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Council still has many questions about waterfront tax zone

Wednesday, February 2, 2022 by Jo Clifton

Anyone expecting definitive answers about how the city will pay for improvements for the South Central Waterfront zone after a lengthy discussion at Tuesday’s City Council work session was likely disappointed.

At the end of reports from the city’s financial and housing staff, Council still had numerous questions. Mayor Steve Adler, who has been a proponent of the tax increment reinvestment zone, said Council needs to know how the property within the zone would develop with the TIRZ and how it might develop without the city tax money.

Council approved the TIRZ in December, but left open the pivotal question of how much city tax money would be diverted from the General Fund and into financing streets, sidewalks, parks and trails for the area as well as new utility lines and green infrastructure.

By creating the TIRZ but leaving the tax increment at zero, Council left open the question of how much, if any, tax money there would be to pay for what planners hope will be a showpiece part of town along the waterfront.

Staff members have estimated the cost of streets, sidewalks, parks, plazas and utilities at $277 million. However, as Deputy Chief Financial Officer Kimberly Olivares told Council, the estimates do not include administrative expenses for the Austin Economic Development Corporation, affordable housing, or maintenance and operation of the amenities. She reported that one of the primary duties of the EDC would be to coordinate relevant city departments on needed improvements, including streets and utilities.

In order to win approval from the Texas Attorney General’s Office, the city still has to prove that development or redevelopment within the zone would not occur “in the reasonably foreseeable future but for public investment,” as Olivares noted. Supporters of the TIRZ, including Adler, have argued that the inadequate sidewalks and street layouts are significant deterrents to development. On Tuesday, Adler noted that this highly valued part of town would develop without city funds, though not in a way that the city envisions.

That has not been a sufficient argument to convince lawyers Bill Aleshire, Bill Bunch and Fred Lewis, among others, who have written to Council to let them know that they think the TIRZ plan is illegal.

Aleshire told the Austin Monitor he remains convinced that the city could not make a case for moving forward with a TIRZ because its lawyers would be unable to prove that the property would not develop but for the TIRZ. He and others who object to the TIRZ would have no problem with the use of a public improvement district, however, because that would not take money away from the General Fund.

Attorney Richard Suttle, who represents Endeavor Real Estate Group, said the attorney general had approved TIRZ financing for a variety of areas of town not considered blighted. Those include Waller Creek, Mueller and Seaholm, which would stand as good examples for the city in its argument for approval.

In response to questions from Council Member Mackenzie Kelly, Olivares explained that a public improvement district, or PID, is funded by property owners within the district who pay an additional tax to support amenities inside the district. Property owners who would be taxed would have to agree to the PID. Kelly asked whether the city had heard from property owners within the tax increment reinvestment zone. Olivares said they had not, but that was not surprising because the TIRZ would not cost them any additional money.

Council Member Kathie Tovo, whose district includes the South Central Waterfront, had many questions, including one about progress on a regulating plan for the zone. Olivares told her she anticipated the plan being ready in July.

Council Member Pio Renteria said he was concerned that the area would not produce enough affordable housing. He noted that he had been disappointed in the past by a number of developments that promised and then failed to produce the needed housing.

Tovo said, “We have the flexibility to talk about this. … There is currently no public financing going to this TIRZ. We need to be able to understand as a Council and explain to the public what are the implications of different paths and what is the comprehensive benefit that we can bring through one financial mechanism vs. another because there are ways this can develop. … We have invested lots and lots of community energy, staff energy, public dollars in trying to get this right in such a critical part of the city.”

Council Member Leslie Pool expressed reservations about diverting so much money from the city’s General Fund into the waterfront zone. She said she was “worried about tying up a chunk of revenue” that future Councils might need, concluding, “It really is a difficult decision.”

Adler, on the other hand, said he was concerned that if the area was not developed properly, people would look back in 20 or 30 years and wish it had been done differently.

Rendering of South Central Waterfront courtesy of the city of Austin.

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