Loading...
MIN CC 10/28/2008CITY COUNCIL MEETING of OCTOBER 28, 2008 BOOK "U" 155 -ES OF THE HUNTSVILLE CITY COUNCIL MEETING HELD ON THE 28TH DAY OF OCTOBER, 2008, IN THE CITY LOCATED AT 1212 AVENUE M IN THE CITY OF HUNTSVILLE, COUNTY OF WALKER, TEXAS AT 5:30PM. Council met in a special session with the following: PRESENT: J. Turner, Wayne Barrett, Tom Cole, Charles Forbus, Clarence Griffin, Melissa Mahaffey, Ray, Dalene Zender ABSENT: Mac Woodward PRESENT: Bill Baine, City Manager; Thomas Leeper, City Attorney; Stephanie Brim, City Secretary TO ORDER [5:29pm] Turner called the meeting to order. OF ALLEGIANCE to US and TEXAS FLAGS, INVOCATION amber Barrett led the invocation. WORK SESSION City Council conducted a work session to discuss TIRZ No. One and the Ravenwood Project. ' Mayor Turner welcomed citizens and guests, and turned over the floor to Councilmember Forbus to conduct the meeting. Councilmember Forbus thanked those in attendance, including Mr. Jay Williams [Property Commerce], Dr. Richard Montgomery [Huntsville Independent School District], and staff. Councilmember Forbus read a prepared statement, and then opened with questions. Councilmember Forbus' first set of questions discussed the gap analyses and the difference between the two. Glenn Isbell, Public Works Director, answered briefly that the scope of the project had changed, affecting the gap analyses, and also cited additional follow up with consultants Schrader & Cline for more details would be in order. Councilmembers Mahaffey and Forbus continued with questions on the timeline of when the gap analyses were passed, and when the residential portion of the project was introduced. Mr. Isbell answered that the original project did include the Metro national tract, and did not include the residential portion initially. Councilmember Forbus asked Mr. Williams questions aboutthe residential housing — how they came to the number and build out schedule, who would build the houses, etc. Mr. Williams stated the numbers came from planners, and they would have sold the property to a land developer or home builder. Councilmember Ray followed up with additional questions on the developer's intent to follow through with the residential development, and Mr. Williams indicated repeatedly that they [Property Commerce] would not build the houses. Councilmembers continued discussion with respect to the residential housing being a part of the package deal included with the retail development, and the inclusion of the 380 agreement to incentivize the project. Mayor Turner and Councilmember Forbus thanked Mr. Williams for attending and asked that regular updates be provided to the City Council. Councilmember Forbus also asked Mr. Williams about the potential sale of the property 'tagged' for residential as for sale for multi - family housing. Mr. Williams reiterated that no residential housing would occur with the current economic outlook. Walter Ragsdale, P.E., Interim City Engineer, gave a detailed report on the status of public improvements at the site. Councilmembers continued discussion with respect to approval of changes to the project, and that any changes need to be approved by the City Council. Councilmember Barrett also stated that his intention as Chair of the TIRZ Board would be to ' improve communications between the Board and the Council. Councilmember Cole discussed with Mr. Williams his prior experience with 380 agreements, as used with other projects. Mr. Williams also verified that Target has begun construction with a target opening of July 2009, but did not reveal any other potential retail tenants when asked. Councilmember Griffin continued discussion with Mr. Williams regarding the property [the residential, "back" 60 acres], and the reasons behind Property Commerce purchasing the property if they did not want it. Mr. Williams discussed briefly having a CITY COUNCIL MEETING of OCTOBER 28, 2008 BOOK "U" 156 ienfial developer come in to build houses, which led to further discussion on the TIRZ agreement. Councilmember Ray Mr. Thomas Leeper [City Attorney] agreed that any changes to the TIRZ agreement with respect to potential third orother as would have to be brought back to the City Council for prior approval. again discussed the desire for more updates on the project. incilmember Forbus reiterated that the residential housing, as part of the package deal sold to the Council and community, ,veryimportant. Councilmember Ray questioned Mr. Williamson his perspective of the 380 agreement, and howthe retail residential were tied together. Councilmember Cole inquired as to Property Commerce's long -term management of the 3", once built. Mr. Williams indicated no long -tern strategy, but stated that Property Commerce did manage about 50% is properties they built. Councilmember Mahaffey reiterated that the City Council needs to be approving any changes to project, not deferring any of their authority [to staff]. incilmember Forbus turned the conversation to the purported benefit to the school d istrict, citing that the amount originally )rted had dropped significantly. Dr. Richard Montgomery spent time detailing the funding formulas and explaining the ;ulations. Responding to questions from various Councilmembers, Dr. Montgomery also explained briefly legislative nges that have occurred since that time and their impact, the complicated tax structure and State contributions with respect chool funding, the different tiered fund ing levels, the school's attendance in relation to funding, and the distinction between operations and maintenance and debt service appropriations. iember Mahaffey stated the need for the truth of the funding and real benefits to the school to be told to the ity. Councilmember Ray restated that the benefits the school district will receive will not be the same as the time the as sold to the Council, and discussed funding further with Dr. Montgomery. Dr. Montgomery reiterated that increased ce is still the key. Councilmember Barrett commented that the additional funds the school should receive needs to be so that people really know what the district will get or not get from Ravenwood. icilmember Forbus stated that the anticipated windfall profits from the rollback would be significantly less than originally ipated, only around $57,000. Councilmember Mahaffey stated that all of the property did not have an agricultural , iption, which contributed to the wrong projections. rton Duke, Director of Finance, talked about the cannibalization effect [or crossover, the loss of revenue at other local' iesses when new businesses come in]. He researched several sources, and used 33% for calculations and models. City ager Bill Baine stated he wanted to be conservative, so the cannibalization effect was included in the updated models [that handed out at the October 7, 2008 meeting]. Mr. Duke also explained briefly the current taxing structure, portions sated to property tax reduction, and the 380 agreement. Councilmember Mahaffey stated that the City relies heavily on r tax and does not want an adverse effect on that revenue source. Mr. Duke confirmed that sales tax is more important the property tax as far as the City's revenue is concerned. incilmember Ray confirmed [with respect to the model] that the cannibalization rate was an estimate, and could be higher lower, and that the loss of existing businesses was not included. Mr. Duke responded that the difference was substantial, explained the various reasons behind his assumptions in the model [property taxes, school tax rates, etc.]. Mr. Duke pted that his office was not consulted in preparing the pamphlethnformation put out by the City. Councilmember Ray ad that the City would not receive the utility fees; Mr. Duke agreed, although he had not reviewed that information cifically and did not include it in the model. Councilmember Barrett spoke on the importance of sales tax to City operations. Baine reduced the model description to state the City's net effect would be about one -sixth of what was originally reported. uncilmember Forbus summarized by stating the Council had covered: the two gap analyses [with additional information to forthcoming from Mr. Isbell /Schrader & Cline]; Property Commerce will not build the residential housing [that portion of the yect is on hold]; the final project plan was approved by Council in April 2007; Mr. Williams will provide the Council with lular updates/information; Target is coming, although we don't know the other businesses; we won't be getting as much iD benefit or rollback as anticipated, and the cannibalization effect is going to be rather dramatic. Councilmember Ray Jed that the numbers don't add up to what was sold to the Council — retail and jobs would be coming, but the anticipated cool tax benefit, housing, rollback taxes and net financial benefit will not be realized; and read from a court decision. T [8:12pm] Forbus thanked everyone for coming and adjourned the meeting. r Ste anie A. Brim, City Secretary HUNTSVILLE CITY COUNCIL MEETING SPECIAL SESSION APPEARANCES COUNCIL MEMBERS: DALENE ZENDER, POSITION 1 MELISSA MAHAFFEY, POSITION 2 CHARLES FORKS, POSITION 3 LANNY D. RAY, POSITION 4 TOM COLE, WARD 1 MAC WOODWARD, WARD 2 "(Not Present) CLARENCE GRIFFIN, WARD 3 WAYNE BARRETT, WARD 4 HUNTSVILLE CITY MAYOR: JAY TURNER On the 28th day of October, 2008, at approximately 5:30 p.m., in the City Hall Council Chambers, 1212 Avenue M, Huntsville, Texas, a Special Session of the Huntsville City Council was held as follows: October 28th, 2008 Huntsville, Texas (Proceedings in open Chambers) MAYOR TURNER: I would like to call this workshop of the Huntsville City Council to order. If everyone would please rise and we're going to pledge to the flags and remain standing for an invocation. (Pledge of Allegiance recited) MR. BARRETT: May we pray. (Prayer Offered) MAYOR TURNER: I want to welcome everyone here tonight. This is a work session that is an outgrowth of the request that we had back in July from Council member Forbus and others. He's done a great deal of work in preparation for this tonight, and so I'm going to turn over the floor to him and he will direct the direction as we go. MR. FORBUS: Thank you, Mayor. And I want to thank all of you for coming tonight. Mr. Williams, I've never met you before but glad to have you here. Dr. Montgomery, thank you for coming. And all the staff here. We have a few questions, and let me preface this with this is an information gathering session. It's to provide the citizens of Huntsville an update on the TIRZ and Ravenwood. We need to ask questions and be good stewards for our citizens because Ravenwood is the largest tax abatement Huntsville has ever participated in. The total amount could be over sixteen million dollars. This is money for the developer's infrastructure. But we must remember that those dollars are not the council's nor the city's, they are the citizen's money. Those dollars will not be available for police, fire fighters, street repair, street lighting, storm sewers. So it is our responsibility as council members to make sure that our citizen's money is well spent. We are here to examine the mutual commitments between Property Commerce and the City because it is the responsibility of the council to do that. We want to make sure that the city is meeting its commitments, and we also want to make sure that the developer is meeting their commitments. There were claims made during the presentation for the Ravenwood development that have recently been called into question. The issue of housing, the amount of HISD tax benefit and the roll back windfall tax and other concerns that many citizens have asked me and the other council members about and hopefully we'll be able to clarify these issues tonight. Recently there was a proposal for an additional TIRZ tax abatement for two hotels. And there were suggestions that if the council didn't approve the new tax abatement that they were anti economic growth. And I don't believe any member of this council -- and I know that I'm not, against growth. The reason we are here tonight is to be sure that any decision made in the future regarding tax abatements are in the best interests of the tax - paying citizens because that money is our citizen's money. So we must be very careful with it. ' So with that said, this is not a gotcha type kind of get together. We just want to get some information. And I have a couple of questions. The first one I think I talked with Glenn about this morning and yesterday is there were two gap analyses, and I noticed that there was like a five million dollar difference in the two. And I don't know if Glenn had time to look at those. And I know one of them, he said one of them was the wrong one that was in the — I wonder if you could address that gap analysis? MR. ISBELL: I haven't had time to get with Cline and Schrader. Cline and Schrader, obviously, prepared the gap analysis. Staff did not prepare those. I do know that the contracts that were provided, the supplemental came from the city Planner at tnat time ana so research it. The question I believe was related to the land costs in each of those documents. One of them, I think, was around seventeen million dollars and the other about twelve million dollars. About a five million dollar difference. COUNCIL MEMBER: Yeah. MR. ISBELL: And so I would just really need to get with the consultant and see what his take on it was. I do know the twelve million dollar figure was the last gap analysis that we had coming from the consultant so I'm comfortable with that number. The project, itself, as it began took many phases. Originally we were starting out at seven hundred something thousand square feet of retail. The Metro National tract was included in that property. As the thing began to evolve the Metro National tract fell out of the property. Then everything got down sized. But every time the project changed the numbers changed, a new gap analysis was done by the consultant on the numbers. And so there were probably five or six gap analyses performed over the course of the project. But the one dated right prior to council approval, which I think was 4 — MR. FORBUS: 4 -7. - MR. ISBELL: 4 -7 was the last gap analysis that was performed on the pro forma at that time that the council made the presentation. ;) MR. FORBUS: The reason I was asking is I noticed in the contract — this one, the larger one, was attached to the back of the folder that showed the contract. And I was wondering which one of these gaps that we had approved? Was it the sixteen million, eight hundred sixty or sixteen million, four thousand? MR. ISBELL: Well, you approved the one that was the 16 -04. MR. FORBUS: This one, okay.' , MR. ISBELL: The gap was sixteen million. The contract, itself, was eight million TIRZ, six million 380, for a total of fourteen million. Which was two million less than the gap. ! MR. FORBUS: Okay. All right. Do you want me to handle these questions? COUNCIL MEMBER: Go ahead. MS. MAHAFFEY: My concern is when originally, when I guess they were — the two figures of the seventeen million and the twelve million, my concern was that the gap was almost exactly the same. MR. ISBELL: Because the scope of the project changed. If you look at the seventeen million dollar figure you will find a larger development. More than likely — and that's one reason I need to get with the consultant, more than likely at the time that was done the Metro National tract was part of that project, which would have been an additional thirty -two acres of land. And so those are issues that I really need to discuss with the consultant before I can give you the right answer to it. Originally it started out as the hundred twenty and the thirty -two. It started out as a hundred fifty acre development originally and then the Metro National tract fell out. MR. FORBUS: I did have a question. When you talk with Metro National on — if they have a copy of this old one, the larger one, would you see if they could break out the residential like they did on the other one? MR. ISBELL: The residential was not part of the original — MR. FORBUS: That was just a lump? ! MR. ISBELL: -- project. MR. FORBUS: That was just a lump then? , MR. ISBELL: No. The residential -- there was no residential component in the original presentation. When we started day one it was strictly retail. The residential component came in probably about the third or fourth edition. As the Metro National fell out there was another gap analysis done. The residential component came in at a later date and there was another gap analysis done. And so, like I say, this was — this was a work in progress from day one to the final presentation. MR. FORBUS: But the 4 -07 is the actual breakdown of the project? MR. ISBELL: Yes. MR. FORBUS: Okay. Any other questions? MR. ISBELL: And I will verify that with Mr. Cline as well. MR. FORBUS: A question -- I guess this one will be for Mr. Williams. I read in the transcripts of April 24th of'07, when the presentation was made for the Ravenwood project, at least five times the hundred seventy -five, hundred fifty to two- hundred number, roughly hundred seventy -five houses were mentioned at least five times. And I was wondering if -- I know Property Commerce doesn't build houses, usually. I was wondering if that was - - how that figure was come to be, the one hundred seventy -five houses. If you wouldn't mind answering that? MR. WILLIAMS: I believe that number came from —we had a land planner layout single family lots at the rear of the property and that's the approximate number they felt like fit on that piece of property in the back, the sixty acres in the back. MR. FORBUS: Who was going to build those houses, though? MR. WILLIAMS: Well, we — we would sell the property to a land developer or a home builder to actually develop that property for single family homes. MR. RAY: Excuse me. If 1 may jump in? You never planned to build these houses? MR. WILLIAMS: No. We don't build houses. MR. RAY: Did Ravenwood, Ltd, ever plan to build these houses? MR. WILLIAMS: We would not build them, we would sell them — MR. RAY: When you say we, you've got a bunch of hats and I'm not trying to trip you up here but -- MR. WILLIAMS: No. Ravenwood Village, doesn't build houses, no. Ravenwood Village, Ltd, Property Commerce, we do not build houses. Never have been in that business. MR. RAY: And you've seen the original statute that was passed here that allowed these contracts? And I know you have seen the contracts, right? MR. WILLIAMS: Which contracts are you -- MR. RAY: The performance agreement, TIRZ -- or the development agreement? MR. WILLIAMS: Yes, uh -huh. MR. RAY: And both of those agreements talk about the residential section, though, right? MR. WILLIAMS: Yeah. I think they actually separated out the TIRZ money in the commercial piece in the property and the piece in the back. We divided those up. I don't recall — again, I'd have to go back and look, but 1 don't recall that the agreement said that there was a requirement to build residential. But I think that was at the time the highest and best use for that property. MR. RAY: Let me direct your attention then to the -- this is the development agreement. And it defines Ravenwood Village as to include residential and retail uses. And then throughout this particular development agreement it talks about the residential property. And it includes as an exhibit, which is part of the document, a build -out schedule that shows fifty -eight homes being built this year, another fifty -nine the following year, at cetera, at cetera. It clearly contemplated residential homes. And what's the status of those, the residential property right now? MR. WILLIAMS: Well, I mean, I think you're familiar with what's going on in the residential market. Single family market is dead right now and has been for six months. We don't know -- I mean, I'm not an economist, but I don't know if it's coming back in three months, six months or a year. But right now there is no single family development to be done anywhere that I know of, Huntsville or Houston. I don't think you can get it financed right now. So we're in a pretty big crisis, as you know. So I don't think single family could happen right now. ivim. "y: vvnat company or entity or whom were you discussing building this with before when you were gong to farm it out orjoint venture it? MR. WILLIAMS: I couldn't tell you off the top of my head. But we talked to, you know, half dozen or a dozen land developers and home builders about the site. I can't tell you off the top of my head exactly who they were. MR. RAY: Do we know how much — and I'm not sure if this question is for you, how much of the sales tax 380 was allocated or apportioned to gapping out, or whatever you want to call it, for the residential property? Anybody jump in. MR. ISBELL: I could probably jump in a little bit. The 380 is a sales tax— 380 is a sales tax generated incentive. The residential, obviously, doesn't generate any sales tax. MR. RAY: I wasn't talking about the source of the 380. 