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    Austin Shops Fight Nordstrom Tax Aid in Drive to Keep the Weird

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    Austin Shops Fight Nordstrom Tax Aid in Drive to Keep the Weird

    Post by sang_garuda on Fri Oct 31, 2008 6:21 pm

    Mom-and-pop shops are asking voters in Austin, Texas, to revoke city tax breaks for shopping malls that invite competition from big chains such as Neiman Marcus Group Inc. and Nordstrom Inc.

    It's homegrown boutiques and bookstores that give Austin an aura of individuality, according to the Web site of Stop Domain Subsidies. The group of more than 500 local businesses opposes incentives given to Simon Property Group Inc. for developing Domain Mall on the city's northwest side.

    They want Austin to renege on $64 million of sales-tax rebates pledged to Indianapolis-based Simon and $12 million of city bonds for redevelopment of the Mueller Airport site. The issue goes to voters Nov. 4 as Proposition 2, which also would bar most such incentives in the future.

    ``The public isn't in any mood to subsidize corporate welfare,'' said Brian Rodgers, an Austin real estate developer who led the petition drive to get the proposal on the ballot. ``By going against the existing retailers, the city council has created a lot of ill will.''

    If the measure passes, it could trigger a review of the city's AAA bond ratings and require using taxpayer dollars to defend any lawsuits that result, Mayor Will Wynn said.

    ``A small group of people in a back room can put together a charter amendment that would arbitrarily force us to violate our contractual agreements,'' said Wynn, 47. ``These are drafted by people who aren't familiar with public finance. It's a hard way to run a city.''

    Standard Moves

    Austin's two agreements with retail developers are typical of the incentives used in Texas, said Steve Murray, senior director in Fitch Ratings' Austin office.

    ``The incentives were consistent with what we've seen on other deals,'' Murray said. ``This is about a philosophical disagreement about how the city should spend its money.''

    He said Fitch isn't taking a position on the measure.

    ``Austin has a lot at stake in its reputation,'' said Trey Salinas, a spokesman for Simon who works for Martin & Salinas Public Affairs Inc. in Austin. ``If this is undone, it wouldn't send a positive signal about when a deal is a deal.''

    The money due to Simon would be better spent on roads, libraries and other services, according to the Stop Domain Subsidies site. Some supporters of the proposition contend that the city isn't legally obligated to pay Simon because of a change in the contract wording.

    Domain Mall opened in February 2007. Its 700,000 square feet (65,000 square meters) of space holds stores including Burberry, Tiffany, Louis Vuitton and Neiman Marcus, and a Nordstrom is scheduled for 2011.

    Support for Weirdness

    The prevalence of locally owned small businesses is part of the uniqueness celebrated by the Keep Austin Weird movement, including the Cathedral of Junk, Ginny's Little Longhorn bar and the Museum of Natural and Artificial Ephemerata.

    Austin is one of the fastest-growing cities in the U.S., according to Census data. It's the state capital and home to the main campus of the University of Texas. Dell Inc. is based in nearby Round Rock, and other technology companies including Advanced Micro Devices Inc. have operations in Austin.

    Supporters of the anti-incentive proposition range from art gallery Gypsy Born Designs to record store End of an Ear to Karavel Shoes. The stores, galleries and cafes are individually owned or backed by a small group of investors. Many operate out of storefronts or downtown.

    Creating Sprawl

    Economic incentives designed to revive blighted areas are being misused and creating suburban sprawl, said Greg LeRoy, executive director of Good Jobs First, a Washington- based advocate for more corporate and government accountability in economic development.

    ``Too many states have relaxed the rules to allow these kinds of developments to go into newly annexed corn fields,'' LeRoy said. ``They've been perverted.''

    The ballot proposition has broad political backing, including the Republican Club of Austin, Travis County Democratic Party, Libertarian Party, Green Party and three dozen other political, community and labor groups.

    Opponents in a group called Keep Austin's Word say the city shouldn't endanger its reputation by breaking agreements without good reason.

    Truth or Lie?

    ``No one would know if Austin could keep its word or if its officials would be holding a crossed finger behind their back,'' said Janice Cartwright, executive director of the Real Estate Council of Austin.

    The incentives helped recapture sales from retailers fleeing to the suburbs and generated 500 jobs at a time when employment was falling, said Wynn, the only council member still serving who approved the Domain agreement. The Mueller Airport project on Austin's east side redeveloped 750 acres (300 hectares) into housing and retail and commercial property, and created 10,000 jobs, the mayor said.

    It doesn't make sense to encourage big retail developers when small businesses have been generating jobs and supporting the economy for years, said Stacy Mitchell, a senior researcher with the Minneapolis-based Institute for Local Self Reliance, an advocate for local communities.

    ``Austin has such a strong, independent retail sector that is the envy of the rest of the country,'' Mitchell said. ``Why not just play to the city's strengths?''


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