Travis County Commssioners Court
April 29, 2003
The Closed Caption log for this Commissioners Court agenda item is provided by Travis County Internet Services. Since this file is derived from the Closed Captions created during live cablecasts, there are occasional spelling and grammatical errors. This Closed Caption log is not an official record the Commissioners Court Meeting and cannot be relied on for official purposes. For official records please contact the County Clerk at (512) 854-4722.
Item 44
Number 44 is to receive and discuss request for financial incentives from the domain urban village project. A few days ago I think I delivered to the different offices the copy of the presentation made to the city of Austin last Thursday, I believe. And today we were delivered a [indiscernible] this afternoon.
>> good afternoon, judge Biscoe and Commissioners.
>> good afternoon.
>> thank you for allowing us to come here and talk about the domain project. My name is kirk moody, this is bryce miller, we work with endeavor real estate group. This is dallas kelly with martin salinas who has been involved in the project. And this is david armbrewster which has been helping us with this project. What is an urban village? An urban village is a very dense mixed-use regional destination project that we've been working on for a year now. On your screen, I guess shortly -- sort of delayed -- here it is -- is a rendering of the main street in the urban village. The components of that urban village will consist of anywhere from 500 to 700,000 square feet of retail space, from 350 to 650 multiunit, multifamily rental units. It could consist of a hotel or more than one hotel and some recreation facilities, entertainment facilities. It is located at the former i.b.m. Industrial manufacturing campus. You can see on your screen that this project is about 50-acres and bound bid mopac expressway on the west, brakier lane on the south and burnett road on the east, and it's a very heavy industrial part of town. The i.b.m. Company brought this land in the mid 60's and began to develop it and some of the buildings just to the east of where the urban village is going to be are very old industrial manufacturing and assembly buildings. Let's go to the next one. So why are we here? We are here to request that the county participate financially in this project. We have done -- we, bryce and me and endeavor real estate group and at our former company, a number of projects in this community, retail projects, office project, industrial projects, and we haven't ever requested from a public taxing jurisdiction investment in a project, and so I知 sure you're asking why is that the case. Well, it is the case because this is going to be a very expensive again dense multi-use project in what essentially is in the middle of the city. In order to make it like that, we plan on making significant investments in public areas because there's going to be so much square footage on the site unlike other projects that you have seen, we plan on servicing it with a combination of parking garages and surface lots rather than a lot of surface parking lots. Because it's mixed-use an dense we intend to build multifamily units vertically over the ground retail around what is sort of a very dense town center type development. And so in order to make this project work and be viable, it's going to require a public investment. We anticipate the value of the project, the cost of the project to be approximately $130 million. Let's go back, dallas. Specifically what we would like to ask the county to consider is a participation in the project equivalent to 50% of what the county collects in ad valorem taxes over a 20 year period. Okay? There's some unique things as it relates to the structure of what we're asking for. Two components that are very unique is that it is a no-risk proposed structure and it's also performance-based. No risk means that unlike other projects that have requested and actually received incentives in this region but in other regions in the past, we're not asking any of the jurisdictions that would potentially invest in this project to put money up. Endeavor will pay for 100% of the initial cost to build the project including all the fees associated with this project, so we say it's a no-risk project because we're asking the jurisdictions, the county, to invest the money only after they've collected the money generated from this project and that's also what we mean when we say performance based. The county collects ad valorem taxes from projects in this community, only after ad valorem taxes are generate and collected by the county, are we asking the county to reinvest 50% of that amount over a -- over a 20-year period. I think when we as business people in this community contemplate investments, we always think about a couple -- at least a couple things; that is what are the returns of that investment going to be and what is the associated risk of that investment. I hope i've already addressed the associated risk and that is unlike other investments, we're not asking you to invest any money up front, so the risk is minimal if not zero. But let's address the benefits because the county needs to understand if they're going to make an investment what those benefits are. We've already talked a little bit about the regional destination aspect of this project. This is a project that is designed to be very unique, very special, and to draw people back into this region. This project is located within walking distance of 18,000 employees today. There are currently on the rest of the former i.b.m. Campus about 2.5 million square feet of industrial and office space. It is right across the street from the i.b.m. Tivoli campus, the j.j. Pickle research institute, mcc and the national instruments campus, so it's going to be something that draws people throughout the region, and hopefully will be something that will reverse the trend of the declining sales tax of this region as it relates to the sales tax base of other regions. Next there is a definitive and easily calculated economic benefit to Travis County. We are anticipating -- by the way, charles heimsath is an economist on our team who has helped us perform pro forma budgets on the project and helped us to extrapolate what we think the value of this project is going to be over a given amount of time. Based on those projections, even after the county were to invest 50% of the ad valorem taxes over 20 year, there would be an additional $9 million added to the county's tax base over 20 years and over a 40-year period, that number is projected to be $40 million.
