[1. Call to Order]
[00:00:04]
>> HERE. THERE IS STEPHANIE, SHE'S UNLOCKING DOORS.
I THINK WE'RE ALL HERE AND ALL READY TO GO.
[2.A. Presentation and discussion of the operation, structure, laws and policies of Municipal Utility Districts (MUD).]
IF YOU GUYS DON'T MIND, WOULD ASK IF YOU WOULD JUST DO A BRIEF INTRODUCTION, COMPANY, HOW LONG YOU BEEN DOING THIS AND GO FROM THERE.OR IF FLOYD, IF YOU'D LIKE TO INTRODUCE, THAT'D BE GREAT.
>> YES, MAYOR. WE'RE PLEASED TO HAVE A OPPORTUNITY TODAY FOR THE MAYOR AND COUNCIL TO DISCUSS OPTIONS FOR INFRASTRUCTURE FUNDING.
WHAT WE'RE BRINGING TODAY IS OUR CONSULTANT ON POSSIBLE POLICY AND MOVING FORWARD WITH A MUNICIPAL UTILITY DISTRICT.
THE QUESTION IS, WHY MUNICIPAL UTILITY DISTRICT AND WHY NOW? HISTORICALLY, AMARILLO STRUGGLED WITH SUPPORT FOR INFRASTRUCTURE GROWTH, AND WE'VE LOOKED AT THIS FROM MANY ANGLES OVER MY CAREER HERE.
BUT THE CHALLENGE IS THAT THOSE INFRASTRUCTURE PROJECTS MUST COMPETE WITH THE LIMITED CITY FUNDING, WHETHER THAT'S GENERAL FUND, ENTERPRISE FUNDS OR OTHERS.
THERE ARE ALSO CHALLENGES RELATED TO LEGISLATIVE ISSUES, RELATED TO SUBDIVISION, ANNEXATION, AND THOSE BRINGS IT TO BE AN ISSUE THAT NEEDS TO BE LOOKED AT NOW.
BUT THE FUTURE OF AMARILLO'S GROWTH IS A COMPONENT OF WHAT WE'RE TALKING ABOUT.
WE'RE TALKING ABOUT POLICY DISCUSSIONS RELATED TO THE DEVELOPMENT POLICY MANUAL, RELATED TO HOW WE LOOK FORWARD TO THAT, AND OBVIOUSLY BEING AT THAT HIGH LEVEL OF DISCUSSION, IT NEEDS TO BE SOMETHING WITH COUNCIL'S UPDATE AND APPROVAL TO LOOK AT GOING FORWARD.
BUT WHAT WE'RE LOOKING FOR, IT WOULD BE AN OPPORTUNITY TO FIND A DEDICATED FUNDING SOURCE FOR DEVELOPMENT AND HOW THAT WOULD LOOK FORWARD IN THE FUTURE, SUCH THAT IT'S NOT COMPETING WITH OTHER NEEDS AND YOU ALL HAVE BEEN THROUGH THE BUDGET TO UNDERSTAND THE COMPETING NEEDS WITHIN THE EXISTING FUNDING, SO WE DON'T NEED TO GET INTO THAT.
BUT HOW DO WE MOVE DEVELOPMENT FORWARD CONSISTENTLY OVER TIME? WE'VE BEEN THROUGH MANY DISCUSSIONS.
SOME OF YOU'VE SERVED ON CITIZENS COMMITTEES AND SOME OF YOU ARE NEWER AT THIS.
AS WE LOOK AT THIS, WHY NOW? BECAUSE WE'VE HAD A DEVELOPMENT COMMUNITY BRING THIS TO US IN MULTIPLE TIMES ASKING THE QUESTION.
IS THIS AN OPTION THAT WE WOULD BE WILLING TO LOOK AT FOR CERTAIN DEVELOPMENTS AROUND THE CITY? IT'S RIPE FROM THAT PERSPECTIVE THAT OUR DEVELOPMENT COMMUNITY IS LOOKING AT THIS.
WHAT WE BROUGHT TO YOU TODAY IS OUR CONSULTANT LOOKING AT IT.
WE'RE PROUD OF STEVE ROBINSON AND ALIA VINCENT, I'LL LET THEM INTRODUCE THEMSELVES WITH THEIR QUALIFICATIONS BETTER.
BUT THAT'S WHERE WE'RE AT AND THAT'S THE INTRODUCTION THAT I HAVE FOR YOU TO START THIS MEETING.
STEVE, ALIA, YOU ALL TAKE IT FROM THERE?
>> CERTAINLY. MAYOR, COUNCIL, IT'S A PLEASURE TO BE HERE.
I'M A PARTNER AT ALAN BOONE HUMPHREYS ROBINSON.
BUT IN THIS INDUSTRY, I GUESS I'M IN MY 34TH YEAR OF DOING THIS AND REALLY OUR LINEAGE GOES BACK REALLY MORE THAN 60 YEARS IN THIS BUSINESS.
WE HAVE OFFICES IN HOUSTON, AUSTIN, AND DALLAS.
MY PARTNER, ALIA VINCENT, IS IN THE HOUSTON OFFICE.
TODAY, WE'RE ABOUT 48 LAWYERS, 165 TOTAL PERSONNEL, AND THIS IS EXCLUSIVELY WHAT WE DO.
WE WORK WITH CITIES, COUNTIES, AND DEVELOPERS ON THE USE OF SPECIAL DISTRICTS TO PROVIDE PUBLIC INFRASTRUCTURE FOR LAND DEVELOPMENT.
WE DO HAVE A VERY ACTIVE LEGISLATIVE PRACTICE IN THIS AREA.
MOST OF THE LAWS IN THIS AREA AND THE REGULATORY ENVIRONMENT ARE THINGS THAT WE HAVE WORKED ON FOR A VERY LONG TIME.
WE HAVE WORKED AND REALLY TODAY WORK THROUGHOUT THE STATE.
I WANT TO MAKE IT CLEAR, WE ARE HERE AS YOUR LAWYERS.
WE ARE HERE TO HAVE A FULL DISCUSSION ABOUT HOW THESE ARE USED, WHY THEY'RE USED, WHAT ARE YOUR DECISION POINTS, ETC.
IN ADDITION TO TODAY DOING A ONE-ON-ONE, SO WE'RE GRATEFUL FOR THE OPPORTUNITY TO BE HERE AND REPRESENT THE CITY AND HOPEFULLY TO TRY TO DEMYSTIFY WHAT THESE VEHICLES ARE.
ALIA, IF YOU WANT TO ADD ANYTHING ELSE.
>> WELL, I DON'T HAVE A WHOLE LOT TO ADD, BUT IT'S ALWAYS GREAT TO BE BACK IN WEST TEXAS, AND WE HAVE A PRESENTATION THAT WE'VE PREPARED IN ADVANCE.
WE'LL WALK OUR WAY THROUGH THAT, BUT WE WELCOME ANY QUESTIONS OR DISCUSSION THROUGHOUT.
[00:05:01]
THEN OF COURSE, WE'LL STICK AROUND FOR QUESTIONS AT THE END.WE'VE REALLY APPRECIATED THE TIME OF YOUR STAFF.
THE CITY STAFF HAS PUT A LOT OF TIME INTO MAKING SURE THAT WE HAVE THE INFORMATION WE NEED TO HELP PROVIDE YOU WITH GUIDANCE, AND WE'RE GLAD TO GET STARTED.
>> [NOISE] JUST TO MAP OUT A FEW GOALS HERE.
WE NEED TO GET A ONE-ON-ONE EDUCATION ON WHAT A MUD IS, MAYBE A COUPLE OF THE OTHER INSTRUMENTS THAT COULD BE AVAILABLE.
THEN WE NEED TO SEE BEFORE WE GO DOWN THIS ROAD, DOES THIS COUNCIL WANT TO DIRECT A POLICY CHANGE THAT WOULD ALLOW FOR THIS TYPE OF GROWTH? IS IT GOING TO BE HELPFUL KNOWING THAT WE ARE BEING, PETITIONED IS THE WRONG WORD, BUT WE'RE BEING PROPOSED BY A DEVELOPER OF HEY, WE WOULD LIKE TO DO THIS THE FACT OF IT IS THAT THE DEVELOPER CAN DO IT WITH OR WITHOUT US IN THE WAY IN WHICH THEY GROW, IS THIS A WAY THAT WE CAN GROW TOGETHER? WE IMPROVE ON CITY SERVICES, WE IMPROVE ON OUR TAX BASE, SO ON AND SO FORTH.
STEVE, I'VE GOT YOU, IS IT LEA OR ALIA?
>> ALIA. HOW DO YOU SPELL THAT?
> WE'LL GET YOU RIGHT HERE THEN.
LET ME ASK YOU GUYS IF YOU DON'T MIND, MY OVERALL GOAL HERE IN BEING IN A FEW CONVERSATIONS WITH YOU, ALSO BEING IN CONVERSATIONS WITH DEVELOPERS AND SEEING THE NEED AND I HAVE 25 YEARS OF DOING BUSINESS WITH MY CITY.
I UNDERSTAND HOW THE ANSWER CAN BE SOMETIMES OF, WE DON'T HAVE THE MONEY, SO THE ANSWER IS NO.
UNLESS YOU WANT US TO RAISE TAXES AND PEOPLE ARE GOING TO GIVE US MORE THAN WE CAN'T PAY FOR THAT, REGARDLESS OF THE ROI.
[NOISE] IN TRYING TO SOLVE THAT PROBLEM OF WHY ARE WE HERE, WE ARE TRYING TO SOLVE THE PROBLEM OF HOW DO WE GROW, ANNEX PEOPLE VOLUNTARILY, AND STILL TELL THEM, WE'RE NOT GOING TO PAY FOR ALL OF YOUR INFRASTRUCTURE ON THE FRONT END.
WE CANNOT GO PUT $30 MILLION OUT OF POCKET ON $100 MILLION DEVELOPMENT, WHERE THERE'S NOT ONE HOUSE THAT'S SOLD AND NOT ONE USER WHO NEEDS A WATER METER.
HOWEVER, THIS COULD PROVIDE A WAY THAT THAT $100 MILLION INVESTMENT COULD BE PAID WITH THE DEVELOPER, AND THE ANNEXATION COULD BE NEGOTIATED IN SO THAT THEY BECOME PART OF THE CITY AND THEY BECOME PART OF OUR TAX BASE AND USER FEES DO APPLY AND THAT THEY'RE REIMBURSED.
>> WE WILL GO THROUGH ALL OF THOSE ISSUES AND HOW WE'VE GOTTEN HERE AND WHY WE DO THESE, THE NUTS AND BOLTS AS WELL AS THE WHY ANSWERING AND THEN GET TO MORE OF THE POLICY CONSIDERATIONS FOR THE CITY ABOUT HOW TO APPROACH IF YOU ARE GOING TO APPROACH.
>> WITH THE WHY IS A LITTLE BIT OF THE HOW. HOW DO WE DO THIS? WELL, WE COULD CHOOSE TO GO AND NEGOTIATE WITH A DEVELOPER, AND WHATEVER WE AGREE TO WITH HIM OR THAT ENTITY IS YOUR NEW POLICY BECAUSE YOU'VE DONE IT, OR WE COULD CHOOSE TO ALLOW STAFF TO NEGOTIATE WITH THE DEVELOPER, WORK ON THAT WITH CONSULTANTS AND LEGAL TO LEGAL.
COUNCIL COULD WORK ON THEIR OWN POLICY INITIATIVES BASED ON WHAT WE THINK WOULD BE A GOOD FIT WHILE ALL THAT'S GOING ON.
WE'RE GOING TO LEARN AND THEN WE'RE GOING TO HAVE SOMETHING WHERE IT COULD BE A TAKE IT OR LEAVE IT.
IF YOU DON'T GET TO A NEGOTIATION WITH THAT DEVELOPER, WE DON'T WANT IT TO DIE.
WE DON'T WANT TO SAY, WELL, WE DON'T DO MUDS HERE.
WE WOULD LIKE TO HAVE SOMETHING WHERE EVEN IF THEY CHOOSE NOT TO DO BUSINESS WITH US AND BECOME PART OF THE CITY, CAN WE PUT FORWARD A POLICY INITIATIVE THAT ALLOWS FOR GROWTH AND THE NEXT DEVELOPER MAY SAY, THIS IS GREAT.
I'M ALL GOOD. THAT'S MY GOAL HERE TODAY IF THAT MAKES SENSE.
>> SUPER. WELL, LET'S GET GOING AND WE'LL TRY TO COVER ALL THINGS THAT YOU'RE DOING.
HIGH LEVEL, WHAT ARE WE TALKING ABOUT? A MUNICIPAL UTILITY DISTRICT AND WE'LL USE THE TERM MUD.
THERE ARE OTHER SPECIAL DISTRICTS THAT ARE USED AROUND THE STATE THAT ARE VERY SIMILAR.
YOU'LL HEAR THE TERM WATER CONTROL IMPROVEMENT DISTRICT OR FRESHWATER SUPPLY DISTRICTS.
THERE WAS A TIME WHEN THOSE HAD A LOT OF DISTINCTIONS.
THOSE HAVE GONE AWAY BY AND LARGE.
I MAY USE THE TERM SPECIAL DISTRICT OR I MAY USE THE TERM MUD, BUT WHAT I'M TALKING ABOUT IS A POLITICAL SUBDIVISION WITH THE ABILITY TO LEVY A PROPERTY TAX TO FINANCE A LIMITED NUMBER OF PUBLIC FACILITIES,
[00:10:01]
WATER, SEWER, DRAINAGE, AND ROADS.THERE ARE CERTAIN COUNTIES AROUND THE STATE WHERE THOSE DISTRICTS CAN FINANCE PARKS AND RECREATIONAL FACILITIES.
YOU ARE NOT IN ONE OF THOSE COUNTIES, AND SO THEY DO HAVE THE ABILITY TO OPERATE THOSE FACILITIES, BUT THEY DON'T HAVE THE ABILITY TO FINANCE THEM.
THEY ARE A LIMITED DEFINED BOUNDARIES, GENERALLY DRIVEN BY A LAND DEVELOPER'S REQUEST TO CREATE A DISTRICT OVER A DEFINED AREA.
THEY ARE A WAY TO PROVIDE MUNICIPAL INFRASTRUCTURE AND SERVICES WHERE THOSE DON'T CURRENTLY EXIST, AND THE CITY EITHER DOES NOT WANT TO TAKE THE DEVELOPMENT RISK OF EXTENDING WITHOUT ANY HOUSES THERE YET, OR IS UNABLE TO AFFORD TO PROVIDE THOSE AND EXTEND THOSE FACILITIES.
I WANT TO TALK A LITTLE BIT ABOUT JUST THE GENERAL BACKGROUND.
THIS CONCEPT OF UTILIZING A PROPERTY TAX TO FINANCE PUBLIC INFRASTRUCTURE ACTUALLY GOES BACK TO THE RIO GRANDE VALLEY AND THE IRRIGATION DISTRICTS OF THE EARLY 1900S, WHERE ALL OF THE FARMERS GOT TOGETHER AND SAID, HEY, WE'RE GOING TO CREATE AN IRRIGATION DISTRICT, IT'S GOING TO HAVE 10,000 ACRES.
WE NEED TO DRAW WATER OUT OF THE RIO GRANDE, WE'RE GOING TO BUILD A CANAL SYSTEM, ETC, AND WE'RE GOING TO LEVY A TAX OVER ALL OF THIS AREA WHERE ALL THE FARMS ARE TO HELP EACH FARMER PAY THEIR PRO RATA SHARE.
IN THE EARLY 1960S, THAT CONCEPT WAS PICKED UP PRIMARILY IN HOUSTON WHERE GROWTH BEGAN TO OCCUR ON AN EXPONENTIAL BASIS BECAUSE OF THE ENERGY BOOM, AND THE CITY OF HOUSTON HAD NO CAPABILITY OF EXTENDING THE UTILITIES AND KEEPING UP WITH DEMAND.
