April 01, 2009
Stimulus package, Council-style

What to make of this?

Houston is set to embark on a program to provide a boost to some of the city's biggest developments, many of which have been put on hold amid the ongoing financial crisis.

The plan aims to entice developers not to put their multimillion-dollar projects on hold in exchange for millions in incentives if the companies begin building soon and agree to make improvements to public roadways, sidewalks and streetscapes.

City Council is scheduled to vote today on what would be the first such incentive package for Regent Square, a planned 4-million-square-foot, $850-million mixed-use development that city officials said was about to be put on hold indefinitely by Boston-based GID Urban Development Group. The development will abut Allen Parkway near Dunlavy and Dallas.

If council approves, the company will receive $10 million in reimbursements to be paid out of tax revenues generated by the development.

"This is our own stimulus program," said Andy Icken, deputy director of the Department of Public Works and Engineering, who helped negotiate with the developer on behalf of the city. "The alternative to what we're talking about would have been to have a great deal of investment going on in this community and to have a big, giant piece of property sitting vacant for a long period of time."

Critics say such incentives go too far and run the risk of artificially propping up some property and creating more commercial real estate than there is demand for at a critical time for the economy.

"It's a zero-sum game," said Barry Klein, president of the Houston Property Rights Association, who has fought the expansion of government-involved development in that area in the past. "There's no net gain to the economy. It doesn't change the demand for commercial space, it simply changes the supply. The favored developer who owns the land is the beneficiary and the victims are taxpayers on the one hand and unfavored, unsubsidized developers on the other."

On the one hand, it doesn't do anybody any good for these lots to lie fallow. Empty lots are a drag on property values and property tax revenues, and can negatively affect nearby businesses; as Christof writes about the shaky start for Houston Pavilions, one dead block can turn off a pedestrian easily. We should want something to get built on them, it makes sense for that to be the original project where possible, and frankly some kind of incentives for developers is what makes the world go 'round, at least around here.

On the other hand, and I can't believe I'm about to say this, I think Barry Klein has a point. If we're incentivizing commercial development at a time when the economy can't support it, that doesn't sound like a recipe for success. How sure are we that this is the best use of our resources at this time?

Having said that, I disagree that this is a zero sum game. It's an investment, and if it's a good one there will be a return on it. It's certainly fair to question the value of such an investment, and I hope this is being done on more than optimistic assumptions. What kind of improvements would the developers be required to make, and would they be above and beyond what they would have done anyway? How many jobs might be created by getting these projects off the ground? Surely we can quantify some of this stuff.

I think Campos has a reasonable take on this:

Two things: 1) Commentary doesn't have a problem with this as long as other parts of town also get stimulated, and 2) How do the Mayoral candidates feel about this since they are the ones that are going be dealing with it next year.

Yes, if we're going to go down this road, we ought to make sure it's not an exclusive road. As for the Mayoral candidates, we'll know how Peter Brown feels about this by his vote on the measure. Annise Parker is still City Controller, and as such is well placed to speak out on things she thinks are Bad Ideas, so I'd say if we don't hear anything explicit, we can assume she's okay with it. I can predict with a fair degree of confidence that Roy Morales will oppose this on grounds that the government doesn't have any business stimulating anything. That leaves Gene Locke, and I don't know what he might think about this. But I agree it's a good idea for all of the Mayoral candidates to get asked about stuff like this going forward.

Posted by Charles Kuffner on April 01, 2009 to Elsewhere in Houston

I look forward to the Houston Property Rights Association speaking out against other kinds of government subsidies of real estate development - for example, building sections of the Grand Parkway where there are no people, so that developers can throw up houses and make a profit thanks to public investment in connecting their development to the rest of the city.

Posted by: John on April 1, 2009 9:41 PM
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