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Committee seeks data on homestead district

Thursday, April 30, 2015 by Jo Clifton

The City Council Housing and Community Development Committee took a small step forward Wednesday toward funding affordable housing within the Homestead Preservation District in Central East Austin and possibly elsewhere. However, committee members did not pick a financing mechanism and still have questions about how much such a district would cost.

The initial Homestead Preservation District is within Council Member Pio Renteria’s District 3. Renteria, who chairs the housing committee, is pushing forward a resolution he hopes will eventually create that mechanism.

With budget season right around the corner and departments told to cut 5 percent, however, any new program that takes away from the general fund is going to get a lot of scrutiny. That is especially true considering several members of Council made campaign promises to enact a 20 percent homestead exemption.

After the meeting, the Austin Monitor asked Mayor Steve Adler if he saw any conflict between the homestead exemption, which he has championed, and the establishment of funding for affordable housing within the Homestead Preservation District. He said the two things are not related. In addition, Adler promised, “We’re going to do something. … We’re going to advance the ball on housing this year. How we advance the ball, I’m not sure. But housing can’t be a challenge we just talk about.”

Deputy Chief Financial Officer Greg Canally explained the popular financing tool known as Tax Increment Financing or TIF, which two different Texas statutes allow: Chapter 373A of the Local Government Code and Chapter 311 of the Tax Code.

Under Chapter 311, which staff prefers, the city can designate a Tax Increment Reinvestment Zone, or TIRZ. There would be a board of directors, usually City Council, that could issue bonds and pledge money from the tax increment fund as security for the bonds to pay for specific affordable housing projects. The city used Chapter 311 to create the Mueller development at the city’s former airport location.

Under the alternative law, Chapter 373A, the city would not be able to issue bonds and would only be able to spend money as it is collected.

According to the chart Canally presented, there could be a high general revenue impact if the city chose to use Chapter 373A, but possibly no impact or a low impact under Chapter 311.

The city hired Economic & Planning Systems, Inc. to look at Homestead Preservation Districts and decide which financing tools would work best. The consultant found that the city’s current affordable housing funding strategy “successfully leverages existing financing tools available to the city. However, addressing continuing issues of affordability in Austin requires additional funding sources. Aside from (Homestead Preservation Districts) and Tax Increment Reinvestment Zones, the majority of alternative funding” measures are prohibited by state law.

The homestead districts and the reinvestment zones, on the other hand, “provide a legally enabled, sustainable funding source that can capture value and reinvest in areas of greatest need while reducing the extent to which the city may be required to undertake discretionary funding projects in the future. As such, Austin should incorporate HPDs and/or TIRZs into the city’s overall affordable housing financing toolkit.”

In San Antonio and Dallas, developers came to the cities with a petition to build a project under Chapter 311. If a developer came to Austin with a proposal for a project in the Homestead Preservation District, under Chapter 311, “you could build it now and pay it off over 30 years,” Canally said. Under Chapter 373A, however, the city would be collecting and saving money until it could pay for a project in its entirety, he said.

Renteria had prepared his homestead preservation resolution to allow for either possibility. However, the committee opted not to choose either one, so the resolution will move forward to Council without a designated funding mechanism.

Council Member Greg Casar seemed interested in considering a Homestead Preservation District for the Riverside area. In order to make sure that area would be eligible, he suggested removing a section of the resolution that would prohibit designating any areas with 50 percent or more of its population enrolled in college or graduate school. That section was removed, and the three committee members present, including Council Member Sheri Gallo, voted to advance the resolution.

Gallo, in particular, had a lot of questions about the funding. She asked staff to bring back specific numbers and especially wanted to know about the financing of the Mueller TIF, which Council approved in 2004.

Gallo said after the meeting, “I want to know what the citizens have bought for what we’ve given to that project.”

Canally said that when the 2004 Council chose to make Mueller a TIF zone, the property had no buildings and not much tax value as a former airport. In addition to the 25 percent affordable housing residents got on the site, he said, they also received density, open space, a town center and other amenities.

 

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