Opinion: Who Pays $278 Million: Austin Taxpayers or Private Developers?

Council should not vote to divert city tax dollars to the south shore property owners

Opinion: Who Pays $278 Million: Austin Taxpayers or Private Developers?

On March 3, the City Council will vote on whether to allow developers of 118 acres of prime real estate just south of Lady Bird Lake (from South 1st to east of Congress) to divert $278 million in property taxes from the city's General Fund to pay for infrastructure for their development. If approved, this diverted revenue would no longer be available for libraries, parks, public safety, affordable housing, and other public needs across the city.

City staff proposed in December that a Tax Increment Reinvestment Zone (TIRZ) be created for the South Central Waterfront (SCWF) District. Staff estimates that $278 million in property taxes would be diverted from general revenue to pay for streets, water, sewer and drainage facilities, and parks in the zone instead of following standard practice that the developers provide that infrastructure.

Before Council votes to provide these massive tax subsidies to the SCWF developers, we believe there should be clear and convincing evidence that these giveaways are actually needed and what exactly the money will pay for. So far, the only city financial analysis shows that the TIRZ is not needed and that the developers can make a healthy profit paying for their own infrastructure.

The SCWF is envisioned as Austin's "second Downtown," with luxury office, retail, and residential towers. The Statesman property constitutes 18.3 acres of the SCWF District and the most valuable part. This parcel is owned by the billionaire Cox family and its developer, Endeavor, the largest in Central Texas.

In 2016, the city approved a SCWF Vision Plan based on developer and community input. It called for 6.2 million square feet in new development with beautiful parks, streetscapes, new and improved roads, and plentiful bike lanes and sidewalks ("SCWF infrastructure"). The plan now includes a Project Connect transit stop.

The 2016 plan included a financial feasibility study. This analysis shows that the SCWF District could be privately redeveloped profitably through rezoning, and with the developers paying for the parks, roads, and other infrastructure. The developers also could provide 527 "affordable housing" units. The SCWF property owners – and not Austin taxpayers – would pay for the then-estimated $73 million in infrastructure through a Public Improvement District (PID).

Five and a half years later, the city staff rolled out their new SCWF TIRZ plan. The 2021 plan still called for an additional 6.2 million square feet in development. But now taxpayers would pay for the new infrastructure through a TIRZ. And, inexplicably, the cost has somehow ballooned from $73 million to $278 million.

A few days before Christmas 2021, Council gave preliminary approval even though the city's only feasibility study showed there was no need for taxpayer money. Notably, the TIRZ plan made no mention of the 2016 financial analysis. If anything has changed since the 2016 analysis, it's that prime Downtown real estate has skyrocketed in value, making it even more clear that the SCWF developers can and should pay their own way like every other developer.

But worse yet, to have any chance of legally using this special financing provision of the Tax Code intended for underdeveloped or blighted areas, Council will have to formally find that development of this prime real estate "would not occur solely through private investment in the reasonably foreseeable future" (Texas Tax Code Sec. 311.003(a)). Given Austin's booming economy and the incredible value of this area, no reasonable person can make this finding in good faith. If there's any property in Austin that will redevelop "in the reasonably foreseeable future" without taxpayer giveaways, it's the south shore of Lady Bird Lake in 2022.

But with developer lobbyist influence at City Hall, this huge diversion of our city tax dollars to the south shore property owners may slide right through on March 3 absent an outcry from voters. Join with us and Taxpayers Against Giveaways to stop this latest boondoggle. Tell the Mayor and Council no.

The authors are Austin attorneys and civic activists with a combined over-80 years of experience in Texas municipal, environmental, land use, and open government law. Bunch is executive director of Save Our Springs Alliance; Aleshire is a former Travis County judge now in private practice; Lewis leads Community Not Commodity. Bunch and Lewis are part of the recently incorporated Taxpayers Against Giveaways. The column represents our own personal opinions, and not those of any group.

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Statesman property, South Central Waterfront District, SCWF Vision Plan, Taxpayers Against Giveaways

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