What’s in store for City of Hays? Legislation could pave way for retail development

Potential legislation requiring larger cities to wholesale water and wastewater to smaller municipalities upon request could be one of the last keys unlocking a proposed 530-acre mixed-use development bridging the Hays and Travis County lines. 

But opponents of House Bill 2959, authored by State Rep. Jason Isaac (R-Dripping Springs), fear the move could not only place burden on existing municipal utility rate payers, but goes against Austin’s plan to avoid development in the Barton Springs Edwards Aquifer recharge zone.

Under HB 2959, a home rule municipality with a city-owned utility located in a county with a population of more than one million people would provide wholesale water and sewer service to general law cities with less than 301 people upon request.

If the law is approved, wholesale service could be provided if the extraterritorial jurisdiction (ETJ) of the larger home rule city borders the ETJ of the general law city, and if an aquifer provides the sole water supply for the smaller town.

A photo taken from a drone shows the state of construction on State Highway 45 Southwest, which is a 4-lane toll road that will connect FM 1626 in Hays County to MoPac in Austin. Legislation requiring big cities to wholesale water to smaller ones could be one key that unlocks a developer’s plan to place a mixed-use development at the FM 1626/SH 45 intersection. ( photo courtesy of Walters Southwest)

In addition, a general-law city that makes the request is responsible for paying infrastructure costs for service, while a home rule city cannot recover through its rates any cost associated with extending service.

Bill Walters, president of Walters Southwest, said Isaac’s bill came as a result of a team effort between him and city of Hays officials.

Walters said the bill is in conjunction with a service extension request to the city of Austin in order to provide utilities to a 530-acre project called Hays Commons.

The project, located at the intersection of FM 1626 and the under-construction State Highway 45 Southwest, is partially within Austin’s ETJ and the City of Hays’ ETJ.

Walters, who was the lead developer of the 300-acre Sunset Valley master plan in southwest Austin, said the project is “strictly a mixed-use commercial master plan” with no single-family residential components. He said plans could include retail, restaurants, office space, multi-family and possibly some “affordability component” to the project.

Walters said the bill could require Austin to be “responsible in the watershed” and provide the City of Hays with the ability to serve the area with central sewer and water. He said Austin has extended service to west Austin suburbs such as Rollingwood, Sunset Valley and Westlake. Walters said there is “alternate methodology” that can be used, but the responsible way is extending service.

“The goal here is to eventually get people off of the Edwards Aquifer well and septic systems for the betterment of the environment, and have a true win-win-win result for SH 45 and the immediate regional in a balance of responsible development, mobility and conservation,” Walters said.

During a House Committee of Natural Resources hearing April 5, Isaac said the bill was designed to help cities such as City of Hays, which has a population of 250 people and no water or wastewater infrastructure.

Isaac said Austin could extend services to the City of Hays, which he said is a city that “wants to grow, but can’t.”

By extending sewer lines to City of Hays, Isaac said it would also alleviate “some of the pressure” on aquifers and avoid the “proliferation of unmanned septic systems.” He added the developer would incur the cost of extending infrastructure.

Harvey Davis, mayor of the City of Hays, said the current city council recently approved a resolution in support of HB 2959.

But the City of Hays’ support of the project hearkens back to 2013, when that city council approved a development agreement with Walters Southwest for the Hays Commons project.

Henry said the concept was Walters would “be able to negotiate an agreement” with Austin to provide water to his development.

The goal was to have Austin extend infrastructure to the development, while also sell the City of Hays water. The City of Hays would then annex the area and manage the water system for the development.

Advantages of the agreement would be the city annexing area that could bring in sales tax revenue. The city currently does not generate sales tax revenue as no businesses operate within the city limits. It would also offer the city a possible backup water supply in the event of a crisis, Henry said.

However, Isaac’s bill received pushback from Bart Jennings, who spoke on behalf of the city of Austin April 5.

Jennings said Austin Water opposes the bill as any wholesale utility service “should be considered between two parties,” which he said could be done through current law.

Jennings said Austin had been approached regarding extending wastewater services in 2015, but has not been approached since then.

But Jennings said extending services was thought to cost millions of dollars. He added the bill could force the burden of improvements on to current ratepayers and could affect capacity on the city’s system.

Kelly Davis, a representative with the Save our Springs (SOS) alliance, opposed the bill, claiming it goes against Austin’s comprehensive plan that steers development to the east and downstream of the Barton Springs recharge zone.

“This would destroy the semi-rural character of the area,” Kelly Davis said.

Harvey Davis said there are mixed feelings regarding the Hays Commons project; he said many residents are concerned about the growth and possibly losing the character of the area.

But he said the concern is the case “all over Hays County,” and that the character of the county “is changing for better or worse.”

“Our city government’s thinking is this intersection is too valuable,” Davis said. “It’s going to be developed one way or another. The best way to develop it is if the city of Austin is involved.”

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