The Making of an Endorsement


Recap


10/14/08 8:43 PM

Michael King:

I never had a chance to respond to Amy's argument, but don't want to suggest I was ignoring it. Since we've already endorsed, I won't belabor the issue, but thought I should at least make a few brief responses for your consideration.

See notes interlinear below.

MK

Amy Smith wrote:

> I am very much for Prop. 2 and would urge each and every one of you to join me in endorsing the measure. I am aware though that many of you have already jumped on the train heading in the opposite direction, but here's hoping enough of you will at least agree to running a minority opinion, which I would be happy to write.

>

> Here are just a few thoughts that help form my opinion:

>

> 1. Developers are extremely clever animals. Consider the sequence of events before and after the rushed Domain deal: Endeavor announces plans for the Domain in February 2003; Endeavor takes the aquifer hostage on behalf of Wal-Mart in March 2003; Endeavor clinches an incentives deal for the Domain in May 2003; Endeavor retreats on aquifer plan a few months later. I disagree that taxpayers should have to continue paying for this lemon just so we can say we kept our word. In my view this was a fraudulent deal. Developers don't need incentives to build things. That's what they do.

Certainly developers build things without incentives; but they seldom respond to larger community values in those projects unless it can be made financially worth their (or their stockholders') while. Something would have been built at the Domain, likely an Arboretum imitator/replacement; the Domain isn't a wonderland, but it's more walkable, transit-oriented, and community-centered than a conventional mall complex like the Arboretum. The city should have demanded more in exchange, and subsequently has. As for "fraud" -- if there is real evidence of fraud (or aquifer blackmail) let's report it, and press the city to sue accordingly; exaggerated PR is annoying, but not fraudulent.

>

> 2. Endeavor, with the help of Toby and Sue Edwards, sold this deal as a "destination center," a win-win for small, locally owned businesses, and as an overall "community benefit." Can anyone show me the community benefit, other than the sales taxes ... that were dislocated from somewhere else in the city?

As I noted above, the Domain is far from paradise but it's a great improvement on the standard mall complex, all of that improvement (and future improvement) directly a consequence of city involvement in the planning. There is more to come; if the subsidies (which are too high) are killed or subject to lawsuits, it's very likely the extended development will drop public input and return to a much more car-based, margin-maximizing design. That will be a loss to the city, whether "people like us" ever shop there or not. I would prefer the public get actual equity in these deals, rather than simply a tax-base trade-off, but that would require almost a real revolution in Texas notions of property rights. In the meantime, we have to work for a better city landscape in the best ways available.

>

> 3. I don't buy the city/RECA/Chamber's warnings of unintended consequences and lawsuits. If I may play the "I've-covered-local-politics-for-a-long-time-card," let me just say that I've covered local politics for a long time and these are the arguments they put forth any time a ballot proposition threatens the money crowd. If anything, the city is very good at negotiating, or coming up with loopholes, to avoid unintended consequences.

I've been a reporter for a good long while, also.

I've seen unintended consequences happen, at the state and the city -- sometimes even of nominally progressive policies that are not adapted to new conditions. The Mueller negative effects will certainly be real, as will the effects on the city's entire new urban project. Maybe they'll lawyer or loophole their way out of it -- but this is an argument to pass the amendment and then undermine it later. I don't see how that builds public confidence in city government, which supposedly is one of the intentions of the proposition.

>

> Let me also say that any time certain city officials, the Chamber and RECA are all on one side of an issue, and people like, say, our advertisers, are on another side of the same issue, I instinctively go with the people who help me pay my physical therapy bills (or whatever I happen to be paying for in an election year).

Frankly, I find the argument that we should defer to our advertisers both dismaying and insulting. We make the best decisions we can in our reporting, our writing, and our endorsements. Some of our readers and advertisers will agree with us, some won't. That's as it should be.

>

> 4. Does the city even have an incentives policy in place? I don't know the answer to that. If passage of Prop. 2 forces the city to rework its agreement with Mueller, who knows -- it may just be an opportunity to craft a better agreement that's more in tune with our economic times. For example, how do you address retail subsidies for a development whose national retail tenants are hanging on by their fingernails? And Shoe Pavilion, for one, is in foreclosure.

