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Split downtown panel backs affordable housing incentives

Thursday, January 31, 2008 by Kimberly Reeves

A split Downtown Commission approved the interim affordable housing incentives that will go to Council today, with some members expressing reservations about whether the proposed $10 per-square-foot fee would discourage downtown development. The Affordable Housing Task Force and the Density Bonus Task Force developed the incentive proposal.


In a freewheeling conversation, members of the Downtown Commission expressed their views on the proposed incentives in the Central Business District and Downtown Mixed Use Zoning District on the edges of downtown.


Earlier in the week, the Design Commission unanimously approved the proposed interim affordable housing incentives, at the same time it was reviewing the draft version of the Downtown Plan. The panel emphasized that the provisions should be applied citywide, and not on an opt-in basis. They also gave specific advice about how the $10 fee should be used, with 50 percent going to affordable housing and 50 percent to community benefits, such as aiding the homeless.


Council Member Lee Leffingwell, commenting on the proposed incentives, said, There’s a question on my mind about whether or not this is premature since the Downtown Plan hasn’t been presented yet. But it’s also labeled as an interim planjust like the other one was labeled as interimso presumably we have to go back again after the ROMA study is completed and do another affordable housing plan.


Leffingwell said it was his understanding that ROMA is close to completing the Downtown Plan. However, he said if the Affordable Housing Task Force and the Density Bonus Task Force had reached an agreement, he could support that on an interim basis.


The Downtown Commission is nothing, if not pragmatic, about downtown development. The concerns of Charlie Betts of the Downtown Austin Alliance resonated with some members. Betts cautioned the group to focus on the amount that developers would have to pay on downtown properties rather than the community benefits.


The density that downtown developers bring to downtown – and the addition of a permanent tax base – is much more significant than the one-time fees that the affordable housing incentives might generate. No one wants to discourage developers from adding additional density to downtown Austin, Betts said.


Many of the larger parcels are now developed downtown, Betts said. If Council wants to move forward with incentives, it should be done with the understanding that most future development will be done on parcels that are a half-block or smaller, Betts said.


It would be far wiser, Betts said, to encourage a project like the Marriott Hotel, to take full advantage of the density. Why build eight stories, when it probably makes more sense to build 10 or 12 stories for a downtown hotel? Betts asked.


Betts said that developers on three current downtown projects had run the numbers on the incentives and considered the potential cost implications. A couple of the developers said if the fee was in place, they would likely reduce the size of their projects in light of the costs. A third developer said he would consider putting his project on the shelf, calling the increased density too pricey.


Developer Robert Knight, a commission member, put figures to that number. The limits on downtown development are 8-to-1 floor-to-area ratio (FAR). If a developer wanted to develop a half-block parcel at a 10-to-1 FAR, that would mean two additional stories and an extra 80,000 square feet of developable space. That would be $800,000.


Knight did note he wanted a date certain in the ordinance for expiration of the interim incentive policy. The intention is to replace it with a permanent formula when the Downtown Plan is approved. Knight said he wanted to make sure that the incentive did not hang around longer than intended and was reviewed consistently.


For some commissioners – like Perry Lorenz and Teresa Ferguson – such a price does not seem excessive. Lorenz noted that $10 per square foot is not excessive if land is sold at $20 per square foot downtown. Ferguson said she didn’t consider the price a deal breaker. Knight noted that fees in the UNO overlay had not stopped development.


“The reason that I’m willing to go along with this – and, in fact, am encouraging it, is that this is already happening on any number of the big projects downtown that require zoning changes,” said Lorenz, adding that developers were paying big bucks to guarantee community support for increased density. “It’s been happening. Why not formalize it? Why not make it transparent and predictable, instead of a political process to make deals to quell opposition?”


Patrick Goetz, the Urban Transportation Commission’s representative to the Downtown Commission, said he had philosophical objections to the incentive. He called the incentive fee a 5 percent up-front development tax. Goetz said it made more sense to him to put downtown properties into a tax-increment finance zone and continue to draw down tax revenues for a number of decades instead of a one-time fixed fee.


“With a downtown TIF, the property taxes from that 5 percent would be recovered right now and the next 20 years is gravy,” Goetz said. “It’s the gift that keeps on giving.”


When the time came to vote, Chair Stan Haas said he could not support the motion. He wasn’t opposed to affordable housing or incentives to that end, but he could not wrap his mind around the concept of adding another burden to the development community. Haas, an architect, said he was concerned the fees would be a disincentive.


The final recommendation – including several amendments – was the proposed ordinance, plus additional stipulations that parkland dedication fees could never be waived; that the city commit to a review of the formula upon the approval of the Downtown Plan or by Sept. 30, 2009, whichever came first; and that fees would be waived if the city could not comply with its own expedited timeline for approval.


The fee would apply to downtown properties that are either residential or mixed use with a residential component. It would exclude hotels. An amendment to exclude hotel-condo projects – and, more specifically, hotels that choose to convert rooms into condominium units – failed.

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