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Council decision on ETJ release clouds future for film studios

Friday, March 7, 2008 by Mark Richardson

On a day that was supposed to clarify whether the proposed Villa Muse Studios would go forward in East Travis County, the Council’s actions on Thursday did little but muddy the waters and leave the film studio project’s future in doubt.


The Council voted 4-3 to instruct city staff to open negotiations with the Villa Muse developers but with the staff-recommended restriction of keeping the project within the city’s extra-territorial jurisdiction. Villa Muse had requested that the city allow it to develop the movie studio-digital media complex on 1900 acres released from the city’s ETJ, and had said that it likely could not go forward under any other scenario.


The project may not be dead, but according to Council Member Brewster McCracken, Thursday’s vote may have put it on life support.


“We had information about the funding implications of trying to keep it inside the city versus keeping it outside,” he said. “It’s complicated, but I’m very concerned that the majority vote imperils this major film studio-digital media complex. We’re not the only region that wants to become a major film and digital region. There are other regions that want to take that away from Austin, so I suspect they’re going to be getting phone calls from those other regions.”


Villa Muse was planned to be a huge project east of SH 130 near the confluence of Gilliland Creek and the Colorado River. Developers planned to build the core of a major movie and digital media complex, including soundstages, post-production and music facilities. Once the studios were up and running, housing was to be developed on the site for people to work and live in the same area.


However, city staff who studied the proposal raised questions about the city’s ability to control critical aspects of the development, particularly environmental standards, if the project was released from the city’s ETJ. There was also concern about the city’s ability to annex the property back into its ETJ and into the city in the future.


Hiten Patel, a financial adviser to the Villa Muse developers, said the Council vote was not what they wanted.


“Yes, we’ve spent all lot of time and a lot of money, wanting to be in Austin,” Patel said. “We’re all Austinites and we want it to be in Austin. But the reality is we’re getting to the point where we’re going to have to evaluate options. We thought we were in a position to move the football forward with the proposal we had put on the table. Having it structured in the ETJ is going to cause us to go back to the drawing board in terms of does this project make economic sense. That’s going to take some time to do.”

Garry Kimball, vice president of finance for First Southwest Company – which is the project’s main financial advisor — said they are headed back to the drawing board.


“The city has approved going back into negotiations on the original proposal from the city that we remain in the ETJ, which in our opinion hampers our ability to place the public debt that the investors for the project need to make the economics work,” he said “So we’re scratching our heads and wondering what to do next. The decision today hurts the economics of the project and is forcing us to go back to the drawing board to see if it’s a viable deal for the City of Austin.”


During its presentations Thursday, Villa Muse’s developers said continually that because of time constraints, they could not develop the project without being released from the ETJ. In a later presentation, city staff laid out three options for the Council to consider: deny the request for ETJ release; develop the project inside the city ETJ; or release the project from the city’s ETJ.


Following a great deal of discussion about financing options and the details, McCracken moved to approve the third staff option. Council Member Mike Martinez seconded that motion.


However, Council Member Lee Leffingwell, saying he was concerned about the potential environmental problems with the project, offered a substitute motion to approve the second option of keeping the project in the ETJ. Council Member Jennifer Kim seconded his motion.


After some additional discussion, Mayor Will Wynn and Mayor Pro Tem Betty Dunkerly joined Kim in supporting Leffingwell’s motion. Council Member Sheryl Cole joined Leffingwell and Martinez in opposition.


Several supporters of the project said that given Villa Muse’s stated stance on developing within the ETJ, Leffingwell’s motion was a death sentence for the project.


Travis County Commissioner Ron Davis was so concerned about Leffingwell’s opposition to the Villa Muse ETJ release, he called In Fact Daily to explain his point of view. He said, “Lee Leffingwell is raising environmental issues (on Villa Muse) and yet he’s leading the charge on bringing a landfill, recycling and a water treatment plant all on that property in Webberville. He seems to be focusing on bringing the bad stuff (to eastern Travis County), yet when we try to get positive development out there, he seems suddenly to raise the flag of environmental issues. It appears that Lee Leffingwell has lost his sense of direction”


Leffingwell said he disagreed with Davis’s assertion.


“My opposition to the Villa Muse project was based on the requirement of an ETJ release,” he said, “I have consistently said that I support their project and I would like to see them build their project. I just made a substitute motion to encourage the city manager to do the project and do it within the ETJ. I just think ETJ release is a very terrible precedent to set. As pointed out by our lawyers–and even more so in executive session–it’s really problematic that we could ever get it back once it’s released. “


Leffingwell also said he is not the primary sponsor of a resolution placing a landfill, recycling center, and other city projects on city land near Webberville. He is a co-sponsor of a resolution to move forward with those projects scheduled for the March 20 Council agenda, but he says it will be another four years before any dirt is turned on that project.


City Manager Marc Ott and his staff now have about five weeks to try to work out an agreement with the Villa Muse developers and bring that back to Council by April 10.

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