Tag Archives: Austin fee waivers

KEYE-TV News Story On Taxpayer Wage Subsidies – Can We Close Pandora’s Box?

By Bill Oakey – April 21, 2016

Huge thanks to KEYE’s investigative reporter, Walt Maciborski, for prying open this disturbing chapter in Austin’s taxpayer battle against special-interest fee waivers. The story was aired on the 10:00 PM edition of the KEYE news on Wednesday evening. You can watch the video here. The text of the story appears below. But first, one small bit of conjecture. How did this little gem of an issue slide by all of the members of Capital Metro’s Board of Directors? The original contract had called for a construction workers’ wage of $11.39 per hour. But a resolution passed at the Travis County Democratic Convention sparked them to reconsider the living wage portion of the contract. The wage went up to $13.03, to be paid for in part by you and me. While some of us were probably in bed asleep, the new contract was hammered out with lots of special-interest spin. That’s just an educated guess. It sets a bad precedent. But boxes can be opened and boxes can be closed. Pandora’s is no exception.

Close Pandora's_box

Activist says taxpayers paying $500K to get East Austin mixed-use project done

The Plaza Saltillo development project in East Austin is finally on track to be a reality. But are taxpayers picking up part of the bill?

Capital Metro and Endeavor Real Estate Group hammered out a last-minute deal for a 10 acre mixed use housing complex at 5th and Comal streets.

A key part of the deal was to get the workers a living wage of at least $13.03 an hour, a jump from the original plan to pay workers $11.39 an hour.

“The problem is that this new agreement specifies that 50 percent of this difference between $11 and $13 is going to be subsidized by the taxpayers,” AustinAffordabilty.com blogger Bill Oakey said.

That difference is about $500,000.

Oakey says this is a great project for the city and East Austin but he thinks it’s a bad deal for taxpayers.

“And I call that a wage waiver which is a lot like a fee waiver that is commonly given to developers,” Oakey said.

We called Capital Metro to go on camera so we could ask them to explain the costs of this new deal and if this is a fee waiver for the developer. They refused to go on camera. But they gave us a statement.

They say, “Capital Metro’s 50 percent cost share for the living wage increase to $13.03 will be funded only from rent increases on the additional height in the office building over 99 years.”

Capital Metro also says this is new revenue it “will receive from office space (which) is new, un-projected revenue. In the end, it is revenue that Capital Metro didn’t have before, to be applied to transportation costs.”

“Right now we’re headed for trouble,” Oakey said.

He isn’t buying it. He says it’s still money that’s coming from the taxpayer pool to make this project happen and he fears it could get worse.

“To me it’s the precedent that is the most alarming,” Oakey said. “It’s opening Pandora’s Box. And I’m afraid that other taxing entities like the city and the county might follow this dangerous precedent. I’m asking our local officials to please close Pandora’s Box and do not continue this wage waiver subsidy with taxpayer money.”

Musical accompaniment (plus a comedy recording) for this blog posting:

  1. “Bus Driver’s School” – Bob Newhart, from the album, “The Button-Down Mind Strikes Back,” 1960
  2. “Bus Stop,” – The Hollies, 1966
  3. “Magic Bus” – The Who (rare long version), 1968
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Taxpayers Stuck For Construction Workers’ Wage Increase

By Bill Oakey – March 24, 2016

This seems to be week for “Holy Cow! Did I Read That Right?” news stories. Here’s one I woke up to this morning. Are you ready for this?

Capital Metro Gives Developer a “Wage Waiver,” (A New Breed of Fee Waiver)

Capital Metro and the Endeavor Real Estate Group negotiated a deal for the construction of the 10-acre Plaza Saltillo development downtown. When the dust settled after Tuesday night’s board meeting, the developer walked away winning their original offer of $11.39 per hour minimum wage for the workers. And yet the workers won also, because they will be getting paid $13.03 per hour. That’s because Capital Metro agreed to “share” part of the difference with money that would otherwise belong to the taxpayers. The shared portion will be 50% of the wage increase  The net taxpayer loss is estimated to be $500,000.

Capital Metro will be leasing the 10-acre tract of land to the developer for 99 years. The “shared” portion of the workers’ wage increase will come in the form of a subsidy in reduced lease payments.  The lease subsidy benefits the developer the same way that a fee waiver would. So, I suggest that we label this groundbreaking event the dawn of the “wage waiver.” History will remember that the era began on Tuesday March 22, 2016.

