“There was a big mistake made somewhere”

Admitting the city was "culpable" in a massive governmental bureaucratic kerfuffle that resulted in a local corporation facing a major overdue tax bill, the City Council took action Tuesday night to correct the situation, thus paving the way for a possible addition of 82 new professional jobs in Kyle, and then later passed a series of measures that could result in the location of a linen-cleaning business in North Kyle that could mean another 223 new jobs.

Put your abacus away. It works out to a total of 305 new jobs in one meeting. That’s a significant shot of economic adrenalin. But it did not come easy and it did not come without some serious soul searching from one city council member.

The "bureaucratic kerfuffle" I referred to above concerns RSI which set up shop in Kyle in 2007 on land that was owned by the city. That land was, in the words of City Manager Scott Sellers, "transitioned" from the city to RSI in 2011.

"When the property transitioned to RSI’s ownership in 2011, they reached out through their annual tax process with their CPA to pay the tax obligation to the local tax entities on the real property," Sellers told the council. "At the time they were told by the county, also probably by the city, there was indeed no tax obligation for the real property due at that time."

The same thing happened in 2012, 2013 and 2014. RSI kept asking about its tax bill and were told by the county it didn’t have a tax bill. But this year, Sellers said, the city "uncovered" the fact that, indeed, RSI not only had a tax bill for 2015 but actually owed back taxes from 2011 through to the present.

"We immediately notified Hays County and verified that a mistake had been made," Sellers said.

On its end, RSI has been bidding on large contracts that involved a significant research and development investment. "Because of that, RSI was not able to pay the full burden of the property tax they were faced with and appealed to the city for assistance," Sellers said.

Sellers indicated that during the last eight months, the city has been in meetings with Hays County to see if the back taxes could just be forgiven, since RSI was pretty much blameless in the whole mess. Sellers said the two parties could not find a way legally to do that. "The tax note, statutorily, would be due," he said. "So we tried to find a way to assist the company to remain viable with its tax note looming." Together with the Greater San Marcos Partnership, he said, they looked at "a job creation and retention incentive for the company."

RSI is bidding on a number of large contracts and if it lands any one of them it could mean a significant number of new jobs. However, RSI has facilities in many other locations and there was no guarantee those jobs would come to Kyle. So, to convince RSI to locate those 82 jobs here over the next 10 years, the county and the city have each pledged $123,000 for an incentive package.

"So what we are looking at tonight is an incentive package, combined with a direct loan to the company," Sellers said. "RSI will agree to pay the 2015 tax obligation. The additional tax obligation, while being paid by RSI, there is going to be a loan made by the city to the company. There will be a $123,000 commitment up-front from the City of Kyle, which equals $1,500 per job over the next 10 years. Hays County will match that $123,000. The incentive states that at the end of each fiscal year, the city will sit down, audit the number of jobs and insure a correct pro-rata of jobs have been created for the year. If not, the incentive is returned.

"There is also a $234,000 up front loan also being proposed as part of this package that would be an interest-free loan, payable beginning 2018 for 10 years," the city manager added.

Mayor Todd Webster acknowledged to Sellers the city "shared culpability for this error. There was some confusion around the (2010) transition of administrations from the (Tom ) Mattis period into the (Lanny) Lambert era, where there were things that just didn’t get picked up. There was the Bunton Creek PID issue and this is very much like that. But my sense is that the city bears some responsibility for the mistake. It’s not clear how such a big mistake occurred but the fact is it went on long enough that we could have lost one of the most important members of our business community. That led to me hoping you guys could come up with something to try to salvage this situation. There was a big mistake made somewhere. Whose mistake it was doesn’t matter, but I’m appreciative of the work you have done to figure out how to solve it."

Council member Travis Mitchell, who arguably had more hands-on responsibility for shaping the final agreement than any other council member, said the deal contained "three layers."

"One is an existing tax obligation," he said. "Not a tax obligation from the past, but a current bill that is now due that recognizes previous taxes were not properly billed to the employer. That’s different than saying they were billed and they chose not to pay. The second layer to it is who’s responsible. No business owner can escape culpability in that situation. However, we do have documented evidence that the property owner did try to pay the property taxes, did inquire multiple times through the years about paying those taxes and were told there was not a bill. That is an error. He did have a bill, but it was not properly given to him. The way I see it culpability lies on behalf of the business owner to know better and on the city and the county for making the error in the first place. The third layer is the incentive that’s on top of the first two issues and that incentive is our opportunity to make some of this right without putting the business in a very difficult position"

Mitchell said the ultimate result is that "RSI is getting a very small incentive to double in size in our target market with the best sector jobs that we can hope for in this town. They are also being forced to repay those taxes but are not having to do it lump sum right up front which no business of that size could afford."

