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The argument on increased sales tax revenue is only valid if the retail development creates increased consumer buying power and demand. Otherwise, the purchases at the new development are simply displaced purchases that would have been made at similar stores a few miles away generating the same sales tax revenue. Without somehow causing an increase in consumer buying power with creation of the development, I fail to understand how a net increase in sales tax revenue for the city would occur. It does not matter if I turn left to the existing shopping mall that was built without tax rebates or turn right to go to the shopping mall that was built with tax rebates. Either way the tax revenue still goes to the same place and there is no increase in tax revenue caused by my shopping at the subsidized mall.

This proposition is about sales tax refunds for retail development only. It does not try to control property tax abatements. That what I was trying to make clear in my reply srothstein. He was arguing that property tax abatements were acceptable because the increased value of the property due to the improvements will benefit the city in the long run and thus such improvements should be encouraged by property tax abatements. I was saying that that logic and be applied to any construction of property improvements and a business is no more deserving of it than a home owner. The relative benefit to the city is probably better for home construction as a house built on a one-acre lot generally adds more to the tax base than a wharehouse on the same lot and thus in some sense, the homeowner is more deserving of the abatement than the business, but you never see it happen in Austin. In any event, this proposition only address restrictions on sales tax incentive to retail developments.

srothstein wrote:<snip>
The logic of the development programs is that the developer will get back a portion of the property taxes on the property if it grows and meets certain milestones. This is a win for the developer and a win for the city. The developer makes money, but the city also makes more money from the taxes on the property than they would have otherwise. And, the handouts tot he developer do not last forever while the higher property values (tax revenues) do last.
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Lastly, repealing the present deal is a contract breach. It can, and probably will, result in a lawsuit against the city which will cost it more than keeping the contract. The suit would be solely dependent on the good will of the developer to file or not.

The issue here as I understand it is not a property tax rebate, but rather a sales tax rebate. The development is effectively allowed to keep a portion of the sales tax it collects from consumers. The property tax abatement argument as a win-win situation has a serious flaw in that it is true for all construction that happens in the city. When a home owner builds a house, the city gets more property tax than it did from just the land and that higher property value lasts. Why not give the home owner a property tax abatement for 10 years to encourage him to build then? The same argument can be made for any business small or large also. There is no more reason to give a property tax abatement to a retail development than there is to a home owner.

The argument the city leaders use on the Domain subsidies is that the rebate here is on sales tax which is something unique to retail business and thus we encourage retail business by giving the incentive so that the land is used for this use rather than for housing or manufacturing that would not produce the sales tax. What they assume is that the construction of a retail business will somehow create significant new consumer demand and buying power and thus generate real new sales tax revenue. Of course what happens for the most part is that purchases made at the new development are simply displaced purchases that would have been made at another retail outlet and would have generated the same sales tax revenue for the city. I see these agreements as just payback for political favors. When is the last time you saw a proposal in Austin for a sales tax rebate to Wal-Mart? I would guess that Wal-Mart generates more sales tax revenue for the city than the Domain ever will.

There is no need for tax kickbacks on retail development and that is what proposition 2 tries to eliminate. As I said before, I expect the Domain deal to be unaltered as the courts will uphold it, but it may limit future agreements.

I support the proposition as I see no reason to encourage growth in Austin as the infrastructure of the city is already stressed to the breaking point. This has been going on for the 30+ years I have lived in Austin (and probably before that) and it is time to stop the taxpayer subsidies to encourage growth that serves no one except the politicians who get bigger budgets and more opportunity to control people's lives. I do not buy the argument that the city will spend millions defending lawsuits when they do not pay the subsidies as I foresee one of two things happening if the proposition passes. The first possibility is that the Domain will sue for the payment and the city will essentially not bother to put up a defense to the suit and will let the court rule that they have to pay. The other possibility I see is that the city will simply ask the AG or other judge to rule component of the proposition dealing with the Domain unenforceable since it unilaterally alters an existing contract. Either way, the city leaders will not honor what the voters say if the proposition passes just as they failed to do with the STNP, airport, and light rail. They do whatever they wish regardless of ballot outcomes. The successful passage of the proposition may keep future deals like the Domain from happening, but I believe that it will not effect existing contracts once the courts (with the cooperation of the city leaders) get through with it.