Longform

The Thing That Ate Downtown

Like other public officials, Dallas City Council member Veletta Lill got the pitch in the Victory Marketing Center, a former machine shop made over to sell the prime, quite empty real estate around American Airlines Center. The show was impressive. Flickering down the granite-topped table were slides of new hotels and chic stores on Chicago's Michigan Avenue, a massive 53-story corporate headquarters and theater on New York's Central Park, fountains dancing in a bougainvillea-filled plaza in West Palm Beach, Florida, whole new city centers in the high-tech hubs of San Jose, California, and Reston, Virginia.

These are our projects, Lill was told by a team from The Palladium Co., the New York developer that has an option to develop 20 acres of Tom Hicks' and Ross Perot Jr.'s arena-side land. We can work our magic for Dallas, too, on this very ground.

We just need a little favor. A $44.5 million tax favor, and we've drawn up a plan. Say yes, and $600 million worth of stores, hip hotels, restaurants, apartments and offices will rise up around a big grassy square.

A detailed handout and achingly complex flowchart suggested how to do it. Boiled down, it proposed tossing central downtown, which has been on a slow comeback courtesy of tax incentives, together with the West End and the 70 acres of Hicks-Perot's land called Victory. "The idea was to form one giant TIF," says Ken Wong, a Palladium executive, using the acronym for a tax-increment-financing district, which is how Dallas distributes help to developers. Out of the pot would flow the money Palladium says it needs to build its streets, square and parking garage. Without this break on future taxes, spread over as many as 20 years, there is not enough return to attract investors, Wong says. "It doesn't pencil." Without the public kicking in, he says, it will not be done.

Since 1996, Dallas, like many American cities, has been generous with incentives for those willing to rebuild its depressed downtown, both in the Hicks-Perot Victory development and the city center. (Developers who work nationwide complain Dallas is, in fact, conservative compared with cities such as Chicago and Denver, which pour it on even more.)

Even former Councilwoman Donna Blumer and mayoral candidate Laura Miller--whose political reputations have been built on opposition to public money going to big developers--have voted for millions of dollars of tax incentives for improvements such as restoring building façades and removing asbestos from privately owned buildings downtown.

Since the downtown incentives began four years ago, most of a $43 million budget has been directed to developers to redo lofts and hotels or renovate buildings into stores and parking. In the city's core, loft renovations began bubbling after that money was added to other government help, such as low-interest federal housing loans and credits for restoring historic buildings. Some of downtown's most ambitious projects, keyed to a retail district along Main Street, have been approved but have not begun.

For its new request, which it floated in private meetings with city officials this fall, Palladium knew it had a tough sell given the city's history with Perot and Hicks. Even a few people on the Palladium team admit as much in private.

Four years ago, the two multimillionaires threatened to move their hockey and basketball teams to the suburbs if voters did not kick in $125 million raised by new hotel and car-rental taxes to help finance the arena, an arrangement former Mayor Ron Kirk sold as a painless touch on out-of-towners. Perot promised before the close, divisive vote that the arena would attract $550 million of development before he was done. Next, while they were building their $420 million American Airlines Center, Perot and Hicks convinced city and school officials to kick in $46 million more--in effect a credit against future property taxes--so they could build roads and bring utilities to the abandoned, polluted industrial site.

A third bite at the apple was not likely to charm.

To make a few friends, Hicks-Perot-Palladium proposed to join forces with the old central downtown, which next year will reach its own incentives limit and is likely to ask Dallas City Council for more. Hence, says Palladium attorney Mike Baggett, they designed their everybody-in-the-pool idea of a single tax-fueled development sector stretching from downtown, through the West End and north into the Victory land.

If ever there was a misfire in coalition building among Dallas' biggest players, this was it.

Rather than rallying round, representatives of city-center businesses and real estate went to work lobbying council members, leaking to the press and imploring civic leaders to resist the plan. It's a money-grab, says one, explaining on background that the structure, if tweaked a certain way, could shift public money toward Victory, especially if a couple of downtown's more ambitious projects should fizzle. "It's become personal," says Dallas County Judge Lee Jackson.

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Thomas Korosec
Contact: Thomas Korosec