Travis County Commssioners Court
August 19, 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 42
42 consider the request from endeavor real estate group, llc, for financial incentives on the domain development project and take appropriate action.
>> the biggest one is that -- I'm going to leave most of this to marry yet take, we need the attachment, marietta, the Travis County economic development policy, I'm going to let her get more specific because this is really more of a legal contract on a project in terms of what changes that we made.
>> actually, I think most of the changes are reflected in the -- in the changes that we made in the policies that -- the 12 months for the employment requirements to kick in after the completion date, the extension that can be granted and that extension would be granted if the company had made application and paid all of the required fees, that's the indication of good faith effort on their part and the steps would be granted -- extension would be granted. There's reference to the -- to the phasing plan f. There is a phasing plan presented, that would be presented separately in writing and the court would have to approve that. Then the -- there would be a completion date for each phase. And -- and that -- that change was made. They included hotel and office as possible uses, that may be made of the -- of the development within the development. There were some changes to the reporting information. There will be -- some of the employment information will be reported to the company by the third party retailers who are in -- who are renting space within the development. They will provide the employment information and then the company will put that information together and give that to the county as part of their reports. And -- then the county, if necessary, as far as monitoring, would be able to go in and see the reports that have been provided to the company by the retailers that are there. We would just receive the summary, if there were any questions, issues that -- that came of any report, then the county could go in and monitor and review those reports, if -- [indiscernible] their report on us, too. One of the things was the initial completion of the entire project, if it was in phases, it would be all phases of the project. Has the $100 million investment. Once that amount, if that amount is met as of the completion of the entire project, then that requirement has been met. If during the remaining years of the term, due to economics, downturns in economic situations here in the county, that should dip below the 100 million, that won't put the company in default. The number of employees has to be 1100 as of the comeetion of the entire project -- completion of the entire project. If again due to economic problems that number dips, that won't throw them in default unless it dips below the 750 minimum that's in the policy. The housing requirement remains the same, they will have to have the 300 units, 10% of which are either inhabited by or held for eligible tenants. That stays the same throughout the term. I think that was -- the 100 million, being something that was met is that -- that investment would have been made as promised to us and if for some reason it dipped below, let's say it went to 99 million, what that would impact is the reimbursement back to the company in terms of they would be getting it back for less than what they hoped in terms of reimbursement because the 20 years is the 20 years is the 20 years. If it dips below, but they absolutely had to reach the 100 million to trigger compliance with that. But we certainly know that is something that is out of -- out of their control, once the investment is made. We did also spend a considerable amount of time related to this reporting segment. As I said many times, it's important for everybody to have a full understanding of what the reporting requirements are and in what form we want it in. Because we don't want some Commissioners court 15 years from now to go how are we supposed to monitor this, what were you all thinking? So there was a great deal of time that was put into the reporting form, how to count part-time employees, and I -- I find out whether this is finally in a form that we are at in terms of how we count --
>> that's what I just handed you, new section 3 for your attachment d reporting form, which shows how they will tally up part time.
>> because, again, that was a very legitimate issue that was brought to our point as how do you count a part-timer? Because in the retail business sometimes people have five hours, sometimes people do 20 hours, sometime part-timers are 30 hours. So there is a specific formula here in terms of how part-time employees will be captured and credited to the full count. So we hope that we're -- we're addressing the concerns that legitimately were raised about, well, what's a part-time employee and how will they be captured.
>> uh-huh.
>> but the reporting requirement was very -- very spent a lot of time on this. Up front, the agreement as to what it will look like because we are going to have to live with this or some future court will have to live with this beyond our tenure. Is that questions, comments for the court?
>> yes, I have a couple of questions that I would like to ask.
>> first of all, I would like to thank you all for coming to the Commissioners court with this. Especially in -- really leaning toward the performance based type of initiative economic development and also enter into an agreement, which I think is very important, so that we could have some kind of contractual direction in the way I think we should go in the future. I would also like to ask this, if -- and when if the Commissioners court decide today to support this particular initiative, how long do you think it will be before we start seeing the results of what we are doing here today as far as you getting started, where you are going to be, the projections and stuff like that. How far are we, can we get back to you, as far as those time lines are concerned?
