The San Marcos City Council voted seven to zero, on the first of two readings, to approve an Economic Development Agreement with Midway Development, LLC for “Project Cat Tree,” which would involve a full-service hotel downtown operated by New Waterloo, at Tuesday’s regularly-scheduled meeting. The agreement would involve providing incentives in the form of partial rebates of hotel occupancy and sales taxes over ten years with a minimum capital investment of $40,000,000.
“This project is in line with councils approved strategic goals 2025-2026 in the Strategic Plan for Economic Vitality, promoting San Marcos as a destination by expanding and supporting responsible tourism programs and promoting local commerce,” said Christian Smith, San Marcos Economic and Business Development manager. “Although this site is located on Texas State University property, the council approved Downtown Area Plan Section B.4 does call for the attraction of a downtown hotel that provides multiple economic benefits and assets downtown to service visitors in San Marcos as well as the university.”
Smith said the project would be a minimum 130-key hotel, have a public event lawn and amphitheater, restaurant, bar, meeting and event space. The location is on Texas State University property between North Guadalupe Street and Fredericksburg Street and north of University Drive.
“I will make clear to council this is a project that will generate property tax revenues and will be treated as a private property for the purposes of taxation,” Smith said.
The presentation showed that the company would host job fairs in partnership with the Hays Caldwell Economic Development Partnership to connect with local businesses, organizations and students to find skilled staff and would provide 207 to 256 jobs. Salaried employees could get anywhere from $60,000 to $185,000 a year. Hourly non-tipped employees could receive from $16 to $33 an hour. Hourly tipped employees could receive $3.50 plus tips, which they calculate to being around $25 to $30 an hour, to $16 plus tips, which they calculate to being $18 to $20 an hour for that position.
San Marcos City Council Member Amanda Rodriguez asked the developer if the minimum for non-tipped positions could be $18, and the developer said that is something they would consider. She said she preferred $20 an hour for non-tipped positions, if possible. He said that he could speak with the hotel operator to talk about the numbers and could have an answer at the next reading of the item.
“It’s much easier for me as a council member to really advocate on behalf of a project like this with sufficient wages,” Rodriguez said. “Our people deserve it.”
Gonzalez said he wanted those pay rates to apply to contract and part-time employees as well, which the council said they would like to see by next reading.
The proposed terms would require a minimum capital investment of $40 million for the hotel, which would be a minimum 130-key hotel. There will be no rebate of property taxes but a 95% sales tax rebate over ten years and a 95% Hotel Occupancy Tax rebate for eligible expenses over 10 years. Both will draw down over time. As the hotel stabilizes financially, the HOT and the sales tax rebates draw down 25% per revenue category. There will also be a rebate of construction sales taxes. Smith said the total rebate would be $9.1 million with total HOT retained $1.8 million, total sales tax retained $456,000 and total property tax retained $2.4 million.
San Marcos City Council Member Lorenzo Gonzalez asked what the revenue would be for the remaining five years when there would be no rebates.
“Assuming there would be no change, in other words, if you held those numbers stable … you’d be looking at about $7 million in additional net revenue to the city,” Smith said.
Smith pointed out that the hotel is going to be 4 stars, which is not something that currently exists in San Marcos. City staff recommended approval of the item.