1 know it's a sales tax rebate. And just to catch everybody up, I think — catch me if I'm wrong here, Glenn. It's a fifty percent of the sales tax comes back to the city, fifty percent goes back to the developer to be passed on to the retail, or however they want to rig it. My question was when this whole thing was passed how much of the 380 money was in there because of the residential development? Because I have read some transcripts and seen some other stuff that certainly indicates very strongly that part of the 380 money was in there because of the contemplated loss in the residential development. So I was just wondering how much or all, some, how much of that went that way or if we have some kind of chart here we can see that will show us that? MR. ISBELL: I don't know, Mr. Ray. My understanding with Mr. Evans at the time that the TIRZ money for residential would pay for the public improvements and essentially the 380 was additional incentives for the retail. MR. RAY: Just for the retail? MR. ISBELL: Right. That was my understanding. II MR. RAY: Was that the understanding of council at the time? MS. MAHAFFEY: No. It was a -- it was a package deal. I would like to read something here from the -- a direct transcript from the tape that night of April 24th, 2007, where -- this concerns me because I think a lot of people that spoke, there were a lot of real estate agents that spoke because they knew how badly we needed housing here. And I think everybody saw it, not just city council. And I think most of them saw it and residents alike saw it as a package deal. And Larry Cline, our consultant, TIRZ consultant was here along with Mr. Williams from Property Commerce and Scott Bing representing the development. And Mickey Evans asked "this is a multi use development to include residential and retail uses and shall include a Target retail store as the anchor. That's guaranteed ". And Glenn Isbell says, with these other people in - present, "that's part of the contract agreement, yes, sir". So -- MR. ISBELL: I'm not disputing that the retail and residential was part of the contract. As a matter of fact, I made that statement that they were. I thought the question was the allocation of the money. Why was the 380 incentive induced to start with? The contract clearly states a multi -use residential and retail development in the developer's agreement. So I'm not disputing that. I think I'm trying to explain to you my understanding from Mr. Evans why the additional incentive on the 380. We discussed many times about the massive amount of dirt work that had to move on the site, topography of the site, the adversities that had to be overcome in that area that were above and beyond normal development sites to be able to do a development of this size. Those items were discussed. That's not allowable in the TIRZ ordinance. As I understand it TIRZ is strictly for public improvement type standpoints where that incentive would be -- could be induced with the 380. So that's the reason that I understood that it was primarily for the retail development section. MR. RAY: Was that understanding ever put out in front of the public? Is there some brochure that was passed out, chart, memo, something where — MR. ISBELL: I'm not aware of any written documentation. I do know that Mr. Evans had made that statement several times in public. MR. RAY: That the 380 was exclusively an incentive for the retail? MR. ISBELL: Well, that the massive amount of dirt work that was involved in developing the site was a contributor to the additional incentives. That statement was made more than one time to the TIRZ Board, to the EDC Council and to City Council. MS. ZENDER: I was sitting on the TIRZ Board at that time and, you know, I understood this to be a complete package deal, and that that 380 money could be used for the front and the back. And that the issue -- one of the main issues with the back property as far as residential goes was the cost to develop it from the standpoint -- just the cost of the land and divided out the cost to build the roads, the infrastructure and et cetera. The lot cost to develop each lot was about sixty thousand dollars, if I remember. That's the number that pops in my head and I'm sure that's pretty close to that. And so I feel like this project was sold as a package. And that 380 money would, in addition, also offset not only the front part but also the residential. MR. ISBELL: I don't think there is anything contractually that would limit -- would limit that. I think it is a package deal. It is a residential and retail, multi -use development. But it was my understanding that the additional incentives were to be because of the massive amount of earth moving and those kind of things that had to be accomplished on the front sixty acres and that's why it was induced. I think if you read the contract, I don't think that the separation is there in the contract, front sixty, back sixty. It is a package deal from that standpoint. But if you ask what the driving issue was for the additional incentive, that was my understanding. MS. MAHAFFEY: So you're saying that the extensive amount of site preparation for the retail stores was why we gave them the 380? That's why the — MR. ISBELL: That was one of the reasons. MAYOR TURNER: Talk into the microphone. MR. ISBELL: That was one of the reasons, that was my understanding, yes. I think that was vocalized on more than one occasion by Mr. Evans. MR. FORBUS: Any other questions? MR. BARRETT: I might just- - MR. FORKS: Yes, go ahead. MR. BARRETT: -- chime in. 1— not really so much a question for Mr. Isbell but just to contribute my perspective to this. I certainly — because I was not on council at the time, and I certainly don't think there was any division in the mind of the public in the project. And I think in the minds of the public this was certainly a package deal, and certainly discussion of the projected homes was quite extensive. Also, 1 would just note that this performance agreement and the Ravenwood agreement were passed on the same day. And I'm not an attorney, and I know we have some in the room, but still, just if I can read and understand English, the last provision in the performance agreement under "I ", entire agreement, of course basically says this is the whole agreement, "except provided, however, the parties acknowledge this agreement is made in association with the City of Huntsville TIRZ No. 1 development agreement for Ravenwood Village project executed on the same date herewith ". So these agreements are joined. And in the Ravenwood Village project, certainly the residential is in there. And even as Mr. Ray mentioned, in the build -out schedule. So I just — I can't understand, irrespective of what conversations may have taken place, I think certainly in the mind of people who were trying to follow this and understand what was going on, and I would think in the mind of council members, that the participation that Huntsville was giving was to the entire project as a whole and not only to half the project. So that's not to disagree with you, Glenn, but just to contribute my perspective to this discussion. And that is my perspective on this particular matter. MR. ISBELL: Councilman Barrett, I do not disagree with that. This is a package contract. The performance agreement and the TIRZ agreement, the developer's agreement, plainly talk back and forth to one another. The question I thought was asked is the reasoning behind the 380 incentive. And I'm expressing to you what was communicated to me, I think to the council at that time. And that may not have been the only factor, but that was certainly a major contributing factor to them. MR. FORBUS: Anyone else? MR. RAY: Yes. I would like to follow up on that. Okay, so we're all in agreement this was a package deal. The 380, TIRZ, residential and housing, it was a package deal. And now we understand that part of the package, the residential part of the package, is no longer a possibility, at least not in the foreseeable future. MR. ISBELL: I did not understand that. MR. FORBUS: I think that would be a question for Mr. Williams. do ya'II think the single family market is going to come back? In three months? Three years? I don't know. 1 mean, there is no single family market right now today so -- anywhere. So -- but I have no -- it may be back in three months. I don't think so, but the residential market may be back. Single family market may come roaring back. MR. RAY: When did you figure out we weren't going to get the housing part of this? MR. WILLIAMS: You keep — no one said you're not getting the housing. Right now you're not getting the housing because there is no single family market. But no one has said that the single family market — that this isn't going to be developed, this thing. Nothing is being developed back there right now. It's a bunch of trees. And nothing is going to be developed until a market is established. MR. RAY: If you're going to deviate from the contracts and the build out schedule and what was in here don't you think you should have come and let us know? I mean, I've got a build out schedule here and the public has a build out schedule that says fifty -eight homes this year and obviously they are not going to happen. You can -- you're not doing it by omission, they are not happening. Don't you think you should come back for a modification? A final plan approval requires council approval by my read of the law. MR. WILLIAMS: You know, if you want me to come back and let you know what is going on I would be happy. I have never been -- I have never been asked to come talk to City Council before. The first time I was asked was last week and here I am. So I don't know -- MR. RAY: Nobody gave you a call like in late June and said we're going to do an update? MR. WILLIAMS: No. I've never been asked by City Council to come visit with ya'II. I've, you know, talked regularly to city staff about the project, but I've never been requested by City Council to come talk to ya'll. And I don't -- it's not in my norm. I mean, we've done a lot of developments, but typically city councils don't want you just walking in and giving them monthly reports on what is going on on a development project in town. But, you 11 I , know, if you want reports or updates we are happy to give them. I mean, you know. And whatever form you want them I'm happy to come up here. I'm up here all the time anyway so that is not a problem. MAYOR TURNER: If I may say we very much appreciate you coming here tonight. 11 MR. FORBUS: Yes, we do. Thank you for coming. MAYOR TURNER: I just want to say that. Because as Mr. Forbus said early on, we're a small city and this is a big, big chunk for us. And we appreciate as far as your willingness to be here because this is something that many people had concerns about and so I just want to make it very clear that we do appreciate you being here. MR. WILLIAMS: Thank you. I'm glad to be invited. MR. FORBUS: We will be glad to have you come back and give us regular updates. One of the things I wanted to mention -- am I talking too loud? MR. WILLIAMS: You want me to sit down? MR. FORBUS: One of the things that— I was not a city council member at that time, either. I sat in the audience that night and I noticed that there were a lot of people, real estate people, who were pretty excited about these new homes. And also people in the Independent School District were excited about the possibility of new families coming in, new students coming into the -- coming to the school district. And so when I saw that the Ravenwood land was listed for sale as a multi - family — and I would assume that's apartment type sales -- I was really surprised. Because I thought -- I really thought it was going to be a single family dwelling project. Would you say that's pretty much just on hold right now, right? MR. WILLIAMS: Well, its not going to be a multi - family project, either, any time soon. Multi- family market is on its back as any other market. So right now that, you know -- MR. FORBUS: The money is tight, right. I I MR. WILLIAMS: You can't get a multi - family project built. You can't get a single family lot development deal done right now. So really that tract is going to be sitting there until something happens with national economy and the credit crunch is over. And then no one knows what it's going to look like then. MR. FORBUS: You know, that is a unique ecosystem out there? People come from all over the world to see that parcel of land where those homes are. It's kind of interesting. MR. WILLIAMS: Are you talking about the flowers or the -- MR. FORBUS: The flowers, the flora out there. MR. WILLIAMS: Actually that soil is on more on the front of the property because we were contacted by the State — the State Park to come remove some of that soil and move it to the State, which they did. But that soil was actually more on the front, flat part of that property. It's not back where the trees are. It was some type of prairie flower, I think. MR. FORBUS: Yeah, it is, yes. That's part of it. MR. WILLIAMS: Speaking way out of my expertise. But evidently there was — its the actual soil. And they scraped it up and took it off and took it over to a project they were doing at the State on some type of prairie program they have got going over at the State Park. MR. FORBUS: I just wanted to make a point that Huntsville is unique. MR. WILLIAMS: Evidently you can't find that soil in too many places. MR. FORBUS: That's true. MR. WILLIAMS: So -- MR. FORBUS: So right now to kind of cap this end of it, the housing project is on hold. And going back to what Mr. Ray was alluding to earlier, they say that the final plat for Ravenwood has to be approved by City Council. It's paragraph 311.010. The tax code says "council must give final approval of the project plan ". And 1 know I haven't done it since I was here. Was that approved by earlier council? Does anyone know? MS. MAHAFFEY: No, it was not. I've not seen a plan. MR. FORBUS: Thank you. MR. WILLIAMS: Are you talking about the plat or the plan? You said — MS. MAHAFFEY: The project plan. MR. WILLIAMS: The plan. And 1 think the architectural elevations were the issues, I believe. MR. FORBUS: Yeah. We had a couple of other issues from the P and Z. They were concerned about the deferred public improvements haven't been presented to the P &Z and the City Council, either. And I believe that is in that — another paragraph in Section 311 of the tax code and I didn't know if that was -- MR. BAINE: I think Glenn needs — Glenn needs to answer that question. MR. FORKS: Maybe Glenn can answer that. MR. ISBELL: The finance plan and the project plan were approved by City Council on April 24th, 2007, at the same time that the development — or prior to the development agreement and the performance agreement being approved. The project plan is a different animal than the plat. MR. FORKS: Oh, okay. Glenn, is this the project plan, basically? MR. ISBELL: (Inaudible). MR. FORKS: Looks kind of black and white here. MR. ISBELL: I don't have the color original. MR. FORBUS: Thank you. How about the public improvements? Glenn, do you -- MR. BAINE: I think Walter would be the person to explain that. And he has a graphic up there already. So -- but he's had quite a shootout in the last couple of months. MR. FORKS: Fast draw. basically kind of depicts the front half, including all the public improvements that are out through there. And let me orient you first here. We've got 45 on the north, on the top of the map over here. North is over on the left edge. South, Smither Drive, over on the right edge. And then west over here. the area that you were talking about, basically this is the front half of the total hundred twenty acres. Or the graphic that you see here depicts the sixty acres. And it's the sixty acres that's the