Proposed studio's developers want out of Austin's ETJ

Developers say city must agree soon or Villa Muse project, planned for southeast Travis County, will go elsewhere.

Concerned about Austin's taxes and time-consuming development approval process, the backers of a proposed film, television, gaming and sound studio in southeast Travis County are asking the city to release their 1,100-acre property from Austin's future growth zone.

If that happened, Austin would give up all regulatory control over the development of the Villa Muse Studios and the adjacent residential and office development and surrender the right to collect property and sales tax in a large swath of its desired development zone near the new Texas 130 toll road.

Villa Muse's development team says the city has nothing to lose and everything to gain from releasing the flood-prone land and signing a non-annexation agreement that would likely last decades because the land isn't likely to be developed by anyone else.

"The vast majority of the jobs created and the economic benefits are going to be outside the boundaries of Villa Muse," said Paul Alvarado-Dykstra, vice president of strategic development for the project. "Austin is going to benefit more than anybody from what we're doing."

Located in Austin's five-mile growth boundary outside the city limits, also known as the extra-territorial jurisdiction, the Villa Muse property is currently subject to the regulatory authority of both Austin and Travis County.

The developers argue that Austin's cumbersome approval and permitting process would take too long to get the studio up and running by the end of 2009, which they need to do because of growing competition in the industry.

They want to build under only Travis County's less-rigorous approval process, which it also wants to customize and shorten for the project.

In Texas, cities have far more regulatory authority than counties.

Approval at Travis County generally takes 6 to 9 months for large projects of more than 1,000 acres, mainly because developers only need approval for the subdivision plats — which divide property into lots and lay out where the roads will go — while projects that require city approval must also specify lot sizes, street designs, land use and water quality controls. Commercial projects also acquire additional permits in the city. Approval time for the entire city process is roughly 12 to 18 months, according to real estate attorney David Armbrust.

Austin City Council members heard a Nov. 8 presentation from the developers that was held in executive session because the council was getting legal advice related to the request for the release of the land from the city's jurisdiction. Several members enthusiastically support the project but are reluctant to agree to the request.

"We have a stated policy for releasing folks from the ETJ, and this doesn't meet that criteria," said Council Member Mike Martinez.

"They need to come to the table with an offer that is mutually beneficial," he added. "Simply providing jobs and a studio isn't (enough)."

Villa Muse would be anchored by a 200-acre studio that would include production and post-production facilities surrounded by more than 1 million square feet of office space and high-end housing for up to 9,000 people.

The project's backers say the studio would help Austin compete in the entertainment industry by attracting a larger pool of creative talent and accommodating larger productions than those using the city's current facilities. It would also offer studios, producers and others everything they need to create and complete a new project in one place, which is a growing trend.

The developer's consultant, the Perryman Group, estimates the studio could create anywhere from 40,000 to nearly 110,000 jobs in Austin and generate between $6.5 billion and $20.2 billion in local spending each year. Competition among major studios is escalating.

In recent years, major studios have been built around the world in places such as South Africa, Australia, Canada and Spain. Late last year, the well-established Pinewood Studios Group in London announced that it would double in size within two years and incorporate a large residential component, much like Villa Muse.

Closer to home, the $74 million Albuquerque Studios opened in New Mexico last year with six soundstages on 28 acres. It's set to expand this year.

Approximately 80 percent of the Villa Muse site is in a floodplain. The developers plan to spend $8.6 million to reclaim the land, using dirt from 800 acres adjacent to the property that is owned by the sand and gravel company Travis Aggregates. The Villa Muse developers also want the city to release that property, which it might eventually buy, from its ETJ.

The developers estimate it will take $300 million to build roads, parks, hike and bike trails, a wastewater treatment plant and water lines as well as planned community centers, an auditorium and schools. They project it will take another $450 million to get the studio up and running.

To pay for the project, the developers are trying to put together a public improvement district that could issue debt and be repaid by from a property tax assessed within the district.

The developers say the district wouldn't be a viable financing option if Villa Muse became subject to city property taxes before its debt was repaid. So the developers also are asking the city to sign an agreement that Villa Muse wouldn't be annexed until its debt was paid off.

Council Member Brewster McCracken said he needs more information.

"We want to know how likely is this to happen," McCracken said. "Do they actually have contracts, memorandums of understanding with studios and an actual real estate developer hired at the moment?"

The development team said the city must act quickly, and they have offered to include a clawback provision in any agreement that would put the property back in Austin's ETJ if the studio fails to materialize within five years. But Council Member Lee Leffingwell said fast action isn't likely.

"I think it's going to take a lot of study," Leffingwell said. "I don't think it can be decided in a matter of a few months."

"Villa Muse is going to happen," said founder and CEO Jay Podolnick. "We hope it happens here."