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Downtown density bonus goes unused in favor of CURE overlay

Thursday, June 30, 2011 by Kimberly Reeves

Council approved one more high-density downtown tower last week that used a “CURE” overlay and bypassed interim downtown density bonuses.

Four years after the interim downtown density bonus program was proposed, not a single project has used it to gain increased zoning entitlements, typically high-density floor-to-area ratios.

Instead, most developers have chosen to pursue a DMU-CURE overlay, appearing before Council offering a smorgasbord of various negotiated agreements on donations to local trails or affordable housing.

That didn’t sit well with attorney Heather Way, who teaches affordable housing law at UT Law School and was a stakeholder in the original drafting process. Way asked Council members to delay the case to August to consider what the city lost with future developer Endeavor bypassing density bonuses, which she calculated to be in the range of $3 million

“In this case, there has been no vetting at all about what the city is bypassing, what benefits the city is bypassing by granting this developer an exemption by going through CURE, and I think it is critical to know information. There needs to be more information.”

Unfortunately for Way, however, nothing forces land owner Perry Lorenz or potential developer Endeavor to pursue density bonuses on the acre parcel, located at 309, 311 and 315 Bowie Street behind the Tiniest Bar in Texas. Even the 350-foot Shoal Creek Walk tower across the street, being pursued by Schlosser Development, bypassed density bonuses and only negotiated affordable housing options with some pressure from then-Planning Commissioners Kathie Tovo and Danette Chimenti. (See In Fact Daily, April 5, 2010)

The city concessions being made on the Bowie tower, given its footprint, would be even more generous than those given Shoal Creek Walk. Under the agreement hammered out at Council, zoning was upgraded from DMU to DMU-CURE, with a floor-to-area ratio of 12-to-1 and a maximum height of 400 feet. A conditional overlay, tied to the project at the site plan stage, would address the daily trip limits on the property, which would soon sit at the intersection of a number of major downtown towers.

Agent Jamil Alam, pressed by Council for more specifics on the project, said the final financials on the property would determine whether it would be a mixed-use project or an office tower with a potential anchor tenant or a residential tower.

“We expect to make a decision on product type within the next 60 to 90 days and are hopeful we can move things along faster than that,” Alam said. “In terms of community benefits, we are committed to go green building or LEED silver.”

Other benefits Alam ticked off included a dedicated easement for the hike-and-bike trail, a flood plain wall and Great Streets participation. Property taxes, Alam projected, would increase from $100,000 to $1.5 million a year for the city once the project is completed.

City staff recommended the up-zoning. Planning Commission approved the project in early June on a consent agenda, with no comment. And, as Mayor Pro Tem Sheryl Cole pointed out, the Downtown Austin Neighborhood Association also supported the project.

Downtown density bonuses will be finalized with the downtown neighborhood plan. At that point, CURE zoning options will go away and developers will negotiate the difference between current zoning and projected entitlements, property-by-property. Community benefits for downtown density, where it’s desired, will be spelled out for developers.

Until the density bonuses are approved, Endeavor has every incentive to pursue DMU-CURE zoning. Council Member Bill Spelman, during discussion of the zoning change, mused aloud whether the $10 per square foot, pegged to additional square footage in proposed projects, might be too steep a price in the current economy.

“On a long-term basis, it sounds like $10 a square foot or 10 percent affordable housing units might be reasonable at the time,” Spelman said. “Given the current drying up of financing since November 2008, it has been much more difficult to find financing. I can easily understand how your average real estate developer would say, ‘Well, I would have gone for that in January 2008, but I can’t think of it now.’”

Alam said the additional square footage on the Bowie tower would have made it entitlement cost prohibitive. Using the prior ordinance, Council has been able to squeeze another 30 or so affordable housing units into the downtown housing mix, a rather minor accomplishment. Barton Place Condos on Barton Springs, for instance, offered to donate $500,000 towards affordable housing in its deal.

It might be time to revisit the amount of the density bonus and see how burdensome it was on developers, Spelman said. The other elephant in the room, of course, is that various projects have been carved out from the program. Hotels no longer have to pay the surcharge. Nor do office buildings. So the burden only lies with proposed residential towers.

Council Member Laura Morrison said, “I believe going ahead and approving this is putting the cart before the horse, and if we are going to use the guidelines for height in the downtown plan to approve this project, then we really should be following the rest of the guidelines for community benefits that are in the downtown plan. So, with that, I won’t be supporting this motion.”

Morrison was the lone nay on the zoning change. Council approved the change, 6-1, on all three readings.

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