You are correct. The Resort's share of the assessments is approximately $1.6m annually. During my conversation with Doug at the Marriott on September 25th, I said that I'd like to see us find a way to make the maintenance subsidy go away. I pointed out that one thing the city could do for The Resort is to provide the $6k or $7k annually that would be raised by a hotel occupancy tax. The State limits what those funds can be used for to six specific expenditure categories. There is virtually nothing the city can use that money for that doesn't involve spending it to impact the hotel's business.  The Resort is the most qualified to administer those expenditures. Contractually allocating those funds to The Resort is permitted under the law. If those funds, collected from the Visitors, could replace a portion of the subsidy he receives from the property owners' assessments, and those assessments could be used to support the property owners' obligations, I think that would be worth considering.  Doug's response to that was that he would prefer to sell his entitlement outright.  A lump sum, he said, would enable him to reduce his debt load, which would significantly improve his net cash flow.  He didn't offer any clues as to how much he has in mind, and I didn't probe that.  Under the Declaration of Reservations, that subsidy does not expire unless terminated by the owners of 100% of the property in HSB.   Thus, it's infinitem and any lump sum purchase of that entitlement is significantly discounted.

2. Am I right in reading you would like the Village to takeover the airport? Do you have any idea how much money the airport loses every year? Or that it is not up to FAA minimums if we wanted to convert it from private to public?

It has been in Doug's plans for a long time to lengthen the runway to 7,000' and widen it to 150'. I've related to Doug that as a city, Horseshoe Bay has the ability to get funding from TxDOT and the FAA to make improvements to the airport. TxDOT's qualification for such grants is a compelling presentation that you can base 20 aircraft there within 5 years. Doug would have to deed the infrastructure over to the city and we would have to contract for the improvements. We can then lease it back to him so that he continues to absorb any losses from its operation. The intent of my discussions has been to point out the various opportunities, available to us as a city, that can positively impact The Resort. As such, I've argued that Doug should embrace incorporation and relish the opportunity to be a client instead of the landlord. I don't necessarily advocate the idea of expanding the airport into a regional facility. My house is right in the flight path. There is obviously lots of possible pitfalls in the details. This is none-the-less an idea worthy of consideration.

3. Do you have any data to support the need for an immediate need for a sales tax? Although the MUD rate has been the same for a while, the tax base income has grown each year to more than offset incremental operating costs. With the new homes going up coupled with the growth of Escondito, Trails, Centex and other developements I find it hard to believe we need any taxes to support the Village. If you have information to the contrary can you share it?

As for the sales tax, my position is that this is the only tax which gives us an opportunity to get visitors to Horseshoe Bay to contribute to our costs of providing infrastructure and public safety services. The hotel tax cannot be used for those things. The first 1% of a sales tax can be used for any general fund purpose. The next 1/2% must be used to reduce the ad valorem tax rate. This shifts at least some of the burden off the backs of property owners and puts a little bit on the backs of those visitors. Marriott's goal is 125k to 150k visitors/year.

I agree with you that the MUD (eventually the City) will have a surplus in it's tax collections due to the new development and value appreciation. They have projected a $1.38m surplus in this year's 10/2005 - 9/2006 budget. I see no reason to need to raise tax rate, and would like to see us in a position in our 2007-2008 budget to be able to lower the tax rate based on having sufficient revenue from sales taxes beginning to flow in 2007.

With so much of the verbiage on the subject of zoning and the property owners control or influence over what might be, it appears that this component of reason to incorporate is a mute point.

Is this the reality on this issue?

You did a good job on your explanation and perhaps until last night most people just might have had the wrong impression.
10/18/05

Let me explain a few of the fundamentals that are the basis for my statement:

1.  Deed restrictions are covenants that run with the land.

2.  Owners of the land, by virtue of their purchase, are bound by those covenants (regardless of whether they actually know what they are).

