The Domain, "Affordable Housing" and the Soul of Austin

Photo courtesy of Melissa McGee and used with permission. Check out more wonderful pictures by this artist at http://www.flickr.com/people/redhotjezebel/

“Wealth and rank are what people desire, but unless they are obtained in the right way they may not be possessed.”
--Confucius (China's most famous teacher, philosopher, and political theorist, 551-479 BC)

The Domain opened with great fanfare this week appearing on the front page and two section lead articles in the Statesman for it's grand opening. And what's not grand about it? It has those stores that local Austinites have been craving for since moving here from Houston, San Antonio, Dallas and California. Such Austin-y establishments like Neiman Marcus, Tiffany & Co. and Louis Vuitton (because I just don't know how we *ever* got along without being able to buy that customized $140,000 BMW M6 for Christmas!). So how will Austin benefit by having the upscale shopping mall within its borders? I'll let the lead-in to this Statesman article set the table (my emphasis):

"Austin lobbyist Andrea McWilliams travels regularly to Dallas and Houston for business, squeezing in trips several times a year to Neiman Marcus to buy suits for work and gowns for formal events. Starting this week, McWilliams won't have to leave home to shop at Neiman Marcus, which opens Friday at the Domain, a 700,000-square-foot upscale retail center near MoPac Boulevard (Loop 1) and Braker Lane that has been five years in the making."

A quick Google on Ms. McWilliams produces the following page:

"Andrea & Dean McWilliams
Occupation: Lobbyists
Employer: McWilliams & Associates
Home: Austin, TX

Almost all of the 45 state lobby contracts that Andrea McWilliams reported when she answered the Pioneer call in 1999 were for $10,000 or less. But the sheer number of them added up to an annual lobby income of up to $465,000. Many of her clients were big business interests, including businesses of two Pioneers: Lee Bass and Ken Lay. After becoming a Pioneer, McWilliams reported that 35 clients paid her between $1.2 million and $2.5 million in 2003, with her top 23 clients—including Ohio developer Brisben Development (see William Brisben)—paying her from $50,000 and $100,000 apiece. McWilliams’ top industries in 2003 were trucking and pharmaceuticals. This lobbyist’s husband was the spokesman for one-term state Senator Michael Galloway, who lost a 1998 reelection bid. Dean McWilliams then hit the revolving-door lobby, reporting 10 lobby contracts in 1999. Dean McWilliams shared most of the 28 clients that he reported in 2003 with his wife. In one exception, just Dean McWilliams reported that the state’s largest lobby client, SBC Corp. (see Edward Whitacre), paid him from $50,000 to $100,000."

Now, I don't mean to imply that Mrs. McWilliams and her husband aren't noble and just people and that lobbying and fundraising for GWBush as one member of a select nationwide group of 940 Pioneers is some sort of crime, but do these people accurately represent and speak for Austin's community values today?

This, for me, again, comes down to the same ol' conversation I've been having with my blog buddies M1EK and AustinContrarian over the last year: What's the market rate for the remainder of Austin's artistic culture and soul? A quick reading of any of M1EK's or AC's numerous blog posts or the multitudes of comments they leave attached to any blogger's posting that dare question development here in Austin will show that for at least these two Austinites, the promise of economic return greatly outweigh any perceived loss of culture. Some people believe that Austin's culture will seamlessly morph and homogenize into Home Depot strip malls and IKEA wünderlands in the name of "progress," which, by the way, can't and shouldn't be stopped by granola-crunching hippie types like myself and our pesky neighborhood associations. We're just gumming up the works and we just don't know what we're talking about so we must trust in them that they know what's best for us.

But there are also a few bloggers like myself that are trying to act like the proverbial canaries in the mine shaft, attempting to alert those who care to notice to the noxious vapors rising out of city council sponsored developer incentives over the last few years. Incentives which have spurred gentrification in some areas, accelerated it in others while slowly putting the pillow over the face of our once great and vibrant artistic identity (to which, I might add, these very same develop-- *cough, cough*, I mean council members hypocritically "sell" to national and regional developers as why they should relocate here with all that cash. An Endeavor that both champions and strangles that Austin uniqueness and flavor in the process.).

So let's take a closer look at this latest "success story," the Domain. Back in 2003, the city council gave the original developer of The Domain, the Endeavor Real Estate Group, to what amounted back then as $37 million in tax breaks and incentives to develop a "mixed-use infill project that combines office and residential with retail," as one of my favorite city council members has been recently quoted. (In a nutshell, the deal allows the developers to keep $.06 of the $.08 sales tax over the next 20 years while the city pockets $.02 among other things.) Back before 2003, The Domain was slated to be just another office development but someone figured out that incentives would be hard pressed so more was needed than just office space. A new mixed-use plan as well as a new economic development model was put in place. Retail only development rarely and as some argue, should never, receive developer incentives but with the sales tax crunch that the city council was dealing with at the time, and the former Mayor Kirk Watson's "Smart Growth" plan in place, the council eventually found a way to slip the developers the cash they sought (only one council member opposed the tax breaks at the time, CM Daryl Slusher).

