By, Melissa Jewett, Publisher
On Tuesday, as what was already an issue amongst councilmembers, the San Marcos City Council voted to approve the ground lease for 201 S. LBJ Dr. with Becerra Corp.
The City of San Marcos is under scrutiny after a controversial decision was made on May 1 to waive $11,054.78 in back rent from 2015 to 2016 for the former location of Dixie Cream Donuts.
The decision included a settlement of $2,063.21 for 2017’s rent, which the city received on April 24, 2018.
During Tuesday night’s council meeting, Councilmember Scott Gregson proposed seven amendments that would provide clear and explicit terms to the lease agreement between Becerra Corp and the City of San Marcos. Amongst those amendments were also ones, he said were aimed at protecting the city from liabilities.
The following are the seven amendments proposed by Councilmember Gregson; item five was ultimately withdrawn from the Dias as the item could be covered under item four.
- Amend to include that Mr. Becerra personal (financial) guarantee this lease
- Amend to make as a requirement of the lease the city has financials presented by Becerra Corp. on an annual basis.
- Lessee shall show proof of registration with all taxing authorities of the true and correct ownership of any and all personal and real property located on the premises within five days of execution of this lease.
- Lessee shall, within 30 days of any change, provide an executed, correct and current copy of all lease documentation with Union Pacific Railroad.
- Lessor shall provide lessee evidence of Union Pacific Railroad has also agreed to the approval of any sublease under their lease.
- Lessee acknowledges that no invoice is required to be sent for any and all sums and obligations to be due and payable under the terms and conditions of this lease.
- Amend the ground lease rate be adjusted to $0.51 per square foot to match the rate charged for the property across the street leased by the Stokes.
Proposed amendment 4 by Councilmember Gregson passed by a 7-0 vote. Amendments 1, 2, 3, 6 and 7 failed by a 2-5 vote with Councilmember Gregson and Mayor John Thomaides voting yes.
During the discussion over Gregson’s proposed amendment 6, Cosentino said, “It’s implied in any lease agreement when it has a due date for payment of rent that you don’t have to bill them. And it’s been acknowledged by the staff for all those years there was no bill sent to Mr. Anderson or the Becerras.”
In explanation for why council members would be voting against the proposed amendments by Councilmember Gregson, councilmembers stated that none of the city’s other leases had any of the proposed language or terms in the agreement.
“I’d like to see when we do our audits if we’re going to ask that of one lease, that we ask that of everybody,” Councilmember Lisa Prewitt said. “So, until we have a clean contract that the city gives to all of our lessees, I don’t want to support any amendments from what the city staff has already negotiated with the Becerra family.”
Councilmember Prewitt went on to say that she wanted to clarify the narrative on the Dais.
“We did not have a license agreement with the Becerras,” Prewitt said. “It was a transfer agreement from Union Pacific to the City of San Marcos that somebody purchased the piece of property two years later and never had communications with the city.”
“Even our own council, if you want to go back and look at the statements he made to us, basically saying we have a lease with Mr. Becerra,” said Councilmember Gregson, “A legal lease with Mr. Becerra for this space.”
Councilmember Derrick read an email from Katlyn Anderson, the daughter of Daniel Anderson, where she stated her father had told them of the handshake deal with the City of San Marcos during the family talks with selling.
According to Section 34.076 of Article 3 of the San Marcos city ordinances, “it is unlawful for an owner or occupant of a lot to cause or permit weeds, rubbish, brush or stagnant water to accumulate or remain on the lot.” The ordinance requires all lessees or property owners to maintain the property.
“[The lease] existed by virtue of the assignment or partial assignment from Union Pacific Railroad Company in 2013,” said city attorney, Michael Cosentino. “[The lease] is terminated by this action, and this is in its place.”
Mayor Thomaides addressed two issues that were brought up during public comments.
“It was stated earlier that this was an item that was less than $50,000 and should not be before the city council,” said Thomaides. “Mr. Cosentino, I would like to make a clarification that all leases have to be approved by the city council.”
“Yeah, a lease is a conveyance of interest – not ownership, but it’s a leaseful interest in real property, so per the charter, that’s why it’s on your plate,” said Cosentino. “The staff can’t approve a lease; it has to come to city council.”
Mayor Thomaides proposed to amend sections 18A and 11B of the proposed lease agreement with Becerra Corp.
- Section 18A: The City Manager shall terminate this lease for lessee’s default by giving lessee notice of termination and…”
- Section 11B: Prohibition of political advertising on city-owned property and adjacent right of way.
The amendment to Section 18A would grant the city manager the authority to terminate the lease if the lessee failed to cure the compliance issues within 30 days; one of the issues the city manager would be able to begin default proceedings on would be a failure to pay rent. The amendment failed 2-5 with Mayor Thomaides and Councilmember Gregson voting yes.
According to Cosentino, unless responsibility is delegated to an individual or staff member by city council, the responsibility for terminating the lease would default to city council and be brought to the Dias.
The amendment to Section 11B passed 5-2 with Councilmembers Prewitt and Derrick voting no.
Cosentino said there is a provision in the Texas Election Code that states it is a criminal offense to allow city resources, other than a city polling place, to be used for political advertising.
“We have had to respond to allegations in the past, and it’s a pretty harsh law. And it’s vigorously enforced by the Texas Election Commission,” said Cosentino. “It’s not explicitly stated in this lease but to avoid any misunderstandings about it, perhaps, the council would want to consider a prohibition on this property.”
Before the final vote to approve the lease, Assistant City Manager, Steve Parker, offered four requests originally made by the Becerras to city council for potential amendments to sections 3B, 7B, 13A and 12B.
- Section 3B: Clarifying language: the resetting of rent above the automatic 3 percent increase will take place no sooner than Feb. 1, 2021.
- Section 7B: Lessor reserves 1) the exclusive to permit placement of signs according to its city ordinances.
- Section 13A: Lessee will arrange and pay for all utilities and services to the premises or to lessee, for which lessee has contracted to pay.
- Section 12B: Substitute a paragraph of language staff had cleaned up after the document was submitted to city council.
No motion was made on suggestions for sections 3B and 7B. An amendment to Section 12B to substitute corrected language for the language provided in the agenda packet passed 7-0.
While council withdrew a motion to amend section 13A, the motion was brought back after Becerra spoke on behalf of Becerra Corp. and explained the reason for the request.
Becerra said Yogurt in Love was currently in operation at 201 S LBJ Dr., and that the owner, Ruth Molina, had spent several months doing the legwork that would allow that operation; currently, the utility bills are under Molina’s name.
Councilmembers amended Section 13A allowing the utilities to be under the name of the sublessee by a 5-2 vote with Mayor Thomaides and Councilmember Gregson voting no.
City council approved the proposed lease by a 4-2 vote; Mayor Thomaides and Councilmember Gregson voted against.
Councilmember Melissa Derrick walked away from the Dias before the vote stating, “You don’t need me to vote on the main motion.”
“I realize the city wasn’t perfect in its…but there’s plenty of issues to go around; and I believe there was a lease,” Thomaides said in his closing statements. “I believe that three city managers sent letters saying there was a lease. I believe all the attorneys in our department said there was a lease. And I just feel like the previous lease should have been paid. And if it had been paid or some kind of payment plan worked out, that’s what I think should have happened. That’s the cure that I would have liked to have seen and would have supported and voted for. I understand that’s different from my colleagues. But I just want to say that’s the reason…I don’t have any faith that this lease is going to be executed.”