3.  Under Texas Law, the owners of deed restricted property, cannot cause a modification of the deed restrictions, even with the required plurality of signatures, that would take away any right or entitlement of the developer, without the developer's permission. From the Property Code of the Texas Statutes:

§ 201.0051. SPECIAL PETITION APPROVAL REQUIRED FOR CERTAIN RESTRICTIONS. A right created or an obligation imposed by an existing restriction that relates to the developer of the subdivision or an architectural control committee established by the instrument creating the restriction cannot be altered unless the person who has the right or obligation signs and acknowledges the petition. Added by Acts 1997, 75th Leg., ch. 451, § 3, eff. Sept. 1, 1997.

4.  Our deed restrictions require the signatures of the owners of 80% of the fee-titled land in the subdivision to modify the covenants contained within the restrictions without the approval of the developers.

5.  A city council, of elected representatives, does not have a power of attorney to act on behalf of that plurality of property owners to effect any change to the covenants.

6.  Texas gives a higher priority to covenants running with the land over the action of individuals, in the form of a municipal or county government to pass laws affecting individuals' property rights.

From Local Government Code of the Texas Statutes related to adoption of a Zoning ordinance:

§ 211.016.  CONTINUATION OF LAND USE IN NEWLY INCORPORATED AREAS.  
Text of section as added by Acts 2003, 78th Leg., Ch. 279, § 1
    (a)  A municipality incorporated after September 1, 2003, may not prohibit a person from:
        (1)  continuing to use land in the area in the manner in which the land was being used on the date of incorporation if the land use was legal at that time;

The Texas Municipal League, in their Handbook for Mayors and Councilmembers further elaborates on the limitations of a city council in the following precaution:

"Every councilmember needs to know the risks expressly contained in Section 1983, Title 42, of the United States Code:

"Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any state or territory, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured."

The literal language of Section 1983 makes all persons, councilmembers included, personally liable for damages if their acts result in depriving others of their civil rights, regardless of whether such acts were reasonable and made in good faith. Additionally, the U.S. Supreme Court has held that Section 1983 does not require proof that a defendant deliberately intended to deprive the plaintiff of his legal rights; the mere deprivation is itself a violation.

An example of potential liability under Section 1983 would be the council’s decision to deny a developer the right to use land by denying a rezoning or building permit to the developer because the construction plans are opposed by a vocal neighborhood group." (enthuses added)

Very simply, you cannot ordinance your way around what's in the Declarations of Reservations.  Under the Declarations, property classified as A-1 (Amenities Property) or FD (Future Development) property, can be reclassified, unilaterally by either of the developers, for any purpose (commercial, multi-family, etc.), and those properties are not subject to the section of the Declarations dealing with Structures.  Those properties, even after being reclassified are also not subject to Maintenance Assessments.  As such, the developers can elect to build a mid-rise or high-rise building, on property that currently adjoins single-family properties, and there is nothing that the city can do, through the passage of ordinances that can eliminate or inhibit those entitlements.

Candidates who are espousing that they will pass a Subdivision Ordinance, with zoning, platting and building restrictions, are under the false impression that those ordinances will apply to the A-1 and FD property, thereby forcing those tracts to have to comply with the same structural requirements that apply to other properties.  This is misleading and would be harmful to Horseshoe Bay if they are elected and allowed to proceed under that pretense.  The developers know their rights and will defend their rights by filing lawsuits against the city if such an ordinance is passed.  That's certainly not the way I want to see us get started.

By recognizing the reality of what we cannot do, I have looked toward other avenues for compelling the developers to be more sensative in their future development planning.  I believe there is a lot of room for negotiation with both Douglas and Wayne using the benefits that a city can bring to the table in support of their needs.  In the end, the result can address property owners' concerns about the location and scope of those developments.