So here's where some artistic license on my part begins. I can imagine that in walks "Smart Growth" blessed, Kirk Watson approved former and current developer, Mayor Will Wynn and the former developer lawyer, CM Brewster McCracken to the negotiation table. Who, because we the public don't have access to know what's in these deliberations (another curious Bush era similarity to which Proposition 1 and 2 tried to address), I'm guessing the idea came out that if they develop a "mixed-use" retail property instead of straight office space, they might be able to project the "grand scheme" through the prism of the former Mayor's downtown revitalization and density initiative as well as on the promise of future tax revenues (see this article from the Chronicle at the time). Never mind the fact that The Domain is nearly in Round Rock, nowhere near downtown and that affordable apartments and single family homes abound in the area (more on that below). What Austin really needed, in the minds of these council members was that Neiman's and the conspicuous consumption that will bolster the sagging sales tax base not to mention saving all the gasoline that people like Mrs. McWilliams use to go to Dallas and Houston for their fancy ballroom gowns to swish along the dance floor at the next GWB fundraiser. It was a twofer! Sales tax and environmental savings. Who can argue with that? (end snark)

This incentive program actually produced a lawsuit from a local real estate developer, Brian Rodgers. As seen in this article and freshly posted at the Chronicle, Mr. Rodgers settled his case against the city and the developers (now, the Simon Group) to where the city can now walk away from the subsidy deal with no penalties, returning that projected $40-60 million in tax revenue back to the city coffers. His point, and it's a good one, is that the Domain developer subsidies unfairly discriminate against local businesses and developers because the local businesses will lose business to the Domain while still paying 100% of their city taxes. With tenants like Nieman's, Louis Vuitton and Tiffany's, his argument of there being no need for additional incentives to entice certain businesses here seems to be valid.

Government shouldn't be able to "prefer" one retail outlet over another, no matter the name, reputation or perceived social status of the store. The "siphoning" effect of the Domain will produce a relocation of tax revenues and jobs, not the net gain the council desired and certainly won't be enough to offset the tax breaks the developer stands to receive (this premise is mentioned in the article as a "zero-sum" game and one of the reasons why strictly retail developments rarely receive incentives). But I will agree that with the current tenant list, there will be some added revenue generated from the Andrea McWilliams' of Round Rock, Pflugerville, San Marcos and those in West Austin that were going to Dallas and Houston for their Neiman's fix before but can now drive to North Austin. But just as the attraction of a Neiman's or Tiffany's might pull people through the doors, will there really be enough "common folk" to purchase these luxury items to make up the tax incentives? Will people really stop going to Target or CostCo, shifting the bulk of their shopping at Neiman's, et. al?

And that could be why Mrs. McWiliiams is such an apt spokesperson for this development. No matter how you slice it, common folk or rich lobbyist, the Domain and all of it's glitzy high-end stores are optional markets. The Domain will be where people will pick up a trinket or two but most will not be doing the majority of their shopping there. I would argue that most people will not be spending large sums of cash there on a regular basis either. But while I doubt most people do the bulk of their shopping at say, Barton Creek, the incentive for the majority of the Austin population would still more heavily favor that mall with it's more affordable stores (Sears, Dillards, etc) than with the very high-end fare at the Domain. So in reality, because of the high-end nature of the Domain, the primary customers will be those like Mrs. McWilliams that used to drive (or maybe fly, who knows?) to Houston or Dallas for those fundraising and lobbying clothing essentials and not the other 90% of Austin's population that aren't millionaires.

So with both parties essentially agreeing that the incentive package may be discriminatory (otherwise, why settle out of court?), the framework is in place to return that misbegotten money to the city that, in my opinion as well as CM Daryl Slusher's at the time, probably shouldn't have been offered in the first place (when first proposed, the project met most of CM Slusher's "boondoggle tests" while going through the council). So couldn't we use the money elsewhere in the city's budget like maybe some *real* affordable housing initiatives? I mean, $40-60 million could make a nice dent in the overall affordability picture...

But, as some might argue, the Domain is already participating in "affordable housing" as it's not just a retail development as referenced by this article. Because of the new design standards, the Domain had to give up approximately 10% of it's rental stock to people making 60% of the median income (which currently stands around $68,000/yr). Based on the article, these units, at approximately 700 sq. ft. will run about $1,000/mo. Hmm, not bad you might say but let's take a look at the bigger picture.