The Tuesday night board meeting played out with the typical drama of an Austin showdown between a developer, government officials and citizen activists. Members of the Workers Defense Fund were justifiably upset because the agreement lacks sufficient worker safety provisions and many workers will be denied worker’s compensation insurance. According to an article in the Austin Monitor, the Workers Defense Fund may oppose the zoning change for the development when it goes to the City Council.

And what will the developer have an opportunity to ask for at the zoning hearing?

Fee waivers, of course!

So, Where Does All of This Leave the Taxpayers?

The worst thing about this first “wage waiver” is the dangerous precedent. $500,000 is “only a little bit of money” out of a big contract. But what about the next contract and the one after that? Every developer that goes into a construction and lease deal will want the same thing. Think about the massive complex of buildings being planned for the land owned by Central Health. What we witnessed this week was the opening of Pandora’s Box.

Pandoras-box

Leslie Pool Takes The Lead In Battling Fee Waivers

By Bill Oakey – November 23, 2015

City Council Member Leslie Pool sponsored a resolution last week that will help protect taxpayers from the burden of subsidizing special event fee waivers next year. Ms. Pool took the time to call me in response to my previous blog posting regarding public safety spending for 2016 special events. The key point as she explained it is that she has tracked down another funding source that will not come from taxpayers. There is a Business Retention and Enhancement Fund that is being considered for this purpose. This fund contains the $2.4 million returned to the City from White Lodging, as a result of their lack of adherence to their incentive agreement.

I will take this opportunity to apologize to Council Member Pool for not contacting her before I published the blog posting on the resolution that she sponsored. She has made it clear that she supports a long-term solution that will reduce or eliminate taxpayer subsidies for fee waivers. This has been a long and treacherous affordability battle, and it’s great to know that Leslie Pool is in our corner and taking the lead on this issue. The resolution that she sponsored and got passed is an important first step in the right direction. Now it is up to the City Manager to follow through with a plan for alternate funding sources for special events and the permanent elimination of fee waivers – finally!

The Fee Waiver Controversy Gets A Brand New Twist – And It’s A Humdinger!

By Bill Oakey – November 11, 2015

We all remember the big brouhaha over special event fee waivers that has raged in the press and at City Council meetings over the past couple of years. It’s a twisted tale of a City Council resolution seeking “alternate funding sources” for the multimillion fee waivers for SXSW and other large event promoters. Of course the money to pay for these waivers comes from you and me, the taxpayers.

So, here’s a quick recap. In May of 2014, Mayor Pro Tem Kathie Tovo got a resolution passed unanimously to direct the City Manager to develop a plan to remove the local taxpayers from the fee waivers and pay for them with alternate funding sources. Her suggestions included surcharges on ticket sales and possibly a portion of the Hotel Occupancy Tax. The first resolution deadline of August 2014 came and went with no action. Then a November 2014 memo surfaced, promising a new deadline of August 2015. When that deadline slipped away, I asked for help from a City management contact person.

Mr. William “Bill” Manno in an office called “Management Services” sent me an email this past July 10th, stating that a draft report responding to the Council resolution would be delivered to the City Council by “October, if not sooner.” On Tuesday of this week I emailed Mr. Manno and asked him to please send me a copy of the report.

City politics is a lot like participating in a real life novel of mystery and intrigue. The level of gamesmanship that goes on behind the scenes is stunning. One of my best inside sources at City Hall alerted me today of a fascinating twist in this saga. First, let me mention one quick thing. The City Council accepted my appeals not to include any funding for special event fee waivers in this year’s budget. All along I’ve been hoping that my compromise proposal for alternate funding sources might have a chance.

Well, take a look at these two items coming up on the Council’s Nov. 19th agenda:

67. Approve an ordinance amending the 2015-2016 Fiscal Year Budget to provide funding for public safety during South by Southwest.

( Notes:   SPONSOR – Council Member Leslie Pool )

68. Approve a resolution directing the City Manager to create a long-term plan to address overall public safety during the spring festival season.

