Editorial – New Development in Aubrey

June 30th, 2015 by

The Aubrey City Council met last Thursday night and voted 4-1 to create a Public Improvement District (PID) for the Jackson Ridge development on FM1385. This was the next step towards the building of nearly 1400 new homes in what is now the newest part of Aubrey’s city limits.

Having the unique perspective of leading the negotiations over the previous 24 months; and because there were people at the meeting who were suggesting that this was done in haste and without enough thought or public input, I’d like to explain how Aubrey got to this point.

Aubrey was approached by the landowner, Centurian American, in late 2012 about supporting the creation of a Municipal Development District (MDD) on the property. The reason they approached the city was because most of the property they wanted to develop was in Aubrey’s Extra Territorial Jurisdiction or ETJ.

ETJ land is not land owned by the city as some mistakenly believe. It is private property that will eventually be part of the City of Aubrey as the city grows. In Aubrey’s case, most of this land was brought into Aubrey’s ETJ between the mid 90’s and the mid 2000’s through a series of voluntary agreements between the private landowners and the city.

In this particular case, the landowner wanted to legislatively create an MDD for the purposes of issuing debt to build the infrastructure; roads, sidewalks, water and sewer lines, etc. in their new development. This is a financing mechanism that is popular with large land developers but has been criticized by some citizens and elected officials.

The criticism stems from the fact that it basically creates a new governmental taxing entity, essentially controlled by the landowner, for the purposes of issuing debt that the future residents will be responsible for. The general argument is that the developer will, in most cases, make tens, possibly even hundreds of millions of dollars in profit, depending on how big the project is, so why shouldn’t they assume the risk rather than issuing debt.

Had we said no to support the creation of the MDD the landowner would have still been able to create a new governmental taxing authority bureaucratically through the Texas Commission on Environmental Quality (TCEQ) and issue debt, albeit on a more limited basis; but with no city input into what type of development is built.

Faced with a scenario where, regardless of what position Aubrey took relative to the creation of a new taxing authority, it was going to happen, we determined supporting the legislative district was the best path forward.

The district was created during the 2013 legislative session with a provision that the landowner had to enter into a development agreement with the city before the district could be confirmed or issue any debt.

We began the discussions of a development agreement in earnest in early 2014 when the landowner asked to be voluntarily annexed into the city limits. This was an unexpected but welcomed development because if they annexed into the city there would be a greater level of control over all aspects of the project including the issuance of debt, quality of construction, etc. as well as tax revenue to the city.

The immediate challenge was how to get this and another project owned by the same developer into the city limits because they were not contiguous to the current city limits. Over the next year, while continuing to discuss the details of the project, we actively pursued many different paths to annexation. First looking at a voluntary strip annexation, then looking at a condemnation of McNatt Road; we even asked TXDOT to deed FM 2931 to the City.

We finally settled on the method that has played out over the last six months where the landowner deeded approximately 23 acres of land to the city, free and clear, which was annexed into the city limits.

The landowner then voluntarily annexed the rest of their property into the city limits off that city owned land. This was certainly the most creative method of accomplishing the goal of annexation but it was accomplished without having to do any condemnation and it added 23 acres of land and the value of that acreage to the bottom line of the city’s asset sheet; all at no cost to the taxpayers.

Once we overcame the challenge of annexation, we focused on the many details of a project of this size. The lion-share of the next few months were focused on the financials of the project but we were involved in discussions about many details including lot sizes, building materials, building set-backs and much more.

The city’s leadership team, including the new Mayor, City Administrator, City Attorney, Financial Advisor, Bond Council, City Engineers, Planning Consultants, Water Consultants and key city employees met sometimes weekly for months to attend to every detail of the development agreement. It’s important to point out that other than city staff time, all expenses related to the discussion of this district was paid for by the developer through a Professional Services Agreement, not costing the city anything.

The development agreement was approved by council as my last act as Mayor. The development agreement is now a public document and anyone who wants to see what was negotiated is welcome to read it in its entirety but I’ll sum up the important points.

• The city has agreed to, in phases, issue up to $55 million dollars of debt to finance the project. This is an important point to not overlook. In an ETJ district, the developer has significantly more control over the debt issuance. In the deal we struck, with the district coming inside the city limits, the debt is issued by the elected council, giving much more accountability to the citizens.

• This debt is paid for by the approximately 1400 homeowners in the Jackson Ridge development. It DOES NOT affect any of the current residents of Aubrey and will not negatively impact our tax bill.

• The debt does not affect the city’s ability to borrow money in the future.

• There is no risk of the developer “making off” with millions of dollars because the payments to the developer are through a reimbursement AFTER the work has been completed, inspected and approved by the city.

• There is no risk to the city in the extremely unlikely event that the project defaults. If that happens a foreclosure takes place and the proceeds from the sale go to the bond holder towards their lien. If the foreclosure sale is for less than what is owed, the investor/bond holder loses. The City of Aubrey has no obligation to make them whole.

• The city will reimburse the developer approximately $8 million dollars of that debt issuance through what’s called a Tax Increment Reinvestment Zone (TIRZ) for the cost of major improvements that include the Certificate of Convenience and Necessity (CCN) from Mustang Water for the infrastructure being acquired as well as the construction of an elevated storage tank, underground storage, pumping station and right of way and major pipes connecting to Upper Trinity, which is the wholesale provider of water and sewer for that area.

• We also negotiated for the developer to build and for the home owners association to maintain competitive sports facilities on the 23 acres the city owns in that development. For Jackson Ridge, they’ll be building soccer/football fields and will be building competitive baseball/softball fields in the other project coming to Aubrey in the near future.

There are, of course, hundreds of additional little details that could stretch this already lengthy editorial into a novel but this covers the major issues. As I mentioned above, the development agreement is a public document and can be obtained through city hall to read in much more detail.

As you can hopefully see, this was a thorough and thoughtful process to get to the vote last Thursday and should put to rest the notion that there was a rush to judgement. It is my opinion that the council took appropriate action in approving the PID and moving forward to the next stage of the process.