Latest arguments over historic zoning sound like déjà vu
How do you tell when a building is "historic"?
According to the city of Austin, historic properties, aside from meeting a few basic criteria including age and structural soundness, must be significant in at least two of the following areas:
• architecture, such as embodying a certain school or aesthetic;
• historical associations with the surrounding community;
• archaeology, including Austin history (or even prehistory);
• community value, such that would make the structure a cherished feature of the neighborhood; or
• landscape features with "artistic, aesthetic, cultural, or historical value."
It's a tough but often subjective set of standards, ultimately reliant on individual judgment calls. Under a program dating back three and a half decades, a fluctuating number of properties – from dozens to practically none – have passed muster each year, for a current total of about 270 historic residential properties. What caught the public's attention – and some controversy – about the process of historic landmark zoning in Austin was a sudden deluge, late last year in a single City Council meeting, of 25 properties throughout the Pemberton Heights and Old Enfield neighborhoods, all clamoring for historic landmark status – and the tax benefits that come with it.
Suddenly the normally sleepy subject of historic zoning is fraught with issues of equity and fairness, as the question arises whether the city is slashing the taxes of the citizens who need the least assistance – and if that's so, whether anything will be done to make the program more equitable.
How a House Becomes Historic
"Anybody who files a historic zoning case, they file it through us," says Steve Sadowsky, chief of the city's Historic Preservation Office. "We make sure it's good to go," he continues – a process that often includes an initial judgment call by Sadowsky on whether landmark status is realistically worth pursuing – and once the historic zoning application, usually filled with photos, deeds, and histories, is complete, the application is submitted to the Historic Landmark Commission, a group of City Council-appointed volunteers facilitated by Sadowsky. If the commission deems an applicant's house worthy of historic zoning, the application then travels to the Planning Commission, which issues a nonbinding recommendation whether or not to approve; from there the application proceeds to council for final approval.
Tax abatements are allotted to historic properties – but not all historic properties receive tax abatements. "You have to file an application every year," says Sadowsky. "You don't get it automatically." The property may be inspected to ensure it's being maintained properly; if everything is in order, the good word and the abatement application go to the Historic Landmark Commission for approval. (This decision doesn't go to council; the commission has the final say.)
Beyond city property taxes, the potential tax breaks encompass the four main local taxing entities: the city of Austin, Travis County, Austin Community College, and Austin Independent School District. The first three provide a 100% exemption on the historic structure itself and 50% on the land; AISD halves that, exempting 50% of the actual house and 25% of the land's value. (Both the city and AISD have capped the refund amounts, both to the higher of $2,000 or half the respective property taxes before any exemptions.)
Consider the case of a Pemberton Heights house with an appraised value just less than $1.1 million, one of the applications approved by council at the end of last year. Before any exemption, city estimates had taxes owed on the property totaling $28,660, with $17,744 owed to AISD, $5,408 to Travis County, $4,628 to the city, and $880 to ACC. But that ignores an existing homestead cap, allowed by the Legislature in the 1990s, which limits increases on taxable value to 10% a year. Estimating the total tax exemptions using 2009 rates, the tax owed plummets dramatically: $7,342 to AISD, only $96 to the county, $2,256 to the city, and $206 to ACC, more than halving the total tax bill, at $9,915.
For an issue so focused on history, it's ironic that the current controversy has failed to recall a similar debate over the program from the recent past. Though the 25 cases (and the approximately $400,000 in combined tax breaks) appeared as a sudden shock at the end of 2009, tax breaks for historic landmarks roiled Austin politics throughout the first half of the last decade – driven, at that time, by arguments over gentrification.
Going back even further, the city's historic landmark zoning program began in the mid-1970s, with tax abatements for historic properties offered soon after, to help offset the maintenance and historically accurate improvement of the homes. Many of the early buildings designated were in and around Downtown. (This discussion is primarily confined to residential property; historic properties that house businesses, like many of the buildings on Sixth Street, also qualify for tax abatements, but at half the percentages of homes.)
By the early 2000s, the program had become successful with homeowners – so much so that the activist group People Organized in Defense of Earth and Her Resources (PODER), angry at seeing a new wave of people move to the Eastside, refurbish homes, and receive historic zoning designations and tax breaks, claimed the program was in fact promoting inequitable gentrification east of I-35. Sustained pressure from the group and others led to the 2002 creation of a task force dedicated to reviewing the influence of historic zoning on promoting gentrification. The group ultimately decided that historic zoning had in fact had little effect.
