Creature comforts are in short supply at CrossFit Waco’s gym at Webster Avenue and South Eighth Street, where members groan and sweat under free weights in a metal building without air conditioning.
The former auto body shop suited the gym’s spartan style in 2014 when it moved there in the shadow of some rusty old cotton mill silos.
Three short years later, those silos are a nationally known tourist attraction, property values in the area are soaring, and taxes are driving CrossFit out.
“We’re right in the middle of tourist central, but unless we sell shiplap here, we’re not benefiting from the tourists,” said CrossFit co-owner Jonathon Shelton, referring to the popularity of the Magnolia Silos and the “Fixer Upper” renovation show.
Shelton said rising appraisal values have increased his property taxes from $7,700 in 2014 to $26,000 this year, and bigger bills are coming. The McLennan County Appraisal District has increased the 2017 value of the CrossFit and Yoga Bar building 46 percent, which will be reflected on next year’s tax bill.
“We could almost say in this year alone, we could outfit our facility with all brand new equipment with the amount of money we’ve had to pay in property taxes,” Shelton said.
He said CrossFit’s lease, which expires next July, passes along all the taxes to the tenant, and that has required CrossFit to raise its membership rates.
“The only thing we need is space,” he said. “It’s hard to justify paying that to be in downtown.”
Skyrocketing property tax appraisals are putting the squeeze on business across downtown, not just in the silo area, downtown advocates say.
“There’s definitely a concern about property taxes, and we have talked to a couple of businesses that are at least exploring alternative locations to lower their costs,” said Megan Henderson, City Center Waco executive director. “We’re working very hard to retain those businesses in downtown, though possibly in different areas.”
This year, certified taxable property values have increased about 20 percent in the Tax Increment Financing Zone, which includes downtown, the Elm Avenue Corridor and the Brazos River corridor, according to MCAD. Much of that increase has fallen on the “Silo district” as well as areas along Interstate 35, South 11th Street and University Parks Drive.
Last year, the area saw a MCAD taxable value increase of more than 31 percent, hitting the Austin Avenue and Brazos River zones especially hard.
When values in the downtown Tax Increment Finance Zone increase by 34 percent — and in many cases, more than double last year’s values — is it reflecting a bull market for downtown Waco real estate, as McLennan County Appraisal District officials say, or will soaring taxes kill the goose that laid the golden egg?
Henderson said downtown Waco is a rapidly developing real estate market, which comes with growing pains like high taxes and rents.
“Is it bad to have high property values downtown?” she said. “Not necessarily. If the values are accurate, the market is going to adjust to place businesses at levels that make sense. … The only thing we continue to stress is the importance of (appraisal) accuracy, and that means the appraisal district getting the right information. Accuracy is important for everyone.”
One upside to the tax growth is that it will replenish the coffers of the TIF Zone, which was set up to reinvest a portion of downtown property tax receipts into downtown redevelopment.
TIF has funded infrastructure and building renovations to benefit a range of projects, including CrossFit, the Waco Hippodrome, Lula Jane’s Bakery, McLane Stadium and the Brazos Promenade development.
City finance officials expect TIF revenues to grow from about $10.8 million in 2016-17 to $12 million in the coming budget year. Because of prior commitments such as McLane Stadium, officials estimate that the TIF board will have about $4.6 million of uncommitted funds available for new projects next year.
Henderson said there’s plenty of demand for those funds given private and public projects now in the pipeline.
“I think downtown continues to have a tremendous need for infrastructure and improvements,” Henderson said. “People associate that with sidewalks and streetlights, but no less important are water, wastewater and stormwater facilities that make all this development possible. When you see old buildings above ground, you probably have old pipes underground. Developers going into downtown have real challenges in adding onto these systems that are in need of significant repairs.”
Over the past year or two, the TIF board has shifted its focus from subsidizing individual projects to building a network of public facilities, such as sidewalks.
“The purpose of the TIF was to incentivize growth in a blighted area,” city economic development director Melett Harrison said. “What was once a blighted area has become now a not-blighted area. … When it was difficult to get a loan for a project downtown, TIF funds had to be more of an incentive so those projects could be bankable. Now that downtown is less of an investment gamble, the shift is to focus on public projects that can tie those pieces together.”
The TIF may soon see requests from City Center Waco and the city itself to help with parking, telecommunications and transit projects, Henderson said.
For example, the city is studying an $80 million “bus rapid transit” system that could create a transit backbone from Hewitt to downtown to Bellmead, possibly along Franklin Avenue.
“Even if we get a federal grant for the BRT, there’s a lot of support infrastructure needed to make that system work,” Henderson said.
Meanwhile, Henderson said she hopes to work with businesses that are dislocated by the rising tide of taxation to keep them somewhere in downtown.
In the case of CrossFit, that will likely mean moving away from the Magnolia area, which is becoming a retail and leisure destination.