Public safety still driving city budget train

Futrell plans pay raise for first time in three years in FY2004-2005

Escalating costs for public safety and another year of falling property values are putting Austin in a $29 million hole as the Budget Office steps up its work on the budget for the next fiscal year. City Manager Toby Futrell told Council members at their most recent meeting that the primary focus will be on containing those cost drivers in order to bring the budget into balance. The $29 million deficit figure is based on keeping the effective tax rate, a two-percent increase in sales tax revenues and a three-percent drop in overall property values.

The Budget Office is facing many of the same problems in assembling the FY 2004-05 budget as it did in putting together the FY 2003-04 document, said Futrell. Those include rising costs for public health services, operations and maintenance for new facilities and escalating health insurance costs for employees. One difference next year is the inclusion of a pay raise for city employees. “For the first time in three years, our budget includes a wage adjustment for the general workforce,” Futrell said.

In addition, Futrell said her plans include:

• Continuing the two-percent pay premium for public safety employees;

• Maintaining step and longevity raises for those employees;

• Preserving staffing levels in both the police and fire departments; and

• Finding funds to replace expiring grants covering public safety expenses.

“Public safety remains a to priority in our community,” she added, “but it is also our largest cost driver.”

Although the first quarter of the 2003-04 fiscal year has just concluded, Budget Officer Rudy Garza told the Council that his office was already working with other city departments on their plans for next year and a five-year forecast. That forecast should be ready for Council review by mid-April. “That is a little earlier than in prior years; we normally do this in early May. It does provide the Council more time to analyze the financial picture,” said Garza. “It also will provide the Manager and the departments more time to begin the development of the Draft Policy Budget, which is also a change from the last couple of years. We have brought back or reinstituted the practice of a Draft Policy Budget . . . which gives you an opportunity to see the significant policy issues that the City Manager has highlighted and the actions that she is proposing or considering for the upcoming budget.” The Draft Policy Budget will go to the Council by the end of May, with the proposed budget presented at the end of July.

As part of the effort to provide the Council with the latest data for use in budget discussions, staff will present the first of what will be quarterly economic updates on February 5. That update will include information on the national Gross Domestic Product and consumer confidence, along with local figures on unemployment and sales tax revenues. In addition, there will be a report on hotel and motel bed tax revenues, the number of passengers travelling through Austin-Bergstrom International Airport, new building permits, the number of site plans being reviewed and utility customer connections. At the request of Mayor Pro Tem Jackie Goodman, the report will also include data on home foreclosures.

Downtown Commission likes Second Street plan

Urban Partners of Dallas to coordinate leasing of shops, restaurants

The Downtown Commission gave its endorsement last night to an ambitious plan to create a six-block retail district along downtown’s Second Street.

Next month, the City Council will hear details of the public-private partnership. The first retail space should be open for tenants this fall. Last night, the team coordinating the retail effort provided an overview of development for the proposed 188,000 square feet of space.

All six blocks in the retail district would front Second Street. The south side of the block would include retail space on the backside of City Hall and the two adjacent CSC buildings. The north side of 2nd Street would include what are known as Blocks 20, 21 and 22. AMLI is developing Blocks 20 and 22. The city will put Block 21 out for development in the coming months.

According to the key terms of the retail agreement between the city and AMLI, an initial cash flow payment would be made to AMLI, followed by payments to retire the development debt on the project. AMLI has agreed to put up an initial $5.5 million to develop the property. Any remaining revenues on the project would be split 80-20, with the lion’s share of the proceeds going to the city.

Ultimately the goal would be to put the six developed blocks under the ownership of one investor. According to the terms of the contract, after 3 years and when 90 percent is leased, the subleased interest can be sold. The city would receive 80 percent and AMLI would receive 20 percent of the proceeds once the development budget is repaid.

The estimated sales price on the 2nd Street District over the next 10 years is projected to be between $12.8 million and $13.9 million, based on current leasing projects.

Taylor Bowen of AMLI said the benefit of selling the project to one well-capitalized investor is that it provides a consistent level of care for the project. No one block will fall into disrepair, nor will various blocks be competing against each other for tenants.

“Once you have people competing for tenants, the tenant mix has been lost,” Bowen said. “It creates a downward spiral you don’t have with a well-capitalized group.”

Right now, AMLI has more to say about what the project will look like and when it will be ready than who the tenants will be. Robert Bagwell of Dallas-based Urban Partners will coordinate the leasing of the project. He said that creation of a distinctively Austin retail district will be a challenge, especially given the fact retail has yet to take hold downtown.

“It’s going to be hard,” Bagwell admitted after the meeting. “The plan is to create an urban/retail/restaurant district, as opposed to a restaurant district. We don’t want to replicate 6th Street and we won’t be going after bars. We want to create a place that people in Austin really identify with, one that really reflects the spirit of Austin.”

Urban Partners developed a similar retail district, West Village, in Dallas. The pedestrian-oriented walking district, with 1,000 underground parking spaces, mixes clothing stores with hair salons, restaurants with lofts and even includes an independent movie theater. A trolley runs alongside and around the small urban village.

Creating the right mix is a labor-intensive project, Bagwell said. Urban Partners reviewed more than 100 different layouts before settling on the right mix for West Village.

For the 2nd Street Retail District, Bagwell envisions a mix of 25 percent food, 30-40 percent apparel, 10-20 percent home furnishings and hard goods and 10-20 percent entertainment. The agreement with AMLI/Urban Partners is that 30 percent will be Austin-based businesses, as well as a smattering of national brands and tenants new to the market.

“The last thing we want is to create something predictable,” Bagwell said. “We want to draw people downtown, create a place for people to have fun. Our goal is truly to have the typical Austinites say this is their favorite place to go to shop.”

The project should attract both conventioneers and local shoppers, Bagwell said. If the mix is right, it could attract people from a 100-mile radius to downtown Austin.

One of the biggest issues will be parking. Initially, the goal is to create reasonably priced valet parking that will use a couple of levels in the City Hall garage. Bagwell said the goal would be to make parking convenient enough to bring people downtown.

According to the presentation to the Downtown Commission, the 2nd Street District will generate $2 million in sales tax during its first 10 years, as well as $3.7 million in property tax. The project is expected to create 400 new jobs and provide new marketing opportunities for the Convention Center and Hilton Hotel.

Beyond that, the project is expected to nurture small local retailers in reasonably priced downtown retail space, stimulate the downtown residential market and showcase the new City Hall project.

The vote of the Downtown Commission to support the project was unanimous, with the exception of Commissioner Carl Huntley of the Capital City Chamber of Commerce. Huntley abstained from the vote. Commissioner Bruce Willenzik of the Armadillo Arts Bazaar said he never expected to vote for the project but was pleasantly surprised that the developers had addressed most of his concerns…

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