During 7 days in May 2003, a well-connected developer, Endeavor Real Estate, cut a rush deal with the City of Austin for $65 million in tax incentives to build a high-end shopping mall in north Austin called the Domain, comprised of 670,000 square feet of luxury retail plus 390 apartments and office space. With scant public scrutiny and through a series of false assumptions and misrepresentations, the developer cloaked the true taxpayer cost and convinced City of Austin officials to rebate public sales tax and property tax money back to the developer until the year 2028. Shortly thereafter Endeavor flipped the deal to Simon Properties, a $49 billion company and the largest mall developer in the US. In addition to bilking the taxpayers, the deal has forced local merchants to compete with a shopping mall subsidized by public tax money; an unfair disadvantage for the unique local businesses that give Austin its character.
The developers made several key misrepresentations to the city in order to get their subsidy:
* The developer showed projected sales levels that were well below what they knew would be generated by luxury stores, so as to hide their actual expected compensation from the tax incentives ($65 million instead of $37 million!).
* The developers claimed the project would not be feasible without city help, when in fact it was in the black by $28 million before the taxpayer incentive package.
* Many of the 1,100 permanent new jobs the project was to create were actually old jobs brought over from existing shopping centers such as JCrew, Borders, Tommy Bahama, Banana Republic, Victoria Secret, Luxe Apothetique, and St. Thomas Boutique.
* The wage levels for these retail jobs were promised at $35,000 but the reality is closer to $22,000. The 644 restaurant jobs average only $17,500.
* The developer promised the city tax revenue for the year 2005, though they knew this goal would be impossible to meet. (The actual opening was 27 months after they promised.)
* The developer promised to provide four acres of public open space but only provided 1.4 acres unless you count the sidewalks.
Local Business v. Corporate Chains
Many in the small business community in Austin have asked ‘why fund the Domain, to compete with our local home grown businesses”? They argue:
* Locals hire more people than corporate chains, including local accountants, attorneys, ad agencies, etc.
* Locals spend their profits in the city, effectively multiplying its effect on the city’s economy. Chains send their profits out to corporate headquarters.
* Locally owned stores provide far more tax revenue.
* Locally owned stores provide far more entrepreneurship.
* Locals give more to charity, and are more involved in the community.
* Locals understand and contribute to the unique character of Austin, while chain stores bring homogeneous style and feeling to an area, making our city less distinct and a less pleasant place to live. (In fact, our tourism is geared towards these home grown Austin businesses, including our local bus tours!)
Stop Domain Subsidies Documentary Preview
Public Money, Private Profit: Part One
Public Money, Private Profits: Part Two
Public Money, Private Profits: Part Three
Stop Domain Subsidies – “Not One Red Cent”