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Background

Why Stop Domain Subsidies?

During 7 days in May 2003, a well-connected real Austin estate developer, Endeavor Real Estate, cut a rush deal with the City of Austin for $65 million in tax incentives to build a high-end shopping mall in north Austin called the Domain, comprised of 670,000 square feet of luxury retail plus 390 apartments and office space. With scant public scrutiny and through a series of false assumptions and misrepresentations, the developer cloaked the true taxpayer cost and convinced City of Austin officials to rebate public sales tax and property tax money back to the developer until the year 2028. Shortly thereafter Endeavor flipped the deal to Simon Properties, a $49 billion company and the largest mall developer in the US. In addition to bilking the taxpayers, the deal has forced local merchants to compete with a shopping mall subsidized by public tax money; an unfair disadvantage for the unique local businesses that give Austin its character.

The developers made several key misrepresentations to the city in order to get their subsidy (see our Archives for documentation taken by Brian Rodgers in to court, that substantiate our claims below):

* The developers claimed the project would not be feasible without city help, when in fact it was in the black by $28 million before the taxpayer incentive package.

* Many of the 1,100 permanent new jobs the project was to create were actually old jobs brought over from existing shopping centers such as JCrew, Borders, Tommy Bahama, Banana Republic, Victoria Secret, Luxe Apothetique, and St. Thomas Boutique.

* The wage levels for these retail jobs were promised at $35,000 but the reality is closer to $10,000.  The 644 restaurant jobs average only $17,500.

* The developer promised the city tax revenue for the year 2005, though they knew this goal would be impossible to meet. (The actual opening was 27 months after they promised.)

* The developer showed projected sales levels that were well below what they knew would be generated by luxury stores, so as to hide their acctual expected compensation from the tax incentives ($65 million instead of $37 million!).

* The developer promised to provide four acres of public open space but only provided 1.4 acres unless you count the sidewalks.

Local Business v. Corporate Chains

Many in the small business community in Austin have asked ‘why fund the Domain, to compete with our local home grown businesses”? They argue:

* Locals hire more people than corporate chains, including local accountants, attorneys, ad agencies, etc.

* Locals spend their profits in the city, effectively multipying its effect on the city’s economy. Chains send their profits out to corporate headquarters.

* Locally owned stores provide far more tax revenue.

* Locally owned stores provide far more entrepreneurism.

* Locals give more to charity, and are more involved in the community.

* Locals understand and contribute to the unique character of Austin, while chain stores bring homogenous style and feeling to an area, making our city less distinct and a less pleasant place to live. (In fact, our tourism is geared towards these home grown Austin businesses, including our local bus tours!)

How We Got to a Charter Amendment

The City of Austin has a way out of these subsidy payments pursuant to a lawsuit settlement in 2004; namely, the city can walk away at any time with no penalty. However, the council maintains, “a deal is a deal”, even though developer’s gains were ill-gotten, and despite the growing public opposition, the city refuses to walk away from the deal.

Local activists have bypassed the city council by collecting 27,000 signatures for a ballot initiative in November to strip away the subsidies which has pushed the Domain’s current owner, Simon Property Company, the largest real estate company in the US worth $49 billion, into a tight corner. The stage is set for a November showdown.

What the Charter Amendment Does?

It’s not too late to reverse the Domain subsidies; no money has yet been given. The first check is due in October, but we expect the city to wait until the matter is resolved at the ballot box in November. If the SDS charter amendment (Prop 2) passes (you need to vote FOR the amendment), the city will not be able to give this money away and will never again be able to give city money to retail interests.

Who runs the city, developers or citizens? Passing the amendment will send a powerful message to the city that they need to pay close attention to the needs of the people and not just blindly follow the will of the few who are monied and connected.

The Documentaries

Public Money, Private Profit (working title) will be three short documentaries about the Domain development scam, the local businesses that are forced to compete with these large corporations without the benefit of government subsidies, the fight to expose the scam and get the measure on the November ballot, and the impact of diverting money away from local economies to corporate chains. Far reaching solutions to this national issue will be presented at the conclusion. Sign up to receive our email blasts with the documentaries (see our front page).

Comments

Comment from Jack
Time August 21, 2008 at 11:42 am

Why won’t you name the developer?

Comment from sounny
Time September 7, 2008 at 9:13 pm

they did name the developer. It is endevor. They are the same people who developed south park medows in south Austin.

Comment from Tax payer
Time September 8, 2008 at 4:10 pm

I’m all for supporting local businesses in Austin but I can’t help but think the Domain is frankly good for growth and job opportunities. How is this hurting Austin?

Dear Tax payer:
Perhaps you didn’t notice that our property taxes just went up? Or, maybe you don’t mind that the libraries were cut back — again. Or how ’bout that the city is in a fiscal hole? Please take the time to read our section on the 7 misrepresentations made by the developer of the Domain. But let us simply end with this. Even if those misrepresentations don’t bother you, most people we talk to believe you cannot justify using taxpayer dollars to subsidize a high-end shopping mall of national chains. Why? Because it undermines our local retailers. They are the lifeblood of our local economy. You hurt them, you hurt the people of Austin. It’s time for voters and small businesses to stand up and vote FOR Prop 2! — Stop Domain Subsidies

Comment from Sharon
Time September 16, 2008 at 2:42 pm

The city of Austin government is out of control. The citizens need to step up and claim their right for a government that protects the citizens, not big development. Vote for Prop 2 in November to start gaining your rights back.

Comment from dave m.
Time October 13, 2008 at 1:28 pm

Thanks for all your work on Prop 2. This is a good idea.
I do have a question. It seems the City Council was duped on their intention which was to create a dense, retail/residential mix to focus development thereby creating savings in services expenditures and build an anchor for a intense development zone.
It’s my belief that Austin really needs to do this going forward. I travel the country and return astounded at how we in Austin continue to sprawl when we know it’s not good.
If we pass this prop, how should we expect the city achieve that goal? I mean, what should we ask them to do instead. I’m not being a wise guy here, I support Prop 2, but we do need to achieve what the council thought they were doing. What can I tell my friends your position is on this? I see that you believe retail can cover it’s own expenses, and I agree, but how do we get the mix we want? Look at South Park Meadows. It has a cute, local business courtyard with a handful of locals, but in essence it’s a giant overgrown strip mall and could be planted in anycity, usa tomorrow. I fear that’s what we’ll get if we don’t provide some sort of plan like the domain. Help! Please correct me!

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