BELLAIRE – OUR TOWN
By Lynn McBee – © July 9, 2008
The 1980s – Bellaire Special TIFD District Formed to Rebuild Downtown
From boomtown to slowdown, in 1980 population in Bellaire dropped from a high of almost 20,000 to less than 15,000. President Ronald Reagan defeated Michael Dukakis and reigned for the decade until George H.W. Bush took over in 1989. There was Black Monday in 1987, when the Dow Jones Industrial Average fell 22.6% on October 19th, largest one-day decline in history. The Exxon Valdez oil spill in 1989 closed the decade.
In Houston Kathryn Whitmire was elected first woman mayor of Houston; Mark White, Democrat, was elected Governor. Hurricane Alicia came through Galveston and Houston in 1983, the most expensive hurricane in U.S. history at that time. By 1986, bankruptcies and foreclosures were climbing in the area, eleven banks failed. The Shamrock Hotel was demolished and Wildcatter Glenn McCarthy and Defense Attorney Percy Foreman both died in 1988. Unemployment by 1989 dropped below the national average.
In Bellaire, there followed a two year controversy about the opening/closing of Newcastle to shield Bellaire from the development planned by Aberbcrombie Realty Co. of its 95 acres, 18 of which were in Bellaire. In a complex of suspicion and disagreements about the effects of this mixed use project (one-third high rise office, one-third residential apartments, one-third streets and open space, Bellaire declared Newcastle to be open in 1979 (Ord.79-062) and repealed that in 1981 (Ord. 81-071).
An initiative referendum election was held in November 1981 and resulted in narrowly allowing ingress and egress open along Newcastle. This checkerboard history in part explains how Newcastle today bends at Glenmont, the northern Bellaire City limits.
Against this backdrop of business slowdowns and efforts to combat it, Bellaire jumped into a financing scheme newly permitted under state law (Tax Increment Finance District) to “improve blighted areas.” TIFD was justified from studies and a November public hearing that the central business district of the City was particularly in need of redevelopment and modernized development.
The City Council under Mayor Bill Berryhill on December 31, 1982 enacted (Ord.82-105) to create the Bellaire Tax Increment Finance District (TIFD) in 93 acres of downtown Bellaire as a proposed reinvestment zone. Funding would be by the projected increased valuation of commercial properties within its boundaries from 1982 forward, referred to as the “increment”. The resulting increased tax revenues generated by the “increment” each year from the Zone within the City of Bellaire, Houston Independent School District and Harris County would be transferred to the new TIFD. The findings in the creation ordinance were:
“…The area…is deteriorated to such an extent that it substantially impairs and arrests the sound growth of the City and constitutes an economic liability to the City, and in addition, is a menace to the public welfare in its present condition and use by reason of the presence of a substantial number of substandard, deteriorated or deteriorating structures; predominance of defective or inadequate sidewalk or street layout; faulty lot layout in relation to size, adequacy, accessibility or usefulness; deterioration of site or other improvements…obsolete platting…not more than ten percent of the property… is used for residential purposes…defined by a house which has less than five (5) living units…that the total appraised value of all taxable real property in the zone…does not exceed fifteen percent (15%) of the current total appraised value of the taxable real property in the City…”
Nine directors were initially named to serve as the Board of Directors, the first five for two-year terms, the last four for one-year terms:
Bill Barziza, Chair Robert Delay
Bill Gough, Vice-Chair Earl Kelly
Kenny Meyer Richard LaSance
Don Springer John Semler
Martha Doty, Secretary
The City would provide services of its City Planner, Sara Jane White, City Attorney, Firmin Hickey, and City Council member, J.G. Webster, Jr., as ex officio members of the Board. Meetings would begin on January 1, 1983 and termination of the zone would occur on December 31, 1992, or earlier. Funds would be controlled and segregated by the City.
Thus was the new district within the City born on New Year’s Eve, enabling capture of the tax increment for 1982. What did it accomplish? During its almost ten year life, it was highly controversial, distrusted by many worried citizens that it could impose eminent domain and property takings (but only with the power and agreement of the City) and diverted revenues that could otherwise be expended for better purposes by each of the three jurisdictions (city, school district and county). Newspapers opined about the concept. Its subsequent life was every bit as controversial as its birth.
A preliminary plan was presented in 1983 asking the City for its approval to direct administrative staff to make studies, legal, fiscal, public improvements, land acquisition and environmental to determine the feasibility of said plan and any modifications that should be made, including contracts for public improvements and zoning modifications deemed necessary. In other words, the preliminary plan was to seek studies to determine whether a plan was feasible. Its first required annual report in June 1983 reported that the tax increment base was $37,633,100 for 1982 but that no funds had been received.
By 1984, under Mayor Sam McKinney, tax increment revenue for the TIFD was reported at $45,748. (HISD), $14,425. (City) and 0 from the County, total $60,183. But TIFD also reported in its Annual Report that year that it had adopted a “conceptual final plan.” That was to conduct a nationwide campaign to attract developers.
It expended funds of $323,323. provided by automatic interest-free loans from the City for planning to a variety of consultants: traffic engineering, land acquisition evaluation, modeling, feasibility study, street engineering, planning analysis, appraisal consultation, public relations, surveys, and of course for its meeting lunches and other. The City Attorney reported services in the amount of $33,660 for future repayment. TIFD began with an “IOU” to the City of Bellaire
Also in 1984, the City Council created another entity allowed by state law, a public non-profit housing finance corporation, authorized to acquire home mortgages and make loans to lending institutions for home mortgage loans on homes owned and occupied by persons of low and moderate income. Appointed to the Bellaire Housing Finance Corporation Board of Directors were five Bellaire residents, Bill Gough, Karl Hoffman, Earl Kelly, J. Patrick Hughes and Clyde Willbern. This entity did not produce public reports that have been found and no funding came from the City.
