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Kroger gets its 380

Despite neighborhood opposition, City Council has approved a 380 agreement for the proposed Kroger on Studemont at I-10.

District H Councilman Ed Gonzalez, who represents the area around the proposed store and who championed the 380 agreement, insisted the deal was less an incentive to Kroger than it was a way for the city to extract benefits from a market-driven project. The deal gives the city two blocks of road, sidewalks and traffic lights more than a decade early, and also hands over to the city a third of an acre that it would someday need to extend Summer Street from Studemont to Sawyer.

Mayor Annise Parker said Houston’s strategy differs from that of cities that build infrastructure first and then try to recruit businesses to move in.

“We have not chosen to use that sort of what I would call ‘corporate welfare.’ We have said, ‘Business, if you want to open and you need the street, you pay for the street. We’ll pay you back, but if you really want to be there, you use your dollars upfront,'” Parker said.

The city will pay a premium on that upfront money. The deal calls for the city to pay Kroger back with 5.17 percent interest. The city’s rate on bonds through which it finances public works projects ranges from 2.55 percent to 4.06 percent, according to information that Councilwoman Anne Clutterbuck got from the city’s Finance Department.

“What do you make on your IRA? I would love to make a 5.17 percent return,” Clutterbuck said. “The taxpayer, in my opinion, should not be on the hook for that.”

The rationale given by Mayor Parker for the use of 380 agreements is sensible. It’s certainly a less risky approach than “build it and hope they come”. Aside from the premium interest rate, whether it’s good policy to use a 380 in this particular location is another matter. The outline of the deal here sounds better than what was struck for Ainbinder on Yale Street, but I’m dubious about the wisdom of a supermarket there. I’ve seen traffic at the light back up all the way to Center Street during the afternoon rush hour, thanks in large part to the many people wanting to enter I-10 West from Studemont. The thought of adding in grocery store traffic, not to mention another traffic light, makes my head hurt. Having said that, I’m not sure what kind of development could have been built there that would be both low impact on traffic and profitable to the developer. Long term, I may have to think about using Sawyer/Watson as an alternate route, though if the rumored plans of an Alamo Drafthouse come to fruition, it may not be much better.

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12 Comments

  1. Jules says:

    The $40K “donation” to Olivewood tells me that the people framing this agreement, on both sides (Kroger and the City) have no moral compass. (It’s not a donation by Kroger at all, it’s reimbursable, at 5.17% interest by the City.)

    Parker, in Council Wednesday, said that it was a “mistake” that it was called a “donation” in the Request for Council Action (the summary that Council reads instead of long complicated legal docs).

    Here’s what the 380 itself says: “Developer agrees to donate forty thousand dollars ($40,000) to Descendants of Olivewood, Inc.”

    It’s not until you get to the list of reimbursable items that you see it’s reimbursable.

    It’s pretty clear this “donation” was cooked up to lessen the public’s worry about both Walmart and Kroger increasing erosion of the historic Olivewood Cemetery through lack of detention and was intended all along to be viewed as a donation by Kroger – if not for the public getting involved, it would have worked. This whole deal disgusts me.

  2. C3 says:

    I have a great idea, how about we let Kroger build if they want to build! Why does our tax dollars need to be used to pay for anything?

    Parker’s logic is flawed based on two key facts:

    One, that Kroger, with or without the 380, has been planning to build for a while. Evidence of Kroger’s commitment to build is seen in their TIA dated November 2010, not to mention their responses when asked if they planned to build without the 380.

    Second, if Kroger developed a crappy building then that would result in a poor reflection on them, not the city. Based on the success of the company, I can’t imagine they routinely build poor buildings with weak infrastructure and unappealing amenities. That just doesn’t make sense in a free market, so if connecting a road or building a sidewalk with their own money enables them to increase their business traffic over their many competitors in the area, then I am confident that they would.

    Parker keeps claiming that the 380’s will give the city influence in the building process and based on her past 380’s, she has not pushed for anything outside the bare minimum requirements.

    If Parker had applied a 380 to an area in need of economic development that would be one thing, but from where I am sitting it appears as though she is spending our tax dollars faster than we can generate them.

