It’s been a very slow period for news both out of Columbus and Austin as it pertains to where the Columbus Crew will end up in 2019 (and beyond). It’s been a bit surprising; if you read my “Save These Dates” story, you’ll have seen that we’ve already blown through a couple of deadlines with nary a word coming out of either city. Some of that has to do with confidential nature of settlement negotiations. Some of it is just good old fashion backroom political dealings.

All that being said, there have been some developments in Austin, in the form of an initiative released last week by IndyAustin, a local Political Action Committee which focuses on ballot issues. Upon its release, there was a bit of confusion regarding what the initiative purports to do. So I called up Roger Borgelt, who helped draft the initiative language which IndyAustin hopes to enact pursuant to a vote by the citizens of Austin.

WHAT THIS INITIATIVE WANTS TO DO:

In short, IndyAustin would like to stop deals like McKalla Place development without giving the citizens of Austin input into the deal via a public vote and/or affirming the deal with a supermajority of the Austin City Council. Further, they want to ensure that groups like PSV is paying the appropriate taxes on these types of developments. Finally, they want to prevent what they see as behind-the-scenes backroom dealing, where the details of the agreements are not disclosed to the public.

The initiative itself is split into 11 parts. IndyAustin must now go about the process of securing enough signatures to have the initiative placed on a May 2019 ballot. “Because we launched it now, we will be able to take advantage of early voting,” Borgelt said. “We need to get the petitions turned in…by February,” for a May vote, Borgelt said. As such, he does not see any issues getting the required signatures and getting them verified.

“Initiative was the really only way we could go,” Borgelt said, “because the Council did not pass an ordinance; they’re doing all of this by contract. So there is no way to have a referendum.” Since a referendum would challenge an ordinance that the Council passed, there is nothing to challenge in this situation, since the City and PSV will be signing a lease/development agreement, not passing a law.

Some questioned why this initiative wasn’t set for the November ballot, and it essentially boiled down to an issue of time. “It was too late,” Borgelt said. “We would have had to have the signatures turned in I think in July in order to have them verified [by August]. With the timing of the deal going down when it did there was just no way. It wasn’t going to work.”

Another issue in the initiative that piqued the interest of many was the effective date of this ordinance should it pass, and whether it could undo the Term Sheet. In other words, would this initiative apply retroactively? The short answer is: it’s unlikely to be able to undo the Term Sheet, nor the Lease/Development Agreement, assuming it is signed before this initiative were to become law. “There are issues about abrogation of contracts retroactively, there’s constitutionality issues there,” Borgelt said. “And so we put language in there so that if the contract allows it to be retroactive it can be. We fully do not expect them to write a contract that will allow the retroactivity clause to apply.

“I don’t think there is a viable way at least through this petitioning process to stop it, in terms of actually stopping the contract,” Borgelt said. “But there are other things in there that may be occurring some time down the road, and the petition could theoretically have a chance of stopping those things from occurring.”

Because the lease development agreement hasn’t been signed, some of the things “down the road” that PSV will have to obtain are permits, site plan approval; all of the bureaucratic red tape that makes developers tear their hair out. Unless PSV is able to get the Lease/Development Agreement signed, and get all of the approvals needed, this initiative, if passed, would apply to them. “It would apply to the zoning, it would apply to variances, it would apply to performances bonds. It would apply to external costs which [Austin] is requiring them to carry,” Borgelt said. “There are ways we have contemplated it might be applied to aspects of this deal that will not be finished by May.”

So this is a very interesting point. I’m sure many have forgotten during the exhausting Austin City Council meeting where they finally approved the Term Sheet, but one line item that PSV fought (and lost) was on the issue of what laws would be applicable to them as they went through the development process. PSV agreed to waive the ability to be grandfathered in, and as such, any permitting/zoning applications will be subject to the laws in place when the applications were submitted, and not on laws in place at an early date (Mayor Adler argued that the date should be when the Term Sheet was passed on August 15). Thus, it is possible that unless PSV has all of their ducks in a row by May, their permitting/zoning applications will be subject to a supermajority vote by the Austin City Council.

With respect to taxes, it was reported that there was a “poison pill” of sorts based on the requirement in the initiative that PSV pay taxes. However, Borgelt pointed out it is up in the air as to whether that provision would apply to the PSV development. “This [tax] piece can’t be retroactive either, so it kind of depends on when and how taxability determinations are made.” Borgelt said. “It would require this type of deal going forward from May to have to pay property taxes or if its determined to be tax exempt by the taxing authorities to make payments in lieu of taxes that are equivalent to the taxes that would have been paid.”

I also asked about the scope of this ordinance, and whether IndyAustin was concerned it would discourage development going forward. Borgelt said there was some debate about the issue, but there was consensus that they struck the right tone. “My sense is that they [the drafters of the initiative] were satisfied that the language was not too broad,” Borgelt said. “There were certainly people involved who should have been concerned about that, and they aren’t, so I think we are okay.”

