Photo by Rocky Garza Jr. | @r0ckssss_ | Heron contributor
Encore Multifamily, the Dallas developer that wants to build the first phase of the Broadway East master-planned community east of the Pearl, is struggling to gain support in City Council for the up-to-$7 million incentive package that the board of the Midtown Tax Increment Reinvestment Zone (TIRZ) approved for the project in August.
Encore pulled the package from the agenda of the Sept. 30 meeting of City Council after District 2 Councilman Jalen McKee-Rodriguez indicated he did not support it. His district would include the $90 million, 386-unit complex, which is planned at the northwest corner of Carson and Austin streets in Government Hill.
McKee-Rodriguez has said that housing developments shouldn’t receive public incentives if they don’t include units priced below market-rate. All of the units in Encore’s complex would be market-rate.
“TIRZ is an opportunity to reinvest in communities that have been underinvested in, but instead it’s been used as a tool to maximize the profit margins of developments,” McKee-Rodriguez said in a text message. “For any housing-related applications, I will not be supportive if there is no affordability component, and this application did not include any affordable units.”
He added: “Most council members indicated that they’d follow my lead on projects like this in my district.”
[ Visit our development profile for Encore’s Broadway East project for more background and info. ]
In a TIRZ, revenue earned from the rise in property taxes is collected and spent on infrastructure upgrades and (in recent years) below-market housing initiatives, also known as affordable housing, within the boundary.
District 1 Councilman Mario Bravo said in an interview that he was “definitely leaning against” the incentive package.
“They had not convinced me that that was the best use of any incentive program dollars that the city is able to provide,” Bravo said. “If they were to bring it back, they’d have to do a better job of convincing me.”
Encore has begun demolishing structures to make way for the complex, spokeswoman Amy Dunaway said in an email. But “no construction of the project can or will occur until the TIRZ reimbursement is considered” by council, she said.
“We understand there is opposition to the TIRZ public infrastructure reimbursement from the District 2 councilman and small number of council members,” Dunaway said. “We are continuing to discuss and work with City Council to address their concerns.”
The incentive package would consist of 10 years of property tax reimbursements, offsetting the cost of expanding water and sewer lines to service the complex and future additions to Broadway East, which local developer GrayStreet Partners had once planned to develop with 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 reimbursements, as Encore Multifamily and officials with the city’s Neighborhood and Housing Services Department have said, will fund streets and sidewalks, and other infrastructure upgrades in the area—setting the stage for Encore’s development, but others, as well.
If the TIRZ package isn’t approved, it will have “far reaching and negative effects on redevelopment in the area,” Dunaway said. “Denial will cause critical public infrastructure improvements—water and sewer, streets and sidewalks, flooding/storm water—to not occur.”
The Midtown TIRZ approved the package on a vote of 7-1 at its Aug. 31 meeting.
The package is unusual in that it would grant Encore $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.
According to the city, the reimbursements would likely end up below the $7 million cap, amounting to an estimated $4.9 million—but that would still make it one of the largest incentive packages the city has ever awarded.
Several council members are critical of the way TIRZs have been used. In an interview, Bravo pointed out that the new council, which took office in June, has not had a public conversation about the purpose of TIRZs and how their success should be measured.
“We have four council members that haven’t been a part of that conversation,” he said. “Like Councilman McKee-Rodriguez, I definitely want to make sure there’s clear community benefits such as affordable components.”
He said he expects that conversation to happen in the coming months.
District 4 Councilwoman Adriana Rocha Garcia said in a text message that the city’s TIRZ policy “needs some revisiting and updating so it aligns with the new housing goals we are working on.”
She said that she had asked city staff to add the matter to the agenda of a future meeting of the council’s Planning and Community Development committee.
“It’s important to adopt metrics we can utilize to track our progress and determine what adjustments need to be made over time,” she said. “As new council members come on board and new frameworks are implemented, we need to ensure everyone receives detailed briefings from city staff to discuss items, like TIRZ, and have an opportunity to weigh in.”
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
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Our councilman is right. We do not need to be subsidizing anything that does not offer genuinely affordable housing.
There’s a lot to unpack here and the council’s decision to pull the incentive is short-sighted. As residents of Government Hill, we should be disappointed that we will be staring at mounds of dirt for years to come (this is going to be a long fight). So aesthetically, our neighborhood will continue to look even more downtrodden. Mckee-Rodriguez has not addressed the impact that killing this project will have on the local businesses nearby. Hello Paradise, the new Guillermo’s, Five Star Bar, Alamo BBQ, The Modernist, La Gardenia and all the future retail space in the Jefferson Building/1800 Broadway are going to lose several hundred permanent customers (plus all the laborers working on the project). These are customers that will pay sales tax to the city, incentivize small businesses to open shop in Government Hill and sustain local jobs in our neighborhood for decades to come. Not to mention, adding this many people to Gov. Hill will also help the small businesses along N. New Braunfels that have struggled since they closed the entrance/exit to Ft. Sam Houston.
In addition to the small businesses facing collateral damage, the city is also shooting itself in the foot. Instead of kicking off a project and considering the long-term benefits of a $90MM investment, they are choosing to focus on the negative. The cancellation of this incentive results in the loss of 2-3 years of work for lower-income earners that the city is supposed to be helping. All of these blue-collar contract laborers have just lost job security and thousands of dollars’ worth of wages with the snap of a finger. In effect, the city council is punishing the people they are supposed to be protecting.
From an optics perspective, I would strongly reconsider my position if I were Fulcrum (the company that owns the other 18 acres nearby). How can you justify executing a +$500MM mixed-use project over 10 years if the city nixes a $90MM project with one of the most sophisticated developers in Texas? If Fulcrum gets cold feet on their Broadway East Project because of this decision, the city loses out on over $14MM in annual property taxes that could be applied towards housing for the less fortunate. The council needs to take a deeper dive into the long-term impacts of this. They cannot simply couch it as “the developers are maximizing their profits” to justify their decision. There’s a lot more to it.
I agree with CNT, But I strongly feel that Silver Ventures are responsible for all the empty space in our neighborhood. Bought all that land, moved everyone out to now have empty buildings with broken windows and trash. To leave it all for the lone star brewery project. It was careless, greedy and irresponsible. Very disappointing.