Council Watch

Taking the Plunge: City Dips Into Water Deal

Council Watch
By Doug Potter

The Austin City Council approved the 50-year water deal with the Lower Colorado River Authority by a vote of 7-0 last week. More or less on the spot, City Manager Jesus Garza presented LCRA General Manager Mark Rose with two checks for a total of $100 million, in return for a fixed water supply of 325,000 acre-feet per year until 2050, with an optional extension to 2100. Austin will receive a continuation of the terms of the city's 1987 contract with the LCRA, and LCRA will get money with which to pay off its purchase of the Garwood water rights on the Texas coast, as well as certainty regarding the future of the bulk of its water supply. In the end, neither the questions raised by Save Our Springs Alliance attorney Bill Bunch, nor the uncertainty of several city boards and commissions, nor the warnings of water/wastewater rate advocate Birny Birnbaum, could dissuade council members from securing the water they believe Austin needs, at a price they believe isn't going to dip any lower.

Those who urged immediate adoption of the deal back in August must have (or should have) been red-faced upon seeing the contents of the deal as adopted, as important changes made during the 45-day council deliberation period provided safeguards as to both the amount and the cost of the water purchased.

First, the city may now appeal the LCRA's rates to the Texas Natural Resource Conservation Commission at any time, instead of after our water demand reaches 201,000 acre-feet per year. (Austin's projected water demand for 2000 is only about 150,000 acre-feet.) Second, the city will have the opportunity to review once every 10 years the amount of water it will actually need from LCRA, and adjust the amount accordingly. Instead of a cash refund, LCRA will provide credit for the unused water that the city may redeem at a later date. In previous drafts of the deal, the city was only allowed a one-time revision of its water demand, between the fifth and 20th year of the water deal.

Then there's the city's self-financing of the deal through long-term debt, which will save Austin water ratepayers about $17 million and ensure that rates increase only about 1.5%, or a little over $3 over the next 10 years. But the financing instrument, while a money saver, comes with its own set of political pitfalls. The $73 million debt (the rest was paid in cash from the Water/Wastewater Department and capital improvement projects funds) will be financed by 40-year revenue bonds (which will be repaid with revenues, in this case from the water utility, instead of from the city's General Fund).

Austin's city charter requires that revenue bonds be approved by a vote of the public, and in this case, the time it would take to arrange such a vote would be far outside the bounds of Mark Rose's and the LCRA's deadlines. Luckily for the deal's supporters, there's a superseding state law stating that cities can issue revenue bonds without a public vote, and the city of Austin has done just that on a variety of occasions, including the infamous $19 million purchase of One Texas Center on Barton Springs Road. Nevertheless, City Attorney Andy Martin's announcement that legal precedents obviated the need for a vote, and perhaps even left such a vote open to legal challenge, drew outraged gasps from the progressive-enviro crowd in the audience, which in addition to Bunch included Mary Arnold, Mike Blizzard, and Kirk Mitchell. This was not helped when City Financial Officer Betty Dunkerley said that the city has routinely issued revenue utility bonds for Austin Energy without a public vote since the mid-1990s.

Later in the day, Mitchell, a former SOS president and one-time county commissioner candidate, took the microphone to protest the charter evasion move. "I'm aware the law allows you to basically subvert the city charter. But I don't think it's a wise idea from a public policy point of view; and I certainly think the voters, who have shown themselves to be very interested in that kind of thing, expect you to follow the charter whether state law supports it or not."

(Plus, if you're Bill Bunch, the financing is not an improvement. Because it includes an up-front, lump-sum payment of $100 million, it "makes a bad deal worse" because it increases the amount of money Austin can't get back if and when it should decide that he was right all along, and that the water deal is a real stinker.)

Ultimately, though, the deal's two most likely opponents, Council Members Daryl Slusher and Beverly Griffith, decided that the benefits outweighed the charter issue and the deal's attendant risks, and voted yes. Slusher, however, first circulated a soul-searching memo expressing his continued discomfort with the deal and the quality of debate that preceded it, which he called "somnolent" compared to the vibrant, years-long exchange that led up to the city's last agreement with LCRA in 1987.

Slusher's vote was ultimately secured by last-minute amendments to the deal, including the once-a-decade water adjustment provision, designed to allow for advances in conservation technology that would dramatically decrease the city's demand for water. Slusher also elicited a verbal promise from the council that, when the Water/Wastewater Department brings its cost-of-service study to the council in November, his colleagues will consider whether the rate burden falls too heavily on residential customers, as opposed to commercial and industrial users. (As Slusher's amendments were read into the motion, Gus Garcia said, "This is predicated on Council Member Slusher voting for this," perhaps alluding to the infamous Forum PUD vote, in which Slusher wrung concessions out of the victorious supporters of the MoPac shopping mall, and then refused to vote for it anyway.)


Get to Know Me!

Through the six personal statements made by council members before the vote (Mayor Kirk Watson alone declined to make one), council watchers got the opportunity to learn more about our highly placed civil servants.

Some examples: Garcia's father owned a grocery store, and the council member learned at an early age the ups and downs of meat-slicing machines. Bill Spelman's uncle was an auctioneer who pretended young Bill was a bidder in order to drive up the price of the horses he sold. Mayor Pro Tem Jackie Goodman grew up in the dry El Paso desert, and harbors a fear of getting caught in a jam -- without water.

