Austin City Council eyes tax incentives in effort to rescue local businesses from pandemic closure

In the ongoing effort to curb the pandemic’s decimation of Austin’s small-business ecosystem, especially those in the live music, arts, child care and restaurant industries, City Council could soon approve an emergency tax incentive program aimed at coaxing landlords into renegotiating commercial leases.

The Austin Economic Development Department is offering the program to City Council for a vote Nov. 12. The proposal would allow the city to offer commercial property tax reimbursements to landlords who renegotiate their leases and offer rent reductions to business tenants. Qualifying businesses will need to be headquartered in Austin, prove revenue drops of at least 25% and employ no more than 75 people. Renegotiated leases must extend for at least 12 months.

The proposal, which offers a lifeline out of the pandemic, comes in response to City Council’s unanimously supported effort to preserve and ensure the success of the child care, live music, art, restaurants and/or bar industries—industries city leaders said are especially vulnerable, represent the city’s essence and would be hard to revive if shutdown by the coronavirus.

According to city documents, the economic development department is wagering the cost of reimbursing property taxes to commercial landlords will be outweighed by the property and sales taxes generated by the saved business, the impact of the establishment on the city’s brand, and the property and sales tax generated by employees of the business staying employed and remaining active consumers.

Since March, the pandemic has scorched several legacy local businesses, many of which were already struggling prepandemic with the city’s growing affordability problems. Iconic names such as Threadgill’s, Shady Grove, I Luv Video and Magnolia Café have all shuttered. For the past couple months, City Council has been debating ways to intervene in the market and buoy struggling local businesses.

As City Council worked in October on the creation of a $17.5 million program to infuse money into and assist these struggling industries, Austin Mayor Steve Adler said he did not want the city’s efforts to essentially kick the can down the road and only offer financial help on a few months of overdue rent. Adler said he wanted the program to ensure the industries would be better off than they were prepandemic.

City Council will likely discuss the program during its Nov. 10 work session and move toward a vote for its Nov. 12 meeting.