Councilmember Koop and I traveled to Portland and Seattle last weekend to tour each city’s streetcar system and bicycle infrastructure. Assistant City Manager A.C. Gonzalez (who oversees economic development) and Jay Kline (DART’s streetcar coordinator) joined us.
STREETCARS
Both cities have used streetcars as economic catalysts, allowing considerable mixed-use development in depressed areas. The Pearl District in Portland is a great example. Only a few years ago, it was a run-down, crime-ridden warehouse district. Today, it’s a vibrant, clean, mixed-use community with businesses and residences. MORE….
I’m voting YES on Proposition 1 because I am concerned with the risk to Dallas taxpayers. Proposition 1 will prohibit the city from owning a convention center hotel, as the Mayor has proposed.
In theory, the hotel would be able to pay for itself through its own revenue. But if the hotel doesn’t meet the Mayor’s rosy projections for occupancy, taxpayers get stuck with the bill. So I am voting YES on Proposition 1.
I am voting NO on Proposition 2, which will essentially call for a referendum whenever the city provides more than $1 million in financial incentives for a development.
There are areas of our city that need incentives to convince developers to build there, and developers won’t stick around for a public vote. They’ll simply go elsewhere — Las Colinas, Irving, McKinney — where they can get the same incentives without waiting months for a vote. Bottom line is, Prop 2 has the potential to make Dallas non-competitive and seriously damage our city’s ability to provide reasonable economic incentives to businesses.
UPDATED: On another website, someone posted “So many things would have to go wrong for this hotel to use taxpayer funds.” Not really. Just missing a mortgage payment could force the city to dip into taxpayer debt.
While the hotel debt is initially secured by hotel revenue, it is also secured by taxpayer dollars. Apparently, the market didn’t feel comfortable betting solely on the hotel, so it required additional security — in the form of taxpayer funds. So here’s how it works:
The city’s going to borrow $550 million for the hotel: $500 million to build it and $50 million to set aside in a rainy day fund (the “reserve account”). The reserve account protects bondholders so they know they’ll get repaid — the city can dip into this reserve account if the revenues for the hotel aren’t enough to repay the debt.
If it ended there, I’d be supporting the city-owned hotel, but it doesn’t. The reserve account has to stay at $50 million to satisfy bondholders. Guess who has to keep the reserve account full? Well, if the hotel doesn’t have enough money to pay its mortgage, it surely won’t be able to refill the reserve account. So that will fall on taxpayers. It’s really not that complicated, or that unlikely.
This city-owned hotel is a gamble, and in this economy, it doesn’t make sense for the city to be putting taxpayers at risk.
On Wednesday, the City Council will vote on whether to provide a loan of $550,000 to Downtown’s only grocery store — Urban Market — to keep the store open. Private investors would match that amount.
So why should the city subsidize this business? Four reasons.
First, in 2001 the city REQUIRED that the developer who renovated the Interurban Building put in a grocery store in order to get historic tax abatements to rehab the vacant, dirty building. That’s right. The developer didn’t come up with the grocery store idea, the City did. The City knew exactly how many apartments and condos were going to be built over the next few years, what the surrounding population would be to support the market, and knew that it would be hard for the grocery store to scrape by. But the City saw the grocery store as a necessary amenity to lure residents to Downtown. Now that the City required this significant investment, it would be wrong to shrug and say, “Oops, sorry it didn’t work out.”
Second, Downtown business leaders and developers are stepping up and putting in money of their own. They understand the Market is a huge draw for new residents, and an important amenity for those already there. Losing the Market could impair developers’ ability to sell units. They have seen the population growth expected for Downtown over the next couple of years, recognize that it will likely be able to sustain the market in two years, and they’re willing to make that investment. If the private sector steps up and believes that this project is indispensable to Downtown, the City should step up as well, considering we’re the ones who mandated it.
Third, if Dallas is going to meet its goal of tripling the population of Downtown over the next several years, the City MUST support “meat and potatoes” businesses in Downtown. It’s the little things, like grocery stores, that help transform a group of city blocks into a neighborhood. The Council’s Economic Development Committee has requested that city staff focus less on high-end, esoteric shops in Downtown as it has done in the past, and more on residential necessities like drycleaners, grocery stores, and other neighborhood shops. Time and time again, residents tell me how important the Market is to their experience of living Downtown, and we need to support one of the pioneering stores at this crucial time.
Fourth, the Market opened to great fanfare. It was to be a harbinger of great things to come for Downtown Dallas. Letting it close now would send a signal that our Downtown is stumbling.
As more residents populate Downtown in the next two years, they’ll bring their dollars with them and help make the Market self-sustaining. It’s also important to keep in mind that the City and the private investor group will have the authority to approve and oversee the Market’s operator, will have financial oversight, and will reevaluate the Market’s financials in a year to make sure we’re on track. If not, we won’t continue to financially support the Market, and will have only invested $225,000.
