Poison Little Pills

The city manager usually projects a mild-mannered demeanor while sitting on the dais, but annexation anger infected even Jesus Garza at last week's meeting. Garza caused a stir when he ripped into citizen speaker Judy Jennings, who had come to vent about the annexation of her district, Northwest Travis County Municipal Utility District #1 (MUD 1). The angry exchange between Garza and Jennings, a MUD 1 board member, was only the latest in a long history of disagreements between MUD 1 and City of Austin officials. And it was only the tip of the treacherous annexation iceberg that's causing so much damage in the often contentious relationship between Austin and the MUDs.

Garza did get a bit hot under the collar, but some might say he was provoked. Jennings started a tirade by complaining that the city's annexation plan was going to hinder MUD 1's ability to complete a neighborhood park, and calling the city's insistence on co-signing a bond issue to fund the park "superfluous." She then launched into an attack on the city management staff. "I have never said this in public, but I will tell you now that every councilmember said, `We would love to have a discussion with you.' They directed us to an assistant city manager who told us in that meeting that `The city council is telling you to your face that they will meet with you -- and behind your back they are telling us to screw you to the wall,'" said Jennings, her voice shaking with anger.

"That's not true, Judy," Garza immediately broke in.

"That is exactly what we were told by an assistant city manager," Jennings asserted.

"Judy, you know that's not true," Garza said, speaking over Jennings. The bond-signing "wasn't superfluous in terms of annexation and you know it's not. That wasn't the facts, and you know they're not," Garza insisted.

Jennings took a deep breath and decided to move on. She asserted MUD 1's willingness to enter into a "strategic partnership" with Austin, and then walked away from the podium visibly shaken from the debate with Garza. Stepping into the hallway to meet friends, she said, "He lied and I am furious."

"Well, so am I," jumped in Assistant City Manager Jim Smith, who had followed Jennings into the hall, catching her by surprise. "You know the only reason you're in this is because of the way you act," he continued. "Mayor [Bruce] Todd extended an offer to you and you never returned it!"

Jennings was taken aback. "Uh... uh, we didn't have the time," she said.

"That's because you were too busy in the lege trying to fight us!" Smith shot back, stalking off in disgust.

What was that about, you ask? Turns out that what Jennings was arguing about with Smith and Garza is the nasty underbelly of the annexation debate -- age-old state-wide legislative wars between MUD districts and their sponsoring cities. Although MUDs are supposed to be districts developed outside of incorporated city limits without the benefit of piped-in water and wastewater service, those definitions have been stretched to the limit in recent years. In fact, the most basic tenet in the formation of a MUD -- eventual annexation by the city which helps nurture the MUD's growth -- is continually challenged in the legislature by suburban lobbying groups going head-to-head with city lobbyists. And since one of the most powerful of these suburban groups -- the Central Texas Association of Utility Districts (CTAUD) -- is headed up by Jennings herself, it is no wonder that the city has had a difficult time negotiating the annexation of the district she also helps run.

MUD 1 was created in the late Seventies and early Eighties by the extension of City of Austin water, electricity, and wastewater treatment to the MUD's district. MUD 1 is a "wholesale" water and wastewater customer -- meaning that residents pay for the service with their property taxes and the district pays for pump stations to send wastewater back to the city. Most MUD 1 residents receive electric bills directly from the city, but garbage service, drainage, and water/wastewater are not included on the bill.

"You need to put this in the context of a three-year history," explains Smith, the city's legislative liaison. "Going into the 1995 session we knew that all the MUDs out there were rallying around. The Austin and Houston MUDs were working together," he says. Sensing the political climate, Smith says that Austin worked with then-CTAUD president David Harper of Anderson Mill MUD to draft legislation that would allow "strategic partnerships" between cities and MUDs -- agreements which allowed for slowly-phased annexation and the maintenance of local control by keeping MUD boards intact.

But while the city began working on a strategic partnership with Anderson Mill, Smith says that other MUDs were not interested in negotiations. "They were putting all their efforts into hiring lobbyists and did not want to be seeking any level of compromise," he says. The MUDs managed to get a two-year moratorium on annexation passed at the end of the 1995 legislature, and by the time the 1997 legislature was in session, it was obvious that CTAUD was going to continue to fight annexation. "So, Mayor Todd stepped in and extended [MUD 1] a strategic partnership agreement. They were made an offer of basically everything they say they want now, and they rejected it," says Smith.

