Wednesday, October 17, 2007

My Decision and what I considered in reaching it

Modified October 30th for financial news from JR Moore.

After considering and discussing different views on this subject, I have reached my decision. A number of people have asked me to take a look at this election, knowing full well I was not married to any of these propositions. Therefore, I looked into it the best I could with my limited time, just like most other voters, and concluded the debate in my own mind. I present my voting position, with an explanation of how I reached it. I am endorsing the plan for TCID to govern The Woodlands, and I will tell you exactly why.

I am voting YES on all three propositions.

Just a few months ago, I was not inclined to vote for being governed by the TCID, because that governing entity was not elected to govern the villages of The Woodlands. However, after a number of discussions, enquiries and research, I came to respect those who have been appointed and elected for improving the Town Center. They are capable and willing to govern (click) our villages, as well as the Town Center. The TCID directors who will be in place after May, 2008, will be elected representatives of the villages and Town Center. Each was elected into a position of some entity within The Woodlands and have been placed on the board as elected representatives, whether appointed to that specific position or elected directly into that position. Although the boards constituency has representation from nearby communities such as Shenandoah, those appointments were appropriate at the time and will go away with the May election. My endorsement does not mean that I cast my vote without risk. Everything we decide has risk. However, I am confident in my decision. For the current situation, time, and goal, it is the correct and only choice to make. Associated risks are not as high as I had first thought. I even tried to inflate some risks to make sure I was not taking the easy way out. In fact, I now see the opposite to that which I first saw. The threat of annexation by Houston is real, and it would not be in our interest to let them annex us. The Regional Participation Agreement has been approved by the Houston City Council and holds up to the original agreement quite well. I have now included it as part of my analysis. We all need to vote YES on the first two propositions. The third, though optional, is a necessity to me also, out of pure financial consideration. It would help TCID plan ahead, give me a tax write-off, and give TCID an additional tool to help us go forward, so I am endorsing that as well. Unfortunately, it cannot take effect until 2010 at the earliest.

My decision is analytically derived, but I depend on intuitive reasoning as well. I am not biased by emotional preference, political or personal, and have no personal motives except for the desire to live in a self governed community apart from Houston. I simply want us to govern ourselves and maintain our values, control our processes and preserve our lifestyle. I have reached my conclusion based on:

1) Sufficient risk mitigation evidence and due process by the Governance Council, the TCID board, our legislators, and many others who have worked so diligently to get us this far. 2) Role and urgency of this very important step in the vision of the road to our independent governance (click), and 3) My personal understanding of the issues involved.

Let me say first that there is risk to voting YES! I have come to understand that the risks have been mitigated in about every way they should be, under the conditions which exist. Since I run this risk assessment based on a YES vote, I also need to state that I believe the NO position has much more risk than the YES position. I address the NO position at the end of this posting.

As background and from a personal perspective, I have a vision of future incorporation, yet maintain an open mind to alternatives. I postulate that what we need and what we want could be in conflict, and we should study our choices in the future, say over the next 5 years or so to determine our final step on the road to governance. The timing to take this step for self governance is very much now! Our strategy now should be to execute our plan, not start all over! For the future, we should make ready to finalize our governing strategy in about 2014. To do that, I believe we should begin work on the final solution about 2010, after the election for the 7 at-large representatives. To prepare for the work on that, our ultimate solution, we must elect candidates starting in 2008 who have the desire to seek the appropriate final solution in a timely manner. TCID will have plenty to do before they can start working out the details. We have momentum, but we must maintain it to reach our desired outcomes. There could be other interim actions to build on what has been completed already, to simply strengthen the power of the Township. Our legislators are very aware that there may be some fine tuning (amendments) to optimize the organization and responsibilities of the township board. One tune-up initiative might be to seek legislation for local ordinances in the next legislative session. Another could be to alter the makeup of the board to provide for village in addition to at-large representatives.