commercial. And let me just kind of walk you through the public improvements that you see here. And generally what you see here is the site plan, the landscape plan and the public improvement plan. You could see the building layout with 45. We've got the back side here. And you can see the Target being located in this location here, with more retail along the back, over and through here. You see some pads up here in the center that can be developed as basically stand alone restaurants or other uses. And then you see some out parcels that are up close to 45. And, again, the out parcels are stand alone. They are out -- they are not included in the landscaping or other things that you see here. But the public infrastructure or the utilities is being provided. As ya'II discussed, there was a big hill out through here. And you can see a pad site. The size of a Target store has to have a large, flat area to build the store along with all of the retail in back. When we talk about public improvements to serve the infrastructure we're talking about all of the water, the fire protection, the sanitary sewer, the roadway, the drainage, the pedestrian type improvements. So let me kind of walk you through how that is occurring. And right now in order to be built we have to basically allow the public improvements and the infrastructure to get started. And the developer through this process is starting to install these things. Now, the public improvements, infrastructure have to be complete really prior to occupancy of the buildings. So we don't want a facility as large as Target to get completed and there be no fire protection or something else like that. So the public infrastructure is underway with a time schedule to allow the completion out and through there. Now, water and fire protection, when you look at something like this, is one of the key components of public safety. Behind the property here we have a twelve inch waterline that loops into the system that we've got over here on Smither Road. And you want to loop fire lines because you feed that fire hydrant from two directions, you get a lot more volume in through there. So the water line in behind and the domestic services for , these buildings, you know, the water fountains, the restrooms, everything else for these will be served behind the building in through there. The waterline continues up along Ravenwood here and then it also loops across the property here to serve the rest of the buildings to complete that loop as an eight inch waterline. Now, an eight inch up here but a twelve inch back here. Generally the city needs to oversize facilities because we expect more development, so we need a bigger line to provide more water to development. So this line here being a twelve inch, you know, helps serve this back portion over and through there. So we're in turn looping the water system and then dispersing fire hydrants all throughout the area so that we have adequate fire protection. So we've got the domestic water supply, the fire protection, the future service that the area needs out j through there being installed under the water system. Now, you can see that, you know, we do have public easements that go out and through here. And its kind of hard to depict on this map here, but we have, you know, the fire hydrant services and everything elsewhere within the public rights -of -way or public easements because fire is something that the city has got to take a very pro active role in. So we want to have the right, should that line break, to go in there and repair it and make sure it stays operational. Let me move into the public sanitary sewer of the site. And, again, that is being installed with sanitary sewer to serve the back lots. And then up front we've got another sanitary sewer system that comes in serving some of these lots. And then we have again some easements coming in through here to serve some of the mid- point lots in through there. MR. FORKS: I have a question. The back of the unit or the project behind Target, behind those other stores, is that going to be a road? MR. RAGSDALE: Yes. This is a service road that comes down through here. Doesn't show a driveway that comes down through here, but we do have -- and you can see the truck entrances and kind of some truck bays back in through here so you can keep all the eighteen wheelers and everything else back there along this road. MR. FORBUS: Will that be a private road or a public road? MR. RAGSDALE: Let me call it a drive. It would be a private drive, driveway, service court. It will not be a public street, no. , MR. FORBUS: I was under the impression that that would be public -- only way it would be public facilities or j infrastructure if it was off of a public road. I mean, am I missing something here? MR. RAGSDALE: It will be a fire access but it will not be a public street. Ravenwood here is the public street that is out there. MR. FORKS: The one that runs down on the north side? MR. RAGSDALE: Uh -huh. This is the public street to serve it. And this goes into the parking area and loading area back in through here. So it is really just like this parking area and loading area. MR. FORKS: Well, I still don't understand. If that's a private street how can that be public infrastructure? The sewer and stuff like that? MR. RAGSDALE: They have public easements dedicated to the city to allow the public the use of that. MR. FORKS: Okay. MR. RAGSDALE: It's in a public utility easement. MR. FORKS: Okay. MR. RAGSDALE: So anyway — MR. FORKS: We have another question for you. MS. MAHAFFEY: I have -- I have a question. Yeah, I think this is less about, you know, exactly what we are building and — I mean, that's interesting and something we probably need to go over. But a question I have is there has been a question that approval of this by the city, 1 think there is some confusion. My reading of that and what I think -- since it's what I believe, is that when it says the city's, in the TIRZ agreements, approval, I think that means City Council. And I think we need to figure that out so that it isn't, you know, the engineering department of the city approves it. I think we need to get -- to decide what that is, maybe get a legal opinion or something. And I think -- because my opinion is that the City Council, as this reads, is the ' one that is supposed to approve the project plan and any revisions to the reinvestment zone financing plan as well. And if you look in the agreement it also says at 311.011, "project and financing plans ", that that's to be approved by the City Council. "The project plan should include a map showing existing uses and conditions, proposed changes of zoning ordinance, master plan of the municipality, building codes and other municipal ordinances ", which you know are things that are very interesting to City Council, "a list of estimated non - project costs, a statement of the method of relocating persons" — I don't think we have to worry about that -- "and the reinvestment zone financing plan ", that earlier in the TIRZ plan says "must be approved by the City Council, includes a detailed list of the estimated project costs of the zone, including administrative expenses, a statement listing the kind, number and location of all proposed public works or public improvements in the zone, an economic feasibility study and the estimated amount of bonded indebtedness to be incurred, the time when related costs or monetary obligations are to be incurred ", and there is a few other things. But anyway, you know, I'm uncomfortable because I don't feel like we have seen any of this. Now, are you approving this? MR. BAINE: I'm approving -- I approve the public infrastructure based on his signature and based on my consultation with the -- our attorney that that was part of the position to make sure. And I know because I've talked to many of you that I had to insure that we were getting our money's worth out of the drill, and we did. So Walter has been incredibly dedicated to that task. Early on, I think the third day, I was brought something to sign and I didn't sign it for about two months until I was absolutely sure that we were getting every fountain and every tree and everything that we were supposed to get. I know personally, I think -- but, you know, I've been on the other side of this dais trying to develop so. And I don't know that approval -- on what basis you would evaluate what a light pole costs or a fire hydrant costs or how much the land cost for the dirt to be removed off thirty -five foot of infrastructure, and he did that. He did a good job of that. MR. FORBUS: What I think we need to do then -- let me come to an understanding that if you feel like something is what we need, if we need to reduce the cost of fire hydrants or whatever, compile that information. Would the counsel be more agreeable if you compiled it, brought it to us for approval? ' MS. MAHAFFEY: What we need is to decide if this means, you know, we need a lawyer to tell us what this means. What does it mean, Thomas? Does approval of the project plan and does that mean it comes to City Council? Originally the project plan had to come to City Counsel, so I don't understand why any revisions and these changes, why it wouldn't mean -- why would it change all of a sudden that calling the city — MR. RAGSDALE: I don't think we are talking about revisions or things like that. I think we are talking about the details and the concept and everything else. Yes, ya'll looked at that and approved that. And I think what we are talking about is the details. Whether it is a twelve inch water valve or an eight inch water valve and how many of those that we have out there. MS. MAHAFFEY: I'm not talking that. I'm just talking about following the letter of the law here on the TIRZ. I think that is something we need to be doing. MR. RAY: I think I could help clarify that. 1 think we are passing at different altitudes here. What Mr. Ragsdale is dealing with is -- not to minimize it, but the nit -picky details. How big the water lines are, whether or not it complies, how big the trees are. Where I think Ms. Mahaffey is going and where I was kind of headed earlier is the original project plan -- and by law includes a map that shows what is going to be there, what it's going to look like. When that changes in a major way, such as the evaporation of half the land of housing or the Target is not going to be in the back side it's going to be right on the feeder, or there is not going to be twelve stores there is going to be two stores, any kind of change of substance under the contract, itself, and the statute that I think she was referring to, would have to come back for an amendment or a modification. If you look at this there is, you know, four point something million dollars designated in the TIRZ to go for the residential. Obviously that needs to be modified or yanked or off the table or something because we are not building residences. We certainly don't want to give up four point four million dollars for it. Likewise, if everything else is changed significantly I think that needs to come back to Council through the TIRZ Board for approval of modifications. Which under the language of the contract and in my opinion, if it's reasonable we, of course, will approve it. But just to sit here not knowing I think is not acceptable. I'm not talking the details, Mr. Ragsdale. I'm not even talking really to you right now. MS. MAHAFFEY: I think you're doing a fine job on that. MR. RAGSDALE: Just so everybody knows, let me finish up with the storm drainage and everything else that is out there just to make sure that everybody has a clear picture of, you know, what the details relate to. We talked about the sanitary sewer in through here. The roadway necessary to service everything is a roadway that begins at the access road and basically is still open to go back into some sort of residential development in through here. Along the feeder roads we have deceleration lanes and acceleration lanes at the roads and the major driveways that you see in through here, along with the driveways coming off of Smither to service that. You see a lot of green area out there depicting the landscaping, both along the edges here and central to the property, along with lighting in through there. All the landscaping is irrigated and hydro mulched in through there. You see a rather large amount of landscaping along the front in through there with meandering sidewalks all the way around the property. The sidewalks also are — have benches out and through there, scattered across the area in through there to take care of all the pedestrians. You see some storm drainage. There is some storm drainage improvements occurring down over here in this corner. We have detention areas over here and over here. Those two detention areas are actually landscaped with fountains and a water feature in through there. We also have some small detention areas here and another detention area in the -- behind the building to take care of the storm runoff. So basically that is kind of an overview of the public infrastructure improvements that you see going on right now. MR. FORBUS: Well, I appreciate your supervising this project because I think you're doing a real good job. It does appear to me from looking at the plan that there have been some major changes in the -- not just in the residential lot but also in the commercial lot, too. Looking at it on the concept plan. So thank you. MR. RAGSDALE: Thank you. MR. FORBUS: And back to the changes. When were we going to get updates on the changes from the build out schedule as to -- Mr. Williams, I'm — I think you can probably address this. I know we're not getting the build out on the fifty -eight homes, and I didn't know if — had anyone contacted -- you said no one contacted you to come to City Council to bring this up to date on this? MR. WILLIAMS: No. MR. FORSUS: Okay. I would like to make an appointment for you to come and tell us exactly — not tonight, but during the regular council meeting — to come and give us an update on exactly what you're build out plans are and bring us up to date on all of that, if you would. MR. WILLIAMS: Love to. MR. FORBUS: We will give you a couple of days notice anyway, okay? MS. MAHAFFEY: Here is what concems me. We have this year twenty -eight million dollars of the value of things that were supposed to be built out in 2008. Eleven million six hundred of that was for these fifty -eight homes. That's the biggest thing on there. There's — I guess that maybe this is the Target building, six million -- six point three million. And then there is national retailers, which I guess haven't been identified yet, at four point eight six 0 million. But, you know, the largest single -- almost half the money was for the homes. And, you know, this was a part of the plan that, you know, the citizens expect from us and expect us to have the oversight of. And, you know, I want to — 1 want to be able to tell the citizens, I need to know when things change. And I need to be able us to tell the citizens what happened. I think this is a better plan than the one we had here. But my reading of the TIRZ says that when there is a revision the City Council needs to approve it. And that would only make sense because of oversight. I mean, it's not fair for our staff to make, you know, decisions like that. They need to take care of the details but, you know, we need to be in charge of that because we are answerable to the citizens. And so that's what concerns me. Because I think a lot -- a lot of the a -mails I got, and I still have them, they all talked about the housing and how that was going to bring more students here and that was going to bring more people to the public schools and that was going to give the schools more money. That's what sold the citizens. And they spent a lot of time, you know, sending a -mails and talking to us. And so, you know, it's a big disappointment. And I believe it was October 8th that kind of the stock market went to hell. Not that it wasn't on its way, obviously, or whatever. But I'm pretty involved in real estate and actually the market here, we are lucky to be stable probably because of the University and the prison system which are a little bit immune to downturns in the economy. And so, you know, I protested the kind of housing that was being built. I thought it was over priced for what we would call affordable housing in Huntsville, which is a little bit different market. And, you know, I kind of recognized then that maybe you weren't familiar — or Property Commerce probably wasn't really familiar with housing markets and what houses were selling for, particularly in this area. But, you know, that's my concern that this is part of the project plan that fifty -eight homes will be built this year, fifty -eight homes would be built next year. And, you know, it's — we are almost what, eleven months in the year and they weren't started. I mean, that's a concern. Because this -- this was a package deal, as we keep reiterating. And those of us who voted for — you know, who voted, well, they voted for the TIRZ, and a big part of that I know, and with the other members, too, was that this affordable housing was a real concern. MR. FORBUS: Any other questions? MR. BARRETT: Charles, I might just — MR. FORBUS: Go ahead. MR. BARRETT: -- add. I don't think this completely clears up sort of this communication question. But I think one area where I hope there can be improvement — and this is from the TIRZ Board, too, and from the Council -- I think we need better communication there. And I really plan for us to have it. And just to read a little section from the ordinance that set up the original TIRZ No. 1. 