For more than a year, Stop Domain Subsidies has focused on one campaign issue: that local businesses suffer when the city pays developers tax dollars to build more stores, such as the high-end shops in the Domain retail center in North Austin. But with the SDS charter amendment – which would ban financial incentives for retail development – on the November ballot, opponents of Proposition 2 are starting to speak out about their own concerns. Should the amendment pass, they claim, it would force the city to renege on a deal, endanger the city’s bond rating, and possibly increase taxes. Plus, they argue, it’s not just the Domain agreement at stake but another high-profile development: Mueller, the redevelopment site of the city’s old airport.
Amidst the waving of $46 underwear purchased from one of the Domain’s swankier tenants, opponents of the amendment have only a short window of time to rebut the campaign arguments defined by SDS and its founder, Brian Rodgers. (See “SDS Campaign Launches Online Videos,” Sept. 5.) First up would be the list of “7 Developer Misrepresent-ations” that Rodgers has built his movement upon in his quest to terminate the city’s 2003 financial incentive package with the Domain. The list goes back to the 2003 negotiations between the city and the original developer, Endeavor Real Estate Group, and places the blame on Endeavor principal Kirk Rudy. “For over a year, Brian Rodgers has been talking to community organizations, business organizations, people at City Hall, and what he’s been saying is that we lied,” Rudy said. He emphasizes that Endeavor does not benefit directly from the incentives. (While it is building its own section of the 304-acre Domain, the agreement only covers Domain I, the original 55-acre site that was developed first and is now owned by Simon Property Group Inc.) He’s quick to point out what he views as Rodgers’ own misrepresentations: None of Rodgers’ allegations is actually about the deal as it stands, Rudy said. Simon, he argues, has met and exceeded all the actual criteria of the agreement, so SDS has to go after Endeavor. “The only thing they can rely on is trying to convince people that we misled people like Betty Dunkerley,” he said of the former mayor pro tem.
Rudy also claimed Rodgers has misrepresented his biggest legal victory to date. In 2004, Rodgers’ sued the city and got the Domain deal amended, but Rudy maintains the change in the contract was a correction, not a battle. The original deal obligated future councils to make the payments, which a court found unconstitutional. The rewritten deal reinstated a get-out clause for the city, though the Austin Chamber of Commerce argues against using it. The chamber officially jumped into the campaign fray on Tuesday, when its board of directors voted unanimously to oppose the amendment. Chamber President Mike Rollins says there are not seven points to the argument but just one: “Promises made not kept,” he said. “The debate will really be at that high an issue.”
City Council Member Sheryl Cole warned that, if passed, the amendment “ties our hands.” She is most concerned about SDS’ underlying claim that the amendment is so finely drafted that it will only affect the Domain deal. She called the ballot language “fair in informing the public of what the intentions are” but added, “I just don’t know if the general public knows the impact it will have on deals other than the Domain and other developments we are considering within the Desired Development Zone.”
According to Jim Cousar, an attorney with Thompson & Knight LLP and the city’s outside counsel for the Mueller deal, “The real problem with the SDS amendment and Mueller – and I’ll say at the outset that I sure don’t think this was intended – is that it depends on public financing to build a lot of the infrastructure out there.” Under the Mueller Master Development Agreement, Catellus Development Group pays for big infrastructure such as major roads, and the city sells bonds to pay them back, which it pays for with a mixture of property and sales taxes. The city created a tax increment financing district to manage the property tax, but the sales-tax component could create problems. “The property tax is OK with the SDS amendment, because the amendment has an exemption for tax increment finance districts,” Cousar said. “The time that Mueller was created, there was no such thing as a sales-tax TIF.”
Rodgers told the Chronicle he believes there are sufficient exemptions built in to protect Mueller. But his critics argue that if the city takes sales tax out of the Mueller bond equation, the fund to pay off the bonds will shrink, which could affect the city’s current AAA bond rating from Standard & Poor’s. This would make the city’s bonds less attractive to investors, which in turn would push up taxes to pay higher interest. For Mayor Pro Tem Brewster McCracken, this means voters might have to choose between paying incentives they may oppose or risking higher taxes. “That’s the risk of legislating through charter amendments,” he said. “Once you start gathering signatures, you’re locked into the language that people signed on to.”
This article appears in September 12 • 2008.
