Chances are you’ve taken your picture in front of the “Greetings from El Paso” sign at The Substation, and soon you’ll be able to check out the Canyons at Cimarron and its new retail, office and residential offerings. These are new developments my team and I have helped develop across El Paso, contributing to its recent growth and progress, which I am proud to be a part of.
Creating spaces that add to our community’s quality of life is something I strive for. However, new construction and development don’t happen overnight. It takes time and money. When planning these projects, incentives from the city, county and state do play a role.
I think it’s important to explain how development incentives work. Many of you have visited other cities and seen developments and asked, “Why doesn’t El Paso have stuff like this?” The answer is simple. The cost to build is similar in most Texas cities, however the rental rates that developers are able to achieve in Dallas or Ft. Worth are much higher. This means a developer would need to build less expensively in El Paso to achieve the same profit as a developer in Dallas.
Incentives help bridge this gap by incentivizing the developer to build a product with certain features that the city sees as beneficial to the community but may not be economically feasible given current rental rates.
I am not an advocate of incentives for every development; I am an advocate of smart, proactive and targeted incentives that are programmed and monitored by our city’s development department.
Incentives take many forms. The city might help extend utilities or agree to reinvest tax revenue back into the zone where it was collected, or offer short-term tax breaks to help developers attract new retailers and restaurants or add certain features such as public areas or art.
For The Substation, we invested $4.5 million into transforming vacant lots and a dilapidated building into a vibrant center of commercial and cultural activity. As an incentive, El Paso agreed to waive up to $10,000 in building and planning fees and to provide a partial rebate of sales taxes from construction materials and of property taxes for five years. The value of these incentives came to less than $128,000 over five years, or roughly 4 percent of the amount we committed to spending.
Prior to development, the property was generating less than $15,000 in property taxes, and now it is generating close to $70,000 in property taxes each year. Without the incentives, we would have built a completely different product, if we had decided to move forward at all, and the value to the taxpayer would have been much less.
Incentives are long-term investments in our city, and ourselves. Thanks to them, El Paso’s future is looking bright and moving forward.
Will Harvey is president of EP Riverbend Development, which built The Substation shopping center in the Upper Valley and is developing a mixed-use center, Canyons at Cimarron, on the far Westside.