Exact shape of South Central Waterfront TIRZ in limbo

After a lengthy and complicated discussion at Tuesday’s work session, City Council directed Chief Financial Officer Ed Van Eenoo to advertise a new public hearing about the long-awaited tax increment reinvestment zone for the old Austin American-Statesman site and surrounding areas, known as the South Central Waterfront area.

Of course, there has already been at least one public hearing and many lengthy discussions about the subject. But on Tuesday Council Member Kathie Tovo and Mayor Steve Adler learned that the property at 425 W. Riverside Drive (known as the Snoopy PUD) would not be part of the TIRZ.

Tovo told her colleagues she would move to put that property back into the zone when the item came before them on Thursday. However, that would cause legal problems, as Van Eenoo and Assistant City Attorney Leela Fireside explained.

The TIRZ is a zone created under regulations set forth in state law. Specifically, tax increment financing allows the city to designate a certain area as a likely area of growth that will benefit from city investments. As a result, the city takes any additional tax revenue generated by the district and finances bonds that pay for public amenities.

However, that means those revenues do not support the city’s General Fund, and that has become more of a worry since the state Legislature restricted property tax increases to 3.5 percent. The assumption about the TIRZ is that it would not have experienced the growth in value and property taxes but for the city’s investment. In fact, Fireside referenced the “but for” phrase on several occasions when explaining the city’s dilemma.

In order to move forward with the plan for the zone, the city must present documentation to the Texas attorney general showing that the growth the area is now experiencing would not have occurred but for the city’s investment. Fireside and Van Eenoo expressed strong reservations about whether the Snoopy PUD would qualify under that criteria. It has already been built and will be on the tax rolls as a major source of property tax revenue next year.

Tovo and Adler disagreed about whether the PUD needed the promise of the TIRZ in order to prosper. However, staff had already prepared all the documentation to move forward on Thursday without the PUD being included in the zone. And it became clear that Council would have to have another meeting, either on Dec. 17 or Dec. 20, if they want to include the Riverside property in the TIRZ.

Van Eenoo explained that the timing is related to advertising a public hearing in the Statesman and that Council cannot simply add a property into the zone without that public notice and hearing. And Council must take action before the end of the year in order to capture money for the TIRZ.

In the past, when city finance experts were less worried about General Fund income, Council has directed 100 percent of any taxes resulting from growth in the TIRZ. However, Van Eenoo recommended that the city designate just 46 percent of the new funds for the amenities planned for the South Central Waterfront area.

In response to questions from the mayor, Van Eenoo said it would be easier for staff if Council did not take any action on the TIRZ on Thursday. “I think amending the plan will be substantially more work,” he said. “Our concern remains making the justification … we can all see it out the window – that but for the public investment it would not have occurred. That’s our concern.”

Adler finally said, “All we’re trying to do is preserve options.”

Council Member Alison Alter was not pleased about her colleagues’ apparent intent to take more money from the city’s General Fund. She said, “I appreciate the desire to have the Snoopy PUD in there, but I’m struggling with this because I don’t understand the argument,” related to the but-for.

“It’s built, it’s there. It has not been a question,” she said, noting the city could still include that property in a public improvement district or some other funding mechanism. “I’m not understanding the argument that you’re making that we can get around the but-for. It’s built and it may call into question the whole TIRZ and put a lot of scrutiny onto the TIRZ.”

In addition, Alter said she appreciated the fact that the city would not be taking 100 percent of the additional tax money for the TIRZ.

Architectural rendering of the south shore by Stephanie Bower, courtesy of the city of Austin.

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