Messing with Subsidies in Texas

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nobankroll2Two new proposed charter amendments up for public vote in Dallas this May should have developers a little anxious about their ability to secure large subsidies without public scrutiny. If successful, they have the potential to change the way Dallas does development.

First, the Dallas Right to Vote proposed charter amendment would subject all proposed development subsidies over $1 million to approval by public referenda. Private development affected by the amendment includes any “hotel, convention center, luxury residential condominium, or retail facilities, and/or infrastructure” serving any of these (with the exception of small retail development designed to service subsidized housing).

All grants, tax concessions or tax relief, authorizations of debt or debt instruments by the city to support the project, and the granting or below-market sale of city-owned land over $1 million will trigger a public referendum. This means tax increment finance districts and public improvement districts could face a public vote before receiving approval for financing. The petition drive to place the amendment on the ballot in May has already raised over 30,000 signatures.

The second charter amendment appearing on the ballot in Dallas this May concerns the financing of a proposed city-owned convention center hotel. Citizens Against the Taxpayer-Owned Hotel has already submitted 60,000 petition signatures to the city in order to prompt a referendum that has the potential to obstruct public financing for the $550 million, 1,200 room hotel. The hotel’s ground breaking is scheduled for April. Dallas Mayor Tom Leppert supports the hotel and believes the referendum will have no effect on its construction. The legal outcome of a successful referendum on hotel financing has not yet been determined, but Citizens Against the Taxpayer-Owned Hotel has not ruled out a future lawsuit. Interestingly, there is no affiliation between Citizens Against the Taxpayer-Owned Hotel and Dallas Right to Vote, according to Anne Raymond, an organizer for the former group.

This November, we reported on the failure (by a narrow 4% margin) of a proposed charter amendment in Austin, Texas known as Stop Domain Subsidies that would have prohibited the use of subsidies to incentivize new private retail development in the city. This spate of recent voter-led policy initiatives in Texas indicates a shift in the way that voters perceive private development subsidies. At a minimum, it indicates a growing public awareness of the use of taxpayer dollars in economic development deals. Our experience tells us that when subsidized development is subject to public vote, it rarely receives approval. Democratizing the development process results in greater accountability and fewer dubious deals.

One Response to “Messing with Subsidies in Texas”

  1. RD Vogel Says:

    The significance of this issue is now coming to the fore. In “How Globalization Works: Toyota Manufacturing, Texas (TMMTX)–A Case Study” I reported on the massive subsidies and tax abatements that were granted to Toyota by federal, state, and local officials to get the company to build the massive Tundra plant in San Antonio.

    The total underwriting bill was so huge that Toyota took the figures off their website after my article appeared.

    Toyota is presently contemplating closing the plant, a move that will totally disrupt the community and leave it to the taxpayers of Texas to pay off the monumental debt.

    The complete article is available on our website http://combatingglobalization.com.

    R.D. Vogel

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