Here's how the Office of Management and Budget defines and determines what is a principal city (page 3, paragraph 1).
"In addition to identifying the more significant places in each Metropolitan and Micropolitan Statistical Area or NECTA in terms of population and employment, principal cities also are used in titling Metropolitan and Micropolitan Statistical Areas, Metropolitan Divisions, Combined Statistical Areas, NETCAs, NECTA Divisions, and Combined NECTAs."
In addition to being above 50,000 in population, a principal city should be a major job center within the statistical area. As for Schertz not qualifying due to its status as a "bedroom" community, while that may be true at a superficial level, there is a significant amount of commercial development within the city, most notably the Tri-County Business Park, which has seen significant expansion over the past few years. Since Schertz would have to see a 60% increase in population to qualify as a principal city on the basis of population, its not hard to see it becoming even more of a jobs center by that point. Now, if Seguin also had 50,000 people by that point, the edge would probably go to that city not just because of its larger, older core area, but because of the jobs that represents: the university, Caterpillar, and Seguin's function as a county seat.
This also makes it easy to see how San Marcos would be chosen as a principal city over Cedar Park, given SM's status as a county seat, the home of a state university, and the location of a very large outlet mall. I'd think this also gives it the edge over Georgetown, which is also a county seat.