New scenarios for HealthSouth site could revive redevelopment push from Council
Friday, October 25, 2024 by
Chad Swiatecki A pair of new scenarios for redeveloping the former HealthSouth properties downtown could revive the city’s efforts to use the sites to provide hundreds of units of affordable housing.
A memo released last week from Mandy DeMayo, interim director of the Housing Department, includes analysis of two new scenarios for the properties, which had been placed on City Council’s back burner earlier this year because of a lack of financially attractive redevelopment options. The scenarios were prepared by financial consultant Economic & Planning Systems Inc. in response to a Council resolution passed late last year.
Because the properties had generated four earlier redevelopment scenarios, the new options are referred to as Scenario 5 and Scenario 6.
Scenario 5 involves utilizing the Downtown Density Bonus Program to maximize the sites’ potential for affordable housing. Rather than paying an in-lieu fee to meet affordable housing requirements, this scenario calls for the direct provision of 96 affordable units on-site.
That approach would generate similar numbers of affordable units, both on-site and off-site, as earlier proposals like the “Rainey Bonus” scenario, with the main benefit that it would directly increase the city’s affordable housing stock without relying on payments to fund affordable units elsewhere.
The analysis revealed that by including affordable units on-site, the overall revenue from the project would be reduced but Scenario 5 would provide funds to leverage the creation of an estimated 1,223 additional off-site affordable units.
Scenario 6 proposes using a Public Facility Corporation development structure, with half of the total residential units – approximately 700 units – designated as affordable for households earning between 60 percent and 80 percent of the area’s median family income. The analysis found the PFC model offers developers a full exemption from property taxes in exchange for making half of the units affordable, making the project financially viable without additional public subsidies.
Instead of making staggered payments over time, the developer would provide an upfront land payment to the city to immediately fund the development of an estimated 404 additional off-site affordable units.
EPS found the drawback of Scenario 6 is that an estimated $492.9 million in tax revenue would be lost over the affordability period, which could last up to 99 years.
This loss in tax revenue would affect the city and other taxing entities, raising concerns about the long-term financial impact on public services.
The memo doesn’t advise any next steps for staff or Council but does read in part: “Of the six total scenarios presented, the ‘PFC’ (Scenario #6) produces the most on-site affordable units and provides the quickest path to funding additional off-site units. However, it comes with the trade-off that millions of dollars in property tax revenues will not be generated to support any other public services throughout its 60-99 year affordability period. Should City Council desire additional conversation, including the contemplation of a solicitation for the redevelopment of the former Health South site, the Housing Department would work collaboratively with Rally Austin (formerly Austin Economic Development Corporation) and the Financial Services Department to identify appropriate resources necessary and potential timeframes.”
In recent years, various members of City Council had seen the HealthSouth properties as a potential cure-all for a variety of downtown needs, with a child care center and creative or cultural spaces included in proposed redevelopment strategies. A previous agreement to redevelop the properties with the Aspen Heights group fell apart when rising interest rates and other market conditions caused the company to say it could only deliver 65 affordable units.
That agreement was terminated after a recommendation last summer from the Economic Development Department to look for new redevelopment options.
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