(Seguin) — The city of Seguin has been at loggerheads with the Navarro ISD over the city’s decision to partner with a developer to build a high-end apartment complex at the corner of State Highway 46 and Cordova Road. The Seguin City Council met Tuesday night to consider an item that would allow the city to share the revenue it receives with the Navarro ISD.
City Manager Steve Parker says they are moving forward with the nearly 300-unit apartment complex, which is being built using the city’s Public Finance Corporation (PFC). The PFC is part of a state law that allows the city to work with a private developer on workforce housing that’s aimed at providing quality housing for working people, like teachers, police officers and firefighters. Even though a private developer would pay for the construction, the PFC would allow the city to own the apartment complex, and because it’s owned by the city — it would not be subject to property taxes. Navarro ISD officials say it would create an additional burden on the district, because it would bring more students to the district, but the district would not be able to receive any ad valorem taxes for the project.
Parker says they have listened to the concerns of the school district, and they wanted to formally offer the district a significant share of the revenue that would come to the city in the form of rent payments over the 75-year agreement that covers the project.
“I think the council believes that workforce is an initiative that they want to invest in but at the end of the day, it wasn’t our intention to completely not partner with the school district so with that, council seemed to have intent to share in the revenues related to the rental lease payments that would be coming from Vaquero as a developer and we talked to the school district and the county and the county was not really interested in the project. They are eventually against a Public Finance Corporation project and so they have said that do not want to participate in receiving any of the funds from the Public Finance Corporation,” said Parker.
As Parker referenced, the city originally offered to split the money with both the school district and Guadalupe County, but the county indicated that it did not want to participate in the project and asked that their proposed share be given to the Navarro ISD. Parker says the city thinks it’s fair to offer the district a 50-50 split of the revenue that the city would receive.
Parker says the resolution would also clearly spell out that the $500,000 upfront payment that the city receives from the developer would go directly to make improvements along Link Road, next to the Navarro ISD schools.
“We drew up a resolution tonight that would offer the Navarro School District the $500,000 that the city would have received at closing. We initially made that offer to make improvements to Link Road. We know that is not enough to fix Link Road, but we know that there will be some improvements that will be necessary just to meet the minimum requirements related to their TIA that we require of any developer as they build their new high school, but we knew that it wasn’t enough to start and finish that project, but we thought it was a nice thing to do. We still kept that in there even though we are going to share the rental payments and give them that $500,000 at the closing and the recommendation was to split those rental payments 50/50 now that the county is not participating,” said Parker.
Navarro ISD School Board President Renee Rehfeld asked the city to delay action on the resolution it approved on Tuesday. She says her board was scheduled to meet and discuss the issue Wednesday night, and they wanted to first have that conversation before the city took any additional action.
“At the meeting that we had jointly, there was a big discrepancy between the valuation of the property so we just wanted to have more time to understand exactly what the tax impact would be for the school district with any revenue share. Initially, the original proposal was for 1/3, 1/3, 1/3 — one third for the county, one third for the district and one third for the city. The county had asked that their one-third go to the school district. They said it that night at the meeting. I think they have communicated that to you too a couple of times Mr. Parker. They’ve communicated that to the district,” said Rehfeld.
Rehfeld stressed that the district would like for the city to consider giving Navarro ISD two-thirds of the revenue collected as part of the deal, with the city getting only the remaining one-third. She says the district needs that money to offset the loss in tax revenue that the district will experience for the next 75 years.
“I know it may sound like we are trying to be greedy with two-thirds but we don’t have other revenue streams as the city and the county does and that’s the reason the county gave up their third to give to the school district because they know that we have state funding and we have taxes. That’s all we can do to get revenue for the district. So, our question back to the city that we wanted to talk about at our board meeting is why would the city not grant the county’s request for their one-third to go to the school district to help minimize the impact? Because even with the two-thirds portion, we are still talking a huge impact to the school district not only in terms to the taxes we receive but the bonding capacity that we are going to have to try to continue to build the schools and the facilities that we are going to need with all of the growth that we are seeing,” said Rehfeld.
Rehfeld says they also still have a number of questions about the $500,000 that the city says it would give the school district for improvements on Link Road.
“It’s always had Link Road attached to it. We don’t own Link Road and so weren’t sure if we could even accept the $500,000 because if there’s any understanding that that $500,000 would be used for Link Road, we can’t do that. As a school district, we don’t make improvements on Link Road. It’s the city and the county that own Link Road. Now, if we could use the $500,000 towards the high school project then that’s something different and there will be roads associated with that but it won’t be Link Road so we just need more information on that,” said Rehfeld.
The city could move forward without offering any revenue sharing with the district or with any other entity, but Parker says they are coming to the table as a good neighbor. He says a 50-50 share is unheard of when it comes to these kinds of PFC projects.
“This is the only community that I know who has ever offered from what our understanding is ever offered a share in any of the rental payments related to the Public Finance Corporation. In any community, the cities have chosen to keep that all themselves and so that was probably our logic in splitting this,” said Parker.
The city’s Public Finance Corporation is working with Vaquero Multifamily LLC to build the apartment complex, which city officials say will have 288 units and it will boast high-end amenities that are not normally found in apartment facilities in the Seguin area. The project will cost roughly $58 million. The city will own the building once it’s completed, and the developer will pay for all of the expenses related to construction. It will also be responsible for leasing up the apartments and for managing the complex. The city would be paid rent over the life of the 75-year deal. The original agreement offered no revenue sharing, which was one of the major sticking points for the Navarro ISD. The district’s board of trustees was scheduled to meet and discuss the issue during a special meeting on Wednesday night. It’s not clear what action, if any, was taken during that meeting.
Meanwhile, the city council on Tuesday approved its resolution by a six to one margin, with Councilman Chris Aviles casting the lone dissenting vote. Council members say approval of the resolution allows the city to make a formal offer to the Navarro ISD and allows for additional discussions and maybe negotiations to take place.