Hays County Hell

Elgin Bank Victory May Mean Colonia-like Development

Hays County Comissioner Jefferson Barton says that when Travis County lost the battle against Elgin Bank, he was forced to approve this colonia-like development.
photograph by Jana Birchum

A couple of miles east of the interstate, near Kyle, a subdivision called the "I-35 South Ranches" lies on acres of beautiful, rolling Hays County countryside. Like a lot of rural subdivisions, however, the pleasing name is a misnomer -- the development is a patchwork of mobile homes and poorly built houses. The aesthetics aren't the biggest problem. In digging septic-tank holes in the region's blacklands clay soil, the developer -- Robert Sweeney of Del Valle -- loaded much of the out-fill into county ditches, which caused flooding, created stagnant pools of water, and damaged the abutting county roads. The heavy rains in early June only exacerbated the problem, turning huge stretches of the development into impassable mud fields and pools of water into ponds.

"Despite the name," Hays County Commissioner Jefferson W. Barton dryly noted in a memorandum to the Conference of Urban Counties this year, "I-35 is nowhere near, and nothing about the lots could be mistaken for a ranchette, much less a ranch." (An unofficial developers' manual must have this rule: The shoddier the development, the more grandiose the name; in Nueces County, the court public works director says that similar problems exist in the Tierra Grande development and at Country Club Estates West, which is in a low-lying area with unpaved roads and no water, sewer, or drainage.)

The 35 South Ranches are an example of what's becoming known around the state as "Elgin Bank" subdivisions. The name comes from a court case, Travis County v. Elgin Bank, which the Texas Supreme Court made final in January 1996. The Elgin Bank case gutted county authority in unincorporated, non-municipal areas, and a year and a half after the decision became final, the case has taken on a descriptive character of its own, like a Miranda warning. Some so-called Elgin Bank developments are a shorthand way of describing substandard developments with bad roads, drainage problems, and eyesore housing. It's brought a kind of subdivision hell for county commissioners and, more importantly, their constituents.

The problem started in a case brought by the Elgin Bank of Texas in a dispute over its plan to subdivide land for a Travis County development. The county won at the trial court level, but the Austin-based 3rd Court of Appeals held that a county doesn't have the power to require an owner of a tract of land to prepare a plat, or a subdivision plan, of a subdivision when the owner doesn't plan to lay out streets or parks or other parts of the tract dedicated to public use.

In non-development-speak, the opinion means that as long as a developer extends part of a subdivision to an existing street, he doesn't have to get subdivision approval from a county. Such lots are often called "flag lots" because long, thin strips of land, resembling flagpoles, are extended to existing roads. As long as lots are "flagged" to an existing road, the developer can escape virtually all county supervision.

At the 35 South Ranches, the lots are "flagged" to two existing public roads, which lets the developer off the hook with respect to virtually all county regulation. Blacklands clay also is a bad surface on which to maintain and build roads. The two existing county roads were already of questionable quality, and the influx of residents has made them worse. Besides crumbling roads, there are no turnarounds for school buses and other large vehicles. And with no streets built inside the subdivision, emergency vehicles have an almost impossible job finding the correct home -- assuming, that is, that they can maneuver through the muddy ruts that lead back to residents' houses.

Sweeney is matter-of-fact about his development's shortcomings. "We build that way to save us from the expense of building roads. We can offer more for less money," he says. "We are targeting the market that is less capable of spending money on a home."

"If we had to build roads out there, it would put these people in a different pricing category," Sweeney says. "If you want to make a first-class subdivision, fine... it would make a little more sense to put in good roads."

Sweeney has little patience with county officials' complaints about the inaccessibility of the development to emergency vehicles. "We continue to nurture the weak and to mollycoddle people who will not insist on taking care of their responsibilities," he says. "It's not my responsibility to build roads for the county or for those people." County officials, Sweeney gripes, "are just social engineers" who need less power, not more.

Hays County commissioners twice rejected approval of the early stages of the 35 South ranches, but when the Elgin Bank case became final with the Supreme Court's decision not to hear the case, commissioners had no choice but to approve the development. "It's not a good subdivision, but it's a legal subdivision," Commissioner Barton lamented in July 1996, when approval was reluctantly granted.

