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South Shore zoning approved, affordable housing fee still in question

Monday, October 26, 2009 by Kimberly Reeves

A split City Council approved zoning for the South Shore Planned Unit Development (PUD) on second reading last week, but questions about how much the developer Grayco should pay into the city’s affordable-housing fund — and whether the city should take on-site apartment units instead of just a cash payment — still linger over the project.


The issues of the project’s height and its relationship within the waterfront overlay were dealt with during first reading on Sept. 24. Mayor Lee Leffingwell and Council Member Laura Morrison indicated that they could not support the zoning at that time, and no one expected those votes to change on second reading. However, the other five members were expected to land on an affordable housing option on second reading on Thursday. That did not happen and Council Members seemed to be headed in different directions on that question.


Grayco owns the 20-acre South Shore PUD triangle and the site next door that is closer to the proposed East Riverside corridor rail transit stop. Grayco, represented by attorney Steve Drenner, offered the city a combination of units and a fee-in-lieu payment as part of a package showing that their planned PUD would be superior to regular zoning.


According to the proposal, Grayco would provide $1,620,000 to the Austin Housing Finance Corporation’s housing assistance fund, plus 60 on-site apartments affordable to a family living on 80 percent median family income over the next four decades. Alternatively, Grayco offered to pay $2,625,600 to AHFC with no on-site units.


Either way, the developer also agreed to cover the cost of an on-site police substation for 25 years and contribute $225,000 for additional trail facilities, plus $800,000 in required fees. Grayco also offered funding to help relocate displaced residents.


That was one end of the spectrum. On the other were affordable housing advocates such as Karen Paup and Cathy Echols, who want to see as many displaced residents remain in the community as possible. Riverside is one of the densest corridors in the city, with many of the city’s most affordable apartment projects.


During first reading, when more local residents were present, speakers who live in the neighborhood referred to themselves as the “East Side slum dwellers.” Putting new affordable housing on the South Shore site, Echols said, is critical. A total of 573 affordable housing units, which Drenner said could not be rehabilitated, will be demolished in order to construct the South Shore project. And rents in the area, they said, are  closer to 60 percent of median family income than the 80 percent suggested by Drenner.


According to her reading of the PUD ordinance, Echols calculates a payment of somewhere between $7 and $8 million, which would require a contribution for every square foot of land. That is not outrageous, Echols said, given the critical need to create on-site affordable housing.


“That’s a very desirable area; because of its close proximity to downtown and other parts of Central Austin that’s going to be a really good area for transit. So as that area is redeveloping, it’s really important that we keep affordable housing in the area,” Echols said. If we don’t do anything in terms of keeping on-site affordable housing, we’re going to see all of those properties redeveloped, and that’s going to become a more exclusive area that’s not going to provide affordability at a level that working people in this community can afford.”


The city’s Housing and Community Development staff landed in the middle of the spectrum, suggesting a package of $3.76 million, which would include the $800,000 police substation, plus $90,000 for resident relocation services. That amounts to about $2.87 million for the fee-in-lieu, still more than the Grayco plan.


Drenner expressed his doubts about such a substantial package. South Shore would be a $150 million project with about $50 million in private capital. And beyond that, the city would likely be getting $10 million in ad valorem taxes on the upgraded property over the first 15 years of its existence. When the numbers start coming together for community benefits, that total could be north of $9 million, he said.


A height variance on Lady Bird Lake might be a precious commodity, but it still has to fit within the framework of what works for the developer, Drenner said.


“I would just tell you, from a reality standpoint, like all developments, there is a tipping point where it doesn’t make sense to go further,” Drenner said, adding that capital goes where there is a potential for return. “We would love to have more of that available for affordable housing, but I will tell you in all honesty we have reached that tipping point.”


Housing advocates want to get replacement housing as close to the South Shore PUD development as possible, even if it means fewer units would be built there than in the suburbs. Council Member Sheryl Cole pressed Paup on the issue of geographic dispersal – the same amount of money would put more units in outlying areas – but Paup was fairly clear on the need to remain in the neighborhood.


Council Member Chris Riley expressed his desire to see more on-site options explored, especially given the site’s promixity to a transit stop. As Paup pointed out, East Riverside is already one of the most heavily used bus corridors in the city, and it would follow that a built-in ridership for transit exists in the area.


Mayor Pro Tem Mike Martinez noted that South Shore had voluntarily agreed to meet the new city PUD regulations. Grayco’s rezoning request was in the city’s system before the new ordinance won approval, and, therefore, the new ordinance does not apply to the property.


“The applicant has voluntarily agreed to apply the new PUD standards,” Martinez said. “So we need to make that real clear, when we start referencing something that doesn’t actually apply and is not binding on this particular request, but, again, we are applying those standards.”

Martinez also indicated that the police substation and relocation funding should not be counted toward affordable housing. “It is a community benefit and should be considered in terms of the overall superiority of the PUD,” he said.  

At the end of the discussion, Cole moved for the staff recommendation, as well as to limit cocktail lounge space to one-third of any commercial space. Initially, that total was 20,000 square feet out of a potential 30,000 square feet of commercial space, but under questioning from Spelman, Drenner agreed to the lower percentage. He said the amount of commercial development would depend on market variables.


The door was left open on the affordable housing issue, with third reading expected on Nov. 5. Asked on Sunday whether he expects the five Council members in the majority to arrive at the same number by final reading of the ordinance, Spelman said, “I’m almost certain of it.”


The final vote on the motion was 5-2, with Leffingwell and Morrison voting no, as before.

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