>> the first phase is really a function of the overall economy. And the momentum that we build in our -- through our leasing efforts. The project needs to be a certain amount of a certain percentage of -- preleasing needs to be accomplished before the project can start. Our projections today are that that will be done and we will start construction around may of '04.
>> may of '04.
>> uh-huh.
>> if the project is built out in one entire phase and construction time frame for building out a project of this scope is about 18 months.
>> I just want to get some -- some figures of timing in my head so I can look forward to seeing the result of what we are going to do here. That was definitely my only question. Thank you very much.
>> I see mr. Rodgers is here, I certainly want to make sure that he has any final say, if there's any other advice that he wants to give. But in terms of any question of what is the value of anything that's put into this property, we are deferring that to mr. Corey or his successor in terms of he is determining the value that is put in. We are relying on t cad, it's not what somebody says, what somebody paid, it is the value established by t cad for purposes of --
>> anything else from the court.
>> mr. Rodgers did you want to speak to the court?
>> hello, my name is bryan rodgers, last week I presented a petition from 14 retail merchants rejecting property tax incentives for this mostly retail project at mopac and braker. I explained how using property taxes is unfair to the independent merchants in Austin. Now it causes them to spend more money on advertising just to stay even and requires them to work longer hours. I presented evidence from the Texas workforce commission that -- that despite the developers claim that the annual compensation at the shopping center will be $35,000, the actual median wage for these retail jobs is at the poverty line at only $18,000 per year. Health insurance isn't even considered. I question why the developer should get credit for new jobs created if they simply move the clothing store from one shopping mall to this one. I question why the county wants to help the developer who is already making a $47 million profit. I pointed out developers are falling all over themselves trying to get into this area and that government subsidies are not needed to spur development. I wondered how the county could forecast 25 plus years into the future, a life span of this subsidy an: I spoke of the unintended consequences of overbuilding the retail market using taxpayer assistance, how today's healthy niche is tomorrow's overbuilt market and the subsequent decline in values of competing properties. I question the need to give tax incentives to build 300 new apartments. Since none of this had any impact on the court, let me turn to the current problem of economic development agreement with endeavor real estate group. I received the draft dated July 31st from Commissioner Sonleitner's office on August 8th. I felt that was somewhat better than the lopsided 37 million incentive agreement that the city of Austin signed on this same project. But this final agreement negotiated on Friday is even worse. Tax abatements were limited to a total of $5 million. But that amount is now ballooning to over 9 million. The county is now paying twice. Once for the tax abatement and a second time for interest on its own money. The developer is charging the county 7.5% interest annually beginning in 2003. Before the developer moves a shovel of dirt and years before this project comes online. Add that to the city of Austin's contribution of 37 million, we have a total incentive deal worth $46 million. The jobs requirement under section 8 .3 has now dwindled from 1100 jobs to 750-6789 the fine print requires only 750 full-time jobs. The 11 job threshold able ho has to be met one time on the completion date, completion date will be when -- when the contractors will still be on-site building the 10 improvements. The retailers will be fully staffed up to start up their stores. The -- they will call for their completion date, the day they get 1100 employees. After that they are under no more obligation other than a 750 job limit. Now we are not only paying for lower paying jobs, but there are 350 fewer required. So what does the county do when the developer can't reach the performance criteria? The county lowers the threshold. Similarly, the project has to be worth -- the project only has to be worth 100 million once on completion date. The next 20 years this value can plummet as mentioned earlier by market forces. So the developer must fear overbuilding in evaluation drop or they wouldn't have insisted on this clause. Let's take a look at the section on company performance. Under the July 31st agreement, the developer had two years to begin construction and a two-year extension would be granted at the county's sole discretion. Now the county must grant the two-year extension if the developer has simply made application for the development permit. The county has no choice. I assure that