State Legislature approves utility districts for 1,674 acres near San Marcos

"It allows development in an area the city does not currently plan to serve," said Kristy Stark, the city of San Marcos' assistant director of development services.

Unlike some MUDs, the Legislature did not grant LaSalle authority to acquire property through the power of eminent domain. One of a number of large projects in the works for eastern Hays County, the LaSalle development is a proposed mix of 7,000 homes and apartments in addition to a handful of commercial sections.

"It creates a lot of rooftops, which are going to come in and shop in San Marcos. I'm sure there will be some shopping in Kyle also," San Marcos City Manager Jim Nuse said. "It provides the rooftops without the obligation to provide some of the expensive services we do," such as police and fire protection.

Boundary dispute

On July 3, San Marcos and Kyle resolved a boundary dispute that had complicated LaSalle's plans.

When beginning to work on the project in 2010, LaSalle developer Mike Schroeder of Brenham thought the property was within the city of Kyle's extraterritorial jurisdiction, or ETJ—any area within 2 miles of Kyle's boundary that is not part of another city. San Marcos and Kyle both claimed overlapping portions of the LaSalle property for their ETJs.

On June 18, the Kyle City Council approved a swap that put the entire project within San Marcos' ETJ. In return, Kyle received a portion of San Marcos' ETJ at the intersection of FM 150 and Hwy. 21, along with two slivers of land on the northern side of CR 158.

San Marcos City Council members approved the trade at their July 3 meeting.

"The intent of the swap is really to clean up boundary lines for multiple reasons," said Matthew Lewis, San Marcos' director of planning and development services. "One, the parcel owners have clear jurisdictions to work with at the time they start development. Two, it makes it easier for future planning. Three, it's also just good neighborly practices to negotiate ETJ boundaries along common delineated roadways or parcel boundaries."

San Marcos received 587.6 acres of ETJ valued at $1.6 million, and Kyle received 193.5 acres valued at $1.5 million.

Debt and taxes

In April, the San Marcos City Council approved a consent agreement with LaSalle in which the MUD will share 60 percent of its future sales tax revenue with San Marcos, and it will pay the city $1 million in master development fees. LaSalle also must conform to San Marcos' development standards.

If the city of San Marcos annexes the property, then it will assume the bond debt. Breaking the development into five MUDs allows the city to annex the land in portions rather than waiting for the entire development's debt to be paid off.

"When you annex a MUD, you take over the debt, so you wait until it makes sense economically to do it," City Attorney Michael Cosentino told council members during a March workshop.

For water service, the company plans to contract with the city of Kyle and the County Line and Maxwell water supply corporations. Although LaSalle has not set a firm construction schedule, it plans to develop the MUDs during the next decade.

"We're pretty excited about it," said Andy Barrett, an Austin-based lobbyist who represents LaSalle. "We have a good working relationship with both Kyle and San Marcos, and we think this is a good thing for everybody."