The original developer of a 625-acre luxury waterfront community in Hitchcock is asserting the city still owes the company money from an initial $12 million investment in the property, according to documents released to The Daily News.

Harborwalk LP, which originally developed 380 lots, a 150-slip marina and yacht club at Harborwalk, invested more than $12.7 million into improvements that were supposed to be reimbursed through a tax increment reinvestment zone, Evan Watkins, son of Harborwalk LP principal Lynn Watkins, stated in an email.

“Ever since the March 2017 TIRZ board meeting, it has felt to us almost like the city is trying to avoid reimbursing the developer at all under the terms of the development and financing agreement,” Watkins wrote in the email to the mayor and the reinvestment zone board.

The email does not say specifically how much the developer believes it is owed.

Hitchcock Mayor Dorothy Childress declined Monday to comment, saying she would refrain from saying anything until she better understood the situation.

“There are a lot of pieces to this puzzle,” said Sabrina Schwertner, executive director of economic development and foreign trade zone for Hitchcock Industrial Development Corp. “I don’t think any decisions will be made until documents are reviewed and a legal opinion is given.”

The city designated about 850 acres that includes Harborwalk, which is on West Galveston Bay, south of state Highway 6, as a reinvestment zone in December 1999, according to a 2016 financial report.

Reinvestment zones originally were meant to attract developers to blighted areas but have expanded to attract development in general. In cities such as Galveston, they have been a source of controversy and lawsuits, especially those that struggle.

In such zones, developers advance money to make public improvements in private developments and receive reimbursement, including interest either from increased tax revenue in the zone or government-issued bond proceeds.

As new construction in a zone occurs, the resulting incremental increase in tax revenue is returned to the zone for a set period of years.

For example, if the assessed value for a base year was $6 million and improvements to the area increased the value to $7 million, the taxes collected on the additional $1 million are earmarked for the reinvestment zone to pay back developers for public improvements. The idea is to attract development and increase the city’s tax base.

Hitchcock’s reinvestment zone in 2006 issued more than $7 million in bonds meant to reimburse the developer for the improvements, records show.

Those bonds were refinanced in 2017 so the city would get better interest rates and so the bonds would be paid off by 2020, instead of 2026 as initially planned, Schwertner said.

Extending the bonds would have allowed the reinvestment zone to reimburse more money to the developer, Evan Watkins argues.

While Harborwalk LP originally developed the community of waterfront homes, there has since been trouble.

In January 2010, Harborwalk LP filed a lawsuit against Compass Bank, which later was bought by BBVA, after the bank sent a notice of default on an amended $30 million note and refused to allow the company to draw anymore money to cover project costs.

Harborwalk LP officials at the time said they had not defaulted on any provision of the loan agreement and had made timely payments. But Compass Bank blamed declining value of property used as collateral for its decision to call the note.

In 2012, Legend Communities, a developer of single- and multifamily residential and associated commercial projects, bought Harborwalk from BBVA Compass bank.

Legend Communities in September 2017 warded off a foreclosure sale of many parcels and properties in Harborwalk.

Several community members and at least one city commissioner have since raised questions about how the development has benefited the city.

“Everything is about future revenues, but we need money now,” Commissioner Monica Cantrell said. “They say ‘in 15 years we’re going to get all this money’ but the city is in dire need now.”

The city finds itself in a troubled financial position because officials have been drawing out of the fund balance at the same time that sales tax revenues have declined substantially, leading officials to cut more than $860,000 from the budget.

“I understand there are people in Hitchcock who feel the TIRZ was a bad deal for the city, but it’s the deal the city made, and in fairness to the city leaders at the time, I think they believed it would spur much more additional development along Harbor Drive and Redfish than eventually occurred,” Evan Watkins wrote.

Matt deGrood: 409-683-5230; matt.degrood@galvnews.com

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(12) comments

M. FARRIS

OMG!!! Why in the HELL would the city enter into an agreement like this when they can't even keep / get a grocery store. The mayor wants to cut more police officer positions but NOT look at / do a line-by-line audit of the budget.

AND let me continue on my rant - IF you do not like how this city is being ran get out and VOTE!!! They approve rezoning acreage off of 2004 near 646 for a chemical storage facility AND then think they can say it will be safe.

So the city does not have enough money to hire / pay / retain police officers BUT they're going to enter into a contract with some "rich" developer for a "luxury waterfront community" - WTF!!! The rich keep getting richer and ignorant people running a city making stupid choices is putting hardships on those that cannot afford to live in a "LUXURY WATERFRONT COMMUNITY"!!!!

Think about things folks - it is time for a change AND for this city to have new leadership.
** Posted for a friend, a Hitchcock resident!!

Kathleen Nebout

I TOTALLY AGREE!!! :-)

Ron Greenwade

While we are talking about "fairness" is it fair that absentee and weekend residents of Harborwalk pay $millions in property taxes to the City of Hitchcock and Hitchcock School District while receiving little or no benefit from the city or school district? Do you Think the quality of those new school buildings and HISD salaries would be the same without taxes from Harborwalk?

Kathleen Nebout

I don't see mention of "fairness" and I like others liked Hitchcock how it was - keep some of the land, marshland, and pastures how it was. Stop all the developing. As far as "weekend residents" - I believe that was the residents choice. I have one home - it is in Hitchcock. The developer and possible Harborwalk residents should have looked more into why the "leaders" of Hitchcock were offering such a "deal." There is a reason - poorly ran and mismanaged budget.

Paul Hyatt

I totally agree with your statement.

