Council Watch

By Doug Potter

"This is not the time to flake out."

-- Austin City Council Member Beverly Griffith

Not the time to flake out, indeed -- though it's tempting, here in the dog days of summer, to do just that. But the city is about to commit to pay the Lower Colorado River Authority more than $1 billion to extend the city's water supply for 50 years. The LCRA has given the City Council an ultimatum: Sign the deal within 30 to 45 days or risk losing your water supply. Though ensuring a future water supply for Austin is a no-brainer, a lot of money -- as well as a design for how Austin will grow in the future -- is at stake. Attention must be paid. Water rights are one of the more complicated legal and public policy topics in existence. They depend not only on an arcane set of state laws, but on sets of projections that are complex and subjective in nature, like population growth and level of demand for water. And even those categories break down further. To calculate demand for water, you have to make assumptions about how much water will be saved through conservation programs, for example, and how much will be "reclaimed" for reuse projects like cooling systems and irrigation.

And that's just the demand side. On the supply side lies the wild and wonderful world of water rights law, which must be reckoned with in order to discover just how much water a given community can claim as its own, and how "senior" -- that is, secured first in time, and therefore superior -- those water rights are. Add to that the evolving policies of the state of Texas, by which all surface water is legally "owned in trust for the public interest," and you have, to put it nicely, a real mess.

It is into this quagmire that the city and LCRA have proposed to wade, with a deal about which two things are currently certain: It would leave the city of Austin flush with water, and the LCRA flush with cash. City staff have been negotiating the agreement, which is pending council approval, for the better part of a year. The proposal was presented to the council in executive session just days before the June 8 press conference which heralded it as "a historic pact that would guarantee Austin a secure water supply -- for at least 50 years."

The deal was scheduled for fast-track approval, with internal city documents calling for the council to "negotiate and execute" approval -- which means the city manager could have done the deal, without further council approval, by Aug. 31. But it didn't go down quite that way. The SOS Alliance's lead counsel, Bill Bunch, started asking questions, and kept asking until he got a lot of other people asking them, too. The dreaded "boondoggle" appellation surfaced, as did comparisons to the South Texas Nuclear Project, in which an earlier council was pressed to act quickly on a big deal -- and in the process lost our collective shirts.

As the issue comes back up for a public hearing tonight, Thursday, Sept. 2, the council remains tentatively divided. Mayor Kirk Watson remains the agreement's primary apologist -- as his Socratic questioning of LCRA General Manager Mark Rose and city water director Randy Goss indicated. (He had them refute the list of SOS questions about the deal.) Council Member Gus Garcia has said he's about ready to go ahead with the deal. Jackie Goodman and Willie Lewis have yet to tip their hands, but Griffith and Daryl Slusher are in open questioning mode, and both have said that 30 to 45 days may not be enough to get all the necessary answers. It's no accident that the council member most vocally critical of the 45-day deadline is our resident public policy professor, Bill Spelman. If anyone is equipped to realize the complexity of this deal, and what it would take to evaluate it adequately, it's Spelman.

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The Finer Points

Austin's current water rights include "run of the river" rights, which mean Austin may take any water passing by it in the Colorado River. The city has an agreement with the LCRA which allows the LCRA to store water for the city in the Highland Lakes, in case drought should deplete our run-of-the river resources. According to the city's current agreement with the LCRA, in effect since 1987, Austin has rights to 250,000 acre-feet of water per year (an acre-foot is an acre of water that goes a foot deep) until 2023.

The new deal would extend the 1987 agreement through 2050 (with an option to extend through 2100) and add an extra 75,000 acre-feet a year to the current 250,000. In return for the water, the city would pay a $25 million lump-sum payment up-front. In addition, Austin will pay $105 per acre-foot for the additional water and about $32 per acre-foot reservation fee for the LCRA to store the water from now until the time that it is used. Add it all together, and you get about $1.1 billion from start to finish.

There are two basic sets of criteria through which to evaluate this deal: 1) Do we really need this water; and 2) Is the bargain Mark Rose and the LCRA are driving a fair one?

Let's start with the second question. There are indications that other cities have done better in their deals with LCRA. Cedar Park, for example, didn't have to include a down payment as part of its recent 40-year water pact (Austin's down payment would be $25 million). And then there are the rates: The water prices Austin agrees to would not be challengeable until Austin's water use exceeded 201,000 acre-feet per year, regardless of what changes may occur in the market. (City officials project that Austin will use 145,000 acre-feet of water in 2000 and that the demand will not exceed 201,000 acre-feet until after 2010.)

More interesting still is the fact that the current proposal may be less beneficial to Austin than an earlier version contemplated by Rose. In a Sept. 17, 1998, letter to City Manager Jesus Garza, Rose laid out possible terms whereby Austin would not start paying for the full amount of water 20 to 30 years before it was needed, as we will under the current proposal. Other possible terms in the initial brainstorm included allowing Austin to challenge LCRA rates and to get actual water rights -- instead of just contracting with LCRA for some of the water the city has rights to.

