Point Austin: Domain City Limits

Charter amendment would end a deal gone sour

Point Austin
It seemed like a good idea at the time.

That's about the best that is said right now about the Domain deal, the 2003 agreement by the City Council to provide property- and sales-tax subsidies to the Endeavor Real Estate Group mall and mixed-use project at MoPac and Braker Lane, aka "Downtown North." Still in the throes of the post-9/11 recession – the proposed 2003-04 budget showed a $77 million deficit, not this year's paltry $20 million – and openly panicky at hemorrhaging retail sales to the suburbs, the city bowed to Endeavor's rushed marketing timetable and insistence that it couldn't go forward without "public participation" and cobbled together a 20-year incentive package that runs somewhere between $37 million and $65 million (one of many matters still under dispute). On the dais, only Daryl Slusher objected to the haste and uncertainty of the decision (and provided the only vote against it). More representative of the prevailing sentiment was Raul Alvarez, who told the Statesman: "I am very excited about this project. I think it would be a wonderful addition to the city."

Five years and a recovery and recession later, nobody wants to claim the baby, and the almost-current council (only Mayor Wynn remains from the 2003 dais, to which Laura Morrison and Randi Shade ascended in June) voted last December to refrain from future retail subsidies – while endorsing existing agreements, i.e., the Domain. But the city has not yet paid any of the performance-based rebates associated with the deal (the first is scheduled for October), and under a proposed charter amendment that the council will likely approve for the November ballot today (Thursday), it may never do so.

Two charter amendments are under consideration, the first a revision to the status of the city auditor (to be removed henceforth only by a council supermajority). The second proposition, sponsored by the Stop Domain Subsidies citizen petition, would effectively end direct retail subsidies altogether, including the "pending agreement" to pay financial incentives for the Domain beginning this fall. (It would also end the Domain's obligations on matters like jobs, open space, and affordable housing, but the critics describe those as mostly hot air.)

When Is a Deal ... a Deal?

According to Brian Rodgers, the peripatetic Stop Domain Subsidies ramrod (who sued a couple of times to block the subsidies), his group is content with the city's draft of both the actual charter revision as well as the much less specific ballot language that would enact it. The ballot language simply says that a yes vote will "limit the City Council's ability" to enter into incentive agreements covering retail projects, while the consequent (and lengthy) charter language attempts to end Domain-type subsidies while simultaneously exempting agreements to pay for infrastructure with similar rebate mechanisms designed to promote development of new, mixed-use neighborhoods (most specifically, the broadly popular Mueller neighborhood project, although the amendment doesn't say so).

Whatever the merits of ending subsidies for retail, the tenuous relation between the ballot language and the actual charter amendment is yet another argument against government-by-petition. But that debate is largely concluded – or will be today. Those opposing the amendment (beyond the developers themselves, understandably glum at the prospect of disappearing baksheesh) will enter the fall campaign defending the Domain subsidy on simpler grounds: The City Council agreed to it, and as a city, we should keep our word.

Rodgers and Stop Domain Subsidies don't buy it. He says "a deal's a deal" only if both parties are fully aware of the terms and one isn't holding a thumb on the scales. Rodgers has identified "7 Misrepresentations" he says Endeavor indulged in selling the deal to the city and Travis County. These range from misrepresenting the financial values of the project, the proposed open space, the number and quality of the jobs to be created, even whether the Domain would proceed without public investment. "The Domain ... is a Trojan Horse of enormous tax subsidies [that] may easily reach $65 million," claims the group. Because of these misrepresentations, the opponents charge, "The City of Austin is not legally or ethically bound to these subsidies" (www.stopdomainsubsidies.com).

A Shell Game

In other words, it's one thing to say we agreed to a bad deal and we shouldn't do that again – it's another to call your partner a liar and say therefore you don't have to pay up. Those appear to be the terms the campaign will be fought on over the next couple of months, and judging only from the petition campaign, it would seem SDS and its allies currently hold the rhetorical high ground, although Endeavor Real Estate Group has not yet begun to fight. Stop Domain Subsidies received a boost recently from a Liveable City report ("Building a More Sustainable Economy: Economic Devel­opment Strategy and Public Incentives in Austin") that describes Austin's incentives policy as relatively "sophisticated and disciplined" but needing more transparency and public input. Most specifically, the report singles out the Domain deal as "a generally bad deal by most meaningful criteria."

Michael Oden, the report's author and a UT professor of community and regional planning, said that the Domain incentives simply can't be justified in financial or planning terms and that the deal shares the common pitfall of subsidizing retail: Rather than generating new economic development, it simply moved existing retail sales from one site to another. Supporters argue that by bringing new shoppers to a "destination retail site," the Domain attracts dollars (and tax receipts) that would otherwise escape city limits.

"That site was already primed for that level of high-end retail development," Oden said, "and the incentives may have changed its ultimate character somewhat but not sufficiently to justify that level of city investment." Oden declined to weigh in on whether it's a good idea for the city to unilaterally restrict its future options on still-unknown projects but concluded, "Direct incentives for retail is generally bad policy."

In retrospect, maybe it wasn't such a great idea after all. It's certain that we haven't heard the last of the argument.

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The Domain, Endeavor Real Estate Group, Stop Domain Subsidies, Brian Rodgers, Daryl Slusher, Mueller Neighborhood Project

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