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Council rejects agreement to keep MUD alive

Friday, August 31, 2012 by Elizabeth Pagano

Though it technically passed on first reading, Austin City Council on Thursday effectively rejected an interim consent agreement with TXI Operations L.P. that would have kept a municipal utility district from dissolving.


With time running out on a Sept. 1 deadline for action, the 2,130-acre Rio de Vida Municipal Utility District (MUD) will almost undoubtedly be dissolved.


Because of the time crunch, and the fact that Council Members Bill Spelman and Mike Martinez were absent, a single vote against extending the interim agreement, cast by Council Member Laura Morrison, had the effect of sinking the MUD. The 4-1 vote was only enough to pass the item on first reading and it needed all five votes to simultaneously pass on the required first, second and third readings. There wasn’t enough time to schedule subsequent votes by Council before the Sept. 1 deadline.


“It is unlikely that we will address this item again, seeing that the expiration date for this authority expires the day after tomorrow, so I would assume that the initiative is effectively dead as of this point,” said Mayor Lee Leffingwell.


The Texas Legislature approved the creation of the MUD in May 2011, with a condition that the consent agreement be reached between the city and the developer by September 1. Questions, and litigation, over water and wastewater service has prevented establishing that long-term consent agreement.


Though it was relatively early in the process of development, serious problems had already arisen concerning who will provide water and wastewater service to the MUD. The city’s policy requires that the MUD be entirely served by the City of Austin. Southwest Water Co. disputed the city’s claim on part of the Rio de Vida MUD, and Austin is currently in litigation over the matter.


Municipal utility districts have been difficult for the city to deal with. Only recently has Austin opted to work with developers in an effort to gain “superior development qualities” from the districts such as affordable housing, environmental considerations and open space requirements. The details of these benefits for Rio de Vida would have been included in the consent agreement, and had yet to be inked.


“It looks like a lot of really terrific things in terms of open space that were being planned,” said Morrison, who said that it was unfortunate that Council didn’t have more time to think through the complicated agreement.


“I just think that since it’s unprecedented, it’s uncharted territory, I tried to play out all of the possible paths that this could go, and there are a lot of potential challenges to the validity of this,” Morrison told In Fact Daily. “I know that our attorneys have walked through, with me, what they consider minimal risks but I just don’t feel like it’s the right decision to make at this time.”   


Without further Council action, which seems unlikely, the MUD will become void on Saturday. The property owner then has the option of reintroducing the legislation with the Texas Legislature and working on striking another agreement with the city or seeking approval from the Texas Commission on Environmental Quality (TCEQ). If TCEQ approves that kind of MUD, the city’s policy provides that they would protest that action.


“If TCEQ ultimately created a MUD, then that would just be a standard MUD, and it wouldn’t contain the kind of provisions that you all wanted to include in your consent agreement related to the requirements in your MUD policy: affordable housing, parks, all sorts of attributes disappear,” said Assistant City Attorney Sharon Smith.


Morrison said that the legislative creation of a MUD would benefit developers as well as the city. Part of the Rio de Vida property is a quarry, necessitating grading and topographical improvements. These could be paid for with MUD financing if it was approved legislatively, as could road improvements and park reimbursements, among other things.


“I think that what we need to remember is that there is a huge interest on the part of the developer to do a legislative MUD,” said Morrison. “It means that they get to remediate their gravel pit with MUD bond funds, and that’s money they would have to find elsewhere. This legislative MUD allows them to charge hotel tax and other things like that so there’s a huge financial interest on their part.”        


Morrison indicated that she hoped there would be enough common interests to move forward later even if the original agreement becomes void. “I am really sorry that we don’t have seven people on the dais right now. Because it makes for a very unusual situation,” she said. “I just cannot support this motion at this time.”

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