SAN ANTONIO – A year after Rackspace vacated the former Windsor Park Mall for smaller headquarters on the far North Side, a dispute continues over how to divide a $9 million lease termination fee paid by the tech company.
Officials with the North East Independent School District contend they are owed half of the payment: $4.5 million.
To date, the district has yet to receive any of the funds.
“I’m pretty frustrated. To my understanding, we haven’t gotten anywhere at this point. We are at a standstill,” NEISD Superintendent Dr. Sean Maika said.
The funds continue to be held by the City of Windcrest, which told KSAT in a written statement it cannot disburse the $4.5 million until NEISD and the City of San Antonio resolve their quarrel.
Dispute rooted in 2007 economic incentives agreement
The framework that paved the way for Rackspace to occupy the massive property along the Interstate 35 frontage road and Walzem Road was laid out in the 2007 Walzem Road Redevelopment Project Master Economic Incentives Agreement.
The agreement shows that the property was partially within Windcrest and San Antonio city limits.
Windcrest spearheaded efforts to bring Rackspace to the mall property, which included a tax abatement for the tech company.
“By entering that agreement, they took that property off our tax rolls. So, we gave up our taxing authority over that component,” Maika said.
Maika confirmed Rackspace paid the school district a $100,000 payment in lieu of taxes (PILOT) each year it occupied the property.
After Rackspace vacated the property, ending its lease early, it was required to pay Windcrest a $9 million early termination fee.
“For us, it is our position and our attorney’s position that we’re owed half of that nine million, as four-and-a-half million. I think the rub becomes: ‘Who really gets access to it and who are the real parties that are impacted by it?” said Maika.
In a statement, an attorney for the City of Windcrest provided the city’s stance on how the termination fee should be disbursed.
“Windcrest understands that San Antonio has taken the position Rackspace’s $9,000,000.00 payment is to be split 50/50 between San Antonio and Windcrest, only. While this position would mean more money for the City of Windcrest, it is not correct. This stance would eliminate any payments to any other entities, including NEISD. Windcrest strongly believes each taxing entity who was part of the agreements is entitled to their share of the payment. All entities came together to make the agreements happen to bring Rackspace to the area in the first place,” wrote Ryan Henry, attorney for the City of Windcrest.
Henry added that Windcrest has already made a distribution payment to the City of San Antonio, but is holding the remaining $4.5 million in a separate account until NEISD and the City of San Antonio come to a resolution.
San Antonio officials declined to make anyone available for an interview. Instead, they released a statement attributed to its city attorney’s office.
“We are working with the City of Windcrest and the North East Independent School District to quickly resolve the dispute. The City of San Antonio is determining the correct amount owed by the City of Windcrest under the Walzem Road Redevelopment Project Master Economic Incentive Agreement. While the Agreement contemplates mediation we recognize that mediation is a non-binding process. We remain confident the City will recover the money owed under the Agreement,” the statement reads.
“I’m not sure whose definition of quick we’re going to use, but in mine, I would’ve thought by now we’d have resolved this,” said Maika.
NEISD intends to use money as an employee retention supplement
Maika said the district intends to use the funds received from the termination fee as a 1% retention supplement for current NEISD employees.
“For me, what that $4.5 million stands for is money back in my employees’ pockets. In the state that education is in currently with the budget deficits we’re facing, with trying to reward employees for their hard work, this is money that teachers and paraprofessionals and custodians desperately need in their pockets that I want to give back to them and I simply can’t because it’s tied up,” said Maika, who pointed out the district’s board would have final approval on disbursing the funds.
At last check, possible mediation for the dispute has not been scheduled.
Maika told KSAT that NEISD’s attorney has asked the City of San Antonio to show the agreement language outlining what the city is owed.
The city, to date, has still not provided that language, Maika said.
A spokeswoman for Rackspace told KSAT in a written statement that it provided Windcrest with the required payment and is not involved in discussions on how to disburse it.
A spokeswoman for Bexar County confirmed Windcrest disbursed nearly $2.9 million to Bexar County.
Last year, county commissioners voted to grant the funding back to Windcrest to support the mixed-use development project now being completed at the property, records show.
Read more reporting on the KSAT Investigates page.
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