Beside the Point

The Proposed Homestead Preservation District

What works east of I-35 doesn't always survive the trek west. We're not talking about a West Enfield carniceria or, conversely, a Holly Street tapas bar, but just as those anachronistic anomalies grow increasingly less so as the Eastside is breathlessly ushered into the condominium era, planning concepts once roundly condemned have come roaring back.

Case in point: a homestead preservation district for East Austin.

Wonk alert: A homestead preservation district is modeled after tax increment financing. In a TIF district, a percentage of revenue generated by property taxes in a geographic area is designated to fuel future growth, repair, upkeep, or development; Sixth Street and Congress each have tourism development funds based upon TIFs. Appropriately and somewhat ironically, the same tax tool capitalizing on Downtown's tremendous growth now looks likely to assist Austin homeowners feeling the brunt of the development boom – those Eastsiders in peril of losing their homes.

The proposed HPD comprises seven census tracts, bordered by I-35, Town Lake, Airport, and as far north as 38th; in order to help those most directly affected by the urban building boom, the bulk of the district parallels the central business district Downtown. "It had to be created next to the CBD," says Council Member Mike Martinez, one of the initiative's sponsors. "Those are the areas that are gentrified the quickest and most often. It doesn't mean we can't expand in the future, but we wanted to start where we'd see most impact." The idea is that if a resident has trouble keeping pace with rising property taxes, the city could buy the homeowner's land and lease it back to her at no cost. This drastically lowers taxes by leaving homeowners to pay tax only on their homes and any subsequent improvements, not on the spiraling land costs. The city would pay for the lands by garnering a percentage of the increased appraisal costs in the district.

The road to the HPD has been long and turbulent, its path riddled with potholes from both state and city. Legislation from Rep. Eddie Rodriguez created the district in 2005, but niggling questions on the state level necessitated a cleanup. This session Rodriguez's HB 470 should firm up district boundaries, remove ambiguous language, create a sunset provision, and more. The proposed council ordinance confirms that the city is finally on board. "There was some severe trepidation from city staff," said Martinez, as the initial draft spent all of the funding source on the HBD, stripping the city of money it uses to fund city services or build infrastructure. "I think there was legitimate concern," Martinez continues. "In a perfect world we'd do 100 percent, but we have to be realistic about providing those services." (The exact percent to be captured in the financing isn't yet set, but we're told the numbers hover around 10%.) Asked if that will be enough, Martinez answers flatly: "No. But let me define that. There's never going to be enough money. … It's a start. It's not an answer to skyrocketing rent, to gentrification, but it will stem that tide, and provide more opportunities than we have today for preserving our neighborhoods and their uniqueness and character … instead of just allowing the market to dictate that."

In a self-reflexive bit of scheduling, today council also gets an affordability toehold west of the freeway, where the market shouts the loudest. That would be Item 55 from Brewster McCracken, allowing the city to buy down the cost of owner-occupied units in vertical mixed-use buildings that meet affordability requirements. Whereas the HPD targets families with income on the order of 60% of the median, or even 40%, the condo preservation district only dips to 80% MFI. Also, bond funds might be used to offset the costs.

Asked to contrast the two proposals, Martinez offered this: "I can certainly see where it looks like a tit-for-tat. But it's also creating affordability where you wouldn't have it otherwise. … I firmly understand and agree that 80 percent MFI isn't affordable for a whole lotta folks, but then again it's a whole lot more than you would have otherwise. The market is exploding in this town, and affordablity is something developers aren't necessarily concerned with. It may seem like it's not that impactful, but in the grand scheme, it is."

Rounding out council's heavy lifting is the initial vetting of the Congress Avenue Retail Retention and Enhancement Fund – the city's attempt to find a way out of the Marriott vs. Las Manitas impasse. We'll know next week if Las Manitas fixes its migas to go with the city.

*Oops! The following correction ran in our January 19, 2007 issue: Last week in "Beside the Point: TIFing the Eastside" (News, Jan. 12), a map of the Eastside Home Preservation District incorrectly labeled the northernmost boundary of the district as "18th Street." Actually, the label should have read "38th Street." (As the article states, the district boundaries are I-35, Town Lake, Airport Boulevard, and 38th Street.) The Chronicle regrets the error.