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Council postpones vote on Rio de Vida MUD agreement

Friday, August 24, 2012 by Josh Rosenblatt

The Austin City Council voted Thursday to postpone approving a temporary agreement with the developer of a future municipal utility district (MUD) on the banks of the Colorado River to get more information from staff. If Council members vote against the agreement next Thursday, the Rio de Vida MUD will be dissolved on Sept. 1.

The temporary agreement is necessary, staff told Council members, because the MUD’s developer, TXI Operations L.P., has not been able to resolve water and wastewater utility issues that are in litigation. When the Texas State Legislature created Rio de Vida MUD in May 2011, it did so under the condition that the City of Austin enter into a consent agreement with the MUD no later than Sept. 1 of this year.

The Rio de Vida MUD encompasses 2,130 acres in eastern Travis County that will, hypothetically, feature a large mixed-use development on the banks of the Colorado River.

The lawsuit concerns who is going to be the provider of water and wastewater utilities for the property. It is city policy that MUDs be entirely served by the city. However, a difference of opinion over the language of a settlement agreement between the city and Southwest Water Co. has called into question whether the property is entirely in the certificate of convenience and necessity (CCN) area of the city and, therefore, if the city is allowed to serve the entirety of the area. 

“The city didn’t have a CCN for water and wastewater, and we were in negotiations with several parties like Southwest Water in the 2000s,” Assistant City Attorney Sharon Smith told In Fact Daily. “We moved into settlement agreements with those parties to resolve any overlapping areas or issues about where the boundaries were going to he drawn. That didn’t mean those boundaries couldn’t be redrawn or that customers couldn’t get out of the service area of one utility and be served by another. In this instance, however, Southwest Water has asserted that it does mean that they keep the city from ever serving any property that’s released from Southwest’s territory.”

In other words, if the city wants to provide water and wastewater service to the Rio de Vida MUD, it first has to convince a judge that the property is in the city’s certificated area. And that takes time. Currently the city is awaiting a judge’s ruling on the declaratory judgment action it filed to speed the process along.

So far the city hasn’t been successful and has to continue waiting. As a consequence, Smith told Council, “We haven’t started negotiations on this in any kind of substantive way.”

So rather than let the time run out on the MUD staff is asking Council to approve a one-year interim agreement between the city and the MUD.

Signing off on such an agreement would have little effect beyond preventing the dissolution of the MUD, according to Planning and Development Review Director Greg Guernsey. It would create the MUD but not allow the MUD’s directors to actually do anything. “It’s good faith on both sides,” Guernsey said. “It’s keeping it in place for another year. This, in essence, would allow them to be in the same position they are today for an additional period of time.”

But Council Member Laura Morrison was skeptical. Looking through the interim agreement, she said, turned up any number of issues that could potentially compromise the city’s authority over the MUD and ability to negotiate a permanent agreement. Quoting directly from the agreement, Morrison pointed out passages that raised questions about development on the MUD site during the life of the temporary agreement, about its governance and about the role the city would play in lawsuits related to the MUD. She also expressed concern that the temporary agreement could jeopardize the city when it comes to drawing up a potential permanent agreement a year from now.

“I’m concerned about making sure there aren’t any leakages of our leverage in terms of coming up with an agreement,” Morrison said. “Other issues tell me this is uncharted territory that make me very uncomfortable.”

In that spirit, Morrison moved not to approve the interim agreement. But Council instead voted 5-0 to postpone the item until next Thursday, when members will have gotten more information from staff and Mayor Lee Leffingwell, and possibly even Council Member Bill Spelman, will be back on the dais. Both were absent during Thursday’s discussion.

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