[Update, 12/21/2018: I have provided some supplemental information throughout this article as this project continues the pre-development stages.]
The Jersey Village City Council voted on Monday, August 6, 2018 to approve the purchase of over 23 acres of land along Jones Road south of U.S. Highway 290, also known as “Jersey Village Crossing”. We will now proceed to conduct further due diligence on the property, including an environmental assessment.I will update the contents of the article below to fill in additional details from the meeting, including information regarding the appraisal and, to the degree I am able, progress we have made with an interested developer.
In an effort to provide citizens with a better understanding of the purchase, I am compiling some of the more frequently asked questions that have been posed to me or posted elsewhere.
First, a note on executive sessions and confidentiality
Keep in mind that I will be answering these questions based solely on information I have that is available in public records or has been otherwise publicly disclosed. I have participated in numerous executive sessions regarding related lawsuits and economic development wherein I received information that is either attorney-client privileged or is part of a confidential discussion to which I am legally obliged to keep confidential by state law.
As a city council member, I have a right to participate in these discussions, but the legal privilege belongs to the City of Jersey Village. I do not have the right to waive this privilege unilaterally. The confidential discussions concerning economic development are there to provide city officials with the ability to discuss negotiations with developers and businesses who may invest in the city, but require private discussions to ensure they are not disadvantaged by having their plans leaked to competitors.
I know this appears on the surface to be contrary to my continued commitment to transparency, but there are some instances where the interests of the city as a whole are protected by these limited executive sessions and state law clearly allows for them because of the need for confidentiality in this instances. I hope you will understand and appreciate that these are unavoidable and are the exception, not the rule, to how we operate our city council today.
For a more in-depth discussion of executive, or closed, sessions, click here to read my article on the subject.
Does the city have a developer that is interested in the property?
Yes. We have been advised that we can disclose that a major well-established developer who has been seeking a location in Northwest Harris County to develop a significant real estate project has been engaged in discussions with the city for several months now and has presented some preliminary ideas for the area. The initial concepts presented to city council have closely resembled many of the drawings we received of the proposed Jersey Village Crossing development from 2011.
Discussions with the developer are on-going as they conduct their due diligence and market analysis. All feedback received to date has been very positive and all indications are that they are committed to moving forward based on the information and analysis received. We anticipate having a public announcement in early 2019 once the developer completes their study of the property and area.
New Question, 12/21/2018: If the property is worth what the appraisal claims, why hasn’t it been purchased yet?
The process a developer takes to conduct their due diligence and evaluate market conditions is lengthy. That said, we will have a very big public announcement no later than mid-February.
New Question, 12/21/2018: When will the city see the benefit of new revenues from property and sales tax from the development?
That all depends on how quickly the development is completed and what investments the city has to make in the area to assist in the development.
There is a possibility that a sales tax abatement agreement may be part of the incentives to encourage development in the area. These agreements usually entail returning some percentage of sales tax revenues to business in the area for a limited period of time. The city, however, will still see an increase in sales tax revenue immediately. Also, the city has historically not provided any tax abatement for the 1/2 cent sales tax that goes to the Jersey Village Crime Control and Prevention District. Therefore, it is likely that the city will see immediate support for our police department from sales in this area.
As with any newly developed area, there will be a need for roads, water, sewer and street lighting. The city will be responsible for building those out. Those expenses will be paid using the increased property tax revenues from the Tax Increment Reinvestment Zone (TIRZ) created by city council in July 2017.
Once all of those expenses have been paid, and no further investments are needed in the TIRZ, the TIRZ can be terminated and all increased property tax revenues from the zone will go toward the city’s existing funds (general fund, crime prevention fund, hotel occupancy tax fund, etc.).
New Question, 12/21/2018: Has the city taken out any debt for this project? Does the city expect to take on debt?
No debt has been taken out for this project. At this time, there is no expectation that the city will need to take out debt in order to proceed with the project.
If, however, there is a need to issue bonds in order to build out roads and utilities in Jersey Village Crossing, these bonds will be paid back using the increased tax revenues from the development. No bonds will be issued unless or until we have a developer who has committed in writing to the project and only when such debt is necessary to complete development in the area.
Why hasn’t the Tax Increment Reinvestment Zone (TIRZ) board been advised of the land purchase or the discussions with the developer?
The TIRZ is intended solely for facilitation of development through economic incentives which are paid back using the eventual increased property tax revenues obtained from the higher land values produced by the incentivized development. The board is not an overseer of all activity in the zone. That role ultimately remains with the Jersey Village City Council.
