And the special deal Drippings Springs granted
to one developer
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By Charles O'Dell, Ph.D.
Development interests have long whined, complained and sabotaged efforts to enact responsible development regulations throughout Texas, and now they are focusing on Hays County. Their cry is, “To ensure affordable housing you cannot adopt provisions that would increase our development costs.”Don’t be confused or fooled by such nonsense. Affordability is determined by household income. Cost of houses is determined by development costs and profit margins. If allowed to operate, market competition will keep costs and profits at the lowest possible level. Raising household incomes requires other measures.
Development regulations are rules adopted to support community vision and to protect the public health, safety and welfare. Regulations that protect homebuyers and the community create immediate and long-term value.
There are two major issues in particular that development interests have long opposed and are now trying to undermine. They oppose (1) increasing the minimum lot size and (2) prohibiting increased volume and rate of storm water runoff onto neighboring property from new development. They claim that improving these measures will threaten affordability of new houses.
What Affordable Means to Developers
No developer willingly sells a house for less than it cost to build, whether a lower-cost manufactured house, a million dollar custom house or any price range house in between.
Developers build houses they can sell in the market place, and they will build those houses most profitable for them to sell. The higher the price…the higher the profit.
Developers earn higher profits with densely spaced high price homes such as these in an upscale Dripping Springs subdivision. But they also result in higher taxes for everyone to support additional infrastructure needs such as new schools, emergency services and road maintenance.The claim that lowering the minimum lot size will lower land cost for each house and therefore make houses more affordable is bogus. Affordable housing is a matter of household incomes, not the cost of houses. Builders can build houses that are affordable to lower income families, but it’s more profitable for developers to build higher priced houses.
Developers should not be allowed to diminish development regulations, and thereby the quality of houses and communities, under the guise of building affordable housing.
The prices developers pay for raw land is primarily determined by the minimum lot size allowed in development regulations, and the price range of houses the developer intends to build and market. Higher development density and higher house prices result in higher price paid for raw land, and thus a higher cost per acre.
Much of the cost savings realized from higher density development goes into higher developer profits. How much depends upon the level of market competition that exists. Development agreements interfere with market competition because government agrees to selectively change the development rules.
If a developer is able to increase density through a development agreement, he gains both an unfair competitive market advantage and a significant opportunity for windfall profits.
Selectively Changing the Rules and Non-enforcement
Imagine a football game being played without rules or without referees to enforce existing rules. The game would be chaotic and the score would be meaningless. Every responsible businessman will tell you that it is far more important that all competitors play by the same rules, no matter what rules are in place.
Twenty eight diverse individuals representing a larger number of public stakeholders worked over 2,000 hours during 16 meetings over many months. Our goal was to bring the old Hays County development regulations into conformance with today’s best management practices that respected property rights and long-term community interests.
Determining a Fair and Rational Minimum Lot Size
About eighty percent (80%) of households in Hays County depend on groundwater (wells) for their water needs. The stakeholders discussed various approaches to ensuring that all users of groundwater received their fair share, and that the existing supply of groundwater was not over pumped to the detriment of everyone.
Our consensus solution was to rely on the principle of “correlative rights” associating groundwater usage with rainwater recharge. The most logical, fair and responsible minimum lot size was determined to be that size lot that represented an area of groundwater recharge associated with the amount of groundwater usage by a typical household. If a household required more water than the minimum lot size would recharge, then use of supplementary rainwater harvesting was encouraged.
Do No Harm to Your Neighbor or Community
Regarding impact of new development on down stream property owners, stakeholders agreed to the principle of no increased rate or volume of stormwater discharge from new development.
Under the old rules, more and more downstream property owners find their homes are becoming located in expanding floodplains as new upstream development occurs and the rate and volume of stormwater discharged from those upstream properties increases.
Dripping Spring's variances to developer earned city millions
In 2000, California developer Makar Properties LLC entered into a development agreement with the City of Dripping Springs that contained over 100 variances from the city’s development ordinance.
Through secret efforts by then City Attorney and Pct. 4 Justice of the Peace, Rex Baker, Markar purchased the 1,600 acre ranch at a market price based on density prescribed in the Dripping Springs subdivision ordinances, and a price mix of houses that Makar planned to build and market. In this case, houses are priced from $240,000 to one million dollars.
The development agreement with Dripping Springs allowed Makar to build more homes than could have been built under the city’s ordinances, so by their action the Dripping Springs City Council awarded Makar an unfair competitive advantage and an opportunity for windfall profits. The City’s incentive was a $500 lot impact fee the City would receive for each of the 2,000 houses, and a 4% payment, up to $1,000,000, based on the developer’s utility infrastructure cost.
In effect, the Dripping Springs city council sold unfair competitive development rights on 1,600 acres of its unusually large 75,000 acre extraterritorial jurisdiction (ETJ). The city of 1,500 is poised to receive upwards to $11,000,000 in development fees for which they have zero cost.
Density for sale in the Dripping Springs ETJ
Instead, 30,000 citizens in the ETJ pay for the high density impact with higher school taxes, higher road taxes, higher emergency taxes, and inherit all the problems associated with the high density development while city officials expand City staff, raise salaries and health benefits, and embark on building an expensive central sewer system that serves only a third of the City.
Higher density and resulting increased annual property taxes do not make houses more affordable.
What You Can Do
Special interests are lobbying Hays County Commissioners’ Court to eliminate important provisions from our revised county development regulations that a county-wide stakeholder, science based process determined would protect home buyers and our communities. This process was open to everyone, including the special interests.
Contact your elected officials and tell them not to give in to special interests who want to diminish our revised development regulations that were publicly vetted and designed to protect individual property rights and community health, safety and welfare.
County Judge Liz Sumter (512) 393-2205
Pct.1 Commissioner Debbie Gonzales Ingalsbe (512) 393-2243
Pct 2 Commissioner Jeff Barton (512) 262-2091
Pct. 3 Commissioner Will Conley (512) 847-3159
Pct 4 Commissioner Karen Ford (512) 858-7268
Major development interests include landowners, developers, engineering firms, road builders, home builders, mortgage firms, realtors and of course attorneys and others, including some elected officials.
As co-founder of Hays Community Action Network (HaysCAN) in 2003, Mr. O’Dell strives to carry out the mission of ensuring open, accessible and accountable government. He is a long time and close observer of the workings of the Hays County Commissioners Court. He earned a degree in Agricultural Education and a Masters in Ag Economics at Texas Tech, and, later, a Ph.D. at The University of Maryland while employed as a Research Economist with the U.S. Department of Agriculture (USDA) in Washington, D.C. Texas born and raised on a family farm, O’Dell is a Hays County Master Naturalist and a board member of the Ethical Society of Austin.
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