Kathleen Nebout

Ron, I want to apologize, I thought you were referring to the post when you brought up "fairness" - You were referring to the last quote in the article. And while I do not agree with the contract the city entered into, it is a contract and should be honored. I have no idea how they're (city "leaders") going to come up with this money but a contract is a contract - even when it is done in stupidity.

Paul Hyatt

Wow. Where does one start on the mess that the City of Hitchcock has found itself in now, which is almost as bad as it was back in the 80’s. What I find incredible is that the article did not say in what year this deal with Harbor Walk was done between them and the city of Hitchcock. Another thing that I find incredible is that all of this garbage came to light after the Mayor stepped down and then we had a someone who was appointed and not elected to take over.
Big question to this is the same as what I have asked before. Who was watching the ship as the drain was opened and our city finances were drained off? Bay Wood closed down and anyone with any sense that was involved with the City would have known that when the revenue was going down and the savings was being emptied that something needed to be done to stop the bleeding. But no, nothing was done until the account were emptied and then we had to go out and hire someone to tell us that we were broke and why we were broke. Now we find out that someone in the City that was in charge made a deal that was horrible for the citizens of this town, which is adding insult to injury as this City is all but bankrupt.
My question is who on the City council knows about any of this and why have did they not stand up and let people know that all of this garbage was going on. I know that even though I have been here in this town for 48 years, I am considered an outsider and always will be considered that. This town has been run by the good old boys since hector was a pup and the city was founded and boy has it turned out real well over this last few decades.
I do wonder when the GCDN is going to do some "real" in depth reporting and fact finding about all of this or is journalism dead as I have suspected for many years.
I am beginning to wonder if the county DA needs to be called in to find out what happened to all of our money and about these back room deals.
To be honest the only way I can see that we can get out of this mess and trust me I am NOT in favor of this is to raise our taxes to pay for this insanity that is going on up at City Hall. This is true here in our City as well as the county, State and in Washington D.C., We The People are at fault for we elected these people who have not done our city proud. Everyone needs to wake up and start voting for what is best for the City not for what is best for our best pals in these shady deals....

Carlos Ponce

"What I find incredible is that the article did not say in what year this deal with Harbor Walk was done between them and the city of Hitchcock."
July 26, 2001 Texas City Sun page 14 Classified Section
"Request for Statement of Qualifications Harborwalk Subdivision City of Hitchcock Tax Reinvestment Zone One"

Paul Hyatt

Thank you Mr. Ponce I did not realize that Texas City Sun carried Hitchcock business in their paper. In fact I bet that most in this City don't know that either and it would seem to be kind of a sneaky way of putting notices for the City in a public place that the public will not know about or look for.... Typical of the "good old boy network" is all I can say about it....

Carlos Ponce

Texas City Sun August 6, 2004 Page 7
"The subdivision lies within a tax increment reinvestment zone established in 1999. The zone will reimburse the real estate developer for public infrastructure improvements such as roads and bridges built during the construction of the subdivision.
As a result the city will not see any tax revenues from the project for about 10 years [Mayor Lee] Sander said.
'Taxes will come in but they all go back to the developer,' he said.
However, city officials are hoping that the construction of Harborwalk and the influx of residents will eventually attract other businesses to the area such as convenience stores or restaurants to boost the city's tax base."

Carlos Ponce

Galveston Daily News December 29, 1999 Front Page
"Hitchcock Targets Flamingo Isle for development"
By Steve Mayo, correspondent
HITCHCOCK - The city commission on Tuesday voted to create a tax reinvestment zone that could double the city's tax base.
With Tuesday's unanimous vote, the commission designated Flamingo Isle, an 850-acre subdivision, as the reinvestment zone.
The zone creates a partnership between the four taxing jurisdictions in Hitchcock and developer Lynn Watkins.
Watkins is asking the city to kick in $11.25 million in infrastructure improvements."

Kathleen Nebout

Paul, I agree with everything you said - it is a sad and ridiculous situation "we're" in....and yes - the citizens allowed this to happen - well, somewhat. I have attended city commissioner meetings and other city meetings and I cannot tell you how many times something was voted on & "approved" and the audience is like what are y'all talking about. And the response, Oh, we discussed this in closed session - which isn't exactly what they call it. Anyway, I'm with you - some outside entity needs to come in and see the books - look at where all the money has gone to.... I bet there are so many other "deals" like this and other questionable operating practices - it'd make our head spin.

The article in the Daily News said "...as a reinvestment zone in December 1999, according to a 2016 financial report." So, this makes me wonder how often are financial reports ran AND who the heck are looking at them??? There a many MANY things I question about how the city is ran. Hiring consultants to tell them to stop spending money and they have to cut the budget OR how about paying a person $100,000. with a title of executive director of economic development and foreign trade zone for Hitchcock Industrial Development Corp. WTH!!! "...FOREIGN TRADE ZONE...." Seriously - they can't get a grocery store but we're going to become a foreign trade zone. I'm not even sure what "foreign trade zone" means - so I looked it up

Definition of foreign-trade zone. : an isolated policed area adjacent to a port of entry (as a seaport or airport) where foreign goods may be unloaded for immediate transshipment or stored, repacked, sorted, mixed, or otherwise manipulated without being subject to import duties.

REALLY - I guess the Diversionary Canal is going to become a shipping channel for large vessels. OMG!!!

Yep, time to make a call - the city finances need to be looked at and gone through. Monica Cantrell has asked to do a line-by-line budget audit but the mayor refuses. I think the tax payers deserve to know where the money has gone AND where they're still trying to spend it now.

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