City Hall

At Lake Highlands Town Center, $37 Million in Public Investment Gets Basically Squat

Anyone who's passed the intersection of Skillman Street and Walnut Hill Lane (and who hasn't been reading the Lake Highlands Advocate for the past dozen years) has probably wondered about the shockingly large prairie at the intersection's southeast corner and the pseudo-urban apartment complex/parking garage that's been weirdly deposited in the middle of it.

The apartment building is called "Haven." The whole 70-acre block of land — the apartments, the prairie, the pond, the bus stops — is labeled Lake Highlands Town Center. And yes, your first impression is correct: the project is a complete tire fire.

It's not the apartments themselves; while architecturally uninspired, they have granite counter tops and ceilings as high as 11 feet and seem nice enough. It's also not the Sprouts that will anchor the new, retail phase of the development that's set to break ground this summer. Sprouts is a perfectly competent grocery chain and way cheaper than Whole Foods.

What's disastrous is what it's taken to build Lake Highlands Town Center and how far from the original vision the project has fallen. Over the past decade, City Hall and other local government agencies have bent over backward and poured tens of millions of taxpayer subsidies to turn the corner of Skillman and Walnut Hill into a dense, vibrant urban center.

Instead, the investment has produced a bland apartment complex, a car-centric suburban strip center that's scheduled to begin construction in the summer, and plans for another bland apartment complex and a few dozen townhomes. In the process, Dallas, currently facing an acute shortage of affordable housing that helped fuel the rise of Tent City, suffered a net loss of more than 1,000 low-cost rental units.

Lake Highlands Town Center was the brainchild of City Council member Bill Blaydes, who represented the area from 2003 to 2007. When he took office, the southeast corner of Skillman and Kingsley Road, as that stretch of Walnut Hill was known at the time, was crowded with old, crappy, crime-ridden apartments not too different from the old, crappy, crime-ridden apartments up the road at Skillman and Audelia Road. In 2004, he began publicly pushing to replace the aging apartments with a mixed-use development organized around both abundant green space and a future stop on DART's Blue Line. It would function as Lake Highlands' downtown.

Blaydes began laying the groundwork in 2005. "Kingsley" sounded a bit too low-rent and Garland-y for what he had in mind, so he persuaded the City Council to extend the Walnut Hill name from its terminus at Abrams Road to the Dallas/Garland border. Later that year, the City Council created the Skillman Corridor TIF to subsidize the creation of "a more sustainable mix of rental and owner-occupied residential property" in and around the planned light-rail stop. The Lake Highlands Town Center project was to be the tax-increment financed district's prime beneficiary, with nearly half ($23 million) of the district's $49.7 million in available subsidies earmarked for the project.

The project gained momentum in 2006. With public subsidies lined up, Blaydes found a willing developer in Prescott Realty Group, which began buying up the old apartment complexes. That fall, DART approved $10 million in funding for Lake Highlands Station and Dallas voters approved $4.7 million in bond funds to pay for the infrastructure to support a transit-oriented development at the rail stop. Dallas County and the North Central Texas Council of Governments, a regional clearinghouse for federal transportation dollars, kicked in an additional $12 million or so for a hike-and-bike trail, a pedestrian bridge over Jackson Creek, street work and a pond.

In 2008, as Prescott Realty was beginning to raze the first of the 1,400 old apartment units, property owners in the area voted to create the Lake Highlands Public Improvement District. Improvement districts essentially allow property owners to tax themselves; rather than going to benefit the city as a whole, like normal property tax revenue, these assessments fund amenities only within the district boundaries.

Prescott got some more public help to get the project moving in the wake of the Great Recession. In 2011, the City Council bumped Lake Highlands Town Center's share of the Skillman Corridor TIF's total available subsidies by 74 percent, from $23 million to $40 million. In January 2012, the City Council endorsed Lake Highlands Town Center's application for a $13.4 million HUD loan. (The HUD loan program, Section 108, uses the city's future housing funds as collateral to finance economic development projects, some of which, like the renovation of an old hotel in the Cedars, can be head-scratchers.)

