The following information is adapted or excerpted from a white paper published by Texas Municipal League (TML) attorney Bill Longely.  This 2020 Economic Development Handbook publication from TML also contains detailed information on PIDs (starting on pg 180).

------

Public Improvement Districts (PIDs) are authorized under Chapter 372 of the Local Government Code.  The Statute allows a city to levy an assessment against properties within a designated area, or district, to pay for public improvements primarily serving that area.  While the City is the issuer of the bonds, the collateral guaranteeing the bonds is the property within the District, not City other City revenues or assets.

The statute lists a variety of projects eligible for funding by PID assessments: landscaping; fountains; lighting; signs; street and road acquisition, construction, and repair; sidewalks; right-of-way acquisition; pedestrian malls; art; libraries; parking facilities; mass transportation facilities; water and wastewater facilities; drainage facilities; parks; and the development, rehabilitation, or

expansion of affordable housing.

The statute also recognizes the acquisition of real property in connection with an improvement, special supplemental services for improvement and promotion of the district, and the payment of expenses incurred in establishing and operating the district as authorized projects.

PID Creation Process

Generally speaking, PIDs are created by the property owners wishing to benefit from the public improvements, rather than initiated by the City itself.   Before an assessment can be levied, the City must receive a petition signed by at least:

a)       owners of taxable property representing more than 50 percent of the appraised value liable for assessment (that is, within the proposed PID); and

b)      record owners of real property within the proposed PID that constitute more than 50 percent of all such record owners, or record owners that own taxable property constituting more than 50 percent of the total area within the PID. The petition may initiated by the property owners or the City Council.

After the city receives a petition (completed on 9/8/20 via Resolution 2020-10), it must take a number of steps before being able to levy assessments and undertake a project.

1.       First, the City Council must provide notice and hold a public hearing prior to establishing a PID and levying assessments.  (CURRENT STEP)

2.       If the City elects to establish a PID following the public hearing, the City Council must make findings by resolution as to the nature, advisability, and cost of the improvement, the boundaries of the district, the method of assessment, and the apportionment of costs between the district and the city as a whole. (CURRENT STEP)

3.       During the six-month period after the hearing is concluded, the City council may create the improvement district by resolution, known as an “improvement order.”

4.       The improvement order authorizing the district must be published in the newspaper one time before taking effect.  Construction of an improvement may not begin until after the 20th day following the newspaper publication of the authorization.  Also, construction of improvements can be stopped if two-thirds of the property owners in the district file written protests with the city during the 20 days after publication of the authorization.

Assessment Establishment Process

The apportionment of the assessments must bear a relationship to how each property is benefited by the improvements.  Ideally, this calculation of assessment is being considered at each of the prior stages. The statute provides numerous methodologies for apportioning the costs by assessment: equally by frontage or square foot; according to the value of the property; or in any other manner that results in imposing equal shares on properties similarly benefited.

After the total cost and methodology of assessments are determined by the City Council, the City Council prepares an assessment roll that states the amount of the assessment against each parcel of land in the district. After the Council files the assessment roll with the City Secretary, a public hearing on the proposed assessments must be held. Newspaper notice of the hearing must be published at least 10 days prior to the hearing. The City Secretary must also mail notice of the assessment hearing to each affected property owner.  At the hearing, each and every objection lodged against the assessment must be voted on by the council.  After all objections have been voted on by the council, the assessment is finally levied by ordinance or order of council. The ordinance or order must specify the method of payment, which can include periodic installments. 

City Liability

If a property owner fails to pay an assessment, the assessment constitutes a lien against the property and is a personal debt of the property owner. The lien is superior to all other liens except for non-payment of property taxes.

The owner of the two properties, composing the project known as the Village at Spanish at Spanish Oaks, which is located south of SH 71 and east of Great Divide Drive , has submitted a petition to the City for an approximately 80 acre PID covering the same area as the project.

Per the attached draft term sheet:

• The estimated cost of authorized improvements is :         $ 25 million 
• The maximum bonds to be issued are estimated to be :   $18 million
• The maximum years of capitalized interest is:                   2 years
• The maturity of the bonds is:                                             30 years