An up-to-$7 million incentive package for a high-end apartment complex in Government Hill won unanimous approval from City Council on Thursday after a change of heart from District 2 Councilman Jalen McKee-Rodriguez who had opposed it because the complex will not include affordable units.
Two months ago, it had seemed possible that the package couldn’t make it through the newly-elected council with several first-term members who had promised to restrict or abolish the city’s practice of awarding incentives for market-rate housing. Encore Multifamily, the Dallas-based developer of the $90 million, 386-unit complex, pulled it from the agenda of the Sept. 30 council meeting after McKee-Rodriguez, whose district would include it, withheld his support.
McKee-Rodriguez told the Heron in October that he wouldn’t support any applications for housing incentives for projects without affordable units, and that he believed that other council members would follow his lead for projects in his district. The board of the Midtown Tax Increment Reinvestment Zone (TIRZ) approved the package in August.
At the Thursday meeting, McKee-Rodriguez said he was supporting the project “with great caution and good faith,” noting that it would include meeting space that could be used by neighborhood groups and would create jobs “with a preference for those in the area.”
He explained his decision further in a statement sent to the Heron via text message:
“I maintain high standards for development in my district. I’m particularly cautious of applicants of TIRZ funding and, frankly, unsupportive of housing applicants with no affordability component.”
“Because I inherited an approved Midtown TIRZ project, the Encore development within Broadway East, that already had community support and years of work in progress, it was necessary for me to negotiate community benefits that would be most impactful.”
Encore has committed to spending $20,000 on a study analyzing how the complex, at the northwest corner of Carson and Austin streets, might displace those who live around it.
The package passed on a vote of 9-0, with council members Melissa Cabello Havrda (District 6) and Manny Pelaez (District 8) absent.
Several council members made it clear that they were supporting the package reluctantly. “Like some of my colleagues, I also have some hesitation, but I’m willing to support what the councilman thinks is best for his district,” District 7 Councilwoman Ana Sandoval said.
The incentive package, consisting of 10 years of property tax reimbursements, would offset the cost of expanding water and sewer lines, building sidewalks and making other infrastructure upgrades to service the complex and further development planned in surrounding blocks.
In his statement, McKee-Rodriguez noted that the incentives will not be used to build the complex itself, only for infrastructure improvements in a neighborhood that is in “dire need” of them.
He noted that the new board of the Inner City TIRZ, which he now sits on, will meet tomorrow for the first time. Council members will start working on new guidelines for city staff to use in evaluating TIRZ incentives, putting more emphasis on environmental impact, affordability, accessibility and public amenities, he said.
In a TIRZ, revenue earned from the rise in property taxes due to a project’s construction is collected and spent on infrastructure upgrades and, in recent years, below-market housing initiatives, also known as affordable housing, within the zone’s boundary.
“The main concerns that we have about this item and about TIRZ is that there is no affordability component to it,” McKee-Rodriguez said on Thursday. “Moving forward, there’s going to be a conversation about a new set of standards for TIRZ applicants so that it’s clear for all parties and there’s no surprises on any end when decisions are made.”
After he spoke on Thursday, council members Sandoval, Mario Bravo (District 1), John Courage (District 9) and Clayton Perry (District 10) joined him in expressing misgivings about the city’s TIRZ policy.
“We just finished the Decade of Downtown—at least, we thought we finished the Decade of Downtown,” Courage said. “I think part of that Decade of Downtown was promoting development of a lot of market-rate projects that certainly were wonderful projects and did create some benefit to the city, but didn’t seem to really hit the target for what we need for truly affordable housing. And so I’ve hard concerns about what we continue to do with TIRZ funding.”
[ Related: Dallas developer struggles to gain City Council support for Broadway East project in Government Hill | Oct. 22, 2021 ]
Bravo, who took office in June, pointed out that there are four new council members who have never had an opportunity to discuss TIRZ policy, asking questions such as: What is their purpose? Do they each have the same goal? How are we measuring success?
Council members are scheduled to discuss TIRZ policy at a meeting of council’s Planning and Community Development Committee in January.
Encore has begun demolishing structures to make way for the complex. Construction is set to begin this month and to be completed no later than December 2023, according to a presentation on Thursday from the city’s Neighborhood and Housing Services Department.
The complex will be the first component of Broadway East, a master-planned community which local developer GrayStreet Partners had once planned to build with a total of 1.6 million square feet of mixed-use space at a cost of $560 million. In August, GrayStreet sold much of the project site to a limited partnership linked with local firm Fulcrum Development.
The incentive package awarded to Encore is unusual in that it would grant $1 million next year and another $1 million in 2023. In the following years, Encore would receive a 75 percent reimbursement based on the site’s tax increment—in other words, the amount that its property taxes increase due to it being developed. The deal was structured that way so that Encore could get money quickly to use to build infrastructure, and because the TIRZ is set to expire in 2031, after which the reimbursements will stop.
Each year, a quarter of the complex’s tax increment, or the other 25 percent, would go into an “affordable housing fund” administered by the city. According to the city’s analysis, this would amount to a total of about $954,000 by 2031.
Richard Webner is a freelance journalist covering Austin and San Antonio, and a former San Antonio Express-News business reporter. Follow him at @RWebner on Twitter
Contact the Heron at email@example.com | @sanantonioheron on Twitter | Facebook
Along with these infrastructure upgrades, will they create a connection from Broadway to Alamo? Possibly by extending Pearl Pkwy? This massive block is a huge barrier for pedestrians and pedestrians cyclists as is, do you know if they will fix that?