SAN MARCOS — The city has approved giving an additional $4 million in tax reimbursements to a retail project in San Marcos after the company said the economic downturn threatened completion of the 550,000-square-foot project.
The City Council voted in September 2007 to give Stone Creek Crossing up to $2 million in property tax reimbursements for five years through an economic development grant based on performance. Last week , the city agreed to throw in $4 million more in sales and property tax incentives. In exchange, Stone Creek developers have agreed to build a movie theater, concert hall or other type of entertainment venue at the site, located at Interstate 35 and McCarty Lane.
The center will include a Super Target, a J.C. Penney and a Bealls. San Marcos City Manager Rick Menchaca said that had the city not amended the agreement, the development would still have progressed but possibly without a natural area incorporating Cottonwood Creek.
Menchaca said the land, where building is already under way, has costly drainage problems that deterred other developers in the past. He also said the company was facing higher steel and concrete costs than predicted.
Under the new agreement, the city will keep 20 percent of the property tax payments and give Stone Creek developers any sales tax revenue above $500,000.
If sales tax revenue exceeds $1 million, the city and the developers will split the money.
David Neher , vice president of Direct Development, Stone Creek's Austin-based developer, did not return a call for comment.
The city can afford the extra cash in the coming years in the current economy, Menchaca said: A similar agreement in which the city agreed to give $3 million in reimbursements to San Marcos Factory Shops/Prime Outlets to expand and renovate Prime Outlets has already produced more sales tax revenue than projected.
About half of San Marcos' $39.6 million general fund comes from sales tax revenue, about 60 percent of which is generated at the outlet malls.
The city will complete reimbursements to the mall developers this year, one year ahead of schedule.
The Stone Creek and outlet mall sales and property tax breaks are the only such agreements San Marcos currently has, Menchaca said.
"We look at it as an investment," he said.
San Marcos' sales tax revenue increased 9 percent in August, the most recent month reported, over the previous year. The city relies on sales tax for just under half of its income.
City of Austin voters will decide Tuesday whether to prohibit the city from giving tax incentives to projects or developments that include retail and to stop payment on current agreements.
Austin has only one such agreement with a retail development; the performance-based economic development grant for the Domain is worth up to $57 million over 20 years.