Bills filed in both chambers of the Texas Legislature could upend the deal behind McKalla Place, the new $225 million Major League Soccer stadium scheduled to begin construction in North Austin this fall.

“This legislative attack, directed at Austin and no other city (this bill will not impact stadiums around the state) is a competitor’s effort to keep major league soccer out of Austin,” Mayor Steve Adler said in an emailed statement. “That would be a shame … The legislature should leave us alone and actually fix school finances to lower taxes.”

State Sen. Paul Bettencourt, R-Houston, authored Senate Bill 1771, which would would allow taxing entities such as Travis County and Austin ISD to carry properties subject to economic development deals made by cities on their tax rolls.

"I don't want taxing units setting tax rates for other taxing units, ... setting abatements for othering taxing units, ... [or] setting exemptions for other taxing units," Bettancourt said at an April 16 meeting of the Senate property tax committee.

As written, the bill would apply only to facilities completed after Jan. 1, 2019. The Alamodome in San Antonio and AT&T Stadium in Arlington—both of which were developed under deals similar to the one between the city of Austin and Precourt Sports Ventures, according to a summary prepared by Travis County Intergovernmental Relations Office Deece Eckstein—would not be affected.

The McKalla Place deal, however, was finalized in December. It stipulates Precourt Sports Ventures will finance the stadium but not owe property taxes on it. Instead, beginning in six years, the private company will pay the city of Austin $550,000 a year in rent for the public land on which the stadium will be built.

Austin FC is expected to make its home stadium debut in spring 2021.

Advantages and challenges to incentive deals

Such incentive deals offer advantages to both parties

“For the sports franchise, the arrangement gives them a facility that is (property) tax free; for the city, it gives them the economic activity (mostly measured in sales tax dollars) that comes with an attractive franchise,” wrote Deece Eckstein in the summary, which was presented to county commissioners on April 16.

But they also pose challenges.

“Once the facility is tax-exempt, of course, other taxing entities — counties, school districts, hospital districts, etc. — have to forego property tax revenues as well,” Eckstein wrote.

In written testimony submitted to the Senate's property tax committee on April 16, Commissioner Margaret Gomez, who represents District 4, supported the bill.

"Because we rely primarily on property taxes to fund our mandates, I believe all exemptions of county property taxes need to be posted on the Commissioners Court agenda, carefully scrutinized by the Commissioners Court and voted upon in an open meeting," Gomez wrote. "Allowing the cities to be able to exempt county taxes ignores the fact that there are county residents who do not live in the city and therefore have no voice when tax decisions are made."

Extenuating circumstances

The legislation is tied up in state lawmakers’ ongoing effort to provide property tax relief, known as Senate Bill 2. The bill, which initially proposed a revenue cap as low as 2.5%, has left local taxing taxing entities scrambling to prepare for its impact.

In fiscal year 2018-19, the lowest revenue increase among Austin’s taxing entities—Austin Community College, Austin ISD, Central Health, the city of Austin and Travis County—was 5.1%.

Representatives for each of the entities have spoken out against the bill, which they say will hamstring their ability operate—as well as to fulfill state mandates.

Travis County Commissioner Gerald Daugherty, who represents Precinct 3, said he supports SB 1771 because it would provide the county a means of increasing revenue in light of the proposed revenue cap.

“This is what you have to do when you know that you are staring down the barrel of something that is inevitable,” Daugherty said at an April 16 Commissioners Court meeting.

SB 1771, and its corollary House Bill 4528, would affect businesses, from large construction companies to mom and pop operations, that have entered into such economic development deals, said Julie Wheeler, intergovernmental specialist for Travis County.

Because of this, Travis County Judge Sarah Eckhardt proposed that the court members draft a letter to the business community about how such deals would be affected by the proposed legislation.

The other members of the court were receptive to this idea.

“When the business community comes to [legislators] and says, ‘Wait a minute, you’re affecting our business,’ I think that gives us the greatest opportunity for change [at the Capitol],” said Commissioner Jeff Travillion, who represents Precinct 1.

Next steps

The Senate property tax committee heard public testimony regarding SB 1771, which was left pending at the committee level.

Meanwhile, the McKalla Place deal is likely to face other hurdles.

In February, the city of Austin certified a petition by a group called Friends of McKalla Place, comprising mostly residents from Gracywoods and the North Austin Civic Association neighborhoods, that asks for sports stadium deals on public land to be subject to an election.

More than 29,000 residents signed the petition.

As a result of the petition, an ordinance with the petition’s ask was presented to Austin City Council, which refused to adopt it. The likely next step is for voters to resolve the issue in a special election this November.