When the city council late last month approved a $450 million predevelopment agreement with Epicenter of League City LLC to deliver four or more new hotels and a convention center to the city, it raised, for some residents, unpleasant memories of public-private partnerships the city had forged in recent years, including the sports complex Big League Dreams and the incentives dangled to lure Cabela’s, a retailer of hunting, fishing and camping gear.
City officials, who were already contemplating a bond election, should have brought the agreement to the voters, said Chris John Mallios, a League City resident.
But, despite resident concern, city officials argued they did do their due diligence before the council approved the predevelopment agreement in October.
The city in May hired Washington D.C.-based Brailsford & Dunlavey for an initial $49,600 to study the feasibility of the project, said Sarah Greer Osborne, spokeswoman for the city.
“I thought the staff did a great job preparing us to make a good decision,” Mayor Pat Hallisey said. “Residents want drainage and roads, but we are going to need additional sources of tax revenue. This is going to be it for the future.”
League City officials argue that this agreement for a $450 million project that could bring four hotels, a convention center, arenas for a hockey and a baseball team, restaurants and shops, among other businesses, alongside Interstate 45 is not like other recent agreements.
Residents in the days since the vote have questioned the move, asking what incentives the city offered developers and citing frustration with recent deals such as one that brought Nebraska-based Cabela’s Wholesale Inc. to the city.
The city in 2015 inked two agreements in that deal. One was a so-called 380 agreement under which the city will reimburse developer Pinnacle Fund Alliance up to $9.3 million over 15 years. The reimbursement will be paid from the sales tax revenue generated by the Cabela’s store and the other new retail at Pinnacle Park, 2471 Interstate 45. The city also agreed to pay Cabela’s $825,000 directly.
The city also borrowed $19 million to build Big League Dreams, which is a city-owned series of fields and a soccer arena. In the arrangement, Big League Dreams manages the complex. The venue, which opened in 2005, was championed by promoters as an economic development boon for the city. But, it faced cost overruns because of rising material costs, among other issues.
But, thanks to the potential structure of the agreement and the city’s demographics, the $450 million project is deemed viable, according to the Brailsford & Dunlavey report.
League City hired the advisory firm to assess the feasibility of the proposed project, its potential benefits for residents and review financial statements to ensure reasonable cost and revenue projections, along with ensuring the development group’s ability to fund the project, company officials said.
Unlike some previous developments, this one won’t be paid for with tax money or other city funding, according to a city spokesman.
Rather, city officials will provide some benefits via House Bill 2445, a piece of legislation that went to the governor May 30, 2017, and was approved without his signature June 15, 2017, amending Chapter 351 of the Texas Tax Code.
The bill will allow League City to pledge the state’s portion of hotel occupancy taxes to help fund tourism-related improvements, such as a convention center, entertainment-related convention center facilities or hotel infrastructure.
Also as part of the agreement, the developer would fund the design and construction of a new, larger sportsplex for the city on the growing western side of town on about a 100-acre site near the Bay Colony subdivision, replacing the current Chester L. Davis Sportsplex.
The current sportsplex sits on prime real estate along Interstate 45 that would one day house the new development.
The developer would then enter a 99-year lease for the land, allowing the city to keep ownership of the property, Hallisey said.
“The city has taken care to shield itself from various forms of risk associated with the development,” advisory officials said in the report. “The project is being funded entirely through the private development partner’s equity and debt and will not require any capital outlay from the city.”
The city in September paid the advisory group another $32,000 to help create the predevelopment agreement and will eventually pay a third price for the actual development agreement, Greer Osborne said.
But the developer will reimburse the city for all those costs if an agreement is reached, she said.
Some questions remain and things could change between now and when a final agreement is signed, but for now the deal looks to be a good one for the city, Hallisey said.
Now that the city has reached a predevelopment agreement, staff members will work with the developer over the next several months toward a development agreement to be finalized perhaps by the end of January, officials said.
Once a final development agreement is signed, construction could begin as soon as 30 days later, officials said.