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Council to consider settlement in historic landmark lawsuit

Wednesday, August 3, 2011 by Josh Rosenblatt

The City Council will consider changes this week to regulations governing historic zoning as part of a settlement of a lawsuit that challenged the way it has been granting tax exemptions to owners of historic properties.


In the lawsuit filed in April, plaintiffs Dominic Chavez, Alfred Stanley, and Mike Levy argued that the city had violated the state tax code by not requiring owners of properties zoned historic to show their properties are “in need of tax relief to encourage preservation,” as stated in the code.


At Tuesday’s Council work session, attorney Beverly Reeves, of the law firm Reeves & Brightwell, who has been representing the city in the case, presented a settlement recommendation for Council to consider at their Thursday meeting.


That settlement, Reeves said, is composed of two parts. “We modify provisions of the ordinance related to the granting of the tax exemptions for historically designated properties to track the language of the Texas tax code section 11.24,” she said. In addition, she said the property owner would have to provide a statement that will read, “My property is in need of tax relief to encourage its preservation because …”


Last year, the city granted tax exemptions to around 500 properties. Documents submitted during the lawsuit show that most historic properties automatically receive those exemptions. Reeves said the new version of the historic preservation ordinance would provide more discretion to the Council in determining the need for an exemption.


“The way the original ordinance was written, it legally doesn’t give the City Council any option other than to grant the tax exemption,” said Reeves. “With the modification of the ordinance, the City Council will have the option to approve or not approve a particular tax exemption request.”


Should Council vote to approve the settlement, the next step for staff will be determining the process and the criteria for assessing the meaning of “need.”


Jerry Rusthoven from the city’s Planning and Development Review Department told In Fact Daily that property owners seeking the tax exemption would have to seek a recommendation from the Historic Landmark Commission and Council approval.


Owners of historic properties have to reapply annually for tax exemptions.


Having the lawsuit off the table will clear the way for Council to put the final touches on an amended Historic Landmark Ordinance, a project it’s been working on since December 2009, when nearly 50 homes were granted historic landmark status in that month alone. That event sparked public outcry over the negative financial impact the program might be having on the city.


And more changes could be on the way. Yesterday Mayor Lee Leffingwell informed his colleagues that he would be coming forward with two proposals of his own, both concerning a new “hard” cap of $2,000 that staff is recommending be placed on all tax brakes.


Leffingwell said he wants the grandfathering of the current system – whereby the maximum city exemption is the greater of $2,000 or 50 percent of the city tax levy – to apply only to properties that were designated historic before Jan.1, 2010, when Council started reconsidering the program. Staff is recommending that the new cap apply to all properties, phased in over time.


However, Council Member Mike Martinez said he would view any modification of a property’s current tax-exempt status as the city reneging on an agreement with its citizens.


“If I as a policy maker feel like the rules need to be changed, and I as a body change then rules, then they apply moving forward. … not retroactively,” Martinez said. “When these folks after January 1, 2010, when they applied, they applied under the rules that existed. I don’t approve of retroactively imposing a cap just because we’ve been talking about it for a year and a half.”


In response, Leffingwell pointed out that the city has notified every property owner who has applied for historic status since January 1, 2010, of the possibility of future revisions to the program. 


In related news, historic preservation advocacy group Saving Austin, represented by Paul Saldaña, yesterday released the results of a report that the groups says reveals “that property values in and around residential historic landmarks in many parts of the city have grown much faster than the overall city average, and even higher than the overall neighborhood” and that “tax incentives for historic preservation is a factor that helps generate higher tax revenues and helps attract families to Austin’s urban neighborhoods.”


According to the report, in the four neighborhoods analyzed – Robertson Hill, Fairview Park, Hyde Park, and Old West Austin – property values in and around landmarks outpaced the city average by between 8 and 25 percent.

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