Why would Rose have made such an offer? This brings us to the elephant in the living room: the Garwood water rights. Rose's 1998 letter was an attempt to prevent the city from trying to scuttle LCRA's purchase last year of the Garwood water rights from a group of rice farmers on the Texas Gulf Coast. With the Texas Natural Resource Conservation Commission's blessing, LCRA converted its acquisition to municipal water rights. Because the Garwood rights had seniority on the Colorado River, there was a concern that Corpus Christi's use of Garwood water could interfere with Austin's own water supply. The specter of the Garwood rights hovers closely over any discussion of the water deal. Since LCRA has been carrying heavy debt service costs since making the $75 million purchase last year, critics charge that the current city-LCRA agreement is being driven by the authority's need for a quick capital infusion to retire the Garwood debt, and not necessarily by the city of Austin's need for more water.

Which brings us back to question one: Do we really need this water? We need water, obviously, but do we need this much? And do we need it now, especially when we have to start paying for it right away? The city's own water planning consultants have previously indicated that 2010 would be an appropriate time to buy more water from LCRA. Critics charge that doing the deal before there's consensus on the population projections, and the water demand, conservation, and reuse projections -- all of which are currently being disputed -- will undermine the city's growth, planning, and environmental policies.

Then there's a third question: If the council doesn't act now, will it undo its ability to buy water from LCRA in the future? The specter being floated is San Antonio, though Rose himself told the council, "I've never had a conversation with someone from San Antonio about buying any water from us." If Austin doesn't take the water now, this deal's critics argue, it will remain up for grabs until we come back for it, or someone else does first.

Nevertheless, it was clearly Rose's intention to put some kind of fear into the council at last Thursday's public hearing. Rose cajoled threateningly and threatened cajolingly, warning the council of the doom that awaited the city if they didn't jump at his offer, by his deadline. Rose told the council that on the very day they were meeting, run-of-the river rights alone would not be enough to supply the city's need. The situation would only get worse, he said, without the LCRA and their water, until the middle of next century, when the city would be without water six months out of the year.

And the danger wouldn't start in 2023, when the current agreement expires, warned Rose. It could start as early as 2000, if the LCRA decided to use the city's failure to build a water treatment plant, in which the LCRA would have been a partner, as a legal tool to try to invalidate the 1987 agreement. But if the new deal goes down, he implied, he'll let the whole thing slide.

Rose wasn't the only one engaging in scare tactics last week. In addition to the quite valid questions they raised about the water deal, SOS's Bunch and Stuart Henry (of the firm Henry Lowerre Johnson & Frederick ) went the extra mile, impugning motives and implying conspiracies. Since then, they've been spending makeup time showing the cold, hard facts around the city to bolster their case. But though the many good questions surrounding the water deal may have been somewhat ill-served by Bunch's polemical approach and tone at last week's public hearing, they were much more heinously aggrieved by the subsequent editorials in the Austin American-Statesman (see "Media Clips," p.30).

The Statesman's diatribes did have a positive impact, however, as they inspired the city's consumer advocate for water rates, Birny Birnbaum, to write a letter to the council decrying the Statesman's work as "filled with and based upon incorrect assumptions," and erroneously characterizing Bunch's questions "as the irrational whinings of no-growth radicals who do not care about the future generations of Austin citizens.-- The fact that a deal with the LCRA may be good for future generations of Austin citizens doesn't mean that this proposed deal is a good deal."

The city manager has responded to Birnbaum's memo by calling in consulting firm KPMG to evaluate the agreement for the city, a process which he says can be done by the end of September. All this will likely bump up against the LCRA's 30- to 45-day deadline, so it is likely that Rose's bluff will be called. If so, will he take his water supply and go home, as he has threatened? Or will he be forced back to the bargaining table by a City Council that, once and for all, has demanded all the facts?

This Week in Council: At the council's 9am meeting today, budget briefings are scheduled for the Smart Growth Initiative, Development Review and Inspection and Planning, Environmental, and Conservation Services departments, as well as Austin Energy, Solid Waste Services, Water and Wastewater, and Watershed Protection. Of those, Austin Energy should be the kicker, with questions from council on their budget, and adherence to their five-year plan. The utility was also slammed last week with harsh words from Scott McCollough, electric utility consumer advocate. More on that next week.

Scheduled for 6pm are a cluster of public hearings: on the city/LCRA water deal; on the new budget; on the new tax rate; and on site development regulations for the "Waterfront Overlay Auditorium Shores Subdistrict," which includes the new Town Lake Park, Palmer Auditorium redesign, and new civic center. In between, mercifully, not much is expected to happen. Exceptions: an item contracting out management of the city's community access channels to Austin Community Access Center Inc., to the tune of $1.15 million. Also, if you had X-ray vision, you could check out the council's behind-closed-doors, executive session discussion of pending lawsuits such as FM Properties Operating Co. v. City of Austin, and City of Austin v. Travis County Landfill Company.