you the developer will get their four year window to begin construction. Likewise the court has given the developers four years to actually build the project with another two-year extension possible. That's a 10-year window before the project is required to open for business. This project might not come online until 2013. That's a whole boom and bust cycle in itself. Add another 20 years for the actual abatement period and you have a 30 year project, lasting until the year 2033. So let's revisit the county's goal under the recitals. Says whereas the Commissioners court finds that the development set forth in this agreement will result in substantial immediate and long-term benefit to Travis County. Substantial and immediate benefit. So should we scratch this out of the document because obviously there is no substantial immediate benefit. Now I believe that the agreement has taken an ominous turn. The word office has been inserted under section 5. We quoted development shall consist of mixed land uses which may include housing, shopping, hotel, office, entertainment and commercial workplaces. So no leases are signed, developer is not committed to building any project in particular. This could be an amusement park, an office complex with hotels, a medical center, a shopping center, the only fixed component is 300 apartments. So we have -- so we have an enormous incentive package looking for a use. The county has in effect commissioned a real estate project. You might as well say the developer surprises us with something special. The office workers counted as new jobs if they move from steck to braker lane. That's the way that the agreement is worded. A minimum of 1100 jobs will be filled within the project. What does fill mean? Does the county now subsidize new office building construction, too? My mother used to tilt me to keep an open minds, not so open that your brain falls out. I ask that you think about this before you vote on this great give away of 2003. I would like to ask the court the following three questions: if an office tenant moves from steck avenue to the domain or the office -- are the office employees counted as new jobs? What does the word fill mean in the sense of a minimum of 1100 jobs will be filled within the project? And why did this county cave in to the 750 job minimum?
>> you are waiting on answers to the question?
>> please.
>> fill means employed. Until the jobs are filled until people occupy the jobs through employment. In response to your question, if they move from another place of employment to this particular project, they would be considered an employee. So if I retire as county judge and get a job working out at the domain, I would be an employee. What was the third question?
>> the third question is why did the county cave to the 750 job minimum, while the whole way has been touted at a 1100 minimum job project.
>> okay. You must achieve that threshold from the time it starts running for completeness, right?
>> correct.
>> as you said a few minutes ago, though, we are looking at 20 to 25 years, depending on when the project commences, when it end. They don't -- they can't for tell the future as same as we. No matter what happens, though, the question what is do we get out of it? On the jobs we rolled back to 7 auto because that's in the policy. -- 750 because that's in the policy. That's what every employer in the future for every project advocate in the future must meet at least 750. That's why we roll back to that. No matter what happens we expect you to have 750 employed. If you don't, we suspend the contract so that the financial incentives go away. Now, if you reached a $100 million threshold and something happens and your property is worth $50 million all of a sudden, then the financial incentive would be 50% of the 50 million-dollar valuation. See what I'm saying? If the project increases in value, the 50% to the developer goes up, but you still have the total amount to -- to achieve.
>> uh-huh.
>> if it goes down, you got the 20 years that will kick in, plus you have 50% of the lower value.
>> right.
>> now, back to the other thing, there's no way to get to the $40 million figure you mentioned. What we did was go in there and apply a discount rate, to the $5 million. So $5 million today equals however many million over 20 years, we discounted that at the percentage that's how we get up to the nine million. From our vantage point though the question is is it an economic advantage for Travis County residents and I look at what we received from the property right now, 25 to $30 million, and what we will receive from that same property when it's completed. If it were completed today, at that value, it would be 10 to 12 times that amount immediately. If it's completed seven or eight years from now, now, we can phase-in, right, there can be a phase-in agreement. At the completion of the phasing in, it's when the financial incentive would kick in by the developer. That's when it would start costing the county 50% of the new valve yaig. All right?
>> correct.
