Seguin City Council changes course, offers support for workforce housing project
(Seguin) — It’s been a long and bumpy road, but the Seguin City Council is again prepared to move forward with a workforce housing development project. The proposed Lily Springs Apartment Complex is slated to be built at the corner of State Highway 46 and Cordova Road. It will be aimed at providing quality living spaces for teachers, police officers, firefighters and other employees who work in the Seguin area. City officials say it is not a public housing project, instead it is a partnership that will be partially owned by the city of Seguin, through its Public Facility Corporation (PFC). The council makes of the PFC’s Board of Directors and it met Tuesday night to discuss the project.
City Manager Steve Parker says they were bringing the item back because some new questions were raised after the item was voted down during a council meeting in early December. The deal would allow the city to share ownership of the complex with a private developer. In lieu of property taxes, the developer would make lease payments to the city for 75 years. Because it would be owned by the city of Seguin, other taxing entities — like the the Navarro ISD and Guadalupe County — would not be allowed collect property taxes on the complex for that 75 year period. The city attempted to make this an easier pill for the Navarro ISD to swallow by offering to share two-thirds of the lease payments it receives with the Navarro ISD. It was an attempt to help the school district recover some of its lost tax revenue. However, that previously proposed deal wasn’t enough to garner support from a majority of the council last month. But Parker says things started changing after that meeting. He says they went back and took another look at how they could change the terms of the deal and better share that overall revenue. Parker says this incentive is a long term commitment, but it could have a positive impact on the community, even though it would not be on the tax roll.
“I know it has a negative connotation as being an abatement, but there is a revenue sharing opportunity that we need to consider. After that item was voted down, we had several council members ask me questions about how it actually worked, what the revenue sharing was and how we could make the Navarro School District closer to being whole. If you remember, the council had agreed to share two-thirds of the rental payments that would come into the PFC. Two-thirds of that would be allocated to the school district. The city would receive payments anytime a sale would occur, as a partnership, because we’re part owners of this as well. The first sale is 15 percent of net profits. Any additional sales would come in at two percent of the gross proceeds,” said Parker.
Under the newly proposed agreement, Parker says the city and the Navarro ISD would likely get more money than they would if they were just to collect taxes on the property.
“There is a revenue stream here. When you hear the word abatement, this is not a true 75 year abatement. Council member Biesenbach reached out to me and I think he reached out to the school district as well. We ran some financial performas and we actually provided those to you in your packet tonight. So, you could see that with the sharing for the school district – with the two-thirds, one-third and sales tax calculations — if this thing sells four times over a 40 year period, which is very, very reasonable, I think that’s a very conservative estimate. (If that happens), the city of Seguin would be about $5.9 million to the positive above (what this would be) if this was a fully on the market taxable property. And that’s the message we’re trying to make sure everybody gets,” said Parker.
Parker says that there are still some other misconceptions about this project. He says this will be a first-rate apartment living community, with approximately half of it offered to working people below the normal market rate for those units. Parker says this type of housing is currently not affordable for people, who may be starting out their careers in education, in public safety or in some other jobs across the community. He says workforce housing is needed, which is why the PFC exists and why they are pursuing this project.
“It is a policy issue. Do you want workforce housing in your community? We think with the retail growth (it’s a good idea) for our first to third year teachers, firemen, (and) policemen. This is a is the only product out there that finances those types of developments. This is not subsidized government housing by any means. This is a Class A product that would be in our community,” said Parker.
The new proposed deal would bring the property back onto the tax 25 years sooner. Parker says it would reduce the abatement from 75 to 50 years, but again he stressed that the city and the school district would continue to receive funds whether the complex was on the tax rolls or not.
“This would still be. 75-year lease, but we do have an option — at the 50 year mark to opt out. If the city chooses to do so at the 50-year mark, we can take this off and put it back on the tax rolls and it would not be a Public Finance Corporation project at that point. We thought that was worth bringing back to the council to see if that changes the appetite. But I did want to make sure that we clarified that even though this is the terminology of a 75-year abatement or 50-year abatement, there is money — as a partnership that would be to the positive for our community. (It would be) $5.9 million more than we would have if it was on the full tax rolls of our community,” said Parker.
Councilman Jason Biesenbach was part of the majority of the council, that voted against the project in December. He says he still had questions about it, but he also understood the city’s need for workforce housing. Biesenbach says the reworked revenue sharing agreement makes this easier for him to now support.
“I am glad that we’ve been able to negotiate that 50-year agreement. That’s a good thing. And I absolutely love the fact that Navarro — I don’t want to say is made whole because, of course, taxes can change and things like that – but as it sits now, they’ll be doing much better. You know, workforce housing is something that we’re always looking for. Everybody needs a little bit of hand up sometimes. That’s a positive for our community as well. And I think this would do a lot to spur. You know that area of Navarro right there. So, I think with the changes made and this new negotiation, I think it’s a positive for sure,” said Biesenbach.
