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Intel scores $$$$$$$ incentives to locate new campus downtown

Friday, May 19, 2000 by

Spelman recalculates total and comes up with $2.5 million actual 'incentives'

While a $15.1 million package of incentives to attract Intel Corp. might look like a big carrot for Intel, it was a figure that Council Member Bill Spelman thought tasted more like rotten cabbage and was hard to swallow. So before the City Council voted on the items yesterday, Spelman waded through the list of items one by one and whittled the figure of $15.1 million down to about $2.5 million that amounts to actual incentives, he said. ( In Fact Daily on May 16 detailed the package of incentives and avoided capital costs that make up the $15.1 million.)

Then and only then did the City Council vote 6-0 (with Council Member Willie Lewis absent) to grant a package of incentives designed to lure the world's No. 1 maker of microchips to downtown Austin. The company racked up income of $7.3 billion in 1999 on sales of $29.4 billion and had 70,200 employees, according to Hoover's Online.

The way Spelman counted it, only four items from the long laundry list should be described as incentives: $368,021 in development fee waivers; $135,827 in waived capital recovery fees, tap fees and inspection costs; $192,000 in capital improvement project funds for sidewalks; and $1,840,681 in waived fees for temporary use of rights of way. That comes to a grand total of $2,536,529. The figure begs the question of other incentives that were, de facto, approved in principal and will be brought back to the council at a later date when the dollar figure is known. These include a waiver of license fees for private use of public property (such as placement of electric vaults in the sidewalks adjacent to the two proposed buildings, a subterranean tunnel to connect the two office buildings, and an aerial passageway to connect one office building with its parking garage), as well as financial assistance for necessary modernization, relocation, and upgrading of utilities.

Disqualified from the "incentives" label in Spelman's calculations were $634,700 in water and wastewater cost reimbursements for meter boxes and appurtenances, water and wastewater service lines, and miscellaneous water and wastewater improvements, such and cutting and plugging old lines and relocating lines. Sue Edwards, director of Redevelopment Services, told the council that the city would be reimbursing the developer for these expenses anyway.

Another $4.5 million was cut from the list of "incentives" by clarifying the city's responsibility with respect to Intel's two parking garages. As described in the documents before the council, "the city manager is authorized to give thorough consideration to a collaboration between the city and Intel, for parking facilities to be located on the Intel campus, and to negotiate and execute an agreement that provides a mechanism which over a period of time will reimburse Intel for a portion of the parking facility costs in an amount not to exceed $4.5 million." Edwards, however, said the parking garage is "revenue neutral" and is "not really an incentive. We're not even putting in $4.5 million."

City Manager Jesus Garza said, "They will pay us for management of the garage." He said the $4.5 million is "the estimate of the revenue to return to Intel off the parking facility." He said Intel wants the city to operate the garage and a certain number of spots will be available for hourly paid parking. Revenue from those spaces, after management costs, will be returned to Intel. "It's their capital (paying to build the garage) and it's their garage. We get the benefit for its use by the public." Edwards added, "Intel is exploring other options to manage the garage and this may not be the final agreement."

All the while this laborious examination of the incentives was going on, Mayor Kirk Watson chimed in periodically to spin the message and make sure the public understood what was going on. "Sometimes we rapidly throw the word incentives and forget what we're doing," Watson said as Spelman began his examination. Later, as to the $192,000 for sidewalks, Watson noted the sidewalks would not be used solely by Intel. "If we incentivize and it gets built with $192,000, it adds to downtown so people who come to visit downtown will use those nicer, wider sidewalks," he said. Regarding the $1.84 million in waivers for street closures, Watson said, "Sometimes we forget why we even started Smart Growth: we're trying to protect environmental areas while growing the tax base. If they build in the Hill Country we don't have to have street closures. Once we start building in a compact way it impacts streets…It's an incentive, but an incentive with a real reason."

The $7.4 million in deferred capital costs is the figure offered by Austin Energy to sell Intel services in the form of chilled water and thermal storage for air-conditioning (saving Intel $4.5 million); engineering, construction, and operation of the heating and air-conditioning systems within the buildings (saving $1.17 million); and standby electrical generators and uninterruptible power supply (saving $1.75 million). Although Austin Energy would make the capital outlays for these items it would recoup those amounts and more in terms of revenue. "This is the fourth client to take advantage of that chiller in the Hobby garage," said Chuck Manning, general manager of Austin Energy. He said Austin Energy is also negotiating with others on how to use the uninterruptible power supply. The utility also benefits because the chiller and thermal storage will shave the peak load on generators.

The mayor said the city has been highly successful in protecting the environment and growing the tax base through Smart Growth. "Just in the past weeks two cities have been here looking at what we're doing in Smart Growth and downtown because we're national leaders. The International Downtown Association was in town and wanted to study it."

As to the parking, Watson said, "The No. 1 thing we hear is downtown there's not enough parking." He said the Intel agreement and other incentives would benefit private restaurants and clubs and retail downtown, and the electric utility benefits in the way it will be able to do business. "There are additional benefits beyond what we're trying to do with Smart Growth."

