Thursday, March 25, 2010

2010 Woodlands Bond Issue Announced

The Woodlands, TX (March 24, 2010)… The Board of Directors of The Woodlands Township issued $34.8 million of tax-exempt unlimited tax bonds today with an average interest cost of 3.82 percent.

The Woodlands Township Chairman of the Board Nelda Luce Blair said, “Our financial plan assumed a five percent interest rate, so this issue is going to yield significant savings to the taxpayers.”

The Woodlands Township’s Financial Advisor Drew Masterson said, “This rate is one of the lowest I’ve ever seen.”

The sale of today’s bonds comes after the voters in The Woodlands approved three different bond propositions on November 3, 2009, to fund fire services, park improvements and refinancing of association line of credit. The sale of the bonds included a very favorable bond rating of AA by Standard & Poor’s. The S&P noted The Woodlands Township’s strong economy, good financial management and limited future debt as strong positives for the rating, according to Chairman Blair.

“We’re very pleased to issue these bonds,” Chairman Blair said. “We are very pleased with our bond rating and very pleased with the interest rate. The voters in November asked for us to move in this direction, and today’s sale is reflective of their wishes, which ultimately benefits the taxpayers of The Woodlands. The passage of all three bond propositions shows that residents said that parks, pathways, fire stations and lower debt are important to their quality of life, and that they understood that these bonds will make those things possible.”  

The winning syndicate underwriters in a sealed bid process included Southwest Securities, Citi, EdwardJones, Wells Fargo, and Stephens. These firms prevailed over three other bidders. Bonds were offered by the underwriters to initial investors at rates ranging from 0.73 percent in 2011 to 4.33 percent in 2030. Bonds can only be offered by the underwriters through the Official Statement, which will be posted on The Woodlands Township Web site.

The first proposition approved by the voters addressed fire department needs. Proceeds from the sale of the bonds will be used to construct two fire stations, purchase related fire equipment for these stations, provide payment of any emergency services district (ESD) debt allocable to the Township upon removal of certain territory from the overlapping taxing jurisdiction of the ESD, and any related issuance costs.

The second proposition approved by the voters addressed The Woodlands Township’s Parks needs. Proceeds from the sale of the bonds on the second proposition will be used for the construction of new parks and pathways pursuant to the Recreation Facilities Development Agreement and Construction Management Agreement assumed by the Township from The Woodlands Association, Inc. and The Woodlands Commercial Owners Association, Inc.

The third proposition approved by the voters addressed the refinancing of existing debt obligations from the community associations. In accordance with the terms of the Transition Agreement, the Township assumed certain debt obligations from each community association and related service companies on January 1, 2010. Proceeds from the sale of the bonds will be used to refinance existing debt obligations of $19.080 million assumed by the Township from the community associations and The Woodlands Fire Department, Inc., and to pay for bond issuance costs.

Click here for additional details. 

The Woodlands Township Web site is at

Monday, March 8, 2010

Government control of association functions - deed restrictions

We have a controversy in The Woodlands that has arisen from a single action. I will not direct my comments to the exact nature of the issue, but will direct my thoughts to the overall situation relative to the situation. This is also intended to review the process here so that residents have a more in-depth understanding of it.  In The Woodlands, there are three organizational entities which enforce property covenants, otherwise known as "deed restrictions". The enforcement of covenants is not normally part of a government function. In this region, association fees are normally paid by residents to fund association functions, especially to provide covenant enforcement. In the merger of the township with the associations, the township government acquired legal authority through the legislature to bring covenant enforcement under its umbrella. This has inherent consequences that residents should understand. We should also understand why we have merged this function into the government rather than keeping it separate.

Our covenants in many ways are no different than other communities, except for a few values we uphold to make our community uniquely "The Woodlands" and to provide amenities for the type of resident for which the community is intended. For example, the community highly values its trees by design and vision from the master plan. This value includes the trees on home properties, as well as in green areas. A tree of 15+ years is recognized for its value to neighbors and the community as a whole. Therefore a caliper measurement of a tree's diameter determines its protection by property covenant. This same value is highly esteemed for public property owned by the township. 

To enforce our residential covenants, we have a three-tiered system. On the frontline we have employees in the township who administer enforcement. They receive complaints, keep records, prepare and send out notification letters, monitor neighborhoods for violations, organize materials for meetings of the DSC and RDRC, and more. The Residential Design Review Committees (RDRC) is the second tier. This committee consists of resident volunteers elected annually by the community of each village to review covenant violations and decide on appropriate actions. The theory is that covenants are for the residents, and therefore actions should be decided by the residents of those village neighborhoods. I am the chairman of one of those committees, so I have been involved in the decision making process during my tenure of several years. It is the goal of an RDRC committee to be fair to the residents but at the same time enforce the covenants. A covenant is a contract between the community and the property owner. Therefore, it is legally binding. The RDRC committee members are not normally deeply versed in law, nor are the members necessarily property experts. They live in the same neighborhoods as those who seek changes to their property or have violated the covenants. They seek consistency in property presentation to the public.  Those who serve should be and generally are citizens who have the same value system as the community and willing to spend their time to keep the community consistent with the master plan vision. Each decision is based on data collected from the covenant administrator who has been assigned to that particular committee, plus any committee member's personal knowledge of the situation. The RDRC does not have the authority to file lawsuits, nor does it have the authority to decide on final action of any sort. After the review of requests, the committee recommends an action plan to the property owner. It also recommends an action plan to the third tier of enforcement, if the owner does not wish to follow the recommendation, or the committee is electing some variance to the covenant.  RDRC and DSC committee meetings are open. Each committee member follows the regulations of the Texas Open Meetings Act(TOMA). Residents are welcome and do at times attend RDRC meetings and DSC meetings.

