Landrush

The city of Houston is being carved into special taxing districts, promising windfalls for some, financial burdens for others

Rarely has the absurdity factor at City Hall been so high as on June 22, when in a public session of the Houston City Council it was revealed that the Galleria has fallen on hard times and is in dire need of some taxpayer-funded economic development.

This distressing and, no doubt, surprising news was delivered to councilmembers by John Breeding, a tall, affable-looking man with glasses, chubby cheeks and a thick head of carefully blow-dried hair. Breeding is president of the Uptown Houston Improvement District, an organization that represents the shared interests of Galleria-area property owners.

The city hasn't spent enough money on the roads in Uptown, Breeding told Council, resulting in horrendous traffic jams that shoppers find annoying to no end. Later this year, Breeding said, the Mills Corporation will be opening one of its patented megamalls, 45 minutes away on the Katy Prairie, and "in order to have a fighting chance," the Uptown area needs $235 million to improve streets, build parking garages and construct an air-conditioned "pedestrian network."

More than 1,200 residents gathered July 20 to protest the proposed TIRZ in the Memorial City area. City Council approved the zone the next day.
More than 1,200 residents gathered July 20 to protest the proposed TIRZ in the Memorial City area. City Council approved the zone the next day.
More than 1,200 residents gathered July 20 to protest the proposed TIRZ in the Memorial City area. City Council approved the zone the next day.
Phillippe Diederich
More than 1,200 residents gathered July 20 to protest the proposed TIRZ in the Memorial City area. City Council approved the zone the next day.

According to Breeding, the Uptown district, which levies a 14-and-a-half-cent ad valorem tax on its member property owners, can't afford to provide these amenities itself, having dropped a wad four years ago on the boulevard-spanning arches and intergalactic overhangs that adorn the area's intersections. So Breeding proposed that the city create a tax-increment reinvestment zone, or TIRZ, whereby the city, Harris County and the Houston Independent School District would agree to freeze ad valorem rates on more than 1,000 acres of land in the Galleria area for 30 years.

Cash for improvements within the zone would come from the sale of tax-exempt revenue bonds issued by a nonprofit "redevelopment authority," whose board members are appointed by City Council and other local elected officials. Presumably the improvements would cause land values in the zone to rise. The subsequent increase in property taxes generated — the increment — would then be collected by the redevelopment authority to pay off the bond debt. According to Uptown's financing plan, the project would cost $410 million, including $175 million in interest.

Not surprisingly, some councilmembers were compelled to question the wisdom of committing nearly a half-billion dollars of taxpayer money to improve what is already some of the most improved, if not the richest, real estate in Texas. After grousing that Uptown's sidewalks are "only two and a half feet wide," William Miller of the Tanglewood Corporation, which owns a shopping center on Post Oak Boulevard between Westheimer and San Felipe, drew an immediate rebuke from District F representative Ray Driscoll.

"Have you ever been to Gulfton, Mr. Miller?" asked Driscoll, whose southwest Houston Council district is home to some of the city's roughest, most neglected neighborhoods. "They don't have sidewalks, let alone sidewalks that are only two and a half feet wide. There are pregnant women walking down the sides of the roads."

District E Councilmember Rob Todd took a swipe at the Uptown district for its attempt to create a TIRZ before a major change in state law goes into effect on September 1. After that, school districts that choose to participate in TIRZ projects will likely lose some state education funding. Without the participation of HISD, which could contribute more than $200 million of its future income to the Uptown zone, the projects would likely collapse.

"Almost a quarter of a million dollars would be shifted from the education of children to safer streets for shoppers," Todd said. "What you're saying is, I may be able to get to the Galleria ten minutes quicker, but the kid ringing up my purchase won't be able to read."

Todd and Driscoll raised valid points about tax-increment financing, which their colleagues absorbed with palpable indifference. Several councilmembers didn't even attend the public session. Those who did drifted in and out of Council chambers, seemingly far removed from the possible implications of forgoing millions and millions of dollars in revenue. A few appeared almost charmed by the sharp-suited men who appeared before them, hat in hand, representing some of the richest corporate landowners in town.

At one point Staman Ogilvie, an executive with Hines Interests, developers of the Galleria (recently valued at $1.6 billion), offered the opinion that a TIRZ in Uptown would be "wise public policy." He called the mall "the golden goose of the city" that, together with the surrounding retail centers, generates millions of dollars annually in property and sales tax revenues for the city, county and school district — some of which would likely be siphoned off by the Katy Mills megamall unless the city of Houston created a TIRZ.

"That was a very effective presentation, and well thought-out," gushed District D councilman Jew Don Boney, before lobbing a few harmless questions toward Ogilvie, who stirred the collective soul of the room by invoking the Galleria as "a rare civic amenity."

A decade ago, as a decidedly radical activist, Boney, given the chance, would have laid into a well put-out whitey like Staman Ogilvie on, say, the ever-widening gap between the rich and the poor. Then again, a decade ago, the city wasn't in the habit of promising huge sums of property tax revenue to private developers, at least not publicly.

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