every one of the Council members. Narvaiz certainly earns a bit of criticism, but a lot of that comes from her having mastered the ‘bully pulpit’ of the mayor’s office. There’s a reason she became the Chair of the Capital Area Council of Government Board of Directors. This certainly isn’t an endorsement of her, nor is it an endorsement of any other member of the Council.

The next topic for this blog will probably discuss either the Austin Community College District or the economic impact of college sports on the local economy in light of ‘The Drive.’

Chance Sparks

chance@bobcatfans.com

The Deal: Basically, the City would provide a $2.5M zero-interest loan to Triple Tap Ventures, conditioned upon them opening and operating an Alamo Drafthouse Theater at Springtown Mall for the duration of the incentives. But the devil is in the details. The draft deal states “the increase above 2009 taxes in the City’s sales tax and ad valorem tax revenue generated from (”Tax Repayment”) from and after the Effective Date will be applied to offset the Loan Amount.”

Allow me to translate: Triple Tap will receive a loan that will not be repaid by their profits or capital reserves—it will be repaid through taxes that the City would have been getting. Triple Tap is left with little financial obligation and no real risk. Plus, these incentives are to an end-user that will hold a lease, not the actual property owner. This is counter to best practices in using economic development incentives for retail users that do not have fee-simple ownership. And apparently these incentives to Triple Tap will allow Lamy-Springtown, LTD to build a beautiful mixed use urban center (that we have not even seen concept drawings of, so I call BS).

So this is a loan, paid back through local taxes and leaving Triple Tap with no financial risk, that will help a property owner already in default (apparently the property owner, Lamy-Springtown LTD has a hot date with the Courthouse steps and a bankruptcy lawyer). Ask yourself this: Would you loan money to anyone that you know is already in default and likely to file bankruptcy? Would you loan money to anyone that says they have a fanciful vision, but doesn’t even have a concept plan/sketch or business plan for how to do it, and the deal doesn’t include any strings to make sure it happens? You would have to be an idiot to sign-up for this, and apparently Lamy and Triple Tap think they have found their idiot(s). If I were Triple Tap though, I’d be worried. At the 2/16/2010 meeting, I watched new Councilman Ryan Thomason vote with Bose and Thomaides to deny incentives for another project (based on voting patterns, Jones would have likely voted against but had to recuse himself). Many predicted he would march blindly to the drum of a certain constituency. Perhaps Thomason really is going to back up his rhetoric about being conservative with economic incentives with action. If so, he is about to prove an awful lot of his naysayers and skeptics wrong.

Strange Circumstances at City Hall: A commenter on the Newstreamz website perhaps said it best, “I am really getting tired of government by ambush from the City of San Marcos.” This time, the City teetered dangerously close to violating the Texas Open Meetings Act. In fact, I would argue they violated the intent of the Act, considering that this was posted as an addendum on a holiday weekend with few people around. The City Secretary’s Office is highly professional–I doubt seriously that this really was an error on their part (perhaps information was not supplied in a timely manner to them).

Ambush has been an ongoing characteristic of economic development incentive proposals involving Springtown Mall, which go back nearly 18 months to the first meetings the city had about the project. This lack of transparency stinks to high heaven and is an absolute disgrace. By my estimate, this is the fourth iteration of an incentive proposal, and the first going directly to an end-user rather than the property owner. That alone would raise flags with me if I was sitting on the dais.

Help! Help! My Hair is on Fire: That 18 months is important. Why? Because the sudden placement of this item on the agenda was justified, in part, on Lamy-Springtown Mall, Ltd facing foreclosure at the beginning of March. My question is, why did this deal suddenly appear in mid-February, when we haven’t heard so much as a peep out of this project since the summer? So what I get from this is that Lamy is an idiot when it comes to investing, and set himself up to end up upside-down on Springtown.

While the City deserves blame for Springtown hemorrhaging anchors, Lamy did an effective job of shooting himself in the foot. Several of the smaller tenants have reported that Lamy chose not to renew their leases, or presented lease terms that were not acceptable under Springtown’s economic realities shortly after JCP departed for StoneCreek. When you don’t have a deal in hand for new anchors or a redevelopment plan, you cannot afford to lose your little tenants. Six months to a year is nothing for a commercial vacancy, assuming you are a smart commercial investor. He grossly overpaid for those two parcels even for the 2006 real estate climate, and there are consequences for that. Let it go to foreclosure. Somebody else will pick it up, but they won’t have near the financial burden and will be able to afford to do quality redevelopment instead of another crappy facelift that becomes obsolete just as the incentives come to an end.