( Notes:   SPONSOR – Council Member Leslie Pool )

You will notice one piece of terminology that is conspicuously missing from these items. You guessed it, the phrase “fee waiver” do not appear in the agenda verbiage! Someone with Karl Rove’s knack for political maneuvering decided that “public safety funding” sounds a whole lot prettier and nicer than the dirty old ugly term “fee waiver.” But the end result to the taxpayers is still the same. Instead of requiring event promoters to pay their own fees for City services, or using ticket surcharges or Hotel Occupancy Tax funds, the problem can be solved by simply passing a budget amendment. Let the taxpayers subsidize the additional public safety services.

Since Leslie Pool was not on the Council during the loud public controversy over fee waivers, perhaps she was seen as an easy target by the special interests who have worked behind the scenes to protect the status quo on fee waivers. But the cat is now out of the bag and we still have time to push for adoption of the alternate funding sources originally conceived in the 2014 Tovo resolution.

Here Is My Proposal for Special Event Funding

Compromise Funding Proposal for Special Events By Large For-Profit Companies

By Bill Oakey – November 11, 2015

  1. Do not approve any designated “public safety funding” for special events until a policy is adopted pursuant to Mayor Pro Tem Tovo’s Resolution # 20140501-036. This was the resolution calling for the City Manager to develop an alternate funding plan for special event fee waivers. Please note that Mr. William “Bill Manno” in the Management Services Office made a commitment this past July 10th that a report would be delivered to the City Council by “October of this year, if not sooner.” Providing public safety funding for special events equates to the same thing as granting fee waivers, regardless of whether the “fee waiver” label is used.
  1. Do not approve any multi-year agreements with special event organizers until a non-taxpayer supported funding policy has been formulated.
  1. Ask City staff and the appropriate task force / committee members to develop and recommend a compromise funding strategy with the following three elements:a. A portion to come from the Hotel Occupancy Tax funds. (This would require amending City Code Chapter 11-2, Section (B) (3) that allocates 15% of Hotel Occupancy Tax receipts to the cultural arts).b. Surcharges added to ticket prices for those events. A study could be done to estimate the amount that could be generated from the surcharges at various levels, such as 25 cents, 50 cents, one dollar, etc.

    c. Require the special event companies to pay a portion of their own fees. As a part of this component, the outside companies that piggy-back on SXSW should be required to pay a reasonable fee (or an increase in their current fees, if there are any) when they apply for their permits. SXSW itself may not be entirely to blame for the entire funding gap that has been attributed to them.

Please note that the City’s total service costs for special events exceeds the cost of the current fee waivers. The funding gap was $4.2 million in 2013, per the City Transportation Dept. Report. That’s because the City does not set the fees high enough to cover the actual cost of all services provided. Therefore, the new funding policy that replaces the fee waivers should be formulated sufficiently to completely eliminate any funding gaps. That would result in a zero-cost impact on the local taxpayers. That is what we need. The bottom line is that local taxpayers can no longer afford the cost of the fee waivers. The current fee waiver system is one of the most unpopular programs in all of City government.

A Resolution To The Solution Of Meaningless City Council Resolutions

By Bill Oakey – July 11, 2015

On Friday I reported that the City Manager’s Office finally provided a response to the many months of questions surrounding the long-delayed May 1, 2014 City Council resolution dealing with special event fee waivers. Well, I am (somewhat, but not really) pleased to announce that late on Friday I received another update.

Update On July 10, 3:04 PM

From Mr. William “Bill” Manno:

Mr. Oakey, please see my responses below.

  1. Will the report include an evaluation of using ticket surcharges as an alternate funding source? Response: Surcharges are included in the discussion.
  1. Will your report to the City Council by October or earlier be coordinated with the Parkland Events Task Force as part of their review of special events funding? Response: That is very likely, however, we will have to wait until that task force begins to meet and sets its agendas.
  1. What is the status of the staff proposal for multi-year agreements for large special events that was addressed in the City Manager’s memo shown below? Will that topic be addressed in your report on alternate funding sources? Or will these be two separate reports? Response: They are related, but separate issues.

My Conclusions

Friday’s update showed that the resolution’s required deadline of August 2014 that got extended without City Council approval to August 2015, has now been extended to “October, if not sooner.” This little peek into the back rooms of City Hall should be a powerful lesson for anyone wishing to become engaged with “the process.” When I first became a citizen activist in the mid-1980’s, my mother started out by telling me what all mothers say, “You can’t fight City Hall.” Well, it tuns out that you can not only fight them, but you can win. However, the watchdog and reform business requires a level of patience and persistence that can only be described as crazy. Let me put it this way. If you really want to take on City Hall, you don’t do a little tiptoe up the steps and a little rap-tap on the door. You grab the entire building by its foundation and shake it till the bureaucrats’ eyeballs rattle in their sockets!

