BELTON — In a boardroom at Belton City Hall, City Manager Sam Listi presides over a set of foam poster board maps centered on the Three Creeks subdivision — an in-progress, unincorporated residential development across from Stillhouse Hollow Lake that will eventually contain approximately 1,500 homes.
The 500-acre tract of land with a grand entrance on Farm-to-Market 1670 on the western edge of Belton recently approved its third phase of utility construction and has issued 169 home permits.
“They’re in a unique situation,” Listi said of the subdivision’s developer, WB Development. “This location is appealing to a lot of different markets but just where it sits has potential. There’s opportunity — and there’s obviously the linkage it brings to Belton.”
In Listi’s eyes, Three Creeks — also known as the Bell County Municipal Utility District No. 1, overseen by Killeen developer Bruce Whitis — is the crown jewel of the city’s future thoroughfare plan: A blossoming nest of homes around which future transportation projects could sprout like spokes on a wheel.
The agreement signed in 2010 between Listi and Whitis to approve the development was part of a “collaborative process,” that took more than three years of negotiation to secure, according to Listi.
Within that contract are terms highly favorable to Belton taxpayers, including premium tap connection fees and water rates, developer-constructed on-site and off-site utility facilities and improvements to a connection leading north of the district along Rocking M Lane.
Even better, the city of Belton was obligated only to practice “best-faith efforts” to secure road infrastructure improvements to service the district — most notably a connective thoroughfare to Shanklin Road, creating a “southern loop” around the city — with no capital investment from Belton residents.
But the ongoing process of building out Three Creeks, Listi said, reveals the uncertainty for cities in municipal utility district agreements — and the extreme parity in the way districts and municipalities negotiate terms for those developments.
Like Belton, Killeen has an agreement with Whitis’ company for a municipal utility district.
Unlike Belton, a Killeen council made an agreement that will lock city residents into millions of dollars in infrastructure improvements, with the city receiving no premium rates on tap fees or utility rates.
However, the agreement does ensure the developer will reimburse some of those costs and construct off-site lift stations for water infrastructure.
A LONG PROCESS
In 2007, Whitis approached the city of Belton for a potential project on a 539-acre tract of land his development company had carved out along FM 1670.
At first, Whitis pursued what is called a “380 agreement,” according to a timeline of events provided to the Herald.
A 380 agreement is a state-authorized pact between cities and private enterprise to promote economic development by providing loans or municipal services and personnel for projects.
Over the course of nearly two years, Whitis’ plan evolved into requesting a municipal utility district that could recoup its infrastructure costs by issuing debt and paying back the debt principal through an elevated property tax on the development’s future residents.
The tax rate currently in effect is 85 cents per $100 of assessed property value — more than 20 cents per $100 higher than the rate in nearby Belton.
“We approached the request that came to us — they needed utilities for the thing to work, and we saw some advantage in the extension of our infrastructure to the subdivision,” Listi said.
After a setback in January 2010, when the City Council voted down Whitis’ initial petition to the council, the developer met with Listi more than 10 times over the course of next 11 months to hash out a mutually beneficial arrangement.
On Dec. 21, 2010, the council formally approved the consent agreement between the city and developer, freeing Whitis to take the proposed development before the Texas Commission on Environmental Quality, a November 2012 general election ballot and the Bell County Commissioners’ Court for formal approval.
According to Bell County Clerk Shelley Coston, the item was never considered during a formal meeting of the court but only discussed at a workshop meeting in 2013 of which no minutes are currently kept.
The path to approving the city-developer agreement was not a smooth one, according to Listi and City Council minutes during that time.
Residents in the area, according to Listi, spoke out against the proposed development — particularly homeowners along Rocking M Lane, a private road owned by Whitis that runs southward from Auction Barn Road.
“There was certainly some commentary,” Listi said. “As it was going on, there were people that came and objected — more of the uncertainty: ‘what’s it going to be, and what’s going to happen?’”
The city also received negative feedback from property owners who negotiated with Whitis independently to secure easements for water/sewer infrastructure.
