Critics of a proposed $51 million upscale apartment complex in north Killeen have complained that the city needs to focus its efforts toward getting a grocery store for the area instead.
That argument is off base for two reasons.
First, it’s not an “either or” proposition. The agreement by which the city would facilitate the apartment project through a newly created public facility corporation is legally restricted to housing projects, so it could not be applied to a retail development such as a grocery store.
Second, bringing a grocery store to Killeen’s north side is a matter of corporate economics. Grocery chains are not likely to consider a lower-income area for a new store unless that area shows signs of an economic upturn.
No one disputes the fact that Killeen’s north side has turned into a food desert since two grocery stores — an IGA on Rancier Avenue and an H-E-B on Gray Street — pulled out in 2019, forcing northside residents to travel more than five miles to shop at a full-service grocery store.
But given the area’s deteriorating aesthetics and stagnant growth, it’s not hard to see why the stores closed their doors — and why other chains might be hesitant to rush in to fill the void.
However, the proposed apartment complex could be the first step toward revitalizing the area and making it more appealing to retailers in general — and grocery chains specifically.
The apartment complex would be located on 25.77 acres of land near the intersection of Business 190 and W.S. Young Drive, extending to the west to abut Conder Park.
The proposed complex would consist of 368 units, geared toward a wide income level.
Amenities for the gated community would include a clubhouse, a resort-style pool, a state-of-the-art fitness room, a coffee bar, conference rooms and a dog park, among others.
Most importantly, the complex would be required, under the agreement, to offer 50% of its units to tenants for whom the rent is no more than 30% of their incomes — making the apartments available to many residents who could not otherwise afford to live there.
But for many dissenters, the big sticking point is the 75-year tax exemption being offered Ohio-based NRP Group, which would build and manage the complex.
The city council last week voted to establish a public facility corporation, an option available only to municipalities, that would allow the company to be exempt from property taxes for the duration of the lease. The city also voted to rezone the parcel of land on which the complex would be located, setting the stage for the final agreement with the developer.
The council vote on each item was 4-3, with Mayor Jose Segarra casting the tie-breaking vote for all three ordinances.
Certainly, this is a hotly contested issue, with strong arguments on both sides.
No doubt, this is uncharted territory for the city, in which the city council will serve as the board of directors for the public facility corporation. And a 75-year tax exemption for a private corporation is also a subject of some concern.
But in this case, the pros would seem to outweigh the cons when analyzing the impact on the city.
First of all, even though the city would forgo property tax for 75 years, Killeen would receive $350,000 at closing from NRP, according to City Manager Kent Cagle. Cagle said the city also would receive about 3 acres of land on the corner of Terrace and W.S. Young Drive, which the city can sell or encourage business development. Then, starting four years after the project’s completion, the city would receive, from 15% carried interest amounts, well over $100,000 per year, per information from the NRP presentation to the council last month.
That would certainly go a long way toward offsetting any lost property tax revenue and give the city funds with which to address any extra infrastructure needed to serve the project.
Also, it’s important to note that when the project is completed, the city’s public facility corporation becomes the owner of the land and its improvements, but NRP is allowed to operate the development. And most notably, the city is not on the hook for any debt incurred by NRP.
So, from a cash-flow standpoint, the city seems to be positioned well if the deal goes through.
Still, there are those on the council who are concerned about shortchanging other local taxing entities, such as the Killeen Independent School District, out of 75 years worth of property tax. Others have contended that it’s unfair to offer such a generous tax exemption to one developer and not to others.
First of all, other taxing entities are not being cheated here.
At present, there is nothing taxable on the land where the complex would be located. In fact, as Cagle quipped, the property hasn’t changed since the buffalo roamed there. So right now, KISD is getting very little tax revenue from the land. Killeen’s entering into a tax-exemption agreement won’t change the situation. It’s not as if tax revenue is being taken away from the district or any other taxing entity. It just won’t be added to anyone’s coffers.
Secondly, the agreement is not about fairness. Per state law, the tax-exempt status can only be offered for housing developments — with the requirement of reserving half of the units for low-income tenants.
It’s not as if any other development companies have come knocking at Killeen’s door offering to build such a complex — and to build it in an older section of town.
Additionally, none of the local developers who have been complaining about the deal’s “fairness” have a history of building large multifamily projects in the city, instead focusing on duplexes, fourplexes and single-family homes.
On the plus side, the construction of the 368-unit housing complex has the potential to bring in millions of dollars in disposable income to local businesses and sales tax revenue to the city.
The Greater Killeen Chamber of Commerce put Killeen’s median income at $53,101. Even adjusting for the lower-income families and single tenants who would live in the new complex, the housing development could possibly represent more than $10 million in annual income.
Considering Killeen sees about 700 new homes constructed each year, the NRP project could potentially house half that many families — and represent a sizeable portion of income for those families — in a single multifamily complex.
Certainly, the presence of an upscale housing complex in a declining part of town has the potential to boost surrounding businesses, as well as serve as a focal point for attracting new ones.
As the area in the vicinity of the NRP project continues to develop, it’s possible that grocery chains might take a second look at the area with an eye toward locating a new store there.
With a final vote on the NRP project slated in the coming weeks, some critics are saying the city would be taking a big chance if it moves forward with the deal.
Perhaps. But at this point, it appears the city would be taking an even bigger chance by turning its back on the opportunity.
And in this case, opportunity only knocks once.