Tuesday, February 14, 2006

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

City has other tools to spur downtown renewal
Dallas: Facing loss of tax abatement option, officials cite alternatives
12:00 AM CST on Friday, February 10, 2006
By DAVE LEVINTHAL / The Dallas Morning News
The tax abatement is among the most effective tools in Dallas' downtown economic redevelopment toolbox. It has helped spark the renovation of numerous old skyscrapers and the creation of new towers, too.
But as city officials acknowledge that they may shelve downtown tax abatements for decades to secure financing for the Mercantile Bank redevelopment, some also say it may not matter much when it comes to attracting and retaining businesses or renovating long-vacant historic structures.
Combinations of business personal-property abatements – which apply to office equipment – sales tax reimbursements and various grants, they explain, could provide significant incentives in the absence of tax abatements, which generally allow businesses to keep some or all of their property taxes over a fixed duration.
"It depends on the project; their incentives could equal or exceed a tax abatement," said Jim Wood, assistant director of downtown initiatives for Dallas' Office of Economic Development.
Myron Mims, chairman of the Downtown Dallas Development Authority, a quasi-governmental body appointed by the City Council, said the lack of tax abatements will not stop development.
"Because of the projects we've already approved, and the projects that are going to be part of the 2006 bond program, you'll see progress," he said.
Alice Murray, president of the Central Dallas Association, which represents dozens of downtown businesses, agreed that the city must be financially creative when attempting to attract and retain downtown businesses. "We're going to have to find any public way to get these done," she said.
Bill Blaydes, chairman of the City Council's Economic Development and Housing Committee, said he's exploring all options, although he's not ready to say what those options are.
"We are running a couple of things by our city attorney to make sure we're within the guidelines of the law," he said. "We, as a council body, are bound and determined to come up with a program."
Council member Angela Hunt, whose district includes much of downtown, says she sure hopes so.
Ms. Hunt hadn't yet been sworn in to her seat when the council in May struck its $70 million tax incentive deal with Cleveland-based developer Forest City for the Mercantile project. Had she been, Ms. Hunt said, she probably would have opposed the deal.
Meanwhile, Ms. Hunt says she hopes the council will approve a plan to allow historic downtown buildings first access to tax increment finance dollars through Dallas' Downtown Connection Tax Increment Finance District.
While city officials expect that the Mercantile project will monopolize this money for nearly a decade – the tax increment district funnels property tax payments back into the area for various improvement projects instead of into Dallas' general fund – other projects should be eligible sometime next decade.
"I'm frustrated, and I do sense some frustration among my colleagues," Ms. Hunt said Thursday. "Until now, though, none of us were aware of the fact that the Mercantile would preclude us from using tax abatements."
So why can't the city use tax payments to secure funding for its portion of the project?
The city is selling about $65 million in bonds to obtain its funding, and officials say continued abatements would drain downtown's property tax base, thereby concerning investors. Such wariness could lead to a downgrading of the bonds' ratings, meaning the city would have to pay higher interest rates or worse.
"You don't want to do tax abatements if you need that revenue to pay off the projects that are getting TIF money," Mayor Laura Miller said. She added that she agrees that property owners will have other incentives to use.
The city's proposed 2006 bond program could also inject large sums of money into downtown to create parks, rebuild streets, and extend the McKinney Avenue Trolley line, among other enhancements, the mayor noted.
Last year, Forest City ended negotiations with Dallas when Assistant City Manager Ryan Evans presented company leaders with an incentive package they didn't consider large enough. Mr. Evans had argued that Dallas couldn't effectively fund all of its key downtown redevelopment projects with too large an incentive package.
But the majority of the council disagreed, and a contingent of city leaders led by Ms. Miller reopened talks with Forest City and struck a deal the company accepted.
"Forest City insisted they get their money up front, and the other projects would have to wait many years to get their money," Ms. Miller wrote in an e-mail. "But that's what the three council members and I and staff negotiated. And that's what the whole council knew when we voted to accept the deal."
"Everybody's eyes were wide open," said David Levey, Forest City's executive vice president. "We told the city from the first day: We need to know the money will be there. If they didn't have the money, they didn't need to do the deal. But they did the deal."
Mr. Levey added that the discussion over tax abatements is not affecting the development of the Mercantile and other nearby buildings, which began in December. If completed as designed, Forest City will have redeveloped nine now-vacant high-rise buildings on the eastern end of downtown.
By next month, the council is expected to approve the bond sale, with conditions that it not use tax abatements in the Downtown Connection district for 30 years.
Could this change yet?
"You never know," Mr. Mims said. "But it'd be highly unlikely. The best way to proceed is the way we've outlined."
E-mail dlevinthal@dallasnews.com