>> not a tax base, but it would additional tax revenue to the county.
>> okay. Thanks. We are anticipating that this project will generate approximately 1500 temporary jobs through the construction phase and approximately 1100 permanent jobs. Those jobs of course would be in Travis County. This is a benefit we think to not only the city of Austin but the county in that there has been much talk about the need to assist small local businesses, a million dollars small business endowment fund, local business endowment fund will be installed to help tenants with them to go into the domain, or to guaranty their leases or to execute their leases or even to subsidize their rent. They're going to be, as I said, anywhere from 350 to 600 multifamily units on the campus. We have agreed to allocate 10% of those units to affordable housing. This city has a smart housing program which you may be familiar with. We have met with that decision within the city and have agreed to ensure that those units comply with that program. Rush, you want to address? This is just one of the main entrances into the urban village will be off of mopac, you can take the burnett duvall exit and go right into the domain... That will effectively help us kind of shield some of those older industrial buildings. This is just a rendering of -- this is just a rendering of the main street in downtown -- in downtown? -- in the domain. This gives you an idea of the type of investment that we think will be required in the public areas and the street areas and the street scapes. If the majority of this people come to the project to shop or to work and to live and they only stay for an hour or two hours and then leave, we had probably not have achieved what we're trying to achieve. We anticipate this will be a project where people come throughout the region and stay for a day or a half a day. It's going to be a number of things to do and it's going to be that type of a project. When we first started working on this project some four months ago, and in fact our marketing people have been working on it for probably four months longer than that, we felt it was appropriate to approach those jurisdictions that would benefit economically and otherwise from this project to participate in the project. So we want you to know that we're also talking to the city of Austin about participating financially in the project, and wanted to show you what that structure might look like. We are asking the city to reinvest. Again it's also sort of no-risk and it's also performance-base in that they would not reinvest the money until they've had already collected it. We asking them to -- I think that's supposed to be 25% of the ad valorem taxes that are collected over a period. It's supposed to be 25%. Freudian slip. We're asking them to invest 80% of the sales taxes generated by the project for the first five years and then 50% for years 6 through 20 and it goes away, it terminates, after the 20th year. Again, if I were sitting on the dais at city council I would want to know what the returns to the city are before I agreed to do something like that, so I wanted to take you through those. We are anticipating that the city could collect approximately $40 million in additional revenues over did first 20 years as a result, and that again is after their investment, and $183 million over 40 years. This type of a project is a significant consumer of utilities so we anticipate, based on source books that we have that illustrate what projects like this consume in terms of utilities, to generate $1.4 million in additional utility consumption and $36 million over a 20-year period. It's not legal for aisd to reinvest in a project but we thought it would be helpful to show you what the economic benefits would be to aisd. Based on these proposed values this project would generate approximately $65 million to aisd over a 20 year period and $178 million over a 40 year period, and to capitol metro it would generate $55 million in additional revenues over a 20-year period and 157 million over a 40 year period. That's the end of this part of the presentation. We're certainly happy to answer any questions that you might have. (one moment, please, for change in captioners...) :
>> third or fourth quarter of '04.
>> yes, sir. Next year, for it to be open and operational probably the first quarter of '06.
>> first quarter of '06.
>> yes, sir.
>> okay. What schedule is the city on, did they say?
>> in terms of considering our request?
>> right.
>> we have had a city council work session last week and their plans are to consider it at the city council meeting o may 8th.
>> okay.
>> your honor, david krider from the city economic development department is here if you have any specific questions specifically about the city.
>> may 8th is the date?
>> may 8th, yes.
>> okay.
>> it's interesting, I just got back from memphis from a four-day conference at the international downtown association and saw a lot of things there were were -- where the city and county in memphis are teaming up on some things that are very non-traditional, but they do things to spur economic development when things aren't going so great and it may be a different kind of a formula or set of standards when things are real flush. But I think we are in the former, not the latter right now. I do have a couple of questions here. How -- are we talking about the add-on value? Because obviously this piece of property right now has a value. Are we talking about the added value to this particular property?
>> right now the property is land and we are talking about 50% of the ad valorem Texas' generated from the property after the land has improvements on it.
>> gotcha. The second question is who are we going to decide is the authority on what the value is? Are we going to about what t cad says is the value of the property?
>> that's what we anticipate just like any other property within the county.
>> how often is this going to be appraised? As we all know with our own personal property, mr. Corey and his staff do not do that every single year. Are you going to render or -- how are we going to make sure that this is indeed an up-to-date figure so that we all know what the numbers are?
