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The real projections for Waller Creek Tunnel

Friday, July 23, 2004 by

Any one of three scenarios project city gain of at least $60 million over 20 year period

Yesterday’s story about consultant Steve Spillette's study of property values and economic projections based on a future Waller Creek tunnel project caused consternation among some readers. Those readers said both In Fact Daily and the American-Statesman misinterpreted numbers generated as a result of the study, which showed that the city would bring in more than $60 million above cost under any of the three scenarios.

The story was pulled and the number portion rewritten to reflect those projections. In Spillette's study, the three options on the tunnel project were measured against a financial analysis of the expected returns on office, retail, residential and hotel markets downtown. The returns measured how much land could reasonably be developed, of what type and within what time frame. Overall, the study was more conservative than the previous work completed by Kellogg, Brown & Root.

The projections, measured against the cost of the project, showed a range of predicted economic gains over a 20 year timeframe. The cost of the15.5-foot diameter tunnel was estimated at just under $50 million. The return on that investment, after paying the city and county back for their investment—assuming the county takes part in the project—is estimated at $71.8 million. The net revenue on that project is 163 percent of the cost.

The return on the high-end tunnel after subtracting the estimated cost of $68.3 million is projected to be $69.6 million. Assistant City Manager John Stephens explained that the total net return of 99 percent on the larger tunnel would translate into about $70 million in revenue for the city and the county. The projections are based on using a tax increment financing (TIF) district in which the city and the county would participate, plus sales tax revenues for the city.

In a meeting hosted by the city last week, Spillette described the study as a market-based approach rather than a supply-based approach. Projections were based on current trends in downtown real estate, as well as recent development in the city's core. The study also sought to project revenues if businesses were developed at the top of slopes as well as at creek level.

Chris Riley, chair of the Planning Commission, attended the meeting and said when everyone realized that all three scenarios would give the city additional revenues—and the Cadillac version could produce the economic engine property owners have been seeking—they were elated. “Everybody came out pretty upbeat. Not only does it pay for itself, it pays for itself twice over,” he said.

In the category of office space, Spillette has projected that given the current supply, there will not be additional demand for an office tower until 2009, at the earliest. The market has both existing and new supply, in the form of the Frost Bank Tower. Rumors also indicate at least one more such building in the real estate pipeline.

Other factors also play a role in reduced demand. Mergers like Bank One and Chase, for instance, are likely to mean the consolidation of some space. Downtown can expect substantial blocks of office space to be put back on the market when the new City Hall opens. Hence, it's unlikely to expect a significant demand for office space on Waller Creek, unless it's part of a mixed-use project for creek-side development.

Retail has not exactly been rosy in downtown Austin. Much of the first-floor space in downtown office buildings put aside for retail is still available. But the kind of retail attracted to the Waller Creek project would be specific, primarily dominated by bars, nightclubs and restaurant space, like on the San Antonio Riverwalk, Spillette said.

Waller Creek may have some retail appeal because of its proximity to the Convention Center, but it will also be competing with developed retail along Second Street and the significant retail node accompanying the Whole Foods complex on the west end of downtown. Spillette says his projections indicate that the Convention Center expansion will drive some demand for space, but that the demand will not be significant.

The cost of real estate along Waller Creek is likely to drive lower-end retailers out, Spillette said. The real estate along the San Antonio Riverwalk is so hot that some space generates revenues in excess of $1,000 per square foot, primarily among restaurants. Because of the high cost, it's likely that retailers along Waller Creek would be specialty retailers such as artisan shops or art galleries. The more deeply that retail can embed itself on the slopes of the creek, the more valuable the property will be.

The one bright spot in the economic forecast is that demand for residential property downtown remains high. A large number of residential units have been absorbed into the downtown market, with the focus on multi-family mid-rise to high-rise apartments. Downtown properties are continuing to demand, and generate, the highest rents in the region, he said.