The motion to pass the measure passed 5-1 on a roll call vote (council member David Wilson was out of town) with council member Daphne Tenorio casting the one dissenting vote. When council member Shane Arabie’s name was called during the vote, he paused for a considerable length of time before voting in favor of the deal. After the meeting I asked him about the pause and he told me "We’ve been negotiating for nine months and at the end the deal changed and it became something I didn’t necessarily agree with. I agree with economic development incentives, but I didn’t agree with the way it went at the end, the loan portion. I don’t agree with an up-front loan. I don’t believe we should be in the business of loaning money." In the end, however, he said he felt the positives — 82 new jobs — outweighed the negatives.

The vote came after an hour and 54-minute executive session that came at the beginning of the meeting, right after the citizen comments period. Council member Becky Selberra slipped out of the meeting shortly after the vote was taken at around 9:40 p.m., which is the reason all the subsequent votes totaled five.

The second economic development proposal involved the location of an approximately 20,000-square-foot-plus linen cleaning facility planned for the business park being developed across Kohler’s Crossing from the Home Depot. The four items on the agenda covering this project, each of which the council passed unanimously, provided for the application of a $1 million grant that would be used for the construction of a wastewater pipeline to service the facility.

In other action Tuesday night, the council:

• Received a progress report on all five road bond projects that I will write more about tomorrow after I get some much-needed sleep.
• Asked Police Chief Jeff Barnett to rethink his idea of renewing a lease on three Harley-Davidson motorcycles to determine (1) whether it would be more prudent economically to purchase and not lease, and (2) whether Harley-Davidson is really the best brand option.
• Unanimously passed on first reading amendments to those sections of the city’s code that have to do with impervious surfaces after determining that cement swimming pools are not impervious. The most interesting thing about the discussion on this issue, however, was the prediction from Mayor Webster that "sometime down the road," residential stormwater fees will be determined by the amount of impervious surface on a resident’s property.
• Unanimously passed on first reading amendments to the landscape ordinance.
• Unanimously passed on first reading an ordinance that would more equitably distribute the costs of constructing water and wastewater systems among various developers.
• Voted 4-1 (Tenorio voting "no") to contribute $10,000 to pay the city’s share for a study to determine the feasibility of constructing a regional wastewater treatment plant somewhere in the Blanco River basin.
• Unanimously approved an agreement to provide retail water and wastewater services to the Anthem Development.
• Adjourned at 11:26 p.m.

Anthem developer proposes new water deal

The Kyle City Council is scheduled to consider Tuesday evening a proposal from Clark Wilson, the developer of the proposed 673-acre Anthem subdivision located about a mile northwest of the intersection of FM 150 and RR 2770 in Mountain’s City’s extra-territorial jurisdiction, that would call for Kyle to sell water and wastewater services to Anthem through infrastructure provided and paid for by Anthem.

The proposal would presumably replace a far more complicated proposed Interlocal Agreement that would have ultimately led to Anthem being annexed by the City of Kyle. Under Wilson’s latest proposal, Anthem would remain in Mountain City’s ETJ under the terms of a Development Agreement signed in December 2014 by Wilson and Mountain City Mayor Tiffany Carnutt. The proposed Interlocal Agreement created a political turmoil in Mountain City, arising from the fact that many of that community’s residents did not want Kyle to annex the subdivision.

Prior to considering Wilson’s latest proposal, the Kyle City Council is supposed to rescinding approval of the ILA with Mountain City and Hays County, which could be moot anyway because, the way I understand it, Hays County withdrew from the deal several months ago and was replaced by the City of Dripping Springs.

Under the terms of the agreement, Mountain City 150, a limited partnership Wilson formed when he signed the original Development Agreement with Mountain City, "at its own cost and expense, will construct a potable water distribution system" so that Kyle can provide water services to the estimated 1,900 residences in the project as well as "wastewater improvements and all necessary facilities to allow (Kyle) to provide retail wastewater services to the customers." Presumably, although it’s not actually stated in Wilson’s proposal, Kyle would bill the customers directly for the water and wastewater services.

In addition, Wilson would, through MC 150, pay Kyle "funds to assist in financing offsite improvements, including expansion of the city’s wastewater treatment plant," which, depending on the amount he plans to chip in, could be just the sweetener needed for the council to look favorably on the deal. Wilson’s proposal says "The amount, timing of payment and all details shall be included in a binding retail water and wastewater services agreement."