>> Commissioner, I think commercial properties are reappraised yearly.
>> yearly.
>> and we would not anticipate this to be any different.
>> in deference to what happened downtown, where some values were attached to commercial properties that are now having to be corrected, what if there's a protest by y'all for the investors in terms of what the value that has been attached to this property, how do we go about resolving that?
>> you know, it's interesting because the county probably and the developer of this situation would go through would protest it to go up. Right? [laughter] but fortunately, we will be kept in check because of that because oftentimes when you execute leases with department stores or users, there's provisions in their lease that give them the right to enforce the developer to protest because the pro rata share of ad valorem taxes at times is passed through to them. So we will be protesting a value if tenants think that the value is higher than it should be.
>> also, what if the players change in this deal and I guess I知 reminded of what happened with the city. They made certain commitments on let's say the intel property. Because they thought that they were going to get the private investment and the sales tax dollars from a private business going into that land, and they may or may not have made a different deal if they had known that perhaps the federal courthouse was going in there, in which case you are not getting property taxes and you are not getting sales tax. How do we handle a changing of players or concept in -- in this deal? To ensure that the vision is followed through on --
>> in reality, you have to look at this as a project. You can't look at it as mr. Rudy and mr. Miller. The city, we will enter into an agreement with the city under chapter 380 of the local development code, which will set out some parameters. They will have to meet the parameters in order to receive any payments and we would expect that that would be likewise if the structure that the county would impose on the projects. But the developers may come and go, but you really have to look at it as the project and what the project will do for the county.
>> I would just add that it's certainly our intent that because of the cost of this project and what we think we can generate in terms of returns, that's why we -- that's why the public investment is required. If it were -- if it were a courthouse, a federal courthouse instead of this, you know, I think that it's a jump ball and it's just -- it's a different project.
>> right, right. Two other quick questions and then I will be finished. Certainly you are anticipating trying to get back a certain amount of dollars over a 20 year time period. Let us just say, for instance, this thing goes like gang busters. And what you thought would take 20 years, takes us -- takes a lot less. Is there a thought either with the city or the county to put a cap on what you anticipated to return? And it's your anticipation that it will take 20 years to get there, but what if it takes less.
>> there is more than a thought with the city in that they have capped what their investment would be in terms of present value dollars and if we got to that number early, then it would stop.
>> and you would consider the same kind of thing with the county.
>> yes, ma'am.
>> and final question is how are we going to ensure the count of new jobs because I知 -- I知 envisioning that there may be a certain business that decides to relocate there and that's not really a -- a new job that we add to the economy, it's a transfer job that's -- that's just going to a different location. How do we handle that?
>> we are still working with the city on the details of that and haven't really talked about how we've contemplated that. We have really focused on the fact that there would be -- in fact that is one of the performance criterias for this city, for us to be eligible for the city to invest is for that project to generate 1100 jobs.
>> okay. And like I said from the very beginning, I think this is something consistent with bringing people back into the urban core and unlike many projects, the transportation infrastructure with 183, mopac, burnet road, it's already there in terms of the -- of the transportation infrastructure, which is a big deal.
>> [indiscernible] is already there, too.
>> two rail lines as a matter of fact because the -- because the union pacific goes through it --
>> part of the transportation --
>> another line owned by another entity in town, but I can't recall their name [laughter] I知 sure Commissioner Daugherty will.
>> part of the transportation system.
>> those are my questions, thank you.
>> let me breathe in for a few minutes here. [laughter] you had to bring the word up, didn't you? [laughter]
>> I didn't say it.
>> I see he tried to get over -- [laughter] [multiple voices]
>> here to say. Here to stay.
>> I think that -- that one of the biggest hurdles that -- that I can see is the precedence -- precedent setting that we do with this. You all know abatements, all of -- you know, all of the kind of things that we use here are really lightning rod issues for elected officials. I could see -- I probably could get beyond that but it is an issue that will come at us real hard. There are at least three other visits that I had for my office for sort of the same kind of incentives. You have to pick and choose who you are doing this kinds of business with. Which would be a tough, a tough deal. You would say, you all should have gotten here in the first three, first five, whatever. So I want you to know that -- that who will really own this project? Who do you envision will really own this?
>> right now, endeavor real estate group is the sole party involved in the land. We will need to go and attract additional equity capital. That may come in the form of additional private equity capital or institutional capital. And we are in the process of doing that now, so we don't have an equity partner that has -- that is committed to the project today. We anticipate that it could be either again a combination of additional private equity individuals and/or an institutional institution realty investor.