On a less nostalgic note, however, discussion of the LCRA item smoked out some old rivalries in the development wars, and raised once more the age-old question of how best to manage the area's dizzying growth. In his testimony to the council, Bunch thought it worth mentioning that the LCRA's Rose was a leading voice for approval of the Circle C municipal utility districts when he sat on the Austin City Council in the mid-1980s. Mayor Watson did not think it worth mentioning; on the contrary, he admonished Bunch against "personal attacks" on Rose.

It was one of several scoldings Bunch received from Watson, who repeatedly chided a nameless someone for negativity and obstructionist intervention in the water deal. But Bunch said the proof of Rose's actions was in the pudding: "You're sitting here today with four lawsuits on today's agenda alone -- The wreckage we are still cleaning up with what happened with Circle C." (Indeed, later in the evening after the water vote, council approved a $9 million settlement with Circle C, with another $7-8 million dispute likely headed for the courts.) And several council members commented that Bunch's tactics resulted in a better deal than the city would have otherwise driven. "Whoever disagrees with some decision that we make, do know that you were very important in getting to a much better place," said Goodman in a rather cryptically worded statement.

That said, Goodman added that opposition to the LCRA or its actions -- like the proposed water line to Dripping Springs (see p.26) -- was no reason to expose Austin to the risk of water shortage. "I think we cannot play politics, as much as we might want to -- I, too, think that a pipeline out to the Hill Country is probably the beginning of the end for the aquifer, unless we get a whole lot more help from the state than we ever have before."

Council members agreed that holding up the water deal wasn't the way to oppose the pipeline, and that, anyway, it wouldn't work. "If it makes good financial sense," they will build it, said Spelman. "The only thing in the world more movable than water is money. They'll find the money one way or another." Spelman then doled out a little free advice to the pipeline's opponents: "If you want to stop the pipeline," he said, "engineer the world in such a way that it does not make financial sense to build the pipeline. Talk to Fish and Wildlife about the [endangered species] guidelines" which govern what kind of development can take place in the area.


What Could Have Been

In his final speech to the council, Birny Birnbaum was still arguing that the LCRA deal could get better; seeing the writing on the wall, however, he took time to argue for another important issue: "One thing I want to point out to you is how valuable a funded consumer advocate would be to you in a situation like this." He noted that city staff seemingly had "unlimited resources to hire any number of experts they want to buttress their points."

Lucky for the council and the citizens of Austin, Birnbaum happens to hold two master's degrees from MIT, and has worked with the port authorities of both New York and New Jersey. The council got this kind of pedigreed consumer advocacy for free. "But I don't have the resources to put together charts, to hire experts or do anything like that," said Birnbaum.

Would the experts have gotten us a better deal than the one we have? There's no telling. Only time will do that, and in his memo to the council, Slusher said one reason for his uneasiness about the water agreement was that the same forces that were behind this were behind the nuke, and vice versa. They argued that not to secure the needed resources for a growing city would be foolhardy and irresponsible. Sound familiar? Last time out, the critics were right. As Slusher's memo put it, "I don't believe this deal is of the disastrous magnitude of the Nuke. And I know that city government operates on a much higher plane than it did in those days." So perhaps this time the critics will be proved wrong.


More on Gotham

When the council voted 5-2 two weeks ago to approve preliminary zoning for the Gotham condominium project at 200 S. Congress, their request that the Parks and Recreation Board and Downtown Design Commission hear the case seemed like a mere formality, a bump in the road to its inevitable approval as-is. But serious concerns raised by both groups may prompt council members to reconsider Gotham when they take it up again, most likely at their next scheduled meeting on October 28.

The Parks Board voted Tuesday to advise the council to limit the project's height to 60 feet -- the limit for the current zoning, Light Industrial, as well as the height that some old-time Town Lake partisans say is ideal for structures abutting the river. (Gotham developer Randall Davis and his representatives, Richard Suttle and Sara Crocker, have repeatedly said that the Gotham would be unbuildable at less than 120 feet, due to financial constraints.)

Likewise, on Monday, the Downtown Design Commission considered Gotham, and it got "a cold to lukewarm reception at best," according to one insider who attended the meeting. Commissioners will send a memo to council within a few days outlining their concerns with the project. Neither an outright approval or rejection of the project, the memo is expected to "damn it with faint praise," advising the council to consider a 60-foot height limit as well as other design issues, like the building's pedestrian friendliness, access to the hike and bike trail, and the building's southern façade, which is "insensitive, flat, and a mess -- like showing someone your rear end," according to the source.

One Design Commission member said he could feasibly accept more than 60 feet if other design changes were made to improve the building's exterior. "Who doesn't want downtown housing?" asked Commissioner Edgar Farrerra. "There are [probably] ways you can go beyond 60 feet and come up with an acceptable building. -- There are probably homes in Westlake that are higher than 60 feet."

This Week in Council: Another two-week council break starts this week, as Jackie Goodman and Willie Lewis accompany the mayor to the Far East to scare up more high-tech business for the city. Now that's an interesting trio. end story

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