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Council denies tax‑exemption path for Riverstone apartments; cooperation agreement withdrawn
Summary
After hours of testimony from developers, housing advocates and taxing authorities, San Marcos City Council voted 7–0 to deny a resolution of no objection for a proposed tax‑exempt conversion of Riverstone Apartments; the applicant later withdrew a related cooperation agreement with the Texas Housing Foundation.
San Marcos City Council on July 7 rejected a proposal that would have facilitated a tax‑exempt sale of the 336‑unit Riverstone Apartments and then recorded the applicant’s withdrawal of a companion cooperation agreement.
The action came after a staff presentation from Terry Floyd, director of planning and development services, describing an amended resolution of no objection and a proposed cooperation agreement that would let the owner partner with the Texas Housing Foundation and convert the property to tax‑exempt status. Staff outlined a proposed payment‑in‑lieu‑of‑taxes (PILOT) of $100,000 per year with 2% annual increases as a way to recoup some revenue while allowing deeper affordability targeting.
Supporters, including Lisonbee Smith of the Texas Housing Foundation, said the change would stabilize affordability and allow the property to serve households with greater need. “This is a path to preserve an existing affordable housing asset,” Smith told council, adding the arrangement would increase affordability ‘‘by providing deeper income targeting than currently exists.” Developer representatives said rapidly rising tax valuations and softer rental markets left the property financially stressed and at risk of default. LDG Development’s representative described lender pressure and a financing gap that, absent a tax relief approach, could lead to foreclosure and a conversion to market‑rate ownership.
Opponents included Ryan Thomason of Capital Area Housing Finance Corporation and Miguel Urduondo, a San Marcos CISD trustee, who warned of the financial consequences to local taxing jurisdictions. Thomason said Capital Area declined to participate because its board could not absorb the loss; Urduondo told council a conversion could cost the school district roughly $495,000 a year. “A $500,000 loss in our general fund budget would be catastrophic,” Urduondo said.
Council debated alternatives—including tabling to negotiate PILOT payments with the school district and county—before voting to deny the resolution of no objection by a 7–0 vote. After that denial, the applicant confirmed on the record that it had withdrawn the cooperation agreement with the Texas Housing Foundation.
The decision preserves the status quo: Riverstone remains on the tax roll under current ownership and the applicant’s proposed path to tax‑exempt ownership is no longer before the council. Council members who opposed the conversion said they were reluctant to reduce revenues for schools and other taxing entities while others warned that foreclosure could eliminate affordability entirely.
The city manager and staff said they would remain available for follow‑up discussions with the developer and other jurisdictions, and the council noted that applicants may return with alternate proposals or revised PILOT offers.