THERE WAS AN AGREED UPON PIECE BETWEEN THE CITY OF HOUSTON AND THE DEVELOPERS.
IF YOU WILL BUILD TO OUR STANDARDS, IF YOU WILL ALLOW US TO REVIEW YOUR PLANS AND SPECIFICATIONS FOR WATER, SEWER, DRAINAGE, AND ROADS, WE WILL ALLOW YOU TO CREATE A MUNICIPAL UTILITY DISTRICT AND USE PRIVATE CAPITAL TO BUILD THE PUBLIC INFRASTRUCTURE, AND IF YOU PERFORM, YOU CAN UTILIZE THE DISTRICT AS A MEANS TO GET REIMBURSED.
BUT THE DEVELOPER IS GOING TO TAKE DEVELOPMENT RISK, YOU WILL KEEP YOUR FINGER ON THE TRIGGER FOR THE TIMING OF WHEN YOU DEPLOY CAPITAL TO CREATE ADDITIONAL PUBLIC INFRASTRUCTURE.
THE TIMING OF GROWTH DRIVES THE NEED FOR INFRASTRUCTURE, AND INSTEAD OF A CITY BUILDING A BIG WATER LINE OUT AND HOPING THE DEVELOPERS ARE DEPLOYING THEIR CAPITAL TO BUILD THE STREETS IN THE INTERNAL INFRASTRUCTURE, WE'RE GOING TO SAY, NO, YOU MAKE THAT DECISION.
YOU TAKE THE RISK, AND THE DEVELOPER SHOULD TAKE THAT DEVELOPMENT RISK.
IT IS THE WAY IN WHICH HOUSTON WAS ABLE TO VERY RAPIDLY GROW TO MEET.
IF YOU THINK ABOUT HOUSTON TODAY, A CITY OF ABOUT 2.2 MILLION AND AN 8 MILLION MSA, WELL, GUESS WHERE ALL OF THOSE OTHER OUTSIDE OF THE 2.2, THE VAST MAJORITY WERE IN THESE DISTRICTS THAT WERE ABLE TO PROVIDE THAT PUBLIC INFRASTRUCTURE.
BUT THAT THEN BEGAN SPREADING THROUGHOUT THE STATE INITIALLY TO CENTRAL TEXAS, THEN TO SAN ANTONIO, AND NOW INTO THE DALLAS FORT WORTH AREA.
WHY WE DO THIS, REALLY HAS TWO COMPONENTS.
ONE IS, WHO SHOULD TAKE DEVELOPMENT RISK? MEANING, SHOULD THAT BE THE MUNICIPALITY THAT IS GOING TO EXTEND OUT INTO UNDEVELOPED AREAS, HOPING THAT THE DEVELOPER WILL SHOW UP AND CREATE THE TAXABLE VALUE, OR SHOULD WE ALLOW A MECHANISM THAT ALLOWS THE DEVELOPMENT COMMUNITY TO TAKE THAT DEVELOPMENT RISK ON THAT GROWTH.
BUT THE SECOND PIECE AND MAYBE THE LESS OBVIOUS PIECE IS THAT THIS IS A MUCH MORE EFFICIENT WAY TO PROVIDE AFFORDABLE OR ATTAINABLE MORTGAGES.
[00:15:01]
IF YOU THINK ABOUT A TRADITIONAL LAND DEVELOPER WHO BUILDS WITHIN A CITY, YOU HAVE ONE POINT IN WHICH YOU HAVE A REVENUE EVENT.THAT IS, WHEN YOU SELL A LOT, YOU GET YOUR LAND BACK, YOUR DEVELOPMENT COST, YOUR PROFIT, BUT ALSO ALL OF YOUR PUBLIC INFRASTRUCTURE.
YOU HAVE TO GROSS UP THAT LOT PRICE AND EMBED INTO THAT LOT PRICE.
THAT ENDS UP BEING IN THE MORTGAGE.
WHEN WE HAVE A DISTRICT, WE HAVE TWO REVENUE EVENTS BECAUSE THAT FIRST REVENUE EVENT IS WHEN YOU SELL A LOT.
THE SECOND REVENUE EVENT IS WHEN YOU GET REIMBURSED FOR ALL OF THE PUBLIC INFRASTRUCTURE THAT WAS NOT INCLUDED IN THE LOT PRICE.
BECAUSE OF THAT, YOU'RE ABLE THE GENERAL METRIC RIGHT NOW MAY NOT BE IN THIS MARKET, BUT IN NORTH TEXAS, 50 FOOT LOT, ABOUT $1,500 PER FRONT FOOT IN PUBLIC INFRASTRUCTURE OR $75,000 PER LOT.
THAT COST CAN EITHER GO INTO A MORTGAGE OR IT CAN BE PAID BY THE MUNICIPAL UTILITY DISTRICTS TAX.
WHAT HAPPENS IS IF YOU ADD FAR FEWER PEOPLE CAN ATTAIN THAT MORTGAGE WHEN YOU ADD THOSE COSTS, PARTICULARLY WHEN YOU LOOK AT THE LOT PRICES, NATIONWIDE ARE TYPICALLY BETWEEN 18 AND 22% OF THE ULTIMATE HOME PRICE.
THERE IS A WAY TO CREATE MORE ATTAINABLE HOUSING, AND WE'LL TALK ABOUT THAT LATER TODAY IN AN EXAMPLE.
>> STEVE. DO YOU MIND TO GO AHEAD AND JUST HIT A COUPLE OF THE DEFINITIONS SO THAT WE'RE FAMILIAR AS WE TALK YOU THROUGH IT? FRONTAGE FEES, DIFFERENT DEVELOPER FEES, ROUGH PROPORTIONALITY.
DO YOU MIND HITTING JUST A FEW OF THOSE KEY ITEMS THAT WE USED TO LOOK TO? WE USED TO SAY TO OUR DEVELOPERS, ESSENTIALLY, LIKE YOU ASSESS A FEE, AND THAT WILL COME TO US OR THEY HAD A FEW OTHER WAYS OF DOING THAT.
IF YOU'LL BRING US UP TO SPEED ON A FEW DEFINITIONS, IF YOU WOULD.
>> YEAH. WHAT WE'RE TALKING ABOUT, MUNICIPAL UTILITY DISTRICT IS THAT DISTRICT, THEY'RE GOING TO LEVY AN AD VALOREM OR PROPERTY TAX WITH TWO COMPONENTS.
>> YOUR OPTIONS FOR PROVIDING THE PUBLIC INFRASTRUCTURE OR THE CITY EXTENDS ALL OF THOSE HOPING THAT IT COMES BACK, YOU IMPOSE AN IMPACT FEE IN THAT AREA TO RECOUP SOME OR ALL OF THOSE COSTS, THOSE THAT WHEN I TALKED ABOUT A FRONTAGE FOOT, I MEANT IF YOU HAD A 50-FOOT WIDE LOT PER FRONTAGE FOOT, OUR AVERAGE COST NOW IN THE NORTH TEXAS MARKET IS SOMEWHERE BETWEEN 1500 AND $2,000 PER FRONTAGE FOOT SO BETWEEN 75,000 AND $100,000 OF PUBLIC INFRASTRUCTURE, WATER, SEWER, DRAINAGE, AND ROADS TO DEVELOP THAT LOT.
THOSE ARE THE METRICS THAT WE'RE TALKING ABOUT.
>> CAN I WEIGH IN JUST FOR CLARITY, MAYOR? WE DON'T CURRENTLY IN THIS MANUAL HAVE A REIMBURSEMENT POLICY OTHER THAN FRONT FOOT FOR WATER AND SEWER THAT IS MINIMAL.
>> WHEN HE'S TALKING ABOUT FRONTAGE FEES, JUST FOR Y'ALL'S CLARITY IS WE DON'T HAVE THAT.
THERE ARE MECHANISMS OTHER THAN A MUD WHERE YOU CAN GO IN AND HAVE THIS REIMBURSEMENT POLICY.
WE DON'T HAVE AN ORDINANCE FOR AN IMPACT FEE INTERNAL, AND SO SOME OF THE THINGS THAT YOU'RE TALKING ABOUT JUST FOR CLARITY IS WHERE WE'RE AT VERSUS WHAT A MUD CAN OPTION.
>> FRONTAGE FEES NOT BEING APPLIED TO RESIDENTIAL SO TO MAKE THAT DELINEATION THERE ONLY ON A COMMERCIAL PROJECT WOULD YOU HAVE A FRONTAGE FEE INCURRED COST.
>> YOU DON'T HAVE A REIMBURSEMENT COMPONENT FOR STREETS AND DRAINAGE AT ALL.
ON THE COMMERCIAL, YOU DO, IF YOU HAD A MAINLINE EXTENSION.
I THINK PROBABLY DEBATED FOR A WHILE AND DEFINITELY, I'D SAY THE BUILDING COMMUNITY DIDN'T WANT THOSE.
>> OUTLINING A LITTLE BIT OF THE REASON WHY A MUD MAY BE A GOOD IDEA.
>> IF WE CAN, WE'LL KEEP PLOWING THROUGH SOME OF THIS BECAUSE I
[00:20:03]
THINK WE'LL ANSWER ALL OF THOSE QUESTIONS.JUST A LITTLE BIT OVERVIEW, THIS IS NOT A SMALL MARKET.
THERE ARE OVER 2,151 ACTIVE SPECIAL DISTRICTS, MILLIONS OF PEOPLE IN TEXAS LIVE IN THESE.
LAST YEAR, THE MUNICIPAL UTILITY DISTRICT BOND MARKET WAS ABOUT $3.1 BILLION.
THAT'S THE AMOUNT OF PUBLIC INFRASTRUCTURE THEY FINANCED AS AN INDUSTRY IN TEXAS LAST YEAR.
THE MAJORITY OF THE LAND IS OUTSIDE CITY LIMITS, BUT THERE ARE DISTRICTS THAT ARE IN CITY AROUND THE STATE ALSO AND THESE ARE VERY OFTEN USED FOR OUR LARGE-SCALE DEVELOPMENT, USUALLY NOT USED BECAUSE OF TRANSACTION COSTS, NOT USED ON A 50-ACRE OR A 30-ACRE INFILL.
THESE ARE TYPICALLY USED FOR YOUR TRACKS OF 150 ACRES OR MORE YOUR LARGE-SCALE MORE PLANNED COMMUNITIES.
WHAT DO THEY DO? THEY CONSTRUCT AND OPERATE WATER SEWER AND DRAINAGE, THEY CONSTRUCT PUBLIC ROADS, AND ALL OF THOSE HAVE TO BE COMPETITIVELY BID, PUBLICLY BID, THEY CONSTRUCT AND OPERATE PARKS AND RECREATIONAL FACILITIES.
HERE YOU COULD OPERATE THEM, YOU CANNOT FINANCE THEM.
WE FINANCE THROUGH A REIMBURSEMENT BASIS, AND THIS IS A REALLY CRITICAL PART OF THE TEXAS SYSTEM AND IT'S DIFFERENT THAN THE SYSTEM AROUND THE COUNTRY FOR OTHER SPECIAL DISTRICTS.
THE TEXAS SYSTEM SINCE 1989, HAS BEEN SOLELY A REIMBURSEMENT-BASED SYSTEM.
THE DEVELOPER HAS TO SPEND ALL THE MONEY TO BUILD ALL THE PUBLIC INFRASTRUCTURE UP FRONT, TO MEET THE CITY'S STANDARDS, SUBJECT TO CITY REVIEW OF ALL THE PLANS, ETC.
THE DEVELOPER CANNOT GET REIMBURSED FOR THOSE FACILITIES UNTIL THEY MEET CERTAIN FINANCIAL CRITERIA REGULATED BY THE TCEQ.
THE IMPORTANT PART OF THAT ARE TWOFOLD, ONE, THE DEVELOPER TAKES ALL DEVELOPMENT RISK.
THE CITY DOES NOT TAKE DEVELOPMENT RISK.
SECONDLY, THE REIMBURSEMENT IS BY THE MUD WITH MUD-SUPPORTED TAXES, NOT CITY REVENUES OR CITY-SUPPORTED TAXES, AND THREE, BECAUSE IT'S A REIMBURSEMENT BASIS, AND YOU HAVE TO BE FEASIBLE PURSUANT TO THE TCEQ RULES, TEXAS COMMISSIONER ENVIRONMENTAL QUALITY RULES TO BE ELIGIBLE TO BE REIMBURSED, THE DISTRICTS HAVE TO BE ABLE TO SHOW THAT THEY CAN PAY ALL OF THEIR DEBT FOR THE LIFE OF THE BONDS WITH THE CURRENT VALUE ON THE GROUND AT A REASONABLE TAX RATE.
THE RESULT IS SINCE 1989, WE HAVE HAD A 0% DEFAULT RATE, NOT A SINGLE.
IN ALL 2,100 PLUS DISTRICTS, SINCE 1989, THERE HAS NEVER BEEN A DEFAULT ON A SPECIAL DISTRICT BOND BECAUSE WE ARE VERY HIGHLY REGULATED TO MAKE SURE THAT WE DON'T ISSUE DEBT UPFRONT.
WE CAN PROVIDE SUPPLEMENTAL SERVICES.
THESE ARE TYPICALLY IN THE ETJ OR IN THE UNINCORPORATED AREA BY CONTRACT FOR FIREFIGHTING, TRASH, POLICE, THAT IT WILL BE ONE OF THE DECISIONS THAT WE WILL WANT TO TALK ABOUT IS WHETHER OR NOT IN THE ETJ, YOU WANT THEM TO PAY FOR THOSE SERVICES.
THEY ALSO HAVE THE AUTHORITY TO IMPLEMENT THOSE BY ENTERING INTO CONTRACTS, TAXING, THEY HAVE LIMITED EMINENT DOMAIN RIGHTS FOR OFF-SITES THAT ARE NEEDED, THEY CAN OPERATE, THEY CAN CHARGE FEES.
WHY DO WE DO THIS? FIRST AND FOREMOST, THIS IS A MEANS FOR NEW GROWTH TO PAY FOR ITSELF, MEANING WE CAN ISOLATE THE COST OF THE PUBLIC INFRASTRUCTURE AND THE SERVICES THAT NEED TO BE PROVIDED TO PROMOTE LAND DEVELOPMENT THAT IS ADJACENT TO THE CITY, AND YOU CAN SAY YOUR MUD WILL PAY FOR ALL THE WATER, SEWER, DRAINAGE, ROADS, YOU WILL CHARGE FEES.
WE CAN PROVIDE FIREFIGHTING AND POLICE SERVICES ON A FEE-FOR-SERVICES BASIS, AND WE'RE GOING TO ISOLATE THOSE AND THEY ARE GOING TO BE PAID FOR IN THE MUD.
[00:25:04]
YOU CAN, ON A SELF-SUPPORTING BASIS, OBLIGATE THAT MUD BY CONTRACT TO PROVIDE THOSE FACILITIES AND SERVICES AND HAVE THAT DISTRICT, THE DEVELOPER IS GOING TO PAY FOR THEM UPFRONT, THEY'RE GOING TO GET REIMBURSED BY THE DISTRICT, BUT THAT NEW GROWTH IS NOT GOING TO BE SUBSIDIZED BY EXISTING TAXPAYERS.ROOFTOPS IN GENERAL, UNLESS YOU HAVE VERY EXPENSIVE HOUSES ARE ALMOST IMPOSSIBLE TO SUPPORT FULL MUNICIPAL SERVICES.
YOU'RE GOING TO GET THE SALES TAX FROM GROWTH IN YOUR ETJ, NO MATTER WHAT, THEY'RE GOING TO STILL SHOP IN YOUR CITY.
THE PROPERTY TAX COMPONENT, UNLESS YOU'RE BUILDING IN MOST CITIES AROUND TEXAS, 800, $900 MILLION HOUSES ARE NOT GOING TO BE SUPPORTED.
YOU'RE NOT GOING TO SUPPORT THOSE FULL MUNICIPAL SERVICES WITH PURE ROOFTOPS.
