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Council moves forward on Homestead Preservation District

Friday, December 19, 2008 by Kimberly Reeves

The Austin City Council moved forward with the proposed Homestead Preservation District on Thursday night, while still leaving it up to Travis County Commissioners to determine the level of financial commitment each jurisdiction will put into the new affordable housing venture, which has been in the works for almost two years now.

The concept of a Homestead Preservation District – using a tax-increment finance zone to provide additional affordable housing alternatives in East Austin – is a new concept for Austin and required a new section of state code.

For its part, the county has concentrated its affordable housing efforts in the area outside the city limits. That strategy, combined with the possibility of losing property tax revenue in a weak economy, left commissioners with some trepidation.

At last night’s Council meeting, it also was apparent that people had some confusion, possibly fueled by language in explanatory documents that cited some guidelines for relocating displaced residents. Those guidelines applied to the rehabilitation and renovation aspects of the program, but it was clear residents were confused.

Given Austin’s history – displacing people from their own homes in East Austin in the name of revitalization or improving the community – it was not surprising that some people would express distrust of the program, noted Council Member Sheryl Cole before Council took the vote to move forward.

“It’s understandable,” Cole said.

Comments from the community were mixed. Jane Rivera, a member of the Rosewood neighborhood contact team, said her district needed the preservation district. Approximately 70 percent of the city’s foreclosures were within the East Austin boundaries of the district, which covers portions of both Rep. Eddie Rodriguez’s (D-Austin) and Dawnna Dukes’ (D-Austin) districts.

“More of the poor live in this area than in any other area of town,” Rivera said. “We strongly support this, and we want to give a special thanks to Eddie Rodriguez.”

Gavino Fernandez of El Concilio, however, saw a displacement zone. He accused it of being a silent tax increase on current homeowners. Fernandez looked at the proposal and saw an effort to improve infrastructure but not help residents.

Marcelo Tafoya, speaking on behalf of LULAC, simply was suspicious of the program. Anything that looks too good to be true, typically is, Tafoya said.

Council Member Mike Martinez assured those who spoke that he would never have pursued the homestead preservation district if it were going to impose a new tax burden on East Austin residents. Instead, the district would take a portion of the tax increase over the next 10 years and put that into affordable housing.

“I realize that the concerns that were raised here tonight – on their face – would be alarming if they were actually what was going to take place,” Martinez said. “I assure you I would not have spent 4 ½ years on this if that was the case.”

Martinez acknowledged the concerns of the county – the county, of course, relies almost entirely on property taxes, unlike the city – and started with a motion to leave the option of participation up to the county. That would have meant, in essence, that the county would set both the city and the county rate, since both entities are required to participate equally under law.

Mayor Will Wynn was not comfortable with that motion and suggested a ceiling on the city’s participation. Because the city and county would be required to put in the same amount of money, the percentage of tax-increment financing would be different for each. Early estimates put a minimum 10 percent participation at a cost of $4.2 million. Over 10 years that would add up to $42 million if the county had chosen to offer 100 percent of its tax increment to the district.

Under the proposal, that tax revenue would go to a non-profit land bank that would purchase – but not condemn – available property, with the understanding that the resulting homes would target people between living at between 30 and 70 percent of median family income. Homeowners would pay taxes on their homes but not their land, which would seek to defray home costs and limit tax burdens. Such an effort also would keep prices reasonable for the surrounding properties.

Documentation on the effort also notes a goal of rehabilitation and renovation of existing housing stock, with a focus on low-income residents. County staff has given the city three pages of additional questions to answer about how the programs would work and operate.

Council Member Lee Leffingwell settled on 40 percent ceiling for the motion. Council agreed. The proposal, now approved by Council, goes back to the County, which will hear another presentation on the project by Dec. 23.

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