Giving incentives a bad name

Currently the most controversial aspect of the plans for the Domain is not the wholesale redesigning of a large section of North Austin but the original subsidy deal that the City Council and the developers struck to pay for it. In 2003, the council entered into an economic incentive agreement with then-developers Endeavor, under Chap­ter 380 of the Texas Local Government Code. The agreement means that, based on property- and sales-tax receipts from Domain I tenants, the developers would receive subsidy payments for initiating the project. The incentives were capped at $25 million at 2003 values: Inflation index-linking means this could lead to an eventual payout, over the agreement's 20-year term, of $37 million.

However, opponents of the deal, now organized as Stop Domain Subsidies, argue that the real cost to city coffers could be as high as $65 million. The group contends that, due to a court case brought by SDS founder Brian Rodgers in 2003 and a subsequent renegotiation, the city is neither ethically nor legally bound to fulfill the agreement, and they've been pressuring the council to terminate it. According to SDS consultant (and former county commissioner candidate) Jeff Heckler, the group's campaign has been met with broad support for its opposition to what it describes as a subsidy for high-end retailers. "We seem to have tapped into some anxiety within the small-business community," said Heckler. "It was there before, and we're not responsible for it."

Thus far, SDS has concentrated on getting local business people to sign a petition asking the council to terminate the deal. At press time 371 firms have signed on, and the group has also received support from the local AFL-CIO. Heckler said that the group is not opposed to the Domain development or to 380 deals in general, just to this particular agreement. The city has five other 380 agreements in place, but the difference between those and the Domain deal is that they are what are called firm-based incentives, undertaken with a single employer. The Domain deal is the only project-based incentive agreement, where the developer and not the employer is the recipient and the only one with a retail component. Not only is SDS trying to end the current deal, but it is advocating a charter amendment to prevent such a deal being repeated in the future. They are currently refining the language for an amendment that would severely restrict the city's ability to use tax money to create incentive packages that would give any retail development an unfair commercial advantage over smaller retailers. "We hope the city will fix this with an ordinance, but we're not slowing down waiting for them," Heckler said.

SDS plans to get the amendment onto the ballot for the uniform election on May 10 next year, by collecting 18,000 petition signatures (5% of registered voters). Heckler believes that the support from the business community will quickly translate into those signatures. "This may be the easiest petition drive we've ever run," he said. "Our small-business partners are eager to help us, and we've had no local resistance at all."

While the Greater Austin Chamber of Com­merce took no position on the original agreement, it has since worked with the city to develop a formal policy on redevelopment incentive packages. Senior Vice President for Economic Development Dave Porter says the chamber has always supported firm-based incentives. However, he did strike a note of warning about ending the current agreement prematurely. "If the efforts lead to the city reneging on the agreement," he said, "this could send a message to corporations around the country that Austin can't be trusted."

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