THIS AS A WAY TO THINK ABOUT IT, IS REALLY A LONG-TERM GROWTH MECHANISM, MEANING WE WILL ALLOW THE PROJECT TO DEVELOP, SUBJECT TO OUR RULES.
WE WILL ISOLATE ALL THOSE COSTS, MAKE SURE THEY ARE SELF-SUPPORTING, AND THEN OVER TIME AFTER IT HAS DEVELOPED, WE WILL ANNEX IT TO THE CITY AFTER IT HAS PAID FOR ITS NEW GROWTH.
WE ARE NOT GOING TO ASK OUR EXISTING TAXPAYERS TO TAKE DEVELOPMENT RISK OR TO SUBSIDIZE BECAUSE THE ROOFTOPS SIMPLY CAN'T PAY FOR THOSE SERVICES.
>> STEVE, CAN I ASK A QUESTION REAL QUICK?
>> THERE IS AN ANNEXATION AGREEMENT TIED TO THIS THAT WHEN IT BECOMES SELF-SUSTAINING WE'VE ALREADY AGREED THAT WE WILL TAKE IT, CORRECT?
>> THAT'S CORRECT. YOU WOULD TYPICALLY AGREE THAT YOU HAVE THE RIGHT.
>> WE DON'T HAVE TO EXERCISE IT, BUT IT IS THERE IF WE WANT IT IF IT'S SELF-SUSTAINING.
>> JUST A QUICK ON THAT, THE TEXAS LEGISLATURE REMOVED THE UNILATERAL RIGHT OF ANNEXATION FOR THE CITY IN 2019, BUT THEY ALSO INCLUDED THAT BILL, WHAT ARE CALLED STRATEGIC PARTNERSHIP AGREEMENTS.
STRATEGIC PARTNERSHIP AGREEMENTS ARE AN AGREEMENT BETWEEN THE CITY AND A MUD, WHICH WE WOULD CONTEMPLATE AND HAVE CONTEMPLATED HERE THAT PROVIDE THE TERMS AND CONDITIONS FOR EVENTUAL ANNEXATION, OF THE AREA WHEN YOU MEET THE CONDITIONS IN THAT AGREEMENT.
THE IMPORTANT PART OF THAT IS IN THE ABSENCE OF A STRATEGIC PARTNERSHIP AGREEMENT, THE CITY WOULD BE UNABLE TO ANNEX AN AREA IN YOUR ETJ WITHOUT HOLDING AN ELECTION IN THAT AREA.
WITH A STRATEGIC PARTNERSHIP AGREEMENT, YOU ARE FROM DAY 1 TELLING EVERY RESIDENT YOU ARE SUBJECT TO A STRATEGIC PARTNERSHIP AGREEMENT, YOU WILL BE ANNEXED OR AT LEAST THE CITY HAS THE RIGHT TO ANNEX, AND IN THE FUTURE, AS THE MUD PAYS DOWN ITS DEBT, AND IT'S FINANCIALLY VIABLE FOR THE CITY TO ANNEX, WE HAVE THE RIGHT UNDER THE TERMS AND CONDITIONS OF THE STRATEGIC PARTNERSHIP AGREEMENT TO ANNEX YOU.
THE OTHER RELATED BENEFIT IS A STRATEGIC PARTNERSHIP AGREEMENT GIVES YOU THE ABILITY TO DO A LIMITED-PURPOSE ANNEXATION OF ANY COMMERCIAL PROPERTY.
IF THEY DID SOME NEIGHBORHOOD COMMERCIAL IN A MUD, A GROCERY STORE, DRY CLEANERS, ETC, IF YOU LIMITED PURPOSE ANNEX THOSE AREAS, YOU CAN LEVY YOUR SALES TAX, EVEN THOUGH IT'S IN YOUR ETJ IN THE FUTURE, AND THAT'S ALL PURSUANT TO THE STRATEGIC PARTNERSHIP AGREEMENT.
>> YOU TALKED ABOUT SALES TAX, HOW DOES THAT PLAN AFFECT WHENEVER YOU SAY THERE'S A CAD IN PLACE WITH THE COUNTIES ALREADY THAT ARE MAXIMIZING THAT FULL 2%.
>> THE REAL QUESTION IS, SALES TAXES ARE FIRST COME FIRST SERVE, MEANING WHOEVER'S THERE FIRST GETS THAT SALES TAXES AND SO WHEN YOU ANNEX, THE REAL QUESTION IS, WHAT'S AVAILABLE? YOUR ONE PENNY OF SALES TAX IS WHAT IS TYPICALLY AVAILABLE.
IF YOU HAVE A COUNTY ASSISTANCE DISTRICT THAT HAS LEVIED A TWO-PENNY TAX, THEY ARE THE FIRST ONES THERE, AND THAT TWO PENNY IN THE ABSENCE OF AN AGREEMENT WITH THE CAD WOULD REMAIN IN PLACE.
>> STEVE, I WOULD JUST ADD SAME THING WITH EMERGENCY SERVICES DISTRICT.
IF YOU HAVE ESDS THAT HAVE ALREADY GONE IN AND TAKEN THE SALES TAX THAT'S AVAILABLE, THEN YOU DON'T HAVE ANY FURTHER ABILITY.
[00:30:03]
WE REALLY ARE CAPPED OUT AT THAT TWO CENTS AND IF SOMEONE'S ALREADY SHOWN UP AND TAKEN IT, THEN THERE ISN'T THE POSSIBILITY OF DOING THE LIMITED PURPOSE AND IMPOSING YOUR SALES TAX BUT THAT'S PART OF THE EVALUATION.BUT THE STRATEGIC PARTNERSHIP AGREEMENT, SALES TAX IS ONE COMPONENT OF HOW IT CAN BE VALUABLE BUT REALLY FOR A CITY IN TODAY'S LEGISLATIVE CLIMATE, THE PRIMARY VALUE IS THE ABILITY TO ANNEX THAT PROPERTY AT YOUR OPTION, WHICH OTHERWISE DOES NOT EXIST.
>> I'LL BE MORE DIRECT, THE AREAS IN THE ETJS THAT ARE DEVELOPED WITHOUT A STRATEGIC PARTNERSHIP WE HAVE NEVER, SINCE THE PASSAGE IN 2019, HAD AN ELECTION PASSED IN AN ETJ TO ANNEX AND WE DON'T EXPECT THAT THOSE ELECTIONS WILL PASS AND SO IT REALLY IS THE PATH FOR ETJ GROWTH THAT IS GUARANTEED THAT YOU HAVE THE RIGHT TO ANNEX.
>> TO GO A LITTLE DEEPER ON WHAT HE'S TALKING ABOUT, YOU WOULD NEGOTIATE UPFRONT A FEE FOR SERVICE FOR POLICE AND FIRE IN THOSE AREAS?
>> CORRECT. OUR TYPICAL AGREEMENTS, YOU WOULD HAVE A DEVELOPMENT AGREEMENT THAT RELATES TO WHAT YOU'RE GOING TO BUILD, A STRATEGIC PARTNERSHIP AGREEMENT THAT PROVIDES FOR THE ANNEXATION, AN AGREEMENT RELATED TO UTILITIES TO PROVIDE WHAT COST ARE GOING TO HAVE TO BE PAID FOR AND HOW SERVICE IS GOING TO BE PROVIDED TO THEM, WHOLESALE, RETAIL, ETC AND THEN A SERVICES AGREEMENT.
THOSE SERVICES THAT THE CITY DECIDES THEY WANT TO PROVIDE IN THE ETJ, CAN BE PROVIDED TO THEM ON A FEE-FOR-SERVICES BASIS.
USUALLY, YOU WOULD DO A COST-FOR-SERVICE ANALYSIS.
WHAT DOES IT COST US TO PROVIDE FIRE PER HOUSE, A MONTH? WE'RE GOING TO CHARGE YOU 2,150 PER MONTH, IT'S GOING TO BE PUT ONTO YOUR WATER BILL, AND YOU'RE GOING TO COLLECT THAT FOR FIRE.
I'M JUST THROWING OUT NUMBERS OBVIOUSLY.
WHAT DOES IT COST TO PROVIDE POLICE, AND WE'RE WILLING TO PROVIDE THOSE.
THERE ARE THE ABILITY TO NEGOTIATE FUTURE EXPANSION OF PHYSICAL FACILITIES, ALSO LIKE NEW FIRE STATION SITES, NEW FIRE FACILITIES, AND THE DISTRICTS DO HAVE THE ABILITY WITH A FIRE PLAN TO ACTUALLY FINANCE AND PAY FOR THOSE.
>> DO YOU HAVE EXAMPLES AROUND THE STATE WHERE LET'S SAY YOU HAD A TAXING DISTRICT THAT ALREADY HAD THE SALES TAX? HOW DOES THAT FUNCTION LOGISTICALLY IF YOU HAVE A COUNTY THAT SAID, WELL, WE'RE NOT INTERESTED IN A SHARED COST?
>> DO YOU EXCLUDE SERVICES AND ANNEX THOSE? DO YOU REQUIRED TO PROVIDE SERVICE UPON ANNEXATION? HOW DOES THAT WORK?
>> UPON FULL PURPOSE ANNEXATION, THE CITY HAS THE DUTY TO PROVIDE FULL MUNICIPAL SERVICES AT THE SAME LEVEL THAT THEY PROVIDE AROUND THE CITY.
CITIES WHO JUST SAY, Y'ALL JUST DEAL WITH THE COUNTY OR AN ESD, DO YOUR OWN TRASH.
WE DON'T WANT ANYTHING TO DO WITH IT, WE WANT THAT AREA IN THE ESD TO FEEL VERY MUCH LIKE IT'S STILL PART OF THE CITY OR IN THE MUD.
WE WANT CITY FIRE, CITY POLICE, CITY TRASH, FROM DAY 1, YOU'RE JUST GOING TO PAY FOR IT, AND WE'RE NOT ASKING OUR RESIDENT TAXPAYERS, SINCE THEY'RE NOT PAYING YOUR PROPERTY TAX, OUR RESIDENT TAXPAYERS TO PAY FOR THAT.
>> DESCRIBE STEVE, IF YOU WOULD, THE INTERIM.
BECAUSE LET'S TAKE A 3,000 HOME DEVELOPMENT.
YOU'RE GOING TO TURN OUT LET'S SAY FOUR OR 500 HOUSES AT MOST PER YEAR.
FIVE, SIX YEARS OF GROWTH, ARE THESE MUD HOMES UNSERVED JUST LIKE ANYTHING IN THE COUNTY OR I SHOULDN'T SAY UNSERVED? ARE THEY SERVED BY COUNTY SERVICES UNTIL THE ANNEXATION UPON COMPLETION? IS THAT HOW THAT WORKS?
>> IT COULD MORE OFTEN THAN NOT, WHERE WE HAVE VERY CAPABLE CITY MUNICIPAL SERVICES.
THERE IS A DESIRE AS LONG AS YOU'RE NOT ASKING YOUR EXISTING TAXPAYERS TO SUBSIDIZE, AND THEY WILL PAY, THAT THE CITY PROVIDES ON A FEE FOR SERVICES BASIS.
YOU CAN SAY, WE'RE FINE WITH THE COUNTY PROVIDING THE SHERIFF, PROVIDING AND WE DON'T WANT TO PROVIDE POLICE, BUT WE WANT TO PROVIDE FIRE.
[00:35:01]
THIS IS A MENU OPTION FOR YOU TO NEGOTIATE.THEY GO TO CHOOSE WHAT THEY WANT.
ARE THE BUILDERS AND DEVELOPERS IN THE DISTRICT SUBJECT TO THE MUNICIPAL BUILDING CODES AND ORDINANCES AS THEY DEVELOP?
THAT'S PART OF, THEY ARE NOT IN THE CITY, YOUR ORDINANCES DON'T APPLY BY A MATTER OF LAW.
WHAT REALLY HAPPENS IS WE NEGOTIATE A DEVELOPMENT AGREEMENT AND CONTRACTUALLY WE AGREE ON, CODES THEY HAVE TO APPLY, WHAT THEY'RE GOING TO HAVE TO COMPLY WITH BY CONTRACT.
PLATTING AUTOMATICALLY APPLIES BY LAW, REVIEW OF ALL THE INFRASTRUCTURE PLANS, ALL APPLIES BY LAW.
THE REAL QUESTION IS LAND USE, ALL YOUR DESIGN STANDARDS, ALL OF THOSE THINGS THAT ARE ONLY APPLY BECAUSE YOU'RE IN A MUNICIPALITY.
BY ORDINANCE, WHICH OF THOSE DO YOU WANT TO APPLY HERE? IT COULD BE ALL OF THEM.
IT COULD BE CERTAIN NEGOTIATED ALMOST LIKE A PUD ORDINANCE.
THAT'S PART OF THAT DEVELOPMENT AGREEMENT PROCESS BECAUSE THEY ARE IN YOUR ETJ, THE ORDINANCE DOESN'T APPLY, BUT BY CONTRACT, WE'RE GOING TO AGREE ON WHAT THE RULES OF THE GAME ARE.
>> WE'LL GET YOU BACK ON TRACK HERE ON THE PRESENTATION.
>> THESE ARE NOT TYPICALLY A DESIRE TO HAVE A ONE, TWO ACRE TRACK WITH A BAR DITCH, NO CURB AND GUTTER AND NO YARDS, NO FENCE.
THESE ARE VERY TYPICAL IN TOWN RESIDENTIAL DEVELOPMENTS.
THEY'RE GOING TO HAVE CURB AND GUTTER, THEY'RE GOING TO HAVE SMALLER STREETS.
THEY'RE GOING TO HAVE SMALLER LOTS.
DENSITY IS WHAT THE DEVELOPERS GOING AFTER.
I JUST WANT COUNSEL TO KEEP IN MIND.
WE'RE NOT TRYING TO FIGURE OUT HOW TO ANNEX IN, 2-5 ACRE LOTS INSIDE OF THE CITY AND THEY DON'T FOLLOW THE SAME CODE STANDARDS, EVEN FLOOD STUDIES.
DRAINAGE, ALL OF THAT STUFF COMES INTO PLAY.
THIS IS A DESIRE TO BE ABLE TO WORK WITH A DEVELOPER ON A VERY IN-TOWN RESIDENTIAL STYLE, MORE DENSE DEVELOPMENT.
>> OBVIOUSLY HIGHLY AMENITIZED AS PART OF GETTING AGREEMENT ON, WHAT TYPE OF AMENITIES YOU'RE GOING TO HAVE.
THESE DISTRICTS GUARANTEE THAT YOU WILL HAVE HIGH QUALITY INFRASTRUCTURE, THEY MUST MEET ALL OF YOUR STANDARDS AND BE REVIEWED BY THE CITY.
WE CAN'T FINANCE ANYTHING THAT CITY DIDN'T REVIEW AND APPROVE BEFORE WE WENT AND BUILT IT IN A DISTRICT.
THEY'RE SUBJECT TO TCEQ RULES ON INFRASTRUCTURE QUALITY.
YOU WILL INITIALLY HAVE A BOARD THAT'S APPOINTED EITHER BY THE TCEQ OR THE LEGISLATURE BUT EVENTUALLY WILL BE ELECTED FROM RESIDENTS WITHIN THAT AREA.
IT DOES ALLOW US TO ACCESS TAX EXEMPT FINANCING, WHICH IS PART OF THE EFFICIENCY HERE, AND WHY WE'RE ABLE TO DELIVER THAT INFRASTRUCTURE LESS EXPENSIVELY THAN BUILDING IT INTO A MORTGAGE.
IT DOES ALLOW US TO PRODUCE MORE ATTAINABLE HOUSING BY PULLING OUT FROM THAT MORTGAGE THOSE INFRASTRUCTURE COSTS.
>> STEVE, CAN YOU TOUCH ON, WHAT IS THE TCEQ'S ROLE IN ALL THIS? YOU KEEP MENTIONING TCEQ. WHY ARE THEY INVOLVED?
>> GREAT. IT'S LATE, BUT WE'LL HIT ON IT QUICKLY.
