Waco pioneers new development approach with Riverway

The city of Waco’s deal with Riverway, which passed the council’s first vote on a 3-2 margin this week, would also involve economic development tools Waco has never used. That includes the creation of a municipal management district, a sort of government within a government with taxing powers and the ability to build and maintain roads, parks and amenities.

It would also use a relatively new funding mechanism called Tax Increment Financing Zone No. 4, which would reinvest part of the tax revenue generated by the development into public improvements at Riverway. Current projections place the amount of public funding at $130 million, to be paid over a 20-plus year period.

Roughly half the homes will be larger estates, while the other half will be moderate density homes and multifamily apartment units. The project will include 160 acres of publicly accessible parkland along the Brazos River and extensive trails that ultimately would connect to Waco’s trail system.

The project has been controversial because of the amount of public funding required, the use of new funding mechanisms and the subsidy of a higher-income development in a city where many residents are low-income.

Caldwell Companies, the Houston real estate firm developing Riverway, first announced the project in October 2020 under the name The Waterfront at Brazos, but the project gained public attention when Waco city staff and Caldwell representatives gave a presentation to the Waco City Council on April 2. Included in that presentation were requests by Caldwell for $93 million in TIF reimbursements for infrastructure construction, a number which was later raised to $130 million, and for the creation of a municipal management district to govern aspects the community.

While Mayor Dillon Meek, Mayor-elect Jim Holmes and members of city staff have gone on record with their support for the Riverway development, the council has recently been split in their support for the amount of TIF funding the development would require. At the council’s Tuesday meeting, council members Andrea Barefield and Alice Rodriguez expressed trepidation at the $130 million price tag in TIF reimbursements the development carries, and each said they would like more time to consider the funding before voting on it.

The measure passed a first reading Tuesday with a 3-2 vote, with Rodriguez and Barefield voting no and Council Member Josh Borderud abstaining from voting and discussion due to a conflict of interest. For the funding to be fully approved, it requires a second reading and second vote of approval.

Meek and City Manager Bradley Ford recently sat down with Tribune-Herald staff writer Matt Kyle, Managing Editor J.B. Smith and Executive Editor Steve Boggs to answer questions about the Riverway deal and their rationale for supporting it. The interview has been condensed and edited for clarity and conciseness and organized in a question-and-answer format.

How will Waco benefit from Riverway, and why is city leadership in favor of this development?

Meek said building such a large development so close to downtown would bring “disposable income” into downtown businesses and would help along the continued growth in downtown Waco. Riverway would help shift the growth of Waco to the north, a direction that has seen little development for decades.

“It’s really important for us to have a multifaceted approach to housing,” Meek said. “But one of those approaches needs to be ensuring that there’s disposable income proximate to the downtown corridor. When we’re trying to recruit business, one of the things that they will observe is that much of the disposable income is moving westward.”

Meek said with higher cost housing farther away from downtown, more economic development is being seen in West Waco, making it difficult to recruit businesses to downtown Waco. Meek said the city partnering in the development of Riverway will help accomplish many of the city’s goals, namely revitalizing downtown and growing Waco.

“The idea of incentivizing a residential development is unusual, and people have raised their eyebrows,” Meek said. “I’ve gotten a couple of emails saying, ‘Are you sure we should be incentivizing residential development?’ I think that it’s rare that we should do that, but there’s a time and a place where that makes sense.”

Meek also said Riverway would generate tax revenue for the city for decades, allowing for the continued funding of city goals.

While the TIF reimbursements are estimated at $130 million, repayments would be based on the amount of tax revenue each year. Meek and Ford referred to the deal as an “eat what you kill” strategy, meaning other taxpayers would not directly subsidize Riverway.

During the term of the agreement, Caldwell would retain 70% of the generated revenue, while the city would retain 30%.

What is Caldwell Companies, and why is it developing a master planned community in Waco?

Caldwell is a real estate development firm formed in Houston in 1990 by CEO Fred Caldwell, a Texas A&M University graduate. Caldwell has developed 32 projects, mostly in the Houston area, with a mix of apartment complexes, master planned communities, college buildings, shopping centers and businesses. Riverway will be Caldwell’s second project built outside of the Houston area after Mission Ranch, a master planned community in College Station.

Caldwell’s biggest development is Towne Lake, a 2,450-acre, 3,000-home master planned community built around a manmade lake in Cypress. Caldwell Chief Development Officer Peter Barnhart has said in council and TIF board meetings Caldwell is using Towne Lake as an inspiration for Riverway, as both communities will be built around water.

The property was bought in phases by Waco businessman Weldon Ratliff, CEO of Ratliff Ready-Mix. In a recent interview with the Tribune-Herald, Ratliff said he purchased the property with the intention of developing it into something that would benefit Waco, settling on the idea of a housing development with walking trails to bring needed housing to Waco and to preserve the natural beauty of the riverfront property.

Ratliff said he looked to bring in a large firm to develop the property and chose Caldwell because the firm planned on maintaining the natural elements of the tract, and because he was impressed with the firm’s work at Towne Lake. Ratliff said he is a partner on the project along with Caldwell.

What is a municipal management district, and how will it function in Riverway?

A municipal management district, or MMD, is a political subdivision of a city meant to control aspects such as tax rates and amenities in a small area, such as a neighborhood. MMDs can also exist in larger districts, such as Uptown Houston.

