Tuesday, October 20, 2009

Dallas City Council approves subsidy packages for Deloitte, Continental Building

By RUDOLPH BUSH / The Dallas Morning News rbush@dallasnews.com

The Dallas City Council approved two major subsidy packages Wednesday aimed at drawing workers and residents to downtown.

A $17.5 million tax-increment subsidy was approved for Cleveland-based developer Forest City to restore the vacant and decaying Continental Building on Main Street.

And the council voted unanimously to provide a $2 million grant to accounting giant Deloitte in exchange for the firm's agreement to move 470 employees from Irving to an office at Chase Tower in downtown Dallas.

In 2005, Forest City received $68 million in city subsidy, mainly for redevelopment of the Mercantile Building, which has since become one of downtown's largest apartment complexes.
The deal became one of the richest tax subsidy packages in Dallas' history but proved to be too little to restore both the Mercantile and the Continental as intended.

So the council returned to the subsidy table for the Continental on Wednesday, with the hope its redevelopment will bring downtown more of what it desperately needs – residents.

The $17.5 million in tax increment money – paid out over many years – will be used to help repay federal loans Forest City also needs for the deal.

Tax increment is a portion of property tax money the city sets aside in a specific area as property values rise.

Most of the tax increment raised for the Mercantile and Continental deals comes not from downtown but from growth funded through private investment in Uptown.

Council member Ann Margolin was alone in voting against giving more subsidy money to Forest City.

She said that while she believed the deal was a good one, she wanted the city to study how it doles out tax-increment funds and whether they might better be used for other projects.

"We are on a course that is going to use up the [tax-increment] money pretty quickly," Margolin said.

Mayor Tom Leppert, along with the rest of the council, said the deal was important to keeping downtown's redevelopment momentum going.

Leppert said he expects that, eventually, the city will not have to provide subsidies for downtown redevelopment.

"Clearly, we're dealing with some challenges that weren't invested in long ago. We're trying to kick start that," Leppert said.

Deloitte's move

In the day's second subsidy deal, the grant to Deloitte, to be paid in four installments from 2011 through 2014, requires the company to maintain at least 1,111 employees in the Chase Tower office.

Margolin said she voted for the deal because it makes good business sense for the city.
"The economic model is very conservative and shows over 10 years the employees should bring about $8 million to the city," she said.

Many at City Hall hope the benefit becomes much greater over time.
Deloitte plans a $20 million renovation to its downtown offices, Assistant City Manager A.C. Gonzalez said.

An investment like that suggests the firm may be thinking of making Dallas a major regional headquarters, if not something more.

Southern Dallas plans

The council deferred action on a zoning and development plan for neighborhoods around the University of North Texas campus in far southern Dallas.

The plan, devised around new urbanist principles of walkability and connections to rail lines, is intended to define how the area around UNT will grow in coming decades.

City Hall has high hopes that its plan will spur strong urban neighborhoods centered around stations on DART's planned Blue Line.

UNT's Dallas campus is expected to support 25,000 students and thousands of faculty and staff members.

The school should be a strong impetus for growth in one of the few areas of Dallas that still has large open stretches of developable land.

But council member Tennell Atkins, who represents the area, said he had concerns about elements of the development plan and asked that it be returned to council's economic development committee for a hearing on Dec. 9.

Specifically, Atkins is worried about a provision that prevents the covering of creeks and streams. He said that could affect construction of the planned DART lines.

He also said work needs to be done on requirements governing building height and setbacks from the street.