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June 27, 2017

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Citizens to be Heard - DEVELOPMENT AGREEMENT

April 27, 2017

The following was read during Citizens to be Heard at the City Council meeting on April 26, 2017. During this meeting several citizens stood up to speak about concerns with the toll road project. As of June 28th, this citizen has still not received a response from the city. 

 

Our opposition is not to change, it’s not to growth, and it’s not necessarily to a road. It’s to this toll road and the partnership with this company, Texas Turnpike. I’m a numbers and facts person and really wanted to take my time reviewing all possible facts about the toll road and the company before coming to a final conclusion. Unfortunately, the more I look the more concerned I become.
 

When researching Texas Turnpike and Public Werks I found myself in a never ending web of shell corporations, partnerships, LLPs, etc. It seems like no matter what I found it lead to a different company. These ranged from toll related companies (Blackland LLP), to mining companies (Mine Werks), Utility companies (Republic Holdings), even dairy companies (National Dairy Holdings, LP). None of these companies has a professional website and all are based out of the same office suite but have different “primaries” for the companies. This raises immediate red flags.

 

Then I started researching John Crew, in particular. Mr. Crew was involved in a utility development project in Lubbock that failed.

 

Under the agreement, Republic was to secure private investment capital to complete feasibility studies and implement their findings, while an energy generation partnership called High Plains Diversified Energy Corp. was to issue revenue bonds to secure funds for the energy generation and transmission facilities outlined in the agreement….. Knowing the litigation waters are murky even against a city that has signed a binding contract, no developer can ignore the reality of sovereign immunity and knows there’s an inherent risk of a deal going south with money left on the table. Public Werks Inc. President John Crew, who has spent decades putting together infrastructure deals and public-private partnerships, said he works closely with attorneys in drafting development agreements to guard against the risk of a political decision sinking a deal and a government then potentially hiding behind immunity to avoid paying up. 

“We paper the hell out of these things,” Crew said.

He said getting political entities to warrant their performance and commit to waivers of as much of their sovereign immunity as is possible without overstepping constitutional limits on waiver is key. Also crucial is “putting financial handcuffs” on a city when entering a deal, or structuring agreements so the city has some skin in the game or has pledged collateral, meaning its leaders will know they’ll feel some pain if they do walk away from a deal. Another key step in the early stage of project development is to ensure the project you’re contemplating is considered essential infrastructure for the city or county, because in that case the government will be less likely to walk away from it, Crew said. He also suggested that developers aim to secure an exclusive agreement for the service, meaning that if the city doesn’t pay, it won’t get the power, and writing in terms that mean even if a developer forgoes profit when a deal fizzles, it won’t lose money out of pocket.

The good news for developers contemplating municipal contracts is that in the state of Texas, most political entities are creditworthy, and investment-grade entities do tend to behave in an investment-grade way, as long as their decisions aren’t highly politicized, according to Crew.

Investors burned by a bad deal aren’t likely to go down a similar path again, he said, and for a city that repudiates a contract, it will find an unfriendly marketplace unwilling to partner up on future deals without the city shouldering much of the risk.”

 

Private companies are in it for private gain. They do not care about the public except when they can exploit a public need or perceived need for their financial gain. The development agreement as originally signed shows this clearly. The contract does nothing for the city. It offers very little, if any, protections for the city. We had several separate professionals review it (three attorneys, a city manager, a former councilperson, and a public works director) and each one was shocked that any attorney would advise the city enter into this agreement.

 

IN addition to the lack of protections for the City of Cibolo, the development agreement has several inconsistencies and contradictions. For example, during the February 28th meeting an amendment was added guaranteeing the construction of the express lanes at the same time as the TXDOT improvements. There are 3 places in the agreement where wording in the same paragraph contradicts this.

 

Additionally, the express lanes are described as “two lanes in the median extending 4 miles.” When questioned, council has repeatedly told us we are uninformed and that “despite what the development agreement may say,” the express lanes would only be the overpasses, and that the agreement would be changed to reflect this. Unfortunately, based on Page 25, Section 13.13 of the development agreement you reviewed and signed,

 

“Prior Agreements Superseded.  This Agreement supersedes any prior understanding or written or oral agreements between City or Cibolo Turnpike respecting the within subject matter, and contains the entire understanding between the parties with respect thereto.  There are no oral agreements between City and Cibolo Turnpike.”

 

I am concerned that the city was duped into signing this agreement due to fear. To sign an agreement without knowing where the road will go, what it will look like, what the toll rates will be, what the express lanes actually are, what the speed limit will be, the effect on property values, etc. is shocking.

 

 I am concerned that council hasn’t been given the whole story about the attempts made at getting funding for the road, and that promises that were made by council, such as the development agreement being released for public review before being signed, were not kept. I’m concerned that this agreement was signed with the obvious errors. I am concerned by the continuing communication failures and inadequacies exhibited by the city. Lastly, I am troubled that after the Walmart debacle we find ourselves in a similar position with the same arguments – agreements being made without public support.

 

We all love this city and I truly value all that you do. I know you made the decision that you felt was best based off of the information you were given at the time. However, now you have the chance to make this right. Please consider dismissing the agreement or at minimum putting it to a public vote.

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