Minutes TC 01/26/2009 - Special SessionMINUTES OF SPECIAL TOWN COUNCIL MEETING FOR THE
TOWN OF TROPHY CLUB
LOCATION: 100 MUNICIPAL DRIVE. TROPHY CLUB. TEXAS
Monday. January 26. 2009 at 7:00 P.M.
STATE OF TEXAS §
COUNTY OF DENTON §
The Town Council of the Town of Trophy Club, Texas, met in a Special Session on Monday, January 26,
2009. The meeting was held within the boundaries of the Town and was open to the public.
TOWN COUNCIL MEMBERS PRESENT:
Nick Sanders Mayor
Philip Sterling Mayor Pro Tem
Susan Edstrom Council Member
Kathleen Wilson Council Member
Jim Moss Council Member
Glenn Strother Council Member
STAFF AND GUEST(S) PRESENT:
Brandon Emmons Town Manager
Stephen Seidel Assistant Town Manager
Lisa Hennek Town Secretary
Patricia Adams Town Attorney
Danny Thomas Fire Chief
Scott Kniffen Police Chief
A.1 Mayor Pro Tern Sterling called to order and announced a quorum at 7:00 p.m.
Mayor Pro Tem Sterling announced that Mayor Sanders would be late due to traffic and weather.
A.2 Mayor Pro Tern Sterling offered the Invocation.
A.3 Council Member Edstrom led the Pledges.
A.4 Citizen Presentations:
JD Stotts, 1 Narrow Creek Court -Addressed the Council with his concerns regarding Amenity Lake #3.
Mayor Sanders allowed a processor to serve him a Temporary Restraining Order (TRO) filed by MUD2
against the Town.
Mayor Sanders acknowledged the quorum of MUD1 and MUD2 Directors and asked if they wanted to
announce a quorum.
MUD1 Director Cantrell said that although there were four MUD1 Directors present, all were attending as
residents.
MUD2 President Budarf announced a quorum of MUD2.
MUD1 Director Twomey, 203 Oakmont Drive gave his time to Pauline Twomey.
Town Council Minutes -January 26, 2009 Regular Session 1
Pauline Twomey, 203 Oakmont Drive -Addressed the Council regarding the MUD Consolidation Task
Force and Charter Review Committee.
Joseph Boclair, 17 Meadowbrook Lane -Addressed the Council regarding the consolidation of the
Town/MUD2.
MUD1 Director/Master District Chair White, 119 Trophy Club Drive -Updated the Council on the action
taken at the Special/Joint MUD1 and MUD2 meeting this morning. White said that she really hopes that the
Town and MUDs could come together and work things out.
Mayor Sanders read the following statement regarding Item B.2:
"On November 16"', Town counsel met in a strategic planning session and came away with a
preliminary list of the biggest issues we face, a list of the top five items that give our Town
challenge and a list of five wishes for the next ten years. In that meeting we came away with an
understanding that the governance issue we face was among the top three concerns and goals
of the entire Council.
Tonight we are holding this special session for several reasons, but most importantfy to protect
the rights of our citizens of the Town and of the MUDs. The major issue before us tonight is
whether or not the Council wants to move forward with its right to dissolve MUD 2 as opposed to
just moving forward with the consolidation plans of the MUDs. This is the Governance issue.
The MUDs would have you believe that consolidation will be better than the Town taking over
MUD2.
The reason for a special session is that members of council requested it so that we could have
all members present in this discussion. Because Council member Wilson is not going to be
present at our Feb 2"d regular meeting; and the possible action that various citizen groups might
want to take based on the results of this meeting. Council felt it best that we move forward on
this schedule with any action they may want to take. You see, if the Town were to approve the
proposed ordinance, then any group of citizens could put together a referendum with the
appropriate number of signatures to force the issue to a vote of the citizens. If the Council did
not pass the proposed ordinance, then any group of citizens who wanted to see the issue
placed on the May ballot would have about 30 days to get their required signatures for an
initiative, which is 20% of qualified registered voters,.
