A prominent developer and a state senator have carved out a section of southern Dallas they hope to see controlled by a hand-selected board with significant governmental and financial power over about 300 acres.

The deal struck between developer Mehrdad Moayedi and state Sen. Royce West, D-Dallas, has raised concern at Dallas City Hall, where some officials feel that the City Council was frozen out of its traditional oversight role. The council does have some say in the matter, though West has insisted the deal ought to be approved and has said he “will not be a happy camper if they can’t work this thing out.”

A vote is scheduled Wednesday to decide whether the first step of the plan and its complex funding formula can move forward.

West said he supports the deal because he believes creation of the so-called University Hills Municipal Management District will help bring growth to southern Dallas — a long-standing goal of city leaders.

But the nature of the deal, and the way it was legislated, caught city officials off guard. Council member Mark Clayton went so far as to say it “comes across a bit shady.”

"It may be the greatest thing ever, but I don't feel like it's been presented to us in the most transparent way possible," Clayton said.

City officials were under the mistaken impression that a municipal management district needed the city's backing before legislative approval. A presentation to a council committee also pointedly noted that the MMD was created "without any input or prior consent of the Dallas City Council."

West said he was certain city officials knew something and approved of the deal. Ross Martin, an attorney for Moayedi's development company, Centurion American, said they had “worked closely with” previous leaders in the city’s Office of Economic Development.

But a shake-up by new City Manager T.C. Broadnax saw the senior economic development staff change earlier this year. And at the time West moved forward the legislation, he had at least one letter of support from a city official, council member Erik Wilson, who represented the area encompassing the MMD before he lost his re-election bid in June.

Wilson said those critical of the process are “nitpicking” a quality development.

"I just find it difficult to say there was more information to be given," Wilson said. "To me, that's kind of revisionist history.”

The council still has power to approve or dissolve the district. Wilson’s successor, Tennell Atkins, wants to sort through the issues and get moving.

“It’s a game-changer for southern Dallas,” he said.

City staff, meanwhile, are still trying to figure out how this particular district would function. Robin Bentley, who earlier this year ran the city’s economic development department on an interim basis, said she only found out the bill had passed in August — after it had already taken effect — when she met with officials from Centurion American. Bentley and the city’s current economic development director, Courtney Pogue, said the city is still in negotiations with Centurion about incentives and other matters.

Martin, the attorney, said reaching agreements with the city will be needed for the project.

A management district is among a variety of special government districts in Texas that businessmen can create, with the help of friendly lawmakers, to reap profits on real estate projects.

The entities — including Moayedi's University Hills district — wield some of the same powers as cities, including public financing. They can issue bonds and levy assessments on properties in the district, allowing the developer to pass on infrastructure costs.

Special districts have seeded business growth across Texas. The sprawling Woodlands development in the Houston area and the Las Colinas corporate hub in Irving are two examples.

But the districts have also created problems. For example, about two decades ago when business development lagged in Las Colinas and its district's debt ballooned, Irving taxpayers had to help bail it out with millions of dollars in subsidies.

The city of Dallas appears to have little direct control over the University Hills district. The legislation named five initial appointees to the MMD board, none of whom are city officials. Two were chosen by West, including former Texas Education Commissioner Michael Williams, who serves as a representative of the University of North Texas at Dallas. Moayedi's group chose three others. The district will have an election for its board later — a provision the developers’ representatives say was necessary to get the legislation passed — if both Dallas and Lancaster sign off on it.

Dallas officials can head off issues if they insist on a role in the district's decisions, experts say.

"If you don't have high-quality governance systems with strong public input, you can end up at some point with severe financial problems,'' said Richard Sandow of Southlake Capital Advisors Inc., a veteran investment expert.

For years, the town of Westlake battled Ross Perot Jr.'s Hillwood Development and other developers over their aggressive use of special districts to try to win financial incentives. Former Mayor Scott Bradley calls the entities undemocratic.

"In effect, it's putting another layer of government and taxation on people,'' Bradley said. "And the district's not accountable to the people in the city because the developer controls it.''

In Moayedi’s complex plan, tax breaks from new construction in a Centurion housing development in Far North Dallas will be funneled into the development in the south, which proposes 800 homes and other amenities such as event venues and restaurants.

The council is scheduled to vote Wednesday to allow the incentive plan, known as tax increment financing, to move forward. Usually TIFs, as they are known, are meant to help pump back tax revenue back into areas over many years to help them grow faster.

If the TIF passes, the University Hills district hopes to issue bonds, which can be paid off indirectly with the tax increment generated by the northern development. The developer’s reps say the TIF approval is necessary for their project.

Dallas created another TIF for Centurion last year — its $230 million redevelopment of the downtown Statler Hotel and adjoining old library, which now houses The Dallas Morning News. In turn, Centurion took the unusual step of leveraging the future TIF payments as collateral to back a tax-exempt bond issue out of Wisconsin. The city endorsed the move, and that gave the company quick access to cash.

The IRS, however, ruled that the bonds don't qualify for the tax exemption investors were promised. And the Securities and Exchange Commission is investigating the Statler's financing, The News reported in August.

But Centurion doesn’t foresee any trouble with its financing for the management district. And some council members have expressed support. Even Clayton, the council member who had concerns, said the project might be needed in that part of the city.

“I just want to make sure that in the effort to do what’s needed, we don’t take the path of least resistance and right off the bat, there’s a cloud hanging over it,” he said. “If it’s the right thing to do, it’s the right thing to do.”

Correction, 4 p.m., Dec. 13, 2017: Michael Williams was mistakenly identified as a representative of the University of Texas at Dallas. He actually works with the University of North Texas at Dallas.