How to navigate its complex governance hierarchy to address sewer plant failure
In the past 20-30 years, local governance for communities has become a complicated hot mess. That is abundantly apparent following devastation caused by Hurricane Harvey in southeast Texas.
Cinco Ranch, a Fort Bend County association governed community of 8,700 homes for 12,000 households serves as a troubling case study of unnecessary bureaucracy and poor developement planning.
According to a recent investigative report written by James Drew of the Houston Chronicle, Cinco Ranch began in 1991. At the time, developers worked with the Texas State Legislature and Fort Bend County to create the first Municipal Utility District (MUD), and 10 “baby-MUDs” for the initial phases of Cinco Ranch’s 34 distinctive neighborhoods.
The MUD is a special purpose governing district, established by a developer for the purpose of financing construction of new infrastructure by issuing bonds. Created at the pre-construction stage – with oversight from the Texas Commission on Environmental Quality (TCEQ) – the MUD board of directors is hand-picked by the developer. This arrangement reduces financial investment by land developers and County governments, shifting the cost of new construction to eventual property owners, payable as taxes on the property over a period of 30 years.
Proponents of MUDs and similar development districts point out that, becasue up-front costs are essentially deferred by way of repayment on property tax bills, builders are able to sell new construction homes at much lower prices. They argue that economic development is made possible without increasing the tax burden on existing taxpayers.
Opponents of MUDs say that, over time, construction costs of new infrastructure are inflated by interest paid on the bond debt over 30 years. And, because MUDs are created by and for the financial advantage of developers, and with little transparency, there is minimal pubic accountability when construction standards do not meet expectations.
In Cinco Ranch, 790 homes were inundated with flood waters, culminating in complete failure of the South Wastewater Treatment plant.
Cinco Ranch flooding victims: Who’s in charge?
By James Drew September 23, 2017 Updated: September 23, 2017 11:58pm
Excerpts:
The devastation wrought by Harvey has stirred fresh questions about whether MUDs and similar special purpose districts are sufficiently transparent and accountable, and whether they’re capable of putting the public interest ahead of developers’ interests – particularly in protecting neighborhoods from flooding.
Typically, MUDs are created at the initiative of developers, who pick their initial board members, lawyers and other professional advisers. The districts sell bonds to reimburse developers for infrastructure costs. Residents pay off the debt through property taxes.
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Developers and their lawyers effectively control how MUDs are formed, assembling their boards and often handpicking the “electors” who vote to ratify the districts’ existence and authorize bond sales.
In many cases, a mere handful of electors create MUDs and approve hundreds of millions of dollars in tax-exempt bonds to pay for water mains, storm drains, parks and other infrastructure. Without MUDs, developers would have to absorb those costs and price homes accordingly.
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A Cinco Ranch MUD board member, who spoke on condition of anonymity, said the MUD boards should discuss how to work together to mitigate flooding. The board member said the wastewater plant, completed in 1986, should have been built on higher ground, with levees. The plant is adjacent to Barker reservoir, which puts it at risk of inundation during extreme storms.
Read more:
Drew goes onto to reveal that the president of the board of the main MUD, G. Timothy Lawrence, is a businessman who has never resided in Cinco Ranch. He interviews several other homeowners in Cinco Ranch, including a member of Cornerstone MUD and the master HOA, Morgan Stagg. Stagg goes on record advocating for dissolution of the MUDs and incorporation of Cinco Ranch as a municipality. Stagg is reportedly an engineer for Parsons Corporation.
Homeowners are uncertain how to proceed, as they put damaged areas of Cinco Ranch back together.
Complex web of MUDs
Cinco Ranch is governed by at least 16 separate MUDs, according to its website. Each MUD is represented by 5 elected board members, serving staggered 4-year terms, with compensation of up to $7,200. The MUDs manage water and sewer treatment services, as well as trash pickup.
Severn Trent is the contractor operating the sewer treatment plant that failed August 27th, in response to Harvey’s torrential rain. Service was eventually restored, according to Houston Chronicle, on September 8th.
Each MUD is also represented by a law firm.
In general, homeowners object to the lack of transparency of their MUDs, and the fact that management is fractured by multiple boards. They dislike the fact that non-residents can serve as board members. Also, owners say that some of their neighborhood associations make campaigning for vacancies on the MUD board difficult.
Read between the lines – non-resident investors or developer-affiliated holdovers still control some MUD seats.
Side note: roads are maintained and repaired by Fort Bend County, not the MUDs. Therefore, Cinco Ranch qualifies for FEMA public assistance, including removal of debris and trash in ongoing clean up efforts.