If agreed to, the agreement could end a lot of the current friction that exists among the neighboring communities of Kyle, Mountain City and, lately, Buda, which has expressed its dissatisfaction with a deal Kyle is trying to negotiate involving the Dahlstrom Ranch, property the city needed to acquire in order to legally annex Anthem, but may not be needed under this latest proposal. It would also appease local critics who argued Kyle did not need to add such a large chunk of residential property owners to the city’s tax rolls because the property tax burden already falls too heavily on homeowners.

There is no public hearing attached to either agenda item — the one to rescind the ILA and the companion piece to approve Wilson’s latest offer — so any citizen wishing to speak for or against either issue will have to do so during the public comment section that begins the 7 p.m. council session.

As reported earlier, the City Council will not consider Tuesday a zoning change that could have resulted in a truck stop in South Kyle, but it is expected to consider:

• Much needed additional emphasis on storm water management including elevating it to an actual utility, under a proposed ordinance amendment, and levying punishments against those who pollute the storm water system. As part of this, the council could consider the concept of Limited Impact Districts in Kyle, which would go a long way to make the city greener in terms of water and energy conservation.
• Council member Becky Selberra’s request for a "discussion on smoking ordinance," which presumably has to do with Section 23-182 of Ordinance 334 which states "It shall be unlawful for any person within the city limits, in any way, to intentionally or carelessly burn or cause to be burned any combustibles which causes noxious smoke or smoke of a significant quantity or quality to be released so as to inhibit the use and enjoyment of neighboring properties is hereby declared a nuisance and is hereby prohibited." I have, however, unsuccessfully tried to find any ordinance regarding smoking by citizens in public facilities so perhaps she wants to talk about that. Your guess is as good as mine on this one. I have reached out to council member Selberra requesting she provide me some specifics.
• Council member Diane Hervol’s request to learn about and make public the city’s plans to provide public transportation for those citizens, many of whom are elderly, who relied on Austin’s Cap Metro before the city terminated that contract late last year.
• The disposition, delivered as part of the city manager’s report, of a lawsuit between the city and Dr. Glen Hurlston of Princeton, Texas, who sued both the cities of Princeton and Kyle in federal court alleging Kyle Police Chief Jeff Barnett abused his powers by ordering Hurlston’s arrest for the domestic abuse of his then-wife, Suzanne, who gave birth to a child fathered by Barnett.

Mitchell Motorsports owner plans City Council run

(Updated at 5:45 p.m. to reflect the response I received from Council member Diane Hervol.)

Travis Mitchell, the owner of Mitchell Motorsports, a self-proclaimed "family-owned and operated trike, motorcycle, atv/utv, auto and outdoor power dealer." announced today he is running for the Kyle City Council in May.

Travis Mitchell

Mitchell faces an uphill battle because he is likely to face an entrenched incumbent regardless of which place he runs for. Mitchell said he has yet to make that decision. But if they decide to run for re-election, and I believe both intend to, Mitchell would have to face either Diane Hervol, who didn’t even have an opponent in her bid for a second term three years ago, or Shane Arabie, who won a convincing runoff victory in 2014 with 73 percent of the vote when he ran in 2014 to fill the unexpired term of Chad Benninghoff. Both Arabie’s and Hervol’s districts are at-large ones. Mitchell lives in District 2 which is represented by Becky Selbera, Her term expires in 2017, but she is the subject of a recall effort.

Neither Arabie nor Hervol have responded to my requests for their reaction to Mitchell’s announcement.

(Update at 5:45 p.m.) Ms Hervol did respond and told me she is "definitely planning to run for re-election in May.  I will make my formal announcement in the future when I feel the time is appropriate.

"I think it is very important to have as many people as possible to become involved in the future of our city," Ms. Hervol added. "I would hope that other citizens will announce their candidacy in the months to come."

I am still awaiting to hear from Arabie. 

(Back to the original post)
"I am running for city council because I believe Kyle’s best days are ahead," Mitchell said in a statement that appeared today on his blog. "I want to help lead our town by working with the mayor, the council, the city staff, our committees, and most importantly our businesses and citizens, to help realize that belief.

"I am also running because I want the opportunity to help influence the culture of this town," he said. "In many ways Kyle is fractured. So many of our citizens are indifferent to politics and isolated from community. They live here but do not call Kyle home. I want to push the needle forward by leading and inspiring the indifferent to become involved."