>> okay. When do you all think you would feel, if simon -- the article in the paper -- a pretty good article in the last couple of weeks over the domain and there were really some great points made about, you know, if you are -- sort of like what the city is going through right now with borders and with -- and the people on sixth street and you got people across the street saying this is not really a level playing field for us. You all are giving us something -- you are giving them something and yet we are having to plod along here and do our business. I did think that the points were well made and it -- and Karen touched on it. Or Commissioner, sorry.
>> that's okay.
>> touched on it with -- it really is hard to quantify when you say okay this is going to create these kind of jobs because I would suspect if dillard's does less business in Barton Creek mall or wherever they are because of a retailer that you all have brought to the domain that -- that somebody is going to have to lay somebody off and somebody, the domain may hire them. So the net gain of that might not be anything greater than zero. That -- these kind of things for me are not -- are not like boeing wanted to come here and bringing a thousand jobs and the average pay being $55,000 a year. No one is going to make a living and afford to live in this community by working full-time at I think one of the retail shops that's going to be here. I want to be able to stand up to somebody and say, you know, what we really have attracted more -- I mean a group of people that might not otherwise shop in Austin, because I figure that right now, -- right now I guess there's something that you can't buy, maybe you can buy it at nordstrom's, in another year you are going to be able to buy it at nordstrom's. I don't know if there's a sucking motion going to Round Rock right now because they have a unique store that we don't have in Austin. I do remember that the article said that you all were a little reticent on bringing up some names about who might be with y'all that really weren't anyplace else in town. And that would be important, you know, for me, I mean, because -- you know, if you are not talking about net gain out of this thing with either jobs or -- we don't participate in sales tax, but, you know, we do -- we do reap some benefits from it. So that's -- that's a concern. I know that you all, you don't have to have these answers now, but I felt compelled to tell you because we are not going to act on this today, but I want to talk about it.
>> one of your comments, you mentioned how simon felt or another competitor. Currently there are a number of projects outside of the region that are taking place that we are competing against. The day before the article that you mentioned came out, there was an article about -- about simon working out a deal with the city of georgetown for incentives. So I can't tell you how they feel, but they know what's required to be competitive. I know those other regions know what's required to be competitive. We are competing with the hill country galleria, which is a project that is purported to be eligible for somewhere in the neighborhood of $30 million of sin sent actives, there are -- insin actives, other projects all of which provided incentives, I think that's Commissioner Sonleitner said earlier, it is a sign of the times where people, regions are competing for tax base, they are competing for jobs, they are competing for activity. I知 not sure how simon would feel about it. But I know that they have not been reluctant to go request a similar package at another project.
>> I知 not carrying their water, kirk. I知 just asking from the standpoint of are we really enhancing this area with additional sales tax, additional values, not taking it from one place and bringing it to y'all's place. So that's good, you can --
>> I would add with regard to the trading places with tenant users, I would -- I would guess that 50 or 60 percent of our likely prospects today do not have a location in Austin. The -- the arboretum has -- the arboretum area, that sector of retail trade has done very well over the past 15 or so years, but it's always been supply constrained, the past five years. It's been very supply constrained, what we are hoping to do with the domain, hoping to meet some of that supply. Not counting on the domain to suck the tenants out of the arboretum, gateway, some of the other arboretum market. Because they are doing so well there, why would they relocate? There's a lot of demand to get into those centers today. We are hoping to meet that demand, that unmet demand with the domain project. So, sure, I would anticipate that there will be some trading. There are some tenants that don't have enough space where they are. Me need to expand their store. The domain may be a shriekly solution -- likely solution to their space need. So far 80% of our efforts have really been on the on the retailers that are not here.
>> when you first came to see me, there was a capital metro component in this thing what you all are asking is a pretty long-term commitment from the city and county, is the same commitment being asked of capital metro since they were going to receive --
>> no, sir.
>> -- benefits from this thing?
>> if we ask capital metro to participate, it will be on a -- on a one shot basis. It will not be on a long-term agreement with the city or county. If we ask them to participate, we have met with officials from capital metro, we haven't had a meeting like this with them, but we would ask them to reimburse us for certain portions of the project that are transportation related. But it would be one shot.
>> so it wouldn't be tied to them saying that we have got to keep everything that we have because we have made a commitment to the domain, for -- for the next 20 years because that is the issue whenever you allow taxing authority to engage in something long-range and if that's -- if that's the case.
>> right. It would not be long, yes, sir.
>> thank you.
>> Commissioner?
>> I don't have any questions.
>> we will have it back on.
>> thank you.
>> thank you for your time.
>> thank you.
>> yes, sir?
>> thank you.
Last Modified: Tuesday, April 29, 2003 6:52 PM