Considering Austin’s $77 million budget shortfall, why is the Domain — a brand-new, planned, mixed-use project in Northwest Austin whose developers are requesting millions in tax rebates from both the city and the county — more likely to receive incentives than Sixth + Lamar, a not-new, planned, mixed-use project in Downtown Austin whose developers want far less help? The answer, as outlined during last week’s council work-session, is that the Domain better fits what the city is hoping to achieve with its new economic development model: more bang without lost bucks.
Planned by Endeavor Real Estate Group, the Domain is the first project to request public-sector participation along the lines of the recommendations of the Mayor’s Task Force on the Economy. Those guidelines, released in early April, are now being developed into an actual incentive policy; the task force suggests that the city eschew front-loading incentives that take a bite out of current revenue and instead withhold financial assistance until a project produces actual benefits. Thus, Austin would avoid faux pas like the Intel building, or like Sixth + Lamar, for which Schlosser Development Inc., which has already redeemed $700,000 of city incentives and fee waivers without breaking ground on a project that, through several incarnations, has been just-around-the-corner since 1997.
Endeavor claims it needs $37 million in public investment to build its 42-acre retail project — part of a 234-acre site the firm controls just north of UT’s Pickle campus — which includes more than 2 million square feet of work/living space, an estimated 670,000 square feet of retail, at least 450 housing units (10% expected to qualify under the city’s SMART Housing program), civic facilities, and green space, all accessible from North MoPac, Braker, and Burnet Road. The high cost of amenities pleasing to the city — housing above retail, special parking facilities, and streetscaping and landscaping — have jacked up the Domain’s price, says Endeavor principal Kirk Rudy, past president of the Real Estate Council of Austin.
However, Rudy and city staff say, Austin isn’t actually risking a cent by investing in the Domain. Endeavor is comfortable with the new incentive policies, Rudy says, and will pay up-front 100% of the costs and fees associated with the project, in return for future rebates of $37 million in sales and property taxes from the city and an additional $5 million from Travis Co., which has no sales tax. Over 20 years, Endeavor projects that the Domain will, even with the rebates, still generate nearly $50 million in tax revenue to the city and county, along with $36 million in utility fees and $65 million for AISD. Meanwhile, Endeavor will set aside a $1 million endowment fund to help local businesses interested in joining the development, which is expected to break ground in early 2004.
The council is expected to vote on Endeavor’s request May 8. At last week’s work-session, several council members appeared enthusiastic about helping Endeavor — including some who have questioned the much smaller package sought by Schlosser for Sixth + Lamar. While Will Wynn described Rudy as “capable,” Raul Alvarez said the proposed project would be “a wonderful addition” to the city’s retail. (The city is very worried about its ever-shrinking sales-tax collections, which aren’t helped by the explosion of regional retail in Round Rock, Bee Cave, Cedar Park, and Buda.) And Betty Dunkerley — who has taken the lead in reassessing the Sixth + Lamar package — thanked Endeavor for presenting its idea “at a time when not too many people are willing to take a risk to step out and do something really unique in a community that’s in a downturn.”
Endeavor’s previous projects in the area — like the Gateway complex and the Market at Parmer Lane — are not so unique, driven by the usual big-box chains. But though projects similar to the Domain exist in other cities, Endeavor’s project will be Austin’s first, says Sue Edwards, manager of the city’s Economic Growth and Redevelopment Services Office. The Domain, she says, addresses city officials’ concerns about Austin lagging behind nearby communities in attracting not just retail but more attractive and lucrative destination retail — the kind of stores and malls that capture all-day visitors and tourists. “This project is one way for us to get into the mix,” Edwards told the council last week. “We haven’t been there for over a decade, and it’s showing dramatically as we move through this budget.”
Major questions about the Domain remain unanswered — Endeavor can’t say what tenants will participate, or what kinds of jobs the project will create. (The proposed deal just requires that Endeavor create more than 1,000 ongoing jobs.) But city staff and Rudy are optimistic about the Domain’s chances. Not so at Sixth + Lamar, since last week’s announcement by Borders Books and Music that it would not open a highly controversial location there, across from local icons BookPeople and Waterloo Records. (Calls to Schlosser were not returned.)
While Schlosser’s main tenant — Whole Foods Market, planning both a flagship store and a corporate HQ complex — is sticking with the project, the Borders bailout is yet another blow to a project that has changed in composition and name several times over 10 years. (Borders representatives blamed their company’s withdrawal on the state of the economy and dissatisfaction with Sixth + Lamar’s current design.) In recent weeks, in the face of heated public opposition to the Borders store, council members have discussed alternatives to reinstating Schlosser’s incentives — for instance, by offering help directly to Whole Foods for job creation. A final decision on the Sixth + Lamar incentives is pending.
This article appears in May 2 • 2003.