  3. JJ says:

    Take a look at the Chron’s political blog about how the Mayor’s office claims the reimbursement is capped at $2.5 million, including the interest. But the signed agreement that is quoted clearly says that interest is in addition to the 2.5 — that’s what the word “plus” means. So by the Chron’s calculation, the Mayor thinks the cap is 2.5 when in fact it could go to about 3.4 with all that 5% interest. Hey, she’s only off by $900,000, or 36% higher than she claims.

    I don’t think Bill White’s administration made errors like that.

  4. Jules says:

    Mayor Parker saying “it’s not corporate welfare” doesn’t make it true. Using taxpayers money for your own stuff is “welfare” and Kroger is a corporation. Some of the stuff in the 380 Kroger would be REQUIRED by the City – sidewalks, trees, left turn lanes, etc.

  5. Jules says:

    JJ – this is what you’re talking about, right?

    http://blog.chron.com/houstonpolitics/2011/10/an-interest-in-interest/

    It’s been signed one day and already COH and Kroger are disagreeing over almost ONE MILLION DOLLARS. To both you I say, that’s what happens when you deal with a creep that would call the Olivewood thing a donation – waking up with fleas and all.

    Makes a good case to have some sort of review over these things.

  6. MB says:

    “Maximum Reimbursement Amount” means (A) the lesser of (i) $2,500,000 or (ii) the City Improvements Cost plus (B) Interest.

    (A){i} or {ii} + (B) = ?

    Is anyone at the City of Houston actually holding a license to practice law? How about written a contract, applied for a home loan, a credit card or passed elementary math? At this point, the public would settle for someone who could proofread. IT’S OBVIOUS: the $2.5M, as contracted, does NOT include interest. So, now we have an even bigger give-away with, once again, nothing specified within the 380 that will truly be ‘above and beyond’ the minimum. Walmart flashbacks.

    These 380-mis-using politicians PLUS Andy Icken and Mark Loethen are clearly incompetent and need formal guidelines and ordinances to ensure that the public is protected from their negligence. Sounds like more work for the public. Oh well, we’re already doing our full time jobs, and theirs, as it is.

  7. Joshua bullard says:

    Let the record show-i am in full support of the mayor on this kroger deal,as well as the walmart-thats it-no long comment on this one-i am with her on this deal.

    i love grocery stores
    joshua ben bullard

  8. Karl Ittmann says:

    The one real shocker in this deal, the interest rate. COH will repay Kroger at 5.7% interest, 1-2% above market. Why?
    As for the store itself, it is another unnecessary Kroger that will contribute to gridlock on the roads. As Charles noted, the building of the frontage road, the new development on Yale and this store will dramatically affect the traffic going in and out of the Heights. What used to be a relatively easy drive will now become much more difficult.
    As for those who want to say “oh but people call for higher density”, you have to plan for density with mass transit, easy walking distances, bike lanes and limits on parking. That is the reality for cities I’ve lived in like London or Philadelphia. Density without planning gives you Bangkok.

  9. MB says:

    Mixed-use development would be appropriate for these urban areas. The original Ainbinder plan was to be mixed-use with multi-family residential housing, office space, grocery, shops, theatre, etc. — now, it’s a Walmart Supercenter and a taco shop.

    Any development is not better than no development. When the economy improves, and it will, better developers would infill with mixed-use development that would generate far higher taxes for the City of Houston and create real communities in the process. At this rate, Houston will never be able to compete with other cities that cultivate their urban neighborhoods and offer a great quality of life. We’ll suffer brain drain in the private sector, not just at City Hall.

  10. Jules says:

    Karl, exactly – why is the City paying Kroger 5.17% interest when it could be paying 4.06% or even 2.55%? WHY?

    MB – yes, if Kroger can’t afford to build now, let the land sit and in the future a much better development will come along.

    The City is giving up tax revenue for 13 years on this property anyway, what’s the rush? In 5 years it might be worth it to make a nice development suited to the inner city, instead of a suburban Kroger in a saturated market. In the meantime, we have less asphalt and concrete.

  11. John says:

    Sadly, Sawyer/Watson is already kind of a train wreck at rush hour. I was commuting that way until about a month ago, and had already started avoiding that & taking Studewood or Houston Ave as alternates although they were less direct. But, it seems unlikely that a spot like that would sit vacant forever.

  12. Jules says:

    Wow, the City refuses to release a copy of the Kroger 380 to RUDH.

    http://rudh.org/archives/235

    What are they hiding?