THE TCEQ IS THE REGULATORY ENTITY THAT BOTH CREATES THE DISTRICTS, BUT ALSO HAS REGULATORY CONTROL.
THEY HAVE A SET OF RULES THAT LARGELY HAVE BEEN IN PLACE SINCE 1989, UNCHANGED THAT GO INTO ALL OF THE ISSUES OF THE TERMS AND CONDITIONS UPON WHICH THE DEVELOPER HAS TO COMPLY WITH, IN ORDER TO ISSUE BONDS.
THE TCEQ CREATES THE VAST MAJORITY OF THE DISTRICTS THROUGH AN APPLICATION PROCESS.
THEY HAVE A REVIEW PROCESS FOR ANY BONDS THAT ARE ISSUED.
WE CANNOT SELL BONDS UNLESS WE SUBMIT AN APPLICATION TO THEM AND SHOW THAT WE HAVE MET ALL THEIR RULES.
THE DISTRICT HAS MET ALL THEIR RULES, THAT THE FINANCING IS FINANCIALLY VIABLE.
THEY ARE THE SUPERVISORY AGENCY.
[00:40:02]
REALLY WHAT HAS BEEN TRADED HERE IS A VERY HIGHLY REGULATED ENVIRONMENT FOR CREATING A LOT OF CERTAINTY THAT WE'RE NOT GOING TO HAVE DEFAULTS, ET CETERA IN THIS MARKET.THIS REALLY IS JUST A SAMPLE OF WHAT HAPPENS TO THE ULTIMATE HOME PRICES, ET CETERA IN A MUD AND NOT IN A MUD.
THESE ARE SOME OLDER NUMBERS, BUT THEY WERE PROVIDED AT A LEGISLATIVE HEARING BY ONE OF THE LARGEST LAND DEVELOPERS IN THE UNITED STATES NEWLAND COMMUNITIES.
BUT IT BASICALLY JUST SHOWS YOU THAT IF YOU PULL THE PUBLIC INFRASTRUCTURE COST OUT BY HAVING A MUD VERSUS NOT HAVING A MUD, YOU'RE ABLE TO PRODUCE MUCH MORE ATTAINABLE HOUSING.
REALLY IN THE STATE OF TEXAS TODAY, THE COMPTROLLER JUST ISSUED A 27 PAGE REPORT ON THE AFFORDABILITY CRISIS THAT WE HAVE IN TEXAS.
NOW, IT REALLY MAKES A HUGE DIFFERENCE IN WHO CAN QUALIFY FOR A MORTGAGE DEPENDING ON WHETHER YOU HAVE ONE OF THESE DISTRICTS OR YOU DON'T HAVE ONE OF THESE DISTRICTS.
HAPPY TO GO BACK, BUT THERE'S PROBABLY A LOT OF DETAILS THERE.
I KNOW WE'VE GOT A LOT TO COVER, SO I'M GOING TO TURN IT OVER TO ALIA AND LET HER TAKE IT FROM HERE.
>> WE'RE GOING TO GIVE STEVE'S VOICE ARREST FOR JUST A FEW MINUTES HERE.
SOME OF THOSE WE'VE ALREADY COVERED, BUT I THINK IT'S PROBABLY APPROPRIATE TO JUST FOCUS ON IT FOR A MOMENT.
AS DESCRIBED, MUDS ARE POLITICAL SUBDIVISIONS, SO THESE ARE GOVERNMENTAL ENTITIES HEAVILY REGULATED.
WE DO ALWAYS LIKE TO SAY THAT BECAUSE SOMETIMES THERE'S CONFUSION ABOUT WHETHER MUDS ARE GOVERNMENTAL ENTITIES, WHETHER THEY'RE JUST LIKE HOAS, WHETHER THEY'RE NOT, [LAUGHTER] WHETHER THEY'RE QUASI GOVERNMENTAL ENTITIES.
THESE ARE TRUE POLITICAL SUBDIVISIONS OF THE STATE OF TEXAS.
UNLIKE A HOME RULE CITY WHERE YOU CAN IMPOSE YOUR RULES UNLESS THE STATE SAYS OTHERWISE, MUDS HAVE SPECIFIC LIMITED PURPOSES.
UNLESS THE LEGISLATURE GIVES THEM THE POWER TO DO SOMETHING, THEY CAN'T DO IT.
IN THIS CASE, MUDS HAVE BEEN GIVEN THE ABILITY TO EXERCISE POWERS GRANTED BY THE STATE TO DO WATER, SEWER, DRAINAGE, ROADS, PARKS, REALLY CORE FACILITIES.
AS MENTIONED IN ONE OF THE EARLIER SLIDES, THEY DO ALSO HAVE THE ABILITY TO ENGAGE IN FIREFIGHTING SERVICES, IF THEY HAVE A FIRE PLAN, TO PAY FOR POLICING SERVICES, SOMETIMES BY CONTRACTING WITH THE SHERIFF'S OFFICE OR A CONSTABLE'S OFFICE, AND TO PROVIDE TRASH SERVICE, WHICH HAS BECOME A PRETTY POPULAR SERVICE ITEM IN MANY DISTRICTS.
THIS WAS DISCUSSED EARLIER, WHETHER OR NOT THE PUBLIC INFRASTRUCTURE BUILT IN A MUD WOULD BE SUBJECT TO THE CITY ORDINANCES.
WHAT WE WOULD DO IS IF IT'S IN THE CITY, THAT'S AN EASY YES.
IF IT'S IN THE ETJ, WHAT WE WOULD DO IS IN THE CONSENT TO THE CREATION THAT THE CITY WOULD PROVIDE, YOU WOULD REQUIRE THEM TO FOLLOW YOUR REQUIREMENTS, AND THAT WOULD ALSO BE IN THE DEVELOPMENT AGREEMENT.
THE INFRASTRUCTURE IS REGULATED BY THE TCEQ.
THAT'S THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY, THE STATEWIDE AGENCY, THEY ARE THE OVERSIGHT BODY AS DISCUSSED.
MUDS ARE SUBJECT TO THE TCEQ FEASIBILITY RULES, AND ANY LAWYER WHO'S USED TO WORKING WITH MUDS PRETTY MUCH ALWAYS CARRIES AROUND THE THICK BINDER OF TCEQ RULES, WHICH ARE THE INS AND OUTS OF ALL OF THE RULES THAT HAVE TO BE FOLLOWED TO A T IN ORDER FOR THE DISTRICT TO ISSUE DEBT LATER AND REIMBURSE THE DEVELOPER FOR THEIR UPFRONT COSTS.
THE BONDS THAT WE'VE DISCUSSED.
THERE IS A PROCESS FOR MUD BOND APPROVAL THAT GOES THROUGH THE TCEQ.
IMPORTANTLY, JUST LIKE ANY GOVERNMENTAL ENTITY, THERE IS APPROVAL BY THE TEXAS ATTORNEY GENERAL'S OFFICE BEFORE YOU CAN ACTUALLY ISSUE THAT DEBT.
THE MUDS BECAUSE THEY'RE GOVERNMENTAL ENTITIES, COMPLY WITH THE OPEN MEETINGS ACT AND THE PUBLIC INFORMATION ACT, ALL OF THE ETHICS RULES THAT YOU ALL HAVE TO FOLLOW, THEY HAVE TO FOLLOW.
MUDS ARE ALSO REQUIRED TO COMPLY WITH PUBLIC BIDDING REQUIREMENTS FOR THE INFRASTRUCTURE THAT THEY ARE CONSTRUCTING.
WITH RESPECT TO CREATION, THERE ARE TWO DIFFERENT WAYS TO CREATE A MUD.
MOST COMMONLY, THEY'RE CREATED THROUGH AN APPLICATION PROCESS WITH THE TCEQ, BUT THEY CAN ALSO BE CREATED DIRECTLY BY THE TEXAS LEGISLATURE.
IF THE MUD IS IN A CITY'S CORPORATE LIMITS OR IN ITS ETJ, THE CITY IS REQUIRED TO GIVE ITS CONSENT PRIOR TO
[00:45:03]
THE CREATION AND ALSO PRIOR TO THE ANNEXATION OF LAND.IF YOU DO CONSENT TO THE CREATION OF A MUD IN YOUR ETJ, AND LATER THAT LAND OWNER WANTED TO MAKE THAT DISTRICT BIGGER.
THEY WOULD NEED TO COME BACK TO THE CITY TO GET APPROVAL TO ANNEX MORE LAND INTO THE DISTRICT.
ONE OF THE THINGS THAT WE'VE TALKED ABOUT QUITE A BIT AND WE'LL KEEP TALKING ABOUT IS THE SUITE OF AGREEMENTS THAT WOULD GO ALONG WITH THE CREATION OF A DISTRICT THAT IN CONNECTION WITH THE CITY GRANTING ITS CONSENT, TYPICALLY THE LANDOWNER AND THE CITY WOULD NEGOTIATE TERMS, EVERYTHING SURROUNDING PROVIDING SERVICES.
YOU WOULD TYPICALLY SEE A DEVELOPMENT AGREEMENT, YOU WOULD SEE A UTILITY AGREEMENT, AND IMPORTANTLY, YOU WOULD SEE THAT STRATEGIC PARTNERSHIP AGREEMENT AS WELL.
THERE ARE LIMITED CIRCUMSTANCES WHERE MUDS CAN BE CREATED WITHOUT THE CITY CONSENT, WE DON'T USUALLY RECOMMEND THAT.
YOU'LL HAVE TO BE NEIGHBORS FOR A LONG TIME.
UNLESS NORMALLY, WE LIKE TO SEE A GOOD AMICABLE PROCESS WORK THROUGH.
MUDS HAVE THE AUTHORITY TO ADD BOTH CONTIGUOUS AND NON-CONTIGUOUS TRACTS OF LAND.
YOU DO SOMETIMES SEE DISTRICTS THAT ARE CREATED OVER LAND THAT IS NOT TOTALLY CONNECTED TO ONE ANOTHER THAT CAN OCCUR.
IF THE MUD IS LOCATED OUT OF THE CITY IN THE COUNTY, THE COUNTY CAN HAVE THE RIGHT TO REVIEW AND PROVIDE RECOMMENDATION TO THE TCEQ REGARDING CREATION OF THE MUD.
BUT JUST A NOTE THERE, THE COUNTY DOESN'T HAVE TO PROVIDE CONSENT.
IT'S MORE OF A REVIEW AND RECOMMENDATION, NOT A CONSENT REQUIREMENT.
WITH RESPECT TO GOVERNANCE AND OPERATION, WHEN A MUD IS CREATED, THE MUD IS GOVERNED BY A FIVE MEMBER BOARD.
JUST LIKE YOURSELVES, YOU'RE GOING TO HAVE FIVE FOLKS WHO ARE ON THAT GOVERNING BOARD.
INITIALLY, THEY'RE APPOINTED BY THE TCEQ, OR THEY MIGHT BE NAMED IN THE LEGISLATION IF IT'S CREATED BY THE LEGISLATURE.
LATER, ONCE YOU HAVE RESIDENTS WHO LIVE THERE AND NOT JUST COWS, YOU'RE GOING TO HAVE FOLKS WHO ARE ELECTED BY THE COMMUNITY TO REPRESENT THE COMMUNITY ON THAT BOARD.
ALL OF THOSE ELECTIONS ARE REQUIRED TO BE CONDUCTED IN ACCORDANCE WITH THE ELECTION CODE.
ALL OF THE SAME REQUIREMENTS THAT YOU ENCOUNTER IN THE ELECTIONS THAT YOU HOLD, THEY WOULD HAVE TO FOLLOW THOSE AS WELL.
THE BOARD, THEIR OBLIGATION IS TO MOVE FORWARD WITH DEVELOPING FACILITIES IN THE MANNER THAT'S GOING TO BE IN THE BEST INTEREST OF THE RESIDENTS AND THE LANDOWNER.
MUDS TYPICALLY DON'T HAVE EMPLOYEES OR STAFF.
TYPICALLY, THEY UTILIZE A NUMBER OF PROFESSIONAL CONSULTANTS TO CARRY THOSE VARIOUS ROLES AND TO ADVISE THE BOARD SO THAT THEY CAN TAKE ACTION AND FORM SOMETHING THAT ACTS LIKE A STAFF, BUT REALLY THEY'RE THERE TO SUPPORT THE GOVERNING BODY.
THE BOARD OF DIRECTORS IS THE POLICY MAKING GOVERNING BODY.
THE BOARD WORKS WITH ITS CONSULTANTS TO IMPLEMENT THOSE POLICY DECISIONS.
THIS IS ONE SLIDE THAT I WANT TO TAKE A LITTLE MORE TIME ON, AND THAT'S WHAT IS THE ROLE OF THE DEVELOPER IN THE MUD.
THE DEVELOPER IS THE ONE THAT STARTS THE PROCESS.
YOU HEARD FLOYD DESCRIBE HOW WE'RE HERE BECAUSE YOU'RE GETTING ASKS LIKE THIS.
YOU'RE GETTING DEVELOPERS COMING FORWARD AND SAYING, WE WANT TO BUILD A COMMUNITY, WE WANT TO TALK ABOUT WHAT OUR OPTIONS ARE.
IT'S THE DEVELOPER WHO HAS THAT PROPERTY, LET'S CALL IT 500 ACRE TRACT WHERE THEY WANT TO BUILD SINGLE FAMILY HOMES THAT IS GOING TO BE THE ONE THAT REQUESTS THE CREATION OF THE MUD.
ALSO, THE DEVELOPER IS DRIVING THE NEED AND THE PACING FOR WHEN THEY WILL NEED WATER, SEWER, DRAINAGE, ALL OF THOSE FACILITIES, WHEN THEY'LL NEED ROADS, AND THAT'S REALLY BASED ON THEIR LAND PLAN AND THEIR DEVELOPMENT SCHEDULE.
ONE THING THAT'S REALLY EFFECTIVE WITH MUDS IS THAT THIS IS A TRUE PUBLIC PRIVATE PARTNERSHIP.
YOU HAVE THE DEVELOPER, WHICH IS THE PRIVATE SIDE, YOU HAVE THE DISTRICT, WHICH IS THE GOVERNMENTAL ENTITY, AND THEY ARE PARTNERING TOGETHER.
THEY WILL HAVE A REIMBURSEMENT AGREEMENT TOGETHER WHERE THE DEVELOPER PAYS ALL OF THE UPFRONT COSTS.
THEY ARE ADVANCING ALL OF THE COSTS TO BUILD WATER LINES, SEWER LINES, DRAINAGE DITCHES, ROADS.
THEY ARE FRONTING ALL OF THOSE COSTS.
AS STEVE MENTIONED, WHAT THAT DOES IS IT PUTS ALL OF THE RISK ASSOCIATED WITH THOSE COSTS ON THE LAND DEVELOPER.
THEY ARE THE ONES BEARING THAT RISK AS OPPOSED TO THE GOVERNMENTAL ENTITY.
BUT THIS RELATIONSHIP HAS TWO SIDES.
THEY ARE ADVANCING THESE FUNDS, THEY'RE LOANING THE MONEY IN EFFECT TO THE MUD AS IT'S GETTING GOING.
[00:50:01]
BUT ONCE THE DEVELOPER DELIVERS, ONCE THEY'VE NOT ONLY PUT IN THAT PUBLIC INFRASTRUCTURE BUT ALSO MADE SURE THAT THERE'S HOUSING STRUCTURES ABOVE GROUND THAT ARE TAXABLE.THEY'VE ACTUALLY BUILT TAXABLE VALUE.
>> THEN THE RELATIONSHIP SHIFTS AND THE DISTRICT HAS TO PAY THEM BACK.
THIS IS A VERY IMPORTANT DOCUMENT, AND IT REALLY MAKES IT SO THAT THE DEVELOPER IS HAVING TO DELIVER ON THEIR END OF THE BARGAIN.
BEFORE THE DISTRICT PAYS THEM BACK.
THEN ONCE THEY DO, THEN THE DISTRICT HAS THAT OBLIGATION.
