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Travis County looks to TIFs to fund projects

Tuesday, March 11, 2008 by Kimberly Reeves

Travis County Commissioners approved a contract for one tax-increment financing zone and considered membership on the board of another at last week’s court meeting. The county’s participation will get two high-dollar projects done, but it also raises the specter of just how far creative funding vehicles might actually stretch in Austin.


Compared to the need to get voters to approve bonds, a TIF is a fairly painless way to fund a high-dollar project. At last week’s meeting, county commissioners approved the specifics of a contract to participate in a TIF on the Waller Creek tunnel project. Commissioners also approved representation on the Waller Creek TIF board and will take a vote on representation on the Mueller TIF board next week.


Last summer, it looked like the region was going to get TIF-happy. TIFs have been proposed as a funding instrument for the San Antonio-Austin regional rail district, as well as the funding of downtown streetcars and even downtown improvements anticipated under the downtown neighborhood plan. When the requests began to pile up, Mayor Pro Tem Betty Dunkerley proposed a study of the TIF issue.


Christian Smith, executive manager of Planning Budget and Operations Department, presented the basics of the Waller Creek TIF again to commissioners.


The Waller Creek tunnel is one mile from one end to the other and will pull square footage out of the flood plan that is roughly the size of a regional shopping mall like Barton Creek Square. Construction of the underground tunnel, and a ground level master plan, is expected to cost $127 million, a price too step for just one jurisdiction to bear and one that has continued to climb in recent years, Smith said.


“In certain areas it makes a lot of sense, because if you didn’t put the original investment in the area, it would stay just the like it’s been,” Smith said. “And sometimes when you put that investment in – if it’s large – you have got to pay it back. And the way you put it back is through incremental tax revenue.”


To get the county to the table, the city has shielded the county’s financial obligation in the TIF. The county’s participation is limited to 20 years, Smith said. The city could finance on a 30-year term and has agreed to pay for any cost overrun on the project, which is likely, given the rapid escalation of the cost of building materials.


Construction is expected to start in 2010. The county will send a check for half its incremental tax increases to the city. The city will devote 100 percent of its taxes in the finance zone, which already includes a number of current projects.


The simple action of a one-mile tunnel from Waterloo Park to Lady Bird Lake will cost $127 million but it is expected to propel the value of the land in the district from $236 million to close to $2 billion under the most optimistic economic projections. Those projects are based on the long haul, possibly as long as 20 years of development.


Travis County has two seats on the Waller Creek TIF. Commissioners agreed to appoint Smith and Leroy Nellis to those seats.


A TIF also paid to prepare the land and lay down the infrastructure at the former Robert Mueller Airport to prepare it for redevelopment. As a former airport site, the land was ill equipped to handle higher density commercial and residential development. Taxes on those incremental value increases are expected to pay for that infrastructure.


County commissioners were prepared to vote on the county’s single appointment to the Mueller TIF board, but Commissioner Ron Davis raised concerns. Smith is about to retire from the county and retire as a part-time consultant. Given Smith’s limited schedule, Davis proposed more thought be given to the possible appointment to the board.


County Judge Sam Biscoe agreed to delay the vote on an appointment, plus alternate, until this week’s Commissioners Court meeting.


Austin is late to the use of TIFs as a financing vehicle. The Legislature has approved the creation of numerous TIF districts in past sessions, but fewer in recent sessions. Houston, in particular, has using the financing vehicle to pay for improvements in the Greenspoint, Uptown and Downtown areas of Houston. Frequently, a management district administers the tax revenue generated by the district.

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