October 7th, 2009
Buda still facing US Foods fight

US Foodservice Austin division President John Fowler, left, and Budafirst organizer Carl Urban, right, speak with the Hays County Commissioners Court. Photo by Sean Batura.

By SEAN BATURA
News Reporter

A group of Buda residents has threatened legal action against their municipal government unless city councilmembers signal that they will allow a referendum on a land use change allowing US Foodservice to open just east of town.

The ordinance, passed in June, allows light industrial uses in 95 acres in Buda’s extraterritorial jurisdiction (ETJ).

Following the advice of City Attorney Susan Rocha, Buda councilmembers voted, 6-1, on Sept. 15 to prohibit a referendum on their June decision. Rocha said the land plan change is not an action subject to a referendum under the law.

“Simply put, you may not decline to carry out these ministerial referendum procedures because in your opinion the exercise of this reserved power might result in the adoption of a void ordinance,” said attorney for pro-referendum interests Terrence Irion in a Sept. 25 letter to the Buda City Council. “You are duty bound to call the election and we strongly urge you to do so.”

The city council’s meeting agenda this week did not indicate that councilmembers will take any action on the land plan amendment issue. If by the end of the week a councilmember does not put a referendum-related item on the body’s agenda for next week, legal action from Buda residents may follow. The protest against the land use change is led by a group calling itself Budafirst.

“As far as US Foodservice is concerned, we are aware of the demand letter submitted on behalf of Budafirst,” said US Foodservice representative Howard Falkenberg, president of Austin-based advertising and public relations firm Staats Falkenberg. “I do not expect it to have any impact on our plans.”

Irion, of Austin-based Irion/Slade, PLLC, said he is representing “qualified homeowners in the City of Buda.”

Budafirst came into being in June to oppose the city’s land plan change and gather support for a referendum to overturn it. The group needed 670 signatures to successfully initiate a referendum, and ended up with 788 valid signatures. In Buda’s May general election, 517 ballots were cast.

In March, Buda councilmembers voted unanimously to deny Sunfield MUD No. 1’s request for the land plan amendment allowing industrial uses in about 160 acres of its jurisdiction. In February, Buda’s Planning and Zoning Commission (P&Z) unanimously recommended that the land plan be amended to accommodate the MUD.

In June, the Buda City Council changed course, voting, 5-2, to grant the request by the Sunfield Municipal Utility District (MUD) No. 1, a state-created entity that controls about 700 acres east of Buda, for the land plan amendment. The land use change allowing light industrial partially paves the way for the construction of a $50 million, 500,000-square-foot US Foodservice regional headquarters and distribution center on about 40 acres near the intersection of Turnersville Road and CR 118, which lies within Sunfield MUD No.1’s boundaries.

Buda Councilmember Sandra Tenorio cast the lone vote against prohibiting the referendum in September. Tenorio said that even if the city has no legal obligation to honor the citizens’ petition for referendum, the council could — and should — call for a referendum on its own.

Opponents of the facility claim it will result in less city sales tax revenue and more traffic congestion, air pollution and water waste than the retail and commercial land uses originally intended for the area. US Foodservice officials have said additional heavy truck traffic would be negligible, and proponents of the facility claim city residents would benefit from the 157 jobs the company said would be created at the facility within 10 years. US Foodservice said it pays its warehouse personnel and truck drivers anywhere from $45,000 to $55,000.

Though the 95 acres in question is in Buda’s ETJ, the city has an agreement with the Sunfield MUD No. 1 that grants the city the right to dictate land use in the district. The city council’s action in June to allow light industrial was, in effect, an amendment to an agreement initiated between the city and MUD in May 2003.

Tenorio said some city officials worried that should voters be allowed to overturn the land plan change — or should the council simply reverse its June decision — Buda may be vulnerable to a lawsuit brought against it by the Sunfield MUD No. 1. Tenorio said she received no indication that the MUD warned the city it might consider pursuing litigation in that event, though she said the possibility of lawsuits exists no matter what action the council takes.

“If we had called a referendum election, disregarding our own attorney’s advice, yeah, (the MUD) would probably have a really strong case,” Buda Councilmember Ron Fletcher said.

Buda has a limited purpose annexation agreement with Sunfield MUD No. 1, whereby the city has the right to collect taxes within the district, though Buda has not yet benefited from that provision. The agreement requires the city to return some sales taxes back to the MUD. Fletcher said city officials were hoping to get substantial sales tax revenue out of the MUD to retire some of Buda’s bond debt for the work on the Main Street East extension. As of Oct. 1, Buda projected owing $4.78 million for Certificates of Obligation (COs) issued for projects relating to the Main Street East extension, not including $1.8 million interest. Buda’s total debt amounts to just more than $21.7 million.

“Well, there’s basically been no commercial development (within Sunfield MUD No. 1) at all,” Fletcher said. “We’re going to make payments on the bonds – that’s why we raised property taxes last year and why we held them constant this year – because we are making payments on the bonds for … Main Street East. We took Main Street under the interstate east to where it joined up with the MUD. And part of that 25 cents of every dollar of sales tax (reimbursed to the district) is to help the MUD do things like finish Main Street within the MUD.”

Tenorio said one reason the city’s agreement with the MUD allows the city to dictate land use and collect sales taxes is because the MUD wanted the city to extend road improvements on Main Street east of Interstate-35.

US Foodservice officials have said their proposed facility would generate $2.7 million annually in property taxes. The city will not collect property taxes within MUD until the district pays off its bonds, which probably will not be until 2037.

Fletcher estimated that the 95 acres could have accommodated “two or more” big box stores. Buda’s annual sales tax income immediately increased from $774,000 to $1.4 million after Cabela’s opened in 2005. After Wal-Mart opened near Cabela’s a year later, the city’s sales tax revenue increased to $2.3 million. Buda City Manager Kenneth Williams said in August that the facility would bring $100,000 in sales taxes annually to the city.

“The $100,000 they keep talking about is nothing compared to what you would get in sales tax for that kind of area,” Tenorio said.

Falkenberg said US Foodservice is waiting to “finalize support” from Hays County before buying the land for its facility. The company asked the Hays County Commissioners Court to fund construction improvements to Turnersville Road and CR 118, which run near the facility’s proposed site. In August, the court voted, 4-1, to fund the $1.8 million (including debt issuance cost) in improvements with a 10- or 12-year tax increment finance (TIF) zone, within which ad valorem taxes collected by the county would only be used to pay off debt incurred by the improvements.

Other taxing entities would continue to receive revenue from property taxes in the zone, unless they participate in the TIF. The TIF’s boundaries would probably match the footprint of the Foodservice facility.

“I would like to see US Foods bring its jobs and its tax base to Hays County,” said Hays County Precinct 2 Commissioner Jeff Barton (D-Kyle), who represents Buda. “I have never particularly cared where that happens, so long as it is in a place that the local community and local neighborhood feels is appropriate. In Buda, I know there is disagreement about that. It’s not unanimous. But originally, the council voted unanimously to go out for the grants.”

The city is seeking a $750,000 Texas Capital Fund grant from the United States Department of Agriculture (USDA) for improvements to Turnersville Road. Unless US Foodservice can insure that 51 percent of its new hires qualify as low and moderate income persons three years after the facility’s construction, the company would have to pay some of that grant back.

Bryan Black, Assistant Commissioner for Communications at the Texas Department of Agriculture, said last week that Buda’s eligibility for the grant is still under review and his agency would make a final decision within 30 days.