ONE THING TO NOTE THOUGH, IS THAT THE RATE AT WHICH THEY'RE GETTING PAID BACK IS REALLY TIED TO THOSE TCEQ RULES.
THE TCEQ RULES ARE GOING TO MAKE SURE THAT THE PAYMENTS BACK TO THE DEVELOPER ARE NOT PUTTING THE DISTRICT OUT OVER THEIR SKIS.
IN THE TCEQ RULES, TYPICALLY, IT'S A 10 TO ONE.
IF THE DEVELOPER PUTS $10 MILLION WORTH OF TAXABLE VALUE IN THE DISTRICT, THEN ONE MILLION DOLLAR WORTH OF BONDS CAN BE ISSUED.
AS THE TAXABLE VALUE GROWS, SO THEN CAN THE REIMBURSEMENTS BACK TO THEM GROW, BUT IT MAKES SURE THAT THE DISTRICT IS NOT OVER LEVERAGING, AND THOSE ARE THE STATE REQUIREMENTS, AND AS A RESULT, DISTRICTS HAVE AN EXTREMELY STEADY, RELIABLE CREDIT.
IN THE BOND MARKET, FOLKS WANT TO BUY TEXAS MUD BONDS BECAUSE THERE'S A ZERO DEFAULT RATE, AND THAT IS REALLY EXTREMELY RELIABLE.
THE OTHER THING I'LL NOTE IS THAT REIMBURSEMENTS MAY BE LIMITED IN THE EVENT THAT THE DEVELOPER DOESN'T FOLLOW ALL OF THE TCEQ DETAILS.
WE TALKED ABOUT ALL OF THOSE RULES.
IF THE CONSTRUCTION CONTRACTS AREN'T AWARDED IN THE RIGHT WAY.
IF THEY'RE NOT FOLLOWING ALL OF THE TCEQ RULES EXACTLY, THEN THAT'S GOING TO IMPACT WHAT THE DEVELOPER CAN GET BACK.
THERE'S GOOD ACCOUNTABILITY ON THAT FRONT.
>> THANK YOU, MAYOR. WELL, SO I WON'T GO INTO DETAIL HERE BECAUSE I KNOW YOU HAVE THIS IN FRONT OF YOU, BUT THIS JUST LISTS THE TYPES OF CONSULTANTS THAT WILL TYPICALLY BE HIRED BY A MUD, OF COURSE, THE ATTORNEY, AUDITOR, BOOKKEEPER, ENGINEER, FINANCIAL ADVISOR, A TAX ASSESSOR COLLECTOR, AND AN OPERATOR IF THEY'RE OPERATING WATER AND SEWER FACILITIES.
>> THANK YOU. THAT'S ACTUALLY BACK TO YOU.
DISTRICTS TYPICALLY LEVY TWO COMPONENTS OF TAX RATE, A DEBT SERVICE TAX RATE AND AN OPERATIONS AND MAINTENANCE TAX RATE.
TYPICALLY ABOUT 90% OF THAT TAX RATE IS DEDICATED TO DEBT SERVICE.
YOU ARE PRIMARILY FINANCING PUBLIC INFRASTRUCTURE AND MOST OF THE SERVICES THAT ARE PROVIDED IF THERE'S A FEE FOR SERVICES AGREEMENT ARE DONE ON A FEE BASIS.
THEY'RE TYPICALLY ADDED ON A WATER BILL ON A MONTHLY FEE BASIS.
THE DISTRICTS HAVE THE AUTHORITY TO LEVY THAT AD VALOREM TAX EACH YEAR.
THAT TAX APPLIES AS OF JANUARY 1, JUST LIKE YOUR PROPERTY TAX BY OPERATION OF LAW, WE SELL WHAT ARE CALLED UNLIMITED TAX BONDS, MEANING WE ARE PLEDGING TO THE BONDHOLDERS THAT WE'RE GOING TO LEVY WHATEVER TAX IS NECESSARY TO MAKE SURE THE BONDS DON'T DEFAULT.
HOWEVER, WE'RE SUBJECT TO THE TCEQ FEASIBILITY RULES, SO WE'RE NOT PERMITTED TO SELL THEM IF WE CAN'T SELL THEM AT A REASONABLE TAX RATE.
TAX RATE VARIES THROUGHOUT THE STATE.
HERE IN AMARILLO, THE COUNTIES THAT SURROUND YOU ARE WHAT ARE CALLED ONE DOLLAR COUNTIES, YOU COULD NOT EXCEED ON A FEASIBILITY BASIS, ONE DOLLAR PER $100 OF ASSESSED VALUE ARE 1%.
AS ALIA MENTIONED, WHAT THAT TAX RATE IS DETERMINED BY EACH DISTRICT, AND WE HAVE TO SUBMIT APPLICATIONS TO THE TCEQ.
BASED UPON THE VALUE THAT WE HAVE ON THE GROUND TO PROVE THAT WE CAN FEASIBLY SELL THE BONDS WITHIN THAT TAX RATE.
LET'S SEE, THE MUD AND THE DEVELOPER ENTER INTO A REIMBURSEMENT AGREEMENT EARLY ON, WE SELL AS ALIA MENTIONED, TYPICALLY THE EARLY ON,
[00:55:02]
KEEPING THAT DEBT TO ASSESS VALUE BELOW 10% IN ORDER THAT THE DEVELOPER DOES NOT OVER LEVERAGE THE DISTRICT.THOSE AGREEMENTS HAVE TO BE ENTERED INTO PRIOR TO THE CONSTRUCTION OF ALL THAT PUBLIC INFRASTRUCTURE.
WE SELL BONDS VERY SIMILAR TO THE WAY THAT THE CITY DOES AND PROCESS.
THE BIG EXCEPTION IS ALL OF OUR BONDS ARE SOLD ON A COMPETITIVE BASIS INTO THE OPEN MARKET.
WE DO NOT HAVE NEGOTIATED SALES.
THOSE BONDS ARE TYPICALLY EARLY ON, SOLD NON RATED, NON INSURED, AND MOSTLY ARE PURCHASED BY TEXANS.
ONCE WE HAVE AN UNDERLYING CREDIT RATING, OR MUNICIPAL BOND INSURANCE, WALL STREET'S IN PLAY.
THAT TYPICALLY IS OUR SECOND OR THIRD BOND ISSUE IN MOST DISTRICTS.
BUT THERE IS AN ENORMOUS APPETITE TODAY.
OUR TYPICAL DISTRICT RIGHT NOW IS SELLING IN THE LOW 4% RANGE, JUST TO GIVE YOU AN IDEA.
LET'S SEE. BUT OBVIOUSLY, WE SUBMIT A HUGE APPLICATION TO THE TCEQ ASKING PERMISSION TO SELL BONDS.
THEN WE DO OFFERING DOCUMENTS SIMILAR TO Y'ALL'S OFFERING DOCUMENTS WHEN YOU SELL BONDS AND THEN GO INTO THE MARKET WITH A COMPETITIVE SALE.
ATTORNEY GENERAL HAS TO IN ADDITION, APPROVE THOSE.
LAST BUT NOT LEAST, WE HAVE TO DO AN AGREED UPON PROCEDURES, REVIEW OR AUDIT BY AN INDEPENDENT CPA TO CONFIRM THAT ALL THE COSTS THAT WERE INCLUDED AND PAID FOR WERE FOR THE BENEFIT OF THE DISTRICT AND BASICALLY COMPLIED WITH THE TCEQ RULES.
LET ME STOP RIGHT HERE BECAUSE I WANT TO SLOW DOWN AND TALK A LITTLE BIT ABOUT WHAT THE OPTIONS ARE RIGHT NOW FOR A DEVELOPER WHO HAS LAND IN YOUR ETA BECAUSE IT REALLY FALLS INTO THREE CATEGORIES, AND THIS IS REALLY THE MEAT OF WHERE WE ARE.
IF WE PROCEEDED WITH THE REQUEST OF THE DEVELOPER, THE CITY WOULD BE ASKED TO CONSENT TO THE CREATION OF A DISTRICT THAT WOULD BE ALLOWED TO DEVELOP IN YOUR ETJ.
Y'ALL WOULD AGREE ON ALL OF THE DESIGN STANDARDS, WHAT ORDINANCES APPLY, ETC.
YOU WOULD AGREE TO PROVIDE UTILITIES AT THEIR COST, YOU WOULD DECIDE WHICH SERVICES TO PROVIDE AND AS WE MENTIONED, ENTER INTO A STRATEGIC PARTNERSHIP AGREEMENT THAT ALLOWS YOU THE RIGHT, BUT NOT THE OBLIGATION TO ANNEX THEM AT A TIME IN THE FUTURE.
THAT'S OPTION 1. OPTION 2 IS FOR THEM TO DO WHAT HAS TRADITIONALLY BEEN DONE, AND THAT IS, THEY CAN ANNEX IN.
OBVIOUSLY, IF THEY ANNEX IN, YOUR IMMEDIATE DUTY IS TO PROVIDE FULL MUNICIPAL SERVICES TO EXTEND UTILITIES, YOU DON'T HAVE AN IMPACT FEE, YOU HAVE TO PROVIDE POLICE AND FIRE BY STATE LAW.
IF YOU REALLY DID AN ANALYSIS OF THAT.
THAT IS A VERY EXPENSIVE PROPOSITION BECAUSE THOSE LIMITED GROWTH OF ROOFTOPS AT THE PROJECTED VALUES HERE SIMPLY DON'T SUPPORT EITHER THE SERVICES OR THE EXTENSION OF THOSE UTILITIES.
THERE'S A THIRD OPTION UNDER STATE LAW FOR THE DEVELOPER, AND THAT IS CALLED THE ETJ OPT OUT, AND THE ETJ OPT OUT UNDER SENATE BILL 2038 OF THE 23 LEGISLATIVE SESSION GIVES THE DEVELOPER THE RIGHT TO SUBMIT A PETITION TO THE CITY THAT IS NON DISCRETIONARY, THAT IN 45 DAYS, THEY ARE NO LONGER IN YOUR CITY'S ETJ.
THAT OPTION IN AN AREA LIKE THIS WILL REALLY BE DETERMINED WHETHER IT'S VIABLE DEPENDING ON THE AVAILABILITY OF WATER BECAUSE IF YOU CAN'T SOLVE FOR WATER, AN ETJ OPT OUT IS MEANINGLESS.
I DON'T KNOW THE ANSWER TO THAT, WHETHER THERE'S A VIABLE OPTION, THAT'S PROBABLY OTHERS CAN ANSWER THAT QUESTION.
BUT IF THEY DID OPT OUT, THEY WOULD BE IN THE COUNTY AND THEY WOULD ONLY BE SUBJECT TO COUNTY REGULATION.
[01:00:02]
OBVIOUSLY, COUNTY REGULATION IS VERY LIMITED.THEY DON'T HAVE LAND USE CONTROL, THEY DON'T HAVE LOT SIZE CONTROL THEY DON'T HAVE THE ABILITY TO ISSUE OBLIGATION FOR BUILDING PERMITS, AND INSPECTIONS, ETC, SOME LIMITED FIRE CONTROLS, ETC.
THAT WOULD TAKE YOU DOWN A VERY DIFFERENT PATH, PARTICULARLY BECAUSE YOU WOULD NOT HAVE THAT STRATEGIC PARTNERSHIP AGREEMENT.
ONCE IT DEVELOPS, YOU WOULDN'T BE ABLE TO EVER ANNEX THAT AREA WITHOUT HOLDING AN ELECTION.
IT CREATES A BIT OF A FORK IN THE ROAD TO BE HONEST WITH YOU, BECAUSE IF YOU DESIRE TO GROW IN THAT DIRECTION, AND IT DOES DEVELOP PURSUANT TO AN ETJ OPT OUT, ABSENT PASSING THAT ELECTION BY THE RESIDENTS IN THE AREA WHO WOULDN'T AT THE TIME BE PAYING A CITY PROPERTY TAX, WHICH IS A VERY DIFFICULT THING, THAT AREA WOULD NEVER BECOME PART OF THE CITY.
BIG PART OF THAT IS, CAN THEY SOLVE FOR WATER, OBVIOUSLY, THEY'D HAVE TO SOLVE FOR SEWER ALSO THERE.
WHAT WE BELIEVE AND WHAT WE HAVE BEGUN PUTTING TOGETHER AS FAR AS AN OUTLINE OR THOUGHT PROCESS HERE IS THAT FROM A FINANCIAL STANDPOINT, THAT THE CITY CAN HAVE THE DEVELOPER WITH A MUD IN THE ETJ ISOLATE WHERE THAT NEW GROWTH PAYS FOR ITSELF.
YOU CAN NEGOTIATE THE TERMS AND CONDITIONS OF A DEVELOPMENT AGREEMENT THAT BECAUSE YOU HAVE BOUGHT A SEAT AT THE TABLE, YOU HAVE THE WATER, YOU HAVE THE SEWER, YOU CAN HAVE WHERE YOU'RE NOT SUBSIDIZING SERVICES, EITHER WATER AND SEWER SERVICE, PLEASE FIRE TRASH.
THEY CAN PAY FOR THOSE ITEMS, AND THEN YOU HAVE THE RIGHT TO EVENTUALLY FULL PURPOSE ANNEX THOSE AREAS.
THAT PATH IS ACTUALLY, A REQUEST THAT YOU HAVE RECEIVED FROM THE DEVELOPER, PROBABLY, WHAT'S TO BE NEGOTIATED IS WHAT'S IN THAT DEVELOPMENT AGREEMENT.
WHAT FEES FOR SERVICES, WHAT ARE YOU GOING TO PROVIDE WHOLESALE SERVICE, RETAIL SERVICE, ETC.
BUT THE GENERAL CONCEPT IS WHO'S GOING TO PAY FOR THIS GROWTH? AS YOU KNOW, INFRASTRUCTURE HAS GOTTEN EXTRAORDINARILY EXPENSIVE AND THE ABILITY TO CONTINUE TO MEET ALL THE DEMANDS THAT YOU HAVE FROM A WATER SIDE, SEWER SIDE, DRAINAGE SIDE IS A VERY EXPENSIVE PROPOSITION ON A FULL PURPOSE STANDPOINT.
THE OTHER DECISION THAT WE NEED AND THOUGHT PROCESS WE NEED FROM Y'ALL IS WHAT DO YOU REALLY WANT TO MAINTAIN IN THE FUTURE? BECAUSE WHEN YOU ANNEX, OBVIOUSLY EVERYTHING WOULD BE ISOLATED BEFORE YOU ANNEX.
BUT WHEN YOU ANNEX, THE CITY IS USED TO PAY FOR WATER AND SEWER, AND ROADS BECAUSE YOU'LL TAKE THOSE AND YOU'LL HAVE REVENUES AND PROPERTY TAX REVENUES.
THE REAL QUESTION IS, BEYOND THAT, HOW ARE THE THINGS GOING TO BE MAINTAINED FOR DRAINAGE TO MAKE SURE THAT ON A LONG TERM BASIS, THIS CONTINUES TO LOOK THE WAY THAT IT LOOKS WHEN THEY BUILD IT INITIALLY, AND THINKING THROUGH THE LONG TERM FOR MAINTENANCE, I THINK IS ALSO CRITICALLY IMPORTANT HERE.
PARTICULARLY WHEN IT RELATES TO ANY PUBLIC PARKS, BECAUSE WHAT WE SEE IS A DEVELOPER CAN COME IN, BUILD BEAUTIFUL PARKS.
BUT EVERY PIECE OF PLAYGROUND EQUIPMENT THAT THEY BUILD IN 15 YEARS IS NOT GOING TO COMPLY WITH THE CURRENT STANDARDS.
THEY'RE GOING TO BE BIG CAPITAL COSTS, DRAINAGE, YOU MAY HAVE FAILURES, REPAIRS, ETC.