'The Board of Directors shall make recommendations to City Council concerning the administration of the zone. The Board of Directors shall prepare or cause to be prepared and adopt a project plan and a reinvestment zone financing plan for the zone as described ", so forth. "And shall submit such plans to the City Council for its approval. The city hereby delegates to the Board of Directors all powers necessary to implement and -- to prepare and implement the project plan and reinvestment zone financing plan subject to approval by the City Council, including the power to employ consultants ", at cetera. So I think just in general there can be better updates and communications from the Board to the City Council. And I'm going to try to make sure that that happens. And also we had a good meeting the other day with Mr. Williams and he indicated that as developer he's really accustomed -- and you correct me if I misrepresenting you, Mr. Williams, but — they normally invite —when TIRZ boards meet they are normally invited to be at those meetings. And that's maybe a way they are more accustomed to communicating through that Board with the City Council. And so we're going to make sure he knows — we're going to meet on a regular basis and make sure that he knows when that is and try to improve communication there. And we'll be communicating with the Council. Like I said, I don't think that dears up every question about what has occurred. But still, I think that is one area where there really hasn't been much communication. And clearly that's supposed to be a channel there for the Board at least as a first stop for some things. And then the Board, itself, bringing those things to the Council for review. And really there hasn't been much of that. MR. FORBUS: Any other questions? ' MR. RAY: You mean before we go to a new topic or just -- MR. FORBUS: Yes, yes. Before we go to a new topic, yes. MR. RAY: I don't want to beat a dead horse but I don't think the horse is dead. On these homes, is it your position then that you don't have to build them or you can build them whenever you get around to it? Or if you don't build them you don't get the TIRZ money for it so it doesn't really matter? What are we to take from that? (inaudible). MR. RAY: I wasn't asking you about a legal question. I'm just —what do you think? In your mind what, you can you build them or not or -- MR. WILLIAMS: I think that the — I mean, my opinion is the agreement says we need to do a residential component to the project. Whether those are million dollars houses or townhouses or whatever works there. I'm not sure if there was a requirement there. If there is it can be correctable. I didn't know that there was a requirement in the agreement that said you had to build one hundred fifty - eight, five hundred thousand dollar homes depicted exactly like this. But I'm open to being corrected on this. But at this point there is no residential market right now — MR. RAY: I've heard that and I don't need to hear that again. I'm not going to debate you on the point that the market fell through the floor a month ago because obviously you weren't going to build any homes this year. And there is a time sensitive schedule in here, they are supposed to build some kind of homes this year. I'm just wondering when you think you're going to have to do these before there is some sort of default or modification mandated? MR. WILLIAMS: That's a legal question and I'm not sure -- you and I discussed this the other day and we don't necessarily have the same opinion on this. MR. RAY: I wasn't talking about the single family versus multi - family. Just any type of housing, when? MR. WILLIAMS: When is it going to happen? MR. RAY: Right. MR. WILLIAMS: I mean, you just said you don't want me to keep -- give you the same answers. So you just asked the same question. MR. RAY: I thought I asked it a different way. MR. WILLIAMS: When, I don't know. But I will give you the same answer if you want to hear it again. MR. RAY: That's okay. I think the agreement needs modification in some form because of — well, the modification. My opinion. S. ZENDER: I'll jump in. I agree with you, Lanny, that I think it does need some modification because, you know, clearly it was sold as a package deal that there were homes. The public over and over were excited about the homes and the additional tax money that it would produce for HISD. But that is a whole other issue we'll get to in a minute. I guess I question, Mr. Williams, you said, you know — is, you know, that Property Commerce generally does not for that matter do houses. How did the housing portion get put into this? Because originally you came to the city with the commercial part of this. How did the residential even get added in? MR. WILLIAMS: I don't recall that the property in the back was ever commercial. Because the property was too deep to -- I don't think that — I don't recall ever that the project was a hundred percent commercial. I think we always -- everyone knew that the piece in the back was going to have to be something besides shopping center. I think at the time we looked at this highest and best use for this was single family homes, no doubt about it. So — and that may be the case again. But at that time no doubt that that was the highest and best use for that property in the back was single family homes. MS. ZENDER: I thought Mr. Isbell said something different earlier. MR. FORBUS: Yeah, I thought the same. MS. ZENDER: Maybe I just misunderstood. MR. RAY: I think it was that initially it was just the commercial property as we see here and then the residential , was added later. Is that right? MR. ISBELL: Initially, day one, I think the Metro National tract was part of the concept along with the Smither (inaudible) was clear that the back, the back portion had no retail value to them (inaudible). But with the thirty - two acres Metro National (inaudible) the project cost anticipated at that time was quite a bit higher than it wound up finally being. The retail section came in at a later later component in the Gap analysis (inaudible). The original Gap analysis there was no residential component in the original Gap analysis. MR. RAY: Why did you buy that back section? MR. WILLIAMS: Because the seller wouldn't split the property up in half. MR. RAY: OKay. So the only reason we are dealing with this housing thing at all is because the seller wouldn't split the property, otherwise you would have just bought the front half? Is that fair? MR. WILLIAMS: Yes, exactly. I wouldn't have bought the property in the back if the seller would have just sold me the retail in the front, yes, that's correct. MR. RAY: That's quite enlightening. MR. FORBUS: While you're there, before you get comfortable -- we'll get you a stool and a bar. We've got a letter requesting -- we had some citizens' comments and some letters to the editor in the Item that requested knowledge about who the investors were in Ravenwood Village and the LLCs and I was wondering if you had that information tonight? MR. WILLIAMS: Well, in fad, I brought a letter for the city attorney. I got that letter and requested names, to name names of mall partners, and I'm not going to name names of all my partners. My partners don't want their names in the newspaper nor do they want to get phone calls from people about it. So -- but I will say there is no partner of mine in this project or in Ravenwood Village is on City Council, has ever been on City Council, is on city staff or ever been on city staff. In fad, none of my partners, not one of them is even from Walker County. So I'm not sure where those rumors like that come from or why even a newspaper would give them credence. But, you know, is what it is, I guess. But I've got letters that I was going to give the city attorney that says we don't have anybody in this partnership that is from Walker County. Hopefully that will satisfy. I don't think anybody from outside Walker . County worked for the city or be a city council member or anything like that. I may be wrong, but if so — and if the newspaper has any specific allegations for individuals I'm more than happy to address those individually. MR. FORBUS: Any other comments from City Council members? MR. RAY: Yes, just briefly. Just to make sure we are clear. There is nobody anywhere around Huntsville that has an interest in this financial? I mean, I don't mean indirect -- MR. WILLIAMS: Well, there is people in Houston? I don't know if you consider Houston close by, but Walker County, Huntsville, no. And if you've got any other counties or cities that you're — that someone has insinuated — MR. RAY: I'm trying to anticipate the follow -up questions. MR. WILLIAMS: I will be more than happen to address those issues. I would have to go back — MR. RAY: Madison County? MR. WILLIAMS: Not that I'm -- no. MR. RAY: Roans Prairie? MR. WILLIAMS: Maybe someone has got a ranch up there. MR. RAY: Waterwood? MR. WILLIAMS: No. Again, I mean, I would have to go back and look. I don't know if any of my investors have a second home in Madisonville or 13 something, so 1 can't say Madisonville. MR. RAY: Maybe you can dear it up this way. All the investors in this, are these investors you have dealt with in the past for — MR. WILLIAMS: Yes. ' MR. RAY: — for a continued period of time? MR. WILLIAMS: Yes. MR. RAY: There is no sudden new investors for the past three years or anything like that? MR. WILLIAMS: No. And there is no one from Walker County or — MR. RAY: That should satisfy. MR. WILLIAMS: - -the City of Huntsville. MR, RAY: And you have a letter? MR. WILLIAMS: Yes, I have a letter. MR. RAY: All right. I think that is good enough for me DR. COLE: Have you done 380 agreements before on other projects? MR. WILLIAMS: Yes. sir. DR. COLE: And did this 380 agreement did — was this genesis with your firm or did Mr. Kevin Evans -- I'm interested to know where the 380 came from that was introduced into this agreement? MR. WILLIAMS: That's a good question. 380 agreements and TIRZ agreements have become fairly common. And I say common, that's probably a bad phrase. But they are used quite often and regularly across the State of Texas right now. So the 380's was something I was very familiar with. And whether I was the first to say the word 380 or anyone at the City of Huntsville I can't tell you. But 380's would have been something as a developer, especially any kind of municipality, you know, smaller than, you know, a couple of hundred thousand people is generally something you talk about. So it's a normal developer's — it part of our conversation. DR. COLE: Does anybody know the genesis of the 380? Was it Mr. Kevin Evans' idea or did it come from some other -- MR. BAINE: We are sort of dealing in supposition. I did call Mr. Evans and asked that question. He didn't answer it. I was told that part of the Gap analysis was that the deal would not work without the 380 and suddenly there was a 380 within two or three weeks. Now, I wasn't here, thank God. But the idea of the 380 was to make up some of the gap. And we mentioned a couple of times that there was no figure done, but the gap for the , residential area looks like on the piece of paper that I have it was about twenty -seven percent of the total project. If you did the math, that's one of the things I was doing up here was doing the math. So various people on my staff have told me that was the story. Now, whether that's the story or not I'm not, you know, it's hearsay as they say. So based on what people have told me that was the deal, that it wouldn't work without the 380, so thus there was a 380. We had people here that were on council at that time so they may be better equipped to answer the question. DR. COLE: One of the functions of the City Council is to ask who is responsible and I would like to sort of get an idea where it came from. It just sort of came out of the sky like deus es Macana, or something like that. Do you think the 380 changed the value of the property in dollars per acre — square foot, I mean? Did the property value go up once the 380 was introduced into the equation? MR. WILLIAMS: I don't think the property value went up. I think the viability of the project went up. The ability to get the project financed and worked out. Whether putting a 380 on a vacant piece of property adds any value is probably beyond my knowledge. But I do know that the 380 was an important component of getting not only Target to make the deal work financially but us as well to work financially. DR. COLE: We were looking at the taxable value for acre for acre in relation to the school tax. Everyone was interested in school tax and one of the -- one of the interests of the public was that the school district would reap quite a benefit by this. And the taxable value of the property went up from ten thousand to a hundred thousand an acre seemed like, or something like that. You know, it was a ten fold increase, which was rather remarkable. But I just wanted to see if you thought the 380 contributed to that or -- for example, in Metro National, were you prepared to buy the Metro National plot from them? MR. WILLIAMS: We had it under contract at one time but we decided not to purchase it because the project -- we didn't think the project was — that City of Huntsville could handle another thirty acres on tap of what we were already developing in retail. DR. COLE: You may not want to talk about property value in public but, you know, did Metro National -- was the value of the Metro National plot greater than the Smither property on the hill? , MR. WILLIAMS: I believe their price — what they were asking price per square foot was higher than the Smither's. I do know it was higher, I can't remember how much, but it was higher price per square foot. But so -- MR. RAY: Was the property, the tract you actually bought, was the values different from the front and the back or was it just a big package deal? And you may not want to answer that. MR. WILLIAMS: Well, no, they just sold it as one piece on a certain price per square foot. Of course, we internally placed a different value on the front and the back based on what we could use the property for. MR. RAY: How big of a difference? MR. WILLIAMS: You know, I'm not — you know, we arbitrarily threw a number out there just -- but I don't know how much. It would probably be a good question for an appraiser, what is frontage property versus property not on the highway. I know there is a difference, its several times. I don't know if its ten times or two times but its several times, I'm sure. MR. RAY: So if you actually did a -- I know you listed that residential property for sale during the summer. Were you willing to take a loss on that or -- MR. WILLIAMS: Well, it depends on what you mean by loss. If you looked at what I paid for the total purchase for the property and what I could sell the back for, yes, it would be a loss. If you allocated some of the, you know, a higher value to the front then you could say it wasn't a loss. So I guess it would just be dependent on how you looked at it. But yeah, based on what I paid for the whole property, what I could sell the back piece for is less, you know, significantly less, no doubt. But, again, you could argue that, you know, I paid a higher price for the front and lesser price for the back and I'm not -- you know, so but yes. In real simple terms yes, I would be losing money on the back. MR. FORBUS: Before you leave, before you get away. I'm going to lump these all together. I have three questions. One is Target has made a firm commitment to the land; is that correct? ' MR. WILLIAMS: Target started construction. MR. FORKS: Okay. And when will Target be open? MR. WILLIAMS: July of 2009. MR. FORBUS: Okay. And can you give us the names of the other stores who have signed commitments? MR. WILLIAMS: I would prefer not to at this point announce anything. We've got-- we are negotiating several tenants and we have several under contract or under lease but we really don't want to -- MR. FORBUS: Divulge that information. MR. WILLIAMS: -- divulge those until those are deals that are under construction, primarily because we do have competitors out in the market place. And these tenants may not quite want everyone to know that, who they are and that they are coming. I can tell you we've gotten a — in spite of the economy that we've been facing over the last, you know, ninety days, especially in the retail base, we have gotten a lot of good demand for space here. There is a lot of people real excited about the project. And I think it's going to be real successful. I think it's going to be great for Huntsville. Bring a lot of jobs. Going to keep from having to drive all the way to Conroe and spend all their money. So I think it's going to be a good project and it's going to be successful and we have gotten good demand. There is an education process when you bring people to Huntsville that can understand the economy here and what is going on and the stability and so — but we're getting there. And once Target is under construction and open I think people are going to see wow, this is really good. We built a project in Conroe and we got the same type of -- Conroe, you know, what's Conroe. And then you can see how crazy it's 25 going there as far as retail. MR. FORBUS: We are a lot better than Conroe. ' MR. WILLIAMS: Absolutely. A lot prettier, that's for sure. There is not anybody from Conroe here? MR. FORBUS: No. Hopefully. MR. WILLIAMS: So -- MR. FORBUS: Any other questions? Yes. ,vim. umirrirv: i nave a question Tor you, a couple of questions. On the back hundred and twenty acres there where you was going to build the homes at? MR. WILLIAMS: Yes, sir. MR. GRIFFIN: I think I heard you say earlier that you really didn't want the hundred twenty acres. MR. WILLIAMS: We didn't want --it's not --we didn't prefer the sixty acres in the back because we're not -- MR. GRIFFIN: Sixty acres? MR. WILLIAMS: Yes. MR. GRIFFIN: If you didn't want that sixty acres, well, then, where was you going to build the houses? Let's say you got the sixty, where would you put the rest of them houses? MR. WILLIAMS: Well, I think our intention was to sell the back sixty acres either to a land developer -- a residential developer or a home builder, one or the other. And we really didn't know which direction. If there was a land developer that would come in and buy all sixty acres and build the subdivision himself that would be great. To the extent that there wasn't a developer that would do that we would put the infrastructure in and then sell the lots to home builders. So those were our two alternatives. We would prefer to sell it because our expertise isn't building subdivisions. But to the extent there wasn't a land developer out there that was comfortable that we could enter into an agreement with one or two home builders, we would develop the lots and then sell the lots to a home builder. MR. GRIFFIN: I kind of think that if we had had this information a few months ago, a year ago, it really would have helped us councilmen make an intelligent decision. Now, I just think that it was just a misunderstanding because we didn't