Questions were still raised on Tuesday about the project. Council members wanted to know more about the developer, his company and his experience with these kinds of projects. John Kirk, of Lightpath Corporation, told the council that he has more than 20 years of experience working on these kinds of projects. He says he’s done more than a 100 of them across the country.
He did that while working for other companies, but now he is standing on his own. This would be the first project for Kirk’s company. He says he wants to do this on his own, because it’s in the place that he calls home. Kirk lives in the area, and his children attend schools in the Navarro ISD. He says he is fully invested in making this project work for his company and for the community.
“I’m personally investing in this project. I live across from this project. My kids go to school in this community. So, there’s a lot riding on the success of this project. When comments are made from an experience standpoint, I take a lot of pride in what I do and the experience that I have — direct experiences as a developer. It’s hard as a developer, and I’ve been fortunate in my career to develop the amount of projects I’ve had across the United States. And anytime you develop something in your backyard, it’s special. And there’s also more pressure to do it right. So, I’m looking forward to it,” said Kirk.
Council members also questioned how it could be brought back so soon after it was voted down just over a month ago. Parker says it came back because the council was still asking questions and because they wanted to see if they could come up with terms that were more favorable for the school district.
“Because the terms change, it’s legal to bring it back now. But since a prevailing member or a person that voted no last time — Mr. Biesenbach voted no and he’s the one who requested this item to come back to council. So, this is very much legal for us to discuss this again,” said Parker.
This project has been in the works for more than two years. It city was first approached by another developer. That company could not move forward, which created by opportunity for Kirk and his company. Mayor Donna Dodgen says they’ve learned a lot about PFC’s and workforce housing over the last couple of years. She says the housing need is clear, but she says they also needed to find a way to demonstrate the revenue sharing that would take place under the terms of the new deal.
“I felt much more comfortable looking at it in that manner and that gave me a whole different look about it and the way in which we could make entities have more cash flow and have more revenue. And also still having control and authority within our local area was very important to me as well,” said Dodgen.
That control was a major concern for some members of the council. Dodgen says there have been situations in other parts of the state where projects like this have been gobbled up by outside governmental entities, which has a negative financial impact on the communities where those projects reside.
“And use the word it scared me, and it wasn’t that it scared me…but it very much concerned me that we were going to relinquish control and not have anything at all for our citizens or our constituents. That was really bothersome. I do believe the legislature will make some changes, but until then, I think that we need to be able to be an authority and in control and drive the wagon as best we can,” said Dodgen.
The idea of an outside governmental entity buying a local apartment is not far fetched. In fact, Parker says it has already happened in Seguin. He says there’s an apartment complex (Walnut Grove) that is no longer on the tax rolls, because it was purchased by county in south Texas. It has had a negative financial impact on the city, the Seguin ISD and Guadalupe County — because no taxes can no be collect on that property.
Over by HEB, there’s a property that was bought by the Cameron County HFC, without any notice to the city or the school district. We were making about $54,000 a year in property taxes on that annually. It is no longer on the tax rolls. For the school district, they were making probably $130,000 in annual revenue. And then the county would probably be somewhere around $40,000 a year in revenue. That is no longer coming into our community, because they purchased that property,” said Parker.
Councilman Jim Lievens, who represents the area where the Lily Springs apartments would be built, said that he was initially against this when it came up more than two years ago. He says it placed a burden on the Navarro ISD, which would likely get more students from the complex, while not receiving any significant revenue from the project. Lievens says the new revenue sharing agreement is a novel approach to this type of project. He says that’s not how this normally works, but he says that’s why he now supports it. He says the new deal would make sure that the project has local control, and that the Navarro ISD gets a larger share of the revenue going forward.
“So, the way this has been working since the legislature introduced it, you have governmental entities across the state of Texas, who I’m going to use the term pirating — they’ve been pirating properties located way outside of their jurisdictions. They’ve been going basically in the middle of the night to make acquisitions, where those local tax entities aren’t even aware of it. And so, the local taxing entities find out months or a year or two later (when they ask), ‘hey, where’s our property tax on that apartment complex?’ So, this is very unique. When the city of Seguin first introduced this, I believe the school district may have been left out. But I applauded the council over the last two years and our (current) conversations to create a revenue split, and this is the first time the sponsoring entity has ever done the revenue split,” said Lievens.
The council voted to approve the deal and move forward with a memorandum of understanding. From there, the city and the developer can fine tune the details of the final deal, but it clears a major hurdle that iwll allow the project to move forward.