Stories to watch in 2019 #1: Incorporation decision looms following study

This story is part of our Annual Community Guide, which takes a look at some of the biggest stories to watch in The Woodlands and South Montgomery County in 2019. 

After several months of study The Woodlands Township has entered the last phase of its ongoing $800,000 study on incorporation which, if approved by the board, could lead to a resident vote later this year.

The township has heard several presentations analyzing what it would take to operate as an independent city, following enabling state legislation in 2017 providing procedures on how to incorporate.

However, The Woodlands Township board of directors voted in December to end its contract with Matrix Consulting Group, the lead firm conducting the incorporation, opting to name The Novak Consulting Group—a consulting firm conducting an independent analysis of Matrix’s study—as the lead firm to complete the study.

“Going forward, we look forward to working with the Novak Consulting Group to lead us through these important next steps in fine-tuning the financial model and facilitating a robust public outreach program,” township Chairman Gordy Bunch said in a statement.

Bunch said the study is still expected to be complete in the first quarter of this year, depending on if transition contracts can be negotiated with Harris and Montgomery counties 

for the existing services.

Preliminary models show incorporation would likely cost millions in additional expenditures annually to take full control of services such as police and public works departments. While a financial model has not been finalized, a maximum initial tax rate for what would be needed to incorporate will be released in the coming weeks, after which residents will be able to provide feedback.

Financial models

Perhaps one of the most significant aspects of the study is determining the short- and long-term costs of incorporation. Matrix and Novak both presented draft financial models during the township’s Nov. 28 incorporation planning session.

Prior to the presentations Bunch said the financial models are not final and will be reviewed by the township staff. The township board of directors is expected to provide feedback on the reports during its Jan. 23 planning session.

“The report data … is preliminary and does not represent the final report that will be used to establish a maximum initial tax rate for the purposes of calling an incorporation election,” Bunch said.

Matrix’s model estimates about $20.5 million in new annual costs for new services such as a city secretary, municipal court, police force and public works as well as $7.3 million in startup costs for new facilities and equipment.

However, officials with Matrix said some of the figures, such as the annual costs for police service and public works, are dependent on if contracts could be negotiated with Montgomery County, which currently provides some of those services. Costs could also vary based on levels and models of service.

“There’s a wide range between worst, best and targeted [costs],” Matrix Vice President Alan Pennington said during the session.

Matrix’s model also accounts for new revenue sources the township would have as a city, such as alcoholic beverage tax revenue, fines and forfeitures, and fees from a municipal court. New revenues could total $10.2 million annually, which could offset some of the new costs in the first year of incorporation.

Throughout the study—before it was named the lead firm—officials with Novak had been working separately from Matrix on their own independent model. Novak’s model estimates about $19.7 million in new annual costs, plus at least $2.9 million in startup costs. It also includes about $9.9 million in revenue sources annually.   

Novak Group President Julia Novak said the models are not meant to sway the board or residents one way or another but to give a clearer picture of what the financial effects might be. 

“We have not been asked to give an opinion about pros and cons of incorporation but really more what the facts are in terms of the financial impacts,” Novak said during the presentation. “A lot of this ultimately comes down to the policy decision of identity and independence and the ability to respond to things that you as a governing body want to respond to.”

Property tax effects

Despite startup costs Bunch said the models may not be indicative of how much tax rates could increase, as the township has set aside more than $20 million in reserves to help offset initial costs.

While a maximum initial tax rate was not proposed in the models, township staff previously estimated each cent of property tax added to the existing rate—$0.2273 cents per $100 valuation—would raise about $2 million in revenue for The Woodlands at an average cost of $43.24 for homeowners, assuming the average home value in The Woodlands at $477,000.

A maximum tax rate is expected to be brought back to the board in the first quarter of 2019 for consideration as part of the final financial model. Additionally the maximum initial tax rate will require voter approval should incorporation be placed on a ballot, according to the enabling legislation.

Bunch said Novak will also create an online financial calculator, in which residents can enter their addresses and calculate how much their property taxes may change before a vote is called.

However, some residents have expressed concern about the study, especially the speed at which it has been conducted. While township officials have repeatedly said there is no deadline to place the measure on a ballot, former township Director Mike Bass, who served on the township board during its previous study in 2011-12, said he is worried the spring 2019 deadline for the study seems too soon.

“My objective is not to oppose incorporation just for the sake of opposing it,” Bass said. “I just want incorporation to be done ... without wasting tax dollars.”

Calling for a vote

While township officials could call for a measure on incorporation before August to be placed on the November ballot this year following the conclusion of the study, Bunch said the board has not yet decided when or if that would occur.

“That [decision] depends on when the study is actually completed, overall tax impact, public feedback, pros, cons and ability to execute the transition should a vote to incorporate be approved,” he said.

Before the study ends Bunch said another community forum will be scheduled after financial models and transition contracts—including agreements with Montgomery and Harris counties—are complete. The group will also compile a survey to gather community feedback. 

“We had historic standing room-only turnout for the September forum,” Bunch said. “The feedback from the forum was good, and we hope to build on that forum’s success as we continue with the study process.”

However, local election experts said should incorporation move forward, township officials may want to wait to hold off on placing it on a ballot in 2019. 

Steve Leakey, president of the nonpartisan Voter Awareness Council, said holding a local election in 2019 could lead to low voter participation, based on voting patterns over the last 10 years.

“If you were to guess what it would be like in [20]19, it would be very low, probably less than 10 percent,” he said. “That just doesn’t make sense if you want to put something on the ballot where the highest percentage turnout could possibly be achieved.”

Leakey said in presidential election years, voters are much more likely to cast ballots in local elections. In 2016, 69.2 percent of registered voters cast ballots in The Woodlands Township elections. In 2007, when residents were asked to cast ballots on the creation of The Woodlands Township, only 28.3 percent voted, according to the VAC. 

Leakey said regardless of when or if a measure to incorporate is placed on a ballot, residents should still be proactive about learning the details of the study and how it may affect them.

“The whole theme with this has got to be, ‘Wake up, Woodlands,’” Leakey said. “We’re talking about potential incorporation that will impact every
taxpayer in The Woodlands.”

Editor's note: The graphics in the article above listed annual “new expenses” for a police department as $12.5 million in the Matrix Model and $16.1 million in the Novak model, but did not clarify that The Woodlands Township is already paying $11.5 million annually through existing law enforcement contracts with Montgomery County and Harris County. The “new expenses” for a police department under an incorporation model would be $1 million in the Matrix model and $4.6 million in the Novak model, according to township officials. An accurate expense number for a city police department is not yet available, officials with The Woodlands Township said.
By Wendy Sturges
A Houston native and graduate of St. Edward's University in Austin, Wendy Sturges has worked as a community journalist covering local government, health care, business and development since 2011. She has worked with Community Impact since 2015 as a reporter and editor and moved to Tennessee in 2019.


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