"Gentrification occurs because of location," says Sadowsky, who was at the Historic Preservation Office at the time of the review. "And when you have an attractive area that's close to Downtown with nice houses and big trees, like East Austin, then people are going to be attracted to that neighborhood. They're gonna fix those houses to live in whether they're historically zoned or not." In fact, some preservationists argue that landmark designation keeps prices more stable, by preventing owners from demolishing smaller houses for larger or multifamily housing.
Nevertheless, at that time, with Austin's post-9/11 downturn fully realized in the city's gaping budget, council members began looking more closely at the cost of historic zoning tax abatements. In late 2003, council created the Historic Preservation Task Force, which returned with its recommendations in the spring of 2004. Several proposals proved uncontroversial: the upgrading of original requirements to be considered "historic" by meeting only one of 13 standards and the establishment of a minimum age requirement on a landmark – 50 years – where none had been before. Additionally, the creation of local historic districts, long a goal of local preservationists, was also part of the task force's purview, and it suggested guidelines for historic district formation.
Not all the task force's suggestions were equally popular with preservationists and neighborhood advocates. For instance, Sadowsky and staff were tasked with coming up with new abatement schemes, one of which cut the current abatements in half. "The task force held public meetings," he recalls, "and there was a lot of resistance to that dramatic of a change. I understand it 100 percent, because a lot of people have relied on what their tax bill's gonna be in order to plan [and] finance renovations to the house."
After the initial presentation of findings in March 2004, council reviewed the issue over several more meetings before ultimately reconvening the task force in August to re-evaluate the previous recommendations – including those on tax abatements. When the task force returned in November with its revised recommendations, its previous proposal – abatements should be offered only to homes at least 75 years old – had changed, to allowing all designated historic landmarks to qualify for the exemption. The final 2004 revisions, ultimately approved by council, also created the cap on rebates currently in place today.
How Much, for Whom?
The main criticism of tax abatements for historic properties is, of course, the cost to the city's General Fund, and thus to other taxpayers. All the properties granted historic landmark designation in 2009 are estimated to receive, just in city abatements, more than $115,300. Combined, all historic tax abatements, residential and commercial, comprise about a $1 million cost to the city and $3 million to the other jurisdictions; the revenue loss to AISD alone is roughly $1.6 million.
There's an additional cost component, and that is the direct demand historic zoning case review places on city staff. The city employs only one historic officer, Sadowsky, to travel to homes and ascertain if properties are in compliance and to do due diligence on the applications – "an enormous amount of work," as Council Member Bill Spelman pointed out when he pulled the 25 zoning cases for closer consideration last December. That's especially true if the number of approved historic zoning applications spike as they did in 2009. Last year saw 45 historic homes approved, more than the 18 the year before, and 12 in 2007. So the number of historic residential properties approved is almost three times higher than it was just three years ago.
There are also questions of neighborhood equity, additionally clouded by the revelation from the Pemberton/Enfield cases that several historic zoning applications aren't directly from the homeowners themselves but from third parties hired by the homeowners to do the research and undertake the application process on their behalf. As it's common for these hired agents to base their commissions on the applying homes' property tax bills, it potentially incentivizes the agents to take more cases in more expensive neighborhoods – where the bill, abatement, and commission would be higher – than equally across the city or on the Eastside. (However, as the circa-2000 skirmish between PODER and the city illustrated, whether all neighborhoods are equally receptive to historic zoning remains an open question.)
Sadowsky says use of third-party researchers is relatively common. "We've always had a number of agents in town who do this," he says, "because the nomination is not easy. It requires a lot of research; it requires photographs, deeds, things like that. It's not that it's difficult to do, but it's time-consuming, and a lot of people simply don't have the free time to do it when certain places [like the Austin History Center] are open." (Call it an unanticipated side effect of perennial budget cuts to library hours.)
Back in November, Council Member Randi Shade publicly wondered if payment contingent upon acceptance in a city program was, in fact, a legal practice under city ordinances. Additionally, the issue of whether for-profit research in that process technically qualified as lobbying was also raised. As the city legal department ultimately OK'd third-party applications, controversy over the practice has largely faded.