Spelman said the project will cost Intel $150 million and the city's $2.5 million represents less than 2 percent of that amount. In return the city gets over a period of 20 years, according to Edwards, $9 million in property taxes and $12.2 million in additional sales taxes, based on 1,650 additional employees.

Council Member Gus Garcia said he would bring an agenda item for the June 1 or June 8 council meeting to plow some of the profits that Austin Energy will reap from the Intel agreement into social equity initiatives. "A city that feeds on economic development of this kind, while those at the bottom of the economic pole will have more difficulty. It would be a good idea to look at how to use some of those profits to mitigate social equity problems."

Watson said while the city was absorbing the cost of some improvements to water and wastewater infrastructure for Intel, some of the oldest lines in the city are downtown and "this is the kind of infrastructure that benefits everyone downtown."

Council Member Daryl Slusher said he appreciated Intel working with the city and locating downtown. "In a perfect world they'd do this because they wanted to comply with the city's goals, but that's not the way it works." He said this kind of initiative goes back as far as the Austin Tomorrow Plan of 1979 as the city has struggled to keep large employers from locating in the Drinking Water Protection Zone. "We're really unprecedented to a high degree because most high-tech locates in suburban campuses…(so) to provide incentives is necessary." Slusher said he had received many e-mail messages saying, "No tax abatements for multinational corporations," but noted the city is not giving Intel any tax abatements.

Council Member Beverly Griffith asked Intel to work to preserve the beauty of Shoal Creek, which will be about 10 feet from where Intel plans to build the first of its two parking garages, and to consider putting retail on the ground floor to provide human attractions for employees and others.

Fred Shannon, external affairs manager for Intel in Austin, said that's something that has been discussed with Chris Riley, president of the Downtown Austin Neighborhood Association, and Perry Lorenz, who is a member of both the Design Commission and Downtown Commission. Riley is also a member of the Downtown Commission.

Mayor Pro Tem Jackie Goodman thanked Shannon for Intel's initiative in working with businesses and residents downtown. "A lot of people are fearful of the impact to happen during construction, and they've been generous in volunteering to work with stakeholders to work out those things," she said.

Council Member Garcia asked what Intel would do to help employ minority- and women-owned businesses in the construction of its facilities. Shannon said Intel's architect would meet with stakeholders groups and go through the design and identify local contractors and hold workshops to bring in people who have the proper qualifications. That "underscores our efforts to start early and open communications with the contracting community to be aware of the plan," Shannon said.

With that the council voted 6-0 to approve the package. Mayor Watson noted, "We'll be voting on our side of it and at some point Intel will decide what it will do based on our action today."

Afterwards, Shannon told In Fact Daily that he couldn't say when Intel would make its decision. "We've got internal processes to go through and the design," he said, adding that the company wants to make a decision "soon." Of the company's current space in its offices on MoPac Expressway," Shannon said, "We're getting tight."

Homebuilders face changes in city oversight of impervious cover

Scrutiny spawned by city's settlement with Bradley Interests

The City of Austin is starting to take a closer look at how much impervious cover homebuilders are constructing in new subdivisions throughout the city and its extraterritorial jurisdiction. Council Member Beverly Griffith asked the city manager to try to come up with a mechanism for better control over impervious cover as a result of negotiations with developer Gary Bradley.

Thursday Mike Heitz, director of the Watershed Protection Department, briefed the City Council on steps his department is taking to determine the extent of compliance with the city's assumptions about impervious cover in single-family subdivisions. Those assumptions are based on lot size, but the city has no review or enforcement provisions for single-family developments, Heitz said.

So, impervious cover may exceed limitations for that particular watershed and stormwater controls may be inadequate, Heitz said. Mary Arnold, acting chair of the Save Our Springs Alliance, told In Fact Daily, "That's part of the problem. The subdivisions are based on these assumptions for residential lots. (But) our code does not say you can only build so much per lot." Arnold, a longtime environmental activist, recalled that during the mid-1990s, "we were dealing with Barton Creek Properties and trying to negotiate. One of the city staff realized they were going to do a Parade of Homes out at Barton Creek Properties." When the members of city staff measured the impervious cover for those homes, Arnold said, they found Barton Creek Properties was "building these enormous houses that were much, much bigger than the assumptions they were using for that subdivision."

At that time, she said, the staff realized that assumptions about impervious cover would have to be changed to reflect what was being built.

"So that's when they started trying to change the assumptions, which they did in 1994," for houses in the Barton Springs Zone, Arnold said. The council recently approved another change in those assumptions as part of Smart Growth Initiative. Those changes simply make impervious cover assumptions citywide the same as previously adopted for the Barton Springs Zone in 1994.

