Houston's Big Experiment

The city's first TIRZ set many precedents -- not all of them good

The offices of Ironwood Homes are in an upstairs bedroom of a display house on Hidalgo Street, a half-mile southeast of the Galleria. It's a small space that, unlike most offices, doesn't say much about the business it houses; there aren't any testimonials to Ironwood's record of customer satisfaction, for instance, nor are there any photographs or renderings of the large brick homes Ironwood builds and sells for around $350,000.

There are, however, a couple of things that speak volumes about the company's owner, Robert Silvers. Like the three packages of stomach antacid lined up neatly beside a computer and the sheet of paper, pinned to a bulletin board, that reads, "Never underestimate the power of stupid people in large groups."

As those decorative touches suggest, Robert Silvers is a miserable cuss, a state of affairs he traces back to 1989, when he purchased 107 lots in Lamar Terrace. In hindsight, Silvers is certain he should have resold the land, which he picked up on the cheap from the Federal Savings & Loan Insurance Corporation, and taken a quick profit. Instead, he renamed it St. George Place, tore down dozens of poorly maintained rent houses and petitioned City Council for 20 years of future property tax revenues to rebuild the neighborhood.

Robert Silvers bought himself a lot of trouble when he purchased lots in Lamar Terrace.
Steve Lowry
Robert Silvers bought himself a lot of trouble when he purchased lots in Lamar Terrace.

On December 12, 1990, Silvers became something of a pioneer in Houston real estate circles: He was awarded the city's first tax-increment reinvestment zone.

The city froze the property taxes collected from the dilapidated World War II-era subdivision at their 1990 level. In 1992 the city sold $3.1 million in bonds, and committed another $1 million of its own money, to repair the streets, construct new curbs and sidewalks, replace the sewer and water systems and install lighting and landscaping.

The idea was that those improvements would make it a snap for Silvers to sell his lots to builders, who would construct upscale single-family homes. The new construction would increase land values, and the additional property tax revenues generated as a result would be used to retire the bonds.

By February 2011 the city could begin collecting many thousands of dollars in additional revenue from St. George Place, and Silvers would have attained a level of personal satisfaction that had previously eluded him.

"I had a burning desire to do something good for my city," Silvers recalls. "I had a purpose in life."

If Robert Silvers has a purpose these days, it's to get the hell out of St. George Place and never look back. Unfortunately it will be a while before taxpayers have the same opportunity.

Earlier this month City Council quietly agreed to refinance the 1992 bond issue, thereby extending the debt for another 20 years and delaying until 2031 the additional property tax revenues the city will receive from St. George Place. Moreover, Council also approved $5 million in certificates of obligation on behalf of the TIRZ -- debt backed not by future property tax revenues but by the full faith and credit of the city's general fund. Council also committed another $1.1 million of its own money to the project.

The additional spending reflects the failed expectations of St. George Place, which has been marred by numerous delays, disputes over control of the land, the slow pace of lot sales and a lawsuit. From a financial standpoint, though, the problem is simple: The revenues generated by the TIRZ have not been sufficient to support the debt issued in 1992.

Indeed, half the zone -- from Yorktown west to Chimney Rock, an area annexed by the original TIRZ in 1992 -- has seen virtually no new development, despite the fact that landowners there have seen their property taxes rise. For the past eight years those landowners have, in essence, subsidized development in the original zone, which nonetheless has grown far more slowly than anticipated.

One reason was a two-year dispute over Hidalgo Street, which splits St. George Place. Silvers wanted all the streets in the neighborhood to be quiet residential lanes. But Hines Interests, owner of the Galleria, wanted to widen Hidalgo and Fairdale streets to relieve traffic congestion around the mall. Though Silvers eventually won out, the uncertainty over the size and direction of the streets thwarted efforts to market his lots to builders.

But the most contentious issue, and the one that has caused Silvers the most grief over the last ten years, is eminent domain. While TIRZs are granted considerable powers, including zoning and other land-use controls, city officials have yet to give them the right to take property.

Silvers says that's not how he understood it when he agreed to take part in the city's first TIRZ. In fact, he says he never would have agreed to develop St. George Place if he hadn't been assured that the city would allow the zone to condemn and demolish substandard property.

"If they weren't going to do eminent domain, they shouldn't have done the deal," Silvers argues.

In 1996 Silvers sued his team of consultants, which included former city planning director Patricia Knudson-Joiner, claiming they had misled him into believing that a TIRZ would give him ultimate control over all the land in the zone. The suit was settled earlier this year in Silvers's favor for $2 million.

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