The Austin Chronicle

Austin at Large: It's a Season, Not Just a Day

Showdown at the Batcave, Part II: Isn't this just lining the developers' pockets?

By Mike Clark-Madison, January 7, 2022, News

To recap: As their latest public interest campaign, the law firm of Bill, Bill, and Fred (Bunch, Aleshire, Lewis) have raised alarms about the city's consideration of tax increment financing (TIF) to pay for infrastructure needs in the South Central Waterfront planning area, stretching from South First east to the mouth of Bouldin Creek. It's 118 acres, in 32 separate parcels, the largest of which is the 19-acre former Statesman headquarters at 305 S. Congress, aka the Batcave. (Two other SCW owners control comparable acreage in multiple parcels; the rest is fragmented among many owners, including the city itself at One Texas Center.)

The Batcave, retained by the Cox family when it sold the daily nearly four years ago, is being redeveloped by Endeavor Real Estate Group, which is represented by Richard Suttle of Armbrust and Brown, perhaps this town's most successful development lawyer. Both have a checkered past when it comes to the growth wars of the last 30 years, particularly from BB&F's perspective and that of their allies.

Our three wise men have laid out their objections using their own platforms, and in a 2,000-word letter to Council, which late last month/year voted to set up the shell of the TIF district (a tax increment reinvestment zone or TIRZ, i.e., the map) but not to finalize it, pending what will probably be a month or two of deliberations on and off the dais, which is why BB&F are moving quickly now. To get to the nut of their argument: Setting up a TIF means taking tax revenue that would go into the General Fund and instead earmarking it to pay for infrastructure – streets, open space and landscape, utilities and drainage – that the property owners, and especially the deep-pocketed Batcave team, should normally have to pay for themselves.

Public Bux, Private Benefit?

To BB&F, the SCW infrastructure program developed as part of the city's decadelong planning effort (total price tag: $277 million) would mostly just be a giveaway to those owners for their private benefit, and also wholly unnecessary to prime the development pump in the area, as the state statutes controlling TIFs indicate it should or must be. A case in point: The new office building arising on South First on the ashes of the old Hooters owned by Charles Schulz, hence its nickname of "Snoopy PUD" (or "planned unit development," i.e., mixed-use infill that bends the city's normal land use rules). That got built without any of these investments; how essential can they be?

Last week I filled you in on the history of this weird, unplanned and unplatted chunk of Austin's urban core, just to lay out why it would possibly take $277 million to bring it up to the infrastructure standards of Down­town, or even of the flanking Southside neighborhoods, all of which got a chance to participate in planning the SCW. But let us note that neither the SCW planners nor the city financial staff and consultants working on the TIF assumed that all $277 million would be invested at once, or at first, or ever.

Staff's framework for the TIF identifies about $95 million (including a 12% contingency) of Tier I investments; the rest wouldn't be funded by the city unless they proved to be needed, and only from the TIF proceeds should new SCW development generate enough property tax revenue for the city to continue the set-aside. As the city finance team is acutely aware of how dear the General Fund's property tax dollars will be going forward, it wants to set that set-aside at 46% of the incremental increase in tax revenue over the Dec. 31, 2021, baseline, rather than 100% as is the norm in the city's 18 other TIRZ/TIF districts. Is it still too much money? Maybe so, but it's not a $277 million giveaway yet.

Because the staff has also read state law governing TIFs, it sought at first to exclude the Snoopy PUD from the TIRZ map, but Council pushed back. Bill, Bill, and Fred think that none of these properties really need our help, but there are some obvious places where Council disagrees as a matter of policy. There is the omnipresent mandate for affordable housing (which could be subsidized by this TIF and/or built at One Texas Center), and also for safe multimodal mobility. Every property owner in the city is responsible for creating their piece of the pedestrian network and pays an ongoing fee to maintain and manage the streets and bikeways, on top of their taxes. But we passed a $250 million active transportation bond in 2020 (alongside Project Connect) precisely because people seek to avoid this burden and we don't want the mobility network to be piecemeal and janky. We've seen since 1960 what SCW owners have viewed as a suitable contribution to the public realm; they came up about $277 million short.

Trust, But Verify, Every Day

It is absolutely true, as BB&F have no trouble believing, that TIF schemes throughout Texas have been deformed into total giveaways to real estate interests building Cabela's and outlet malls and such on greenfields in the suburbs. It's also true that if we were planning to pile up TIF treasure in a lockbox to which only Richard Suttle has the key, you should be extremely skeptical! He might even agree with that himself. It doesn't appear we are planning that, but vigilance is not a bad thing.

But vigilance, and diligence, is also required for us to continually shape the city where we live to create the greatest good for the greatest number. It's a project that will last for a season and not just the one day Council takes its final vote on this. Fifty years after being removed from the river's floodplain, the 118 acres of South Central Water­front still have yet to evolve into an urban form congruent with the areas around it. It's that placemaking, as much as the tax revenue or the profit motive, that requires Coun­cil to consider priming the pump here.

Are we done yet? Not quite. We’ll wrap up next week by asking: Is there a potential return on this investment? What is it?

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