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RUDH files suit over 380 agreements

From the inbox:

RUDH has filed a petition in Harris County District Court challenging the legality of a six million dollar tax reimbursement deal between the City of Houston and Ainbinder Heights, LLC, the developer of the Houston Heights area Walmart Supercenter strip mall development. RUDH alleges that the deal violates section 380 of the Texas Local Government Code because the developer was committed to building the project with or without public funds.

Section 380 of the Texas Local Government Code broadly allows municipalities to provide various forms of public assistance to private developers so long as the public funds are used to promote economic development. The City of Houston’s 380 agreement with Ainbinder Heights, LLC provides over six million dollars in sales and property tax reimbursements for various infrastructure upgrades needed for the Walmart Supercenter strip mall development. RUDH alleges that the principals of Ainbinder Heights, LLC , the Mayor and members of Houston City Council all stated that Ainbinder Heights, LLC will build the development with or without the assistance of public funds. RUDH alleges that a 380 agreement cannot promote economic development when the developer can build with or without the assistance.

RUDH also alleges that the City of Houston’s program for awarding 380 assistance agreements violates the Texas Constitution because the program gives the City absolute discretion to ignore standards for awarding assistance in favor of agreements the City believes are “otherwise meritorious”. In the case of the Ainbinder Heights, LLC 380 agreement, RUDH alleges that the City completely ignored its own standards and application procedures and simply gave Ainbinder Heights, LLC over six million dollars to support the development of a Walmart Supercenter strip mall development.

RUDH believes that legal action is necessary because the City of Houston is using section 380 agreements to spend money out of future city budgets without doing anything to promote economic development. If a developer does not need public funds, then scarce tax revenues should not be sacrificed to pad a developer’s profit margin.

You can see a copy of the lawsuit here; one of my blog posts is listed among the footnotes on page 7. Note that the suit asks for a “permanent injunction restraining the City from giving any effect to or complying with the 380 Agreement and from proposing any further 380 agreements” under its 1999 ordinance that created the 380 program. One presumes that would have an effect on the Studemont Kroger, for which a separate 380 agreement was voted on by Council yesterday.

Under the deal headed to City Council on Wednesday, the city would reimburse Kroger as much as $2.5 million for extension of a street, landscaping, traffic lights, sidewalks and other infrastructure improvements surrounding the store. In exchange, Kroger guarantees it will create 170 full- and part-time jobs at the 8.6-acre site.

[…]

In addition to the job-creation requirements, the deal calls for Kroger to donate $40,000 to the nearby Olivewood Cemetery. However, that, too, will be reimbursed by the city under the deal, [Mayoral spokesperson Janice] Evans acknowledged.

Evans said City Hall had no plans to extend Summer Street or do the other improvements for 12 years, so the deal buys the city an accelerated schedule. City officials see that as an economic booster shot that puts people to work sooner and clears the way for other businesses to open on the new street.

[Kroger spokesperson Rebecca] King described the improvements as “above and beyond” what would be required without the 380, but it is not clear how much more the city gets by agreeing to rebate to Kroger some of the property and sales taxes generated at the site over the next 13 years.

I’m pretty sure there will be a motion for a temporary injunction to come, so we’ll see if either of these projects are put on hold. Swamplot and Hair Balls have more.

UPDATE: The Kroger deal is on hold for now.

District H Councilman Ed Gonzalez championed the Krogerdeal as a contributor to economic development and one supported by the local civic associations he consulted.

Other members, who did not get many details of the deal until Tuesday, asked why the city was not offering incentives to grocers to set up shop in the Third Ward, Fifth Ward, Sunnyside, Independence Heights and Acres Homes.

“I hope we revisit our use of 380 agreements and use them in the parts of this city where we most need it, and I would respectfully submit to you we’re not doing that now,” Councilwoman Jolanda Jones said.

Councilman Jarvis Johnson said the city needs to do more outreach to urge companies to locate in low-income neighborhoods.

“We can’t have a city of haves and have-nots, we need to balance the city out to where there’s economic development all across the board,” Johnson said.

According to the Council agenda, the proposed ordinance was tagged by CMs Jones, Rodriguez, Noriega, Johnson, Sullivan, and Bradford

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3 Comments

  1. Jules says:

    This is GREAT news! I have been against this one-sided sweetheart deal from the start.

    The fact that it was misrepresented by Mayor Parker, Andy Icken and Tim Douglass to the public and to City Council should be enough get this deal thrown out. I think an ethics investigation of these 3 is also warranted.

    Great job RUDH!

  2. Ross says:

    If grocers thought they could make money in the “underserved” areas, they would build stores there. The entire concept of grocery deserts is stupid, and has no basis in reality. By the standards used, my grandparent’s house in a small town in South Texas was in a grocery desert because it was over two miles to the HEB that served the entire town.

  3. […] to mess up traffic. The question about 380 agreements is going to be more in the forefront – litigation will do that – but I don’t want to lose sight of the suitability question. I think […]