Forrest Higdon, co-owner of Gumby’s Pizza, said he just wanted space to expand his business at its existing location on Guadalupe Street in San Marcos. Instead his request for a permit to sell beer, wine and mixed beverages illuminated an issue some San Marcos residents said has been growing for years.

Cathy Dillon, co-owner of the Crystal River Inn, a bed and breakfast two doors down from the new Gumby’s location at 312 W. Hopkins St., said if the restaurant was granted a permit for alcohol sales, similar businesses could follow in that area of downtown and threaten the character of an area largely occupied by offices and service businesses. 

"Hopkins Street is in danger of becoming an entertainment district," Dillon told City Council during a Feb. 7 hearing that ultimately ended in the Gumby’s permit request being denied. "So often I’ve recently heard, 'Why do we need to become Sixth Street, and why make the same mistakes Austin has made?' This is all about shining a spotlight on something this city needs to think about real hard real soon."

According to city numbers, since 2003 the number of businesses with permits to sell alcohol within the city’s downtown has more than doubled, causing concern for some residents.

"If you don’t stop this here, then where?” resident Monty Moore asked Council at the Feb. 7 hearing. "How many bars do we need in this city? If you don’t stop it now, then when?"

Gumby’s

Higdon said he was surprised by the council's decision. The property is designated as T-5 under the city's downtown zoning system known as SmartCode. Allowable uses on T-5 properties include "[high] density mixed-use buildings that accommodate retail, offices, rowhouses and apartments,” according to city documents.

Higdon also pointed to the nearby presence of Zelick's Ice House and Twin Liquors as reasons he thought his plan for alcohol sales fit the area's character.

Higdon said the alcohol permit would have allowed his business to stay competitive with other pizzerias in town that sell alcohol, including Urban Bricks Pizza, Figaro’s Pizza & Pub, Pie Society and Pieology.

"The bar definitely played into the revenues we were anticipating from this building, so we’re trying to get creative on other avenues of what we can do with this space and the former bar space," Higdon said.

The restaurant is still aiming to open this summer, Higdon said.

“We’re still really excited about this space,” Higdon said. “We’re going to bring a lot to this side of town. I don’t think we’re the monster we were made out to be. I know we’re not. All I have to do now is prove that to everyone.”

Cathy and Mike Dillon are not strangers to contentious zoning issues in the San Marcos. The pair were involved in resistance to controversial developments in and around downtown San Marcos, including Gumby’s Pizza, Headwaters Drafthouse, Zelick’s and the Lindsey Hill mixed-use project, which was denied by the planning and zoning commission in 2016.

The Dillons said they are concerned more bars—Higdon has said his business’s new location near Crystal River Inn would be a restaurant first and a bar second—could disrupt the character of the 300 block of Hopkins. That could potentially make it difficult to keep their B&B in business. The couple listed their property at 326 Hopkins St. for sale, but they said they hope the next owner will keep it open as a boutique hotel.

The Dillons in 2012 were also involved in a lengthy fight with Zelick’s, which they said has caused disruption to their business because of noise and other issues.

“We want to keep the neighborhoods in the neighborhoods,” Mike Dillon said. “We want to keep the bars and businesses downtown. And we need a transition between the two.”

In response to what the Dillons and other residents see as threats to the integrity of the 300 block of Hopkins, which transitions into a residential area and is seen by some as a “buffer” between the bars on the square and the homes in and around the historic district, Mike Dillon volunteered to serve on P&Z. He was appointed in February.

Other residents have been meeting with city staff to discuss potential threats to neighborhood integrity within the city’s zoning map.

“We need to get involved in the process,” Mike Dillon said. “We need to be starting early on, talking with the people downtown, be involved in the SmartCode, all those land developments, all that stuff that is boring beyond belief and that we basically don’t understand, we need to be involved in that as the community and as part of the neighborhoods.”

City perspective

In March, City Council Member Jane Hughson requested City Council reconvene a committee that had been charged with looking for ways to improve the city’s system for granting permits for alcohol sales, among other things. She said she hopes to lend some consistency to what can often be a very inconsistent practice for granting permits.

Samantha Armbruster, manager of the San Marcos Main Street Program, which is responsible for promoting the city’s downtown, said the perception that downtown is being overrun with bars is not necessarily accurate.

The city has capped the number of alcohol permits available in the city's central business district—an area roughly bound by Martin Luther King Jr. Drive to the south, University Drive to the north, Fredericksburg Street to the west and LBJ Drive to the east.

In August, City Council approved increasing the number of alcohol sales permits available to restaurants from 15 to 25.

Between 2003 and February 2017, the number of downtown businesses the city classifies as bars increased from 13 to 15. But during the same period, the number of businesses with alcohol sales permits—including bars, restaurants and other businesses—increased from 15 to 33.

The majority of that growth resulted from restaurants that offer alcohol sales. Alcohol sales permits were granted or renewed in 2016 to Chipotle, Dahlia Woods Gallery and Root Cellar Bakery and Catering Co., to name a few.

“While we have had an uptick in [alcohol sales permits] that have been granted in downtown, the majority have been granted in restaurants,” Armbruster said. “Bars are the second-smallest business category that we have in downtown.”

Professional services—including a broad range of business types, such as lawyers' offices, financial services and others—is by far the largest business type in downtown, city officials said.

The Dillons and fellow San Marcos resident Amy Meeks plan to initiate discussions with city staff and council members to voice their concerns and provide suggestions for tweaks to the city’s codes that will better protect sensitive areas of the city.

The election in November and runoffs in December have seated a council that Cathy Dillon said is more neighborhood-friendly than in years past.

“Now is the time to speak up and say, ‘We live where we live, and we don’t want to see it going the way of development and buildings,’” Cathy Dillon said. “There are a lot of people who feel that way. We have a golden opportunity in this situation.”