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Why we should subsidize more projects like The Domain

Quick reminder as I prepare to go on a business trip. The reason we need to subsidize projects like the Domain, and especially Mueller, is that existing crappy strip malls actually cost us (the city) more money than they make but thanks to our suburban zoning code, they are the only thing that can be built without special subsidy or regulatory relief.

Read that again. You heard me right - Brian Rodgers' strip malls are already getting subsidized via the tax code and already get regulatory preference in the zoning code. We tax by land and improvement value rather than assessing based on the costs generated by retail - and strip retail is the worst on this scale, since, for one simple example, if you want to visit a half-dozen different stores on Anderson Lane, you may have to move the car 6 times(!). That's not good for Austin, and it shouldn't be subsidized - but if we can't change the tax/regulatory code, and the neighborhoods won't let us do that, then at least we can attempt to level the playing field by subsidizing their more sustainable competition.

I'll try to fill this argument in with some backing data when I get more time, but I thought it important to say this right after the election, since he and SDS are making noise about how close they got. The only reason it was that close is because most people have no idea how much of the status quo isn't natural or 'choice'; but actually the result of public policy that has favored suburban crap like strip malls for decades.

It makes it even harder when a project like Mueller faces so much opposition from nearby neighborhoods that affordability has to be 'bought down' rather than provided through more reasonable density entitlements (subsidizing affordable housing is less efficient than getting the ridiculously low-density zoning out of the way and letting the market provide more supply, but local neighborhoods hate that, so we had to settle for this far-inferior option). No, Virginia, Mueller isn't going to be high-density, not even close - the area around the Town Center, if it's ever built, will approach but not exceed the density of the Triangle - i.e. moderate density mid-rises.

Update: Austin Contrarian argues that retail subsidies are bad but leaves a "design subsidy" hole large enough to admit both the Domain and Mueller, arguably. I'd have no problem dressing my position up in a similar fashion except that I suspect this is too nuanced for the average "corporations bad!" voter to accept.

PS: I believe on this issue that I'm now More Contrarian Than The Austin Contrarian. Woo?

This entry was posted in the following categories: Austin , Economics , I Told You So , Republicans Hate Poor People , Republicans Hate Public Transportation , Republicans Hate The Environment , Subsidies to Suburban Sprawl , Urban Design , When Neighborhoods Go Bad


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Hah. That's what I get for sleeping late. You beat me by an hour.

Interesting point; I'll have to mull it over. Shifting the tax burden to the land rather than improvements would certainly encourage denser development. Eliminating regulations (e.g., parking requirements) that encourage lots of surface parking would encourage denser development. I'm not sure what other changes to the tax code you have in mind.

Impact fees would be a good start. And make sure you credit for 'internal capture' (6 strip malls of 5 stores each generate much more traffic than one walkable development with 30 stores).

The Domain is a poor example of urbanism on its outside edges - nobody's going to walk or take the bus TO it, but at least people will shop and walk around and eat and walk around and shop some more instead of moving the car four times like they'd have to on Anderson Lane.

As for your sales tax argument, only a portion of the sales taxes generated by the Domain are subject to rebate - we still get a lot more bucks than we would if the Domain didn't exist at all.

Some commercial property is appraised using market value, some at income production value, and some using a hybrid of both. Typically it would depend on the appraisal district in question's practices, and whether the property owner has provided analysis to argue one method over another. Income production method makes the most sense for retail stores since they rarely contain anything more than raw inventory. Mike, do you know if TCAD appraises strip retail differently than other commercial property?

I agree with your point. It seems to me, viewing this from a distance, that other tax issues seem to have been overlooked, as well.

First, I never read anything about the additional retail development coming to the Domain area as a result of the success of the first phase. The second phase is unsubsidized but the attraction of retailers like Nordstrom to the project will generate a tremendous amount of sales tax for the city and those funds never seem to make it into the calculation when comparing cost v. benefit.

Additional benefit for the city will come from the increase in property tax values on surrounding parcels because the Domain 1 was so well-done. Not only are attached parcels and future phases of the Domain going to be more highly valued but residential in that area has seen a boost because of the popularity and attractiveness of the Domain.

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