DISCLOSURE:

The other portion of the initiative deals primarily with issues IndyAustin has with the lack of disclosure and backroom dealing with respect to how these deals are put together. There is a section of the Term Sheet that basically shields the City and PSV from having to disclose, well, much of anything from the date it was ratified by the Austin City Council.

In a nutshell: The City must notify PSV of any open records requests its receives pursuant to this development. If PSV determines that they do not want/need to comply with the request(s) based on the exceptions to the open records laws in Texas, they can assert those exceptions and contest them (at their expense). What exceptions? Many would fall under the so-called “Boeing Exception” to the Texas public disclosure laws which created a massive loophole. Basically, in dealing with the government, if a private entity believes that the disclosure would release competitively sensitive information, and can demonstrate the disclosure would give competitors a competitive advantage, they can try to prevent the disclosure.

“We’re trying to close the Boeing Exception; it’s a gaping hole in our public information act.” Borgelt said. The prospective ordinance “allows full disclosure of all of the communications about this kind of deal, because it is a deal involving public property.”

This portion of the ordinance could have wide-ranging effects, since it would potentially require disclosure of most elements of the negotiations and dealings. It was drafted by Bill Aleshire, who was concerned that PSV would use the Boeing Exception to prevent release of the contract itself.

“During the debate on the Term Sheet, I asked Council to include a provision requiring Precourt to waive any Boeing exception and to post the signed contract on the City’s website. Didn’t happen,” Aleshire said. “Please know that as soon as the contract is signed, we’ll request a copy. If they refuse to release (by claiming the Boeing Exception or any other basis) we’ll add that Texas Public Information Act claim to the lawsuit.”

News that PSV could use the Boeing Exception to prevent release of the lease/development agreement came as a surprise to me, since that is a document that I assumed would be made public as soon as it was signed, even if it doesn’t have to be ratified by the Austin City Council again. However, I ran the scenario by a high-level source in Austin government. “Sure they might,” the source said. “PSV could conceivably team up with the City to block.” If that happens and a lawsuit to contest it fails, it is possible that we never see the terms of the lease/development agreement.

Interestingly, if this initiative passes, it’s likely to result in litigation, since it would be in conflict with the Texas Supreme Court’s interpretation of state law regarding public disclosures. “I fully expect litigation over that piece,” Borgelt said.

Given this startling revelation, I thought it only right to contact both the City of Austin and PSV for comment. I asked PSV if they were contemplating using the Boeing Exception to block release of the lease/development agreement. I received a message from a spokesman for PSV declining comment on this issue.

I was able to get in contact with David Green, head of Media Relations for the Austin City Manager.

First, Mr. Green was able to clarify one of the provisions of the Term Sheet, which included a date (October 9) by which the City of Austin could pull out of the agreement. “I think there was some confusion back when all this first came out.” Green said. “That really was there as a safeguard. For instance, if PSV were to tell us ‘we weren’t able to secure funding,’ that gave us a no-harm out.

“It doesn’t apply to the negotiating process; it’s not a deadline to have an actual paper agreement. When they finally passed the Term Sheet, we speculated it would take us 90-120 days to paper out (finalize) the contract just based on experience of doing large development deals like this.”

As to the confidentiality agreement, Mr. Green confirmed the basic process by which a private company would contest the release of information requested by the public. That is to say, the City would present (in this example) PSV with the public information request, and PSV would be the one who would have to assert the exemption. “If and when a request for disclosure comes down, if they have specific concerns, they can raise those concerns, and at that point, in accordance with the various public information laws, that can be taken up,” Green said.

Generally speaking, Green said it applies to particular issues which a company would want withheld (operating agreements, profit/loss), but an entire, such as a lease/development agreement would not be something that the City of Austin would be looking to withhold. “I’ve not heard anything that indicates we [Austin] would be withholding the final agreement [from public disclosure].” Green said. “We’ve actually been telling people we are going to be prepared to provide it.”

As to whether a private company could prevent release of those documents, even if the City was planning to release them, “if the law allows for it, then yes,” Green said. To be clear this is a bit of an abstract point, since there is no lease agreement yet, and PSV hasn’t, as of yet attempted to prevent the release of any information. “Anything in that lease and development agreement, any of the amendments and addendum that are releasable by law, will be released,” Green said. That is, subject to any exemptions/exceptions in the law that people are allowed to invoke.

Since I had the opportunity, I wanted to get up update on the progress of the lease/development agreement, and when it would be ready for release/signature. “Earliest I would say is later this month [October]; latest sometime early December,” Green said. “The Term Sheet was so detailed, that it’s actually made this process pretty smooth from the lawyers’ perspective and they’ve been able to go through and make pretty steady progress,” Green said. The 90-120 day estimate given at the Council meeting could potentially extend that until the end of December, but Mr. Green’s update obviously falls within that time frame.

Finally with respect to the IndyAustin initiative, Mr. Green said that won’t impact their negotiations or drafting of the agreement. “We can only do what we were directed to do,” Green said. “We were directed to go forth and negotiate and execute an agreement based on the Term Sheet executed by the [Austin] Council, so that’s what we’re doing.”

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