Lessons Learned From This Exercise

City Council resolutions with lofty language such as, “Now therefore, be it resolved…The City Manager Is Directed To,” and “This report is due back to the City Council no later than…” etc. carry about as much weight under today’s procedures as a feather in a hurricane. Stay tuned for an effort to establish a policy to make these resolutions respect the dignity of the folks who appear at the very top of the City’s official Organization Chart…The Residents of Austin.

The City Can Save $4 Million Every Year – But There Is a Huge Mountain To Climb

By Bill Oakey – July 10, 2015

In the last few weeks I have met with several City Council offices. One of my top cost-saving priorities is to replace taxpayer-funded special event fee waivers with alternate funding. In May of last year, the City Council passed Resolution # 20140501-036 directing the City Manager to review options for this alternate funding. The intent and the deadline were crystal clear:

“The City Manager is directed to present the proposal for the special events fund and fee waiver process by August 7, 2014 to allow Council to consider the proposals as part of the City’s budget process.”

We now know that last August’s deadline came and went with no formal response to the resolution. So, we have a critical policy issue and very possibly a legal one as well. When the City Council passes a resolution and it is signed and placed into the public record, does it carry the force of law? You would think that a change to the substance and intent of a resolution, or a change to the deadline for directed action would require another public vote by the City Council. This is certainly true of City Ordinances. Is there any provision in the City Charter or the City Code that addresses required actions to amend a resolution? Is there a process in place to follow up on the status of resolutions to ensure that they don’t fall through the cracks?

Not only does the City need to establish a clear set of policies and procedures for timely implementation and amending of resolutions, but the process needs to be made transparent to the public. It would be most helpful if the Council Members, their staffs and the public could go online and check the status of a pending ordinance or resolution. It is my understanding that Council Member Ann Kitchen is interested in pursuing a model that is similar to the one that it is used in the Texas Legislature. And I am looking into resolution tracking systems that have been adopted in other cities.

Here’s what can happen when no one on the outside can see what the insiders are doing with a Council resolution. I found an undated City Manager’s PowerPoint presentation on the City’s website that reveals that they were attempting to comply with the May 1, 2014 resolution on special events funding. Slide # 17 in the presentation shows that 30 Texas cities use funding sources other than fee waivers to support special events. Most of those cities use Hotel Occupancy Tax funds. In the PowerPoint, the staff was told to bring back a funding plan for Council action in time for the resolution’s August 2014 deadline.

But sometime between this presentation and November of 2014, a major intervention took place behind the scenes. Without a vote of the City Council directing him to do so, the City Manager issued a memo to the Council on November 7th. This memo addresses a completely new approach to handling large special events. Although no detailed backup is provided, the aspect of alternate funding sources is dropped from the discussion. The central topic has shifted from single-year contracts with large event promoters to multi-year agreements. Under that arrangement, the local taxpayers could very well find themselves locked into the status quo system of funding special events with fee waivers.

Keep in mind that last November the old City Council was still in office. Here is what the City Manager related to them in his memo:

I have directed staff to take the next several months to gather the necessary information to develop recommendations that can be evaluated as we begin discussion of the upcoming FY2015-2016 budget process.”

So, it appears that the City Manager and his staff are operating on a path to action that is, at the very least, unclear to the public and unclear to the newly elected City Council members. In my meetings with them, I have found no one who is aware of what the City Manager’s staff is working on with respect to the November memo. In another twist, I have been informed that the question of how to fund City services for special events will be taken up by the Parkland Events Task Force. When you click the link to their page, you will notice that they have not held any meeting yet, and in fact the City is still accepting applications for new members. In addition, the primary function of the task force is addressed in a completely different resolution.

My efforts are focused on a compromise plan to pay for special events from three sources: The Hotel Occupancy Tax, surcharges on ticket sales, and requiring the event companies to pay a reasonable portion of their own fees. I have asked the City Council to set an early 2016 deadline for studies and discussions of the new funding formula. In the meantime, I have asked them not to fund any fee waivers for large for-profit events with local tax dollars in the new budget.