Most vexing is the widespread feeling, justified or not – exacerbated by the lean city budgets of recent years – that the program is giving a tax break to the people who need it least. Local real estate developer Richard Hardin has restored several local historic properties, beginning with the mission-style White-Springfield House at 22nd Street and Rio Grande. He's annoyed by what he sees as increasingly less than rigorous standards for becoming zoned historic and also by the tax breaks for wealthy homeowners (of whom, admittedly, he is one): "Why did 33 homes over a million dollars in Pemberton and 15 homes over almost a million-five on Old Enfield just all the sudden up and decide to become zoned historic?" he asks, pointing out the tax benefits – and the necessity to be designated historic by the end of the year. "If this was a child drowning in the sea, I'd understand," he continues. "These are millionaires. What's the rush?"
That District Has a History
That rush of applications is increasingly the subject of conspiratorial whispers among local politicos, who think the late-year push of cases in Pemberton Heights and Old Enfield is in fact part of an effort to eventually designate those neighborhoods as "local historic districts" – a modernization of preservationist criteria allowed for in the 2004 task force revisions but thus far sparsely implemented.
Nationwide, there are some 2,300-plus local historic districts – geographically bound areas designed to protect neighborhood character. Tax abatements are offered to rehabilitate "contributing" buildings – i.e., historic ones – or rehab noncontributing homes if that brings them up to contributing status. However, such districts have also been the targets of protest from developers and property-rights advocates, as historic districts can impose restrictions on property owners to keep their homes historically accurate, thus limiting the potential for redevelopment or even remodeling.
In August of last year, the issue boiled over, when debate arose over how much city land should count toward kick-starting such a district. Under new rules, owners of 51% of the landmass of a given district (down from 60%) had to agree to initiating a historic district request, which would still have to wind its way through the city process; additionally, it was decided, city land could count for up to one-third (17%) of the required 51% landmass. But disagreement broke out on the dais over whether all city property should count or only historic city properties. The fear was that with city land counting toward district petition, a minority of landowners could start the neighborhood down the path to restrictive, subdivisionlike covenants and requirements for things like paint color, historic appearance, and the like.
That fear still persists today among detractors like Hardin. "The real reason these things were rushed through is because there's a desire to put a local historic district in Pemberton and Old Enfield," he says. "It's tough to have one of those if you don't have a bunch of historic buildings."
Back to the Future
Zoning manager Jerry Rusthoven informed council late last year that the city would be looking into possible brakes on the program: a cap on the number of cases before the Historic Landmark Commission in a given period, a yearly financial cap on tax abatements, and/or a cap on cases from individual neighborhoods. "We don't think these three ideas are mutually exclusive of each other," he said, and promised to bring the recommendations back in the new year.
Council Member Laura Morrison, former president of the Austin Neighborhoods Council, has been seen as the member most sympathetic to neighborhood association concerns, including the push for local historic districts. She has repeatedly advocated caution in revisiting historic zoning issues. "I would really want to look very carefully about what the rationale is for any kind of proposal like that, because there are a lot of benefits to maintaining our historic stock," she says. For instance, she points to Austin's recent designation as a Preserve America Community and a pending application for the program's federal grants to develop a historic survey tool. "Obviously we want to make sure that it's fairly offered around the city, and if we have some neighborhoods where historic zoning's less likely to spontaneously happen, that's certainly a case where I want to make sure the city is able to be proactive in trying to engage folks in historic preservation." Still, she says, changes largely shouldn't "contradict the findings of the  task force" that set the program's current parameters.
And indeed, such a realignment – as we saw in 2004 and continue to see with any substantial proposal or revision of local policy – argues for another lengthy period of public input, a task for which the city heretofore hasn't demonstrated the will. Back in the Historic Preservation Office, Sadowsky argues that it was the all-at-once cluster of last December's cases, not the total amount, that was problematic. "If they'd been strung out over the year, I don't think anyone would've picked up on this. It wouldn't have raised such a red flag.
"To me, a landmark has to be something extraordinary," he surmises. "It needs to have not only the architectural look to it and the architectural significance, but it needs to be something that tells the history of the city, too." And judging from the unsettled nature of the historic landmark debate, it looks like that history is still being written.
See a map plotting individual historic residences.