Our community has had many studies, plans, discussions and debates about what we want Austin to look like in the future. One inevitable fact is growth will occur. While we ponder the simplistic upward-or-outward question about where to put all the people moving to Austin, a small revolution has been building in our community.
This is where it gets complicated
While many confrontations of the past have been framed as the developer vs. the environment, the current fight takes on the developer vs. our tax dollars.
On November 4, in addition to voting for president, you will be asked to vote on a complex amendment to the Austin City Charter. Proposition 2 would prohibit the City of Austin from providing incentives to development or redevelopment projects that include retail and would prohibit the city from paying incentives currently contracted to The Domain and potentially others. No doubt you’ve heard the cry of Stop Domain Subsidies (www.stopdomainsubsidies.com) to pass this amendment to prevent the city from paying the rebate of sales tax dollars to Simon Property Group Inc., the current developer of The Domain.
But first a bit of history. Municipalities routinely grant incentive packages to create a thriving economic and cultural environment. Economic policies drive the addition of desirable jobs, recruitment of viable business sectors and development of specific areas of town. These policies can also express the desires of the community for the shape and feel of our city.
The term New Urbanism has been put into play here. New Urbanism seeks to provide neighborhoods that are scalable (no enormous skyscrapers) and contain jobs, a variety of housing options, public spaces, shopping and a walkable community. This translates into mixed-use development. The Domain is an example of this, as is the Mueller redevelopment, The Triangle and others.
In 2003, the city entered into a contract with the developers of The Domain to offer financial incentives to create a desired project that included affordable housing, park space, jobs, locally owned businesses, high-end retailers and a showcase of mixed-use planning. Among the incentives was a rebate of taxes collected on retail sales at The Domain. These taxes would otherwise flow into the city’s general fund coffers to help pay for our community’s needs including public safety, libraries, parks and numerous other necessities. You will hear estimates of how much these rebates cost that range from twenty-five million to sixty-five million dollars or more. The difference in these figures is the twenty-five million is a cap at net present value. That means in 2003 dollars. Over the life of this twenty-five year agreement this could stretch to sixty-five million in real dollars.
What Keep Austin’s Word says is true
In 2004 Brian Rodgers, a local real estate investor, brought a lawsuit against the city and the developers to stop the refund of sales tax dollars to the developer. This ended in a settlement that allows the city and the developers to walk away from the agreement. (I wrote about this issue in November 2007 and explained the pros and cons in more detail. That article can be found at www.goodlifemag.com/archives/2007/11-07/11-07_Lagniappe.pdf.)
Rodgers and others led the petition drive to get Proposition 2 on the ballot.
Recently a new group has formed to defeat the proposition. Keep Austin’s Word (www.keepaustinsword.com) carries the voice of former Council Member Betty Dunkerley. Dunkerley is a well-respected advocate for local business and supported, among others, the Austin Independent Business Alliance throughout her time on the council.
Keep Austin’s Word maintains that the original deal with The Domain should be honored. According to a recent review to be presented to the City Council October 2 (after our press date) The Domain has not only met its obligations under the agreement but has exceeded them.
Keep Austin’s Word claims that it will hurt the city and future projects to renege on The Domain deal. Although the Rodgers’ lawsuit settlement allows the city to stop the refund, Dunkerley and others believe it would be harmful to do so. It’s not just a matter of integrity—the developer is doing its part and so should we—it’s a matter of reputation, unintended consequences and expensive lawsuits. A deal’s a deal. Because you can walk away doesn’t mean you should.
What Stop Domain Subsidies says is also true
Simon Property Group, a successful international developer, doesn’t need and shouldn’t get our hard-earned tax dollars. Especially not to support the likes of Neiman Marcus, Louis Vuitton and others. Just to be clear, the rebates go to Simon Property Group and not directly to the retailers, although every retailer in The Domain, locally-owned and international alike, stands to benefit from these rebates through better amenities and possibly lower rents.
City Council Resolution vs. Proposition 2 Charter Amendment
This was a bad deal. We can debate endlessly the merits of the deal, whether The Domain development would have happened anyway without city incentives, whether they have really complied with the terms of the agreement or it’s a bunch of deceptive numbers, and whether the citizens of Austin should spend tax dollars (as opposed to purchases as customers) supporting high-end retailers.
In December 2007, Council Member Lee Leffingwell introduced a resolution passed by the City Council that would prevent future deals like The Domain but bind the city to pay the rebates in The Domain deal. This was an attempt to satisfy concerns about future deals and derail the Stop Domain Subsidies petition drive for a charter amendment. Clearly the petition drive continued and the proposition is on the ballot.
The power you hold
But the devil really isn’t in the details, he’s in the unintended consequences. Those consequences breed questions such as: How does this affect the Mueller redevelopment? What about the forthcoming redevelopment of the Seaholm Power Plant site? Does it impact the next phase of The Triangle? Will future deals be suspect if we back out of The Domain? Or is this a chance to set a bad deal right? Should this be a part of the City Charter (the equivalent of our local Constitution) or should it be economic policy? The City Charter requires a public vote to change or amend it while a policy can be changed by the vote of the City Council.
As legal minds pore over the possibilities of where we’ll be if Proposition 2 passes, we mere voters must weigh and decide the options by November 4.
While both sides are trying to get your vote, I’d like to pause and marvel at our form of government. We get a lot of things wrong. The Iraq War, greed on Wall Street, our failure to provide affordable healthcare, all these and more weigh on us heavily these days. Corruption comes in waves in both politics and business. The system that’s supposed to protect the most vulnerable among us often fails tragically. But sometimes we get it right.
In 2003, your elected City Council, with little community input, decided The Domain deal was good for the city. By the will of the people (it took the signatures of twenty thousand verified registered voters to get this charter amendment on the ballot) we have the opportunity to rethink this deal. You have the option to tell the council you want a different outcome. This is democracy in action.
Is your vote for Proposition 2 a better decision or mob rule? History isn’t particularly kind in judging the wisdom of voters in overturning a council decision or forcing the power of our will to bear. In an effort to curb the impact of big money’s influence on local elections, a citizens’ group petitioned for and a majority voted for a charter change that limited individual contributions to one hundred dollars. In retrospect it was a mistake, hobbling local elections in the land of the underfunded, and the limits have since been increased.
But sometimes our collective wisdom shines, as in the case of the landmark Save Our Springs Ordinance protecting Barton Springs and the environment we hold dear. The voters (or mob if you were on the other side) demanded to be heard and the voters overwhelmingly supported the initiative.
One side of the Proposition 2 argument is emotional: “Don’t give Neiman Marcus your tax dollars! Protect the little local businesses and let the big international high-falutin’ bigwigs fend for themselves! Do the right thing!”
The other side is practical: “Keep your word. Honor your deals but make better ones next time. Keep your options open and avoid anything rash that may bring those unintended consequences. Do the right thing!”
On November 4 while you’re out electing the next leader of our country, vote on Proposition 2. Exercise the power of your vote and do the right thing.Rebecca will be doing her right thing by voting for Proposition 2 and letting the devil and the lawyers fight over the details.
Rebecca Melançon is the publisher of The Good Life.