A strong, vibrant Downtown is the key to a strong, vibrant city. Our Downtown is at a critical stage in its infancy. It’s still a toddler struggling to stand on its own, and there will be times when we have to intervene to support it. Now is one of those times. For a small investment, we can keep the doors open for this important Downtown amenity that has become a symbol of Downtown revitalization.
We had a briefing today in the Council’s Economic Development Committee to discuss the city’s incentives program to attract and keep businesses in Dallas. I wanted to give a quick overview of that program.
Here are the ways Dallas can attract and keep businesses: - Tax Abatements - Development Fee Rebates - Infrastructure Participation - Right-of-Way Abandonment Fee Rebates/Credits - Tax Increment Financing Districts - Public Improvement Districts - Consideration of Grants and Loans
The city will not give incentives unless the business project would not occur, or would be substantially less beneficial to the city, “but for” the incentives.
The thing that struck me the most about this briefing relates to tax abatements. Tax abatements reduce the amount of property taxes that a business pays to the city for a specified period of time.
Residents often ask me how much money the city “loses” each year due to business tax abatements. There are currently 75 active business tax abatements that resulted in $8.7 million in forgone revenue in 2005. (Texas Instruments’ abatement accounted for $6.3 million or nearly 72% of this amount. Texas Instruments’ abatement will expire after 2007 resulting in the City receiving this tax revenue in FY08-09.) Without Texas Instruments, the city is abating $2.4M a year for businesses. To put that inperspective, our city’s annual budget is $2.2 billion.
Since 1990, the City Council has considered business incentives for over 200 projects with over $4.5 billion in new investment and over 50,000 jobs created or retained.
Since 2003, the City Council has considered incentives through the Program for 19 projects with an associated $429 million in new investment and 5,000 associated jobs.
I would prefer we didn’t have to offer any incentives to keep and attract businesses to our city. Unfortunately, comparable cities around the country, as well as neighboring suburbs, offer incentives, and we have to level the playing field. You may view a list of incentives provided by other Texas cities and other national cities on pages 11 and 12 in the briefing.
Today the City Council approved a change in zoning for a new development in Uptown: the Hanover Residential Tower.
Hanover will be constructing a residential tower on the northern part of the block at McKinney, St. Paul, and Harwood. The lot was zoned for heavy commercial uses, and the developer wanted to add residential uses.
The developer worked with surrounding property owners to reduce the impact on their views of Downtown (“view corridors”). As a result, the developer sought to make its tower thinner and taller — 45′ taller than the 240′ zoning standard permitted by the Oak Lawn Planned Development District. (The same height as the Crescent.) They also asked for increased density for the development.
For these additional zoning rights, the builder agreed to restrict part of its property (the little panhandle that abuts Harwood) to parking and greenspace, and not build on that part of the lot.
I also requested that the builder put in wider sidewalks than required. Uptown is a pedestrian area, and is quickly linking with Downtown and Victory. I get so frustrated walking or riding my bike in Uptown where the sidewalks are so tiny. We need to make the area pedestrian-friendly, and the narrow sidewalks discourage people from walking. So instead of little 4′ sidewalks, I requested 5′ of parkway and 10′ sidewalks on the McKinney and Harwood sides, and a 5′ parkway and 7′ sidewalks on the St. Paul side.
Lastly, I requested that the builder camouflage the parking garage to make it look less like a garage and more like the rest of the building’s facades.
I also stripped out a number of heavy commercial uses that should no longer be allowed at that site.
Overall, this is going to be a great contribution to Uptown, and I am pleased with the resulting zoning changes.
Today the Council voted to authorize the Economic Development team to continue negotiating the Trinity Crossing Entertainment project. You can see more info and my thoughts on this issue here: Previous Blog on Trinity Crossing
Slot machines and a horse race track are currently part of the entertainment center proposal, and I’ve got concerns about bringing gambling in our City. I directed staff to look at this issue more broadly, not just at how much money this will bring to the City. For example, we need to consider the impact of gambling on public safety, social cost in gambling addiction, whether other cities that have adopted slots gambling have themselves become “addicted” to the revenue, and why other cities have tried to get out of the slot machine gambling business.
This issue is now going back to the Economic Development Committee to discuss concerns brought up by me and other councilmembers. (I’m on that committee.) We’ll then give direction to the negotiating team about what we as a City want to see in the agreement.
PROPOSAL: To continue negotiating the land trade and entertainment project; to bring a recommendation to the Economic Development Committee by November 21; to brief the full Council by Dec. 5; to present for Council vote by Dec. 14. (BB moved, JF seconded.)