Hays County contains some extreme examples of Elgin Bank-type problems, but the county is by no means alone. About two dozen counties reported similar problems to the Texas Association of Counties and a related group, the Conference of Urban Counties. The two groups backed unsuccessful legislation in the just-concluded legislative session that would have cured some of the regulation problems caused by the decision (see sidebar).

The free-market rule sparked by Elgin Bank has also put a new twist on the brewing "property rights" movement in Texas, in which landowners have claimed that governmental actions that adversely affect their land are unconstitutional "takings" of property. In Hays and other Texas counties, property owners who live near unregulated subdivisions are experiencing their own form of "takings" -- reduced property values. In a countryside that was fairly pristine, longtime landowners have found that shoddy subdivisions bring eyesore housing -- sometimes with malfunctioning septic systems -- and county roads that become less passable with increased traffic. The counties, in turn, find their costs skyrocketing in the form of road maintenance.

As a result of Elgin Bank, colonia-type developments are spreading far beyond the Texas-Mexico Border -- in fact, it's a fallacy that severely substandard development is just a Border problem; most urban and high-growth counties can point to a number of developments that are a short step up the development ladder from colonias. In the heart of fast-growing Hays County, a half-hour drive south of the state Capitol, developers have rushed in to take advantage of the decision -- in some instances, says County Commissioner Barton, actually brandishing a copy of the court opinion as they inform the county that they know how big a loophole Elgin Bank created.

The Elgin Bank decision stemmed from an unwieldy and confusing section of the Local Government Code that governs preparations of plats by landowners who divide a tract of land. Elgin Bank wanted to subdivide a 150-acre tract of land without filing a plat. Travis County officials, as counties across the state have done for decades, read the law as requiring a plat to be drawn up for almost any instance where land was being subdivided. Elgin Bank's argument was that the statute should be read to require a plat only if two conditions were met: The land was being subdivided and new roads or utility improvements were being constructed in the subdivision. The interpretation of the word "and" became the element on which the case hinged. Elgin argued that since its developments would not be providing roads, then the filing of a plat was not required.

But Travis County District Judge F. Scott McCown gave Travis County the victory in the case. Faced with two different interpretations, and given the vagueness of the statute, McCown decided to rely on legislative history. He found that the Texas Legislature, in a 1927 act concerning city land development, always intended to make it unlawful to provide public utilities without approval of a plat. McCown also found that the county statutes were modeled on the city statutes -- and that both were intended to give local officials a degree of control over development. But the Austin-based 3rd Court of Appeals refused to hark back to the legislative history and sided with Elgin Bank's interpretation. The court reversed McCown, and the Supreme Court declined to review the case.

So far, Elgin Bank has declined to take advantage of the loophole the case provided for it in Travis County. Rather than develop the land itself, the bank subdivided the 150-acre lot -- located at the edge of Travis County on Highway 290 East between Manor and Elgin -- into 10 lots and sold them. To date, only one lot has been developed by its owner. However, Commissioner Barton warns that Elgin Bank has set a bad precedent, and that Travis and the surrounding counties' futures are "co-mingled." Travis County should take note of what's happened in his precinct in northern Hays County, he says, which contains some of the prettiest country around Austin. Barton says it is that proximity, as well as its beauty, that makes it so attractive to developers. The same market forces that drive the creation of colonias -- scarcity of affordable housing, developers who offer homeowners little-to-no-money-down deals, proximity to jobs -- are at work in Hays County. To most city dwellers of at least modest means, the 35 South Ranches must look like barely habitable eyesores. But the demand for this type of housing clearly exists; the development started with 46 lots last summer and all sold out in a matter of weeks.

In the wake of the Supreme Court's refusal to hear Travis County's appeal of the case, County Judge Bill Aleshire blasted the decision as "disastrous public policy.... Instead of weakening the power of county government, we ought to be strengthening it to make sure we don't have colonias all over," Aleshire told the San Antonio Express-News.

Elgin Bank gives developments like the 35 South Ranches a chance to proliferate, to be established almost overnight -- and to put quality developers at a disadvantage. Since the Legislature didn't overturn Elgin Bank in this session, the next opportunity to rein in development won't come until the 1999 regular session. When it comes to developing unincorporated areas of a fast-growing county, that is an eternity.

In the booming 1980s, Hays County's population soared by 62%, to 65,614 residents in 1990. Already this decade the county population has increased to about 88,000. That's a big market for developers who work fast, sell hard, and move on to the next parcel of land.

Elder is a columnist and senior editor for Texas Lawyer.

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