Benefits and Risks of the YES Position

To understand our risks, we must first know the goal and the benefits of these proposals. The goal is simply for us to govern ourselves. I do not agree that our goal is to avoid annexation nor is it exclusively for us to be a municipality. To say either is not framing the issue correctly in my opinion. Certainly the timing of this action now is driven by the need to avoid annexation so that we can accomplish our goal. Placing the governing responsibility into the hands of a 7-member board is a good short term solution, but it is not likely to be our final solution to governing ourselves.

The benefits of the ballot proposals are listed below in no particular order.

Benefit A. Consolidation of The Woodlands associations and services. This has been a challenge for years to residents. In what association am I and why? What are the differences between the WCA, TCID, TWA, WCOA? Who do I go to for what? We should welcome one organization for addressing our local issues, our budget, and our services. This consolidation will not help us with county, state or MUD issues however. We should welcome uniform fees and assessments. We will continue to have several covenants that will continue to create some confusion. Residents will have a stronger presence in the affairs of the villages due to decreased participation and influence of the developer.

Benefit B. Lowered association dues. We should see a 31% reduction in 2009 and onward, excluding normal inflation. We should see a 15% reduction in 2008, a partial tax year.

Benefit C. Village Associations should remain and even be a stronger means to liaison with the TCID for community issues, giving all residents equal access to governmental services.

Benefit D. Proposition 3. We can claim association dues on IRS tax returns. A YES for Proposition 3 is required to signal to the board that we want them to levy a dollar-for-dollar ad valorem tax to replace our association dues starting in 2010. This will result in a tax reduction on our return. For example, if your association fee is $1000 today and your income tax bracket rate is 28%, you save about $310 from the assessments offset by sales taxes and an additional $123 and $422 by claiming the ad valorem tax. (only if proposition 3 passes). After calculating additional sales taxes, the total annual net gain to our bank account would be $579 in today's dollars.

Current association assessment............. $1000 (what we now pay unclaimed as a deduction in our tax return)
Reduction - sales tax revenues ............ -$ 310 (by levying a sales tax and using the surplus to subsidize part of the association fees)
Reduction - AS. dues on IRS form...... -$ 123 (by claiming our association dues in the form of an ad valorem tax)
Reduction - JR Moore's analysis.......... -$ 422 (WCA 42.2% saved by ad-valorem tax)
Added sales taxes (IRS table) ............ +$ 384 (the amount of sales taxes we have to pay for goods and services)
Reduction tax return sales tax............ -$ 108 (by claiming the additional 2% sales tax on our tax return)
New assessment...... $421, or a total savings of $579 annually (57.9%).

Benefit E. Conroe cannot annex Harpers Landing.

Benefit F. Houston nor any surrounding municipalities can annex the remainder of The Woodlands. The Woodlands would be free from Houston ETJ in 2014.

Benefit G. The Woodlands remains a planned community but under one governing body, including the new Village of Creekside Park. Our community captures the Harris county component of The Woodlands.

Benefit H. There should be less influence from the development company and more influence by residents in the villages within the villages. The Commercial Planning and Design Standards will remain the same and be enforced by the Design Standards Committee.

Benefit I. Regional improvements - we will help finance and be able to reap the benefits of projects like Hardy Toll Rd extension into downtown and parks along the creek. The Regional Participation Agreement is a well organized and structured agreement to place The Woodlands in a supporting role with Houston by expending only 1/16th of one percent sales and use taxes into a fund for developing the regional projects. This fulfills George Mitchell's view of our regional role and is an ingenious coorperative solution to enable us to self govern ourselves.

RISK ASSESSMENT of the YES Position using the risk level times impact assessment method.

A "risk" below is assigned a numerical value 1 through 10 and is described by a word. An impact also has a numerical value and is described the same. The risk assessment value is calculated from the two by multiplying Risk*Impact=assessment. Maximum value would be risk(10) times impact(3) = 30. Any over about 15 may not be worth taking for the benefits listed. Red colored risks below indicate those over an arbitrary threshhold value of 8.