Pat Murphy, deputy environmental services manager, said the 1986 city ordinance assumed that a single-family lot of 10,000-15,000 square feet would hold a house of 3,000 square feet. A house built on the same size lot today is assumed to be 3,500 square feet, he said. Under current regulations, Murphy said, a house sitting on one to three acres of land is assumed to be 7,000 square feet. In 1986, the city would have assumed that lot would hold a house of 5,000 square feet.

However, those changed assumptions do not mean that the city knows how much impervious cover is actually being put down. That problem became an issue when the city was trying to reach an agreement with Bradley. Griffith said one reason she ultimately voted for the Bradley deal was because she realized there was no accountability for residential impervious cover in any subdivision.

"The process we're going to go through here is very much a byproduct of the experience of what we went through in the Bradley agreement," she said. Griffith said she learned during those negotiations "how little confidence there is in the assumptions and interest in finding a way that would be accountable." Griffith said she expects the effort to yield positive results.

The big question facing both the city and homebuilders now is how impervious cover limits might be enforced in the future. Murphy said the city could regularly audit single-family impervious cover levels and update assumptions "as necessary to better assure compliance." The city could also require a specific impervious cover allocation by plat restriction so that no lot could exceed the overall limitation.

Enforcement alternatives include:

(1) Audits, complaint investigation and spot checks.

(2) Enforcement within the city limits through building permit review and inspection.

(3) Enforcement through review and inspection of single-family site plans in the city's extraterritorial jurisdiction.

Arnold said developers object to the idea of "impervious cover police. But when you're dealing with a couple of thousand acres of residential subdivisions, and they're promising overall that they won't do more than 'X' amount of impervious cover," she said, there has to be a mechanism for measuring that impervious cover. Arnold said the briefing was "a good start" toward solving a problem that has worried her for years. "The more impervious cover you have, the more stormwater runoff goes into the creeks and the more erosion there is," Arnold said. Runoff and erosion contribute significantly to the destruction of the creeks, she said.

Heitz said within the next 30 to 60 days members of the Watershed Protection Department staff would be meeting with various stakeholders, including homebuilders, designers and environmentalists, to discuss the problem. During that time period, he said his staff would be conducting additional research to try to determine the extent of the problem and select recommended alternatives.

City Council appoints 'first' female municipal court clerk, Rebecca Stark

The City Council Thursday appointed Rebecca M. Stark to serve as Municipal Court clerk. Stark, who will receive a salary of $80,735 per year, as well as other city benefits, has been clerk of the Fort Worth Municipal Court for the past six years. Stark plans to begin her new job June 12.

The clerk is one of a handful of city employees who is appointed by and reports directly to the council. Stark appears to be the first woman to be appointed permanent Municipal Court clerk for Austin. Her immediate predecessor, Paul Martin, left in January to take a federal court position. Richard Harris has been acting clerk since then.

Correction…Although Scott Henson is a member of the board of the Sunshine Project for Police Accountability, his web site endeavor, the Austin Police Department Hall of Shame, is a personal project that started before and is separate from the Sunshine Project. Therefore the headline and story published by In Fact Daily May 18 should not have characterized the criticisms of Place 2 City Council candidate Rafael Quintanilla as an attack by the Sunshine Project. "Whereas the Sunshine Project has chosen to support Raul Alvarez and try to inspire our supporters to assist him as best we could, the responsibility for challenging Mr. Quintanilla as to his whereabouts during alleged police abuses is mine alone," Henson says. "In other words, I 'went negative' but certainly the Sunshine Project as a whole didn't endorse such a pose."… Police oversight delayed…As expected, the City Council voted 6-0 yesterday to postpone until June 1 consideration of the final report and recommendations of the Police Oversight Focus Group. (See In Fact Daily May 18)… Downtown guidelines adopted…With no discussion whatsoever, the City Council voted 5-0 yesterday, with Council Member Bill Spelman off the dais and Council Member Willie Lewis absent, to adopt the Downtown Design Guidelines drafted by the city's Design Commission. As reported by In Fact Daily May 16, Design Commission Chair Juan Cotera said the next step will be to figure out how to implement the guidelines, which at present are not obligatory… Quips and quotes…During a discussion of incentives to bring Intel Corp. to a new downtown campus, Council Member Gus Garcia said he wanted to use some of the profit to be reaped by Austin Energy on the deal to fund social equity initiatives for people not benefiting from the high-tech boom. City Manager Jesus Garza said it might be better to allow Austin Energy to retain those profits and let the general fund address the issue of social equity. To which Garcia replied, "As I understand the council-manager form of government we only direct the manager." Garza retorted, "It's late but you finally did catch on," referring to Garcia's nine years of council service that ends June 15. "He makes those comments after he got a pay raise," Mayor Kirk Watson said of the manager… We are not sinking…During a presentation on suggested improvements in the way the city delivers services to neighborhoods by graduate students of the LBJ School of Public Affairs last night, one of the students noted that some of the improvements had already been started, "but when you're trying to turn the Titanic it takes a lot," he said. City Manager Jesus Garza replied, "I sure hope we're not the Titanic."

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