Instead, the main reason the TIRZ board has not yet been consulted is because there has been no discussion of any financial incentives for development in the area. We anticipate those discussions will occur once the developer has concluded their due diligence and market analysis. [Update, 12/20/2018: A TIRZ board meeting is scheduled for Monday, January 21, 2019 at 6:00pm. An agenda for this meeting should be forthcoming in early January.]
If Jersey Village Crossing hasn’t developed by now, why should we expect it to develop in the near future?
The development of land and the potential for an area to be developed is not a linear progression. Areas become more or less desirable for development based on a myriad of factors.
A few of the factors that are causing Jersey Village Crossing to draw greater attention from developers lately include:
- Construction of U.S. Highway 290 that began in June 2011 is coming to a close by the end of the year.
- From 2015 until very recently, one or both of the major properties in Jersey Village Crossing have been tied up in litigation that substantially limited the ability of the city and the property owners to fully develop this area. Now that both lawsuits are settled, there is more certainty surrounding the land and that makes it more attractive for development.
- The city has only recently taken a more aggressive approach to marketing the area within the last year or so. With the implementation of the Tax Increment Reinvestment Zone (TIRZ) and with our city manager and mayor taking a proactive approach to contacting and meeting with potential developers, a greater amount of interest has been generated in this area.
- Although the Houston area is not as reliant on the oil industry as it once was 30 or so years ago, oil pricing is still a major indicator for many developers and a weak oil pricing scenario can be a substantial deterrent to development in our region. The price of oil appears to have stabilized from its drop that began in 2014 and all indicators are that long-term stability is likely.
- Recent federal income tax breaks have spurred greater interest in capital investments, which in turn means that developers are seeking new opportunities to put their extra capital to work. We have positioned ourselves to be an intriguing opportunity for the right developer.
There are other factors which have been limited to discussions in executive session, so unfortunately I am unable to disclose them here. Hopefully if the situation continues on its current course, we will have something to publicly announce regarding development in the area in the first few months of 2019.
Won’t development of this property lead to more flooding?
No. The City of Jersey Village today has stringent flood mitigation ordinances in place that are consistent with federal law and flood control district requirements for development. Any developer of this land will be required to ensure that sufficient storm water detention exists to offset the effects of the development. The detention will be used to ensure that the area drains properly without increasing the rate of water drainage into White Oak Bayou.
Any engineer who specializes in flood mitigation will tell you that it is possible to adequately mitigate development. The key is to be vigilant to ensure compliance with existing regulations as that development occurs.
Is this purchase part of the settlement of the two lawsuits the City of Jersey Village has been involved in regarding the property in this area?
So the short answer is “Yes and no.” The City of Jersey Village was named as a defendant in a pair of lawsuits filed by owners of two properties located along Jones Rd. just south of U.S. Highway 290. The legal theory of each lawsuit was quite similar. They alleged that the City of Jersey Village violated the plaintiffs’ rights under the Fifth Amendment of the U.S. Constitution by substantially reducing the value of their property through the enactment of more stringent land use regulations known as “form based code”. More information about the use of form based code in Jersey Village Crossing can be found by clicking here.
If you would like to view the settlement agreements, click on the links below:
- Settlement Agreement and Option Agreement with Jones Road Holding, Ltd.
- Settlement Agreement and Option Agreement with Jones Road Project, Ltd.
As part of the settlement of each lawsuit, the city paid a fee to each property owner in exchange for two options to purchase the property. This would allow time to find a developer that would acquire the option and purchase the property for development that was more fitting of the character of our city. The city is not obligated under the settlement agreements to purchase either property – if we did not purchase the property, the claims would only be extinguished if the city rezoned the land to light industrial.
So while the city obtained the right to purchase each piece of property as part of the settlement agreements, the city is under no legal obligation to purchase either property. The last of the two options on the property owned by Jones Road Holding, Ltd. will expire on August 22, 2018, hence the reason why the purchase of the Jones Road Holding property needed to be done during a special session on August 6, 2018.
The city has paid for the first option on the Jones Road Project property, which expires in January 2019. The city will have the right to purchase a second option on that property which would expire in July 2019. [Update, 12/20/2018: City council voted unanimously this week to exercise this second option.] This gives the city control over the property over the course of the next year without the need to purchase it. If we continue on our current course, the property should be sold to a developer before the need for the city to purchase the Jones Road Project property ever arises.