As it turns out, because of legal action filed today on behalf of MUD2, we will not be voting.
They filed for a Temporary Restraining Order that was granted by a Denton County Judge who
would not even hear any arguments, just granted the TRO and said we could discuss it in court
in 14 days. In fact, while the MUDs were meeting this morning they instructed Finance to
transfer $150,000 to First Financial Bank and to get a Cashiers Check made payable to the
Liston Law Firm for this litigation. All of this was going on while the meeting was in process and
was done before the consolidation agreement was voted upon.
Our legal research of this issue provides the following: From the Town's Attorney email of
Jan 8, 2009: Both the Town and MUDs have always agreed that Local Government Code
section 43.074 is the section applicable to the dissolution of MUD2. However, the exact
language of 43.07 4 (a) states that a municipal utility district that was "created from area that, at
the time of the district's creation, is located wholly in a municipality" may be abolished as
speCified in 43.074. Technically speaking, since MUD2 was created prior to the incorporation of
the Town, MUD2 was not created from area that was located within the Town, and Section
43.074 may not apply to the dissolution of MUD2. Based upon additional research, it appears
that Section 43.075 of the Texas Local Government Code contains the dissolution process that
is actually applicable to MUD2, and that pursuant to the terms of that section, there is an
argument that MUD2 was automatically dissolved within ninety days after the Town incorporated
to include the entire area of MUD2 back in 1985.
Town Council Minutes -January 26, 2009 Regular Session 2
Section 43.075 (2) applies to a municipality that by its incorporation includes in the municipality
al/ or a part of the area in a municipal utility district. Section 43.075 (d) provides that if all of
the area in the district becomes part of the municipality, the municipality "shall" take over all the
property and other assets of the district; assume all debts, liabilities and obligations of the
district and "shall" perform all functions of the district, including the proviSion of services. This
section appears to impose a mandatory requirement on a city that incorporates the entire
boundaries of a municipal utility district to take over the responsibilities and assets of that
district. When the Town incorporated in 1985, all of the area of MUD2 was included in the
boundaries of the Town.
Upon first review of LGC 43.075 it appears that it became the law in 1987, two years after the
Town incorporated and therefore would not be applicable to the Town's incorporation in 1985.
However, further research indicates that prior to 1987 and even as far back as 1947, the Texas
Civil Statutes contained a provision that was the same as or similar to that currently found in
LGC 43.075 specifying the process for the assumption of a municipal utility district when a Town
incorporated the entire boundaries of that district into its city boundaries. Section 1182c-1 of the
Texas Civil Statutes was the predecessor to LGC 43.075. Because of the amount of time that
has passed from 1985 until present, the full text of Section 1182c-1 as it existed on the date of
the Town's incorporation in 1985 is difficult to access, and we have not yet been able to obtain
that full text.
Our legal opinion is that given that a city is the pre-eminent power within its boundaries, a court
would probably decide that City consent must be obtained before the two MUDs can
consolidate, especially since a consolidation changes the City's rights as to dissolution of
MUD2.
There is a way other than litigation to obtain a definitive answer to the question. We could ask
that the Public Finance Section of the Attorney General's office to give us an opinion as to
whether City consent is required. This is not a formal Attorney General Opinion process. This is
a procedure bond lawyers use to get guidance on issues, such as this one, that will affect future
bond issues. If the two MUDs in question consolidate and then sell bonds, their bonds must go
to the Public Finance Section to be reviewed and approved. The transcript of the consolidation
proceedings will Ilave to be submitted as part of the bond approval process. Asking for an
opinion in advance of an issuance tells the bond lawyer how to proceed, i.e. whether he must
obtain City consent.