We have a new City Council that wants to find cost-savings in the budget. They have also promised a high level of public engagement and better transparency. Later this month when the Council members get back to town, I will post a link for you to email them and ask them not to include any local taxpayer funding for special events. It’s a golden opportunity to save $4 million per year in recurring expenses. But it will never happen unless they commit to a firm timetable to establish a new funding formula. And whatever path the City Manager’s Office is taking on the matter needs to be clarified and communicated to the City Council.

Update on July 10th, 11:53 AM

I just received the following email from Mr. William “Bill” Manno, City of Austin Management Services, Corporate Special Events Program Manager. This information request was forwarded by Mayor Pro-Tem Kathie Tovo’s office.

Mr. Oakey,

The presentation you referenced was one I made for the very first stakeholder group meeting for the specific purpose of getting the conversations started.  It is in no way the final report to this Resolution and should only be used as a reference as to how this process was started.  The response to Resolution is currently being drafted and will be sent to Council by October, if not sooner.  The research mentioned in that presentation was done by interns and was limited to identifying cities that in some way use HOT funds for events.  I have staff currently doing more in-depth research as to how they actually apply those funds.  This information will be included in the report back to Council.

Resolution No. 20140501-036 included the following language:

“WHEREAS, the City collected approximately $54.8 million from hotel occupancy taxes in Fiscal Year 2012 and these collections from Austin hotels are used to fund the Austin Convention Center, the Austin Convention and Visitor’s Bureau, and the City’s Cultural Arts Program; and

WHEREAS, the City’s Music Commission has recommended that City Council explore other funding mechanisms for special events, including considering whether anticipated increases in hotel occupancy taxes could support special events costs;”

Therefore, the report will discuss other cities’ use of HOT funds, however, it will be Council’s decision as to what aspects of alternative funding mechanisms they wish to move forward with.

Please feel free to contact me directly should you have further questions.  Until the report is finalized and presented to Mayor and Council, it would inappropriate to release any portion of the report.

Thanks,

Bill

Special Event Fee Waivers – Other Texas Cities Prefer Hotel Occupancy Tax

By Bill Oakey – June 4, 2015

The quest to eliminate taxpayer-subsidized special event fee waivers may get a boost, thanks to the discovery of a little-publicized City Manager’s Power Point presentation from mid-2014. This presentation followed the May 1st passage of City Council Resolution # 20140501-036, sponsored by Kathie Tovo, directing the City Manager to review alternative funding sources for special event fee waivers. One specified option was to consider using the Hotel Occupancy Tax. A subsequent information request from then Mayor Pro-Tem Sheryl Cole revealed that Austin’s Hotel Occupancy Tax revenues have galloped from $51 million in 2012 to an estimated $70+ million in 2014.

The newly discovered Power Point presentation should put to rest any fleeting suggestion that Austin cannot or should not use Hotel Occupancy Tax funds to replace millions of dollars in fee waivers. This statement appears on Slide # 17: “To date we have researched and found 30 cities in Texas that currently utilize other funding sources for special events that qualify; most utilizing a percentage of HOT Funds administered by the Convention & Visitors Bureau (CVB).” Cities cited in the presentation include Cedar Park, Dallas, Georgetown, Giddings, Fredericksburg and Round Rock. You can download the Power Point presentation here.

From an affordability standpoint, here’s a revelation that should catch everyone’s attention. On Slide # 8, charts show that in 2013 the City granted $1,146,127 in fee waivers. But somehow they wound up with a funding gap of $3,110,104 that year. The event costs for all City departments added up to $6,703,457, while fees collected only came to $3,593,353. (The City Transportation Dept. reported the 2013 funding gap to be $4,256,000, with the total five-year deficit from 2009-2013 coming to $10,694,000).

At the City Manager’s Power Point session, Slide # 2 states that an alternate funding proposal for special events was due to his office on July 24th, and to the City Council on August 7th (the date specified in the Council resolution). We now know that something transpired at City Hall between May and November of 2014. Marc Ott’s November 7th memo signaled a new direction for responding to the issue, as well as a new one-year-later deadline. They are now pursuing a plan for multi-year agreements with special event organizers. These carry the potential for locking in the taxpayers to continuous fee waiver subsidies. The whole notion of considering the Hotel Occupancy Tax as an alternate funding source disappeared down the rabbit hole.

But now it is on its way back out…Stay tuned!

Rabbit Hole