Agreements include property tax rebates, effluent use, tourism dollars for development

Salado mayor Skip Blancett and landowner Billie Hanks, Jr. signed into effect on Nov. 25 more than 200 pages of agreements and a 12 page Warranty Deed. The board of aldermen approved the agreements following a two-hour executive session on Nov. 19.

The agreements form the basis for a partnership of sorts between the Village and the Sanctuary in which the developers and property owners of the proposed 297 acre mixed use development agree to have all of their properties brought into the Village limits in return for concessions on property and hotel motel taxes as well as guarantees for sewer service.

As part of the agreements, property owner Billy Hanks will donate six acres, or more, of property on the northeastern portion of the 297 acres to the village where it will construct a 300,000 gallon per day wastewater treatment plant for the cost of about $3 million.

The Village will also construct at its cost the collection system for the plant, except for the collection system on the property that will become the Sanctuary Development. As part of 24-page Wastewater Service agreement, Sanctuary developers will design and build the collection system for the development, tying in at Royal Street or another location if easements are not attained by the developer with the assistance of the Village.

While “eminent domain” verbiage concerning the Royal Street tie-in was struck from the final documents, Sanctuary Chief Executive Officer Robert Sulaski warned aldermen earlier this fall that the cost of connecting at a different location would be much more expensive for both the Sanctuary and the Village of Salado as the Village would be responsible for constructing collection lines from the southern end of the Village to the lift station on the south side of Salado Creek.

The current design approach will have a main collection line tie in to a gravity sewer line on Royal Street that will connect to a lift station on the south side of Salado Creek, most likely where the current Stagecoach sewer plant lies, and a force main line will connect to the top of the hill on Royal Street before a gravity sewer line will connect to the future Royal Street wastewater plant.

In addition to the collection system lines on the development property, Sanctuary developers will also be responsible for the design and construction of the “Re-use Facility,” according to the Wastewater and Chapter 380 Agreements. Under these agreements, the Village will provide up to 200,000 gallons of treated effluent to the Sanctuary at no charge.

The Village will provide the treated effluent to the Sanctuary at most through a Chapter 380 Economic Development grant. Determining wholesale water prices is not an easy matter and depends on several variables, according to Salado Water Supply Corporation manager Ricky Preston.

Preston told Salado Village Voice that SWSC has a take-or-pay arrangement to with Jarrell-Schwertner Water Supply to sell JSWSC up to 3 million gallons of treated water per month for approximately $1.50 per 1,000 gallons.

Many municipalities have begun to sell their effluent on the open market, typically for agricultural uses and for some fracking uses. While it is difficult to find what those costs are for the end user, we did find that municipalities in California are selling effluent for as much as $1.80 per 1,000 gallons.

The 380 Economic Development grant could be worth more than $100,000 per year based upon full 200,000 gallons per day at a cost of $1.50 per 1,000 gallons.

The Developer will have to apply for  beneficial reuse of the effluent and will do so at its sole cost, according to the Wastewater agreement.

The Re-use Facilities referred to in the Wastewater agreement are defined as “any treated wastewater effluent lines and related appurtenances constructed by Developer to transport treated wastewater effluent from the Wastewater Treatment Plant for beneficial reuse within the Property.”

The Discharge Permit that Billy Hanks and Salado Utilities, Inc. will donate to the Village states that the Discharge Point is Smith Branch Creek “near Shepard Drive” and FM 2268 on the western portion of the property.

The Wastewater Services agreement defines the Village Wastewater Improvements as “the Wastewater Treatment Plant, the Village Outfall Line, the Royal Street Wastewater Line Improvements, Lift Station No.2, and all other facilities, equipment and appurtenances required for Village to meet its service obligations.”

The Outfall Line would carry the treated wastewater from the WWTP on the north east portion of the property to the Discharge Point defined in the permit. The cost of the outfall line has been estimated as being as much as $500,000.

If the Village should amend the Discharge Permit that is being donated by Billy Hanks and Salado Utilities, Inc., to allow the discharge into the Smith Branch Creek closer to the WWTP, it will have to prepare that amendment and documentation at its own cost.

The period for the reuse of the effluent is 15 years from the “from the date of recordation of the last Subdivision Plat for the Property,” according to the Wastewater Agreement.

The Wastewater Agreement requires the Village to provide retail sewer service to the Sanctuary within two years of the execution of the documents. However, the Village is under no obligation to provide wastewater service to any portion of the property until the lands to be furnished service have been annexed, the lands to be furnished service have been final platted by the Village, the internal facilities for that Phase of the project have been completed and accepted by the Village and all necessary easements and other real property interests have been dedicated to the Village. Further, all required fees and charged have been paid to the Village and the Developer remains in material compliance.