Finally, that summer, Prescott secured a $23 million mortgage insured by the Federal Housing Administration. (Such backing from the federal government, which originated in the Great Depression as a way to allow more renters to buy homes, allows borrowers to secure more favorable interest rates or, sometimes, allows borrowers to actually get a loan.)

With that, Prescott was finally ready to actually build something. The 200-unit Haven apartment complex, which included 7,500 square feet of ground-floor retail, opened in early 2014. The first retail tenant — Artistik Edge Hair Studio — moved in last fall.

Of course, Haven was only the first phase. A few hundred thousand feet of additional retail space and a couple of thousand apartment units — the density that would put the "town center" in Lake Highlands Town Center — were slated to come later.

Emphasis on were. The transformative, walkable transit hub used to justify the demolition of 1,400 apartments and a massive public subsidy is dead. In its place will be built, in addition to Haven, the car-centric, Sprouts-anchored, 60,000-square-foot shopping center, a second apartment complex with 257 units, and 50 to 60 higher end row homes.

Last year, the Advocate did a deep dive into how the shift came about. Basically, Prescott Realty was pushed out of the project in 2012 by its partner and funder, Cypress Real Estate Advisors. Cypress, citing some combination of lack of market support for the planned quantity of apartments and retail along with neighborhood opposition to the planned density, went back to the drawing board. It partnered with the Trammell Crow Co., the developer behind such urban gems as the CityPlace Sam's Club, and produced plans for the strip center.

Bill Rafkin, managing director for Cypress and its point person on the Lake Highlands Town Center project, declined to discuss the changes on Monday. In the Advocate piece, however, he defended the new vision. "Our design of the retail center at Lake Highlands Town Center has been unfairly labeled as too suburban. … We need to change our vocabulary from ‘suburban’ versus ‘urban’ to ‘extraordinary’ versus ‘ordinary.’”

The good news here is that the Skillman Corridor TIF has only put $10 million into the project rather than the $40 million that was earmarked, thanks to the city's startling late-game display of backbone. In order to be eligible for TIF funding, projects have to be approved by the City Design Studio's Urban Design Peer Review Panel, which firmly rejected plans for the shopping center. Frustrated, Cypress pulled out of its agreement with the TIF district last year, leaving the remaining $30 million on the table.

Nor is Dallas putting future HUD funds at risk on the project. In February 2014, when the City Council was set to vote on handing out $13.5 million in Section 108 loan funds for the town center, Lake Highlands Councilman Jerry Allen pulled the item, saying the developer had changed its mind and decided not to take the money. Allen gave a rather vague explanation to WFAA, "At the end of the day, there's always strings attached. I feel like they felt like they're strong enough to move on without federal assistance."

Still, the public investment has been incredibly large — $37 million including the DART station, plus the harder-to-quantify benefits of a taxpayer-backed mortgage, the promotional and maintenance work taken over by the improvement district and not fronting a street whose name extends into Garland.

The public investment seems particularly dubious when one considers how it's contributed to Dallas' affordable housing crunch. As crappy as the 1,400 old apartments were, they provided the working poor with a place to live. Haven, by contrast, is home to 40-ish units that qualify as affordable thanks to the requirement that 20 percent of units in TIF-funded projects be made affordable. And as Blaydes pointed out in 2012 in an attempt to calm a particularly boisterous Advocate comment section, "affordable" doesn't mean "poor."

"[P]lease keep in mind that there is a major difference between affordable housing and low income housing," he wrote. "Affordable means priced at an amount that a person making 80 percent of the median income of the area can afford. Low income housing is where the Section [8] and other HUD programs come into play. Settle down LH, our town center is underway."

Using public money to deliberately clear out poor people? Subsidizing the construction of something newer and ritzier in their place? They used to call that slum clearance. In Dallas, it's just called progress.
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Eric Nicholson
Contact: Eric Nicholson