  1. Houston will annex The Woodlands even if we are part of the TCID special tax district - very low(1) * high(3) = 3
  2. The majority of the governing board will utilize their energy, time and money primarily for the town center, leaving the villages up to their own devices and problems. Low (2) * medium (3) = 6
  3. The Woodlands becomes a hodgepodge of corruption in government where the TCID board is funneling financial resources to their own businesses and/or to their own or their family private bank accounts. Low(2) *medium(2)= 4
  4. Decisions are made by TCID, counter to the wishes of many and regardless of the sentiment of the residents. Low(3)*high(3)= 9
  5. There is no representation on the board of the less financially capable residents, causing a taxation without representation issue for lower income socio-economic areas in The Woodlands. Low(2)*low(1)= 2
  6. There is practically no way to get incorporated. Low(1)*high(3)= 3
  7. Houston will raise the financial stakes in the agreement, forcing us to pay more for our "freedom", leaving the community with an unplanned additional financial burden. Low(1)*high(3)= 3
  8. The financial analysis (click) may be incorrect, so we end up paying more association dues rather than less. Low(1)*medium(2)= 2
  9. Our village and/or Town Center businesses no longer are financially attractive to customers and many fail due to loss of the "sales tax advantage". Very low(1)*high(3)= 3
  10. Houston signs the agreement after the election and we are stuck with a proposal that we cannot agree to. Then NO longer relevant. The agreement has been signed. Low(0)*high(3)= 0
  11. Development company representatives are elected into office and gain control. Low(1)*medium(2)= 2

Rationalization of Risk to the YES position

  1. Houston will annex The Woodlands if there is significant financial gain for the city of Houston. Should we vote YES, all tax revenues will be assigned to the special tax district, removing all possible revenues from Houston's grasp. The regional agreement with Houston is relevant, because we can become a municipality only with an agreement with Houston to not be in their ETJ (jurisdiction of annexation). That agreement has been approved by the City of HOusotn. It contains all the financial obligations originally agreed upon by Mayor White and Senator Williams. It protects the interests of Houston by having a termination clause should The Woodlands forfeit on its payments. This indicates the serious nature of the intent of Houston to not be burdened with all the financial reponsibility of the regional development projects. The risk is now high that Houston will want to annex us soon, should we vote no to the first two propositions. The reason for this conclusion is that Houston will need to finance the projects regardless if we vote yes or no. The agreement is made null and void if we vote no. They will come to us for the tax revenues by annexing us and using much of the sales tax revenues to fund these regional projects. The risk of this item is considered low if we vote YES to the first two propositions.
  2. The integrity of the board members is high. They are qualified to govern the residential areas of The Woodlands. Six residents will be elected at large in the elections of May 2008, a majority of the 11-member board. The WCA appointed representative term ends in 2010. He was of course elected to this position in Indian Springs, so he is an elected official by The Woodlands residents and consistently works for the benefit of the residents. That gives us at least seven "elected" officials, more than a simple majority of the board. All board members have shown significant stake in the outcome, even those who will be leaving in May. All elected board members after May, 2008, will be residents and have a personal stake in what happens in our villages. The experience level of the board is high and they have been successful in their efforts to improve the Town Center. They will continue to have obligations in the Town Center, therefore, there is some risk of village attention dilution. I have determined for my own vote, that the risk of this dilution is not high. I do not see the impact as great, because we have several board members who should have sufficient time and energy to work on the village issues and we should have sufficient capability from those newly elected in May.
  3. The board says they can govern us with integrity, so I am taking their word on that. Read their Bios and comments in the Meet the TCID Board(click) and look them up in the internet of you want to understand some of their works over the past few years.
  4. From my own personal observations, the TCID board is actually listening to residents better than the association. This could change over time if the residents' behaviors are excessively critical. The Village Associations will transition into a stronger resident advocate role. This should help residents be heard effectively.
  5. Socio-economic risks are very low. Some people fear that sales taxes will adversely affect lower income areas. We may need to pay attention to economic consequences of our decisions on taxation, just like any municipality would, but apparently we do not have villages that are significantly more economically stressed than others. We have some families economically stressed in all villages by mortgage issues and other situations, e.g., fixed incomes. Subsidized housing does exist in Panther Creek and Grogans Mill villages, and it is possible that people in those complexes will be impacted more than others, but they are not representative of village residents. We must be sensitive to their needs and not forget they are there. They can work through their village associations to be heard if there is an issue. Some people argue that those individuals and families are at risk because the board positions are elected at-large rather than by village.
  6. The TCID board has the authority to dissolve themselves, per House Bill 4109 This gives us the residents a means to transition to a municipality or other expanded township authority if desired. The process would be similar to transitioning from an association to a special tax district, with the transition of assets, debt and power to a municipal government instead. Some oppponents to the propositions claim that it is nearly impossible to move the debt, but I have read this provision several times and that allegation and fear is just not true. Therefore this is a low risk.
  7. There was a lingering fear that the Houston City Council will change the terms of the regional agreement between Major White and TCID (via Senator Williams). This passed by the city of Houston City Council on October 23nd as city ordinance #25. This has no risk at all now except if we go into an economic depression and are unable to collect sufficient sales and use taxes to pay our part of the financial obligation.
  8. The financial analysis was done by the Vice President of TCID and not contracted to an outside firm. From all I can see, the information is correct, as one would expect from the person responsible for finances in TCID.
  9. There is not any real threat of residents boycotting the businesses here because of a sales tax. Convenience is something to consider in The Woodlands. People will not go far for most goods and services. Shopping here is no different than Houston or Conroe. This crosses the risk threshold in my mind, but I am not very concerned about it.
  10. Should we vote no on the proposals, and the agreement is axed, we can still go ahead with the TCID consolidation and taxation effort to ward off annexation. HOwever, Houston is set to find a solution for regiponal improvements and we would no longer be under a cooperative agreement, so The Wioodlands would be a prime target for annexation again, probably higher than before. That would probably occur promptly in 2014.
Benefits and Risks of the NO Position