Our attorney was not able to locate a copy of 1182c-1 ofthe Civil Statutes from the time ofthe
Town's incorporation in 1985. She was able to get a copy of the 1182c-1 statute from 1987
prior to its codification, and by using it along with other historical information was able to make a
conclusion regarding the text of that section in 1985. Unfortunately, it appears that in 1971
there was an amendment which removed the automatic assumption in the absence of an
ordinance. Since the history showed no further amendments between 1971 and the date of its
codification in 1987, it does not appear that the 1985 statute contained the automatic
assumption provision currently contained in LGC 43.075. Apparently, when the Texas
Legislature codified that section into the Local Government Code, it changed the language back
to the original language which provided for the automatic takeover of a water district
incorporated entirely into a city.
We could make the automatic assumption argument under 43.075 based upon the plain
language of the statute; however, there is no case or other authority to support that
interpretation.
Today at the joint MUD meeting, a member of MUD1 said that the important thing was that the
citizens getthe right to vote. That is true in the since of a consolidation, but not true in the since
if they want the Town to take over MUD2. If the Council had been allowed to vote, then the
Town Council Minutes -January 26,2009 Regular Session 3
issue would be up to the citizens if they want to force the vote or uphold the action of Council.
Our Town Charter allows for various forms of actions that could have been taken. As it now
stands, we will not get a ruling on the TRO for two weeks and therefore if Council were to take
action to pass a proposed ordinance, those citizens who wanted that to be voted upon, would
have very little time to take any action without the decision being forced to the November
election date."
Mayor Sanders concluded by stating as a result of the pending litigation, conversations between the Entities
now have to be limited.
B.1 Receive report and overview for the storm water account, to include explanation of monies
used to date and the balances. Council discussion and appropriate action regarding same.
A. Discuss and take appropriate action regarding the storm water issues on Inverness Drive,
as inherited from the MUDs at the time the Town took over Storm Water.
Mayor Sanders said that he placed this item on the Agenda based on the concern of a MUD Director.
Town Manager Emmons stated that the Town took over the Storm Water in October 2003, but the transfer
of funds from the MUDs to the Town occurred in March 2004. The amount transferred was $42,000 and by
the end of the year there was a balance of $57,000 in the fund. The Town expended $19,000 during the
year and it left a balance of approximately $38,000. For FY2004/2005 the Town collected $36,000 and
expended $10,000 leaving a total ending balance of $64,000. In FY2005/2006 the Town collected $36,000
and expended $66,000 (Cyprus and Inverness repairs and engineering). The repairs left a beginning
balance of approximately $34,000 when the Town increased the fee to $3.00. Since October 2006, we
have collected approximately $244,000 and expended $108,000 to date, which leaves a current balance of
$170,000. Since October 2006, our largest expenditures have been Salaries ($39,000), Engineering
($30,000), Maintenance ($14,000) and NCTCOG Dues ($6,000). The Town currently had projects planned
that will utilize some of our remaining balance such as the Timber Ridge drainage improvements ($134,000)
and OverhililTimberline (approx $20,000).
Council member Moss clarified that GASB gets a portion of the Storm Water funds.
Council member Edstrom confirmed that the $3.00 fee was an average of what cities charge in the area
based on the survey provided by Town Manager Emmons.
MUD2 President Jim Budarf, 547 Indian Creek -Said his personal audit showed that these funds were
never filtered through the GASB account. Budarf questioned $39,000 salary in the Storm Water Budget.
Town Manager Emmons stated the money was in the Storm Water and GASB fund. Ernmons said that he
was not aware of a contract with Utility District for maintenance and that the 2006 repairs on Inverness were
contracted out. Emmons assured that the Town had an audit performed every year and to look for
irregularities and explained the $39,000 salary was spread over several years and not an annual salary.
Council member Edstrom suggested that a simple conversation with the Town Manager would have been
simpler rather than throwing out allegations.
Council rnember Wilson stated that Mr. Budarf asked the question as a citizen and that his presentation was
not out of order.
No action taken.
Town Council Minutes -January 26, 2009 Regular Session 4
B.2 Discuss and take appropriate action approving an Ordinance providing for the consolidation
of Municipality Utility District #2 into the Town of Trophy Club as authorized pursuant to
"state law, including without limitation local government code."
