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As the population continues to swell in Central Texas, residents moving up, down and around the region's big cities have been clamoring for more grocery stores. One city between Austin and San Antonio is taking a unique step to try to give them what they want.
The San Marcos City Council during a May 7 meeting approved the parameters of an incentives agreement to help lure a grocery store to the city. The unusual aspect of the move? It hasn't started negotiating with any specifically.
"It's almost like a first offer just to let people know that we're ready for business and we want to see that kind of commercial development take place here," Christian Smith, San Marcos' economic and business development manager, said during the meeting.
While the Chapter 380 incentive agreement can — and likely will — be tailored in the future to an interested company, the broad parameters approved by city leaders formalizes a way to make an "investment more attractive and to speed up that timeline for construction," Smith said.
Smith and council members said one of the biggest issues they hear about from the community is a need for more grocery options. Not counting convenience stores, there are five grocery stores in San Marcos, according to city staff. San Marcos had a population of about 70,000 in 2022, up from about 45,000 in 2010.
Smith noted that grocery stores often look at both residential housing and average income as key factors in determining where to put new stores. While San Marcos has been growing, its median household income of $47,394 in 2022 is well below the state's $73,035, according to the U.S. Census Bureau.
He pointed to other nearby cities that have used incentives to attract grocery store development: New Braunfels provided $1.5 million in incentives to lure a 120,000-square-foot H-E-B store, while Kyle provided $950,000 in incentives for a 23,000-square-foot Sprouts Farmers Market.
The San Marcos City Council evaluated possible incentive requirements based on those other agreements, as well as the scope of a potential project and the potential rebates and grants. It eventually approved providing a five-year Chapter 380 agreement for property and sales tax rebates starting at 80% and then incrementally dropping to a number to be determined by staff. It did not have a size requirement but did include a desire for higher architectural standards for the project.
While it's hard to evaluate the value of a potential deal before its finalized — and before even knowing if any grocers are interested — Smith provided an estimate based on various parameters. For instance, a 20,000-square-foot store with property and sales tax rebates starting at 100% and dropping to 25% would still result in a net benefit to the city of $280,00 over a five-year period. A 50,000-square-foot store with the same deal parameters would result in a $600,000 net benefit to San Marcos, while a 120,000-square-foot store would generate $1.6 million for the city.
For perspective, the average size of H-E-B's newer stores is roughly 100,000 square feet.
Should the effort to lure a new grocery store prove successful, it would add to a number of grocery stores being built in the Austin outskirts. The Austin Business Journal recently mapped out H-E-B's footprint in the metro totaling more than 50 stores, including three underway in Manor, Georgetown and Pflugerville.