Benefits to the NO Position A. As-is comfort zone for the majority of The Woodlands; everything remains status quo. B. Opportunity to apply for incorporation now. I believe this would be politically doomed for failure and is not a real opportunity. C. Special election could be called later.

RISK ASSESSMENT of the NO Position.

1. Annexation of part of The Woodlands by Conroe - high(9)*small(1)=9 2. Annexation of the majority of The Woodlands by Houston - medium(5)*high(3)=15 3. High water rates due to Houston and Conroe city taxes - medium(5)*medium(2)=10 4. Lower service performance from Houston's and Conroe's service providers. high(3)*high(7)=21 5. Opportunity for a special election. high(7)*high(3)=21

Rationale of Risk Assessment to the NO Position

1. Conroe has limited time in its annexation initiative. They would be forced to complete their initiative immediately, even we if said we would have a special election later. This is a small part of The Woodlands, so its impact on the whole is relatively small. Nevertheless, it has high probability of occurring. 2. Houston annexation planning could start in 2011. There is only one legislative session left before they could start that process. With a stroke of luck, there could be another session opportunity in 2011. Mayor White may not extend out that long. So there is a threat of the loss of his leadership, as well as our legislative sponsors by that time. Timing is very important. 3. High water rates by Houston is almost a given if we are annexed. A typical water bill for one month is well over $100 average. Added to this is the fact that annexation would bring to us a 2% sales and use tax and a City of Houston ad valorem tax (similar to the one proposed). 4. No provisions have been provided for a special election. The next legislative session is in 2008. We would have to put off the propositions until then, so at the earliest, we might have another election in 2008.


fatlip said...

Thank you so much for your time and effort on analyzing this. I found your words and opinions very helpful towards my position on these propositions. I almost want to see if you can determine what came first, the chicken or the egg. Great job, let me know if you decide to run for office.

fatlip said...

Thank you so much for your time and effort on analyzing this. I found your words and opinions very helpful towards my position on these propositions. I almost want to see if you can determine what came first, the chicken or the egg. Great job, let me know if you decide to run for office.