Mayor Sanders said due to the current restraining order the Town was unable to take action. Sanders
suggested the Council discuss the issue.
Town Manager Emmons provided a Consolidation Report to Town Council.
Council member Moss stated in order to decide what was best, he would need to see both the short and
long term impact to the residents and felt the Consolidation Committee was working on creating a report.
Moss said that he could not make a decision until he saw the numbers and felt that the Consolidation
Committee was the appropriate group to prepare the data.
Town Attorney Adams advised that under the TRO, the Town was open to discuss the Item but could not
take any action. Adams said that a hearing on the merits on seeking a permanent restraining order was set
for February 6, 2009.
Council member Edstrom said that it was ironic; everyone wants the right to vote, yet, MUD2's action limited
Council'S right to vote.
Mayor Sanders read a letter submitted by Lou Opipare, 32 Crestwood -Against B.2
Dennis Sheridan, 1 Hillcrest -Clarified that at least four (4) of the Town Council members would have to
vote in the affirmative in order to adopt the Ordinance.
MUD1 Director Jim Hase, 209 Inverness Drive -Said that the Consolidation Committee only had a draft
version.
MUD2 President Jim Budarf, 547 Indian Creek -Spoke against the Town absorbing MUD2 and said that
the Town needed to be well into negotiations with Westlake prior to making the move.
MUD1 Director Neil Twomey 203 Oakmont Drive -Presented updated data and numbers which will be
reviewed by the Consolidation Committee tomorrow at their meeting.
MUD2 Director Jim Thomas, 7 Meadowbrook Lane -Stated the whole idea behind the Consolidation
Committee was to form a group to collect the numbers, argue those numbers and then present those
numbers to all Entities.
Pete Reincke, 3 Colonial Court -Appreciated the confidence in his ability to produce the right numbers but
said that he did not think that was his place. Reincke said it was his job to assure that the Consolidation
Committee was being thorough in their research and that two members from each Board should be able to
come together and agree that the numbers were correct.
Mayor Pro Tern Sterling said that per Director Hase, the Committee was gathering unbiased numbers and
had not received or reviewed the Town's numbers, yet MUD2 filed a Temporary Restraining Order against
the Town. The difference is long term versus short term and the consolidation of MUD1 and MUD2 is short
term, it does not solve the ultimate goal and would only delay the payments and taxes. The Town taking
over MUD2 is long term solution. The Town's plan is a long term solution, whereas the MUDs' plan takes
one step and stalls out. Sterling stated that based on the TRO, the purpose of the Consolidation Committee
is now unclear.
Council member Wilson said that MUD2 had every right to block the Council's vote as the Council was
prepared to take action tonight to absorb MUD2. Wilson said she was sworn in to do what's best on behalf
of the residents and did not believe what was occurring was the solution or fulfilling her oath. The current
financial climate was not favorable to incur further hardships upon our residents. Wilson stated that the
Town Council Minutes -January 26, 2009 Regular Session 5
personalities needed to be removed from the conflict in order to find the best answer and resolution
possible.
MUD2 Director Jim Thomas, 7 Meadowbrook -Agreed that Trophy Club needs to do away with as many
entities as possible and that he was instrumental with the dissolution of MUD3. Thomas said while
attending the American Public Works Association Conference the past weekend, he learned that there are
hundreds of MUDs that exist within Texas municipalities and do so successfully.
Rob Stecker, 12 Meadowbrook Lane -Said that he was ashamed of the Council and their lip service,
stating that dissolution is in the citizen's best interest Stecker said he was sick of hearing about his
numbers versus her numbers and asked what the actual numbers were.
