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Council members debate alternatives to CURE zoning in Downtown Plan

Thursday, November 3, 2011 by Josh Rosenblatt

With the finish line of Austin’s nearly four-year Downtown Plan development process in sight, Council members are still scrambling to address the issue of density management in a way that both encourages downtown development and ensures affordable housing. At Tuesday’s work session, Council members discussed compromise measures that might at long last solve the CURE/Density Bonus debate.

At issue is an amendment added to the Downtown Austin Plan by staff in August to retain Central Urban Redevelopment, or CURE, zoning. CURE allows developers to add height or Floor-to-Area ratio without guaranteeing affordable housing units or paying the city a fee. In the original draft of the plan, CURE zoning was eliminated. Keeping it around, critics argued, de-incentivizes developers from taking part in the downtown density bonus program, which requires community benefits in return for those zoning variances.

On Sept. 13, the Planning Commission voted 7-0 to reject staff’s amended proposal. At Tuesday’s meeting, Council member, and former Planning Commissioner, Kathie Tovo, explained why she believes keeping CURE would be counterproductive to the city’s goals.

Addressing a debate between her colleagues over recalibrating the cost of the density bonus program based on individual projects, Tovo pointed out that no developer has used that program while CURE has been an option.

“We’ve, in essence, allowed there to be a zero-dollar option in CURE,” said Tovo. “And so zero is always going to be less than whatever is in our density bonus no matter how we recalibrate those numbers. As long as we have CURE we’re going to have trouble getting people to use the density bonus.”

Tovo also took issue with the argument that the density bonus program will discourage developers from building downtown.

“You go and get a 310-foot increase in height, which happened over the summer with a CURE rezoning, that’s a significant increase in financial value for your property,” said Tovo. “Returning a fraction of that through the downtown density bonus program is not going to stifle development in my opinion.”

But Council Member Chris Riley disputed the idea that a one-time, up-front density bonus fee would actually help grow affordable housing development downtown.

“CURE or no CURE, under any scenario, the density bonus program is not likely to result in a significant, continuing, and reliable stream of revenue to support affordable housing,” said Riley. “Especially since we’re thinking about (permanent supportive housing), which requires not just one up-front capital investment for bricks and mortar but actually requires an ongoing revenue stream for operations and maintenance over time. And if the only mechanism we have for supporting affordable housing downtown is the density bonus program, it’s going to be hard to look to any revenue coming in.”

Riley argued that the one-time nature of density bonus payments, in addition to their unpredictability based on economic conditions, would make for a “fairly frail reed on which to support our entire program for affordable housing downtown.”

One way to strengthen that reed, Riley said, would be to consider a proposal put forward by Mayor Lee Leffingwell that would finance the properties through project-specific Tax Increment Financing, or TIFs, by which the increased tax revenue generated from a project would go toward financing the debt incurred to pay for that project initially. Riley said this approach could result in a “reliable, steady income stream” to fund affordable housing projects over the long haul.

Council Member Bill Spelman then put forward the idea that the plan could use the long-term payment approach without calling that approach a TIF. “We would need flexibility in the density bonus program,” he said, “which calls for a one-time lump-sum payment, instead of maybe getting more money by allowing developers to pay over time.”

But Assistant City Attorney Chad Shaw responded to Spelman’s proposal by saying that any affordable housing program would have to be set up beforehand and be predictable, free of negotiations. Any program by which a developer were given the option to pay, say, $3 million upfront or $5 million over 10 years would, he said, “raise concerns on our compliance with state law.”

The Downtown Austin Plan will be the subject of a public hearing this afternoon. Tovo said she hoped she and her colleagues could find a way to convince stakeholders that economic development and community development aren’t “incompatible goals.”

“We should be able to support a vibrant and dense downtown while also returning some of that value to the community, to support a community priority we’ve identified, which is affordable housing,” Tovo said.

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