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Austin Oaks: The numbers, the fight

Friday, April 7, 2017 by Elizabeth Pagano

In this column, the Austin Monitor will look past our normal, daily coverage in an attempt to reflect on how some of the bigger issues facing Austin are currently playing out at City Hall and beyond.

By the time City Council got around to discussing what to actually approve for the Austin Oaks planned unit development, it was past midnight and after several hours of public testimony.

There is a valid petition against the project, which means it will take the support of nine Council members to approve the zoning change. On the most recent vote, which will be the second of three, Council Member Greg Casar’s amendment won, but only with seven votes. So what was the difference between his and the other main amendment, which came from Council Member Alison Alter? And what is at the heart of this fight over the amendments?

Last week, the main dispute came down to a familiar topic of disagreement: How much are increased entitlements worth? And how much can developers be asked to give before a project becomes unworkable and they leave all of the affordable housing, parkland and other community benefits behind and just build an office building?

Recently, in the Thornton Road case, Council pushed past that limit. Though neighbors and Council Member Ann Kitchen labored over a deal that would make the plan to build housing work for them, crafting a unique small-area plan in the process, the end result forced the developer’s hand, and they now plan to move forward with a commercial project that would be allowed under the current zoning instead of a residential one.

This lost opportunity for more housing – and more affordable housing – is frustrating for many. And it’s a scenario that has played out in various ways across the city. For years, the best example was the downtown density bonus program that was intended to be a way to get more money for affordable housing, or more on-site affordable housing. But, because the buy-in for the program was calibrated so high, developers passed on the extra entitlements. They just weren’t worth it.

At the same time, as Alter argued repeatedly during the Austin Oaks discussion last week, there is no obligation on the part of the city to make the developer’s investment a good one. Council is tasked with determining the best use of land in the city, and if developers don’t go along with their best laid plans, then it’s really not Council’s problem. But it is clearly a balancing act, with the explicit threat of scrapping the whole thing and moving forward with what is allowed – up to 975,000 square feet of office space – even after more than two years sunk into the current plan.

Graves, Dougherty, Hearon & Moody attorney Michael Whellan stresses that his client, Spire Realty, would prefer that Council approve the plan that came out of the charrette process, noting that it is already a compromise when compared to the original plan. (Though that process included participation from the Council member representing the development, it was done while former District 10 rep Sheri Gallo was in office, not newly elected Alter.)

That said, Whellan entertained the two main proposals on the table as of last Thursday. He explained that Casar’s amendment would be workable, if costly, because the amount of office space has been increased to balance out the additional affordable housing. Casar’s amendment sets aside 10.8 percent of the housing as affordable, puts $826,000 toward traffic improvements, changes the proposed hotel to an office and changes one of the office buildings to a residential building that is one story less than originally proposed. In exchange, the restaurant use on two parcels will get an additional 18 feet in height, one building will get an additional two stories, two buildings will get an extra story in height and one of the parking garages will get an extra two stories.

On Thursday, in an interview with the Austin Monitor, Whellan said that Alter’s amendment did not have that balance. Alter would allow for an office to be built instead of the hotel, residential instead of office space and, like Casar, asks that $800,000 for affordable housing and $826,000 go toward traffic mitigation. The changes would also add affordable housing. But, he explained, Alter’s plan would not really allow an office building instead of a hotel, because there was no corresponding increase in parking, as would be required. And, just as importantly, there would be no additional height added to compensate for the changes.

According to a March 20 memo from the Neighborhood Housing and Community Development department, the cost to the developer for affordable one-bedroom apartments is $214,474 each and $354,000 for two-bedroom apartments. Under the current plan, with 46 units of affordable housing split between one- and two-bedrooms, the cost to the developer to build that housing is $12.8 million. And, though they may have been somewhat lost in the working out of additional details, Whellan also noted that the existing community benefits also have a cost/value, like: 8.5 acres of parkland, large landscape trees that are required and $1.5 million in parkland dedication fees.

But it’s all in how you look at it. During the late-night discussion, and again on the City Council Message Board, Alter struggled openly with how the increased office space value was calculated. In her post, she noted that 25,000 square feet of office space has a value of anywhere between $1 million and $2 million, depending on the source. Those numbers matter, she stressed, and it’s important that everyone agrees on the same baseline, at the very least.

Alter told the Monitor that she didn’t have an agreement with the developer, but she didn’t expect that she would with a more attractive offer on the table. “The fact of the matter is the developer bought this property with a certain set of entitlements, and it’s our job to make land use decisions – it’s not our job to make them whole,” she said. “A building of residential is worth something – it’s not worth as much to them as office. … If we can never say no, we can never get more.”

The idea that Council should be able to say “no” is true, certainly. As is the idea that someone looking to make a profit will gravitate toward the more profitable offer on the table, unless they have a terrible head for business. But embedded within the planned unit development ordinance is the idea that development should have a community benefit, and those have costs attached. It’s a tricky business to figure out the value of office space unbuilt. But it’s perhaps even trickier to figure out the cost of affordable housing unbuilt and of parkland unbuilt, and whether the addition of those things are worth more than their dollar value. It’s a struggle that’s come to a head in this planned unit development, but it’s not exclusive to it.

What seems most clear is that these are not values that are best worked out with eggs breaking and people warning about the “blood of children” in the background. A lot of focus is put on the idea of not making decisions so late at night – but it’s often the political pressure cascading up to the dais that causes costs to be weighted differently than they are in the light of day. A better system, it seems, is something tediously crafted and established after meeting upon meeting, with figures set long before things ever reach that point.

Casar told the Monitor, “(It) has to be negotiated, because a developer can choose to use PUD zoning or not. This developer could just choose to leave this office park and continue to charge rent on it, could choose to build a bigger office park with zero affordable housing and without the environmental superiority or the new green space or any of that. I think the majority of Council voted for the proposal on second reading because it was a negotiation that got us (those things) … while keeping the developer at the table.”

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Key Players & Topics In This Article

Austin City Council: The Austin City Council is the body with legislative purview over the City of Austin. It offers policy direction, while the office of the City Manager implements administrative actions based on those policies. Until 2012, the body contained seven members, including the city's Mayor, all elected at-large. In 2012, City of Austin residents voted to change that system and now 10 members of the Council are elected based on geographic districts. The Mayor continues to be elected at-large.

Planned Unit Development: A zoning classification designated by the city to allow greater flexibility for projects within its boundaries.

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