CITY OF SAN MARCOS
The San Marcos City Council approved an affordable housing development, The Springs, that are not required to pay property taxes due to the submission of an application for Low Income Housing Tax Credits to the Department of Housing and Community Affairs and the creation of a partnership with the San Marcos Housing Authority at the regularly scheduled meeting last week. There was an item on the agenda that involved a discussion on Low Income Housing Tax Credit Projects, particularly those with property tax exemptions, and the policies governing council approval of those types of projects as well as the need to balance the availability of affordable housing while not putting the burden of funding city processes solely on other property tax paying residents.
“They are looking at an exemption from local taxes,” said San Marcos Mayor Hughson. “We need to remember that local property tax is a good bit of how we fund our parks and our libraries, our public service [and] our police and fire [departments].”
Amanda Hernandez, San Marcos Planning and Development Services director, said The Springs provided two options for a Payment in Lieu of Taxes agreement, which were a $250,000 lump sum payment to the city plus $20,000 a year for 15 years or a $400,000 lump sum payment. The coun- cil unanimously voted in favor of the $400,000 lump sum payment.
“All units will serve those making 60% or less than the Area Median Income,” Hernandez said. “The property is currently located within the FEMA floodplain. However, the applicant is working through the FEMA process to remove the property from the floodplain. There was a question on the message board about the 2015 floods, and this area did have flooding. However, our records indicate that the multifamily buildings, or at least most of them in the area, were only affected meaning the units were still habitable after the event.”
San Marcos City Council Member Jude Prather said approval of this complex would help to address housing affordability in the city.
“Housing affordability is a concern we hear frequently from our citizens, and frankly, it’s a concern throughout the country,” Prather said. “Two of the most proven ways to address housing affordability is increas[ing] supply and subsidizing housing, and this does both of those.”
San Marcos City Council Member Mark Gleason said he was in support of the development but was glad discussion would be held on the impacts of a property tax exempt development.
“I’m glad that we’re going to have some deep discussions about what these exemptions really mean with all these LIHTC [Low Income Housing Tax Credit] developments. I have some real concerns about the volume of them that we’re seeing,” Gleason said. “It’s going to have some real world impacts on our services and potentially budgetary concerns over the next couple of decades.”
Prather suggested the possibility of enforcing a required Payment in Lieu of Taxes with a standardized formula using the loss of property taxes over a 15 year period.
“I’m kind of torn between I want to invest [in] and subsidize affordable housing — and I think we’ll still be able to do that — while also not hindering future budgets [and] future councils by this loss of taxes,” Prather said. “I think we just need to increase that formula where we can recoup some of that potential lost taxes, and let that be known beforehand.”
San Marcos City Manager Stephanie Reyes suggested hiring a demographer to look at the ratio of housing that does not pay property taxes and housing that does.
“I hear this council talk a lot about not wanting to gentrify neighborhoods and also have tax breaks,” Reyes said. “It makes it very difficult when you have a lot of PILOT housing as well as ones who don’t pay taxes because what that means is that then the rest of the residents that do pay taxes are having to pay for whatever service requirements that you have for public safety, library, roads, all of those things. So you need a mix of both. That’s the thing that you want to understand is what is the community’s capacity to handle this type of product versus the other types of housing we need as a community.”
Gleason agreed that it would be valuable to have the demographic information, particularly the percentage that the city has grown compared to the percentage of LIHTC developments. He also said he would like to codify the requirement of a PILOT payment.
“If we’re going to see these kinds of things we need to know who’s on the waiting list, how many and what kind of changes are we seeing over time so that we can stay ahead of that curve instead of us making a reactionary decision a few years down the road,” Gleason said. “The other part of it too is I’d like to see what our peer cities are doing like how many projects are they seeing in correlation to their growth.”
Hughson said the city could add some benefits for developments that are building at market rate if the developer is willing to incorporate some low income housing.
Hernandez said there are already some benefits for market rate developments that incorporate some affordable housing, but developers haven’t been utilizing it.
“We haven’t analyzed it, and I have a feeling that’s something that we’ll do after our comp plan is adopted to kind of look at that and see and figure out why people aren’t using it and if there is any way that we can improve that part of the code,” Hernandez said. “But it’s there.”
San Marcos City Council Member Alyssa Garza said she is hearing a lot of concerns about how much money the city is losing.
“When it comes to compiling information for us to contemplate in a more meaningful discussion perhaps in a work session,” Garza said. “I’m personally more interested in hearing how we can best use these types of projects in ways that make it worth the investment.”
Hughson said that the loss of money should not be a reason for denying a development, but she wants to look at the amount of lost property taxes in order to figure out other ways to balance out that loss of property tax.
Garza suggested having the San Marcos Diversion, Equity and Inclusion officer review and contribute to the policy.
“There is a lot of literature that’s written on these types of programs and how they can be leveraged … and negotiated to truly serve the most vulnerable [populations],” Garza said. “Local residency preferences is most aligned with a more equitable housing framework.”
Hughson wanted to outline how the PILOT funds would be dedicated instead of going into the general fund with a DEI lens. She gave direction to staff to accumulate the necessary data discussed in the meeting and to come back with a specific policy for consideration.
“I’m happy to give you some time to think about it, and whenever this comes back as a work session item … you all [in city staff] may have a completely different view. And it may be great,” Hughson said. “But I’d like to see something specific.”