>> but if there's no phase-in agreement it would be upon completion of the entire project. Until that point, though, there's no financial incentive for the developer f. It takes nine years to complete, if there's not a phase-in agreement, the first year of the financing incentive would be the year following the first year of completion because that's when the evaluation would be done. Time during the -- sometime during the first year the payment would be due at the end of that.
>> right.
>> the reason for the phase-in agreement, that is a big project. If you are trying to get tenants in there, anchor tenants, et cetera, it may be beneficial to go ahead and phase it in two or three increments rather than trying to do it all at one time. With a phase-in, though, our financial incentive is reduced based on the size and the valuation. So we have various check points in there that protect us. But the end result, if you don't buy into this, I can see where you wouldn't agree with it, the end result for us is for Travis County taxpayers, what's the advantage and to me the advantage is you get many, many times the tax revenue that we get from the same property right now. Would there be some duplication, yes. There will be some employees that have jobs [indiscernible], they ought to move there. Well, the jobs in which they move become available to somebody. We all hope as you change jobs, you are moving up. That happens a lot, a lot of times it doesn't happen. We really don't control that. At least we are doing our part to try to stimulate the market by making these opportunities available. Now, if I -- if I own a small business for three or four or five employees and I had made it on my own, my guess is that I wouldn't like this that much, either. But from our perspective, this is a certain number of jobs, certain number of additional tax revenue for Travis County, and many will say, you may think well, this project may happen without us. It may. It may not happen without us. This was presented to the Commissioners court several months back, that we were favorably inclined. We have said we won't do this until there's a policy in place, a policy that enables us to be fair handed with everybody else. If the next developer comes in, meets those criteria, we will consider that prong. Whether we grant it or not depends on a lot of other factors. At least we can say here's what we are looking at.
>> this project was put forth not as a $100 million minimum project, it's 130 million cost at $158 million final value. So to automatically start bumping around, talking about 100 million, it's -- it was always put forth as 1100 job project, now the what will facade of not having anything to do with jobs seems to me now it's just a tax money grab. You can take a job, maybe a guy with a store and employee employees is mad. What about a guy who owns an office building on steck, you subsidize more office building development and then these guys come and take the office -- you know, a 20,000-foot tenant off of steck avenue. He's not going to be happy either, his property value is going to depress, you are going to have what I talked about early arer, the unintended consequences of where you may think that you are getting money, but the ripple effect may be substantial.
>> three things. We know that we are getting capital investment. We know that at the end before completion there ought to be, it must be at least $100 million. But if you phase in, whatever the phase-in agreement is, tough feed that, for the financial incentives to be triggered. You have to need that. The capital investment, really. The second investment really are jobs. Really they came up with a whole lot more jobs than I think are important. 750 is the minimum. They got -- we locked it in at 1100. But if something happens down the road beyond their control, we back off to the minimum set forth in the policy that everybody must meet. The third thing, though, we really don't start getting this until completion of the phase or full deal, would be the additional tax revenue. We get three things. You are saying three, but we could have the gotten more, certainly. We think this is fair, though, looking at those three. I don't think if I came in opposed to it, I don't know that anybody number would make me happy. The first time I looked at it the numbers seemed to be big enough to consider it. We have since in the policy scaled back because we were told look there are much smaller prongs that may well -- project that's may well provide specific economic benefit for Travis County, at least leave the door open for the opportunity to consider those. We changed the policy language, that's that.
>> I understand that. I think that -- that smaller can be better and that more jobs can be created that are truly economic growth. But moving jobs around from malls to here from office buildings to here is just a shell game.
>> but that's also life. That's also life.
>> well, it's not life. Don't call it job creation, that's not what it is.
>> not every person that goes to work, though, is coming from unemployment. In fact my grandpa taught me 40 years ago it is easy inventory find a better job if you have one.
>> uh-huh.
>> it's much more difficult to be unemployed and find your job.
>> right, but if you have a job sitting on steck avenue with 27 other people and in a small insurance firm and then, you know, a month later you are sitting in the domain, it's the same job.