As we've reported over time, the city does have an incentives policy in place, involving value and performance standards, which are applied to both production facilities and residential developments. These are adapted to particular situations, and have been improved over time -- witness Mueller, much more innovative and ongoing than the Domain. It's not at all clear what the city can offer to Catellus for infrastructure if all economic resources -- as the amendment requires -- are prohibited. If the commercial retail begins to crater -- the Shoe Pavilion closing was a national decision, not a local one -- that will not be solved by amending the agreement. The project has worked to get more small local retailers, but they will likely arrive only when the big stores are anchored and filled with potential customers. On the residential side, Catellus is currently attempting to infill with more density to provide more affordable housing; if the infrastructure subsidy is lost, that's one more undermining of the project's economics. SDS claimed at first that the amendment would have "no effect" on Mueller; now they say it's the city's fault that Mueller is affected. That's simply not true -- they want to ban all retail subsidies (in true mythical libertarian fashion), and the Domain is far from the only project that uses or can use retail subsidies.


10/14/08 10:28 PM

Nick Barbaro:

Well, since you had to, I had to, too.

Michael King wrote:

>

> See notes interlinear below.

>

>

> Amy Smith wrote:

>>

>> 1. Developers are extremely clever animals. Consider the sequence of events before and after the rushed Domain deal: Endeavor announces plans for the Domain in February 2003; Endeavor takes the aquifer hostage on behalf of Wal-Mart in March 2003; Endeavor clinches an incentives deal for the Domain in May 2003; Endeavor retreats on aquifer plan a few months later. I disagree that taxpayers should have to continue paying for this lemon just so we can say we kept our word. In my view this was a fraudulent deal. Developers don't need incentives to build things. That's what they do.

> Certainly developers build things without incentives; but they seldom respond to larger community values in those projects unless it can be made financially worth their (or their stockholders') while. Something would have been built at the Domain, likely an Arboretum imitator/replacement; the Domain isn't a wonderland, but it's more walkable, transit-oriented, and community-centered than a conventional mall complex like the Arboretum. The city should have demanded more in exchange, and subsequently has. As for "fraud" -- if there is real evidence of fraud (or aquifer blackmail) let's report it, and press the city to sue accordingly; exaggerated PR is annoying, but not fraudulent.

But, her point is about the "keep our word" argument. I don't think the deal was legally fraudulent, but neither do I think it was negotiated in particularly good faith. They sold us a bill of goods. But they didn't get the signature on the right dotted line, so we don't legally have to keep paying, and now they're saying we should be honorable and not take advantage of the loophole, when you know damn well, every time the situation is reversed, Endeavor will take advantage of every loophole they can argue for.

>> 2. Endeavor, with the help of Toby and Sue Edwards, sold this deal as a "destination center," a win-win for small, locally owned businesses, and as an overall "community benefit." Can anyone show me the community benefit, other than the sales taxes ... that were dislocated from somewhere else in the city?

> As I noted above, the Domain is far from paradise but it's a great improvement on the standard mall complex, all of that improvement (and future improvement) directly a consequence of city involvement in the planning. There is more to come; if the subsidies (which are too high) are killed or subject to lawsuits, it's very likely the extended development will drop public input and return to a much more car-based, margin-maximizing design. That will be a loss to the city, whether "people like us" ever shop there or not. I would prefer the public get actual equity in these deals, rather than simply a tax-base trade-off, but that would require almost a real revolution in Texas notions of property rights. In the meantime, we have to work for a better city landscape in the best ways available.

I doubt they'd go back on the basic design concept, simply because, if you drag developers kicking and screaming to dense, NU design, they find out it's way more profitable. That's something Endeavor definitely gets.

Look at the Triangle: very different negotiating situation, but very similar concept and financials. Once Tom Terkel was forced to octuple his total square footage, he discovered he liked it. Imagine that. (I don't know if the Triangle got the sort of incentives that would be banned under SDS, but I do know that if they hadn't been available, it wouldn't have changed the basic concept.)