ONE OF THE THINGS THAT WE SEE A LOT AROUND THE STATE IS PROVIDING ON A LONG TERM BASIS FOR THOSE TO OCCUR EITHER THROUGH THE DISTRICT OR
[01:05:01]
THROUGH A COMBINATION WITH A PUBLIC IMPROVEMENT DISTRICT THAT JUST ASSESSES FOR THOSE ITEMS. REALLY, AGAIN, THIS IS ABOUT, ARE THOSE NEW COSTS GOING TO BE ON THE CITY'S LEDGER OR ON THE NEW GROWTH LEDGER FOR MAINTENANCE.YOU DO HAVE THE ABILITY TO COMBINE THIS DISTRICT WITH A MAINTENANCE PUBLIC IMPROVEMENT DISTRICT THAT WOULD MAINTAIN THE PARKS AND WRECK AND MAINTAIN THE DRAINAGE, ASSUMING Y'ALL DECIDED THAT WHEN YOU ANNEX YOU WANTED TO TAKE MAINTENANCE OF THE ROADS AND OWNERSHIP OF THOSE AND MAINTENANCE OF ALL THE WATER AND SEWER FACILITIES.
ONE OF OUR PROPOSALS THAT WE'RE LOOKING FOR FEEDBACK ON IS, DO YOU WANT TO INCLUDE AS PART OF THIS A WAY TO CREATE SOME CERTAINTY FROM DAY ONE ABOUT HOW THAT MAINTENANCE WILL OCCUR EVEN AFTER THE ANNEXATION OCCURS, AND CERTAINLY A PUBLIC IMPROVEMENT DISTRICT COULD BE A MECHANISM TO DO THAT.
THERE ARE SOME OTHER WAYS TO DO THAT.
THAT'S SOME LIMITED DISCUSSION WITH THE OTHER SIDE, AND THEY I THINK WOULD PROBABLY PREFER THIS ROUTE.
BUT WE'RE OPEN TO TALKING ABOUT THAT LONG TERM MAINTENANCE BECAUSE WHAT WE WANT IS TO CREATE A STRUCTURE THAT NOT ONLY MAKES THIS FINANCIALLY VIABLE FOR THE CITY INITIALLY, FINANCIALLY VIABLE FOR THE DEVELOPER INITIALLY, BUT REALLY ON A LONG TERM BASIS, IN ORDER TO MAINTAIN PROPERTY VALUES, YOU NEED TO STRUCTURALLY PUT IN PLACE THE MECHANISMS TO MAKE SURE THAT THIS COMMUNITY IN 30 YEARS CAN MAINTAIN ITS PROPERTY VALUES, AND THAT'S GENERALLY HOW'S IT MAINTAINED? DO THE PARK STILL LOOK GREAT.
IS THE GRASS GETTING MOWED IN THE DRAINAGE? DID THEY REPLACE THE PLAYGROUND EQUIPMENT, ALL OF THOSE THINGS? I THINK PLANNING FOR THOSE ENDS UP CREATING A LOT MORE STABILITY IN YOUR TAX BASE IF THEY'RE APPROPRIATELY PLANNED FOR.
>> I JUST WANT TO ADD TO THAT. THAT'S A GOOD POINT.
CURRENTLY, OUR PID POLICY IN THIS DEVELOPMENT MANUAL DOES NOT PROVIDE FOR THIS TYPE OF MAINTENANCE.
OUR PID POLICY IS STRICTLY FOR AMENITIES AND PARK TYPE AMENITIES.
THAT PATH WOULD REQUIRE SOME ADJUSTMENT TO THE PID POLICY AS WELL.
NOW, STEVE, I'D ASK YOU TO CLARIFY JUST BRIEFLY, THAT THE TRADITIONAL ANNEXATION WITH A PID IMPROVEMENT ALSO IS AN OPTION.
YOU TOUCH YOU TOUCHED ON THAT.
BUT CLARIFY THAT JUST A LITTLE THAT IT DOESN'T QUITE GET TO WHERE A MUD IS ON ALL OF THESE THINGS, BUT IT IS AN OPTION THAT TRADITIONAL ANNEXATION WITH A PID POLICY CHANGE FOR REIMBURSEMENT IS AN OPTION.
>> ONE OPTION, IN ADDITION TO, FULL PURPOSE ANNEXATION WOULD BE TO OVERLAY IT WITH A PID.
>> WHAT YOU DO THERE IS YOU'RE GOING TO PAY THE CITY PROPERTY TAX, AND THE PID ASSESSMENT WOULD BE ON TOP OF THAT.
PART OF THE PROBLEM AND WHY I THINK YOU WOULD MEET WITH SOME RESISTANCE IS IN ORDER TO CREATE AN EQUIVALENT FINANCING VEHICLE YOU WOULD NEED A PID ASSESSMENT EQUAL TO A ONE-DOLLAR PID ASSESSMENT TO BE ABLE TO HAVE IDENTICAL FINANCING CAPABILITY.
NOW, PART OF THAT COULD BE OFFSET BY THE CITY PAYING FOR MORE THINGS BECAUSE YOU ANNEXED IT BUT ON AN EQUIVALENT BASIS, YOU WOULD IN THE MARKET, HAVE A PROJECT THAT WOULD HAVE BOTH YOUR TAX RATE PLUS THE PID ASSESSMENT ON TOP OF IT.
I THINK THAT WOULD BE A VERY DIFFICULT THING FOR THE DEVELOPER TO CREATE A MARKETABLE PROJECT THAT IS COMPETITIVE WITH THE ETJ MUD.
I'M NOT SAYING THAT THEY COULDN'T DO A LESSER PID AND PUT MORE COST INTO THE LOT PRICES, BUT OBVIOUSLY, A BIG PART OF THIS IS TRYING TO PULL THOSE INFRASTRUCTURE COSTS OUT OF THE PID.
THE SECOND IS THE PID FROM A FINANCING STANDPOINT IS AN ASSESSMENT-BASED VEHICLE.
IT'S A FAR LESS EFFICIENT FINANCING VEHICLE, RESERVE FUNDS, HIGHER INTEREST RATES, ETC SO IF YOU'RE GOING TO USE AN IN-CITY VEHICLE,
[01:10:01]
WE WOULD TELL YOU THAT IT'S FAR MORE EFFICIENT TO CREATE AN IN-CITY MUD OVERLAYING A FULL-PURPOSE ANNEX TRACT THAN AN IN-CITY PID BECAUSE THE SAME DOLLAR DOESN'T GO NEARLY AS FAR IN A PID AS IT DOES IN AN IN-CITY MUD.HAVING SAID THAT, I THINK YOU WOULD FIND THAT THE DEVELOPER WOULD SAY, IT'S REALLY DIFFICULT FOR THEM TO APPLY A FULLY LOADED EQUIVALENT FINANCING IN A PID IN-CITY BECAUSE THEY HAVE TO PAY THE CITY TAX RATE ALSO IF THAT MAKES SENSE.
>> YOU MAY HAVE ALREADY TOUCHED ON IT.
IS IT STRICTLY MUDS ALLOWED IN THE ETJ, OR IS THERE A BOUNDARY THAT IT CAN GO OUTSIDE ETJ AS WELL?
>> IT CAN GO INTO THE COUNTY IN THE ETJ.
OBVIOUSLY, YOU HAVE TO GET THE CITY'S CONSENT IF IT'S IN THE ETJ OR IN THE CORPORATE LIMITS, AND YOU WOULD PROBABLY IN THE DOCUMENTS, SAY, THEY CAN'T ADD ADDITIONAL LAND IN THE COUNTY TO ETJ OR IN CITY MUD WITHOUT THE CONSENT OF THE CITY.
YES, THEY CAN EXTEND OUTSIDE, BUT IT WOULD BE WITH YOUR CONSENT.
>> MAYBE, COUNCIL MEMBER IF I COULD JUST ADD, THERE WAS A DISCUSSION EARLIER ABOUT SENATE BILL 2038, THE ETG OPT-OUT.
IF YOU DO HAVE A LANDOWNER IN YOUR ETJ THAT CHOOSES TO OPT-OUT, THEY CAN THEN CREATE A MUD OVER THAT, TOTALLY OUTSIDE OF THE CITY'S ETJ.
THE DOWNSIDE FOR THE CITY, OF COURSE, IS THAT THEY'RE NOT FOLLOWING ANY OF YOUR REQUIREMENTS, AND PROBABLY THE DOWNSIDE FOR THEM IS THAT THEY MAY NOT HAVE AN OPPORTUNITY TO FIND WATER OUTSIDE OF WORKING WITH THE CITY.
>> I GUESS THE BETTER QUESTION IS IF THERE'S A DEVELOPER THAT WANTS TO DO SOMETHING OUTSIDE OF OUR CURRENT ETJ, OR WITH MUD. [OVERLAPPING]
>> THERE'S NO CONSENT REQUIREMENT, NO APPROVALS BY THE CITY.
THE COUNTY DOES HAVE THE RIGHT TO COMMENT TO THE TCEQ ABOUT ANY CONCERNS BUT YES WHETHER IT'S BY OPT-OUT OR TODAY IS PHYSICALLY IN THE COUNTY ONLY, THEY CAN GO STRAIGHT TO EITHER THE LEGISLATURE OR THE TCEQ TO CREATE THAT DISTRICT.
>> BUT IN THAT SCENARIO, THAT WOULD RESTRICT ANNEXATION, CORRECT?
>> THAT'S CORRECT. NOW, PART OF WHAT I WOULD SUGGEST IS IF THEY CAN'T SOLVE FOR WATER AND YOU CAN, YOU PROBABLY WOULD WANT THEM TO VOLUNTARILY ENTER INTO AN AGREEMENT WITH YOU, PETITION TO COME INTO YOUR ETJ, HAVE A STRATEGIC PARTNERSHIP AGREEMENT, AND REALLY, THE ABILITY TO SOLVE FOR WATER CREATES YOUR LEVERAGE.
THE 2002 RESOLUTION FOR CITY SERVICES OUTSIDE THE CITY REQUIRE VOLUNTARY ANNEXATION TO GET SERVICES FOR WATER AND SEWER SO THAT WOULD BE TRIGGERED FOR ANY OF THESE HYPOTHETICALS.
JUST SO YOU KNOW THAT WHEN HE'S SAYING SOLVE FOR WATER AND SEWER, WE'RE GOING TO LAND ON EXISTING POLICY THAT'S IN PLACE, THE 2002 RESOLUTION.
IT SAYS, IT REQUIRES A VOLUNTARY ANNEXATION, WHICH LEADS RIGHT BACK INTO WHAT WE'RE TALKING ABOUT.
>> WHAT IS THE DISTRICT'S BOARD INTERACTION LIKE WITH COUNCIL OR STAFF? HOW'S THAT?
>> IT REALLY VARIES FROM COMPLETELY STAND-ALONE OTHER THAN COMPLIANCE WITH THE AGREEMENTS TO NEGOTIATING IN THE AGREEMENTS A LOT OF COORDINATION.
THAT'S REALLY A DECISION FOR Y'ALL TO MAKE.
I THINK IN OUR TERM SHEET, WE'VE TALKED ABOUT HAVING MEETINGS AT THE CITY BECAUSE THAT WAY YOUR STAFF CAN SIT IN AND LISTEN TO THE MEETINGS AND KNOW WHAT ARE GOING ON.
THERE'S A LONG LIST OF THINGS THAT THEY'RE OBLIGATED TO PROVIDE THE PUBLIC FROM A TRANSPARENCY STANDPOINT, BUDGETS, AUDITS, ALL OF THOSE THINGS BUT THERE ARE CERTAINLY OPPORTUNITIES TO COORDINATE AND REALLY, I THINK STRUCTURALLY, IT'S VERY HELPFUL ON THE FRONT END TO THINK THROUGH THOSE THINGS.
WE WANT TO HAVE AN ANNUAL INFRASTRUCTURE MEETING WHERE WE KNOW THEIR THREE-YEAR PROJECTIONS ON BUILDOUT, THEIR WATER DEMANDS, THEIR SEWER DEMANDS.
WE WANT TO HAVE PERIODIC COORDINATION MEETINGS, AND SO WE OFTEN BUILD THOSE INTO OUR AGREEMENTS
[01:15:05]
BUT THE BEST THING IS REALLY COMMUNICATION AND I WOULD SAY IT'S MORE OFTEN JUST BEING HONEST WITH YOU, THE CITY'S LACK OF PARTICIPATION IN THE DISTRICT AND SO PART OF WHY WE WOULD SAY MEETING HERE MAKES A LOT OF SENSE IS YOU'RE THEN GOING TO OPEN THAT LINE OF COMMUNICATION.YOU'RE GOING TO KNOW WHAT THEY'RE DOING AND HAVE YOUR STAFF THERE TO UNDERSTAND AND I THINK THOSE THINGS CAN BE VERY HELPFUL.
THE BIGGEST THING IS COMMUNICATION FRANKLY.
>> COUNCIL CAN DEFINE THAT BASICALLY, ON THE FRONT END.
>> ABSOLUTELY. ACTUALLY, WE'VE ALREADY IN OUR PROPOSED TERM SHEET, PUT SOME OF THOSE THINGS IN THERE IN COORDINATION WITH YOUR STAFF.
>> I'M CURIOUS IN THE OVERLAP BECAUSE COUNCILMAN BRINGS UP A REALLY GOOD POINT.
WITH OUR PIDS, WE'RE THE FISCAL AGENT TO HELP WITH THE PID FUNCTION, AND SO WE GAIN A LOT THERE.
AM I SAYING THAT CORRECTLY FISCAL AGENT, MR. TORRES?
>> WELL, I'M CURIOUS IF YOU HAD A MUD, WOULD YOU BE ABLE TO OFFER SOME OF THOSE SAME SERVICES THAT MAYBE THAT MUD ENTITY WOULD BENEFIT FROM THE STREAMLINE OF IT PLUS, THEN WE HAVE A LITTLE BIT MORE OF OUR CHECKS AND BALANCES, AND IT WOULD BE AN ANNUALIZED, YOU'D BE ON THE LIST OF REPORTING, WE WOULD KNOW HOW THINGS WERE GOING AND AS FAR AS STRATEGIC PLANNING AND DEVELOPMENT, WE WOULD KNOW A LITTLE BIT MORE EASILY, WHAT THOSE AMENITIES ARE GROWING INTO, DO YOU HAVE BOARD MEMBERS THAT ARE MEETING SAYING, WELL, WE WANT A WATER PARK?
>> THE BIG DIFFERENCE IS PID IS NOT A SEPARATE GOVERNMENTAL ENTITY.
IT IS A COMPONENT UNIT OF THE CITY. [OVERLAPPING]
>> YOU DON'T HAVE THAT OPPORTUNITY WITH A MUD.
>> WITH THE MUD, THOSE BOARD MEMBERS' FIDUCIARY DUTY IS TO THEIR GOVERNMENTAL ENTITY, SIMILAR TO YOURS SO THEY COULD NOT DELEGATE.
I WOULD GREATLY ENCOURAGE COMMUNICATION AND COORDINATION.
DELEGATION OF ANY OF THOSE POWERS WOULD NOT BE PERMISSIBLE.
>> IT STILL FUNCTIONS THE SAME IN A STRATEGIC GROWTH OR STRATEGIC PLANNING ELEMENT, BUT THEN JUST THE FISCAL AGENT SIDE NOT NEEDED BECAUSE THEY'RE A TAXING ENTITY.
>> YEAH AND CERTAINLY SUBMISSION OF WHENEVER THEY DO BOND APPLICATIONS.
THEY'RE GOING TO SUBMIT THAT BOND APPLICATION TO YOU SO YOU KNOW WHAT THEY'RE DOING.
LOOKING AT ALL OF THOSE, WHAT THEY'RE DOING FROM A FINANCING STANDPOINT BUT WHAT I WOULD SAY IS, IF STAFF IS THERE PARTICIPATING IN THESE, NONE OF THAT WILL BE A SURPRISE.
IT WILL ALL BE JUST ORDINARY COURSE OF BUSINESS AND THAT'S WHAT WE REALLY WANT TO SET UP.
