On the Nov. 4 ballot, Austin residents will not only face a decision between McCain and Obama, but also whether to prevent the city from subsidizing retail stores.
If approved, a new citizen-led initiative called Stop Domain Subsidies will halt any tax rebates or subsidies provided by the city to retail stores. City officials designed the subsidies to generate more tax revenue by attracting more retail stores. In its last meeting, the city council approved the initiative's wording for the Nov. 4 ballot.
Brian Rodgers, a local real estate investor, started the campaign in response to the 2003 city council decision to provide Endeavor Real Estate Group and its partner Simon Property Group Inc. with tax rebates for 20 years to develop retail space in Austin. In May of that year, the development company proposed to build a large mall center with 700,000 square feet of luxury retail and restaurant space called The Domain.
In a 6-1 decision, council members approved the project and included a $65 million tax rebate to be provided over 20 years to the developers in the contract, Rodgers said. If Rodgers' initiative is unsuccessful, the city will also return 50 to 80 percent of the mall's sales tax to the developer. The money would allow The Domain to further generate profit.
In late 2003, Rodgers sued the city and two developing companies based on misrepresentations in the initial contract, citing the developers' promise to the city that the mall would provide the city with a portion of the retail stores' revenue by 2005. The lawsuit alleged the development company incorrectly calculated the amount of money needed from a city-provided subsidy to influence city council members to agree to the contract.
In May 2004, the city and the development companies reached a settlement that made the city not legally bound to pay installments from the $65 million it had initially agreed to pay. Despite the decision, Councilman Lee Leffingwell said the city will continue to pay the $65 million so that future investors will not avoid investing in Austin. While Leffingwell was opposed to the contract when it was made, he said he does not agree with the citizen initiative to cancel the city's contract with the development firm.
"What I'm for is honoring our city's obligations," Leffingwell said. "It's an issue of honor and integrity for the city."
Following the settlement, Endeavor Real Estate Group dropped out of the project, leaving Simon Property Group Inc. in charge of developing The Domain. Simon did not return phone calls by press time.
"The city wouldn't walk away from the deal," Rogers said. "Spending $65 million on retail when we cut parks is not a good idea."
The city has yet to make any payments, which are provided based on performance of sales and jobs created, Leffingwell said. Payments could be made by the end of this year or the beginning of next year, he added.
Amy Kennedy, co-owner of local clothing boutique Pangea Trading Co., said Austin should avoid investing in national corporations and instead look to fund local businesses. Kennedy said if her business had received a subsidy, it could have opened another location.
Leffingwell said large firms do not need subsides but that neither do small, local retail businesses. He said the city wants to focus on attracting larger industries, such as those focusing on nanotechnology and renewable resources.
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