Sanctuary properties will pay the same rates as other Village customers for in-city usage.

If the Village should expand the wastewater plant beyond the capacity of 600,000 gallons per day, then the Village shall undertake and complete these additional improvements simultaneously with such expansion: landscaping, walls and/or screening of the property, all blowers  at the plant shall be located within effective sound boggling structures, the plant shall be retrofitted with a charcoal filter vented headworks or comparable odor mitigations technology.

Annexation is referenced in the Master Development and Wastewater Agreements. While the properties will request annexations all at one time, it is done with the understanding that the property owners will continue to claim the agricultural use exemptions for property tax until “such time as they are developed,” with the exception of the 53-acre tract of land that includes the Wildfire Ranch Arena, which will be zoned and taxed as commercial property.

By approving the Master Development agreement, the Village “confirms its approval of the Conceptual Master Plan and specifically approves the land uses, densities, exceptions, utility and roadway alignments and width of rights-of-way shown in the Conceptual Master Plan, Land Use Chart and the Exceptions and Minimum Specifications.

The Exceptions and Minimum Specifications comprise 14 pages of the 68 page Master Development Agreement.

One of the exceptions to the local ordinances includes an exception concerning the dedication of parkland as required by the Subdivision Ordinance because Sanctuary will have private parks, private trails and private green-space.

The Land Uses Master Plan outlines the following general use categories and specifications, which can be amended by as much as 20 percent without further approval:

• Commercial (e.g. office, retail, restaurants, etc.): 515,000 heated sq. ft.

• Entertainment Venue: 40,000 HSF

• Lodging: 355 rooms.

• Multi-family (multi- story including senior housing and rental): 575 units.

• Mutli-Family (for sale including condos, townhouse and duplexes): 130 units.

• Single Family (for sale): 364 units.

• Parking Garage: 500 spaces

Approving the Master Development Agreement also approves the road design standards identified in the Conceptual Master Plan and includes roadway connections to the following Village roads: Royal Street, College Hill Drive, Baines Street, Santa Maria Road, San Jose Road, Salado Oaks Drive, Main Street and FM 2268.

The Design Guidelines referred to in the Master Development Agreement states that the Developer will provide design guidelines to the “Village of Salado prior to the first preliminary plat.”

The Chapter 380 Economic Development agreement outlines 15 years of tax rebates for commercial properties. It states that the owners will receive rebates equal “to the annual Property Tax Receipts actually received by the Village associated with such development (if any) less the amount of Property Tax Receipts in the Base Tax Year for the property associated with such development,”  multiplied by  50 percent.

The tax rebate will not include the debt service tax for the retirement of the debt for the sewer plant, according to City Manager Kim Foutz.

The property taxes will rebated for a period of 15 years “from the  recording date of the last Subdivision as deigned by the Village of Salado Subdivision Ordinance No. 2009.02 or the 15th anniversary date of the last certificate of occupancy issues for a commercial building, whichever is the last to occur.”

The Chapter 380 agreement also includes Rollback Grants for periodic economic development grants “equal to 100 percent of the Rollback Taxes to offset the portion of the Owner’s cost of development of the Land.” Rollback Taxes are defined in the Chapter 380 agreement as “the tax and/or penalty assessed against the Land, or operation thereof, as the result of the removal or agricultural and/or open space land designation(s) for the Land.”

Property that is appraised as Ag Use is valued on its capacity to produce agricultural products, not the market value of the land. According to the article entitled “Ag-use Exemption:  Fact or Fiction?” by Judon Farmbrough in the Tierra Grande, the Real Estate Center Journal, “This is determined by capitalizing the average

net income that the land would have been earned during the past five years using prudent agricultural management practices.”

The chief appraiser will also appraise the land at its market value. Then, according to Farmbrough’s article, “If the land is sold or diverted to a non-agricultural use, the difference between the two appraisals” for the past five years, plus interest, must be recaptured. This is what is referred to as the Rollback Taxes in the Chapter 380 Economic Development agreement, according to Foutz.

Additionally, the agreements include verbiage concerning Future Phases in which it states that the Village “shall look favorably in good faith on extending the existing economic incentives” for the future Phase Two Entertainment District which will consist of an approximately 1,800 to 2,500 seat additional music venue and multistory parking garage. However, the agreement is not binding on this future development.

The agreements signed by the Mayor and Billie Hanks, Jr. include a Tourism Marketing Agreement in which 50 percent of the hotel occupancy taxes generated by the Sanctuary will be rebated to the development to promote the property for overnight stays. The Tourism Marketing Agreement shall “continue for a period of 15 calendar years from the Opening Date of the last Venue opened to the public by the Owners.”