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Developing Stories

If You Believe in Villa Muse, Clap Your Hands

By Katherine Gregor, March 14, 2008, News

Last week, the Austin City Council delivered an unwelcome rejection to Villa Muse – the grandiose entertainment-industry complex (with its own New Urbanist small town) proposed for a 2,000-acre site in eastern Travis County. In a 4-3 vote, council turned down the developer's request for some very special treatment: a "temporary" release from the city's extraterritorial jurisdiction and from its development and environmental oversight.

Was that decision wise or expensively short-sighted? Is Villa Muse economic manna from heaven or too good to be true?

Council directed staff to come back within five weeks with a counterproposal, one that would accommodate the project but keep it within the city's extraterritorial jurisdiction. But Paul Alvarado-Dykstra, a local film producer serving as the project's vice president for strategic development, said competitive time pressures make the project simply untenable if it's subject to Austin's extraterritorial jurisdiction. The homegrown development team – Austinites who say they prefer to keep their project in Austin – announced Friday that Villa Muse now will begin negotiating with other Texas cities.

"We'd be very disappointed to have to take this outside the greater Austin area," said Alvarado-Dykstra. "But we're committed to moving forward in Texas, and our goal remains to break ground this year. Right now, the odds do not favor Austin."

He believes Austin would kick itself for losing Villa Muse. The development team proposes to privately finance and build an infrastructure worth $2.5 billion – without direct public subsidies – that eventually would be annexed by the city of Austin. That represents a potentially juicy addition to the tax base, indeed. A developer-commissioned economic development study projects that Villa Muse could generate up to $20 billion annually in Central Texas spending while adding up to 110,000 desirable jobs. The proposed studio and full-spectrum production center (for the movie, music, gaming, interactive, animation, and advertising industries) represents precisely the kind of "creative class" growth that the city, the Greater Austin Chamber of Commerce, and many locals fervently desire.

Villa Muse is thinking big, big, big. Conceptu­al sketches show 1,100 of the 2,000 acres being sustainably developed (in phases, potentially over decades) with 1,850,000 square feet of top-notch facilities, 9,300 residences, a mixed-use "main street district," even schools, a hospital, and helipads. But in small print at is this key disclaimer: "All details approximate and subject to change."

In part, doubts about the grandiose scale of the unproven project discouraged some council members from bending over backward to accommodate its demands for a hasty decision. "There are times when we, as council members, feel like we are being threatened with deadlines and proposals," noted Mike Martinez, who nonetheless spoke in favor of the project and voted against the resolution to keep it in the extraterritorial jurisdiction. Council members have grown weary of developers who claim a state of emergency as a tactic to pressure council for hasty variances.

"No one could assure me that we could ever get that land back into our ETJ, let alone inside our future city limits," said Mayor Will Wynn. "The lack of environmental regulation, and then potentially compromising our utilization of Austin Energy's tract to its east, forced my 'no' vote."

Alvarado-Dykstra countered with frustration that council and staff had known of the ETJ-release request since last October. On Jan. 31, council promised Villa Muse an answer by March 6. But last week, the still-undefined nature of the complex private project – for which no business plan or financial pro forma has been provided to the city – and the many unknowns represented by an ETJ-release killed the resolution to move forward. In the end, only Sheryl Cole and Brewster McCracken joined Martinez in voting to approve Villa Muse's terms.

Among other cities to which Villa Muse has talked is Bastrop. "We certainly would welcome them!" said Joe Newman, president and CEO of the Bastrop Economic Development Corporation. The town is aggressively pursuing movies growth – and it's far less picky than Austin about the fine points. Asked how far discussions have gone, Newman laughed, "I wish I could talk to you about that!" Villa Muse is not officially disclosing the other cities it's pursuing. But Alvarado-Dykstra conceded that both Bastrop and Fort Worth are "very interesting." Said Newman, "We're looking forward to talking to them some more."

The scale of Villa Muse – and its projected $300 million debt to private investors – would put it under tremendous financial pressure to attract a huge volume of business right away. Some observers question whether the required level of entertainment business would move to Austin, forsaking established industry centers like Los Angeles and New York. Gaining state-of-the-art facilities would certainly help, but Texas remains hampered by its lack of competitive incentives at the state level. (We've reportedly lost some 20% of our movie business to Louisiana and New Mexico, which compensate productions for 25% of their local spending; Alvarado-Dykstra believes a sufficiently competitive 15% incentive will pass the next Lege.) If Villa Muse got partially built, then failed, council could live to regret its loss of development and environmental controls – and setting a bad precedent for ETJ-release demands from other developers along State Highway 130. As state Rep. Mike Krusee put it, we could feel like River City being taken in by the Music Man.

But Alvarado-Dykstra is exasperated by such doubts: "If this doesn't happen, what does Austin lose? Nothing. Right now, the land's a cow pasture that's generating no jobs or revenues." He added, "There's a lot of money coming into Austin right now. A lot! Why not consider the possibility that extraordinary things could happen here?"

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