>> COULD YOU GO BACK AND TALK TO JUST BRIEFLY ON THE BENEFIT FOR THE BORROWING CAPABILITIES FOR THE ACTUAL INDEPENDENT OWNER? ARE YOU SAYING THAT WITHIN A MUD, YOU HAVE AN OPPORTUNITY TO APPLY AS AN INDIVIDUAL HOMEOWNER FOR A LOWER INTEREST RATE LOAN BECAUSE YOU'RE INSIDE OF THAT MUD?
>> WELL, NO, TYPICALLY, WHAT WE'RE SEEING IS WE'RE PULLING OUT OF THE MORTGAGE THE PUBLIC INFRASTRUCTURE COST.
INSTEAD OF ALL OF THE PUBLIC INFRASTRUCTURE BEING EMBEDDED IN YOUR MORTGAGE, YOU'RE PAYING A PROPERTY TAX FOR THAT COMPONENT THEREBY LOWERING.
THERE ARE A LOT MORE PEOPLE THAT CAN AFFORD A $350,000 MORTGAGE THAN A $450,000 MORTGAGE SO WE'RE PULLING THAT OUT.
THE OTHER IS THAT OBVIOUSLY WHAT WE ARE BORROWING IS ON THE BASIS OF THE ISSUANCE OF TAX-EXEMPT DEBT AND IF YOU LOOKED AT THE COMPARABLE RATES RIGHT NOW, LET'S JUST SAY A MORTGAGE TYPICALLY RIGHT NOW IS 7%, MAYBE IT'S SLIGHTLY UNDER SEVEN, WE'RE BORROWING IN OUR MUD AT FOUR AND A QUARTER.
THAT SAME 75-$100,000 PER LOT IN THE MUD IS BEING FINANCED AT 4.5, IT WAS IN YOUR MORTGAGE IT WOULD BE AT SEVEN.
>> WHERE YOU'RE ARRIVING AT THAT IS IN THE COST OF DEVELOPMENT FOR THE LOT SO INSTEAD OF SELLING A $100,000 LOT, YOU'RE SELLING A $50,000 LOT BECAUSE YOU'RE ABLE TO FINANCE THAT $50,000 DIFFERENCE WITHIN THE TOTAL COST OF THE MUD, AND IT SITS AS A STANDALONE THAT'S BEING SERVICED WITH A TAX RATE.
>> THAT'S CORRECT. THAT'S EXACTLY RIGHT.
[01:20:01]
WHAT KEEPS A DEVELOPER FROM NOT PROFITING AN EXTRA $10,000 AND YOU WOULDN'T KNOW THAT HE'S SELLING THE LOT AT 60 INSTEAD OF 50 AND NOW YOU'VE PAID FOR IT?>> THE DEVELOPER, OBVIOUSLY, YOU'RE IN A VERY COMPETITIVE MARKET.
THE BIGGEST PROBLEM FOR OUR DEVELOPERS TODAY STATEWIDE IS AFFORDABILITY.
WITH LAND COST, INFRASTRUCTURE COST, AND INTEREST RATES, THEY ARE TRYING TO DELIVER HOMES AS INEXPENSIVELY AS THEY CAN.
I AM NOT TELLING YOU THAT ALL OF THAT COST AUTOMATICALLY GETS PULLED OUT.
SOME OF IT MAY BE ALLOCATED TO A HIGHER AMENITY PACKAGE, SOME OF IT MAY BE ALLOCATED TO LESS DENSITY THAN THEY WOULD OTHERWISE PROVIDE BUT REALLY THE MARKET DRIVES THAT PRICE AND EVERYBODY IS TRYING TO GET MORE PEOPLE TO BE ABLE TO AFFORD THE HOUSES BECAUSE, FRANKLY, WE'VE PRICED EVERYBODY, OUT OF THE MARKET LARGE.
I'LL JUST GIVE YOU A NORTH TEXAS, DALLAS, FORT WORTH, IN 2013, THE AFFORDABILITY INDEX WAS 83%, WHICH MEAN A COUPLE OF MEDIAN INCOME COULD AFFORD 83% OF THE NEW HOUSING STOCK.
ONLY A COUPLE OF MEDIAN INCOME CAN ONLY AFFORD 27% OF THE HOUSING SITE.
IT IS AN INCREDIBLE EFFORT TO TRY TO DELIVER THOSE HOUSES AS EFFICIENTLY AS POSSIBLE BECAUSE YOU'VE TAKEN SO MANY PURCHASERS OUT OF THE MARKET AND TO BE HONEST, A LOT OF AMERICANS CAN'T AFFORD A HOUSE.
I SAW THE OTHER DAY, THE AVERAGE FIRST-TIME HOME BUYER NOW IS 39 YEARS OLD. IT'S REALLY SAD.
>> JUST TO ADD SOME ADDITIONAL COMFORT TO THIS ISSUE OF WHAT'S TO STOP THE DEVELOPER FROM JUST GETTING THIS WINDFALL THAT NO ONE NOTICES.
I'LL JUST NOTE THAT ON THE MUD REIMBURSEMENT WHEN THE MUD ISSUES BONDS TO PAY THE DEVELOPER BACK, THERE IS THIS VERY DETAILED RULE PROCESS THAT YOU'RE HAVING TO FOLLOW SO THAT THEY GET BACK WHAT THEY PAID.
THEY'RE GETTING PAID THE ACTUAL COSTS OF THAT COMPETITIVELY BID PUBLIC INFRASTRUCTURE, AND THEN YOU HAVE THE THIRD PARTY INDEPENDENT ACCOUNTANT, THAT THE DISTRICT HIRES TO GO THROUGH LITERALLY EVERY SINGLE CHECK AND PAYMENT THAT IS MADE BY THE DEVELOPER AND MAKE SURE THAT THEY'RE ONLY GETTING PAID BACK WHAT THEY ARE OWED WITHOUT ANY WINDFALL TO THAT.
>> YOU CAN'T ADD ANY COST FOR ANY OTHER THAN WATER, SEWER DRAINAGE, AND ROADS THAT YOU BUILT.
>> THERE IS A WAY TO CAP THE BUILDING CONSTRUCTION COSTS.
AT A CERTAIN POINT IN TIME, THE DEVELOPMENT IS CONSIDERED COMPLETE.
COSTS ARE INPUT, BOND HAS BEEN ISSUED FOR REIMBURSEMENTS, WHICH THEY WANT THAT, NOW YOU HAVE A TOTAL AMOUNT THAT IS BONDED AND WON'T BE ADDED TO OR THEY COULD COME BACK AND ADD ADDITIONAL AMENITIES PER THEIR FIVE-MEMBER BOARD.
>> WELL, HERE, WE'RE ONLY DOING WATER, SEWER DRAINAGE, AND ROADS, AND SO ONCE THEY GET THROUGH ALL OF THOSE, THEY WILL SELL THE BONDS FOR THOSE.
IF YOU THEN DECIDE THEN OR FIVE YEARS LATER TO ANNEX, ALL OF THOSE FACILITIES ARE BRAND NEW.
YOUR CURB AND GUTTER STREETS, FOR 20 YEARS, YOU'RE NOT GOING TO NEED TO DO MUCH MAINTENANCE OR REPAIR AND REPLACEMENT.
JUST SO, YOU KNOW, ALL OF THOSE END UP WITH YOUR CITY-REQUIRED MAINTENANCE BONDS, ETC.
IF YOU WERE TO DECIDE NOT TO ANNEX, AND YOU'RE SITTING IN YEAR 30 OR 40 AND THEIR WATER LINES START BREAKING YEAH, THEY'RE GOING TO SELL MORE BONDS SO THEY CAN CONTINUE TO PROVIDE SERVICE BUT THERE'S NO INCENTIVE, AND REALLY PROBABLY THE REAL KEY THERE IS THE BOARD MEMBERS AT THAT TIME ARE ALL THE TAXPAYERS.
THEY'RE NOT GOING TO WANT TO PAY A SINGLE DOLLAR MORE IN TAXES THAN FOR THE ACTUAL INFRASTRUCTURE THAT'S SERVING THEM.
>> THAT MAKES SENSE. REALLY, THESE POLICIES ARE DRIVEN ON FREE MARKET CAPITALISM.
[01:25:05]
IT'S JUST GOING TO BE THE AFFORDABILITY OF THE LOT, BEING ABLE TO COMBINE THESE DOLLARS BOTH BOND, LOWER INTEREST FUNDED VERSUS I GUESS THE COST OF THE HOUSE.[NOISE] I DEFINITELY SEE THAT THIS GIVES US A WAY FOR GROWTH TO PAY FOR GROWTH.
I ACTUALLY BELIEVE THAT GROWTH ACTUALLY PAYS FOR GROWTH AND SOME REPLACEMENT.
I DON'T THINK EXISTING TAXES PAY FOR GROWTH.
>> BUT IN THE WAY IN WHICH IF I WAS TO BRING SOMETHING TO COUNCIL AND SAY, WE SHOULD GO AND SPEND $30 MILLION IN THIS FUTURE DEVELOPMENT, HOPING THAT THE DEVELOPER PUTS IN 70 MILLION, AND 10 YEARS FROM NOW THERE'S 3,000 UNITS.
THEN I COULD JUSTIFY THAT AS, WELL, EXISTING TAX RATE AND TAXPAYER ARE PAYING FOR GROWTH.
THIS WAY, IT FLIPS IT AROUND WHERE IT ISOLATES IT. I LOVE THAT.
I THINK THE QUESTION, THE CONCERN IS, WHAT HAPPENS TO THAT TAX RATE WHEN THEY'RE DIFFERENT AND WE'RE TRYING TO ANNEX? LET'S SAY OUR TAX RATE IS 0.45, AND THEIR TAX RATE IS 0.90.
ARE WE ANNEXING THAT PROPERTY IN AT A DISCOUNT FOR THAT PROPERTY OWNER AND THEY GET TO REALIZE THAT SAVINGS AS SOON AS THEY COME INTO THE CITY OR TELL US ABOUT THE VARIANCE AND HOW IT WORK?
>> SURE. WHAT WE TYPICALLY SEE IS THOSE TAX RATES AT THE HIGHEST THAT THEY'RE GOING TO BE FROM DAY 1, AND THEN THEY BEGIN TO SLIDE DOWN.
ACTUALLY FROM THE CITY'S PERSPECTIVE, YOU WANT THEM TO AMORTIZE AS MUCH DEBT ON THEIR OWN TAX RATE TO PAY IT OFF AS QUICKLY AS THEY CAN.
BUT YOU WILL SEE AS DEVELOPMENT PROGRESSES, THAT TAX RATE WILL START SLIDING DOWN.
TYPICALLY, WHAT WE SEE CITIES DO IS THEY'LL START ANALYZING THE MATH ON WHETHER IT'S TAKING INTO ACCOUNT CONVERTING FROM BEING WHOLESALE WATER TO RETAIL WATER.
DO YOU PICK UP SOME ADDITIONAL REVENUE THERE, LOOKING AT HOW MUCH SALES TAX IS REALLY BEING GENERATED FROM ALL OF THOSE NEW ROOFTOPS? BUT MORE IMPORTANTLY, WHERE IS THEIR TAX RATE AND WHEN ARE YOU READY TO ANNEX AND BRING IT INTO THE CITY FOR FULL PURPOSES.
THAT'S A DECISION THAT A FUTURE COUNCIL WILL MAKE, BUT IT IS NOT AN OBLIGATION.
NOW, YOU'LL SEE MOST CITIES OTHER THAN CITY OF HOUSTON, IF YOU LOOK AT THEM OUT IN YEAR AND AFTER THEY'VE PAID OFF THE DEBT DEPENDING ON HOW LONG THEIR DEVELOPMENT CYCLE IS THEY'RE GOING TO WATCH THAT TAX RATE AND EVENTUALLY THEN FULL PURPOSE ANNEX IT INTO THE CITY PURSUANT TO THE SPA.
>> IN TERMS OF SP 2 WITH OUR 3.5% GROWTH RESTRICTIONS, IF I WERE TO ANNEX A SIZABLE MUD, DO I GET TO ABSORB THE REVENUE THEY'RE BRINGING IN OR IT'S TYPICALLY I'M 3.5%? IF I SUDDENLY BRING IN ALL THAT TAX BASE, AM I STILL LIMITED TO 3.5%, OR DO I GET TO ABSORB WHAT THEY'RE BRINGING IN TO INCORPORATE WITH THE NEED FOR THEIR SIDE OF THINGS?
>> WE MAY HAVE TO GIVE YOU A MORE TECHNICAL ANSWER, BUT I BELIEVE THAT'S CAPTURED IN THE GROWTH COMPONENT OF THAT.
BUT LET US GIVE YOU A MORE DEFINITIVE ANSWER.
>> I SEEM TO RECALL THERE BEING A CALCULATION TO THAT AND I DON'T REMEMBER LAURA IF YOU REMEMBER, BUT I'VE NEVER ENCOUNTERED IT YET.
I HOPE THERE IS AN ALLOWANCE FOR THAT, OTHERWISE, I WON'T BE ABLE TO KEEP UP WITH THE COST AT ALL.
WE WILL GET YOU A MORE DEFINITIVE ANSWER.
>> WE SEE THAT THERE ARE SOME CONCERNS IN THE LOGISTICS AND THE TRANSITION.
AT SOME POINT, THESE THINGS INTERSECT.
THEY HAVE $1 RATE, LET'S SAY THAT YOU COULD AFFORD THAT.
AT SOME POINT, WE'RE GOING TO HIT THAT 0.40 RATE.
WE WANT TO ANNEX AT THAT POINT.
THEY'VE GOTTEN THEIR REIMBURSEMENTS BACK.
>> THEY KEPT THEIR LOT PRICE DOWN.
IDEALLY, THEY'RE SELLING LOTS FOR $30,000, WHERE EVERYBODY ELSE AROUND TOWN SELLING THEM FOR 60.
THE ISSUE IS, IS THEY FINANCED THE OTHER 50% OF THAT LOT, SO THAT OWNER IS STILL MAKING THE SAME $2,000 A MONTH PAYMENT THAT THEY WOULD HAVE, BUT THEY TOOK ADVANTAGE OF THE FINANCE MECHANISM.
[01:30:02]
>> THEN THE WATER, IS IT TOO EARLY TO TALK ABOUT THIS? DO WE WANT TO COME BACK AT ANOTHER TIME AND JUST LET THIS SET IN WHAT WE'RE LOOKING AT?
>> I THINK SPECIFICS, WE'RE GOING TO HAVE TO HAVE DIFFERENT LEVELS OF DISCUSSIONS, BUT GETTING DIRECTION FROM YOU TODAY FOR US TO UNDERSTAND THAT.
BUT WHEN YOU LOOK AT A MUD FROM THE OPTIONS FROM A LONG TERM PERSPECTIVE, YOU'VE GOT TO LOOK AROUND THE CITY AT ALL THE OPTIONS OF MUDS AND WHAT THAT WOULD LOOK LIKE.
STAFF RECOMMENDATION IS THAT YOU ALMOST HAVE TO MAINTAIN THE CAPACITY AS A WHOLESALE PROVIDER BECAUSE A RETAIL PROVIDER OUTSIDE THE CITY LIMITS HAS A WHOLE SET OF CHALLENGES RELATED TO THAT.
I KNOW YOU'RE PROBABLY GOING INTO MORE DETAIL, BUT THEN THERE ARE CONSIDERATIONS FOR HOW TO ACCESS WATER.
DOES ANNEXATION PROVIDES A BENEFIT OF ACCESS TO THAT WATER AND WASTEWATER? WHAT DOES THAT LOOK LIKE IN RELATION TO A MUD? ARE WE GRANTING SOMETHING THAT THIS AREA AND THESE HOUSES WILL HAVE PERMANENT ACCESS TO WATER RIGHTS, SEWER PLANTS, THE EXISTING INFRASTRUCTURE THAT'S OUT THERE? THAT ALL HAS TO BE IN AN INDIVIDUAL NEGOTIATION WITH EACH DEVELOPER, AND THAT WOULD COME INTO AN EXECUTIVE SESSION DISCUSSION AFTER THAT WE GO THROUGH THAT PROCESS.