In fact, Triple Tap Ventures & Alamo Drafthouse might stand to benefit from it facing foreclosure and be able to negotiate a sweetheart deal for themselves with the lease (it’s tough to find a negotiating tool that is more effective than knowing the landlord is desperate). Odds are that the non-profit holding the note on the property will renegotiate before this hits the courthouse steps, because they would stand to be a big loser if Lamy files bankruptcy. Bottom line is that Alamo Drafthouse is a natural fit for San Marcos and is desirable. However, the purpose of tax incentives is not to bail out investors that made stupid decisions.

But Wait, There’s More: Triple Tap Ventures and Lamy have suggested that this deal is integral to gaining the financial backing necessary to turn Springtown into a mixed use urban village of commercial, office and residential space. They act like this is some kind of realization they just came to recently, when that simply is not the case. I know this because I provided them with a 40-page report I wrote that assessed the redevelopment potential of Springtown in late 2008. It built a business case for a mixed-use urban center redevelopment comparable to The Triangle in Austin, and it practically provided an instruction manual for how to do it (including discussions of involving the San Marcos Housing Authority as a potential partner to gain connectivity to Bobcat Stadium).

Speaking of Triple Tap Ventures, they aren’t exactly hurting for capital. They are a subsidiary of Restaurants Unlimited, which owns a laundry list of major chain restaurants. Oh, and Restaurants Unlimited is a subsidiary of Sun Capital, one of the largest private investment firms out there. Yes, these guys really NEED an interest-free loan that is repaid by sales and property taxes, rather than conventional repayment. Local government is not equipped to operate as a bank; it should be considered a lender of last resort.

Yet somehow, San Marcos has become the lender of first resort for any retail development recently. This city is already over-reliant on notoriously unstable sales tax revenue, which is a problem that has come home to roost in the form of hiring freezes and sudden belt-tightening. And Triple Tap Ventures is saying that this project won’t happen without this deal. Right. That is why you issued a PRESS RELEASE saying that you purchased the franchise rights to Alamo Draft House in San Marcos and announce your intentions to open a theater here. Sounds to me like they already had a good business case for locating Alamo Draft House here, even without incentives. Of course I’ll call you on your bluff when you’ve already shown me your hand.

What Goes Around Comes Around: And I am not referring to the Justin Timberlake song “Cry me a River.” The council has been extraordinarily stupid when it comes to incentivizing retail. Incentivizing retail is not considered a good economic development strategy to start with. Incentivizing a developer to cannibalize three anchors from an existing development is almost criminally stupid. Ignoring city staff recommendations that the StoneCreek incentives include buying out the non-compete deed restrictions at Springtown was stupid (though I’m not sure those recommendations ever saw the light of day with the Council).

Not immediately working with the Springtown property owner once the planets were aligned to rape the development of all of the anchor tenants was stupid. The StoneCreek incentives charted an unsustainable course for the city. Springtown will, and probably should sit vacant for a long time just to remind everyone of the importance of thinking long-term. Sadly, the actions on StoneCreek virtually guarantee that San Marcos will need to use some incentives to revive Springtown. The key is making sure you get what you want, rather than just settling for whatever comes through the doors of city hall (which is the current trend, for those of you keeping score). That is how you end up with a bland cheese pizza–you get your pizza, but nobody is really satisfied with it. Me? I’d prefer a quality pizza that perhaps takes a bit longer but is something that is satisfying.

Chance Sparks

chance@bobcatfans.com

Some have probably noticed a topic gaining steam in San Marcos politics–veterans issues. A few candidates have brought it up in campaigns, while regular citizens have made use of the public comment to make their support known. This is generally a good idea, though I am beginning to worry that San Marcos is becoming a little “housing incentive happy” with its efforts toward university staff and now healthcare industry employees. Perhaps promoting homeownership in San Marcos is another blog topic worthy of discussion…

As is typical of city government, the lazy answer has already been put out there with proposals to create yet another appointed board “to investigate the veteran issue further.” As you might have guessed, I would rather have current elected leadership step up to the plate on what should be a relatively simple topic to tackle: making San Marcos an attractive place for veterans in order to compliment the university’s efforts. If they want another board, perhaps it is time to consider a more holistic board to look at community initiatives, including the existing housing incentives and maybe even the community development block grant program.

San Marcos has already got the image aspect of veteran’s issues covered with what is regarded as one of the best Veteran’s Day efforts in the country. So what we’re looking at is local government public policy toward veterans, which is really the meat of any effort toward veteran’s issues. As many are aware, United States veterans have access to a multitude of programs through the Veteran’s Administration and state programs. Therefore, any policy adopted by the City must be careful not to duplicate benefits already provided elsewhere. Existing programs include:

• The G.I. Bill – provides funding for tuition, housing allowances while attending school and a stipend for books and supplies. This bill has variants including the Post 9/11 G.I. Bill, Montgomery G.I. Bill for Selective Reserves/National Guard and the VEAP Post-Vietnam Era Educational Assistance Bill.
• The VA provides educational assistance to dependents if the veteran is disabled or deceased.
• The State of Texas provides the Hazlewood Exemption for Texas veterans that have exhausted their Federal VA benefits.
• The State of Texas offers a property tax exemption to disabled veterans.
• Access to healthcare and military base facilities.

