The downtown Tax Increment Financing Zone board struggled Thursday as an entrepreneur’s vision for a cottage development on Elm Avenue collided with the city’s decade-old vision for how the area should be redeveloped.

In the end, the entrepreneur, Nancy Grayson of Lula Jane’s bakery, got what she wanted: a TIF board recommendation for $145,384 to assist with the development of nine short-term rental cottages next to the bakery. The money would help fund sidewalks, lighting, trees and fencing in the public right of way to assist a $600,000 development of 320-square-foot cottages modeled on a development in Fredericksburg.

But to build the cottages tucked away from Elm Avenue as Grayson plans, she will have to get an official zoning variance to a downtown “overlay zone” that requires new structures to be built up to the sidewalk.

The variance may seem technical, but it led to a tense debate at the TIF board meeting. City Center Waco executive director Megan Henderson, who scores TIF applicants for compliance with the city’s Imagine Waco Plan for Greater Downtown, recommended against the project because of the site design.

“It’s an exciting, ambitious and beautifully planned project,” Henderson said. “But we have grave reservations about a couple of aspects. . . . To fulfill Imagine Waco, it would need to have a different scale and orientation than . . . small cottages tucked away from the street.”

Grayson would not budge on the design. She said rather than redesign the Cottages on Elm project, she would leave the half-block permanently undeveloped.

“I would kill the whole project,” she said. “I plant trees, and it will go unused.”

Approving a variance to the site design standard is the job of the city’s Zoning Board of Adjustment, not the TIF board, which recommends incentives to the city council. The incentive money comes from a portion of property taxes paid on downtown properties.

Based on the Imagine Waco plan, the City Council in 2009 approved a zoning overlay district intended to create a better pedestrian experience in downtown and the Elm Avenue corridor. For new buildings, it regulates window and signage sizes, bars front parking lots and requires the front façade to be adjacent to the sidewalk.

City planning director Clint Peters said the success of Grayson’s adjacent Lula Jane’s bakery in revitalizing Elm Avenue could be a good argument for a variance.

“It’s up to the board (of adjustment), but I do think with your track record . . . there’s a possibility a variance can be approved,” Peters said.

Henderson said setting aside the intent of the Imagine Waco plan and the downtown overlay should not be done lightly.

“It’s about creating a precedent,” she said. “There will be other developments that want us to ignore our design standards. . . . This isn’t just an aspirational design. It’s not just something that would be pretty. It’s about the generational development of this district and how being built to the sidewalk creates a walkable sidewalk.”

TIF board member Malcolm Duncan Jr. said the request creates a dilemma for the TIF board.

‘Struggling with this’

“I’m struggling with this,” said Duncan, a former Waco mayor. “It’s a great idea, but I don’t want to negate the importance of the planning work that’s been done before.”

Henderson, Peters and board members agreed that any variance would need to be based on a finding of special circumstances in an effort to keep future applicants from seeking to waive the requirements.

Board members said the project could be seen as an extension of Lula Jane’s, which itself is built to the sidewalk.

Henderson said she appreciates efforts to “close the gate” on future variances, but she remained concerned about the layout.

“I would rather see the project happen,” she said. “But I’m stubborn enough to cling to the hope that it could be redesigned.”

Grayson shook her head when TIF board member Bob Sheehy asked if she would consider sitting down with Henderson to find a compromise.

The TIF board recommended the project with a 5-0 vote.

In a tour of the property with the TIF board before the meeting, Grayson made the case for supporting her vision.

“If y’all want something for Elm that is unique, that draws people, that makes Elm special, this is perfect. If you don’t, and you want to wait, take a look at what we’re looking at,” she said, referring to the slow pace of revitalization on Elm Avenue. “It’s not working for us, y’all.”

In addition to building and running Lula Jane’s, Grayson has built and sold a Southern-style cottage on Dallas Street and is now building another.

“You may not know me that well, but for me it’s not about money,” Grayson said to board members. “My projects are never about money. My bottom line is, it’s OK not to make money; it’s not OK to lose money. It’s a fine line, but that’s where I sit on everything I do. Fortunately, they explode and go nuts. What we want to do is continue to stimulate community and economic development.”

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