The city of Killeen is expected to finalize a contract this week to create a 370-unit upscale apartment complex in the northern portion of the city — a move that will be accompanied by a sizable windfall.
Certainly, the project is a big deal for Killeen — and not without a considerable amount of controversy.
Several facets of the agreement make it unique — including a provision that the complex will feature fixed-rent rates for 50% of the units. Those rates will be based on 80% of the area’s median income, updated annually, offering high-end apartments and amenities to those who otherwise couldn’t afford them.
But how the agreement between the city and the apartment’s developer, NRP Group, is structured has drawn particular attention. Once the contract is closed, the city will transfer the property near Business 190 and W.S. Young Drive into a joint venture between the developer and the city’s Public Facilities Corporation, in a 75-year lease.
More importantly, during the lease period, NRP Group is not obligated to pay property taxes, because of the project’s percentage of low-income units.
As City Manager Kent Cagle summarized during a public meeting in December 2020, the PFC will own the 26.5 acres of land, NRP builds the project, the corporation owns the project, and NRP holds the lease. Operations, upkeep and collection of monthly rent would all be the responsibility of NRP.
This arrangement has never been used before in the city’s history. In fact, the PFC was created solely to accommodate the mixed-income apartment complex project.
However, while the city won’t be collecting property tax on the $51 million development, it will be seeing a considerable windfall.
Once the contract is closed, NRP Group will pay the city $350,000 in closing fees. The developer will also shell out $85,000 to the city’s Parks and Recreation Department for improvements to Conder Park, which is adjacent the new apartment complex.
So instead of receiving property taxes paid out over a period of dozens of years, the city will get a lump-sum payment of more than a third of a million dollars before the first apartment unit is ever built or occupied.
In addition, starting in year four after the project’s completion, the agreement calls for the city to receive well over $100,000 per year via cash flow from carried-interest amounts, according to information provided by NRP.
That’s a considerable amount of money over the lifespan of the lease, and because of the nature of the agreement, the city is not on the hook for any debts the developer might incur.
All this sounds like a win-win for the city, but already Killeen’s elected officials are differing over how to spend the initial payment from the developer.
At Tuesday’s meeting, two members of the Killeen City Council — which also serves as the PFC’s board of directors — called for dedicating part of the $350,000 in upfront money to housing subsidies and the rest to youth programs. Ultimately, the council reached a general consensus use the money to assist youth programs in the city.
Certainly, investing in the city’s youth is a noble cause. But some of the suggestions from audience members pointed toward giving the money to nonprofit organizations not affiliated with the city, including a youth football league.
As the money is coming through an agreement with the city, it would make more sense to allocate funding to only city-sponsored programs.
But taking the longer view, PFC board members should consider the lasting impact of any proposed expenditure.
Giving money to youth programs is transitory. The programs and city itself only see a benefit as long as the money is in the pipeline.
However, the NRP project has the potential to boost both the image and economy of northern Killeen. As such, the board should consider using the $350,000 — or at least the bulk of it — to make lasting improvements to the area, such as new sidewalks, better street lighting and aesthetic upgrades.
NRP Group is making a good first step in that regard, with the $85,000 in Conder Park upgrades.
The City Council recently allocated $2 million in federal coronavirus aid to boost the park’s profile, with plans to add a public art along what would be the newly completed south end loop trail, more drinking fountains and trees, a graffiti wall near the skatepark, and the replacement of the nine-hole frisbee golf course, among other projects.
The NRP Group’s donation will go a long way to further developing the park, which no longer has a functioning pool after it was filled in during the 1990s.
Killeen’s council members, acting as PFC board members, should carefully consider using the larger NRP Group sum to benefit the area in which the apartment project is being built — rather than distributing it to any community groups that might come forward with their hands out.
With city officials working hard to finalize a deal for a new grocery store near 38th Street and Rancier Avenue, and the city’s mayor pushing for relocation of county offices into a downtown complex, it’s important to keep a sharp focus on improving the aesthetics and amenities of the city’s northern sector. Any additional funding the city can dedicate to improving this aging part of town could pay off in future growth and development.
In the long run, that has the potential to positively impact all age demographics in the city’s population.
Make no mistake, Killeen’s youth should be a priority to council members, and that should always be a consideration when crafting the city’s annual budget, applying for grants, and disbursing state and federal money. However, large-scale dispensation of city funds to random, disparate nonprofit organizations in the name of helping the city’s children and young adults has the potential to do more harm than good.
Which groups qualify? How much does each organization get? And who gets left out?
It’s hard enough to make these decisions when it comes to arts funding, which is handled by a dedicated arts commission using an established application process.
But when extra funding becomes available — as is the case with the NRP Group’s closing costs — putting council members in charge of doling out the spoils has the potential for favoritism and hurt feelings.
A better solution would be to establish a plan for putting the NRP money toward impactful city improvement projects, or let the money sit and draw interest while developing a framework for its use.
In the meantime, the council might consider expanding the concept of awarding hotel-motel tax money to local nonprofit groups for the purposes of arts and tourism. A second fund could be started through the city’s Parks and Recreation Department that would provide assistance to local nonprofit youth sports programs not affiliated with the city.
Certainly, the city has put improving recreational amenities and opportunities at a premium — opting to spend more than $4.7 million in ARPA funding on parks and park-related items earlier this year. The council also approved $750,000 in matching ARPA funding to help pay for a $1.5 million expansion of the Boys & Girls Club in downtown Killeen.
However, now that the large, mixed-income apartment complex is about to become a reality in north Killeen, it’s incumbent upon Killeen’s elected officials to bring the same quality of life to that portion of the city that newer parts of the city enjoy.
That means putting dedicated funding where it can do the most good, for the most people — over an extended period of time.
Unfortunately, giving it away to youth groups as a well-intentioned act of good will doesn’t fit the bill.