I have spent some time discussing this issue with area veterans to learn more about their unmet needs. Texas State has already taken a lead and is recognized as one of the most veteran-friendly campuses in the country. They have done this primarily by offering strong, coordinated guidance counseling and active recruitment. Some veterans indicated that while Texas State does an excellent job training veterans academically, they are also interested in vocational training typically provided at technical schools and community colleges. Enough time has passed since the ACC voter fraud fiasco that it is time for San Marcos to take another hard look at joining the Austin Community College District. This will provide veterans another opportunity for education following their service, along with the added benefit of reducing dropout rates at the high school by giving students not interested in college a secondary education alternative.

Many veterans come to San Marcos because of the GI Bill, which gives them access to higher education following service to their country. However, San Marcos lacks jobs for these veterans once they graduate, forcing them to look toward other cities. San Marcos needs to refocus economic development efforts and incentives toward providing skilled, well-paying jobs that will make San Marcos not just a destination for veterans pursuing higher education, but for veterans interested in making San Marcos the permanent home for their families.

Veterans I spoke with complained about the lack of VA healthcare facilities nearby, noting that they have to travel to Austin or San Antonio. With the growing populations in the corridor between Austin and San Antonio, San Marcos would be a logical location for a VA healthcare facility. San Marcos needs to reach out to the VA, nearby cities and counties, and healthcare providers to bring convenient VA healthcare options to a central location in San Marcos.

Veterans that have served honorably in defense of our country have also earned tax relief. San Marcos leadership should pursue establishment of a special homestead property tax exemption for veterans to reduce their property tax burden. Perhaps they can work with the other taxing entities, such as the school district, to pursue such a policy with their property tax funds.

Veterans are also faced with entering a less-active lifestyle following their departures from the military. Maintaining their health is an important priority for them. San Marcos should waive use fees for the San Marcos Activity Center for veterans and their dependents to promote health and family activity.

I also understand that while veterans have access to special loan products and housing assistance through the G.I. Bill, some gaps exist that can cause financial strain on a recently discharged veteran. Several commented they lack savings for closing costs and a need for gap financing when purchasing a home. San Marcos should investigate the feasibility and need for a veterans’ homeownership assistance program to provide revolving or deferred forgivable loans to veterans purchasing a home in San Marcos. There may be potential for a similar program to help veterans renting a home with deposit costs and potentially a few months rental assistance as they establish themselves and search for employment. In fact, waiving utility deposits would be another great step.

You have probably noticed that I advocate working with neighboring jurisdictions. Regionalism is a great way to gain wonderful programs that are only feasible if certain economies of scale are maintained. Neighboring jurisdictions also have veteran needs. San Marcos, working with area cities and counties, should establish a 2-1-1 veteran hotline that will provide a one-stop shop for veterans and families to receive all available information regarding Federal, State and local veteran resources, saving them frustration. Such services would include referral/crisis services, a database of local government health and human services, healthcare information, clothing and food program information, employment counseling referral, rent and utility assistance information, legal assistance, counseling, child care options and mental health counseling.

Finally, though this is an internal employment issue with the city, San Marcos should strive to become a Department of Defense Employer Support for the Guard and Reserve (ESGR) “Five-Star Employer” that places high value on including veterans in its workforce. San Marcos may have a good mentor with the City of Austin to help them achieve this noble goal.

Veterans are a great population to have in your city. They are a diverse group that tend to take an active role in government and non-profit organizations, have strong work ethics, and are often sought-after by employers. Personally, I think San Marcos would look good with a little more camo in its culture!

Chance Sparks

chance@bobcatfans.com

The Texas State Alumni Association organizes an international trip every year for Bobcats, working through an agency that is, you guessed it, partially owned by a Bobcat. Through group rates, etc., my wife and I will be able to visit China for about 60% of what it would have cost to book everything ourselves, pay for lodging & food, etc. In addition, the group leader will organize meetings with Chinese businesses for any Bobcats interested in doing business overseas with them. Not only that, I’ll be on an airplane for 13 hours with 40 other Bobcats! I’ve got a feeling this means 40 new friends that I otherwise would not have made were it not for the Alumni Association. My neighbor is also going on the trip, taking along her daughter and future Bobcat. Beijing… Shanghai… I’m sure I’ll have plenty of fodder for the next round of blogs when I return on the 28th. Perhaps we’ll see a blog about how for a communist totalitarian dictatorship, China has gotten awfully good at capitalism. In the meantime, I’ll be searching for the best picture of Chairman Mao to take some kind of humorous picture in front of, just for our conservative friends here on Bobcatfans!