HOA hierarchy
Members of each of the 34 neighborhood associations elect three representatives. In turn one representative from each neighborhood – 34 people representing owners of 8,700 homes – elects the 5-person CRPA master HOA board.
It’s confusing, and enough to make your head hurt.
Checking governing documents for CRPA, the HOA is tasked with maintaining common landscaping and storm water infrastructure, including retention ponds and areas.
Of course, there is a direct relationship between functionality of storm water infrastructure and water and sewage distribution and treatment systems. In Cinco Ranch, it is apparent that poor storm water drainage led to severe flooding, and flooding led to malfunction of its sewage treatment plant.
The CC&Rs also note there may be additional financial obligations of individual Neighborhood Associations. The implications are that flooded neighborhoods of Cinco Ranch will bear the costs of rebuilding their own separate neighborhoods, without much assistance from CRPA.
Leadership crisis?
Let’s do some simple math, to determine exactly how many people are needed to govern and manage Cinco Ranch MUDs and HOAs.
16 MUDs x 5 board members each = 80 compensated board members
34 Neighborhood Associations x 3 members each = 102 unpaid volunteer board members
5 member CRPA board + 5 member Landscape Management Assoc (LMA) Board = 10 additional unpaid volunteers
Total residential representatives (not including commercial division of Cinco Ranch) : 80 + 102 + 10 = 192.
And that does not include a hodgepodge of additional management, maintenance, engineering, and legal service providers, among others.
Hypothetically, if Cinco Ranch were a municipality, there would be a council and a City Manager, and possibly a Mayor, democratically elected by all registered voters – who must be residents of the community, regardless of property ownership status. Depending on its municipal classification, the council might be 3-5 elected officials, responsible for all pubic services, simplifying governance, and making it easier to hold leaders accountable. You can read more about the city classifications in Texas here.
County and State roles
As a final note, remember that Fort Bend County and state legislation enabled creation of Cinco Ranch, based on a developer-centric governance model, for better or for worse. And now homeowners and residents are paying dearly for past errors in judgment.
The facts indicate that Cinco Ranch and many other communities in Texas were built on flood-prone land, with inadequate water management infrastructure, and goals of increasing housing density while also saving money at the time of original construction.
The history of development in Texas is detailed in the following New York Times report. It is well worth the read.
There is more oversight of MUDs at creation. I agree with you, the real issue is the local government entity, usually counties, love both of these structures. In Texas, the main approval of MUDs was not through the counties, it was State. In VA in our wonderful County, the county initially approves the developer’s association’s governing docs, its main interest here is the HOA provides exterior maintenance to homes, the HOA is required to maintain waterline and sewer connections to county water lines and sewer lines. That is recorded on our plat, so the HOA can never make residents do that. Bad and good.
In our case, the county never should have allowed our subdivision to be built where it is, and I found documentation in the Planning and development records at the county between the county attorney and Planning Dept in the 1980s that proved that.
That didn’t stop the building of the homes by multiple developers, the developers not doing what the County said to do, yet the County signed off on the projects. We are missing storm drains required but not built, and the county says nothing.
We were “screwed” on everything. Our subdivision is built on known civil war battlefields on former plantation. The builders ignored state laws and despite finding coffins and graves, old newspapers documented they left them. That is typical, a newer subdivision in the next county had it much worse—you don’t want to know.
I can’t solve the issues and move the homes, but I did get the County to put $500K in this subdivision last year.
I generally agree with you. A political entity is preferable to a private HOA. However, MUDs and CDDs (Community Development Districts) are flawed by the fact that they are created and initially controlled by for profit entities – land developers and home builders. The conflict of interest is obvious, yet several states continue to enable what is essentially a Public-Private Partnership to build homes and entire communities. The problem is that the people who reside in these special districts have no say in the initial creation of them, and little control until construction of the subdivision nears completion.
My specialty in Texas real Property law as a paralegal was on HOAs and MUDs. Fundamentally, they are the same process but MUDs are political entities funded through sale of bonds, repaid in taxes homeowners pay. In Texas there is more legal oversight of MUDs because of the political form of government. Fundamentally, the processes are the same.
There is much more money involved in MUDs than HOAs. I got huge bonuses working on MUD issues.
One major problem with Cinco is the multiple entities with different MUDs and HOAs. Normally there, one MUD/HOA per subdivision. That multiples the problems exponentially.
I would much prefer HOAs be set up like MUDs for multiple reasons. Monthly assessments would be deductible, roads etc could be funded by bond sales, there would be more oversight of every process and HOAs would be more accountable.