Some City Council members evidently recognize that "historic landmark" tax breaks for wealthy West Austinites are an awful deal for the city. The solution, naturally, is not to eliminate the tax breaks but simply to slow the rate at which the city hands them out:
The City of Austin would limit the number of homes eligible to be historic landmarks and receive tax breaks under new rules proposed by the city's planning department .
The proposal, which the City Council might vote on next month , comes after some council members expressed concern last year that the historic zoning program is too generous and is taking too much property value off the tax rolls. The council approved a spate of historic landmark applications in December for mostly upscale homes in West Austin.
Any property owner can apply to have a home or building designated a landmark, and if the City Council OKs the request, the owner is eligible for a tax break from the city, county, school district and Austin Community College to help defray the cost of keeping up the property's historical character.
The proposed rules would limit the number of homes the city considers for landmark status to three a month, according to a memo that the city's planning director, Greg Guernsey , sent to council members this week .
Guernsey also wants to limit the number of homes designated as landmarks in local or national historic districts to one per month per district. That could slow the flood of requests from West Austin neighborhoods such as Pemberton Heights, Old Enfield and Bryker Woods, he said.
This last is in response to complaints from residents of other neighborhoods who aren't upset about tax breaks per se, but merely that the boondoggle has been confined mostly to tony West Austin.
These really are massive giveaways. Consider this application for 1701 Windsor (the "Fitzgerald-Upchurch Wilkerson House") which Council approved at its April 29 meeting. The homeowners get a $24,000 tax break this year and its value will doubtless rise each year.
That got me wondering: What is the net present value of that tax break? The feds pick up 35% of the cost, so the after-tax benefit to the homeowners is $16,000. But this is equivalent to $16,000 in investment income with no credit risk and no inflation risk. In fact, the home's value and taxes will almost certainly out-pace inflation. It's a better bet than short-term T-bills, in other words. But let's just use a very conservative 4% discount rate. That would make the tax breaks equivalent to a one-time transfer of $400,000. I do think that's the lower bound.
The homeowners are giving up something in theory but not much in practice. Most of these houses are already big and, because of the McMansion ordinance, could not be made much bigger. The Fitzgerald-Upchurch W'ilkerson House, for example, has 6,2000 sf on a lot that would theoretically allow a tad less than 7,000 sf. I think it's unlikely that anyone will tear this house down to build a house just a few hundred square feet larger or two houses half as large. (I frankly don't think this house would be in jeopardy even if there were no McMansion ordinance.)
In fact, an application to demolish a home in Pemberton Heights and other historic districts already triggers Landmark Commission review. If someone were to decide to bulldoze one of these homes, the Landmark Commission could initiate proceedings to landmark it then.
Historic Landmark status also limits the changes the homeowners can make to the structure's exterior but, again, this is largely illusory because homeowners can modify these homes to their tastes before applying for landmark status. Many of these "historic" homes have already received additions or substantial external modifications such as enclosed balconies or breezeways. Staff duly notes these changes in its reports but, as best I can tell, gives them no weight in making recommendations. Because there is nothing really historic about the architecture, being fastidious about authenticity doesn't make much sense.
The truth is that tax breaks do not correspond very well to the benefits or burdens of landmarking properties. Tax breaks might grossly under-compensate an owner who is forced to restore a dilapidated 1000 sf bungalow surrounded by stately mansions. But tax breaks grossly overcompensate the West Austin owners who would simply continue to maintain and occupy these homes even regardless of the historic landmark designation.