Council member Strother appreciated the citizen's comments. Strother said his goal as a Council member
is to help the Town run more like a business; effectively and efficiently while understanding the complexity
of governance with a Town, MUD1, MUD2 and a Master District Strother stated the Town asked to
participate in the Consolidation Committee, and he has diligently rearranged his other business priorities in
order to attend the meetings. Strother continued that the Council understood if they took action regarding a
consolidation Ordinance, a citizens' group would file a petition for a referendum. A citizen referendum
would allow the residents to choose whether MUD1 and MUD2 should consolidate or if the Town should
absorb MUD2. Due to the TRO the Mayor was served, the Town Council no longer has that opportunity,
but now has to spend the resident's money answering a lawsuit Strother said that he is looking at the long
term goal, which may be to eliminate the MUDs -if it is in the best interest of the Town.
MUD2 President Jim Budarf stated that the MUDs called the election, but did not approve the ballot
language. Budarf said that the MUDs are open to the Town, MUD1 and MUD2 Attorneys working through
the ballot language.
Mayor Sanders clarified that the MUD Orders approved this morning at the Joint Special Session of MUD1
and MUD2 provided ballot language.
Rob Stecker, 12 Meadowbrook Lane -Asked the Council if this legal maneuver was the only way to get this
issue to a vote. Stecker asked why the Elected Officials did not pick up the phone and call one another.
Council member Strother explained the timing involved and the process in order to bring both issues to
residents at the same time. Strother added that Council member Wilson was going to out of town and was
going to miss the February 2, 2009 meeting. Therefore a special meeting was called in order to allow the
entire Council a vote.
Council member Edstrom responded that there is a lot of maneuvering going on, by all entities.
Bill Rose, 219 Inverness -Said that he thought the attorneys should work together and write the ballot
language.
MUD2 Director Jim Thomas, 7 Meadowbrook -Asked Town Attorney Adams to explain the process
following the vote on the Ordinance.
Town Attorney Adams explained that had the Council had the ability to act, approval of this Ordinance
would have required a majority vote. If the vote was 2:3, the Ordinance would have failed, allowing the
residents to file a petition, forcing it to the ballot in May, as opposed to waiting until November.
Peggy Sweeney, 51 Meadowbrook -Said she was astonished with the turn of events of today and
compared it to a chess match that is taking her right to vote away.
MUD2 President Jim Budarf referenced the $150,000 money transfer from this morning, stating that had
Council voted to take over MUD2, all accounts would have been frozen.
Town Council Minutes -January 26, 2009 Regular Session 6
Mayor Sanders advised that residents asked for the Council to vote on the very matter. The special
meeting was called to allow all Council members the opportunity to vote.
MUD1 Director Jim Hase offered for Town Attorney Adams to work with MUD Attorneys Pam Liston and
Bob West on a recommendation to present to the groups. Mayor Sanders responded that when Town
Attorney Adams attempted this, Liston and West said that they do not have the Boards' permission. MUD2
President Jim Budarf said that he would talk to Pam Liston about this issue in the morning.
Council instructed Town Attorney Adams and Town Manager Emmons to work together with the MUD
Attorneys creating ballot language that would allow the residents to vote on all issues.
No action could be taken.
Town Council did not convene in Executive Session.
'EXECUTIVE SESSION
C.1 Pursuant to Texas Government Code, Annotated, Subchapter 551, Section 551.071 (1) and
(2) "Consultation with Attorney", the Council will enter into executive session to discuss the
following:
A. Legal advice related to consolidation of the MUD1 and MUD2; dissolution of MUD2.
TOWN COUNCIL TO RECONVENE INTO REGULAR SESSION
'REGULAR SESSION
C.2 Discuss and take appropriate action relative to Executive Session Item Number C1.
No action taken.
D.1 Adjourn.
Motion made by Sterling, seconded by Wilson to adjourn. Meeting adjourned at 10:15 p.m.
d 1 ?~~ (~?() '4/1,i 1/ /, ~ ;}d~~
v Lisa Hennek, ~own Secretary Nick Sanders, Mayo:
Town of Trophy Club, Texas Town of Trophy Club, Texas
Town Council Minutes -January 26, 2009 Regular Session 7