Feature Photo: The Yarrington Road bridge over the Union Pacific Railroad tracks and Post Road. Image: Google Streets.
by Art Benavidez
San Marcos (Hays County) — City Council took steps to rectify a long-standing tax increment reinvestment zone agreement that has cost millions in interest cost–last week they approved by resolution the publication of notice to issue certificates of obligations.
The city is looking to finance the $8.7 million project that involved constructing, improving, designing, and equipping road and streets projects, and included a railroad overpass and related infrastructure on Yarrington Road within the northern portion of the city.
The $8.7 million also involves payment of professional services including legal, fiscal and engineering fees relating to the project.
Consideration of the resolution authorizes the city to publicize notice of intentions to issue certificates of obligations regarding the road and infrastructure improvements.
In 2005, the city created TIRZ Number 2 consisting of approximately 577 acres of land in the northern portion of the city between the Blanco River and the Union Pacific Railroad tracks, the bulk of which was contained in the proposed Blanco Vista development owned by Canadian developers Carma Blanco Vista, Ltd, who coordinated construction of the four lane bridge that was completed in 2008.
Interim Director of Finance Victoria A. Runkle said that they had been looking at the proposal for a little over a year because they believe that they can secure a better deal for the project.
“Over the years the city has been paying (interest) per the agreement,” she said. “It started off at $9.6 million was the principal amount that the city obligated plus any accumulated interest. In August of 2019, there was discussion at the finance and audit committee meeting to actually trade out of this obligation for bond monies because the city at the time was paying 5.75 % interest and the city of course could borrow less at a less cost.”
The unforeseen circumstances of the COVID-19 pandemic have delayed moving the proposal forward, but now the city is looking to save money, Runkle added.
“This proposal is to borrow $8.7 million to pay off the principal and outstanding interest that has accumulated over time on it,” she said. “What will happen is the city will be able to borrow on an average 2.8% as opposed to 3-3.5% interest rate. The way the money will happen is we will pay the debt along with the property taxes that would be generated from the property. Currently all the property taxes that are generated go toward paying off the debt. We would only spend approximately $500,400 a year and then the city would have at least $130,000 more a year than to dedicate to the general fund. “
Commissioner Melissa Derrick said she understood that the current financial conundrum was not the fault of the current city council, but asked why they had not been informed of the project.
“This makes me wonder,” she said. “This is a 2005 agreement and the city has paid $3.7 million of interest. I’m having a hard time (understanding) why it wasn’t brought to previous councils and why it took some time to notice that we were paying millions of dollars in interest and we weren’t getting any closer to our end goal. I would hope this isn’t our normal mode of operations.”
City Manager Stephanie Reyes said that their objective was to get the best deal for the citizens of San Marcos and couldn’t explain why the decision was made in 2006 to enter the TIRZ agreement.
“We are asking to go ahead and pay the developer off so we can have a better deal and have a better principal,” she said. “We are asking to keep the terms in place so that when our new finance director begins in mid-January, she can evaluate this, along with our bond council and financial advisor. This is definitely something we don’t want to keep continuing to pay high interest rates (on) that we (are currently) doing so that is why we are bringing it to council because this is the most immediate action we need to take in order to get a better deal for our community.”