Irving: Public Cost, Private Benefit

After squandering $23 million in unaudited expenses without laying a single brick, the ousted developer of a proposed “entertainment center” is in a lawsuit with the City of Irving. Meanwhile, city leaders are considering the approval of a second development agreement…and possibly sinking even further into debt.

The appalling malfeasance of the previous developer, the Las Colinas Group (LCG), was infamous enough to be featured in a Channel 8 investigative expose.  The Dallas Morning News recently published an article highlighting cursory details of the agreement with the new developer, ARK, who is offering to pick up the project and pay a $4 million settlement to LCG… Confused yet?

Of course, several council members and city staff — including the city’s manager, Tommy Gonzales – who were outspoken defenders of the abandoned LCG arrangement, are promoting the new development deal with ARK. If the thought of public officials trading fiscal imprudence for political expediency infuriates you, the remaining details of ARK’s proposal will leave you speechless.


If the thought of public officials trading fiscal imprudence for political expediency infuriates you, the remaining details of ARK’s proposal will leave you speechless.
Perhaps a coincidence, fifty percent of the ARK agreement’s language is identical to LCG’s.  It also contains several lucrative giveaways.  In addition to the $4 million legal settlement, Irving would take $44 million in revenue intended for unrelated infrastructure projects, and transfer them to ARK.

Secondly, the city would agree to pay ARK the uncapped revenue generated from a 2% Hotel Occupancy Tax (HOT), levied specifically for the project, totaling a minimum of $200 million over 40 years.  The city would also borrow $40 million with bonds and construct a $10 million parking garage from which ARK will keep all fees and taxes resulting from its use.

The developer keeps the taxes?

The most perplexing contractual ambiguity is that the agreement does not cap the total financial exposure of the taxpayers, so although ARK estimates the total project cost at approximately $165 million, total city contributions to ARK are essentially open-ended, and could easily total twice that amount.

What would Irving taxpayers receive?  ARK would sign a 99 year lease for retail space (the first 30 years for free), unilaterally decide who the tenants will be (insert favorite crony here) and would occupy 100,000 sq/ft of office space; tax free of course.  Just like the LCG deal, ARK has no proof of assets and no private investors.  They have no formal plans, no designs and no track record worth mentioning.  As with LCG, the city would be unable to audit either ARK’s expenditures or their expense reimbursement requests (think steak dinners and limos), until the project is completed.  ARK will be required to sell 100,000 venue tickets annually… at an unspecified price.  Perhaps that will be free as well?

You may be asking yourself, what would prevent ARK from stalling completion if they are guaranteed $12,000 per day from ongoing subsidizes?  Why would the city agree to pay another developer with potentially hundreds of millions in upfront, unaudited cash? Why hire yet another developer lacking a credible track record and proof of private capital?  It would be both more prudent and less risky to follow the example of countless other cities by simply selling the land to developers with their own investors, and taxing the property like every other business. (Setting aside the question of having cities in the land speculation business at all.)

The unfortunate truth is that Texas is not the land of unbridled fiscal conservatism; we have the second highest local debt per person in the nation thanks in part to schemes like these.  And here we all thought local elections didn’t matter…

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Ross Kecseg

Ross Kecseg is the Vice President of Local affairs for Empower Texans and leads the Metroplex Bureau. He is a native North Texan, raised in Denton County. He studied Economics at Arizona State University with an emphasis on Public Policy and Constitutional history. Since 2008, Ross has been active in grassroots organizing, political campaigns and as an Irving ISD volunteer. He enjoys speaking to liberty-minded groups regarding the strategic effectiveness of state and local engagement. Ross is an avid golfer, automotive enthusiast, and movie/music junkie.

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