know that you had maybe selling it out another developer. So if you sell the property now, you sell it to somebody else, well, then, that would take you out of the loophole of building those homes, right? ' Those residential homes? That means that the person that bought it can do whatever they want. MR. WILLIAMS: Well, I guess they could. You know, if we sold it to a lot developer we would probably, you know, place some restrictions on, you know, what they did with the property so they didn't have any negative impact on our project or on our TIRZ agreement or 380 agreement. So we would probably put some restrictions on them, what they could and couldn't do. MR. GRIFFIN: So is that something you would be willing to tell the council board tonight that you would be willing to put some type of restrictions as soon as the market open back up for it? MR. WILLIAMS: Well, you've already got -- I mean, I think to whatever extent we have an agreement already in the 380 or TIRZ it requires me to do mixed use or some type of residential, we already have that agreement. I think my agreement with the — anybody who bought that would be consistent with the 380 and TIRZ agreement. I would say you have to honor the TIRZ and the 380 agreement and comply with them. And, of course, they would want that because if a single family developer came in there to build that he is then a party to that TIRZ reimbursement. And as we have said here, a bulk of the TIRZ reimbursement, I think — and I can't remember the numbers, but I think over half of it is for the residential development. MR. FORBUS: Yes, it is. MR. WILLIAMS: So if a residential developer comes in there to buy that land to build houses he's going to want to, number one, make sure that the TIRZ reimbursement is out there because those are part of -- and he's going to have to be very confident that not only that agreement is in place but that the City Council and the city is going to support that TIRZ and is not going to, you know — the money is going to be there and that no one is going to try and take that away from him. So he is going to be very -- he's going to be as cautious about what happens on that nd as we would ever be because he's looking for that reimbursement. So -- but to the extent that that residential development, you know, sits back there and market doesn't come back in five or six years then the TIRZ is not required to reimburse that money to me or whoever owns that property. So, you know, kind of the good news, bad news, I guess. I mean, the good news is if you get single ' family development there you are going to have a TIRZ reimbursement. If you don't you won't have a TIRZ reimbursement. So, I mean, I think that's the way the TIRZ agreement was set up was, you know, if the homes come then the TIRZ reimbursement allocated back there would be fully reimbursed. If it's a smaller project then there is not as much TIRZ money invested. So I think that was a long winded answer probably. Sorry about that. MR. GRIFFIN: I like to say I thank you for coming and thank you for being candid with me. I just wish that I knew some of this information before. I want to you know that I still support the Target, the Ravenwood situation. I would have looked at the 380 a lot different and if we had -- I think if you're guys would have been a lot more straight forward with us we would just be having the 380 conversation here and not to residential part. Because that's what I went out and sold to the people once I heard it, about the homes that were coming, especially working for TDC. Most families here that work for TDC they are two party families working, the husband and wife work for the State. And that's what they was looking for a nice home. And most of the people in Precinct 3 was also looking for a nice Target to go to. But we're going to get the Target, that's the good thing. I want to say I thank you for that and bringing the other department stores here. I think you're doing a fantastic job. But in the future — I don't know if the other council members have to say, but in the future I hope that you will keep us up to date and abreast of what is going on each month as Mr. Forbus has already stated. Get back and give us a report so that when we go out there it won't sound like I'm just — especially with TDC people. It's hard to get us out to vote or to do anything. And especially when something has sparked their curiosity. And they are looking for me in this precinct to give them information. And I'm sitting there giving them some information that is not necessarily the whole truth. And then I have to go back and I have to bare face with those people. Like I'm going to wind up probably having to do tomorrow when I go to work because they looking for these homes. They are looking for the Target. At the same time and same breath I'm going to say well, you know, the homes are put on hold for right now. Not that they are not coming. But I also told him but we are getting a Target. Can you kind of see the little deception that on my level of understanding that I'm trying to say? And in other words, no, we are not going to get them, and before you punch me in the eye let me tell you we are getting the Target. So 1 thank you for your time, sir. MR. WILLIAMS: Let's don't write -off the residential completely just yet. The market could come roaring back here in twelve months if all of this stuff in Washington works out. I'm not writing it off yet. I still think it is probably the highest, best use at some point. We just don't know when. ' MR. GRIFFIN: And my last question, I hope that you can write that in the proposal to whoever you sell this to with some restrictions that we would like some homes back there. MR. WILLIAMS: Okay. MR. FORBUS: Let me finish beating you up here and just say that I know that the night that this was sold — this was presented that we had a lot of people from the Chamber and a lot of people from the real estate arena come. And basically they were touting the benefits of the Ravenwood for two things; the Target, but most importantly was the residential development that we were all anticipating, the hundred seventy -five houses at $200,000. 1 know our real estate people were saying how much that was needed here and how sellable those houses would be. So I think that the outcome might have been different had we known that. Of course, we didn't know it at the time, and I don't know if you knew it at the time. But I know that we didn't — that council didn't get the true picture of what the project was going to be. So anyway, I just wanted to drop that out. Those homes were very important. MR. RAY: Mr. Forbus, before you move 8 on. Mr. Williams said a couple of things that begs a question. You don't think that the TIRZ agreement is transferable with the land do you? MR. WILLIAMS: I don't think so, no. MR. RAY: Anybody that you sold it to would have to come back and get their own TIRZ agreement? MR. WILLIAMS: No. I think that — I would have to look at the agreement. I think that they will still be -- they probably have to get the TIRZ money through us, I believe. I don't think the TIRZ runs through the land. But, you know, that is way over my head from a legal standpoint. MR. RAY: So you're talking about doing a joint venture where you retain some control? MR. WILLIAMS: Again, I'm not an attorney, but I would think you would have to do some — I don't know. I mean, I think you want to preserve those TIRZ reimbursements and whether that means we would have to build ' the roads or the developer would have to build the roads and get reimbursement through us really don't know. That is kind of above me. MR. RAY: Before you do that you would come ask us, right? MR. WILLIAMS: If it's required under the agreement, absolutely. MR. RAY: Well, I think it is. MR. RAY: Do you agree with me, Mr. Leeper? MR.LEEPER: I agree with that. MR. RAY: Okay. So now we have a consensus of two. MR. FORBUS: Got two lawyers to agree on something. MR. RAY: Well, let me ask you also something I asked Mr. Isbell earlier. May have heard sort of an answer out of Mr. Baine. When we did this package deal how much of the 380 money was caused by the residential part in your mind or from your perspective? MR. WILLIAMS: I'm not sure in my mind I ever divvied up the 380 between any portion of the project. I mean, in my mind the 380 was generated sales tax from the shopping center. MR. RAY: I know where it came from. I'm talking about the reasoning behind the city bestowing it on you? I read all of these transcripts. It seems to me pretty clearly that the belief, at least from my peer, was because you had to pick up that back sixty acres and it wasn't going to be nearly as profitable and the Gap analysis was much larger you needed at least some portion of 380 to make it worth your while. And upon learning that you had to buy that back sixty acres that last piece of the puzzle kind of fell into place for me. It all makes sense with those presumptions. And are you telling me that's not true? MR. WILLIAMS: No. I'm saying that I just didn't allocate a percentage of the 380 money to the back. I mean, in my mind, you know, we had a whole -- 1 looked at it at as one big project. We had a land price, we had certain development costs, we had a certain deal with Target, you know. The project was — MR. RAY: So you didn't have it split out in your mind at all? It's just one big package deal? ' MR. WILLIAMS: To me that's the way we finance projects is we look at it on its whole. You know, whether the money, you know -- one dollar over here is no better than one dollar over here, it's all the same dollar. So we didn't really — I didn't really allocate it as oh, 380, sixty -five percent of it is really for the piece in the back and thirty -five percent is for the front. I didn't do that in my head. I looked at it from the standpoint of we have a piece of property in the back that is worth X and we have a piece of property in the front that we can develop that is worth Y. And we're having to pay this for the land and spend this amount of money to develop it and how are we going to get there? How are we going to make the numbers work? So we are really locking at it from that standpoint. I really didn't allocate the percentage -- I MR. RAY: Total, big picture perspective? MR. WILLIAMS: I mean, that's the way we look at it really from the big picture, so — MR. RAY: All right. DR. COLE: Once this project is over do you have any ongoing responsibility for it in Huntsville? Do you manage the shopping center? Do you just leave and leave that with the management company and go on to another place? MR. WILLIAMS: We've sold shopping centers and we have kept shopping centers. You know, I have owned shopping centers for fifteen years and I've sold some, you know, when I completed them. And we have no plans -- I have no strategy at this point whether we would sell it -- DR. COLE: Cross that bridge when you come to it. MR. WILLIAMS: Yeah. I would say we sell about fifty percent of our centers and we maintain about fifty percent of them. And the ones we maintain we manage. So -- DR. COLE: Is there any -- you know, I was looking through that performance agreement and I couldn't find any ' kind of reference to the dirt moving and the extraordinary nature of the topography to justify the use of the six million dollars on the 380. I'm just mystified by that 380, as you can tell (inaudible). And is there any kind of j memorandum that you or Glenn or anyone had details on what the 380 would be used for? Or if it had any ongoing ties or responsibility once this project is done? MR. WILLIAMS: Just the 380 agreement, itself. That's the piece of paper that I had with the city. And I can't speak on whether the city had any other type of internal documentation. But my agreement with the city was the 380 agreement. And those were, you know, those were the obligations I had and the city has. And I don't know if any other document beside that document that outlined any responsibilities or — DR. COLE: Thank you. MR. FORBUS: Any other questions before I go on to the next subject? MS. MAHAFFEY: I would like to just make it clear that what I believe is that it was a package deal. And that a part of the contract -- and I think when I read the contract, and I'm not a lawyer, its pretty clear to me that one of the requirements is that the residential part be done. And that, you know, there is a schedule for that. And certainly if, you know, if that wasn't going to be done then it's -- you know, sounds like you knew there wasn't an intention and maybe you hadn't read this lately or something. But, you know, I think we need to know because, like Clarence, Mr. Griffin said, we have people asking us, you know, are the houses going in. And we didn't know, either. And so I think maybe we all need to get together and read the TIRZ — the way the TIRZ agreement works and do these -- and we need, you know, the city council needs to be approving these changes and we need to be looking at all the things we are supposed to be looking at. We shouldn't defer our authority. And I don't know why that has happened. But that's something — I think it would help everybody that we are all on the same page and there wouldn't be questions later. MR. FORBUS: Yes. I read the transcript of that April 24th meeting and the emphasis in the whole meeting was on the hundred seventy -five houses as being the biggest, most important part of the -- the biggest selling point of the project. So yeah, 1 think that is something that we need to sit down and really discuss and go over thoroughly. Now, I would like to talk about the tax benefit to HISD. Dr. Montgomery, I know that -- I was looking through some things. One of them was — I know the school district was behind the — promoted the Ravenwood project and -- because I think they thought that there was going to be, according to this, twenty -five point nine ' million benefit to the school district. And this was dated the 1st day of February, 2007. And then we got a flier and I think it adjusted later. Because the project dropped from a hundred thousand down to seventy -four point two — I mean a hundred million down to -- down to seventy -four point two million, and the HISD benefit dropped down to nineteen million. And I know some people from the council, City Council -- not City Counsel., the Chamber, came and we were talking about another benefit that made the project look really good was the benefit to HISD. We were going to help decrease the debt and increase the capacity for HISD to get benefits to our children. And now we found out recently that that amount has dropped considerable. Can you explain what happened? DR. MONTGOMERY: Well, I can explain to you the facts as they existed for Huntsville ISD in 2006 and 2007 based on our tax rate at that time and the funding structure. And I can explain to you what the benefit would be based on today's tax rate and funding structure. But I can't tell you what it will be tomorrow. MR. FORBUS: I understand. We are not -- none of us have a crystal ball, I understand that. DR. MONTGOMERY: And the value that I have made my calculations off of, because I have the same flier that you referred to, and something like twenty -five point nine million dollars over a seventeen year period of tax revenue to Huntsville ISD. And I think that calculation was based on the value of ninety-six point eight million dollars. Is that correct? MR. FORBUS: That's right. DR. MONTGOMERY: Okay. So I did all my calculations based on that. You know, who knows what the value is going to be when it's on the ground, I guess, and those will change every year. But in 2005 -2006 our tax rate was a dollar fortyeight and -a -half cents for maintenance and operations and seventeen and -a -half cents for debt service. MR. FORBUS: Right. DR. MONTGOMERY: Which gave us a total tax rate of 1.66, a dollar sixty -six cents. When you take that and ' apply that to the value then that would give us, over a seventeen year period, twenty -seven point three million dollars in tax collections off of that property. In 2006 -2007 the 79th Legislature passed some legislation that brought about what we had come to refer to as tax relief or tax rate compression. I'm not sure it has been very much relief to any of us because my tax bill had gone up every year. Yours probably has, too. But at least our tax rate has gone down. The school tax rate went from a maximum for Huntsville ISD of a dollar forty -eight and -a -half cents to a dollar thirty -five, six - seven. That was for the '06 =07 school year. Also that year we refinanced our bonds and we lowered our debt service tax rate by half a cent. So they went from seventeen and -a -half cents to seventeen cents. That gave us a new tax rate of a dollar fifty -two, six- seven. And I think that is actually the tax rate that the city used to point twelve million dollars. I think the flier said twenty -five point nine. I'm not sure why the discrepancy MR. FORBUS: Won't squabble with that. DR. MONTGOMERY: So you take your ninety -six point eight million dollars in value and divide it by a hundred and multiply it times a dollar fifty -two, six -seven and you get twenty -five point twelve million dollars. That is if take that amount and multiply it times seventeen years. Which all of us know that is unrealistic because the value isn't going to stay the same for seventeen years. And I don't think there is a school district around where the tax rate has stayed the same for seventeen years. And I don't believe the school funding formula in the State of Texas has ever been the same for seventeen years. So a lot of changes coming up. But our best guess at that point was about twenty -five to twenty -six million dollars. Right now, based on our current tax rate, which is total of a dollar twenty -one, the tax income from that property or revenue from that property would be nineteen point nine million over a seventeen year period. MR. FORBUS: But we don't get all of that? DR. MONTGOMERY: Yes, sir. We get every penny of it. MR. FORBUS: Then I was misinformed. I thought that the net benefit would be around forty to fifty thousand dollars instead of the 1.1 million a year. MS. MAHAFFEY: My understanding, Dr.Montgomery, that under state law for maintenance and operation HISD can only get a $1.04 out of every $100 of assessed value and that can't be increased without voter approval. Is that not true? DR. MONTGOMERY: