The Small-Business Amendment

Why I'm going to vote for Prop. 2 (even though we endorsed against it)

Name 10 of your favorite local businesses in Austin – the places that make this town what it is – and odds are, half of them are active supporters of the Stop Domain Subsidies charter amendment that's on the Nov. 4 ballot.

Coming out of the box, Prop. 2 picked up the fervent support of every political and labor group in town (who know a bandwagon when they see one) and an unprecedented array of local and independent businesses, who see the city government as somewhere between uncaring and actively hostile: giving lip service to keeping Austin weird and independent business investment zones, then actively pursuing policies that favor developers, lobbyists, and out-of-town chain stores. But Prop. 2 also picked up some vehement opponents along the way – notably the City Council and staff, the developer lobby, and this paper, to many people's dismay.

Now, don't get me wrong – I'm perfectly okay with our "no" endorsement, because purely on its own merits, the proposed amendment has some serious flaws; as written, it is distressingly like a rough draft of language we might want to have in our City Charter. Ideally, it should be tweaked until it's right and then enacted. Because it's a charter amendment, however, coming from the initiative-and-referendum process, we don't have that luxury. We vote on what's before us, and the Chronicle doesn't endorse putting bad law into our City Charter. (For more on our intra-office debate, see "The Making of an Endorsement.")

But as a voter, in the final analysis, I'll cast my ballot for whichever course of action will produce the best outcome. Using that test – which Austin would I rather wake up to on Nov. 5, the one that just passed Prop. 2 or the one that just rejected it? – it's no contest.


The Effects

The most direct effect of the proposition, of course, is on the Domain itself. If Prop. 2 wins, Simon Property Group is cut loose from the development agreement: no more payments from the city, but also no more obligations regarding affordable housing, transit, open space, and the like. Nego­ti­a­tions could continue, but without cash incentives, and with both the city and Simon having just been voted enemies of the people, it's hard to see any constructive relationship emerging. If Prop. 2 loses, ironically, more options open up. Since it's now clear that the city's payments to Simon are in fact voluntary, council could demand more benefits on the citizens' side of the ledger – the previously promised bike lanes and sidewalks, for example – before next year's check gets cut. But again, with a "vote of confidence" in hand, will council be inspired to that initiative? Or will it consider it "game over" and accept future payments as automatically due?

To his credit, Council Member Lee Leffing­well did seem open to the idea of holding Simon's feet to the fire over future payments. And if Prop. 2 fails, that's an issue we'll be looking at on an ongoing basis. But as usual, of course, I wonder why such sensible and obvious courses of action occur to council members only under the threat of electoral fiat and not when it could actually matter (such as when they were asked to pressure Simon into putting in more internal connectivity – bike lanes, sidewalks – and declined or when they were asked to put some strings on the upcoming first payout to Simon and declined). "Yeah, we've never done it in the past, but we might do it next time" doesn't inspire much confidence. So, since everybody seems to agree now that this development agreement is a bad deal for the city – that we're just not getting enough civic value for the tax dollars we're paying – if council's not going to demand value, the citizenry should pull the plug.

Then there are the much-discussed unintended consequences Prop. 2 might have if it passes. Everybody's best guess on Mueller is that the development agreement there can be fixed relatively quickly and cheaply, with no effects on the development. Of course, those negotiations have yet to be undertaken, so no one knows for sure, but with all parties in agreement on the means and goals, it's hard to see how things could go too badly.

More problematic are the effects on smaller projects in the future. Clearly, Prop. 2 may "remove from the toolbox" a range of incentives that our city planners have planned to use to get civic value out of future developments – most notably affordable-housing credits in mixed-use buildings – and it's here that I wish this proposal were coming down the pike in a less confrontational format, but it's a restriction we can live with.


Confidence, Trust

This is a significant vote of confidence or no-confidence for our city government. And City Coun­­cil could have headed it off. But even at this late date, council members don't seem to grasp the basic economic argument against retail incentives: that "new" retail a) usually isn't new and b) produces very little actual economic development – and may actually produce a financial negative when the net result is replacing locally owned businesses with national chains. When Old Navy closes its Hancock Center store and opens across the freeway at Mueller, that creates no new revenue. When someone buys a dress at a (city-subsidized?) national chain store instead of at By George, that actually represents a rather large net loss for the city economy; studies consistently show a hefty economic multiplier effect on money spent at locally owned, independent businesses. When Waterloo Records and BookPeople and Bicycle Sport Shop and 500 more businesses I admire all think an existing city policy negatively affects their businesses, I tend to support that; my inclination is to believe they know their businesses. City Hall doesn't seem to get that; they resent the political opposition and don't get that this needs to be their constituency.

What really worries me isn't whether or not this amendment passes – frankly, its effects have been greatly magnified by the venomous tone of the debate on both sides – it's the erosion of trust between the city and its citizens. This whole campaign is about trust, and whichever way the vote goes, if positions keep hardening, rhetoric keeps escalating, and both sides come out of it thinking the other side was being deceptive, we all lose, no matter who "wins."

At this point, I see an unhappy outcome in any case. If Prop. 2 passes, city staff and council have two options. They can accept the vote, take it as a mandate to reconsider the lobbyist-fueled orthodoxy that has reigned down there for decades, patch up the Domain relationship as much as possible, iron out the Mueller wrinkles expeditiously, and move forward. Or, as seems more likely at the moment, they can stonewall: invite a lawsuit at the Domain, make Mueller as complicated as possible, complain about the lost opportunities at every turn, and generally try to prove what a bad choice the voters made. If it passes, Prop. 2 compliance could be very simple (the statesmanlike way) or very pain­ful (the politician's way). I am not optimistic.

If Prop. 2 doesn't pass, on the other hand, council will no doubt take it as a vote of confidence, figure it dodged a bullet, and go back to business as usual. Either way the vote goes, if we stay in campaign mode on both sides all the way through the election and the aftermath – if council gets its back up and resents losing or takes winning as a vote of confidence – we lose as a city.

Most of all, I'm disappointed that a truly unprecedented business coalition hasn't gotten more respect. Here we have 500 local businesses saying they feel the city has broken trust with them, and the city addresses them as electoral enemies rather than as its greatest economic asset. And as the opposition campaign hardens, it continues to bear out the complaint: If Simon Property Group talks (or Endeavor Real Estate Group or Lincoln Property Co. or ...), City Council listens; if the backbone of Austin's small-business community talks, council hires attorneys to oppose it. However this vote goes, it's time for that to change.

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