I THINK THAT'S WHERE YOU'RE HEADED MAYOR IS THOSE DETAILS.
>> THAT'S SOMETHING THAT I THINK THEY'RE GOING TO HAVE TO NEGOTIATE AND BRING TO YOU FOR A DISCUSSION AS TERMS AND CONDITIONS OF AN AGREEMENT.
>> I THINK THAT'S A REALLY GOOD ANSWER BECAUSE WHAT I'M LOOKING FOR IS IF WE COULD GIVE YOU A DIRECTION ON, DO WE WANT TO TEMPLATE OR DO WE NOT? WE COULD SAY, YOU KNOW WHAT? NOT WORTH IT FOR US.
LET'S JUST LET EVERYTHING HAPPEN THE WAY IT HAPPENS.
THAT HAS BEEN SOMEWHAT OF WE JUST TELL YOU WE DON'T HAVE ANY MONEY AND YOU GO FIGURE IT OUT.
IF WE AS A COUNCIL DECIDE, NO, WE WOULD LIKE TO STRATEGICALLY WORK ALONGSIDE OF OUR DEVELOPING COMMUNITY, THEN WHAT WE ARE LOOKING FOR IF COUNCIL MOVES IN THIS, WHAT I WOULD TRY TO DIRECT IS, LET'S GET A BASIC TEMPLATE, BASIC MODEL THAT SPEAKS TO THE UNIFORMITY OF THE THINGS THAT DON'T COME TO EXEC.
NOW, IN EVERY MUD, THIS IS WHAT'S FAIR.
IN EVERY MUD, THESE ARE THE REQUIREMENTS, BARE MINIMUM.
IF WE DON'T HAVE THESE THINGS, THEN YOU'RE NOT A MUD, YOU'RE NOT OPERATING ACCORDING TO STATE LAW REQUIREMENTS, OR YOU'RE NOT GOING TO FIT UP NEXT TO WHAT WE WOULD HAVE TO HAVE TO ANNEX.
YOU LIST THOSE MINIMUMS, THEN FROM THERE, WE WOULD LIKE STAFF RECOMMENDATIONS.
I'M GOING TO PUT OUT A NUMBER.
I DON'T KNOW WHAT IT IS, BUT LET'S SAY IT'S 120% WATER INSTEAD OF 100%.
WATER USER INSIDE CITY LIMITS, PAYS $1, OUTSIDE CITY LIMITS, PAYS 1.20.
WELL, THE AMOUNT THAT WE WOULD PUT ON THERE FOR STAFF'S RECOMMENDATION WOULD BE UNNEGOTIABLE.
THAT COULD FUNCTION DIFFERENTLY DEPENDING ON ARE WE DOING A MUD FOR 500 HOMES? ARE WE DOING A MUD FOR 5,000 HOMES? WHAT DOES MARKET ALLOW FOR AT THE TIME? THE ABILITY TO CONTINUE TO GROW BASED ON THE CHANGE OF HOW THINGS HAPPEN IN THE CONSTRUCTION INDUSTRY AND THE DEMAND.
COUNCIL, I WANT TO STOP THERE AND ASK YOU GUYS.
ALL OPTIONS ARE ON THE TABLE FOR DEVELOPERS AT THIS POINT.
THE STATE HAS SEEN TO IT THAT THEY COULD PETITION AND THEY CAN OPT OUT OF YOUR ETJ, WHICH WE ARE ALSO CONTIGUOUS.
WE CAN'T LEAP OUT FIVE MILES AND ANNEX ANY LONGER ANYWAY.
YOUR DEVELOPER AND YOUR PRIVATE PROPERTY RIGHTS TRUMP WHAT YOU'RE GOING TO MANDATE.
DO WE SEE THE BENEFIT IN MOVING FORWARD WITH SOMETHING THAT WE COULD PROVIDE AS A TEMPLATE AND A MODEL THAT WE WANT THESE CONSULTANTS TO BRING BACK TO US OR WOULD YOU RATHER JUST SIT AND WAIT AND LET STAFF NEGOTIATE WITH THE DEVELOPER THAT'S AT HAND AND JUST SEE IF THAT PROCESS BRINGS SOMETHING THAT SETS A PRECEDENT THAT WE CAN LIVE WITH? REALLY, WE DON'T HAVE ANY NEGOTIATING POWER IN THAT.
STAFF HAS TO NEGOTIATE IT, BUT YOU STILL HAVE THE ABILITY TO TWEAK INDEPENDENTLY WITH STAFF ONCE THEY BRING IT BACK.
IT'S JUST THE EXCHANGE BACK AND FORTH DURING THE MEANTIME.
MAYBE THREE OPTIONS THERE AND WE JUST ASK COUNCIL TO SPEAK TO THOSE.
>> I THINK THE TEMPLATE IDEA IS GOOD, BE A GOOD STARTING POINT.
>> I WOULD AGREE. DO WE HAVE A SPECIFIC BUILDER OR DEVELOPMENT THAT INQUIRED ABOUT THIS?
>> YES. WE'VE HAD ONE ACTUALLY SUBMITTED APPLICATION OF THE TCQ, AND WE'VE HAD ANOTHER MAJOR DEVELOPER LOOKING AT SUBMITTING.
>> NO. I THINK THAT'S A GOOD IDEA.
[01:35:02]
LOOKING THE TEMPLATE, I THINK IT'S A TOOL THAT YOU CAN DEFINITELY USE.>> THIS SIDE? ANY DRAWBACK ON PUTTING A TEMPLATE OUT? ARE WE GOING TO REGRET HAVING A BASIS? I DON'T SEE THE ISSUE.
I GUESS THAT'S A QUESTION FOR OUR CONSULTANTS.
HAVE YOU SEEN HISTORICALLY SOMEBODY TRY TO WORK OFF OF A PRECEDENT, AND THEY'RE GETTING HUNG UP BECAUSE THINGS ARE SO DIFFERENT? ONE SIDE OF TOWN IS FLAT, THE OTHER SIDE OF TOWN IS ROLLING HILLS. HOW DOES THAT WORK?
ONE IS, YOU GO THROUGH ONE OF THESE PROCESSES, LEARN WHAT THE ISSUES ARE, AND THEN AFTER YOU HAVE GONE THROUGH A LIVE ONE, YOU SAY, NOW WE UNDERSTAND IT.
WE UNDERSTAND WHERE ALL THE PUSH POINTS ARE, WE UNDERSTAND TALKING WITH STAFF, WHAT OUR ISSUES ARE, AND THEN YOU PRODUCE A POLICY FOR GUIDANCE GOING FORWARD.
YOU'VE LEARNED FROM THAT FIRST ONE IN ORDER TO CREATE THE POLICY.
THE OTHER IS TO SPEND THE TIME CREATING THE POLICY ON THE FRONT END AND MAYBE A TEMPLATE AGREEMENT, ETC.
I THINK THOSE THINGS ARE A LITTLE BIT HARDER IN A VACUUM BECAUSE THERE'S NOTHING LIKE A REAL PROJECT TO ACTUALLY THE OTHER SIDE DISCUSSING ISSUES THAT CREATES A LEARNING EXPERIENCE ABOUT WHAT'S IMPORTANT TO YOU.
BUT I THINK IT CAN BE DONE EITHER WAY.
I DON'T THINK THERE ARE ENOUGH DIFFERENT ISSUES AROUND TOWN THAT THERE COULD BE SLIGHTLY DIFFERENT ISSUES AND DIFFERENT PRESSURE PLANES OR WHATEVER, BUT NOT ENOUGH THAT THERE NEEDS TO BE DIFFERENT POLICIES FOR DIFFERENT PARTS OF TOWN.
>> JUST A LITTLE BIT OF A DIRECTIVE, IT'D BE VERY HELPFUL FOR COUNCIL BECAUSE WE'RE LEARNING.
THERE'S NO REFERENCE POINT, SO WE CAN'T EVEN LOOK BEST PRACTICES LIKE AROUND HERE.
YOU'RE GOING TO HAVE TO PICK SOMETHING THAT'S PROBABLY PRETTY DIFFERENT FROM WHO WE ARE.
COULD YOU GIVE US A TEMPLATE AND THE MINIMUM REQUIREMENTS OF YOUR RECOMMENDATION, AND COULD YOU SEPARATE OUT STAFF'S RECOMMENDATIONS? THAT WAY WE COULD SEE WHAT'S COMING FROM OUR LOCAL.
>> HERE'S THE HISTORY. THIS IS WHERE WE KNOW WE NEED TO LAND BECAUSE WE'RE PAYING THOSE BILLS VERSUS MAYBE YOUR ADVISEMENT.
THEN HOW LONG WOULD IT TAKE YOU GUYS TO GET BACK IN FRONT OF THIS COUNCIL?
>> I THINK WE COULD PROBABLY TURN THIS AROUND IN A WEEK OR SO AND THEN LET STAFF HAVE SOME TIME TO TAKE A LOOK AT IT.
>> IF WE WERE LOOKING JANUARY, LET'S SAY WE HAVE THE HOLIDAYS AND WE NEED IT TO GO BACK AND FORTH, I WOULD ASSUME YOU WOULD HAVE SOMETHING.
CITY MANAGER ASSISTANTS AND DEPUTY WOULD NEED TO CONSULT AND THEN GO BACK AND FORTH.
WE DON'T NEED SOMETHING THAT WE'RE READY TO VOTE ON.
WE NEED SOMETHING WE CAN TAKE THE NEXT STEP WITH YOU ON.
THEN DOES THIS HELP YOU WITH YOUR NEGOTIATIONS WITH SAY DEVELOPERS, OR ARE THEY FAR ENOUGH ALONG AHEAD THAT THAT COULD BE COMING PRIOR TO US GETTING THIS FROM YOU?
>> I THINK THEY'RE PRETTY FAR ALONG IN THEIR THOUGHT PROCESS.
I THINK WITH SOME FEEDBACK ON A LIMITED NUMBER OF ISSUES, ONE IS THIS OVERALL STRUCTURE OF ETJ, SPA, ETC, THE DIRECTION.
HOW DO YOU WANT TO DEAL WITH MAINTENANCE? WHICH PUBLIC SERVICES? ARE YOU INTERESTED IN CONTINUING TO PROVIDE? DO YOU WANT TO PROVIDE FOR A MAINTENANCE BID ON ONGOING BASIS? I THINK WITH THAT LIMITED NUMBER OF FEEDBACKS ON THOSE QUESTIONS, WE COULD BE DRAFTING AN AGREEMENT.
>> YOU MIGHT BE ABLE TO BRING US BACK THE BONES WITH A FEW THINGS THAT WE WOULD ATTACH TO IT.
THEN WE'D BE ABLE TO SAY MAINTENANCE PID LOOKS GOOD OR NOT NEEDED.
LET'S NOT KEEP IT IN THE BASIC PACKAGE. WE KNOW ABOUT IT.
I THINK THAT IF WE COULD GET SOMETHING BACK THROUGH STAFF WHERE IF STAFF WAS COMFORTABLE AND THEY COULD FEED IT AND DISSEMINATE IT TO COUNCIL IN DECEMBER, THEN MAYBE WE COULD EVEN HAVE A DISCUSSION WITHOUT YOU GUYS IF WE NEEDED TO AT A COUNCIL MEETING.
WE'RE GOING TO HAVE ONE IN DECEMBER.
BUT IF WE MISS THAT, THEN WE WOULD BE LOOKING AT
[01:40:02]
COUNCIL IN JANUARY OR ANOTHER WORK SESSION IF NEEDED.BUT REALLY WOULD ENGAGE WITH YOU ALL IN THAT AND SEE IF WE CAN MOVE IT FORWARD.
FULL ON KNOWING, WE MAY HAVE SOMETHING WE TAKE A STEP BACK FROM.
>> SORRY. FOR CLARIFICATION, SHOULD WE CONTINUE TO NEGOTIATE WITH THE EXISTING ONE?
I DON'T THINK YOU'RE GOING TO BRING ME SOMETHING TO VOTE ON IN DECEMBER, CORRECT?
I DON'T KNOW WHERE THE PROCESS IS AT.
>> I WOULD JUST SAY, I THINK THE PROCESS OF GOING THROUGH THIS TERM SHEET NEGOTIATION IS REALLY HELPING INFORM WHAT WILL BE THE TEMPLATE BECAUSE IT'S THAT REAL WORLD EXPERIENCE OF UNDERSTANDING WHAT THE ISSUES ARE.
I THINK THESE ARE RUNNING ON PARALLEL PATHS.
BUT I'M NOT HEARING ANYTHING TODAY FROM COUNCIL THAT IS INCONSISTENT WITH THE DIRECTION THAT WE'RE GOING ON IN THE TERM SHEET IN TERMS OF PRINCIPLES.
>> I FEEL THAT FROM WHAT I'VE READ IN THE MUD TERM SHEET, I THINK MUCH OF WHAT WE'VE ALREADY NEGOTIATED WOULD FIT A TEMPLATE ALREADY.
BECAUSE MUDS ARE RATHER BOXED, THERE'S NOT A LOT OF CREATIVITY WITH THESE THINGS.
THEY'RE PRETTY MUCH WHAT THEY ARE.
I THINK WHAT WE'RE DOING NOW WITH THIS CURRENT DEVELOPER IS GOING TO EVENTUALLY JUST DRIVE TOWARDS OUR TEMPLATE, I THINK.
>> I WOULD LIKE TO SAY THAT WE WOULD SET A GOOD EXPECTATION, HAVE SOMETHING IN COUNCIL'S HANDS TO READ, STUDY AND UNDERSTAND IN DECEMBER WITH A MEETING IN JANUARY.
THEN THAT GIVES US ALL TIME TO WORK THROUGH IT.
I DON'T BELIEVE THAT WOULD BE A HINDRANCE TO OUR DEVELOPER.
I THINK HE'S BEEN IN NEGOTIATIONS FOR SOME TIME SO FAR.
PROGRESS IS GOOD. ANYTHING FROM STAFF OR OUR CONSULTING GROUP HERE THAT THEY NEED TO ADD BEFORE WE TRY TO FEED EVERYONE LUNCH?
>> THE MAIN THING IS REALLY, EVERYTHING FALLS FROM THIS WHOLE CONCEPT OF SELF SUPPORTING BECAUSE THAT'S REALLY GOING TO BE THE DIRECTION THAT YOU'RE GIVING STAFF WHEN THEY'RE CALCULATING WHAT PAYMENTS NEED TO BE MADE.
I THINK IF THAT'S THE APPROACH ISOLATING SELF SUPPORTING, I THINK WE'RE HEADING DOWN THE PATH.
>> I KNOW THEY'RE JUST GETTING TO MEET YOU.
I'VE SPENT SOME TIME JUST ON A PHONE CALL AND THEN ALSO LOOKING AND FIELDING QUESTIONS BACK AND FORTH.
THEN I'VE BEEN LOOKING AT THIS FOR OVER A YEAR.
I LIKE THIS DIRECTION AND WE LIKE WHO'S ON OUR TEAM.
WE THINK YOU GUYS ARE VERY EXPERIENCED AND THAT THIS ISN'T A BRAND NEW THING.
I THINK WHEN I FIRST HEARD ABOUT IT, WHAT IS IT 25, 30 YEARS NOW?
>> OR MORE. WE'RE ON GOOD FOOTING, AND I THINK IT'S A GOOD PATHWAY AND WE WANT ALL OPTIONS TO GROW.
>> WE'RE A VERY PRO GROWTH COUNCIL AND APPRECIATE ALL GROWTH AND STIMULUS.
IT ALL STARTS WITH THOSE ROOFTOPS.
WE APPRECIATE YOU GUYS BEING HERE WITH US.
IF ANYBODY HAS ANYTHING THEY'D LIKE TO ADD, WE CAN JUMP IN.
OTHERWISE, WE'RE GOING TO ADJOURN. THANK YOU ALL.
>> THANK YOU ALL.
* This transcript was compiled from uncorrected Closed Captioning.