Perhaps me being out of the country will help the fortunes of our Bobcat football team. Let’s hope.

Upcoming blog topics:

City election political hot topic: what can/should San Marcos do for veterans?

Growth of Texas State and higher profile athletic programs: what that could mean for the city’s profile and economy

Dare I say it… a multi-part series discussing the now-vacant Springtown Mall?

Development beat: what cool projects are just around the river bend?

Chance Sparks

chance@bobcatfans.com

Many people place the beginning in the late 1940s, with the establishment of the University of Texas’ Balcones Research Center on the site of a former federal World War II magnesium plant northwest of Austin. Many of the UT faculty and graduate students who worked on research projects at various scientific laboratories in the Center (archeology, aerospace, and nuclear physics, among others) went on to start or work in private electronics and research companies. These companies, and the large pool of highly trained researchers at UT, attracted national electronics corporations and their suppliers to build Austin locations. The next step in this story brought development of the IC2 Institute at UT. The IC2 Institute was created to test the hypothesis that science and technology are resourced for economic development and enterprise growth—that cooperation between regional government, business and academia could create economic development synergies. Michael Dell of Dell Corporation and Jim Truchard of National Instruments can both attest to the success of this program.

The big moment was in 1988, when the semiconductor industry’s new research consortium (Sematech) chose Austin, and chose it despite other locations outbidding the Austin and State of Texas economic offers. Sematech chose Austin because of the rare community effort put forth by Austin’s public and private sector that exhibited a coordinated vision for a high-tech future. The rest, as we say, is history.

So, this is still a Bobcat website right? So why all of the love for UT and Austin? Well, to take a page out of Ron White’s book, I told you that story so I can tell you this one:

On November 28, 2008, Texas State University announced it had received $4million from the State of Texas emerging technology fund (ETF) to establish an accelerator/science park in san marcos known as the Texas State Center for Research Commercialization Center targeting high-tech – small business staging, GreenTech – Texas greenbelt alliance, and industrial connectivity. These funds are dedicated to expediting innovation and commercialization of research, attracting, creating or expanding private sector entities that will promote substantial increases in high quality jobs, and increasing Texas higher education applied research capabilities.

The Texas State Center for Research Commercialization Center serves to assist industry and technology transfer by teaming industrial partners with significant University resources. These resources span from access to faculty research know-how, to scientific equipment, internships, business planning, and joint funding ventures – to list a few. The model is simple – to be agile to the needs of each partner, recognizing that “no size fits all,” treating each industrial partner on a case by case basis, and take pride in being able to respond rapidly, actively, and adapt ably.

Sounds pretty sweet, right? Well, that press release was the last I heard about it. San Marcos city officials should have latched onto this opportunity like Austin did with the Balcones Research Center, IC2 Institute and Sematech. They should have been brokering land deals to get this thing off the ground, but I haven’t heard a peep in nearly a year. City officials give a lot of talk to getting higher-paying jobs in San Marcos, yet seem preoccupied with doling out the corporate welfare to businesses that promise to bring plenty of low wage jobs, the recent biotech company and HEB warehouse expansion being the notable exceptions in the last several years, and even those are hardly knowledge-based. These opportunities don’t come along often. San Marcos had the vision in 1899 to donate land for a university. Will this generation have the same vision? Is it ready to take action? If it is not, I’ve got a feeling the folks in Round Rock, home of the sister campus, are willing to talk turkey. In the meantime, I’ll hold out hope that folks are working the background at San Marcos City Hall.

Chance Sparks

chance@bobcatfans.com

So what is the point of this blog? What should you expect? Naturally, I’ll dabble in Bobcat Sports because that is the true purpose of this website. However, my true expertise and interest is the wonky world of public policy. And therein lays the true purpose of this blog: shedding a little light on the most fascinating features of local politics and whispers on the hill. As you might expect from me, there will be a large interest paid to land development in the San Marcos area. There are two reasons for this: I have experience in urban planning and because when you scratch the surface of virtually any local government controversy, you find a land use issue. Also, let’s face it—people love the development rumor mill.

To some extent, this will be a populist blog. By this I mean that you, the reader, can influence topic selection. Have you heard a rumor? Perhaps you are curious about something going on in the city and want my take on it. Crank up a thread in the “Life in San Marcos” sub-forum and see if I pick it up! One thing though: you will not get an endorsement of any candidates from me. I will, however, give my opinion on key election issues.

-Chance Sparks

chance@bobcatfans.com