Grapevine, DFW Airport look to settle land deal

Uses, taxes, utilities on three tracts up for debate

If leaders with the City of Grapevine and Dallas/Fort Worth International Airport are able to come to an agreement in the coming months, more than 1,500 acres within the city's limits could see as much as $2.3 billion in construction in the coming decades.

At this point, discussions about the property have remained largely behind closed doors, and city and airport leaders caution that there are still months of negotiations ahead. Any deal would need to be approved by the airport's board of directors as well as the city councils of Grapevine, Dallas and Fort Worth. But recent surveys commissioned jointly by the airport and Grapevine, which mark the first time the two sides are seriously considering their options, offer a look at the content of their talks.

Building infrastructure

On the table are three parcels: Site 1 is 272 acres known as the "Mustang" tract that straddles Mustang Drive between Hwys. 121 and 26; Site 2 is 85 acres along Hwy. 114 between William D. Tate Avenue and Main Street; and Site 3, also known as the "entertainment" tract, is 1,151 acres bounded by Bass Pro Drive and Hwys. 121, 114 and 26.

Up for debate is how the city and airport might split the costs and responsibilities of building the sites' infrastructure and of providing them with public safety services. But most importantly, discussions hinge on how Grapevine and the airport's owner cities of Dallas and Fort Worth would split the benefits reaped by millions in square feet of new office, retail, entertainment and industrial space.

"Bottom line, we understand that any deal that is to be done needs to make business sense to the City of Grapevine, it needs to make business sense to the airport and it needs to make business sense to Dallas and Fort Worth," said John Terrell, vice president of commercial development at DFW Airport.

The first order of business is infrastructure. A study by Freese and Nichols Inc. concluded that the cost of extending Grapevine water and wastewater infrastructure to Sites 1 and 3 would be about $31.1 million. An airport survey estimated that another $30.1 million would be needed to build roads, medians and more on the property, and about $5.2 million would cover the cost of gas, electric and communications infrastructure on site.

Grapevine Mayor William D. Tate said the expansion of the city's water and wastewater system to the site seemed likely. Whether the city helps pay for the expansion is up in the air, but either way, Grapevine's infrastructure is closer to the sites than the airport's. Tate also expressed an interest in having Grapevine police and fire officials handle services to the site, though Terrell said the airport, which has its own emergency crews, has yet to decide a preference on that front.

Beyond talks of infrastructure, things get more complicated.

Difficult history

Tax-sharing agreements have long been an item of contention between the airport and its host cities of Grapevine, Irving, Euless and Coppell. And other issues, including intense disagreements over zoning, noise control and plans for the airport's expansion — including a future runway that would have planes cross directly over historic downtown Grapevine — have landed the airport in court against its hosts.

"There is a lot of history here," Tate said. "There are 25 years of bitterness to overcome."

Disagreements have also been settled by legislation. In 2001, Senate Bill 569 thrust Grapevine into a revenue-sharing agreement with the airport, whose terminals all lie within Grapevine city limits. The bill allowed Grapevine to continue collecting tax revenues without disruption up to $5.9 million annually, a cap determined by the city's 2000 revenue intake. After that cap, however, revenue would be split: one-third to Grapevine and two-thirds to the owner cities of Dallas and Fort Worth.

That bill also established something of a compromise between Grapevine and the airport over the land in question today. Property separated from the airport terminals by highways were purposefully left out of the legislation, leaving Grapevine in a position to negotiate the terms on these three tracts. And until 2021, Grapevine must approve any retail plans for those pieces of property.

"After 2021, anything built that produced taxes, all the taxes would go to Grapevine because we would not have a tax-sharing arrangement," Terrell said.

The tax revenues that could be at stake are significant. A survey produced for Grapevine and DFW Airport by Austin consulting firm TXP came up with five development scenarios. Assuming the airport was able to achieve build-out that included hopes for office, retail and industrial space as well as two amusement parks and another 2,400 rooms' worth of hotels by 2026, tax revenue alone could run as high as $350.1 million over 30 years.

Striking a deal

DFW Airport signed tax-sharing agreements with Euless and Irving in 1998 that set a precedent for the one-third/two-thirds split, and Terrell said the airport's preference is to continue the trend with Grapevine.

Its contracts with Euless and Irving include what is known as a "favored nation clause," which states that if the airport makes a better deal with another city, Euless and Irving will receive the same deal.

One-third/two-thirds is not the preference of Grapevine city leaders, though.

"We have more land and we have the best land," Tate said. "They're going to have to give us a better deal."

Terrell said he understands Grapevine's position, and that there would likely need to be two agreements between the airport and the city to get this deal done: a tax-sharing agreement that mirrors those of other host cities, and a developer's agreement.

"This is a much broader arrangement than simply a tax sharing, so we would handle some special needs of Grapevine in the separate agreement," Terrell said.

Another primary concern on Council members' minds is competition. The "entertainment" tract is well positioned to add to the offerings of Grapevine's northern corridor, which already features premier hotels and regional attractions.

But it is also positioned near the two largest pieces of undeveloped, non-airport land within Grapevine's city limits, which means the city and airport could see competition for projects between the sites.

"Obviously we would prefer for new development to go onto [Grapevine] properties," Tate said, "and we also know it could create competition for people who are paying taxes at the full rate and have invested in property for years."

It could be months or even years before a deal is struck between the city and airport, but Terrell said he is encouraged by the fact that the two sides are finally in real discussions.

"I feel very good there's enough benefit on both sides that we really have the opportunity to create a deal that's good for everybody," Terrell said. "It's too important a deal to rush, so we're going to take the time necessary to make sure everybody is comfortable."



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