The 1985 TIFD Annual Report showed tax increment funds received were $28,596 (City), $65,411 (HISD) and $94,088 (County), a total of $188,095. The Final Plan for TIFD was adopted with an agreement with Bruns Development Corporation for redevelopment of a portion of the TIFD (2-10 story high rise office buildings, residential and retail development). In addition, the City’s abandonment of Mapleridge street right-of-way resulted in the inclusion of a new federal Post Office to be located there – and added to TIFD’s plan.
A municipal bond election was held on November 5, 1985 to authorize $85 million to realign Bissonnet, and thereby release existing City owned street right-of-way within the area for sale and private development (at less than market value). Much pro and con was expressed over this concept. Many were outraged; believing it to be a “give-away” of public lands combined with the distrust of the TIFD and would incurr unnecessary costs. Others saw it as a bold redevelopment opportunity with the City providing the City tax-based bond money to reroute the street and the developer gaining land cheaply. The vote was 42.9% For and 57.1% Against, and the proposition decisively failed.
The TIFD Chair Bill Gough was quoted in the Houston Chronicle on Nov. 7th, “I can’t blame some of the voters. If I were in their shoes and did not understand the scope of it and the positive things about it, I might have voted against it, too.” And the developer, David L. Bruns, suddenly died, causing TIFD to also drop that ambitious downtown Bellaire project.
Year 1986 (Sam McKinney still Mayor) saw another government partnership embraced by TIFD between City of Bellaire and the Metropolitan Transit Authority (METRO) for a Mass Transportation Joint Use Agreement (Ord.86-023). Reconstruction of Bellaire Blvd. from Bissonnet to South Rice intersection and reconstruction of South Rice Ave. from Linden to Locust in exchange for free use of Bellaire land right-of-way and permission to METRO to construct a bus transit station in the median of Bellaire Blvd. was promoted as improving traffic flow.
Costs would be shared one-third (up to $500,000) by Bellaire (excluding the value of the unlimited free right-of-way) and two-thirds (up to $1 million) by METRO. Here was yet another controversial event and the “improvement” was quickly dubbed the “bus barn.” TIFD contributed $22,316 of its funds toward the project.
InterFirst Bank S.W. Houston’s added drive-through lanes was another building project supported by TIFD with a sale of $5/square foot for City right-of-way (rear alley).
The TIFD annual report for 1986 stated the increment tax funds received for city and school district totaled $95,007 but none from the county. In 1987 TIFD reported revenue of $196,861, which included sale of right-of-way of $110,625 and a debt to the City of Bellaire’s Capital Improvement Fund of $972,861. Harris County still did not pay any increment tax. The renovation of a 9,763 square foot shopping center as a new location for a Walgreen’s Drug Store (Rice Ave.) and a 10,000 square foot renovation for a new location of Isaac’s Model Shop and the METRO transit station were included in the 1987 report. The total tax increment funds received for 1986 were $80,176.
Jumping to the 1989 TIFD annual report, revenues were shown as $88,212 (city and HISD) and expenses at $50,585. Included, “Harris County has never paid its tax increment, total due as of 9/30/1989 including penalty and interest, is $563,129.35.” But that year, under Mayor Tim Carter, the City Council on December 4, 1989 passed Ord. 89-074 that found the necessity to file suit against Harris County and its Flood Control District, Department of Education and Hospital District to recover all monies due and payable to the City of Bellaire and to TIFD to collect the increments due and owing to the City.
That same year also saw a local bank seek to have a neighboring property condemned through a “friendly” City action. In a climate of “good old boy” cooperation, it was not surprising to many.
Nothing came of the lawsuit against Harris County. In fact, Ord. 91-079 passed on September 30, 1991, after two years, repealed the prior lawsuit ordinance to recover the increments. The City Attorney advised that the matter might remain in litigation for another three to five years and that the court had concluded there existed significant fact issues requiring proof of many relevant facts, including:
- “…existence of a legal basis for the creation of the…TIF District”…
- “Whether construction within the TIF District was commenced under an approved plan…”
- “Whether or not the evidence would show that the TIF District as a separate body politic, had spent money within the TIF District under the terms and provisions of an approved plan…”
- “Whether or not the Defendants in the litigation would be legally obligated to pay tax increments to the TIF District in that the TIF District might be limited in the expenditure of such funds to retire bonded indebtedness and the furtherance of an approved final plan.”
Mayor Tim Carter and the City Council further found that there existed little likelihood that the TIF District mechanism as created in 1982 would be of aid or assistance to any developer and authorized the City Attorney to file a Motion for Voluntary Non-Suit With Prejudice and to dismiss the lawsuit with prejudice to the Plaintiff’s right to refile it.
After nine years, the “accomplishments” of the TIFD and its debt to the City of over a half million dollars, not counting City staff time, can only be judged by Bellaire citizens who paid for it. A governmental district, wrapped in the flag of redevelopment, failed. Yet there are many types of special districts, authorized by the state, that have been and continue to be formed to take the place in part of duly elected governmental units. Who pays, who profits???
Lynn McBee, firstname.lastname@example.org
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