An economic development grant traditionally used to recruit factories could be used to redevelop Waco’s riverfront with millions of public dollars. But the city of Waco would need to update its policies to allow it to happen.
Developers of the Brazos Commons project are seeking a total of $7 million in “Chapter 380” business grants, half from the city of Waco and half from the city-county economic development fund. Combining that with downtown Tax Increment Financing Zone funds, the project would get a public subsidy of almost $15 million, including $2 million to relocate Oncor transmission lines.
The developers, Joe Beard and Rick Sheldon, are planning an 11-story, full-service Drury Plaza next to Clifton Robinson tower, part of a mixed-use development worth $129 million.
They are talking with city officials about a deal that would allow the $3.5 million business grant to be paid over time with reimbursements of city hotel-motel tax and sales tax, rather than with a check up front.
The council will vote Dec. 19 to revise its policies on business grants to allow that arrangement and to specify that mixed-use projects are eligible for the grants, Assistant City Manager Bradley Ford said. The Brazos Commons business grant could go to the council for approval in January.
In a work discussion Tuesday with the city council, Ford said traditional incentives have been given to factories on the basis of jobs and tax base. Incentivizing a signature downtown development requires a different way of thinking, he said.
“The metrics become more about quality and the implementation of a development plan,” Ford said. “In terms of the riverfront, the hotel has to be full-service. With the performance criteria, you start dealing a lot more with quality.”
The Waco-McLennan County Economic Development Corp. would also provide a $3.5 million business grant, but that doesn’t involve a tax reimbursement, so Ford said the corporation’s policies would not have to be adjusted.
Still, the request has drawn some questioning from McLennan County commissioners. The county and city split the cost of incentives from the economic development corporation, which is headed by County Judge Scott Felton, Waco City Manager Dale Fisseler and Waco Industrial Foundation official Bill Clifton. The three-member board has already recommended the Brazos Commons incentive.
At a Nov. 7 meeting, commissioners Kelly Snell and Will Jones raised questions about whether funding a hotel development should be the priority of the city-county fund. Jones noted that Brazos Commons has already received a pledge of $7.9 million in local property tax money through the downtown Tax Increment Financing Zone.
But Felton said in an interview that he is optimistic about the funding.
“I think we will have it back on the agenda on the 19th with a little more thorough presentation on it,” Felton said. “There were some legitimate questions, but if those questions got answers I think the court would support it. If this were just a hotel by itself, I could see the objection, but this is a transformational project, not just a hotel.”
He said Greater Waco has a shortage of high-quality hotel rooms, and increasing the supply could even help the county’s Extraco Events Center.
“When you understand who owns show horses, they can very much afford high-end hotel rooms,” he said. “We need to have lower-cost rooms and higher-cost rooms.”
Kris Collins, senior vice president for economic development at the Greater Waco Chamber of Commerce, said the Brazos Commons project represents a major economic development opportunity. In an interview Tuesday, she noted that other retail and hotel projects have received local incentives of various kinds, including the Waco Hilton, Central Texas Marketplace and Lake Air Center.
“I think once commissioners are able to see the full scope of this project, hopefully they’ll have a better level of comfort with it,” Collins said.
The Brazos Commons project is immediately adjacent to another signature riverfront project, called Brazos Promenade, that is just getting started on city-owned land with significant public incentives.
In addition to the value of the land, Catalyst Urban Development, the city’s chosen developer for that site, is seeking up to $2.9 million in Chapter 380 business grants from the city.
It has already received a pledge of up to $20.2 million in TIF funds, but it now appears the actual amount of TIF funds could be significantly lower.
At the council meeting, staff members said the city-led environmental cleanup and demolition project may cost far less than the $8 million budgeted through the TIF pledge. They said state regulators appear to be willing to allow the city to remove only about 10,000 cubic yards of soil and debris, saving more than $6 million. That savings would be returned to the TIF coffers.
“I think this is most exciting thing on our agenda today,” Councilman Jim Holmes said. “I don’t want to jinx it by talking about it. But for this to be a fraction of what we’re thinking about is amazing.”
Ford said the Brazos Promenade project could get environmental clearance by February, have a development agreement and lease with the city by spring and be ready for construction late in 2018.