Taxpayers on the Hook for Bridge to Tesla Gigafactory in Proposed Plan for Dog’s Head Development

From the City’s Dog’s Head Tax Increment Reinvestment Zone No. 21 Preliminary Project and Financing Plan. The proposed bridge to the Tesla Gigafactory is noted with black arrows. Credit: City of Austin

Some Austinites have wondered in recent weeks if there is a connection between the rushed, controversial Dog’s Head land development deal that city leaders agreed to back in May and the city’s most prominent, yet roundly despised, businessman – Elon Musk. After all, the Tesla Gigafactory lies directly across the Colorado River from Dog’s Head. In meetings with residents, representatives from the Endeavor Real Estate Group, which owns the 2,600 acres that make up the area and is pushing hard for the project, have not clarified whether Musk or his Gigafactory are playing any role in the development. 

Now, an economic feasibility study of Dog’s Head posted to the city’s website last Friday makes clear that the development’s success is predicated to some degree on the proximity of the Tesla Gigafactory. The document repeatedly mentions the importance of Tesla to Dog’s Head. More tellingly, it includes a map showing proposed public improvements for the land, including a bridge labeled “Tesla Road Extension,” which crosses the environmentally sensitive Colorado River directly east of the Gigafactory. 

The enormous tract that makes up Dog’s Head, about twice the size of Downtown, sits east of Highway 183 and one mile north of the airport. It is so named because, when viewed on a map, it resembles the head of a dog. It’s bounded on three sides by the Colorado River and has been used for decades as a sand and gravel quarry. On May 21, City Council voted, over the impassioned objections of environmentalists and Dog’s Head residents, to enter into a 45-year agreement with Endeavor to create a large mixed-use development on the site. Endeavor’s Andy Pastor said his company envisions building a city within a city, with residences, manufacturing companies, commercial businesses, public parks, and hike-and-bike trails lining the shores of the Colorado. 

The feasibility study, titled “Draft Preliminary Project and Financing Plan,” is the crucial next step for the Dog’s Head deal. On July 23, Council will vote on whether to create a Tax Increment Reinvestment Zone for the area. If Council approves a TIRZ, property and sales tax collected from Dog’s Head in the years to come will go to Endeavor, and not to the city’s general revenue fund, to reimburse the developer for the infrastructure it builds – streets, sidewalks, and, perhaps, bridges. City leaders have told the Chronicle that rejecting a TIRZ would likely lead to Endeavor walking away from the project. In that instance, Endeavor has said it will develop a different project under Travis County rules, causing the city to miss out on future tax revenue and the ability to influence what gets built at the site.     

The economic feasibility study, conducted by a national consulting firm called Hayat Brown, provides an optimistic appraisal of the potential success of the Dog’s Head development. It concludes that the site will work for a variety of uses, including single-family and multifamily housing, retail projects, and office development. In the context of the hospitality industry, it states, “The Colorado River frontage setting may support one or more high-end destinations.” It calls industrial development the “most readily feasible use,” saying Dog’s Head “benefit[s] directly from the site’s proximity to the Tesla Gigafactory, Austin-Bergstrom International Airport, and the SH-130 corridor.” The study also finds that the site’s proximity to Tesla, the airport, and the toll road would benefit job creation and help attract more large corporations to the area. 

Exhibit F of the document, labeled “Estimated Location of Proposed Public Improvements,” shows three proposed bridges, one to the north of the property connecting to Decker Lane near FM 969, one to the northeast of the property connecting to Blue Bluff Road, and the aforementioned “Tesla Road Extension,” leading to the company’s Gigafactory east of the site. A chart estimating the funding necessary to build various improvements in Dog’s Head lists “Roads, Trails, Crosswalks, Bike Lanes, Sidewalks, Bridges, and Multi-Modal Connectivity” as costing $1.453 billion. 

The Chronicle asked the city on July 14 if it could provide a justification for creating a bridge leading to the Tesla Gigafactory, which is outside the city limits. We also asked if it is possible for city leaders to reject funding for the bridge without voiding the Dog’s Head agreement and sought clarification on how much the bridge is expected to cost. 

A city spokesperson told us the three bridges in the Dog’s Head proposal are conceptual at this stage and that they may not be built during the term of the agreement or the duration of the TIRZ. “These bridges will benefit the city and county by increasing connectivity throughout the region,” the spokesperson said. “Additionally, if Travis County participates in the Tax Increment Reinvestment Zone, then county funds may also be used to construct these roadways and bridges. State law allows for investment in projects outside of the zone boundaries if there is a direct impact on the zone.” The spokesperson did not provide an estimate of how much the bridge to the Tesla Gigafactory would cost.

The $1.453 billion for streets, trains, and bridges estimated by the feasibility study accounts for more than a fourth of the total $5.631 billion in total public improvement costs for Dog’s Head. The city document states that taxpayers will pay $1.5 billion of that figure through the issuance of bonds, to be repaid by tax revenue from the TIRZ. 

Council Member Mike Siegel, who has read the finance plan, told us he is particularly concerned about a provision in the proposal that would pledge the city’s future “general appropriation credit” – i.e., money from its general revenue fund –  for any shortfall in tax income from the Dog’s Head development, if the taxes can’t cover the bond repayments. “There’s no way Austin should put its finances at risk to subsidize the businesses of the world’s first trillionaire,” Siegel said.

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