New financial information learned about Twin Creeks and Bella Vista

For the past three years, Cedar Park has been working toward its first limited-purpose annexation—one that would add 858 acres and about 1,400 homes to the city's jurisdiction.

But on Dec. 12, City Council opted to halt annexation of Bella Vista and Twin Creeks, citing information that came to light Dec. 11 about the districts' financial practices.

The new data meant that two of the three utility districts within the neighborhoods would need to raise their tax rates to cover the districts' ongoing operating expenses, Assistant City Manager Josh Selleck said. Residents could agree to tax changes, he said, but two weeks is too little time for the city or residents to decide.

"We do not have sufficient time this year to complete the annexation process," Selleck said.

Mayor Matt Powell said he did not want residents who had supported limited-purpose annexation to suddenly find their property taxes increased. City Council members joined him in voicing frustration about the sudden turn after years of working toward annexation.

"I can't believe we spent this time and then we're at this point," said Councilman Jon Lux. "There's no way that we could come to a solution that either wouldn't harm the future or the current residents of Cedar Park."

Motives for annexation

In 2010, Travis County Emergency Services District No. 14 ended its contract with the city of Cedar Park for delivery of emergency services to Twin Creeks and Bella Vista. Firefighters began responding to the area's emergencies from the Volente Fire Department instead of from the city of Cedar Park's closer fire station.

At the request of Bella Vista and Twin Creeks residents, Tom Moody, president of the Twin Creeks homeowners association and a commissioner on the ESD 14 board, and other subdivision leaders responded by holding meetings and distributing a city-provided petition for annexation. They gathered signatures from more than 70 percent of area residents, surpassing the 50 percent required by Cedar Park to consider a subdivision's voluntary inclusion.

"It's a good deal for the community, and it's a good deal for the city," Moody said before the Dec. 12 meeting. "We would eventually be Cedar Park residents anyway, but this limited-purpose annexation is the vehicle to get it done sooner rather than later. And everyone is anxious to be a Cedar Park citizen."

If City Council had approved annexation, city services in the districts would have begun Dec. 26.

Bella Vista and Twin Creeks residents said they had hoped to end ESD 14 coverage by January 2014. The annexation would have shifted the districts' property tax rate of 10 cents per $100 of valuation from ESD 14 to their own districts, which would then pay the city for fire and emergency services.

At the meeting, Bella Vista HOA member Wayne Caswell said a chance of tax increases would render moot the petitions most residents had signed to show support for partial annexation. They were told the rate would remain 10 cents and increase only if the city raised its tax rate.

"I don't want to go back and tell my homeowners that their property taxes would go up," he said.

But subdivision residents and City Council members, joined by Mayor Matt Powell, said they hope they can restart annexation attempts and next time have all financial information on the table earlier in 2014. That way they could be ready by the end of the year, when the city typically makes annexations, city leaders said.

"At this point it's spilled milk," Moody said. "But going forward with 2014, we just have to get it done quicker."

District debt and savings

Twin Creeks has two water control and improvement districts, or WCIDs, similar to Bella Vista's MUD. Both district types carry tax rates levied to pay development and infrastructure debt. City leaders want subdivision residents to finish paying off district debt before the city moves toward full annexation, Selleck said.

"The total outstanding principal debt is approximately $24.4 million between the three districts," Selleck said. "Over the next 15 to 20 years, the districts will pay approximately $36 million in debt service payments."

During the meeting Selleck shared more about the districts' debt situation, saying city leaders had been surprised to learn of the financial obstacle. Newly formed MUDs and WCIDs usually accrue significant cash reserves, similar to a savings account. But in Bella Vista's case the MUD has been withdrawing from that reserve for its regular expenses, Selleck said.

"They're spending down their savings account ... in order to avoid having a higher tax rate for the residents," he said. "What they have told us is they do that because it's in [district residents'] best interest. But that methodology conflicts with what we have been talking about up to this point."

According to the annexation agreement, the city would receive the districts' savings upon full annexation, expected in about 15 years. Selleck said the districts would need to assess property owners at least 5 more cents per $100 of valuation to pay debt, keep the savings and meet the city's expectations.

James Reid, a board member for one of Twin Creeks' WCIDs, said he hoped to see more progress between the city and districts.

"I think that money and numbers matter, but so do people's lives and so do emergency services. So both sides I think need to be more flexible," Reid said. "Moving forward, it's going to be up to the residents of the district and if they want to pay more."

Reid said he hopes to involve more residents in the conversation about annexation in 2014.

Jurisdictions

Bella Vista's MUD and Twin Creeks' two WCIDs are governed by the Texas Commission on Environmental Quality, said Katherine Woerner, Cedar Park director of community affairs.

"They're districts that are set up to provide certain services like sewer [and] wastewater infrastructure," Woerner said. "They're set up as a tool developers use to create new subdivisions without having to have cities pay for all the infrastructure on the front end."

As government subdivisions, MUDs and WCIDs are separate from HOAs and operated by different boards. Reid said the two WCIDs in Twin Creeks and the Bella Vista MUD all operate autonomously but communicate about important issues.

All three utility districts are within Cedar Park's extraterritorial jurisdiction—land adjoining city boundaries that the city has claimed for itself and can legally annex.Woerner said if the districts want to work toward annexation in 2014, they will need to submit another petition.

In the meantime, ESD 14 will continue to service Twin Creeks and Bella Vista from the VFD station. ESD 14 President Tom Stevenson said that although the ESD cannot legally raise its property tax rate above 10 cents, it could receive revenue from a new overlay district atop the existing district.

Moody said he expects changes for the ESD.

"ESD 14 is going to be working to try to increase their revenue any avenue they can," Moody said.

Additional reporting by Emilie Lutostanski