Council to decide what to do with $12.5 million in special fund

AUSTIN (KXAN) -- Austin City Council could decide what to do with $12.5 million of taxpayer money associated with a special fund that was used to pay for the redevelopment of the area surrounding the Seaholm Power Plant.

City staff has told council members the money can not be touched unless the special fund, known as a TIRZ, is officially closed so the funds can be returned to the General Fund and reallocated.

The money could be used to reinvest into the Seaholm area even further or be used to address other projects and needs in the city.

What is a TIRZ?

A Tax Increment Reinvestment Zone is an economic tool used by cities around the country to provide financing for the redevelopment of a certain area. The city will set a boundary for the zone. For the Seaholm Zone, the city created an original boundary in 2009 and then extended it in 2012.

When a TIRZ is formed it will take all of the assessed property value within the zone and create a baseline. Property taxes are taken out of this baseline value and distributed to all the taxing districts in the area. However, as years go by and tax revenue increases on properties, any amount over the baseline will go to a special fund.

The money in that fund can only be used for improvement projects that take place within the TIRZ. Let's use an example:

A TIRZ is created in downtown Austin and the estimated combined value of property in this zone is $1 million. That original million dollars will be the baseline. After one year, the value increased to $1.1 million within the zone. All of the tax revenue resulting from that $100,000 increase will go to the special fund and out of the city's General Fund.

An area must show signs of "blight" to meet the criteria for the creation of a TIRZ. The city has to determine that the investment in the area will not come solely from private investment, and the area must, "substantially arrest or impair the sound growth of the municipality or county designating the zone."

A success story

The Seaholm Redevelopment Zone is considered a major success.

"This is a prime example where a TIRZ, as an economic development tool, worked. It did it's job and the area has transformed. I'm glad that it was able to do its job," Kimberly Olivares, the Deputy CFO of the city of Austin, said.

In the 15 years of its existence it has transformed the area from an industrial space to a booming area of apartments, shops, and open space that is valued at $2 billion. The city was able to use just the money from the TIRZ for its redevelopment projects without having to issue any debt.

The redevelopment project restored the old Seaholm Power Plant, established street infrastructure, and created a public plaza. The only project it failed to complete was a planned pedestrian crossing underneath the train tracks at Bowie and Third streets, known as the Bowie Underpass.

The city said it could not come to a project agreement with Union Pacific Railroad to create the underpass. Since the project is now deemed impossible, city staff is recommending the council close the TIRZ so the remaining dollars in the fund can be returned to the General Fund and reallocated.

What to do with the money?

City council discussed closing the TIRZ during its Nov. 30 meeting. Mayor Pro Tem Paige Ellis pulled the item from the consent agenda to have more discussion about closing TIRZ. She and other members wanted to make sure the $12.5 million that will be returned to the General Fund will still be used to create some type of mobility project in place of the failed Bowie Underpass.

Council member Alison Alter created a motion directing city staff to come back to the next meeting with a budget amendment that marks the remaining funds from the TIRZ to be used for transportation projects in place of the Bowie Underpass.

Mayor Kirk Watson said the council could also look at using some of the funds for other project needs. Some ideas he mentioned during the discussion included the Seaholm Intake project, a possible affordable housing development around Austin High, or additional parking for Zilker park.

Alternative projects

The Transportation and Public Works department sent a memo to council members Monday morning with a list of alternative projects to the Bowie Underpass. There are five listed.

The project with the highest priority is the Shoal Creek Trail Underpass at 3rd street. This $5 million project would eliminate blind spots and sharp turns on the trail. Another project suggestion is expanding the bike and pedestrian bridge on 3rd street to help with congestion over the trestle bridge.

You can read the full list posted on the city's memo site here.