Seguin PFC approves Lily Springs workforce apartment term sheet with 50-year opt-out after debate

The Seguin Public Finance Corporation on Wednesday approved a term sheet with LightPath Corporation to develop the Lily Springs apartment project near Cordova Road and U.S. Highway 46, adopting a memorandum of understanding that includes a 75-year lease structure and an option for the city to remove the property from the PFC arrangement at year 50. The motion passed; Council Member Ewald voted no.

City Manager Parker said the arrangement is structured as a revenue-sharing partnership rather than a straight tax abatement: “this is not a true 75 year abatement,” he said, explaining revenue flows and sale provisions that differ from a conventional exemption.

Under the term sheet presented to the PFC, about half the units would be market-rate; 40% would be affordable at 80% of area median income (AMI) and 10% at 60% AMI. The agreement would allocate the first sale proceeds differently than later sales: the first sale is tied to 15% of net profits and later sales would yield 2% of gross proceeds to the city partnership structure; the council packet includes model projections that show the city could be roughly $5.9 million better off over a 40-year span versus a hypothetical fully taxable development, while Navarro ISD would be roughly $11,000 “to the good” under the shared-first-sale scenario, according to materials cited by staff.

Developer representatives and counsel emphasized that the PFC model gives the city control and enforcement tools. Summer Greathouse, the city’s bond attorney on the call, told the board the Public Finance Corporation’s board is composed of the city council and that the final lease documents will include maintenance and management requirements and approval steps for property managers. “There is control that we built into the lease agreement,” Greathouse said, describing approval rights over property management and requirements for maintenance studies and corrective steps.

Developer Kirk said he is personally invested in the project and lives near the proposed site, saying the local stake makes him “look forward to it” and that he has an interest in maintaining the property’s quality.

Council members and the Navarro ISD representatives pressed for changes after concerns at an earlier meeting that the project could amount to a long-term tax loss for the school district. City Manager Parker said staff and the developer negotiated the 50-year opt-out and the revenue-sharing parameters in response to those concerns. The council’s approval on Wednesday was for the memorandum of understanding; staff and counsel said final terms still must be negotiated and drafted into the lease documents.

Several council members and staff also raised a separate but related concern: the state-level practice by some outside public finance corporations of acquiring or financing apartment properties outside their home jurisdictions, removing those assets from local tax rolls. Staff and bond counsel said the legislature is reviewing the practice and that Seguin and Navarro ISD had asked for protections; staff noted that the city’s approach with this deal was intended to keep the project and any related revenue control local rather than allow an outside entity to “poach” the property.

Mayor Keller called the vote after a lengthy discussion and a motion from Council Member Levens, seconded by Council Member Clawson; the motion passed with Council Member Ewald opposed.

The council approved the memorandum of understanding; staff will return with draft lease documents and final negotiated terms for later review and formal approval.

The Seguin Public Finance Corporation meeting adjourned and the council reconvened its regular meeting.

Less-critical details: staff said the project would be a “Class A” rental product and that 50% of the units are expected to be market-rate while 50% are targeted for affordability tiers (40% at 80% AMI and 10% at 60% AMI). The memorandum of understanding approved Wednesday is the step that allows staff and counsel to draft the formal lease documents and continue lender and partner negotiations.