>> but if you have a chance to move from your present job to the domain whenever it opens, at better pay, shouldn't we be glad of that opportunity for you?
>> if it's a new job, sure. You know, that's good. But this has nothing to do with new jobs.
>> a new job at a new location because it's for the first time.
>> what about the same job at a new location.
>> I don't think any -- any conclusions that that office building you mentioned on steck is going to be vacant for the rest of our lives. It's just one of those things in terms of things move on and things --
>> it's the ebb and flow of the free market. When the government hops in and plays favorites, then people get hurt. And unintended consequences.
>> the only thing that I would like to add to this is in terms of why these numbers. If we had simply -- that's why it was very important for us to have an economic development agreement first. What is the minimum that we are going to do? If these guys had actually come in and said, you know what, we are going to do it exactly like you've got in your benchmark, they could have come in with 750 and they could have come in with 100 million. It is their expectation that it will be far beyond it, but we wanted to protect ourselves that it would be no less than the original agreement that gets them to be able to walk in the door. How I wish we could snap our fingers and something very complicated like this or lakeline mall or Barton Creek mall, the mall of america, any kind of a major project, it doesn't take six months. It doesn't take 12 months to do that. There's a lot of planning. In terms of impact, people designing this project, people employed to build this project. Things happen on a project long before you actually open the doors in terms of people being employed to do certain things to make this thing happen. Finally, i've read over and over in the Austin business journal and other places and see the reports from the state comptroller, city of Austin is horribly losing its sales tax base. Everywhere else, the numbers are going up. People from the city of Austin are going elsewhere to shop. And the city of Austin is trying to rebuild sales tax base here. They are going down to san marcos, they are going up to la frontera. We are going other places, going down to the gallon lone star gallery in houston. You only have to look at the comptroller's reports to see everybody else is gaining, the city of Austin is losing its sales tax base. Finally in terms of what's going to be here 10 years, 20 years from now, a whole lot more people. Right now, according to the last census, we have 812,000 people in Travis County. Those numbers will be substantially more, in 10 years, 20 years, 30 years, over the lifetime of this agreement. And, yes, we are going to need more infrastructure, be it this, be it more park, be it more police, fire stations, e.m.s. We have to do things to build infrastructure as this community continues to grow. And I think this is going to be a part of it. And I do see that there is going to be immediate impact and I think there's going to be long-term impact and they -- they don't deliver, then they don't get the reimburse. This is performance based. There's not one dime going out of the Travis County treasury unless they meet certain benchmarks and continue to meet certain benchmarks related to this project. But at no time do they go below the policy that we just passed that says this is the minimum, they are going above if they don't --
>> right it's $100 million spent you get 750 jobs. So these guys are going to spend 130 or more, but then you are dumbing it down and letting them get by with 750, I this I that's wrong.
>> 1100 jobs now. Something happens beyond their control, years into the future, and they cannot meet the 1100 threshold, they must at least meet the number in the policy which is 750.
>> right.
>> so really they -- you know, that's true.
>> this is beyond people's control. Montgomery ward went out of business. I'm sure the folks at Barton Creek and over at capital plaza and all of the other places were crushed by that. But that was not their decision and in fact it wasn't even related to the economy of Austin or Travis County. That was a corporate decision that happened a ka zillion miles away from here, had nothing to do with them.
>> that's what I --
>> you bet, Barton Creek wound up getting somebody else to go in there because of the opportunities it's called in order strums.
>> you are talking about business that's acceptable to market forces, if this was samsung they had an agreement to provide x number of jobs for x number of years they would be required to do that. But in this case --
>> what happened on samsung it's interesting that you say that, they got a property tax abatement by simply showing up, a 40% cut in their property taxes. From day 1. And they only got a bonus if they reached certain hiring practices.
>> uh-huh.
>> 15% bonus. But they showed up, they got the tax break.
>> that's what happens. I guess the -- you sign agreements that -- that aren't well thought out.