Yes. We just approved that. MS. MAHAFFEY: Okay. And even with voter approval you're limited to a $1.17 for every $100. DR. MONTGOMERY: No that's not true. We are limited d to a .04 for maintenance and operations. When the $ p voters of this district approved a bond election in 1999 they approved for the Board of Trustees to sell so many million dollars in bonds. And at the same time authorized the Board of Trustees to set the debt service tax rate at whatever it took to make the payments on those bonds. So that is going to fluctuate. And the statutory ceiling on the debt service tax rate is fifty cents. We are at seventeen cents right now. So if values were to go down in the district and we weren't collecting enough on our seventeen cents to make our four million dollars a year payments then we would raise that tax rate accordingly. There is no voter approval required for that. So it's very confusing. And, you know, I've worked for the last couple of months to try to explain this stuff to the public and I'm not sure how effective I have been at it. But, you know, I understand — I understand the potential for confusion because I get confused every once in a while myself and work with it all the time. MS. MAHAFFEY: Would you not say that one problem is the more you get from taxes the State sometimes balances that out with what they give you? So there is a misconception by people that everything we collect we get, which is not true. DR. MONTGOMERY: Well, everything we collect we do get, that is true. But on one tier of our funding -- there are three tiers of funding for public school; tier one, tier two and tier three. On tier one, which is our real estate ad valorem taxes, we get every penny that the public authorizes us to assess up to a $1.04. MS. MAHAFFEY: Up to a $1.04, that's my point. We don't get everything, only up to a $1.04. DR. MONTGOMERY: Well, no. Let me go a little bit further because there are several layers here. I will try to make it as clear as I can. Up to a $1.04 we can set a tax rate and we can collect that money and every penny of that tax rate we'll pull that money into the district in the form of ad valorem taxes. That doesn't go away. It's not shared with anybody. It is not offset by the State in terms of the State taking that money away from us. What is offset by the State is that in our tier two funding -- and this is another piece of legislation that took place in 2006 -- is that each district in the State was assigned a target — no pun intended — a target funding ' amount, which is a combination of state aid and local aid, or local taxes. MS. MAHAFFEY: Right DR. MONTGOMERY: And there is an offset there on the State's side, not on the local side. Whatever we set our tax rate at and whatever those values are we are going to collect that money and we are going to have that money. But the State's contribution will only go to our target limit. And there is a ceiling on that. And for Huntsville ISO its $4752 per weighted average daily attendance. Okay. And our weighted average daily attendance is about seventy - three, seventy -four hundred students. And the reason for that is — we don't have that many enrolled but some of them are counted more than once based on the program that they are enrolled in. MS. MAHAFFEY: And I specifically remember you coming up in front of City Council and actually saying, you know, the money we get from that is what we need. You know, the money from this — you know, I remember you saying that daily attendance is what helps us. That's what we need. I remember you specifically saying that. DR. MONTGOMERY: I think exactly what I said was that what the biggest impact on revenues for Huntsville SID, based on that legislation, is enrollment and attendance. And what I look at in terms of economic development is to attract people here, keep people here, hopefully to have kids. And, in fact, I even made this comment that evening and some people chuckled at it, we need to be making more kids, whether we bring them in or we produce our own. Because that's what is going to impact our revenues the greatest. But I think there is still some confusion here about what these local tax values do to our district. In this maintenance and operation side of our funding we're going to hold onto every penny that we collect. But in our tier two level of funding, the forty- seven, fifty -two, if our local tax collections -- for example, if we were a very property rich district and our $1.04 got us to our target then the State wouldn't give us anything in tier two. You see what I'm saying? But since our local collections don't get us to forty- seven, fifty -two then the State contributes its part. And as our values go up and we collect more the State will back off of their contributions. And that's true really for the first hundred pennies on our tax rate. MS. MAHAFFEY: Golden pennies. I've studied this. ' DR. MONTGOMERY: Well, the golden pennies -- the four pennies are not subject to any kind of adjustment on the State's part. And, of course, had our roll back election passed then we would have picked up two additional golden pennies. Those wouldn't have been subject to any offset on the part of the State nor would any of the other cents that we were asking for. And then on the debt service side, the seventeen cents that we currently assess for debt service, none of that is subject to any manipulation on the part of the State in their formula. So any development or any increase to values in this district is going to directly impact that tax burden. And certainly what we are hoping to do over time, as values increase, we can decrease that debt service tax rate because fewer pennies will pull in the same amount of money. Does that make sense? MS. MAHAFFEY: Its complicated. MR. FORBUS: It's complicated. But let me see if I can understand what is going on here, really. We have seventy -three or seventy -four hundred students. DR. MONTGOMERY: About six thousand but we count seventy-four. MR. FORBUS: We get a bonus for certain situations. And each -- we get forty - seven, fifty -two from the — let's make it from this big pile of money. Every student -- every daily average attendance will get forty - seven, fifty -two. We don't collect that much money per student; is that right? DR. MONTGOMERY: Well, our local tax effort doesn't bring in that much money. MR. FORBUS: So we're getting — we're getting a bonus from this big pile of money. What we don't make up we get the difference; is that right? DR. MONTGOMERY: The State will guarantee what they call it a hold harmless, they will guarantee forty - seven, fifty -two dollars per student. ' MR. FORBUS: So this one point one million from Ravenwood will -- we're not going to get anymore than this forty- seven, fifty -two; is that right? DR. MONTGOMERY: In our tier two level of funding for the operation of the school, that's correct. MR. FORBUS: Okay. But we still get the four golden pennies from the one point four cent tax rate. The seventeen cents goes to debt service but — DR. MONTGOMERY: Well, let me put one more layer on this. The golden pennies -- I apologize for being too complicated but that's the State's legislature fault, not mine. DR. MONTGOMERY: The significance of the golden pennies, that doesn't affect the local taxpayer whatsoever. That's the way the State looks at those pennies. A penny is a penny is penny on the tax rate. So, you know, they could be golden pennies, they could be copper pennies, the local taxpayer, it doesn't make any difference to them because their tax bill is going to be based on a cent. Every cent is equal through the whole tax rate up to a $1.21. But when the State looks at how much they are going to contribute to our district they look at our local tax effort and they say okay, they are at a $1.04. Statutorily we should be at a dollar because our tax rate was compressed to a dollar. But they did put some provision in the law that if the local Board of Trustees wanted to capture those four golden pennies, with a majority vote they could do that, which is what our Board of Trustees did. So the State looked at that and says well, in our tier two level of funding we're going to pay more for those pennies per student than we would the regular penny. Its all on the State's side in terms of the differentiation between the value of a penny is concerned. Has nothing to do with the local penny. MR. FORBUS: So that's a tier three, the four golden pennies? DR. MONTGOMERY: Right. MR. FORBUS: Sc if my calculations are correct it's going to be — they are probably not, but they are probably in the ballpark -- what you will really benefit from that 1.1 million tax increase from Ravenwood would be about forty thousand a year; is that right? I mean in -- MR. BAINE: That only assumes that if the people in school remain static and didn't increase — MR. FORBUS: -- or decrease. MR. BAINE: Right. As our tax values in the city go up and more stuff gets collected then the State will be reimbursed out of that money. ' MR. FORBUS: But we still got to reach that forty- seven, fifty -two per daily average attendance in collections before -- well, we never get any more, right? That's what we are going to get regardless of how much you collect. DR. MONTGOMERY: That's what we are going to get until the legislature changes that target for us. MR. FORBUS: Right. MR. MONTGOMERY: But, again, that is limited to that figure -- MR. FORBUS: But that is more. DR. MONTGOMERY: -- Tier one we get the entire amount. And as far as the debt service is concerned, every dollar increased in value, you know, the district gets the full benefit of that. MR. FORBUS: So how much do you think that the Ravenwood project would really net benefit? DR. MONTGOMERY: Well, right now -- and I don't think there is any school district in the state that has a clear picture on how the State came up with their funding formula in 2006. They told us that they put together what we were getting in local tax collections plus state aid at that point. They blended that in some way and came up with our target funding amount. So that's kind of a mystery number to a lot of us. The first time we saw it is when the Texas Education Agency sent our financial template and said here, use this to calculate your revenues for next year. And they do that for us every year. They send us, in fact, multiple templates. In fact, by the time we got through with our budgeting process in August we had received something like thirteen different templates from the State this year and each one is a little bit different. So we are constantly juggling our budget trying to fit what they're saying that we are going to get based on what this template says. So the number in the template, that target amount is going to stay there until they change it. And we are hoping they do this next session. In fact, our State representative has made a promise that she will do the , best she could to get that changed for us. But right now it's about fifty -fifty. The State is contributing about fifty percent of what we operate on and we are contributing about fifty percent. So that's a very simple way to look at this. And it's probably not very accurate. If you want to look at the million and -a -half that is coming from the -- from that particular development, I'm not sure it would be accurate to say we are going to get half of that as a net. I think that's a little bit -- MR. FORBUS: So we are really not -- the projection of twenty -five or nineteen is not — its going to be a lot less than that? I mean, that we are going to be able to net benefit from? MS. MAHAFFEY: Here is the problem. We sold to the citizens that they were going to -- like the school district was going to directly get one and -a -half million dollars -- MR. FORBUS: A year. MS. MAHAFFEY: -- a year from this development. And, you know, I'm not saying you said that, but wherever that came from -- and, you know, what we are trying to do here is get the truth out there so that people know what's really going on. That's what the meeting is about. DR. MONTGOMERY: Right. MR. FORBUS: We're not picking on you. DR. MONTGOMERY: Well, I understand that because I'm picked proof, you know. MS. MAHAFFEY: You're not going to have a one and -a -half million dollars infusion of cash, you know, when this Target opens. And I think, you know, that people thought that. DR. MONTGOMERY: We are going to get the tax revenues off of that project. MS. MAHAFFEY: You're not going to get one and -a -half million dollars of taxes off the project are you? That year? DR. MONTGOMERY: Yes. I COUNCIL MEMBER: Net? DR. MONTGOMERY: Yes, we are. We are going to get the one and -a -half million dollars. MR. FORBUS: Is it going to be a net number is really the question, if things don't change? DR. MONTGOMERY: Tier two funding, no. Because the State will make an adjustment. Debt service funding, absolutely, we'll get the hundred percent. MR. FORBUS: You'll get the seventeen cents? DR. MONTGOMERY: Right. Which the seventeen cents was included in these projections, you know. I guess maybe a better thing would be go back and let's figure our M and O rate and see what that generates and let's figure our debt service rate and see what that generates and make that distinction. Because apparently that is a distinction that wasn't made when this was talked about at the beginning. MR. FORBUS: But the one point whatever it is, one point five, one point one million, even that will not put you over forty - seven, fifty -two per -- DR. MONTGOMERY: That's right. Nothing is going to put us above forty- seven, fifty -two because the State has a lid on it. MR. FORBUS: It's going to take whatever you get. So you're going to get that amount, period. DR. MONTGOMERY: For maintenance and operations, that's whey they call it -- MR. FORBUS: Plus your four golden pennies? DR. MONTGOMERY: Exactly. Well, plus our debt service rate. ' MR. FORBUS: Plus your debt service, okay. So what I'm trying to get at, this nineteen million is rolled into that forty- seven, fifty -two that you're getting already? DR. MONTGOMERY: Part of it is. MR. FORBUS: Yeah. The majority of it. Twenty -one cents isn't out of a dollar twenty -one set tax, right? we are making here that maybe we are not seeing clearly is that the adjustment is going to be made on the State's side, not on the local side. MR. FORBUS: But you're still limited to forty - seven, fifty -two? DR. MONTGOMERY: That's right. MR. FORBUS: Okay, MR. RAY: Mr. Forbus, if I may? MR. FORBUS: Certainly. MR. RAY: See if I can clarify some of this. And first of all, Dr. Montgomery, I really appreciate you coming down here. I know all of us do. And I agree with you that the Robin Hood law is atrocious legislation. I hope Representative Kolkhorst is successful. I have discussed it with her as well. And I hope they at least allow for some adjustments. Because I understand one of the biggest problems is they pegged that number back in 2006 and it doesn't adjust. And, of course, your costs go up but you're stuck at that forty- seven, fifty -two per weighted average daily student. And on the particular issue here, though, what Ms. Mahaffey was discussing is this was sold to the citizens that the school district would get a net benefit to its revenues, extra money in your checkbook, your Op I account if you will, that you can use to spend -- if you go and read the transcripts and the literature that was put out, that you can use to spend to hire new teachers, build new gymnasiums, whatever you wanted to do with it. But under the Robin Hood law that went into effect in September of '06, the reality of it is is that any money the school district gets from this project, or any other project, is going to go into that same pot and you're pegged at the forty - seven, fifty -two per waited student. So the net benefit to your revenues is really only going to be the four golden pennies or about forty to sixty thousand a year extra money for the school district to spend; is that about right? Not talking debt service yet. ' DR. MONTGOMERY: Let me -- and I don't want to get into a terminology issue here, but the Robin Hood plan was brought in in about 1991, House Bill -- MR. RAY: Right. DR. MONTGOMERY: Senate Bill 1. MR. RAY: We are under the current version that hit September of'06. DR. MONTGOMERY: Yes. And I want people to understand that Huntsville ISD has never, ever contributed any money to the Robin Hood plan and never will. MR. RAY: That's correct. DR. MONTGOMERY: Well, as long as we have current values. Once our values per student hit about three hundred twenty thousand, if we have that much value in this school district, then we go from being a Chapter 42 governed school district to a Chapter 41. I'm talking about the State Code. MR. RAY: And right now we're roughly one -half of that. DR. MONTGOMERY: That's correct. And we have a long way to go before we are a property wealthy district. And what we have had, though, in the past and still receive, is we receive money from the State that is contributed by those Robin Hood school districts. We are not really the giver in that plan, we are the receiver in that plan. MR. RAY: And about half of that forty - seven, fifty -two comes from those other sources. DR. MONTGOMERY: Well, it comes from those other sources plus other sources of money that the State funds education with. MR. RAY: So any additional tax base we generate, until we double our entire tax base, we're going to be stuck ' with whatever the legislature says your target revenue is per student, which right now is the forty - seven, fifty - two? DR. MONTGOMERY: That's correct. MR. RAY: So a net benefit of several million dollars to the school district is just inaccurate? DR. MONTGOMERY: Well, to be perfectly accurate about it, I can't tell you that we won't receive that money. MR. RAY: Well, if the legislature changes it then the whole spectrum changes? DR. MONTGOMERY: Right. MR. RAY: But right now there is nothing on the table over in Austin to fix it? DR. MONTGOMERY: Well, we were hoping. We are hoping that they will do two things. That they will raise our target funding amount and they will put an inflation factor into the formula, which they don't currently have. MR. RAY: And hopefully they can do that and dodge the Constitutional infirmities that killed off the '93 bill. Because it was struck down as unconstitutional and that's why they came back in emergency session in '06 and fixed it, they