Listi said Whitis’ company successfully secured the easements necessary to construct a water lift station and the necessary piping to connect into the city’s system.
While no records of those comments are available publicly, council minutes from 2013 and 2014 show one member of the Belton City Council, Jerri Gauntt, was deeply apprehensive about the development as it was going through the platting review phase.
The Belton City Council has final platting authority after plats are voted through the planning and zoning commission. That is not the case in Killeen, where appointed members of the planning and zoning commission currently hold final platting authority. A Killeen ordinance tabled recently by council vote would have reverted that authority back to elected officials on the council.
The Belton council unanimously approved phase 3 of the subdivision Jan. 10.
In August 2013, Gauntt was the sole council member who voted in opposition to a six-month extension of the final plat for phase 1 of the subdivision.
“Councilmember Gauntt stated she hopes the City isn’t giving away more than it will receive in return,” the minutes from the Aug. 27, 2013 meeting read.
Gauntt could not be reached for comment during the reporting of this story.
In the meantime, the county was concurrently reviewing the development’s plats to ensure the district met county road standards.
Phase 1 and 2 of the subdivision were approved by the commissioners’ court in November 2014. Approval of phase 3 is pending.
“We reviewed the plat for all the phases of Three Creeks,” Bell County engineer Bryan Neaves said in an email. “Belton was the primary authority since it was in their ETJ (extraterritorial jurisdiction), but we had a role maintaining the streets. We provided input using our regulations for streets.”
On May 1, the Bell County Commissioner’s Court unanimously voted to accept the warranty for roads constructed in phase 1 of the development, taking over future maintenance of those streets until possible annexation by the city of Belton.
The county was also involved in reviewing the subdivision’s first three phases for floodplain restrictions, per Federal Emergency Management Agency guidelines.
Because the MUD subdivision being developed outside of Killeen will not contract with the county for road maintenance, Neaves said the county has had little involvement with reviewing plats for the subdivision so far.
“I have been to some of the meetings about the MUD,” Neaves said. “They were a couple years ago and in a preliminary stage. I do not even have a copy of the proposed street layout.”
Neaves said the county will still be involved in reviewing the subdivision’s plat for floodplain restrictions at a later date.
Listi said the city did not have any outlook for how many phases the developer would use or on what time span the district would build out.
While the developer initially proposed a rate of 150 homes per year, the subdivision has only approved 169 residential permits in 2½ years of construction.
Listi said the city does not have extensive communication with the developer, reviewing the construction phases only as they are proposed.
“They’re a little city unto themselves, in concept,” Listi said.
Listi said the uncertainty of market demand makes it difficult to predict how a master-planned community of this type will grow and when the city could consider annexing the property.
“Being as it was our first MUD ... we didn’t have a sense for how fast it would go,” Listi said. “We didn’t know if they would do it all at one time or if they would phase it.”
Despite that uncertainty, Listi said the city stood to benefit from a premium return on tap fees and water/sewer rates and the residential growth expected on the western and southern boundaries of the city.
The city currently receives $1,075 for each new home in the development: $500 for each radio-read water meter, $100 for inspection fees, $375 for a sewer tap and $100 for a building plan review.
Development residents will also pay 25 percent more than Belton residents for city-provided water and sewer rates.
In comparison, residents in the development outside of Killeen will pay the same tap fees and purchaser rates as city residents.
“Without this, it’s pretty much just rural out there,” Listi said. “With this, you have rooftops, and you create market demand for retail services and all sorts of services that are going to go into those houses. We certainly hope to tap that.”
Part of tapping into that retail potential is completing a Shanklin Road thoroughfare to the east of the subdivision that will connect the growing community to downtown Belton retail. The city is not contractually obligated to complete the project, but Listi sees it in the city’s best interest to do so.
In the meantime, much like the development outside of Killeen, Belton will not be gathering property tax revenue from the district. The only way to eventually recover those revenues would be an annexation at a later date — which Belton is contractually allowed to do after 10 years but with the catch of having to pick up the district’s outstanding debt.