Doug went heavily in debt to buy Norman's interests.  He went further into debt to make the improvements to the Marina, Slickrock Pro Shop, the Yacht Club, Adventure Inn, and the golf courses.  The Marriott is a different partnership, with its own debt load.  He is negatively cash flowing $3 million annually, primarily due to the debt service.  Over the past 10 years, that's a $30 million dollar investment, over and above his direct equity investments.  Value appreciation has offset that cost, but, his goal is to stop that bleeding.  One way to overcome that net loss is by increasing the utilization rate of the amenity facilities.  The Marriott and high-density developments, such as The Waters, are specifically intended to do exactly that.  The alternative is to raise the dues significantly and lower the price for use of the amenities for guests of the hotel.  His preference is to not do that, but, if he is unable to continue to develop projects, each of which provide some amount of net proceeds which helps off-set that negative cash flow from the Resort operations, then he will be compelled to use the alternatives, which would negatively impact the 2,000 members of the club.

What we can do as a city, first of all is take over the maintenance of the common areas.  That's a "landlord" kind of activity.  Regardless of whether we are paying for all that maintenance through our assessments, the administration of that is costing Doug many thousands of dollars and hundreds of man-hours each year.  If he will accept becoming a "client" in the community and allow the city to become the landlord, all of that time and money can be redirected toward his core business.  He has conceded that this could be a significant benefit for him and is willing to work toward that end.  Having the capacity to qualify for various grants, the city can bring other benefits to the table that would enhance Doug's operations, at little or no cost to the taxpayers.  I'm very familiar with funding available from TxDOT's Aviation Department to build regional airports.  Essentially, if you can establish that you can base 20 aircraft there within 5 years, you can qualify for up to $50 million dollars in FAA and State funding.  I asked Doug, "If we could get $10-$20 million dollars for improvements to the airport, would you partner with the city on the airport?"  He said, "And make it a first class regional airport, in a heartbeat!"  Whatever money he was planning to invest in the expansion of the runway, improvements to the terminal building, more hanger facilities, etc., he could redirect to his debt service or other Resort operations.

Under our current Declarations of Reservations, Doug is entitled to 63.5% of the annual maintenance assessments as a subsidy for the Resort's maintenance.  That is perpetual and will only go away if there is a modification to the Declarations (something that is impossible because the developers can always control more than 20% of the fee-titled property in the subdivision, and if they don't have that quantity, they can add additional land to the subdivision at any time and Doug owns 1,000 acres on 2147 that he can bring in to insure that he has more than 20%).  I spoke to Doug about making that subsidy go away.  What I suggested was that the city will have the authority to levy a Hotel Occupancy Tax of 7%.  This is estimated to generate between $600-$750k per year.  That money can only be spent on 6 very specifically defined uses under Texas law, all of which must directly impact the lodging industry where it is being collected.  As such, the best use of that money is to hand it over to the Resort (under a contract to administer the funds in accordance with state law which is permissible).  That would reduce their marketing budget for the Marriott by half.  Instead, Doug said, he would prefer it if we would buy his 63.5% entitlement.  I have no idea what figure he has in mind, but, the thought of us using current dollars to buy-out a perpetual entitlement that is currently $1.6 million dollars annually and increases automatically each year, is very appealing to me.  He would like to have that lump sum to pay down his debt and eliminate his negative cash flow.  If he can eliminate the negative cash flow, he would not be as compelled to need to build high density housing.  The 63.5% of the maintenance assessments will not go away.  It will simply go to the city to pay-off the bonds that would be required to finance that purchase. 

I can see where that option or some of the others that I have mentioned could give the city plenty of bargaining power to get Doug to agree to limit his developments on A-1 or FD land.  We can make the Resort successful, something that benefits everyone in Horseshoe Bay, and get way more for the property owners in the process than we could ever dream of achieving if we take an adversarial approach such as some of the candidates are advocating.

As I think you can see, it's a complicated matter and impossible to convey in the span of a 2 minute response to a question. I hope I have shed some light on my comments and helped with your understanding of my position.   If so, I would appreciate your vote, and respectfully ask your help in spreading the word to your friends and neighbors.

The quarry is owned by Glen Salem.  It has been a source of much of the rock that has been used for landscaping around the Resort.  It is also a source of granite gravel used in a variety of construction activities.  Nelson Trucking has been mining the quarry for the granite gravel.

The quarry pit is fed by a spring which apparently produces 500 gpm of fresh water.  This water is being pumped through a pipeline to the adjoining TP Ranch to provide replenishment of their livestock tank.