Mitchell did not go into specifics about how he plans to create more citizen involvement, but promised he would share these strategies in the future.

Mitchell said he has named Brandy Kothmann of Kyle as his campaign treasurer.

City raises property tax 10.6 percent above the cost of road bonds

There are many ways at looking at city finances and tax increases and how much property tax is in masked money or in real money. The truth of the matter here is that, in real money, Kyle property taxes are going to catapult 26.2 percent higher than last year, although 15.6 percent of that increase will be because voters approved a $13 million road bond package two years ago, so expect to pay an extra 7.6 cents per $100 property valuation every year for the next 20 years to pay for those five road improvements.

Here’s how to look at the budget in terms of real money, i.e., the actual dollars and cents coming out of the bank accounts of Kyle property owners. If you wanted the city to provide exactly the same service in the upcoming fiscal year as they are doing in this one, the property tax rate would be, according to figures presented to the city council this morning by Finance Director Perwez A. Moheet, 48.71 cents per $100 valuation. That’s lower than the current 53.83 cents rate because the city’s income will increase this year through additional sales tax revenues and higher property valuations. Moheet also said that it will cost taxpayers 7.63 cents per $100 valuation per year over the next 20 years to pay for the 2013 road bond package. However, the estimated property tax rate for this year is going to be very close to 61.46 cents which, of course, is 5.12 cents more than what the same level of service plus the road bonds would cost.

Not that the 5.12 cents isn’t justified. Given the level of service the city provides, it desperately needs to improve its game, although I still wish the proposed new city charter had provided for an internal auditor to monitor the city’s service efficiencies. To me, 61.46 cents seems a high price tag for the level of service residents receive but that also could be because the ratio of individually owned property to commercial property is at an obscene level in Kyle: 85 to 15, according to a survey conducted by Community Impact. (That ratio in Buda is 72 to 28 and its property tax is 29.78 cents per $100 valuation. In San Marcos, it’s a 53-47 percent ratio with a property tax of 53.02 cents.)

So what is that 5.12 cents per $100 valuation extra in Kyle going to be used for?. Well, for starters, about 21.5 FTEs will be added to the city’s payroll, including four new police officers. FTE stands for Full Time Equivalent, but does not necessarily translate into the number of people hired. For example, two part-time workers equals one full-time and City Manager Scott Sellers’s proposed budget adds about 10 part-time employees and converts one parks administrative assistant from a part-time position to a full-time position. In addition, an FTE is a position, not a person. In other words, the city may create a position (an FTE) and fund it, but not hire anyone to fill that position.

But enough of that confusion. Sellers’s original proposal called for 22.5 FTEs, but one of those positions, a division manager of street maintenance paying $85,235 per annum, was axed in a motion by council member Daphne Tenorio, seconded by Damon Fogley and approved unanimously by the council to pay for much needed protective equipment, chiefly breathing apparatus, for firefighters and a laptop for the new code enforcement officers. At the urging of Mayor Todd Webster, $100,000 was added to the budget to give the iconic downtown water tower a fresh coat of paint and, as recommended by council member Becky Selberra, $15,000 was added for a "Rail Crossing Quiet Zone Assessment Study." That money was deducted from $1,529,049 in seed money to start a fund that would keep up with equipment, fleet and facility replacement and repair.

All seven city council members voted in favor of considering the 61.46 cent tax rate at its Wednesday, Aug. 19, special called meeting, which, technically, is not exactly the same thing as approving that rate. However, I’m thinking it’s just a formality. It may be that when the rubber meets the need-to-be-reconstructed road, a few council members, especially those up for re-election next year, may not want to be on record as voting for a hefty tax increase when the matter is considered Aug. 19,but the wheels on which that rubber is fitted will have been greased enough so that it will pass.

After the meeting was over, I asked four council members — Mayor Pro Tem David Wilson, Shane Arabie, Diane Hervol and Tenorio (I wanted to ask Mayor Webster, but he refuses, albeit somewhat politely, to talk with me about anything) — whether they would ever consider instituting a stormwater fee that might help replace some property taxes as an income source. Now, I realize, a fee is actually a tax hiding under a different name, but a stormwater fee is usually assessed in proportion to the amount of impervious surface on a particular piece of property. In a home, that might be a driveway and a patio, but for an H-E-B or a Wal-Mart we're talking about a gigantic, honkin’ parking lot so those fees fall more heavily on the commercial property owners and help relieve some of the burden being borne in Kyle by homeowners.