However, outside forces could cast uncertainty on a future initiative by the city.
“The Legislature, each time they meet, they’re looking at the annexation law and seem to be trying to make that more restrictive on cities,” Listi said. “Two to three sessions from now, what the annexation laws might be at that time and what the opportunity for annexation for the city might be will have to be determined.”
With so much uncertainty, Listi said the crucial thing for the city of Belton is to focus on accruing revenue where possible and keeping an eye on the future.
“As time goes on, we’ll watch the level of development and see where they are,” Listi said. “The 10-year time period (the minimum time allowed before city annexation) is actually 2020, but with the level of development they’re nowhere near paying off their bonds.”
THREE CREEKS TIMELINE
October 2007 — Bruce Whitis begins discussions with Belton on annexation, land use, utilities for potential “380 agreement” for economic development.
Sept. 21, 2007 — Whitis requests “380 agreement” with city
Summer 2008 — Whitis resubmits infrastructure proposal with water, sewers and streets as part of potential municipal utility district, moving away from previous plans
July 23, 2009 — Whitis filed formal petition for MUD development with Belton city clerk under Three Creeks original name, “La Cachette”
Aug. 28, 2009 — Whitis, city and attorneys from Armbrust & Brown meet to discuss petition. By general consensus, Whitis asked to provide proposal for development.
Sept. 13, 2009 — Belton City Council meets to discuss MUD petition. Council votes to disapprove the petition due to “incomplete information”
Sept. 19, 2009 — Whitis resubmits petition to Belton
Jan. 12, 2010 — City Council conducts work session on MUD petition with presentations from developer representatives and financial and legal experts.
Jan. 26, 2010 — Council votes to disapprove MUD petition once again, while committing to provide water and wastewater service to the area
Jan. 29 to May 10, 2010 — City Manager Sam Listi and Whitis representatives meet more than eight times to hash out mutually beneficial agreement for Three Creeks property
Sept. 4, 2010 — Listi meets with City Council to discuss MUD status and update on negotiations
Sept. 12, 2010 — Whitis and Listi meet to hash out agreement; city adviser calls agreement a “a superior deal for the city”
Nov. 19, 2010 — MUD agreement drafted by Whitis attorney John Carlton and submitted to city
Dec. 21, 2010 — City Council votes to approve MUD agreement after two failed attempts previously
MAKING A MUNICIPAL UTILITY DISTRICT
The Texas Commission on Environmental Quality, the ultimate regulatory body for “special districts,” states a municipal utility district is meant to serve a few specific purposes.
Chapter 54 of the Texas Water Code lists the broad grounds for a district’s creation.
1. The control, storage, preservation, and distribution of its storm water and flood water, the water of its rivers and streams for irrigation, power, and all other useful purposes
2. The reclamation and irrigation of its arid, semiarid, and other land needing irrigation
3. The reclamation and drainage of its overflowed land and other land needing drainage
4. The conservation and development of its forests, water, and hydroelectric power
5. The navigation of its inland and coastal water
6. The control, abatement, and change of any shortage or harmful excess of water
7. The protection, preservation, and restoration of the purity and sanitary condition of water within the state
8. The preservation of all natural resources of the state
In order to be approved by the commission, the district must accomplish some of these stipulations, be approved by a local or county governing body and pass a general-ballot election to enumerate the district’s legal powers.
The commission is then responsible for considering the district’s petition to the state. If a petition passes, the commission has little to no regulatory oversight of the district’s future operations — with much of the regulation contingent upon consent agreements between districts and surrounding municipalities.
Developers are also given leeway to forego neighboring cities’ approval of a new district by appealing directly to the state if a city refuses to extend water infrastructure to the developer’s property by request.
In this case, a developer has leverage to bring cities to the negotiating table if the property is outside city limits but within a city’s extraterritorial jurisdiction.
So far municipalities in Texas have not successfully challenged developers’ ability to leverage cities for approval at the state level, leaving an inordinate amount of power in developers’ hands.