Harlingen official outlines settlement ending lawsuit over Bass Pro development

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HARLINGEN — After an eight-month legal battle, City Commissioner Daniel Lopez is detailing the terms of a settlement reached with developers behind a 2010 deal that helped a previous administration land Bass Pro Shops.

In a lawsuit, city officials argued the deal locked the city into “perpetual” payments while failing to develop the Harlingen Heights area into a retail district capable of generating enough sales tax revenue to pay off a $4.4 million principle whose 8% interest rate swelled into a $6.3 million debt.

Late last week, the city and the Harlingen Economic Development Corporation reached the settlement with 83/77 Properties Ltd. aimed at paying off the debt within four years, Lopez said in a statement released Wednesday.

“By coming to this settlement agreement, we will avoid years of litigation, thousands of dollars in attorney fees and have a guaranteed favorable outcome,” Lopez said in his statement. “Under the settlement agreement, the city and HEDC will pay their portions of the original $4.4 million debt in one lump sum within 30 days of the agreement being signed.”

Then, the city and HEDC will use sales tax money generated by businesses within a tract of land surrounding Bass Pro Shops to pay off the balance, he said.

“The city and HEDC will then pay the remaining balance of accrued interest, minus $500,000 which 83/77 (Properties) waived, using the sales tax,” Lopez said. “The remaining interest debt of $1,488,866 cannot and will not accrue additional interest during the remainder of this contract. As such, the debt will be paid in the next three to four years.”

The original deal between the city and 83/77 was designed to be a win-win-win, the commissioner added.

He further noted that Harlingen would get an anchor store in a prime location in addition to retail development.

”… Both of which would bring in new sales taxes; the worth of 83/77’s land surrounding (Bass Pro Shops) would increase; and Harlingen residents would now have more shopping options,” he said. “Unfortunately, that did not happen, and to continue down this path would cost millions of dollars more and take decades to extinguish the debt.”

Meanwhile, Joseph Habbouche, an attorney with Atlas, Hall & Rodriguez LLP, released a joint statement on behalf of 83/77 and the city of Harlingen.

That statement describes the settlement as a “new agreement to support and enhance the retail development at the intersection of U.S. Highways 83 and 77.”

Habbouche described a “resolution” as a “response to growing debt obligations.”

“This resolution allowed 83/77 Properties to better manage its financial risk while enabling the city to secure favorable financing terms despite a high interest-rate environment,” he said in his statement. “Consequently, the 380 Agreement was revised to reflect current economic conditions.”

”The city of Harlingen, the Development Corporation and 83/77 Properties recognize the mutual benefits of the thriving development at Highways 83 and 77 and they are all pleased to announce that the revised agreement will promote the economic growth of Harlingen while balancing their rights under the original agreement. The revised agreement ensures the continued growth and prosperity of Harlingen, fostering an environment of progress and collaboration,” Habbouche said in the statement.

THE HISTORY

In the lawsuit filed in December 2023, city officials said the 2010 agreement failed to include critical terms.

“The agreement omitted essential terms which are necessary for a legally binding financing agreement,” the lawsuit’s amended petition stated.

The city had questioned the terms of the agreement in regards to payments and whether it contained a sunset provision to extinguish the debt.

Meanwhile, the city’s previous administration was counting on the agreement to develop the Harlingen Heights area with businesses generating enough sales tax revenue to pay off the principle and debt, the lawsuit stated.

Harlingen sues over once-controversial Bass Pro Shop development

The city had hoped the agreement would lead to additional retail, shopping, restaurants, bars and other commercial businesses, but it didn’t come to fruition as planned, the lawsuit stated.

After drawing Hooters, AT&T, Longhorn Steakhouse and Cracker Barrel to the new retail district, “development eventually stalled,” Lopez said in his statement.

“To pay for the land without using the city’s existing taxes, the city and HEDC agreed to utilize the projected sales taxes to be collected from the retail development to pay the $4.4 million plus interest,” he said. “Under the terms, payments would first cover the yearly accrued interest and any money over that amount would go towards (principle). If the yearly accrued interest was not fully paid, the remaining interest balance would be added to the loan amount, thereby increasing the overall debt.”

While the original deal did not specify a set monthly payment amount, it also did not set the number of years in which the loan would be paid off, Lopez said.

“Rather, the agreement was built upon the belief that there would be sufficient new sales taxes to pay both the accruing interest and a portion of the (principle),” he said. “Consequently, the city’s and HEDC’s sales taxes were less than the accruing interest.”

In the last 14 years, the city paid more than $2.3 million while its debt “ballooned” from $4.4 million to $6.39 million, Lopez said.