Council moves toward creating South Central Waterfront TIRZ

At its final meeting of the year, City Council gave preliminary approval for the South Central Waterfront tax increment reinvestment zone, or TIRZ in city parlance. Council members Leslie Pool and Greg Casar did not participate in the Dec. 20 meeting, but the rest of the members voted for the plan unanimously.

Council unofficially adopted the plan for the South Central Waterfront in 2016 and many people worked on the plan for years. Since then, a number of Council members have changed, prices have gone up and the city has to deal with the fact that it can’t raise property taxes by more than 3.5 percent without voter approval.

Once the TIRZ is put in place, the assessed values of properties within the zone are frozen, and as property values increase, the city will collect taxes and dedicate a portion of the increased value to improvements within the TIRZ district. That is why Council Member Kathie Tovo and Mayor Steve Adler pushed to take action before the end of 2021; if Council had waited until 2022, the city would have lost the increased value of certain properties. One of these is at South First Street and Barton Springs Road, known as the Snoopy PUD, the site of a brand-new high-rise where a Hooters previously sat.

Council Member Alison Alter expressed reservations about the plan, as she has in the past. Alter said she still had doubts about the inclusion of the Snoopy PUD property, arguing it was hard for her to see how the city could say that the property’s increased value was dependent on creating the TIRZ.

Richard Suttle, attorney for property owner Endeavor Real Estate Group, told the Austin Monitor, “The Snoopy PUD would not have developed but for the South Central Plan and the anticipation of the TIF or TIRZ.” He added that the redevelopment of that particular property “just went faster than everybody else’s.”

Council will now come back, probably on Feb. 3, to flesh out some important details, including the percentage of tax money from the zone that will be dedicated to the TIRZ. That number is likely to be 46 percent, as city staff recommended. Council set the percentage of taxable value for the TIRZ at 0 percent, promising to change the number this year.

If the TIRZ gets 46 percent, that would allow 54 percent of tax monies coming from the South Central district to flow into the General Fund.

The TIRZ is based on an assumption that property values within the district will grow over time as development occurs and the increased tax collections will pay for amenities. Those amenities are expected to include expanding streets and sidewalks as well as creation of a transit station on the site of the Austin American-Statesman building.

The total cost of the project is estimated at $278 million, with most of the funding coming from tax dollars, bonds and some funding coming from developers. According to responses to written questions from Alter, the total amount developers might pay for streets and other amenities “will be updated based on negotiations with developers and based on the availability of other sources of funding.”

Suttle said normally developers would pay for construction of utility lines for their own properties, but the TIRZ will allow the city to enlarge those lines for service to a number of properties within the district.

Even though she voted to create the zone, Alter said she continued to be uncomfortable with the inclusion of the Snoopy PUD, believing it does not meet the legal requirements.

Attorneys Bill Bunch and Fred Lewis both appeared at the Dec. 20 meeting to scold Council for considering using tax money in a way that they perceived as just helping developers. Bunch, Lewis and a third attorney, Bill Aleshire, wrote a letter to Council before the meeting asking them not to endorse the tax zone. The three lawyers argued that the South Central Waterfront area is not an appropriate place for such a tax increment zone, because it is clearly not a blighted area.

Suttle said the city has already created several such zones in areas that were not necessarily blighted. He named Waller Creek, Mueller and Seaholm, adding that all of those “passed muster with the attorney general,” who will be asked to approve the TIRZ.

Photo made available through a Creative Commons license.

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