DALLAS - An Austin developer will continue to receive tax subsidies for its shopping center after voters rejected Proposition 2 that would have curtailed the funding.

The proposition fell short of approval by a margin of 52% opposed to 48% in favor.

The shopping center, known as the Domain, received its first sales tax rebate shortly before the election Tuesday. A group calling itself "Stop Domain Subsidies" gathered enough signatures to get Proposition 2 on the ballot.

Opponents of the proposition, operating under the name "Keep Austin's Word," were led by Austin businessman Bobby Jenkins and former Austin mayor pro tem Betty Dunkerley.

Dunkerley, who retired from the City Council in June, said before the vote that Proposition 2 was unnecessary because the council had already banned retail incentives more than a year ago. The deal with the Domain developers, Endeavor Real Estate Group, had already been agreed upon, she said.

"Proposition 2 wouldn't change a single word of any current city policy regarding economic development or the use of incentives," Dunkerley said. "That means it's only about terminating agreements that were negotiated and executed in good faith many years ago. Doing that without any clear cause is fundamentally unfair."

Austin Mayor Will Wynn said the challenge to the existing city charter was costly and frustrating, but he said he did not regret the subsidies, which were granted only to a few projects, such as the Domain.

The city backed the Domain in an effort to retain sales tax revenue that has been slipping away to the booming suburb of Round Rock to the north.

Supporters of Proposition 2 also feared that the Domain development could threaten the success of the redevelopment of the former Robert Mueller Municipal Airport site in north Austin.

The airport was closed in 1999 with the opening of the new Bergstrom Airport in southeast Austin. In 2000, the city approved a master plan for the 711-acre site, featuring a mixed-use "urban village" that would be home to 10,000 residents and 10,000 jobs. The city hired Catellus Development Group in 2002 to oversee the project.

The redevelopment agreement, approved in late 2004, requires Catellus to pay for infrastructure such as roads and sewers, and then relies on a mixture of city property and sales tax revenue from Mueller itself to finance bonds. Proceeds of the bonds are used to reimburse Catellus.

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