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Citing Proposition 2, Council approves funds for bond validation suit

Friday, September 26, 2008 by Austin Monitor

The Austin City Council has approved a resolution to hire outside legal help to mitigate the unintended consequences the proposed Stop Domain Subsidies charter amendment might have on the Mueller Airport redevelopments.  In addition, city staff will make a presentation at next week’s Council meeting on how Simon Malls, owner of the Domain, has met the job creation and other economic goals set forth in its incentive agreement with the city.

After a lengthy closed session, Council members voted 7-0 to hire the law firm of Vinson & Elkins for $75,000 to help the city file a bond validation lawsuit. The purpose of the suit would be to ensure that the city could pay off bond debts related to the Mueller redevelopment. That suit would not be heard until after the election.

“There are a number of areas involving Catellus Development and the Mueller redevelopment where the city is providing financial incentives,” said City Attorney David Smith. “The city has issued bonds for parts of the project, and we fully expect to be able to pay them back.”

Smith said that filing a bond validation lawsuit would keep the potential effects of Proposition 2 from impairing confidence in the bond markets that the city would be able to repay its bond obligations.

“I was on the dais back in 1999 when we began the process of redeveloping the Mueller Airport area,” said Mayor Will Wynn. “Over the years, it became a staggeringly complicated legal issue, with incredible legal intricacies. It was frustrating to work through all the legal issues, but from that process we have created what is becoming a major public private partnership.” 

In a statement issued Thursday, Catellus Development said. “After careful review of this amendment by legal counsel, it is clear to us that if it passes, it will have a negative impact on Mueller. We also feel that this charter amendment will make it harder, not easier, for the community, the city and developers to achieve the Mueller model of responsible, successful development.”

Meanwhile, members of the Stop Domain Subsidies group held a media event Thursday to protest the Council’s move and promote Proposition 2 on the Nov. 4 ballot. They even brought along a live pig to make their point.

“‘Charity’ the hog came from a local petting zoo,” said Stop Domain Subsidies leader Brian Rodgers. “Charity is here to represent the developers that feed at the public trough here at City Hall. Proposition 2 will stop that sort of public feeding by the hog developers.”

The Stop Domain Subsidies amendment seeks to stop the city from subsidizing retail-oriented developments, like The Domain in North Austin. However, some are concerned that some of the language in the amendment could be applied to the massive Mueller redevelopment, impeding the city’s ability to repay bonds issued for the development.

The city is scheduled to pay Simon Malls $1.5 million on October 30, just five days before the election. Rodgers points out that the Council approved that payment along with the rest of the budget “and that only represents eight months of sales tax.

Rodgers said Council Member Randi Shade has been very helpful in trying to determine whether Simon Malls has provided the documentation to the city needed to determine whether Simon has lived up to its part of the agreement in terms of job creation and other issues. He said Shade has gotten an item on the Oct. 2 public Council agenda. “Thanks to Randi in her continuing press for open government,” he said. “That’s how democracy should work.


Shade said prior to the decision to place the item on next week’s agenda, the item had only been scheduled for a presentation at the Council’s Audit and Finance Committee—on Oct. 28, not giving the Council a chance to consider whether the information is adequate. She noted that the Council had hired an outside auditor to report to the Council in addition to city staff. If they are dissatisfied, she said, the Council could direct the city manager not to make the payment. Shade opposes the charter amendment.


Rodgers said that Proposition 2 was gaining supporters.


“As the public grows more and more educated, our forces grow stronger. I think it’s hard for them (pro payment folks) to frame the issue too,” he said. “Some people say keep Austin’s wordwell what are they keeping their word about? Well, they say it’s about giving money to shopping mall. Right there they’ve lost half the population. And then when they find out that they didn’t provide the $35,000 jobs and the four acres of open space and they use a lot of bogus assumptions a lot of people go, ‘Hey, don’t give them money.Integrity is a two-way street. Keeping your word is a two-way street in a developer needs to keep his word also.”


Others spoke out against Prop 2 at Thursday hearing. East Austin Activist Paul Saldaña said he had major concerns about it.


“I think there are unintended consequences,” he said. “As a business owner, and as an advocate for businesses here in town, I’m concerned about some of the unintended consequences. You may have heard some concerns about potential impact on the Mueller redevelopment. I’m just concerned about the millions and millions of dollars in litigation that could potentially hurt Austin’s reputation and I’m absolutely committed to ensuring that the voters here in Austin work with us to keep Austin’s word to make sure that we oppose Proposition 2.”

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