>> 3. I don't buy the city/RECA/Chamber's warnings of unintended consequences and lawsuits. If I may play the "I've-covered-local-politics-for-a-long-time-card," let me just say that I've covered local politics for a long time and these are the arguments they put forth any time a ballot proposition threatens the money crowd. If anything, the city is very good at negotiating, or coming up with loopholes, to avoid unintended consequences.

> I've been a reporter for a good long while, also.

> I've seen unintended consequences happen, at the state and the city -- sometimes even of nominally progressive policies that are not adapted to new conditions. The Mueller negative effects will certainly be real, as will the effects on the city's entire new urban project. Maybe they'll lawyer or loophole their way out of it -- but this is an argument to pass the amendment and then undermine it later. I don't see how that builds public confidence in city government, which supposedly is one of the intentions of the proposition.

The Mueller argument is a crock. If this passes, of course the city and Mueller will lawyer their way out of it. As I understand it, the sales tax component is a minor amount of money, and there are myriad other goodies the city has to work with on that huge a project. When Jim Walker says there are a lot of smart people who can figure this kind of thing out, I don't think he's being glib, I think he's being literal. If we don't have screws, we'll use bolts, and the guy who's putting it together will make it work.

I'm more concerned about smaller, more specific things like Green, and TODs, etc., which is why we tried to pin that down in the endorsement meeting, and everyone pretty much agreed that TODs would be fine; no one brought up Green; that would've been good to hear.

>> Let me also say that any time certain city officials, the Chamber and RECA are all on one side of an issue, and people like, say, our advertisers, are on another side of the same issue, I instinctively go with the people who help me pay my physical therapy bills (or whatever I happen to be paying for in an election year).

> Frankly, I find the argument that we should defer to our advertisers both dismaying and insulting. We make the best decisions we can in our reporting, our writing, and our endorsements. Some of our readers and advertisers will agree with us, some won't. That's as it should be.

It's probably not appropriate for me to address this area much, but I will say this: The reason I don't like retail subsidies – which tend to favor large chain stores over small, locally-owned businesses – is not because those small stores are more likely to advertise with us. If Waterloo and BookPeople and Little City and 500 more businesses I admire, advertisers and not, all think an existing city policy negatively affects their business, I instinctively tend to support that; my inclination is to believe they know their businesses – though perhaps they've all been duped.

>> 4. Does the city even have an incentives policy in place? I don't know the answer to that. If passage of Prop. 2 forces the city to rework its agreement with Mueller, who knows -- it may just be an opportunity to craft a better agreement that's more in tune with our economic times. For example, how do you address retail subsidies for a development whose national retail tenants are hanging on by their fingernails? And Shoe Pavilion, for one, is in foreclosure.

> As we've reported over time, the city does have an incentives policy in place, involving value and performance standards, which are applied to both production facilities and residential developments. These are adapted to particular situations, and have been improved over time -- witness Mueller, much more innovative and ongoing than the Domain. It's not at all clear what the city can offer to Catellus for infrastructure if all economic resources -- as the amendment requires -- are prohibited. If the commercial retail begins to crater -- the Shoe Pavilion closing was a national decision, not a local one -- that will not be solved by amending the agreement. The project has worked to get more small local retailers, but they will likely arrive only when the big stores are anchored and filled with potential customers. On the residential side, Catellus is currently attempting to infill with more density to provide more affordable housing; if the infrastructure subsidy is lost, that's one more undermining of the project's economics. SDS claimed at first that the amendment would have "no effect" on Mueller; now they say it's the city's fault that Mueller is affected. That's simply not true -- they want to ban all retail subsidies (in true mythical libertarian fashion), and the Domain is far from the only project that uses or can use retail subsidies.

I'm not really clear on what either of you are arguing in this last part, but I'll add this: With the waiting list they've got for their housing, Catellus is filling it as fast as they can build it, which is why they want more density. And once the people are all living there, small local businesses will arrive to sell them things. For your small corner store, which is a better source of potential customers: a thousand neighbors down the street, or a Shoe Pavilion across five acres of parking lot? I'm not worried about retail at Mueller. Retail at Mueller is going to be great -- and it'd be better if a few more Shoe Pavilions went out of business.

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