In case you hadn’t heard, there’s this election thingie going on right now (early voting at least). There’s some national thing happening, I’m not too sure about what’s going on there. If you live in Austin, there’s a couple of ballot initiatives, but the one I am most interested in right now is Proposition 2:
Shall the City Charter be amended to prohibit the City from entering into future agreements to provide financial incentives in connection with the development or redevelopment of property that includes one or more retail uses, and to stop the City from providing financial incentives under certain existing agreements in connection with the development or redevelopment of property that includes one or more retail uses?
My understanding of what all of this means is that if Proposition 2 were to pass, the City of Austin would be prohibited from providing subsidies (in the Domain’s case, they get a check from the City that is a percentage of the taxes that they collect - sales, property, etc) in connection with retail. Proposition 2 would break the existing subsidy agreements at the Domain and Mueller, as well as stopping any future retail development subsidies.
Austinites will be familiar with the two groups on either side of the Proposition, after seeing their signs all over town: Stop Domain Subsidies is on the For side, and Keep Austin’s Word is the Against side. A little about each side:
Stop Domain Subsidies
These guys are the ones that got this onto the ballot in the first place (they’re for it), they had people going around getting petitions signed earlier in the year. I’ve talked to the two people that are leading/coordinating SDS, Brian Rodgers, a “longtime commercial real estate investor” and Linda Curtis, “a longtime independent political activist” (and the voice behind @stopdomain on Twitter). They’ve gotten many local businesses onboard (as best as I can tell, the vast majority are retail) and they have been pushing that connection all over town (I watched a documentary at the Alamo Drafthouse before they screened the last Presidential debate).
Keep Austin’s Word
These guys are against Proposition 2, their banners have only popped up in the month or so, mostly around the Domain itself, and in a few places scattered around town (except for that big one on the building under construction near Camp Mabry on Mopac). Most of their support seems to be coming from the people in government and local media - including almost all of the current City Council, but they have a list on their website of what appears to be mostly non-retail businesses in support.
Thoughts and Repercussions
Personally, I think I am in between a rock and a hard place - I am all about supporting local businesses (notably, I am writing this in an independent coffeehouse almost within sight of the Domain), I don’t like big retail developments, and I don’t like the idea of having my tax dollar subsidizing large non-local businesses. That would put me clearly in the FOR column, however, I think that subsidies of that nature can be useful - the (mostly successful) Mueller development benefits from the types of incentives (among other incentives) being prohibited by Proposition 2. SDS argues that Mueller would still be okay because it would exempted as a Tax Incremented Financing (TIF) project under Proposition 2.
Another thing to consider is that the City of Austin has already passed a resolution to prohibit any Domain-style incentives in the future (leaving present agreements intact). One of the implications of Proposition 2 passing is that when the City does not make its contractually obligated payments, our bond rating could be hurt (the consequences of not “Keeping Austin’s Word”), which basically means that the City would not be as attractive as an issuer of bonds because of the (then) greater chance of defaulting on bonds (see Wikipedia’s article on municipal bonds).
That, I think, brings the possible outcomes for this situation down to this:
Proposition 2 Passes
Stop Domain Subsidies gets what they want - the Domain no longer receives subsidies from the City and local retail businesses won’t be forced to compete against businesses subsidized by their own tax dollars. Ultimately, the City is hurt by a lowered bond rating and possible lawsuits from the Domain because it is prohibited (by Proposition 2) from making the contractually agreed-to payments, but they have more money in the bank because the tax dollars for the incentives stay with the City. They also lose the bargaining chip and tool that retail subsidies offers.
Proposition 2 Fails
Keep Austin’s Word gets what they want - the Domain and Mueller will continue to get their incentives, and no further Domain-style subsidies will be passed (because of the 2007 City resolution). Austin maintains its bond rating, but will continue to lose the money from the incentives to the Domain.
My take
I am inclined to say that it would be better to take the hit now, and vote against Proposition 2. I think it is easier to stay the course that we are currently on, and continue with the subsidies that we agreed to as long as the Domain continues to hold up their end of the bargain (which they have, according to the City), rather than risk the wide-ranging and possibly unknown consequences of the Charter Amendment. We know now that another Domain-type agreement won’t happen under the City’s resolution (which calls for more time and transparency for independent review in any future economic developments). As much as I dislike siding with the Domain on this one, I think it is in the better interests of the City in the long-term to stay the course (and I will of course, continue to avoid the Domain for shopping).
Disclaimer: Everything here is my understanding of the issues, they are very complex and I could be missing something along the way - if you disagree or think I missed some important information, please leave a comment and let me know. As always, do your homework before you vote and make up your own mind.
P.S. Major kudos and thank you to Stop Domain Subsidies for being responsive and active in their promotion efforts - I tweeted with @stopdomain about Proposition 2 and Linda got me in touch with Brian Rodgers on the phone to answer my questions and discuss it with me.