So was the city required to purchase either property?
No. The City of Jersey Village had four options under the settlement agreement with Jones Road Holding, Ltd:
- Assign the option to someone who wishes to purchase the property. This, of course, requires someone who is willing and able to do this before the options expire.
- Purchase the property.
- Rezone the property to light industrial and allow the last option to expire. Under the terms of the agreement, this move would terminate the right of each party to sue for damages under the claims made in the lawsuit. The city would lose any control over the property and there is a chance it could ultimately be developed as warehouses similar to what currently exists along West Gulf Bank just outside the Beltway.
- Do nothing and end up right back in litigation.
As noted above, the city chose to purchase the Jones Road Holding property for $5.25 million in a vote held by the city council on August 6, 2018. The city still retains options on the purchase of the Jones Road Project property until at least January 2019, and possibly as long as July 2019 if the second option is purchased.
So couldn’t the city have simply refused to do anything and force the Plaintiff to re-file his lawsuit?
Legally, yes. But as someone who is an attorney who spent 8 years litigating cases and someone who has spoken with our attorneys regarding our prospects of settling in the event we chose to allow the plaintiff to refile, I can tell you that we would poison any possibility to settle this lawsuit. In essence, we would be saying that we want to spend massive amounts of money to prepare for trial and take the risk that the city is found to have committed a taking and incur substantial liability while not having the property to show for it.
Taking that route would have been, in my professional opinion, absolutely foolish and put the city in far worse position than it is in now. The decision the city made to purchase the land pursuant to the agreement was, by far and away, the best option out of the four routes we could have taken in light of the settlement agreement.
Why wasn’t this decision put to a vote of citizens?
In our city charter, the citizens of Jersey Village have explicitly reserved the right of initiative (proposing policy through petition and election) and the right of referendum (rejecting policy through petition and election). Therefore, city council does not have the power to call an election on most issues. State law and the charter give city council the right to place a bond proposal on the ballot, but such an election must be held on uniform election dates either in November or May. Therefore, the earliest we could have a bond election was Tuesday, November 6, 2018.
Because the last option in the settlement agreement with Jones Road Holding, Ltd. expired on August 22nd, we didn’t have enough time to even consider proposing a bond measure to gauge the interests of citizens.
Why didn’t city council open the floor to citizen comments during the special session when the purchase was voted upon?
Citizen comment is received only during regular sessions, which are held on the third Monday of every month. Council has never added citizen comment to the agenda for a special session.
On the other hand, citizen comment is but one means of contacting your elected officials. In fact, it’s probably the least effective. Why? Because there is limited ability to have a dialog with the citizen who is providing input. When a citizen sends me an e-mail or calls me by phone, we can have a dialog about the issue where I can get a better understanding of the person’s concerns and I can provide some background that may help the citizen to better understand the issue.
I personally solicited input from dozens of citizens in the short time between the public announcement and our meeting. And, to be honest, the vast majority of the input was positive.
Not sure how to contact your elected officials? Click here for all of the details.
Who are the owners of the two properties? Do they have any connection to anyone in Jersey Village?
Jones Road Holding, Ltd. is a Texas-based limited partnership created on July 27, 2009. The general partner is Jones Road Management Co. The president of the general partner is Oliver Chang.
Jones Road Project, Ltd. is a Texas-based limited partnership created on December 20, 2006. The general partner is Jones Road Project GP, LLC. The sole managing member of the general partner is Gopal Bathija.
There is no connection between either owner and the City of Jersey Village.
Why was the purchase of this property disclosed only days before the vote?
Keep in mind that we entered into a settlement agreement of the first lawsuit nearly a year ago that contained two options to purchase this property. So this isn’t a surprise possibility. The intent over the last year was to market the property to developers and eventually assign the option to the developer to allow them to purchase the property once an understanding was reached regarding the type of development to occur.
As time went on, it become more apparent that if we were going to be able to retain control over the property to allow time to secure an appropriate developer, purchase of the property was necessary.
The reason you’re only now seeing that come to the surface is that it was a factor in negotiation of settlement of a second then-ongoing lawsuit and therefore no one on council could disclose that possibility. We had to ensure that remained undisclosed until the matter was settled, and also depending on what happened with each of the settlement agreements, we could have gone in a different direction.
Did the city overpay for this property?
No. City council has done its due diligence, and I am confident that we obtained excellent value for the property.