Residential units would be either condominiums or apartments, with a stronger market for condominium ownership downtown. The upswing in the job market and the growth of downtown development promise continued demand for such units. The market for larger size, higher cost condominiums appears the more promising, Spillette said. The projections in the Spillette study assume a 50-50 mix of apartments and condos.

On the hotel end, no demand appears to be on the horizon. The opening of the Hilton Convention Hotel alone meant a 20-percent increase in the downtown hotel market. At least three other properties are scheduled to open in the coming year or so. Spillette projected that demand for a new hotel may not be in the works until 2008.

Variance recommended for Colorado River Park

The Environmental Board has recommended granting a cut-and-fill variance for drainage improvements at the Colorado River Park near Pleasant Valley Road. The variance will also allow construction within a critical water quality zone to improve a manmade drainage channel that has deteriorated significantly due to erosion.

The Parks and Recreation Department is working on a design for improvements at the park, but those improvements will have to wait until the drainage issues are resolved. "Right now, most of it is undeveloped, but they have plans to develop more of it for public use," said Jason Traweek with the Watershed Protection and Development Review Department. The park covers 406 acres. The variances granted for construction will only cover 35 acres.

Consulting engineers Raymond Chan and Associates noted that during heavy rains, runoff at the park is escaping the designated channel and causing extensive damage to a nearby drainage channel. The firm considered armoring the channel with concrete or stone to prevent further erosion, but is instead recommending reducing the overall channel gradient and flattening the banks. The result would be a wider, shallower channel with a more natural appearance.

Board members wanted to make sure that construction does not disturb surrounding natural areas. Staff had already recommended that the area around the channel be re-vegetated with native grassland seeds. "It has unique trees, some unique native plants," said board member Mary Ruth Holder. "I'm a little concerned about the native grass seeding versus knowing what's out there and restoring that." Holder also noted that the timing of the construction could affect some seasonal plants in the area. Traweek pledged that crews would keep all work as close to the channel as possible, and that the city was committed to full mitigation for any trees that are removed during the project.

The recommendation won unanimous approval. The board's actionincluded specific directions for tree replacement along with the staff's condition for the use of native grassland.

Commission seeks more study of recycling changes

The city’s Solid Waste Advisory Commission has asked for further study of the pilot single-stream recycling project currently underway in limited areas of the city.

For as long as the city's recycling program has existed, materials have been sorted: one container for paper and the other for recyclable materials such as plastic and glass. City workers would have to pick up and load each individual container into the recycling truck.

"My concern about manual collection is that you've got two people on a truck, five days a week, picking up containers from 1,500 homes a day," says Willie Rhodes. "It creates injuries, and if not outright injuries, it creates the strain that leads to injuries."

Under the pilot project, the two recycling streams would be co-mingled in one container that could be loaded automatically into the truck, just like other trash containers. That's far more complicated than it sounds, especially to those on the SWAC like Commissioner JD Porter.

"By co-mingling the materials, it ends up costing you a lot more to process it and you have less usable material," Porter said after last week's SWAC meeting. "You could end up with a net residual rate for processing that's greater than the amount you get from recycling."

Rhodes admits that making a single-stream recycling project work will require education. Single-stream programs are most successful in cities with mature recycling programs where citizens take a direct interest in the recycling process.

Approximately 19 cities in the Dallas-Fort Worth Metroplex have recycling programs, and many of those programs are single-stream programs. The cities are simply too large to spend the time using individual containers for recycling collections.

"What those cities have demonstrated is that you can have an active single-stream program with the education of the citizens," Rhodes said. "It requires providing the right information to the customers of the program in those cities."

The ultimate benefit to the customer is maintaining solid waste fees. The sale of recyclable goods is not only good for the environment, it also helps to maintain current fees, Rhodes said. Ultimately, that benefits both the environment and the customer.