Today the Council voted in favor of a $6.3M tax abatement for Hunt Oil to build its headquarters at 1900 Akard Street in Downtown. You can see my thoughts on this issue here: Previous Blog on Hunt Oil Headquarters
VOTE: (11:2, AH voting yes, LM and MR voting no, GG absent from vote, LK recused)
The City’s Economic Development Department is proposing to create an incentive package to keep Hunt Oil in Downtown Dallas. The City Council will be briefed on the proposal this Wednesday. A copy of the Council’s upcoming briefing is available here: Council Briefing
Hunt Oil (no relation) has been in Downtown Dallas for 68 years. Right now, they rent their office space (and pay no property taxes), but plan to build their own headquarters. Dallas is competing against Irving as the location for the headquarters.
Hunt Oil proposes to construct a $120M building on the west side of the Dallas Museum of Art. Currently, a parking lot and small building sit on the land.
The property taxes the city currently receives on the proposed construction site are minimal. Hunt Oil’s new headquarters will add over $120M to the site’s taxable value. That is more than 7-11′s new headquarters. (Earlier this year, the Mayor led the effort to provide more than $9.75M in incentives to keep 7-11 in Dallas.)
The proposal before the City Council is to abate $6.3M in property taxes from the new building over ten years. It is important to note that the proposal calls for the city to abate taxes that we do not currently receive, and would not otherwise be getting from the site. We’re not taking money from the general fund and giving it to Hunt Oil. Instead we would be taking new tax dollars generated from the headquarters building and rebating 79% of that for ten years. (We would still get 21% of the new property taxes for ten years ($3.87M), then receive 100% starting at year 11 ($1M/year).)
The only legitimate argument against granting the tax incentives is that another company would come along and build on the site without incentives. Unfortunately, recent history shows that hasn’t happened (witness the $60M in public money incentives that the Mayor fought so hard for on the Mercantile project and the $9.75M for 7-11 because the projects weren’t getting built without incentives).
The economic reality of today is that cities must fight to attract and keep large companies that create jobs and increase our tax base. Currently, the suburbs are winning that battle, and the burden of financing our city’s infrastructure is falling more and more to homeowners via residential property taxes. If we want to continue letting the suburbs take away our tax base, we can dig our heels in and tell these companies to go away. But in the end, we lose out.
Dallas has come around to creating business development incentives very late in the game. We lost EDS. And Frito Lay. And Mary Kay, Hagger, Perot Systems, Dr. Pepper, Mobil… and the list goes on. We can’t afford to lose another Dallas business and all the money and jobs that go with it.
On Wednesday, the Council will be briefed by the Economic Development Department on a proposal to create an entertainment complex near the Convention Center in Downtown Dallas. You can read the briefing here: Council Briefing
The terms of the proposal have not been hammered out yet, but the tentative plan looks like this:
-The City owns Reunion Arena, but is losing over a million dollars a year on it. The arena’s total land area is about 360,000 sq. ft. -The City owns half of the Convention Center’s Parking Lot E. Hunt Consolidated owns the other half, about 331,000 sq. ft. -Lot E is where a company named Dallas City Limits is interested in creating an entertainment complex. -The proposed deal would entail a land swap between Hunt Consolidated (Parking Lot E) and the City of Dallas (Reunion Arena). The City has received two conflicting appraisals on the properties, so we’re doing a third appraisal. At that point we’ll have more details about the possible land swap.
That’s part one of the deal. The second part of the deal proposes that the City sell Lot E to Dallas City Lights for fair market value to build the enterntainment complex.
As proposed, the entertainment complex would house retail shops, restaurants, and a horse racing track with “Video Lottery Terminals.” That’s a fancy way of saying slot machines.
I am supportive of the idea of consolidating the land at Lot E in order to create an entertainment center. I am also supportive of creating an entertainment center in our Downtown. HOWEVER, I am very troubled by the idea of allowing slot machines at the race track. Slot machines are highly addictive, prey on the poor, and in general create a seedy atmosphere that I don’t think is right for our Downtown.
Many cities that once permitted slot machines are now putting constraints on them or getting rid of them altogether. If our city becomes dependent on slot machine revenue, it would be nearly impossible to get rid of that form of gambling down the line. (The State Legislature would have to approve such slot machines before Dallas could proceed.)
I am less troubled by regulated horse racing if slot machines are excluded. However, race tracks without slot machines are in decline. Successful new racetracks, called “racinos,” incorporate slot machines and other forms of gambling into the mix. When these racinos are financially successful, it is due to the non-race gambling income, such as slot machines. So the question becomes, can our proposed race track stand alone, without slot machines, and still make money? If not, can Dallas City Limits put together an entertainment package that doesn’t include a race track or slot machines?