On August 6th, city council was advised that it was now permissible to disclose information regarding the appraisal conducted on the property. For both properties, the appraisal estimated a total value between $8,610,000 and $8,950,000, depending on whether the city chooses to rezone the property for either District F or District K, both of which are consistent with the sort of development contemplated for the area by the Jersey Village Comprehensive Plan. The price per square foot was estimated to be between $6.25 and $6.50.
That represents a value of $485,000 to $825,000 above the purchase price set in the option agreements for the two properties.
The final draft of the appraisal can be viewed by clicking here.
If the property is worth so much, why did the owners have a claim against the city?
The city has held the position, and continues to hold the position, that there was no “taking” under the Fifth Amendment to warrant the lawsuits. In the interest of resolving the lawsuits, avoiding further substantial costs of litigation, and in order to ensure that the property was not allowed to return to its former zoning, the city entered into settlement agreements on very favorable terms.
Our appraisal did not evaluate the values of the property under the strict form based codes currently in place. Instead, city council wanted to know the value of the property if rezoned to use based codes under District F (mixed residential and commercial with no industrial use; townhouses, hotels, grocery stores, and other retail would be allowed) and under District K (all uses in District F, plus some light industrial manufacturing, warehouses, and non-retail sales).
Also, under law applicable to such claims, the court would likely have evaluated the value of the property immediately following the actions of the city to rezone to the form based code, which was 2011. The court may not look at what the property is worth today unless this was deemed justified due to some unreasonable delay in litigation caused by the plaintiffs. Obviously the value of the two pieces of property have increased substantially in the last seven years.
Although the recent appraisal commissioned by the city shows excellent value today, it measured something entirely different (value today, under less restrictive zoning that still preserves retail, high-density residential, etc.) from how a court would evaluate the value of the property immediately after the alleged “taking” (value in 2011, under very restrictive form based building codes). They’re apples and oranges.
Is city council planning on moving city hall, the police department and/or the fire department to Jersey Village Crossing?
City council has made no final decision regarding the future of city hall apart from a clear understanding that we need to replace the current building with a new one. Our proposed capital improvement plan to be considered as part of the 2018-2019 budget will include scheduled funding for engineering of a new city hall and the construction of a new building.
As the plans for development continue to firm up, we will evaluate the location of a new city hall and make a decision that takes into account all factors, including the size of a new city hall, the impact on the homes surrounding the current location, the convenience of the location, and the impact on overall development caused by the location of city hall. As always, I welcome your input on such matters. Click here to learn how to contact me.
As for the police department and fire department, we have perfectly good facilities for each right now. If we see substantial development south of U.S. Highway 290 in the future, there may be a need to build additional facilities in that area, including a substation for our police and fire departments. This, of course, is heavily contingent upon development actually moving forward in the area. I will never support any measure which reduces the quality or responsiveness of emergency services to our citizens.
How does this affect the city’s economic position in light of all of the projects that need to be completed?
The City of Jersey Village is in an extraordinarily good financial position. At the start of the 2017-2018 fiscal year, the city’s general fund had a beginning fund balance of $17,266,799.04. As of the end of June 2018, the projected fund balance was $21,510,079.48. This, of course, does not include various other fund balances, such as the $4.5 million in the capital improvements fund, which is the primary means by which the city funds major capital improvement projects.
As a manner of policy, the City of Jersey Village maintains a 150-day operating reserve. For this fiscal year, that balance was calculated to be $4,889,627. The Governmental Accounting Standards Board (GASB) recommends that cities maintain, at a minimum a 90-day operating reserve and no more than a 180-day operating reserve. Even after this expenditure, we still have more than even the maximum recommended reserves.
Will an environmental assessment of the property be completed before closing on the transaction?
Yes. The purchase agreement contains provisions which give the city access to the property to conduct all necessary due diligence, including environmental assessment.
On August 27, 2018, a Phase I Environmental Site Assessment was completed pursuant to ATSM Practice E1527-13, an international standard recognized by the Environmental Protection Agency for performing environmental site assessments for commercial real estate. The assessment was completed by Phase Engineering, Inc. and no environmental issues were identified requiring further assessment.
If any environmental issues are discovered, will the city be forced to remedy them?
No. The city can choose to exercise its option to opt out of the purchase agreement. In light of the completed environmental assessment, however, the question is moot. No environmental issues were identified.
How much earnest money is at stake if the city chooses to opt out of the purchase agreement pursuant to its terms?