Lakeway City Council discussed a $37 million economic incentive request for The Square at Lakeway at a July 13 meeting.
The background
In January, The Square at Lakeway developer requested an economic incentive known as a chapter 380 agreement, which allows cities to provide grants, loans and tax rebates to stimulate economic development, per city documents.
The developer previously requested $46.9 million in grants over a period of 35 years. The grants would be provided by rebates from the city to the developer in annual payments from property and sales taxes received from the project, according to prior reporting from Community Impact.
The incentives were not approved as the developer later withdrew the request.
Since discussing the chapter 380 agreement in January, Lakeway has adopted an economic development incentive policy aiming to provide a framework for evaluating economic development incentives on a case-by-case basis, per previous reporting from Community Impact.
Now, the developer has submitted revised framework that replaces the original stand-alone chapter 380 proposal with a three-agreement structure, each intended to accomplish different public purposes while incorporating additional safeguards for the city, according to city documents.
The details
The new proposal consists of three interrelated agreements.
A development and economic incentive agreement will serve as the master agreement governing the overall project.
This agreement will incorporate the city's 2026 economic development incentive policy, establish the rights and responsibilities of all participating parties, require the completion of Main Street improvements before receiving any incentive payments and require continued compliance with applicable performance and development requirements.
The following two agreements include a tax increment reinvestment zone agreement and chapter 380 grant and economic development agreement.
Under the combined incentive structure, the maximum agreement term is 25 years, incentives will be funded exclusively from new tax revenues generated by the project without any existing city revenue used, Lakeway would retain portions of both property tax and sales tax throughout the agreement term, and the incentive payments would occur only after revenues are received by the city and all performance requirements remain satisfied.
“It’s a performance-based economic incentive package,” Lakeway City Manager Joseph Molis said. “This means that the city would not be responsible for giving any money to the applicant other than what’s generated by the project.”
Based upon the developer’s current projections, an estimated $36.5 million would be paid to the developer over the 25-year term and the city would retain $39.5 million.
What’s next
Staff will continue working with the developer on the agreement through the lens of Lakeway as an investor in the project, rather than as a government body.
“We’re looking to make up a million dollar shortfall,” City Council member Chris Forton said. “It’s going to be such a generator for the city that I don’t see why we wouldn’t want to continue to figure out whether or not it would be worth it for the city.”
