Austin at Large: Storms Along the Waterfront
How much should the city invest in the Statesman PUD? Zero, or $400 million?
https://www.austinchronicle.com/news...he-waterfront/
And now we're back at 305 S. Congress, the former home of the Austin American-Statesman, the place we used to call the Batcave. This 13-acre site's owners – the profoundly wealthy Cox family of Atlanta, which sold the paper itself in 2018 – have partnered with Endeavor Real Estate Group to create a $2 billion-ish redevelopment (now referred to as the Statesman PUD, for planned unit development) should the city agree. Back in April, Planning Commission and Council did agree – the latter on first reading – but with lots of amendments and heavy community pressure on Endeavor and its agent, Richard Suttle, to do better, mostly on affordability.
Endeavor may indeed do better; Suttle has hinted the developer may buy up existing apartments in the South Central Waterfront district and make those affordable, so it can sell the posh condos it plans for the Batcave for top dollar. But Endeavor's response to community pressure so far has been to plead for city funding to help it deliver community benefits, because without it their plan to maximize the property values at the Statesman site (and the future tax revenue to the city) doesn't pencil out right now, at the top of the market and with construction prices and timelines growing like weeds.
Let's Ask the Consultants
Back in 2020, the city paid ECONorthwest, a Portland firm with a good reputation in affordable housing circles, to test Endeavor's claims that this very expensive dirt at a focal point of Austin culture – where Downtown meets SoCo – is not feasible to build out without city assistance. They said it checked out, to the tune of $140 million or so, which ECONorthwest thought could be resolved as market conditions improved (remember, this was six months into COVID).
Well, they sure have improved! So at the April 7 meeting, Council asked for an update of this study to price out the Statesman PUD, with all the community benefits offered and required so far, plus the six proposed amendments that had a price tag. The Housing & Planning Department went to its go-to consultant, Economic & Planning Systems of Oakland, who's been working with the city on deals like this in Austin since the 1990s.
And guess what they found? In a 23-page memo drafted earlier this month, EPS says the financing gap has grown, not shrunk, as construction costs have inflated; the unmet portion of the price tag is now between $238 million and $400 million. The three amendments asking for infrastructure – mostly extending Barton Springs Road into the site, which is also the southern end of Project Connect's Blue Line Bridge – price out to $28.7 million. And the affordable housing demands widen the gap further; the most expensive of these, imposed at first reading by Council Member Kathie Tovo, will cost an additional $266 million.
Are you thinking, "WTF? Is this thing going to be built of pure gold? What could possibly justify the city taking a whole housing bond's worth of spending off a rich developer's hands? And how is it possible that a 3.6 million-square-foot project – that's about 6.5 Frost Bank Towers – in Austin, right on the lake, right now, cannot pay for itself?" But you also may be thinking, "That sounds really cool! It's on the Blue Line? How long before I can live there?"
I Say: ¿Por Qué No los Dos?
Remember that part of the problem – which I wrote about earlier this year – is that the South Central Waterfront was never properly platted or supplied with utilities, drainage, internal roads, and so forth; it was all floodplain until Longhorn Dam was built in 1962, and nobody really knows what lurks under the Batcave's parking lagoon. That means money needs to be spent just to bring things up to code, so to speak. Overlaid on that are the projects included in the South Central Waterfront community visioning plan adopted by the city in 2016. It would not be weird for the city to pay for some of this; that's why PUD zoning cases are all negotiations, all dealmaking.
Late last year, the city planted the seeds of a fledgling public-private partnership, formally establishing a tax increment financing district for the South Central Waterfront, but setting the increment at 0% (it can change it at any time). That's the percentage of tax revenue generated within the SCW that would be set aside to cover the cost of the city's share of the infrastructure, rather than flowing into the General Fund. This is what the city did at Mueller and at Seaholm – the latter of which is comparable in area, if not scale, to the Statesman PUD – but it owned those properties. Again, rich people own the Batcave who could afford to cover the nine-digit gap between Endeavor's financing and the city's demands.
Suttle argues that the rest of the tax revenue from the Statesman PUD, beyond the increment, will be as high as it possibly could be, and not subject to state-imposed revenue caps, and that alone should be worth some city skin in the game. On the other side, Save Our Springs Alliance leader Bill Bunch, in a letter to the Austin Monitor that he shared with the Chronicle, calls the EPS analysis "absurd" and "worthless," adding, "Its whole premise – that the most high dollar real-estate in [Texas] somehow just can't make a profit without taxpayer handouts is ridiculous." Perhaps they are both correct? We'll see what Council decides.
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