AGENDA CAPTION:
Title
Consider approval of Resolution 2025-126R, concerning Project Cat Tree and approving a Chapter 380 Economic Development Incentive Agreement with Midway Development, LLC, providing incentives in the form of partial rebates of hotel occupancy and sales taxes over ten years for the construction of a full-service hotel in downtown San Marcos with a minimum capital investment by Midway of $40,000,000.00; authorizing the City Manager, or her designee, to execute the appropriate documents related to this agreement on behalf of the city; and declaring an effective date.
Body
Meeting date: July 1, 2025
Department: City Manager’s Office
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Fiscal Note:
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Economic Vitality
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☒ Economic Development - Sports Tourism, Eco-Tourism, Retail Tourism & 13,000 year heritage
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Downtown Master Plan
Background Information:
In 2023, Texas State University issued a Request for Proposal seeking a qualified developer to construct a full-service hotel on university owned property in downtown San Marcos. After reviewing submissions from several applicants, Texas State University selected Midway Development Group for this project. Midway is proposing to construct a minimum 130 key full-service boutique hotel that includes an event lawn, amphitheater, restaurant, bar, and meeting space with a minimum capital investment of $40 million. This project seeks to broaden the range of visitors San Marcos can attract, particularly travelers who may choose to spend overnight trips in Austin or Wimberly when traveling in our region. This project would be the first full-service hotel in San Marcos and is requesting a performance-based incentive to help make the project viable. The proposed incentive would offer a 95% rebate of eligible hotel occupancy and sales taxes drawing down over a 10-year period as the hotel stabilizes. The proposed incentive would also include a rebate of construction related sales taxes as the development initiates. The completion of the hotel would add new taxable value for the site improvements on land that currently generates no property tax. This will result in 100% capture of new property taxes by the City, County, and SMCISD.
Council Committee, Board/Commission Action:
On February 26th 2025, EDSM voted to recommend City Council enter into an economic development agreement with Project Cat Tree allowing for up to a 95% rebate of Hotel Occupancy Taxes for qualifying expenses drawing down annually based on the performance of the project for a period of 10 years and a 100% rebate of sales taxes generated at the site for the same period.
Alternatives:
Council may vote to approve, deny, or postpone.
Recommendation:
Staff recommends approval of the resolution as presented.