Memorandum raises questions about affordability and public benefits of Statesman redevelopment

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Friday, July 22, 2022 by Chad Swiatecki

A new memo which foresees significantly higher costs for affordable housing and other public benefits offered by the city for the largest south central waterfront development project has raised a number of questions as the process of developing units expected progress in the coming weeks.

City Council was due to take the second reading of the PUD led by Endeavor Real Estate Group at its meeting next Thursday, although a request from a residents’ group may delay it in August. This could give Council members, city staff and Endeavor representatives more time to work out the findings of the California-based economic and planning systems. On July 8, the group shared an analysis with Rosie Truelove, director of the housing and planning department, that an anticipated shortfall was needed to cover public benefits at the former site of the Austin American Statesman will far exceed the $146 million estimate published in a 2020 analysis.

The memo also says six demands the city has made as part of negotiations over height and density changes to the project would add nearly $350 million to the cost of the $2 billion project, making it probably economically impossible without other public contributions to pay. parks, roads and transit projects. Much of the $350 million relates to affordable housing needs that Endeavor is expected to provide either at the Statesman site or in the larger district.

Last week, the Community Development Commission voted to reiterate its December recommendation that 20% of all housing in the South Central Waterfront district be priced at affordable levels. Members of this commission also criticized a potential reduction in the number of affordable units tied to the project and the ability to use replacement payments from Endeavor to fund affordable homes to be purchased elsewhere in the district.

Council member Kathie Tovo, whose district includes the waterfront area that has been primed for redevelopment over the past decade-plus, said she wanted to know more about the basic financial information used in the new analysis. as well as the 2020 study published by ECONorthwest, both as products contracted by the city. Tovo questioned the high costs and projected funding shortfalls for for-profit development that continues to move forward.

“I find it extremely curious that the note we received continually refers to the infeasibility of the Statesman PUD, because if the planned development of the unit is truly unfeasible, you wouldn’t see a developer moving forward with investors. still in place,” she said. “Until now, we have not had access to financial modeling which gives rise to a certain set of assumptions on which this note is based in reaching its conclusion. Everything is based on information that we do not receive and have not received.

While affordability and public parks remain Tovo’s top two priorities for ongoing project negotiations, she said there is room for discussion on whether to include more rental units in the project. instead of affordable condos which are problematic for low income families due to high fees. and homeowners association dues. On the possibility of Endeavor making replacement payments to fund affordability elsewhere in the district rather than on the Statesman site, she said those payments tended not to produce the desired number of units over the long term.

One of the side issues that also arises with the Statesman project is the proposed creation of a Tax Increment Reinvestment Zone (TIRZ) that would fund some of the public benefits and other amenities of the project using revenues of the gradual increase in property values ​​there. This structure has drawn criticism from those who oppose the use of city tax revenues to partially fund private development, with the creation of the TIRZ blocked while alternatives, including a possible additional tax on the property in the form of a public improvement district, are contemplated. .

“There are some district-wide improvements that we may not be able to do if we don’t identify a public funding source, because they may not be possible,” Tovo said. “It may not be the will of the community to make these district-wide improvements, and we will not be able to achieve the vision of the South Central Waterfront in its entirety without some of these public investments. It’s something where we have to be in tune with the community about it. If that’s not what people want to see in this area anymore, we need to rethink it.

Richard Suttle, an attorney representing Endeavor in the PUD process, said the company was willing to work with the city on the number of affordable rental units on the Statesman site, but stressed there was a need for money. – a TIRZ or other mechanism – to cover the financing gap created by the city’s public interest and infrastructure needs.

“The South Central plan had taken the gap into account and said there would be (tax increase funding) or TIRZ so that there would be public money to cover the shortfall for whatever they want. They underestimated the deficit and we are ready to absorb part of this underestimate, but someone asked me, and if there was no TIF or TIRZ… I replied that this project did not work.

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