The Development Standards Committee (DSC) consists of four appointed qualified residents and three Development company designates who act on enforcement of the standards. The Township Board of Directors is responsible for appointing individuals to this committee. Most of the time, this committee will agree with the recommended actions of the RDRCs but occasionally spots an issue and overrides a recommendation. I have seen only one of these instances in our village, where there was an issue with water drainage and the DSC took appropriate steps to investigate the design of the neighborhood, discovering something the RDRC did not know, and therefore took a different approach to the solution. This is the reason the committee exists, to provide a higher level of expertise on some issues and to provide a means for a resident to protest the RDRC recommendation.

So how does all of this play into what recently transpired at the township meeting? Our tax dollars are now used to enforce the covenants. If legal action is required by the DSC, money must be spent by the community. Legal mitigation of an issue happens when a resident either refuses to take the action(s) prescribed, or when the property owner cannot be found. The DSC has the authority to take a lien out on the property to pay for such actions. If the community pays for mowing the grass, or caring for or repairing the property, the property owner is required to eventually pay for those services. And if there are court costs, the property owner will pay for that as well, unless of course, the property owner wins the case. If the resident cuts down a large tree without permission, he will likely have to pay for replacement(s).

We do have residents who refuse to follow the covenants, even though the residents formally promised to do so by signature when they purchased (or rented) the home . Each and every covenant is to be enforced. Some people believe the trashcan regulation is simply frivolous, but it is serious. Cans left in view of neighbors and the public is unsightly and a nuisance to many residents. No resident has the right to interpret the covenants the way he or she wishes to interpret them. The trash can regulation is very important to some residents, and the regulation is part of the covenants. Making one part of it more important than another is not an option either. However, legal action is prioritized and generally taken based on the severity of the issue. If residents are routinely annoyed by unsightly property and the property owner refuses to comply with the action dictated by the DSC, legal action will be taken and that will cost taxpayers some money.

So the recent issue, noted as a "transition issue" by the Township Board, is one of accountability for taxpayer dollars. While the DSC is an independent entity, not regulated by the Township Board of Directors, it does not have spending authority per se. Covenant administration's budget for 2010 is $2,196,883 and the anticipated income is $30,000. President (Don Norrell) of the Township has signature authority for legal expenses. No one seems to actually have the authority to say "no" to the actions of the DSC to take these actions. Therefore the controversy - growing pains maybe, but also perhaps an inappropriate government function. The idea for having this function in our township government is efficiency and funding power to enforce the covenants. So if the township can intervene in the decisions of the DSC, the process becomes vulnerable to politics, which cannot be tolerated. Our covenants cannot be enforced based on the popularity of government official(s), nor on personal relationships.

I believe everyone in authority in the township does not want the Township Board of Directors to be a fourth tier in the process. They are not designated to be the last resort for a protest by a resident. How are the DSC committee members accountable? They can be removed by the Board of Directors if there are serious issues in conduct. The issue that triggered a discussion on the overall process and accountability debate, was one of timing and resident consideration. The resident asked to cut down a tree and apparently made some remarks on the character of one or more officials for their decision. A constraining order was issued to protect the tree(s), some saying that action was due to those remarks towards some officials. The restraining order occurred during the Christmas holidays. There is a history of residents occasionally cutting down trees, even if they are not permitted to do so. Sometimes the DSC has to assess the probability of that happening. A restraining order is the prescribed action in that situation. 


The question of covenant enforcement autonomy continues to haunt me as we go forward. I believe this Township Board of Directors has the correct perspective on autonomy, but on the other hand, there is the issue of financial control. Taking this one step further, perhaps we should not even have the covenant enforcement function in the government, but instead return back to a separate resident association concept, with fees levied on residents, instead of taxation, to fund this type of activity. Then however, we would lose the economic advantage of IRS taxation relief and probably suffer a higher total cost for this function. We would not have the financial backing of the large tax dollar base when we have to go to court and engage in a battle with one or more property owners. Therefore, I am not in favor for backtracking on government control of the function.

Whatever occurred in this case seems inappropriate to me on both sides of the fence, but whatever occurred would not change anything in the overall picture. The covenants must be enforced without political influence on the process. I see no reason to add another layer of decision-making. The RDRC recommended decision should normally stand, but it can be contested and overruled. The DSC action should always stand. Residents can contest its decision in court. That keeps the whole process autonomous with checks and balances, and like having the function in an association, it is not governing; it is simply enforcement just like a police law enforcement unit. So the township seems to want to reserve the right to intervene in court cases, because those cases will be in the name of the township. I believe we cannot do that. If it makes the township look bad or affects its image to the public, that cannot be the basis of enforcement; the action can only based on the enforcement of a covenant itself. There is compliance or there is not compliance. Certainly we need to have a contract for legal advice on what action to take sometimes as well as consider alternatives to filing a case in court.  It is also wise to assess the impact of non-compliance and see if there is a real need to take a harsh action. That is up to the RDRC and DSC on how they conduct their business. This has worked well in the past from my experiences, but not saying it will always be so. Community associations almost everywhere also have these issues.

Legally, there are books written on the subject of associations that tend to make one want to have this function in a government, At Harvard, the issue of the power of an association was  reviewed in "The Rule of Law in Residential Associations". As one might expect, there are varying views of this subject in other universities and circles of law. By having the function in the Township, we trump the issues of real government vs "democratic sub-societies". However if we maintain our position of autonomy, any related citizen rights issues remain.