The developers of Kyle's Plum Creek community are weighing options to finance the second phase of development. Among those options could be taking on debt through the city by creating a public improvement district, or PID.
The city, however, must decide how to move forward with the proposal even though a formal petition by the Plum Creek Development Partners has not been filed.
But as the partners continue developing the community projected to have a total tax base of more than $2 billion in 25 years, they have approached the city for help in accelerating the pace of development.
In October, the Plum Creek Development Partners delivered a presentation before City Council in which the group explained its plans for the second phase of development. In November, an agreement was reached that requires the partners to reimburse the city for consulting services related to the PID proposal.
"We've given the wish list, but we have really not engaged in any formal negotiations at this point," PCDP Director of Operations Peter French said. "We are still seeking permission to have the discussion. It's still pretty early in the process."
In October the city began what it expects to be a months-long process to review the PID proposal and receive consultation from its bond counsel as City Council and staff assess whether the project should be given the go-ahead.
"We'd like for all these things to happen sooner than later, but the ball is in Kyle's court to move things forward," French said.
The creation of a PID in the Plum Creek community would fund, through tax assessments, the development of certain infrastructural improvements.
Special assessment bonds, administered by the city, would be issued to pay for the projects.
Development would come at "no cost or risk to [the city]," according to an October presentation by Development Planning & Financing Group, which provided financing consultation to the Plum Creek group. The presentation further states that PID bonds would not affect the city's ability to issue bonds for other projects.
"PID bonds are non-recourse to the city of Kyle," the presentation states.
The special assessments would affect only new landowners within the boundaries of the district. Councilman David Wilson said he will work to make sure that is indeed true.
Apart from those concerns, Wilson is encouraged by the proposal, he said.
The city has made similar development agreements in the past to finance infrastructural improvements to bring in major commercial retailers such as H-E-B and health care providers such as Seton Medical Center Hays, Wilson said.
Ultimately, Wilson said he hopes the development will be a boon to sales tax revenue and increase the city's property tax base. He said that would aid the city's ability to develop not only within the potential PID but also outside it.
"All of those are initiators, and [the Plum Creek developers] are going to make our community a really positive place," Wilson said. "If Plum Creek doesn't develop very quickly, that is not a good thing. That means that you have potential that is not being realized from a financial perspective."
According to state law, a PID can be used to fund improvements to public infrastructure.
Among the list of potential Plum Creek PID projects are a Lone Star Rail station, expanding a hike and bike trail, constructing a roundabout at FM 1626 and Kohlers Crossing and regional detention ponds, according to the October presentation.
About five years ago, a PID was created in the Bunton Creek community to fund infrastructural upgrades to the water and wastewater systems there. But collections of assessments have since stalled, and the developer has not been reimbursed in full for making the improvements, said Perwez Moheet, finance director for the city of Kyle.
"In those days, the city was not prepared to handle such an obligation," Moheet said.
Moheet said the PID Plum Creek developers are proposing is similar, in concept, to the Bunton Creek PID but is much larger in scale.
The city is hoping to streamline the process of evaluating whether certain PIDs will be beneficial, Moheet said. He said City Council would confer in upcoming meetings on goals for public policy in areas including economic development, green space development, parkland improvements and affordable housing.
"One of the first things we ought to consider is adopting a PID policy," Moheet said. "How do you evaluate whether Plum Creek is a better candidate versus someone on the east side of the highway?"
For example, the city of Austin steers development toward so-called desired development zones and away from the Edwards Aquifer zone or preserved green space, Moheet said.
"We don't know what's important to Kyle yet," he said. "Those are the types of features and characteristics we need to discuss and come up with a public policy."
Among the potential problems Moheet said the city is being careful to avoid is creating two different classes of taxpayers.
"When people buy homes, it's an emotional decision," Moheet said. "They're not looking at the tax bill yet. That reality kicks in two or three years into ownership."
While the city is not obligated to pay off the bonds, it is responsible for administering them, and it will ensure that the tax rates are not too steep and do not extend over a lengthy stretch of time, he said.
"It's a good concept if it's managed well," Moheet said. "It can be a good productive tool for the city and the developer."