Speaking to Glen yesterday, he is closing the quarry at the end of 2005.  He is in the process of cleaning up the edges of pit and the area surrounding it.  Someone offered to buy the site to continue mining it, but, Glen has turned them down.  He wants to close it.

 

I've known Wayne & Eileen for over 25 years.  They were very good friends of my parents.  I've known Doug & Nikki since I first moved here about 8 years ago.  At one time my company designed and provided hosting for the Resort's website, but, that business relationship ended some time ago.  Other than that, and a membership in the Resort, we are just friends who see each other around the neighborhood and share a common interest in the future of Horseshoe Bay.  They have all known of my involvement in regional economic development and been receptive to my perspective on how that afects Horseshoe Bay.  During the process of incorporation, they have been very open in discussing their roles and potential options for the future of Horseshoe Bay.  This continuing dialog has been both productive and promising.

Thanks Sam.  I think it's very important for whoever becomes our mayor, and the counsel members to have a good working relationship with Jaffe and Wayne.

I met with Doug for 2 hours on the patio of the Marriott after his presentation on July 13th.  He invited me to meet with he and his staff the following day to discuss his idea for an Economic Development District.  We spent another two hours on that occassion.  I left with a committment that if I thought an EDD was a valid alternative for incorporation I would publically announce that, but, if I did not agree, I would also make that publically known. 

On the evening of the Concerned Citizens presentation, I met with Doug briefly in the restaurant at the Marriott afterwards.

On the night of the election, I ran into Doug at the Marriott just after the polls closed.  He was very upset by the results.  I spent the better part of an hour trying to convice him that the vote was not a reflection of an "anti-Jaffe" sentiment.  I came away that night with a hand-shake agreement that he wouldn't take any of the actions that he was contemplating, or make any statements for at least 10 days to give me an opportunity to prove that I was correct.  That was the reason I posted the exit survey on my website.

On Sunday, September 25th, we met for breakfast at the Marriott where I presented him with the results of the survey (see results).  The survey did prove that the majority of voters were not of that mindset.  Over the next two hours, we discussed lots of options for improving the relationship between the property owners and the developers.  He expressed a willingness to cooperate in a modification to the Declarations to eliminate some of the entitlements that were brought in under the Fourth Amendment.

As a result of that, I spoke to Wayne that afternoon and we met two days later at his office to discuss the possibilities of that modification.  Wayne agreed to also cooperate with such a modification if we are able to put the whole thing together. 

For any of what was discussed to come together, we must first get the city up and running.  As I've expressed in my Village Plan, we are severely limited in what we can do until we are able to absorb the MUD.  That will require the cooperation of Mike Walsh, developer of The Trails, and I've met with him in that regard.

You are absolutely right in that we need for our council and mayor to be able to work amicably with Doug and Wayne as well as Mike Walsh if we, the other property owners, want to become not merely a voice but a partner in the future development of Horseshoe Bay.

* IMPORTANT NOTE:  My discussions with all of the principals, Doug Jaffe, Wayne Hurd, Mike Walsh, Michael Thuss, Wayne Brascome and R.G. Floyd, has been in the capasity of a private citizen and as a candidate for Mayor.  At no time did I misrepresent myself as having any standing in the community, or make any committments as to what I could or would do if elected Mayor.   Those discussions, in my opinion, were crutial for my understanding what the possibilities are in order to develop a plan on which I am basing my candidacy.  If I did not believe it would be possible to give the property owners more of a voice in the future of Horseshoe Bay, I would have never entered the race for Mayor.

In all my involvement in community service, for 8 years, I have never been compensated. That was never a motivation for me.

The statutes are clear that the city coucil can adopt a "salary" for themselves, but, they cannot collect it during their term in office. Any such adopted salary would be for a council member or mayor in the next term. Thus the inital elected officials of our city cannot earn any compensation. I'm not opposed to the people who dedicate themselves to service in our community from receiving some compensation. If we want good people to serve we should compensate them for their time. That is not available to anyone running right now. Everyone elected will be donating their time.