thought. DR. MONTGOMERY: They have another constitutional issue now with the business state income taxes. MR. RAY: Yes. On the debt servicing, how much debt does the school district have right now that is being serviced that could use that seventeen cents? DR. MONTGOMERY: About thirty — thirty -four million. And those bonds are -- we have about twenty -eight additional years to pay on those. We did refinance them two years ago and were able to lower our interest rate by about three percent and that's how we were able to cut our INS tax rate. MR. RAY: So to summarize, when I was told, along with everybody else, that this is a good deal because we are ' going to get all of this extra money for the school district to make our school district better, that's just -- that was grossly over inflated to be generous? DR. MONTGOMERY: I don't know what you were told. What I told this Council right about that spot over there I was sitting, I said really the only way we are going to increase the revenues for this district is to have more kids in attendance. MR. RAY: Right. I don't think you're the one that said it. MS. MAHAFFEY: I remember that. DR. MONTGOMERY: And the other thing, though, that you -- and I've got to keep -- because you got to see the whole picture, if we have more kids in attendance, you know, we have a capacity in this district right now for about seven thousand students without having to go out and build anymore buildings. And God forbid that we ever have a bunch of portables sitting around again because that is a horrible situation for the kids in. But if we had enough enrollment growth that we had to build new buildings then every ounce of this development we are talking about will directly benefit the school district. Because we can go out with a bond proposal and say we need to build an elementary school and it is going to cost ten million dollars to do it but we will only have to raise the debt service tax rate by this many pennies because we've got a bigger tax base. If our tax base stays like it is now or it shrinks then to build that same ten million dollar elementary school we require that many pennies. So there is a benefit to the district down the line. Nobody can say what it is because we don't know when the growth is going to happen, if its going to happen. MR. RAY: So this project or any other, the real benefit to the school district then would be if we expand and get more students and need to go build new facilities then we could tap into that tax base and it would be a benefit then. DR. MONTGOMERY:- That would be the — because that tax rate is (inaudible) can be up to fifty cents. I mean, with a three billion dollar tax base you can a do a lot more with fifty cents than you can do with a one billion dollar tax base. MR. RAY: So the best thing we can do for the school district to improve it mid, long term financially, this side of Austin, is add students and add population that lives in higher priced housing, at least above the -- wherever we are now, because we are one -half we need to be to even break even? DR. MONTGOMERY: Right. MR. RAY: Okay. MR. BARRETT: Well, one. And Dr. Montgomery, I want to thank you as well for coming in. I still -- I sort of kind of understand this. Not to the degree that you do, certainly, or even others on the Council. But I think for a lot of people in the community all of this is sort of Inside Baseball. And what's in their mind when they hear more money for the school is quite simple. They are thinking more money for operations. Just additional money, not a different way of participating in funding and the right hand is giving and another left hand is taking away. So -- and I think the points you have made are excellent, especially about how it increases possibility for issuing bonds. I think it would still be useful for folks in Huntsville to know, if this project is up and running as anticipated, how much additional money, how much new revenue that would mean for the school district? I mean, I think right now there is an inflated idea and I actually think that is working against the school district. You would know more about that than I. But I think it's probably a bad thing for the school district for people to think that Ravenwood is going to be a boondoggle for operations because they might be less -- feeling that there is less of a need for additional funds if they have it in their mind that the Ravenwood is making the school district rich. So I think it will be helpful if we knew how to figure -- and I know others have worked on it, but -- and perhaps you have, just when this is up and running, you know, how much money can be added to the HISD budget because of what we would anticipate is additional funds. DR. MONTGOMERY: And we can do that. When the project is up and running and we have a value, a certified value, then we can plug that into our financial template and it will tell us exactly what revenue we'll be able to derive from that. I guess a fairly close idea, we could just add ninety -six point eight million dollars to our tax base, to our values. I mean, it wouldn't be certified, but we could just, for interest purposes, we could plug it in and see what it would do. MR. BARRETT: Well -- DR. MONTGOMERY: But, again, as I said a moment ago, every year we get a new template. And between about May and August, when districts are really preparing their budget and trying to get everything really clear , when it comes to expenditures and revenues, we may receive anywhere between five and fifteen different templates from the Texas Education Agency. Now, they're not wildly different but they are different and they do make a difference. And sometimes it's several hundred thousand dollars and sometimes it is tens of thousands. And sometimes it is over a million dollars. But we can — I would be happy to try to put in this figure in last year's template and just see what that would do and send you a copy of it. MR. BARRETT: That would be great. I think there is interest in that number. And I think it might actually help all III the way around if people really know what the school district will get and will not get from Ravenwood. Thank you again for coming in. DR. MONTGOMERY: You bet. MR. FORBUS: Thank you, Dr. Montgomery. Appreciate it. Any other — okay. I'm going on to another subject. it It's getting late. On the roll back. Everyone was thinking we were going to get a pretty big windfall from the roll back on the Ravenwood figures. And I went to Mr. Kaiser at the Appraisal District and he sat down and confused me thoroughly. But I finally, after about two trips, I finally came up with a figure. And on the front part of the sixty acres, in the front -- or approximately sixty acres in the front, the approximate amount -- and this is not going to be totally accurate. It could be -- varies a little bit. But it's going to be approximately $57,226 for all four taxing entities. Broken down, Walker County will get $13,734, Hospital District will get $4,006, the City approximately -- again, these are all approximate figures, $9,728, and HISD will get the bulk of the money, $29,758. But I understand that you got to share that with other people so -- the State in particular. So, anyway, that windfall profits only amounted to on the roll back, of $57,226. So there went that. MS. MAHAFFEY: I think what happened there was -- and it was an oversight, but that it was assume that all one hundred twenty acres were agricultural exempt acres because there was some cows on them. And only I think less than half of that property was actually agricultural exempt. And that's where the roll back taxes come in is when agricultural exempt properties then are sold commercially then five years of previous that would have been taxed, since it was previously agricultural. Anyway, it's a complicated thing, but that's what happened. And I I guess, I don't know, it was never checked on to see that it wasn't all. It was assumed, apparently. And who knows where that assumption started. And then everybody just fed into it. I assumed that. I didn't go to the tax office to check that it was all agriculturally exempt and it was not. MR. FORBUS: I think also a fallacy in the compilation of that figure, the projected figure, was that they thought that the property would be evaluated at commercial value that it is now but it's not. It goes back -- the approximate evaluation is about $10,000 an acre for the year. And so then you divide that by a hundred and then you have your tax rate. So it's a whole lot less than the commercial value that the development would have brought the property value up to. So sorry to tell you that. And now we have Winston to talk about the cannibalization effect on -- of the 380 agreement on the sales tax revenues in the city. MR. DUKE: We did some research on the cannibalization and basically we talked about a cannibalization factor of thirty -three percent. We talked about different percents. I tried to do some research. I didn't find any reliable references that could give me any particular percent. I've talked to the appraisal district. I've talked to people from Sam Houston and also different consultants that have been here, including Schrader and Cline. And from the references that I know I wasn't able to find any particular source that gave me a good reference to use for a cannibalization rate, you know, that could not be contested. The best advice I got was that if you would take the businesses in the TIRZ, in the particular development, and the businesses -- similar businesses outside and compare that, that would be the best information that you would have. We don't know the businesses, you know, that are in Ravenwood so there is no way to really project that. Now, I do get a sales tax report that pretty much covers Huntsville. A lot of it is confidential information. It lags at least a half a year behind. And it probably will take the development at least a year to get up and going, I mean from the start date of Target until after that. So looking back, in two or three years looking back, I probably will have a better answer. But even that will be a projection. And some conclusions and assumptions will have to be made, you know, on how similar those type of businesses are as far as any kind of crossover. And the numbers that we have talked about with you, we have talked about thirty -three percent, which I thought was — the city manager and I talked about it, and I think it's a fairly good number to use in a model. It's certainly conservative monetarily and should provide, you know, a conservative number. I've heard fifty percent and sixty -seven percent. And I have drawn schedules up to try to come up with those numbers as well, you know, that I could pass out to you. That's what I know about cannibalization. ' MR. FORBUS: Well, explain cannibalization so our audience will know what we're talking about. MR. DUKE: Well, its actually -- understand its not quite a correct term, but it's an attempt to use the crossover businesses that might be lost because a new business comes into a territory. For example, if Target comes in how much business would it take from Wal -Mart? How much would some of the restaurants take from some of the local restaurants? And there are no reliable statistics that I have been able to come up with to be able to tell me that. Also, not factored in would be any kind of business brought in that might be -- I mean, termed as leakage from other places. So that would not be part of it. But I call it crossover, and vernacular around inside the city has been cannibalization, so I've used that term. And on the first model I believe I used both terms. Because I understand is some people have a technical difference, you know, they use cannibalization for. But that's what its meant to mean in this term is business that comes in. May not be one - hundred percent, it might be seventy percent, ninety or fifty percent, depending on what particular types of businesses come in and other factors within the economy. MS. MAHAFFEY: Are you specifically talking about -- when you talk about cannibalization, why we are worried about that is because we won't be getting sales tax, correct? MR. DUKE: We won't be getting sales tax? MS. MAHAFFEY: Cannibalization? The reason we are worried about people going from Wal -Mart to Target is -- MR. DUKE: You're worried that it will not be additional sales tax? MS. MAHAFFEY: Well, if they don't go to Wal -Mart anymore and they go to Target we won't get that sales tax at all. MR. DUKE: It will not be additional sales tax or no net increase. Or the question is what increase will it be. MR. BAINE: I think it works out largely to one - sixth, if its thirty percent, thirty -three percent cannibalization. So he's modeled it that's why the models you were provided in the closed session have cannibalization. And they ' also write down all the assumptions. Whenever you model anything, I can make the model look great or I can make it look dark side of the moon. The modeling that I asked him to do was sort of dark side of the moon modeling as opposed to what happens if everything alines. But I think when you do stuff that -- with public money you need to take a conservative approach in terms of what the taxpayer is going to get. So that's why he's — that's why cannibalization was put in the model. MR. FORBUS: Okay. If the 380 is applied -- if the 380 is applied to the retail stores, then to Ravenwood project, then we won't get sales tax from those stores; is that right? MR. DUKE: Well, no. The sales tax from any store in Ravenwood, we will get the sales tax. I think the question is that the reason I was asked to put in there is that maybe there is an offsetting effect. I use the same principle when we talked about the school taxes. And the question that was put in there -- because you're looking at an overall effect -- is that we're not — it's not that we won't get the sales tax dollars. The comptroller will give us the dollars that is collected on behalf of the city and also the county gets sales tax dollars. We'll get all of those that's collected. I think the question that I was asked was to put in a factor that might say we were losing dollars outside of Ravenwood project. MR. FORBUS: I thought that the 380 allowed the developer to give that sales tax as -- to a retail store out there? And that we would not collect — we would not get that sales tax. MR. RAY: Half is theirs. MR. FORBUS: Or half of it, whatever percentage it is. MR. RAY: Sales tax generated under the agreement, the city gets half the sales tax, the other half goes back to the developer. MR. FORBUS: Right. MS. MAHAFFEY: No. I think -- isn't there one and -a -half cents and a half cent is already legally committed to lowering the taxes and then the one cent that we do get to collect we can't give that away. So we only have one cent to give away. We'll be giving the one cent away to the developer, that's part of our agreement? MR. DUKE: Right. I misunderstood the question. MS. MAHAFFEY: You're scaring me there. MR. DUKE: No. I was talking about another facet of it. The actual collection of all the taxes, itself. The city has , one and -a -half percent. Locally we have two percent. The county has a half percent and it is committed by state law to property tax reduction. Out of our one and -a -half percent, as shown on the sheet, a third of it, which is a half of a cent — MS. MAHAFFEY: What sheet? MR. DUKE: What was passed out on October 7th at the meeting. That part of it is committed to property tax reduction. We collect it. It was not part of the agreement for Ravenwood. There is another point two five percent which is —the Ravenwood development was getting three - quarters. So out of the seventy -five percent they were getting point seventy-five percent of it. There is one and -a -half percent. So the city was getting half of it, the development was getting half of it. So half of it was going to Ravenwood development. And out of our half, well, then, one - quarter of that is going to the general fund. And the other half of it, just like the school district, will actually go to the general fund. But it's for property tax reduction. And the way that works, it works through the effective tax rate. So same with the school district -- same with the county, excuse me, and with the city. As sales tax increases it will put extra pressure on our effective tax rate to reduce the taxes. MS. MAHAFFEY: Let me ask you a question. What do we get -- say, last year, and I know these numbers but I just want to verify and for people to hear it from you since you're the financial person, what did we take in in sales tax? What do we average? MR. DUKE: We average about six million, six point one million. MS. MAHAFFEY: Okay. And what percentage of our revenue is that for the city? MR. DUKE: Well, its about thirty -five percent. MS. MAHAFFEY: So our sales tax of six million is about thirty -five percent of our revenue. And what percentage of the general fund does that make up, approximately? Does it all go to general fund? ' MR. DUKE: It all goes to general fund. And general fund is generally about fifteen to seventeen million dollars. MS. MAHAFFEY: So it's about half of that. So, you know, I think our fear is that because we rely on that, obviously, so heavy as more than a third of our revenue, you know, our fear is that if we give that away, and we're not getting these residences that are building up property taxes, which were part of the plan, then it could be very stressful to the financial situation. What's your take on that, Mr. Duke? MR. DUKE: Well, my take on that is the sales tax is very important to us. Much more important than property value. We are growing on property rates but we are a low property value county and we depend primarily on the sales tax. And so certainly anything that adds to it significantly or takes away from it is going to have a major -- it's going to be a major factor, particularly general fund which funds a majority of our expenses. So we do have to be very careful with the sales tax rate. I do feel like giving part of the rate away and with property tax reduction is going to apply pressure to our property tax side of it. Because we made the decision many years ago to lower the tax rate. So I report a third of that every year to the appraisal chief. So that's two million dollars. If it's all of a sudden ten million dollars or eight million that will