Ford said he expects Riverway MMD would set its tax rate at 30 to 40 cents per $100 valuation, based on other MMDs he has seen.

That revenue would be used to maintain roads, parks and other amenities and infrastructure to a higher level than the city of Waco would be able to afford. Ford said with the MMD having more direct control over maintaining the parks, the burden of caring for an additional park would be lifted from the city.

The MMD would use its tax revenue and the TIF 4 revenue to finance long-term improvements on the property, including streets, trails, parks and water and sewer infrastructure. Those bonds would not affect the city’s bonding capacity or rating, city officials said.

The MMD will have an elected board of five Riverway property owners, and Ford said members must be approved by the city before becoming a candidate on the board. Board members will serve four-year terms and will be elected by other residents of the MMD.

The creation of an MMD will be a first for both Waco and Caldwell, though Caldwell has previously used municipal utility districts, which are similar but are not under control of a city. Ratliff said Caldwell wanted to utilize an MMD so residents will have more direct oversight over needed repairs or projects in the community.

Ford also said the MMD would cease to exist once the bonds for Riverway have been paid off, expected around 2052. After that, the public parks and other public elements at Riverway would then come under the management of the city of Waco, Ford said.

While the MMD would control amenities and tax rates, Ford said city emergency services such as police and fire would still have jurisdiction in the community, as well as code enforcement. The city of Waco would likely build a fire station in the next decade to serve growth in Riverway and nearby tracts.

How will the requested $130 million in TIF funds be spent?

Original estimates given to the council placed the amount of TIF funding to be paid to Caldwell at $93 million, but later the TIF Board approved $130 million in funding to be paid to Caldwell from 2026 through 2052. City officials said the number increased due to inflation expected over the next 30 years, and was the maximum amount allowed under the master development agreement.

Current valuations estimate the property has about $520,000 worth of taxable value. Following full development, expected by 2037 at the earliest, that taxable value would jump to $620 million, and could be much more after inflation is factored in.

Ford said all TIF funding given to Caldwell will be spent on public infrastructure, such as laying new sewer and water lines, paving streets and creating walking trails and public parks. Under the agreement, Caldwell would fund the initial construction but would be reimbursed once the property begins generating increased tax revenue.

The repayments would begin in 2026 with about $233,000 repaid, increasing by a few hundred thousand dollars each year. Final payments in 2050 are estimated at around $8.6 million.

Under the agreement, the city will also retain 30% of the tax revenue collected from Riverway each year until 2052 and will retain 100% once the TIF reimbursements have ended.

Meek said without the 30% reimbursed to the city, he would not be in favor of the proposal.

Additionally, Ford said Martin Luther King Jr. Boulevard and Lake Shore Drive will likely be expanded to account for the increased traffic expected following the completion of Riverway. Ford said the two roads, which are both two lanes, currently experience traffic backups, so the city will consider adding more lanes and shoulders to alleviate traffic.

Ford said under the current TIF agreement, Riverway would need to assist in the funding of the road expansion costs based on how much traffic the road would see due to the new development.

Why is the city not requiring affordable housing to be included in the Riverway plan? Where else in Waco is the city developing affordable housing?

Ford said Waco did not require Caldwell to include affordable housing within the development, as housing on all levels is in a shortage in Waco. Housing studies have previously shown Waco needs over 5,000 housing units in all income brackets.

Barnhart previously said Caldwell would not do the bulk of the housing construction but expected homes in the community to start in the $300,000 to $400,000 range, which is a similar rate seen in other Caldwell developments such as Towne Lake.

Ratliff said Thursday that two areas on the property are zoned for multifamily pods, likely to be built into apartments. Site plans indicate as many as 695 units could be included in the apartments. Site plans for the development will also include build-to-rent properties and moderate density homes that will be smaller and built closer together, placed at about 232 units.

Some have criticized the incentivization of developing Riverway, including former Waco mayoral candidate Aubrey Robertson, who said the city should develop affordable housing first before subsidizing something like Riverway. 

Meek said Waco has worked on revitalizing old neighborhoods and has partnered with nonprofits in the community to address low-income housing and subsidize construction. Mayor-elect Holmes said previously the city has strategically purchased land throughout the city to use for housing, and has pushed for the construction of Floyd Casey Village to address housing shortages.

What amenities of Riverway will be reserved for residents, and what amenities will be open to the public?

Riverway will include a mix of public and private amenities, with 160 acres of the development reserved solely for public walking trails and parkland, which is planned to connect to the walking trails of Brazos Park East.

After MLK is widened, sidewalks for pedestrian use will be added to connect the trail system, and Ratliff said pedestrian bridges across the river may be included in future plans.

Ford said future TIF 4 requests and state and federal grants could be used for bridges to connect the trails to Brazos Park East.

Ford also said there are plans to connect the Riverway trails with the planned MKT Trail in East Waco. 

Currently, crews are working to excavate a 170-slip marina and will create a manmade beach, Ratliff said. The marina will be reserved for residents of Riverway, but Ratliff said the beach will be available to the public.

Ratliff said Riverway will also have an office at the front of the property with a gym and meeting spaces for residents, in addition to resident pools. Also at the edge of the property along MLK and Lake Shore, Ratliff said commercial spaces will be built for shops and restaurants.