Travis County Could Challenge Tax-Exempt Status of Austin MLS Stadium Proposal

Austin MLS stadium McKalla Place rendering 2

Through a decision made on Tuesday, Travis County commissioners left the door open for a legal challenge to the Austin MLS stadium proposal’s tax-exempt status. 

After considerable debate, the Austin City Council voted last week to approve the term sheet for a McKalla Place land lease, clearing the way for Anthony Precourt to finance a $200 million MLS stadium for relocating Columbus Crew SC. Although several amendments were made before final approval, the agreement between Austin and Precourt Sports Ventures still calls for the city to retain ownership of McKalla Place. This means that the stadium and surrounding amenities on the site will not be subject to property tax, but that the city will instead collect rent from PSV through a lease agreement.

The issue for Travis County is whether the agreement prevents it and other taxing entities from collecting property tax on the project. On Tuesday, the commissioners voted “authorize the county attorney to preserve the county’s right to challenge the tax-exempt status of the stadium company’s use of city property,” and ““pursue negotiations with the city and other local taxing entities on expectations for preserving taxable value in the redevelopment of publicly owned real estate.”

It remains to be determined whether this leads to a legal challenge from the county attorney, but there are concerns that the proposal does not fit state law requiring that property tax-exempt development on publicly owned land serve a public purpose. Thought the agreement between PSV and the city tries to emphasize public benefits from the proposal, some Travis County commissioners are skeptical that it meets the criteria. More from the Austin American-Statesman:

“The Stadium will be owned by the City and used for the enjoyment, health, comfort, and welfare of the public,” the term sheet states under a section on property taxes.

The terms also say the city will “reasonably cooperate” with Precourt in asserting its right to the tax-exemption and acknowledges the possibility of a challenge.

It states the company and affiliates have the right to “assert, insist upon, continue, and restate this intent in any agency, forum, or court having jurisdiction and at which the question may arise or be presented.”

Commissioner Brigid Shea, in whose precinct the stadium would be built, said she first raised the issue because she believes tax exemptions should only be offered in rare circumstances when a development has a clear public benefit, such as affordable housing.

Last week’s vote by the Austin City Council approved the term sheet, but it is still up to city staff to turn that term sheet into a final lease. The city is not on the hook for any part of the stadium construction; Precourt will finance it privately.

Rendering courtesy Gensler Sports Practice.

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