The city of Magnolia is considering implementing two economic development tools to jump-start growth within the city limits. A tax increment reinvestment zone and a 380 Agreement may encourage developers to invest in the community by offsetting costs they incur, Economic Development Coordinator Tana Ross said.
Magnolia City Council unanimously voted at a special meeting Aug. 23 to authorize city staff to pursue both measures.
Downtown TIRZ
When established, a TIRZ allows a city to give a developer a portion of the property tax revenue gained from an improvement to the property within the TIRZ boundaries, City Administrator Paul Mendes said.
“For every piece of property [that is] develop[ed], we will split the difference in the value of that property from when [a developer] bought it until when [a developer] completed it,” he said.
If implemented, TIRZ No. 2 would pertain to the entire business district in Magnolia, located near FM 1774, for an unknown period of time.
The city’s first TIRZ is located in the Magnolia Ridge community, Ross said. TIRZ No. 1, located off of FM 1488 near Buddy Riley Boulevard, was implemented in January, according to city records.
“Often [a TIRZ] is in an area that may not otherwise be developed for a while due to many reasons: inaccessibility [or] cost of infrastructure development, which is sometimes too large for a single developer,” Ross said. “Or there could be an area that needs redevelopment that is in a good location, but [is] less attractive to developers without a TIRZ.”
The city of Magnolia is considering a few different tools to incentivize developers to invest in the community.[/caption]
380 Agreement
Similar to a TIRZ, a 380 Agreement allows a city and a developer to share the revenue brought in by development, Ross said.
“In this case, we are considering a retail-specific tool that helps retail developers move on projects that will generate new sale tax revenues in the city,” she said. “Sales tax revenue makes up approximately 50 percent of generated revenues in the city’s general fund.”
Under a 380 Agreement, a municipality gives a developer a portion of the sales tax revenue coming from the new businesses, Mendes said.
“A 380 Agreement would allow the city to help [a developer] be reimbursed for his expenses, based on part of the sales tax that comes out of the businesses that he brings in,” he said.
Both a 380 Agreement and a TIRZ expire once a predetermined dollar amount—such as $2 million in tax revenues—or time period—such as a 10-year cap—of the parties’ choosing have been met, Mendes said.
City officials offered no specifics on when or where both agreements would be pursued. The city is seeking residential and commercial development.
“We’ll be working with a number of developers when they start building out, but right now it’s still in the early stages,” Mendes said.
Municipal utility district
As the city begins work to develop downtown, Austin-based developer Stratus Properties Inc. is expected to begin construction in early to mid-2017 on its 142-acre mixed-use center—known as Magnolia Commons—near FM 1488 and FM 149, Mendes said.
The council approved the creation of a municipal utility district by Magnolia East 149 LLC, an offshoot of Stratus, during the Sept. 13 meeting. A MUD is authorized to provide water, sewer and other services within its boundaries, and district residents are taxed for the services.
Magnolia Commons will include the first H-E-B grocery store within city limits. Stratus has also proposed a movie theater, a home improvement store, 12 pad sites and 1,200 townhomes in the mixed-use center.
