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McALLEN — Years worth of delays in realigning North Ware Road where it meets Monte Cristo Road at the Tres Lagos community are causing millions of dollars not only in lost property tax revenues, but in funds that would go toward maintaining the community.
“Oh yes, it is millions,” said Mike Rhodes, founder and vice president of Rhodes Enterprises, the McAllen-based land developer in charge of the so-called “master planned” community.
Rhodes also serves on the board of directors for the Tres Lagos Tax Increment Reinvestment Zone No. 1, or TIRZ, and the Tres Lagos Public Improvement District, or PID, which both held meetings at the Chase Tower here on Thursday.
One of the top topics of discussion during the back-to-back meetings was how the Texas Department of Transportation’s failure to carry out a long-planned and long since funded road project is putting the future of the Tres Lagos development at risk.
“Right now, we’re over a million dollars (in) deficit at the public improvement district,” Rhodes said after the meetings.
All property owners within Tres Lagos pay into the PID’s coffers, which in turn, uses those contributions to pay for maintenance of things like parks and other community amenities, Rhodes explained.
Residential properties currently pay a rate of $0.25 per $100 valuation, according to figures from the city of McAllen. Commercial properties pay half that, the developer said.
But as commercial development on the community’s north end has been stymied by the lack of a road, PID contributions have also started to lag behind. After all, if a business doesn’t exist, then it can’t pay into the PID.
Rhodes said the master plan called for big box retailers such as H-E-B, a hospital and medical offices, and other commercial investors to have begun establishing themselves on the north end of Tres Lagos by 2020.
But those businesses don’t exist yet because the road still doesn’t exist.
“The corner doesn’t even exist. It’s not like it’s on a small road, there’s no road. It’s the farm,” Rhodes said.
Ware Road intersects Farm-to-Mark Road 1925, otherwise known as Monte Cristo Road, at two separate points several hundred yards apart.
The southern half of Ware Road, along which the existing Tres Lagos development has occurred, lies to the east of where the northern part of Ware Road intersects Monte Cristo.
Rhodes said he and TxDOT were both aware of that disjointed intersection and agreed during Tres Lagos’ planning stages that the development of the community would present the perfect opportunity to correct the intersection.
TxDOT has already completed everything necessary to complete the nearly $20.5 million project, including purchasing rights-of-way.
For his part, Rhodes included the realignment in the original buildout plans for Tres Lagos, laying down infrastructure such as water and utility lines, along the route the realigned Ware Road will follow.
TxDOT assured Rhodes the realignment would take three years to complete.
That was almost a decade ago.
“Each year I meet with TxDOT and it’s three years. And if you talk to TxDOT today, it is three years is what the answer is nine years later,” Rhodes said with a wry, exasperated chuckle.
The developer referred to the road project as vital to Tres Lagos’ development timeline.
“The critical thing to Tres Lagos and the growth of north McAllen is (that) our homes have been right on pace — in fact, we’re about to exceed the pace we’ve projected — but, the commercial part of the development” is not on schedule, Rhodes said.
And those delays in the arrival of commercial property owners could soon begin having financial repercussions not just for Tres Lagos, but the city of McAllen, which in 2016, took on $24.5 million in debt via certificates of obligation to help kickstart the development’s funding, according to McAllen finance records.
“Those commercial improvements carry a tremendous amount of value and the absence of those on the tax rolls will begin to affect and cause the build-out schedule, the finance plan, of the TIRZ to not be in compliance with projections,” TIRZ attorney David Earl said.
That’s because of the way that tax increment reinvestment zones work.
A TIRZ allows for a certain percentage — or increment — of property tax revenue that would otherwise go to a specific taxing entity, such as the city of McAllen or Hidalgo County, to instead remain within the TIRZ itself.
The existence of the TIRZ is not indefinite. They typically last for only a few years, unless all the entities involved in their creation agree to extend the length of their existence.
As the land within the TIRZ is developed, it begins to generate more and more property tax revenue. In turn, the value of the tax increment that stays within the TIRZ also grows, which allows the TIRZ to fund further development that will spur further tax revenue generation.
A TIRZ essentially becomes a self-funding enterprise that can then pay back its initial investors — the city, the county and the land developers that carried out the build out within the zone.
But part of a TIRZ’s success involves the zone being able to meet target deadlines for development.
No one expects a TIRZ to generate much revenue in the beginning, before the land has been developed. But as the years go on, a TIRZ should be able to sustain higher financial obligations.
It’s similar to when an individual takes on an income-dependent loan — the more income you make, the more debt you can afford to repay each month.
Tres Lagos was expecting to be generating more commercial property tax revenue by this point than it is, and had planned its debt repayment schedules accordingly.
The Ware Road realignment delays are threatening that timeline, Earl said.
“The highway department’s failure to initiate and carry out the construction of realignment of Ware Road, which is a critical component for the TIRZ … to ensure the tax base is where it should be in each respective year,” Earl said, describing the situation as “urgent.”
To that end, the TIRZ board authorized Rhodes to engage with TxDOT, state lawmakers and others to try to impress upon them a sense of urgency.
Even if TxDOT acts immediately, the TIRZ will still be years behind schedule — and behind revenue projections.
“Once they do get started, it’s two years to construct. … If they start today, it’d be five years (before commercial construction would be completed), which would mean we’re gonna be about eight or nine years past when we thought we’d have big box retail,” Rhodes said.