Jennings responds: "I said to [Todd], `With all due respect, do you really think you could get the city council to approve a strategic partnership at this point?'" She says that not only had the Anderson Mill negotiation been voted down by council (in fact, it had only been postponed by council for further negotiations), but that by the spring of 1997, Todd was a lame duck mayor. "I was not comfortable with pulling down our legislation. It was the only thing we had," she says.

So Jennings never responded to Todd's proposal, and instead threw her energy into pushing CTAUD's seven-point legislative agenda -- which would have heavily regulated the ability of Texas cities to annex by allowing areas to vote on their own annexation, among other provisions. When that agenda failed to pass through the Senate, says Smith, MUD 1 tried a new strategy. "They invested most of their time trying to invent poison pills," he says, referring to attempts by MUDs to make themselves "as fiscally unattractive as possible."

When the city of Austin annexes, it inherits the debt and the bank accounts of the annexed districts. So, by a variety of methods including spending down their bank accounts, driving up their debt, and setting zero property tax rates, MUDs try to poison the city that is set to devour them. This is precisely what MUD 1 is currently doing as quickly as it possibly can.

On the Saturday following her emotional confrontations in council chambers, Jennings met fellow MUD 1 board member Diane Spencer in a large field of dirt and bulldozers directly across from Spencer's home. "This is the project we're trying to finish before the city takes over," said Jennings, explaining that the future "Tanglewood Park" was the one which city officials refused to allow a bond issue to fund unless the city could act as a co-signer, and thus allow the city some control. Although Jennings and Spencer assert that, following annexation, only the first phase of the unfunded, four-phase park will be built, city officials disagree. "As long as they don't spend all their money, we will finish phase two. And if they would not do the poison pill of a zero tax rate, then we could try to finish three and four also," says Assistant City Manager Toby Futrell, the city's annexation czar.

The city "has not committed to that," responds Spencer. "They can say that, but until they write it in the plan, we don't know that's what they'll do."

In the meantime, MUD 1 has recently entered into several long-term contracts for maintenance of parks and for garbage pick-up, which the city contends are moves deliberately intended to discourage annexation. Spencer argues that the garbage contract will ensure rates lower than the city can provide, and the parks maintenance will insure the higher standards to which her community is accustomed. In addition, the MUD board is using its funds to enter into agreements to lease several vehicles for its parks' maintenance contractor, Allied Utilities, and to pay for the lease on the contractor's facility. "He won't need them if we get annexed," says MUD board member Sue Sevcik, explaining that the MUD cut the deal to protect the contractor from being stuck with unnecessary lease agreements. Lost to no one is the fact that the city would have to honor the terms of these deals after annexation, even if it didn't need the vehicles and facility either.

And MUD 1 is not alone in these tactics. Northwest Travis County MUD #2 recently set its property tax rate at zero -- essentially giving their residents a one-year tax holiday and assuring the depletion of the MUD's accounts. Although MUD 1 has not yet set its tax rate, zeroing it out was one of 13 proposed actions which MUD 1 has already informed the city they were considering taking before annexation. "I do not consider those poison pills," Spencer says. "We are not going to hand over our money to the city and that is the bottom line."

MUD 1 residents -- along with every other area set to be annexed -- have also expressed concerns about the city's ability to provide fire and EMS service, but the area's level of service will actually increase. "It's a gold fire and EMS plan for them," Futrell explains, detailing an increase from
8-hour to 24-hour-a-day service, and an increase from two- to three-member staffing at stations.

Still, despite attempts by MUD representatives to communicate their needs, and by the city to communicate its willingness to meet those needs, the climate of mistrust between the city and MUD 1 continues. Although the MUD has recently attempted to forge a strategic partnership with the city following the annexation announcement, the city has withdrawn its former offer. "If you were going to do a strategic partnership with someone, it would be with someone who has operated in good faith with you," says Futrell, and there's been too much water under the bridge to trust MUD 1 now. According to Futrell, the city is currently in some form of negotiation with at least three areas -- Anderson Mill MUD, North Austin MUD, and Tanglewood Estates.

MUD 1 is not likely to make it onto the "negotiations" list, and Jennings and Spencer know it. That's why they're already planning for the 1999 legislative session. "The council's afraid of the next session, and they should be. What they're doing now is only making it worse," Spencer threatens. "Annexation reform is definitely going to be back in the next session."

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Next Week in Council: The Central City Entertainment Center is back in the house, along with Eastside anger. Plus, annexation fever continues with more heated hearings.