The city ships its recycling materials to a subcontractor such as Browning Ferris Industries or Waste Management Inc. that sorts the materials and sells the resulting usable waste stream to the end user, which in the case of paper is usually a paper products company. Single-stream collection requires the contractor to slow down the belt and examine the recyclables more closely, especially to determine whether the paper is degraded or not. In some cases, the concern is that single-stream leads to a lower quality of recyclable goods as compared to those collected separately, Rhodes said.

Automating the process makes collection of the potential recyclable goods cheaper for the city, but it also increases the cost of sorting and raises the possibility of contamination. The goal is to make sure the quality of the goods remains high, so that sorting is not a problem and the end product is desirable to the end user.

Porter says single-stream sorting has higher technological requirements than traditional sorting. He wants to make sure anyone who agrees to sort Austin's recyclables is doing it properly and getting results. After Rhodes raised issues at last week's meetings, SWAC asked for a regular update on the progress of the single-stream pilot program.

SOS, Buda group say developer violating Clean Water Act . . .The Save Our Springs Alliance and BudaCAN have notified the city of Buda and developers of Garlic Creek West that they intend to sue them in federal court. According to the organizations, developers of the 669-acre Garlic Creek West have violated the Clean Water Act by building an illegal dam and roadway over Garlic Creek, polluting and diverting the water. "The developer has gouged and filled the creek and disturbed more than one acre of land, most of which did not even belong to them. The devastation is enormous. Huge trees have been obliterated,” according to BudaCAN member Margaret Mills. SOS and BudaCAN have already filed suit against the developer and Buda in state court. That lawsuit challenges the development agreement and plat approval for Garlic Creek West . . . Historic zoning process begins for UT house. . . The Historic Landmark Commission this week voted to initiate historic zoning for a home at 1108 W. 25th. It's currently used as a rooming house for UT students. The house dates back to 1886, but was moved from its original location at the southeast corner of 9th and Brazos to its current location in 1956. New owner James Beardsley told commissioners that the previous owner, an absentee landlord in New York, had allowed the structure to fall into disrepair. He's seeking a demolition permit. Samuel D. Harlan built the home, which was sold to Jefferson Johnson in about 1900. Johnson was Austin's Postmaster from 1913 to 1922 . . . For Democrats only . . . Kirk Watson and Alfred Stanley are spreading the word that they have more seats at their table for the John Edwards brunch in San Antonio this Sunday at Aldaco's Mexican Cuisine in San Antonio. Tickets are $250 each. If you want more details you may contact Stanley by email: astanley@astanley.com. . . Why there is extra construction on 5th Street . . . Perhaps this morning will find the problem contained, but here is the explanation given by the Downtown Austin Alliance: 5th Street west of Lamar was reduced to two lanes due to a water line break which occurred late Wednesday night. Crews had been expected to finish repairs by yesterday afternoon. However, a second break occurred, requiring additional repairs, which were still underway last night. If those repairs are completed, all should be fine this morning. If not, according to the DAA, traffic on 5th Street just west of Lamar could still be reduced to 2 lanes . . . A novel tactic for a zoning change . . . The Maria's Taco Xpress will hold a party from 3-6pm Sunday. According to Mike Blizzard, who is doing the PR for Maria’s and Walgreen's, which hope to be co-located on South Lamar, the fiesta is “to raise awareness and rally support for the Walgreen's/Taco Xpress compromise that will secure a permanent home for Maria's Taco Xpress. The City Council is scheduled to hear the zoning case and hold a public hearing sometime after 4pm Thursday . . . Looking ahead . . . The ribbon cutting for the KVUE Concept home by John Siemering Homes and TLConcepts has been scheduled for 7:30pm on August 3. The ceremony will be a combined charitable event for the Make-a-Wish Foundation. When the home opens for general public viewing, ticket proceeds will benefit SafePlace and LifeWorks. The general public can buy tickets to tour the home from August 4-29. For more information call Angie at 826-0546.

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