$130M 'Urban Village' Project Wins Tax Rebate

To assist the project, which Rudy says wouldn't be possible without public assistance, the City of Austin has put together a package of tax rebate incentives. If the development meets certain benchmarks with regard to employment and affordable housing, the city will rebate the owner a percentage of the property and sales taxes the development generates over the next 20 years. Specifically, the owner of the property will receive 25% of property taxes paid for 20 years and, for the sales tax, an 80% rebate for the first five years and a 50% rebate for the following 15 years. In exchange, in addition to developing the project and maintaining the employment and housing benchmarks, Endeavor will create a $1 million endowment fund to help small businesses move to the project, says Rudy.

"My sense is that the elected officials in our community recognize the importance of becoming engaged in the economic development but because of a bad budget position can't allocate cash," says Rudy. "One way around that is to adopt policy that incorporates performance-based incentives."

As a result, although it will cost $130 million to develop the project, $25 million is expected to be returned to the developer over 20 years. "The project is being designed to attract people from a 100- to 150-mile region and is therefore expensive," says Rudy. "The city's investment was required to effectively over time reduce the cost of the development; this project would not have gone forward without it."

Endeavor Capital was formed in 1999 by former principals of the Trammel Crow Co. Rudy says he has been working for eight months on marketing the project and is in talks with several tenants who are at various levels of commitment. "It has been difficult to get them to commit because we haven't been able to commit to them," says Rudy. "Now that we know we will be going forward with it, I anticipate getting a significant number of tenants to commit in the next few weeks."

Rudy says the next steps will be finding an equity partner for the project, nailing down financing and then obtaining the necessary development permits. "There's still a long way to go," says Rudy.