I just picked a random apartment locator service and wound up at AllAustin.com and took an average of the current places available for rent, how much they are, the square footage as well as the year the complex was built for the area surrounding the Domain. The search returned 72 complexes in the immediate area of which two (Westdale Park and Venterra at Waters Edge) did not have the years they were built so I removed them from the list. The list produced the following (the screen-scraped data is available below):

• Total complexes with rentals available: 70
• Average rental price (low side only as no range was stated): $623.04
• Average square footage (low side): 610 sq. ft.
• Average square footage (high side): 1194 sq. ft.
• Average square footage (all units): 902 sq. ft.
• Average cost per sq. ft. (low side): $1.02 sq. ft.
• Average age of all properties: 16 years (1989.5)

The above data does not reflect any current incentives (move-in specials, etc) at any of the listed locations or the current occupancy rate so the cost per square foot may actually be a bit lower if those are figured in. But according to the article, the Domain's "affordable" price is roughly $1,000 for 700 square ft. (approx. $1.43 sq. ft.) which, if my math is correct, is about $.41 higher than the current "market" rate of existing properties in the same market segment. So the city is giving incentives for the Domain to charge people almost 35% more than the current market rate in the area. Schweet! Your tax dollars at work!

But wait! The demand is greater for those 39 properties and that explains the extra $.40 per square foot! Well, I agree with that premise. Because of the greater demand for the properties, it does contribute to the higher prices which is justified and makes my point even more relevant. If the market is going to provide the incentive, why do we, the taxpayers have to bolster it? We're not even talking about the "high-end" properties that will surely be renting at astronomical rates and higher costs per sq. ft. So again, what are my tax dollars buying here? Oh, that's right. Mrs. McWilliams' convenience and a municipally guaranteed profit margin for the developer!

And with that, so goes the soul of Austin, lost in the glitz, tulle and sequins of a twirling lobbyist's gown. That image would almost be laughable if the Domain was a single property; a singular Dallas-like blight lost amongst the live oaks of the Texas Hill Country. But, alas, it's not. It is just one of numerous developments, a repeatable pattern of overall development decisions and incentive programs (Samsung, Marriott, Walmart, Endeavor's original southern location, et al.) and a pattern that was referenced a while back by the city auditors when they declared the city didn't have an "overarching" vision of development. As just about any Austinite that's been here longer than 5 years can attest, there's a general feeling of unease that there's just too much "luxury" oriented development going on which will fundamentally change who we are as a community. With the destruction of local businesses like Steamboat, Liberty Lunch and the coming relocation of Las Manitas as examples, is the Austin population really more like the Andrea McWilliams' or the traditional iconic images of struggling musicians and artists, Willie, Stevie Ray and the countless other historical Austin icons still sold to the public by our city council members as feel-good political point getters? By listening to and encouraging development that primarily benefits the likes of the McWilliams' of Austin, we are marginalizing and relocating the future Willies and Stevie Rays to more artist friendly locations while losing that essential element that makes us, well, so Austin-y. Austin is already losing it's cred as the "Live Music Capitol of the World," which seems to be challenged by this city and that now on a regular basis and unfortunately, we can't take consolation to the fact that all this just snuck up on us. Quoting former Electric Lounge owner, Mike Henry:

"Here's the part of Smart Growth that's not so smart," asserts Henry. "The mayor wants to do all of this stuff to Austin, specifically downtown, to make it more attractive to live in, but in doing that, he's destroying the character and charm of the city that made all of those people want to move here in the first place. Sure you can make a bigger, more efficient, newer downtown. And it can be just like Dallas. You wanna live in Dallas? I don't."

That's from 1999, the year that Austin started it's drastic change and some, like myself, would say it's loss of soul. Are we now living in a miserably cloned version of Dallas directed by Dallas citizen wannabees? I think with the addition of the Domain to the mix and representative quotes from Bush Pioneers and Republican lobbyists instead of local musicians for story lead-ins at the Statesman, I think the journey may be just about complete.

Updates and Corrections

3/12/07 - 6:15pm: Changed "For them, Austin's culture will morph..." to "Some people believe that Austin's culture will morph..." As mentioned in a comment, I didn't mean to mis characterize or misrepresent M1EK or AC but to just speak generally about those that have a different view from mine on development (as their posts and comments speak for themselves). I also removed the line "I can hear M1EK's and AC's machinations from here." and changed "Umm... Actually, I agree with you guys here." to "Well, I agree with that premise." from the section referencing the costs per sq. ft.

3/17/07 - 9:21am: Removed "(of their smallest unit)" in reference to the square footage of rental units as I originally worked up just the smallest units square footage but went back and reworked it later with the larger units. I just didn't see that embedded clause on the rewrite.