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Council takes first step to buy Bull Creek land

Wednesday, September 10, 2014 by Jo Clifton

With only Mayor Lee Leffingwell dissenting, the Austin City Council took a small step Tuesday toward the purchase of the prized piece of real estate at the intersection of Bull Creek Road and 45th Street from the Texas Department of Transportation. The state has given the city a deadline of Friday to make a deal.

Council Member Laura Morrison, who sponsored the original resolution along with Council Members Bill Spelman and Kathie Tovo directing the city manager to acquire the property, figured out a way to get her reluctant colleagues to vote for it. Instead of directing City Manager Marc Ott to “negotiate and execute all documents related to the acquisition of the property,” the resolution simply directs staff to negotiate with TxDOT and do the normal due diligence for acquisition of land.

Mayor Pro Tem Sheryl Cole asked staff to provide as much financial information as possible about how the city might recoup its costs.

According to TxDOT, the property is valued at $28.5 million. But the resolution calls for an expenditure of up to $28.9 million to cover costs.

It is not clear where the city will get the money, however. According to Austin’s Chief Financial Officer Elaine Hart, state law appears to prohibit use of certificates of obligation to purchase property for economic development.

Although much of the talk from the dais and from members of the Bull Creek Road Coalition was about parkland and affordable housing, the city anticipates a certain amount of retail development on the edges of the property. The retail development helps create more value, but makes it more difficult to finance.

Hart said the city has an option of using about $4 million in affordable housing bond money and “anywhere from a half million to one million in parks bonds” to pay part of the cost. She said the parks and housing departments had expressed interest in the project, and that their bond money could be used. “Beyond that, we’re still looking. We’re looking at other opportunities, talking with bond counsel; we haven’t identified them yet,” Hart concluded.

John Eastman, chair of the coalition, told the Council, “We understand that this resolution is being considered in the context of a limited city budget, which is why we want to go on record with two key commitments: Number one, there should be no cost to the taxpayers associated with this project. The BCRC commits to working with the city to ensure the city is paid back in full, with interest, for all the acquisition and development costs associated with the property, no matter what. That is the number one goal.

“The second commitment is that the entire city should benefit. In order to make this kind of investment of city resources, even if it is temporary, there should be benefits for the entire city that exceed the requirements of the Land Development Code. We commit to working with the city to ensure that the project provides tangible citywide benefits,” Eastman said.

He mentioned a higher percentage of affordable units than is usually required by PUD zoning, comparable to Mueller, and the possibility of flood mitigation funds that could be used citywide.

Describing the property, Eastman said there are 3 to 4 acres of floodplain plus another 10 to 12 acres of steep slopes and heritage trees. That leaves about 60 acres of “highly developable” property. The group envisions a compact, connected development with a lot of open space preservation, Eastman said. He explained that the group has developed a set of design principles in conjunction with the development community and “experienced design professionals.”

One of those professionals was architect Sinclair Black, who said he had been working with the coalition for the past two years. He said it was not clear that the state would actually sell the property until August, when the state Cemetery Commission gave up their easement, releasing the property for development.

Council Member Mike Martinez, who had expressed skepticism about buying the property, seemed enthusiastic about the possibility of affordable housing in particular. However, after the meeting Tuesday, it was clear that he remains wary. “If we have an honest conversation with the community and say the only option we have is to increase the property tax rate so that we can issue debt to buy this, I think there’s going to be pushback.”

Martinez continued, “I think there’s going to be concern, because inevitably some folks are going to feel like it only benefits the few that live around that area. So I think we have to have this conversation about the potential economic impact that it could have, and the return on investment should we purchase the property. I think everyone’s goal is that whatever we spend, we want to recoup those funds.”

Martinez said it was unclear exactly how much time the state would give the city to find funding for the project if the city ultimately decides to move forward with the purchase.

Martinez said it would be much easier for the city to go through an RFP process to help it finance the purchase without using certificates of obligation. However, such a process could be very lengthy, and it almost certainly would mean the next Council would be choosing the developer and dealing with the financial implications. And it’s pretty clear that state would not wait for that.

TxDOT spokeswoman Veronica Beyer told the Monitor via email: “If a government entity demonstrates the intent to purchase the Bull Creek property on TxDOT’s terms within their priority period, the pending transaction may then be sent to the Transportation Commission for approval. Upon approval of the Transportation Commission, the sale goes through final approvals that include the AG’s office and ultimately the governor.”

Beyer added, “It is only after those approvals that a closing and conveyance of title can take place. If no government entity chooses to purchase the property within their priority period and on TxDOT’s terms, the immediate next step is a sealed bid to the general public. The city has until Friday to do this.”

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