put extra pressure on lowering the rate. That is one reason why I showed a continually lowering tax rate. Even if we sit here and were Flat and raised taxes, there is no way we're going to be able to avoid the pressure, or the county. One - hundred percent of the county is based on that rate. They will get the money and it's not — it's not one- hundred percent perfect. But there will be extra pressure to lower that rate. MS. MAHAFFEY: So the county didn't give up any sales tax. They couldn't because their half percent or half cent is already committed to lowering property tax rate; is that correct? MR. DUKE: The county's rate is due to property tax reduction, that's my understanding. MR. FORBUS: So on this cannibalization, you figured it at a third, thirty -three percent. So are you saying that that would take two million from our six million present sales tax revenue? MR. DUKE: The cannibalization? MR. FORBUS: Cannibalization, approximately? ' MR. DUKE: No. What I'm trying to convey there is that out of our six million that we collect a third of it, two million, is factored in to us that's for property tax reduction purposes. MR. FORBUS: Yeah. But I'm saying -- what will this cannibalization effect, thirty -three percent cannibalization, do to our sales tax revenues that we will receive? MR. DUKE: Well, it's going to have -- it's going to have an effect to reduce property taxes by some factor that — and again, without plugging that -- just like the school's template, without plugging it into the effective tax rate I wouldn't be able to answer it. MR. FORBUS: What you're saying is we're going to lose property tax based on this but we're not going to get any -- MR. DUKE: It's not going to be an equivalent. You're going to get much more sales tax from it than you are a loss of property tax. But it is going to be some factor. MR. RAY: I have a couple of questions. This model -- first of all, let's deal with this thirty -three percent. That's arbitrary. We just kind of guessed, right? MR. DUKE: That's arbitrary. MR. RAY: And it could be higher, it could be lower? MR. DUKE: That's correct. MR. RAY: In my opinion I don't think it's any lower. I don't know if it's any higher. And that thirty -three percent also doesn't include any collateral damage, to use my term, businesses that will shut down right now that are operating in the city as a result of a new or cooler place to shop or eat out on the interstate. So if mom and pop's restaurant folds we lose that sales tax entirely along with the property tax, ad valorem and everything else and that is not in this model is it? MR. BAINE: We didn't look at what the property values may long term. The Ravenwood was sold with the idea that we would keep people from getting in their cars and drive to Conroe and spend the dollars. MR. RAY: I got it. It was a yes or no. Loss of existing businesses is not figured into that number. So there is collateral damage out there that we're not even talking about. How far off, even with the thirty -three percent, and taking out that economic reality, how far off are these projections and this model from the original projections that were sold to the citizenry? MR. RAY: And by substantially, how many zero are after that? MR. DUKE: Without the — any cannibalization factor, and if you exclude HISD, the numbers originally — my numbers were fairly close to the other, within five or ten percent. I made several assumptions. I used Property Commerce's -- the fact that they were going to build housing, increased the number of years, used the same template. An approximate template from the building, itself, on Target -- I used Wal -Mart right next to it as a model -- the Target is actually going to be less square foot but I figured it was going to be more so I felt like my number was reasonable there. And overall I believe that I was adding maybe four years to the pay back. I would say generally I'm on both sides of it. Now, when you add the school factor that was definitely a big part of it. Because I used the assumption that they wouldn't get anything up to the dollar four. Added the twenty -one cents in there. But from my conversation from the finance director and an appraisal district board member at their meeting, I was informed that they wouldn't be getting extra money from the Ravenwood. And we did -- had conversations based on their school situation and the possible roll back tax. This was a long time before it. My assumptions there are based on what — that they thought -- I did talk to Dr. Montgomery about it at one time and again with Raymond Kaiser and with the finance director over at the school. And the belief was that -- the assumption was that the template was going to work so that they would get the debt, they would get the golden pennies, but the net effect they were going to be hurt on the other side. So that my assumption and the model has them getting the twenty -one cents but not the dollar into it. So it was a significant factor on the school side. And I don't know about the twenty -five or — twenty -five or the nineteen million. I believe in your schedule that was given — I had from business property tax two- hundred thirty -four thousand and insignificant value every year. HISD using that factor is going to be one point six million. So I believe that is where the forty to fifty thousand dollars a year is coming from, if I'm correct. MR. RAY: That one point six is over the life of the project? MR. DUKE: Over the life of the project. But when -- you're reducing it from a dollar sixty, dollar fifty to twenty -one ' cents, that's the effect. And that's what I was asked to do. Not put in the model, what was going to be collected. So you've got to have some factor of putting it in there of what the State is going to do, and in very simple terms. You asked about the property tax, I believe? ICI MR. RAY: Well, just overall. Maybe we could cut to the chase. These brochures that are mailed out in the utility bill, the first one out in January and the next one out in April, with some very high nose bleed level numbers. MR. DUKE: This assumption based on my numbers is two million dollars versus that number which is -- MR. RAY: Forty -nine million. MR. DUKE: Forty -nine million. I don't know where the forty -nine million came from. MR. RAY: I'm looking at the total. MS. MAHAFFEY: Can I ask a question about that? Did you have anything to do with adding those figures up or do you know where they came from that went out in the water bill? MR. DUKE: Well, they did come from the city and it was put out by the communications. But no, I did not. MS. MAHAFFEY: Nobody came to you and said figure this or what do you think about this? MR. DUKE: No. I was shown the numbers. I was shown the numbers. MS. ZENDER: Just to make a correction, it was not put out by the communications board or approved by the communications board. MR. DUKE: I think you corrected me with that one time. MS. ZENDER: Just making sure. It most certainly was not put out by the communications board. ' MR. FORBUS: And she is on it, of course. i MR. RAY: While we are on the subject of this brochure, it also lists utility revenues like that's a great big cherry down there, seven point one three million dollars. MR. DUKE: I didn't look at that recently. That was back in 2005 and 6. MR. RAY: Are utilities bills pure profit? Its rhetorical. MR. DUKE: We have a lot of expenses. MR. RAY: Do we run a very large margin of profit on our citizens with the water bills and such? MR. DUKE: Well -- COUNCIL MEMBER: Careful. MR. RAY: Open and honest government. MR. DUKE: That would require another setting, but I would hope not. If you would include projects in it. MR. RAY: So would you describe putting that in this brochure as misleading? MR. DUKE: The utility? MR. RAY: Yes. MR. DUKE: No. I don't think that -- putting utility payments in there was not necessarily misleading. Although, it's not in the model that you have seen here. MR. RAY: Let me ask it the same way I asked earlier. When it comes to the city's checkbook are we going to get an extra seven million dollars because we've got new utility customers? That would take a lot of new utility customers. ' MS. MAHAFFEY: Seven -one million, right? MR. RAY: Seven point one or thirteen point eight, depending on which brochure you look at. MR. BAINE: Lanny, I didn't ask him to look at the utility billing so — MR. RAY: As I said, it's rhetorical. This doesn't have costs in there. I don't think the city runs a profit margin on utility bills. Certainly not to that extent. Whether or not it's misleading you can draw your own conclusions. MR. BARRETT: So for Ravenwood, as far as the sales tax, the gross -- new money that is spent there, that's our gross. Money that maybe would have been spent in Conroe or money that somebody is now driving in here to spend that they wouldn't have spent before. But for every dollar that's spent there it is cancelled out, as far as the sales tax, by anybody who spends a dollar there who would have ordinarily spent that dollar at another business in Huntsville because we are getting half the sales tax. So for all the new money, any shift of spending to the new development dollar for dollar cancels out. So the only way we can really — the gain will be -- you have to subtract out any shift in spending habits. And so I think the jury is out. I really think a year from now we'll kind of know. And a year and -a -half from now we'll really know. But -- and that's not even figuring in, you know, the kinds of things that Mr. Ray has mentioned. Like if you lose a business here and there, then you have got, you know, other effects upon the city. I think that's maybe something that people don't fully understand is how — to be honest with you, I think a lot of folks in Huntsville think most of the city's money comes from property tax. I think they are just a substantial number of people who don't even realize the importance of sales tax to city operations. And so maybe they're not understanding what the concern of the Council is in that regard. But, of course, if people think they hear a burglar breaking in their house they're not going to call Ravenwood, they are going to call the police and we have to pay the police. And we use sales tax in a huge way to pay them. So it's a -- sales tax is a big deal. And I think there is, you know -- you know, if there is going to be quite an enormous upswing in retail activity here it can cancel out the shift in business, you know, and even go beyond that. So we could net out additional sales tax revenue. I don't know how to call it. I can see it going up and it wouldn't surprise me if our sales tax revenue went down. I really don't know how to call it. ' But I think there is, you know, people may wonder sometimes what is all the concern about sales tax. And because there is often so much -- there is much more discussion about property tax. And so I'm not sure that the Huntsville citizens really understand the importance of sales tax to city operations. So, you know, we'll see. In a year we'll now about these numbers. MR. DUKE: Our sales tax is our bread and butter. I think it will be at least a year to a year and -a -half. And to get a clear picture financially I think maybe even a little bit longer than that. would be? We got six dollars worth of sales, sales tax money from Ravenwood, and what the net to the city is. I think it's pretty easily done. You get six bottles. You figure that two of the bottles of sales tax were as a result were lost to you because they were cannibalized, okay? And you got half of the sales tax money to start with, three. So you take away two, you're left with one dollar or one sixth of the total, the net effect to you, and the gain is one sixth coming out of the Ravenwood operation. Now, that is based on a cannibalization rate of one - third. The good thing, though, is this thing does really go away 12 -12 -- I mean, 12 -31, 1999. So there is an end date certain. Correction, I'm sorry, 2019, 1 stand corrected. We have too many numbers tonight. But in any case — MR. BARRETT: An old model MR. BAINE: In any case, when you look at the net result it's one bottle of water, or one sixth of the net, which is what you're looking at. And I'm not real sure that when you build models that you don't disclose everything about how you build them and why you did it. So it sounds real confusing. But when you reduce it down to either a dollars worth of sales tax and back out thirty -three cents you get down to where you're at. And the net effect will be a sixth of whatever you started with. So as long as you sort of know that going in that's fine. As long as you know it when you're going in. Now it's after the fact. And we're, you know, we're doing the after action report on something that happened a year ago. And we're also guessing by the way. I mean, we are making some assumptions. MR. FORBUS: Anybody else have questions of Winston? I Well, let me summarize what we have done as good as I can. We covered the two gap figures and Glenn is going to get us the answer to what those two figures, why they are so different, from the consultant. Property Commerce has always planned to off load these -- for a better term -- to another developer for the residential development. Is that correct? MR. WILLIAMS: (Inaudible). , MR. FORKS: That's what I'm saying, the home building. You weren't going to build houses. And, in fact, the whole residential project is on hold. The final plat for the Ravenwood project -- am I right, this was in the original plan that was signed by -- adopted the night of the 24th of -- or with the financial planning? Is that correct? Is that right, Thomas? MR. LEEPER: I think that's correct. Could you restate that? MS. MAHAFFEY: The project plan? MR. FORBUS: The project plan? Was the project plan, the final plat or the final approval of the project plan, �!I done with -- at the signing of the contract? MR. LEEPER: The amendment to the TIRZ project plan or financing plan was done at that same night. i. I� MR. FORKS: April 7th. MR. LEEPER: And added the Ravenwood Village project to the Metro National project and the West Hills Park project. MR. FORBUS: Okay. And Mr. Williams is going to provide us with updates, monthly preferably, on the project progress? MR. WILLIAMS: (Inaudible). MR. FORBUS: Okay. You will provide us with the information, that's fine. MR. WILLIAMS: Not that I'm not having fun. MR. FORKS: I understand. Target is coming. The names of the other stores are secret. We are not getting as much HISD benefit or roll back as we had thought we were. And the cannibalization effect is going to be , rather dramatic. So does anyone else have anything they would like to add? MR. RAY: Its not just cannibalization. Even without the cannibalization the numbers don't even close to add up to what was sold. This project was sold to the citizens and Council at the time — and I've read the transcript, and 0 everyone says the same thing over and over again. We're going to have shopping, jobs. That part looks true, that's nice. We're going to get school tax and that's not true. We're going to get housing and that's not true. We're going to get roll back taxes, that's not true. We're going to have a net benefit of -- well, a number that is, in light of scrutiny, too absurd to even mention. And it was rather disturbing that none of the negatives came out during that. There are negatives. Some businesses will fold here. If you don't think so I invite you to watch. And another thing I think is extremely disturbing is over the past few months a lot of these revelations have come out, such as there are not going to be school taxes or the other numbers weren't nearly accurate. And there is not going to be housing. And I look at this list of folks that came up here and talked and those who were sitting up here at the time and talked and they all touted it's for the kids, it's for school taxes, it's this housing that we all need. And the housing was unequivocally $200,000 individual homes, unequivocal. And all of those people that were so vocal and so loud that we need this for all of these reasons are now incredibly, noticeable silent. This is disturbing. And I have even heard mutterings that well, if we try to modify this agreement or do anything to it we are going to get dragged down to the courthouse and beat up. So I would like to finish by reading something from an opinion written by a rather obscure court in Austin with nine Justices called the Texas Supreme Court. "The facts presented here illustrate a fundamental reason why immunity exists; to prevent government entities from being bound by the policy decisions of their predecessors. In this case the county, upon an electoral change in the Commissioner's Court, determined that the action they were up to was a poor decision. Rather than lock El Paso county residents into a contract not in their best interest, Commissioner's Court acted within its discretion to protect the perceived interest of the public by rejecting the contract". And they go on to say that that's fine, you can do that, and that's a wise decision. And the reason we have that level of protection for governments is because you are not bound by the poor decisions of your predecessors. I will spare you the hyperbolic parade of horribles in our history that still exists today if the converse were true. And I thank you and I appreciate those who attended tonight. MR. FORBUS: Thank you all. I appreciate you coming. I believe that this is an indication of community support of the government of their city. So thank you for coming. And we will look for all this information in the local news media. Thank you. I adjourn the meeting officially. (Proceedings concluded) STATE OF TEXAS COUNTY OF WALKER I certify that the foregoing is a true and correct transcription, to the best of my ability, of the audio /video recording of the proceedings held as provided to me by the City of Huntsville, Texas. I further certify that I am neither counsel for, realted to, nor employed by any of the parties or attorneys in the action in which this hearing was taken, and further that I am not financially or otherwise interested in the outcome of the action. I further certify that the transcription fee of was paidlwill be paid by the City of Huntsville, Texas. WITNESS MY OFFICIAL HAND this the day of Johnny D. West, CSR #542 Exp. Date: December 31 st, 2010 THIS PAGE INTENTIONALLY LEFT BLANK. 17