>> on samsung, I had -- that was one of the first decisions that ever faced me here, it was the correct decision then because we could have built that out with homes or retail or anything else.
>>
>> [one moment please for change in captioners]
>> test.
>> it look like a different world on the other side of time. We want economic development just as they do everywhere else here in Travis County. The creation of jobs over there. The creation of employment, there is no doubt in my mind there is that. We have a lack of development coming over there that can satisfy the growth that's taking place. Sh 130 being the longest leg of sh 130 comes straight through precinct 1. And the folks -- as I stated earlier, something as simple as some folk are moving here.
>> market forces will bring those things to you.
>> but listen to what I'm saying. What I'm saying is there's a void, and a big void. In fact, folks even say, well, how come you have a hotel over there? That whole section that's over there is a lot of pressure to have the type of economic growth, but not only that, the job creation that goes along with some folks that do need some jobs. That's being asked of me. And as the Commissioner of precinct 1, I'm going to do what the heck I can to address those concerns. As I think I told you last week, I appreciate everything you're saying, but I appreciate what the folks have been asking me to provide for them over in precinct 1. And I'm going to address those concerns. Yes, we can bring the high employment over here, yes, we want to create jobs, yes, we want economic development, yes, we want to shop over here instead of having to go over to other parts of the county where we don't have the same opportunities. All these things that you are mentioning, the folks are saying in my precinct, hey, we would like to have those things. So I'm going to try to accommodate as much as I can to get them over there. So I hope you can understand where I'm coming from.
>> well, if you had -- if there was a true economic package that was coming over to your precinct, I would be up here supporting it. But shopping centers and relocating retail don't qualify in my mind.
>> there's a lot of diversity we need over there and we need it throughout the county. And diversity is what we're looking for in a lot of the arenas. I'm sympathetic to the folks that I represent over there and the things they're asking me to do, I'm going to do them.
>> thank you for your time.
>> thank you so much for your comments. I appreciate it.
>> any more comments?
>> [ inaudible ].
>> on the agreement, what we need -- if we're going to take action to approve this today, it hasn't been put finally together for you. The attachment for the description of the property has not been included. We're still putting together the schedule where you have the discount. We're going to have a schedule that will show at least an example of how it could be the five, it could be the nine, it could be somewhere in between that depending on how soon it's paid off, which depend on the evaluation each time during the payment term. That needs to be added. And on page 10, the part that we've added about the completion, I think if we can -- where it says if they continue to have the -- to meet the housing requirements and at least 750 jobs that I think our agreement when we discussed -- I would like to add this just for clarification, that if the housing is -- if it went below 750, simply that the agreement would be terminated. No refunds, just terminated at that point.
>> what's the standard?
>> no, we talked about dissension until they got back up above.
>> would there be a time when it would be terminated?
>> (indiscernible).
>> if they never get back up, the clock is ticking.
>> those are the only things, I think, that we need to add. There we would put that it would be suspended until either back above the 750 or the end of the [ inaudible ].
>> how long would it take us to incorporate those standards?
>> well, the schedule we probably won't have until tomorrow would be my guess.
>> we can have that today. Y'all didn't have that previously, but we don't have that with us.
>> and the description of the property is just a matter of getting here?
>> y'all had that already.
>> yes, ma'am.
>> so that we can put together originals for you.
>> move approval of those then. And if we get them and there are issues, let me know by 5:00 o'clock tomorrow and we'll put it back on the agenda next Tuesday for final discussion. Otherwise we'll consider that this motion passes. Move an approval with the changes that she mentioned.
>> and with the new language related to the form that make it very clear how we are counting part-time folks. I want to make sure that's included.
>> any more discussion? All in favor? Show Commissioners Davis, Sonleitner, Gomez, yours truly voting in favor. Voting against, Commissioner Daugherty. Thank y'all very much. We appreciate your patience.
>> thank you.
Last Modified: Tuesday, August 20, 2003 8:52 AM