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Hays County Approves $2.7M Loan for US Foodservice Infrastructure

TEXAS (August 5, 2010)—Having suffered a killing blow from the Texas Supreme Court one month earlier, the case against the proposed US Foodservice regional distribution center in Buda had the nails driven into its coffin last week when county commissioners voted 4-1 to loan $2,689,160 for the improvement of roads to the facility — $889,160 more than the county’s previous commitment.

The county’s loan is contingent on the approval of an interlocal agreement between the City of Buda, the State of Texas, and Hays County that would secure $700,000 in Texas Capital Fund grant money for the improvements to CR 118 (Firecracker Drive) and Turnersville Road.

Illinois-based US Foodservice agreed to repay the $2,689,160 in 20 years or less at four percent interest. US Foodservice must repay some or all of the Texas Capital Fund grant unless 51 percent of employees hired within the grant’s three-year term qualify as low or moderate income persons or families.

Former Buda Mayor Jim Hollis and Buda realtor Christopher Juusola sued the City of Buda in October 2009 on behalf of 788 residents who had signed a petition in favor of a special election to overturn or affirm a city council land use change. The land use change allowed light industrial uses on 95 acres of extraterritorial jurisdiction land, 40 acres of which is desired by US Foodservice for its proposed facility just east of Buda’s extraterritorial jurisdiction.

Last November, the state’s Third Court of Appeals ruled that changes in land use plans are not subject to referenda because Buda’s city charter only specifies “ordinances” as being eligible, and the land use change was a resolution. The justices also ruled that a land use change decision is not subject to a referendum because it is not “legislative in character,” which court precedent defines as policy-oriented and permanent in character.

“It’s been a long journey, and the citizens were essentially denied the right to protect and defend their comprehensive plan,” said Carl Urban, a leading opponent of the US Foodservice facility’s construction at the contested location. “That’s unfortunate.”

Married couple Carl and Betsy Urban, along with another BudaFirst member, offered public comment at last week’s commissioners court meeting, expressing opposition to locating the US Foodservice facility in an area of Buda formerly reserved only for commercial, office and retail uses. Buda Economic Development Corporation (EDC) Executive Director Warren Ketteman offered public comment at last week’s court meeting in support of the US Foodservice proposal.

Funded by the members of the Herman Heep family, which posseses land holdings near the site, BudaFirst formed last summer to oppose the land use change. BudaFirst funded and organized the referendum petition drive.

Betsy Urban is a granddaughter of the late rancher Herman Heep, who established a large spread straddling the line between Hays and Travis Counties lying mostly on the east side of Interstate-35 near the Sunfield Municipal Utility Districts (MUDs), entities created by the state legislature years ago to build roads and provide water, wastewater and drainage services. An agreement between Buda and Sunfield MUD No. 1 allows the city to dictate land use in the Sunfield MUD No. 1, where the disputed land use change occurred.

“The Urbans have been great citizens of Buda,” said Hays County Precinct 2 Commissioner Jeff Barton (D-Kyle). “They are among the largest landowners in Buda and in Hays County and one of the largest in Travis County, as well. So they have their own interests, their own ideas of how this ought to develop. But, at the end of the day, it’s not the job of the county to tell US Foods or the City of Buda which corner this (facility) should be located on.”

2428 Partners, LP, owns the land US Foodservice plans to buy for the facility. Carl Urban contends the traffic impact analysis (TIA) submitted to Buda by 2428 Partners is flawed and does not take into account 30,000 trips per day in the three Sunfield MUDs that comprised the study area.

“I say that because they’ve got 6,900 residents on this project in about 1,000 acres,” Urban said. “And part of those are going to be multi-family. And if you just drop it down to 5,000 residences, Travis County will tell you that it’s 10.2 trips per residence. We’re at seven trips for this particular TIA. That doesn’t even include the 900 acres of commercial and light industrial. So, somewhere in here we’ve lost thirty or forty thousand trips. Now these TIAs can be developer-driven, but it’s up to the city council, the staff, and the commissioners to look at the details and understand this.”

Urban said the TIA does not account for 8,600 children or an arterial road identified for future construction in Buda’s transportation plan, or a section of Turnersville Road running along the eastern boundary of the study area.

In August 2009, commissioners directed staff to draw up an agreement whereby the county would pay $1.8 million for road improvements to Turnersville Road and CR 118 and be reimbursed via tax increment financing. US Foodservice Austin Division President John Fowler told commissioners last week that the majority of the change in his company’s original cost estimate for the construction work stemmed from the need to replace box culverts with a bridge on Turnersville Road in order to prevent heavy rains from flooding out the road.

“We have public streets that border this project,” Barton said. “They’re our streets, they’re our responsibility to fix. They are substandard. One could argue that we should be fixing them without any incentive. But we have told this company that wants to come in and locate on these streets that they are not at the top of our priority list because there aren’t a lot of existing citizens living there. So, it would be several years before we would get around to fixing those streets. They have offered to enter into an agreement with us that will allow us to fix those streets now. Fix our public streets now. And they will guarantee the money to fix those streets. Now, that’s really the essence of the agreement. They will create property value there with the additions they are doing, they will create jobs, bring existing jobs from another city, from another county, into Hays County, and they will create additional jobs on that site for us.”

Buda Assistant City Manager Brian LaBorde, in his comments to the commissioners court last week, said city councilmembers approved the TIA and accompanying mitigation plan at their last meeting.

Commissioners used Chapter 381 of the Texas Local Government Code as the legal basis for providing the loan for the road improvements. In August 2009, county officials planned to use tax increment financing, though now they have determined the Texas Constitution does not authorize counties to use that mechanism.

Fowler said that in 10 years, the 290,000 square-foot facility will sustain 405 jobs, 157 of which will be created in Hays County. Fowler said his company’s weighted average annual earnings for salaried and hourly employees is $58,442, not including about 26 percent more in benefits. Fowler said all full-time employees are eligible for insurance and matching 401ks. US Foodservice may increase the size of the facility by between 100,000 and 200,000 square feet after 10 years and may invest a total of $69-$85 million in the building.

“Of all the times in the last 50 years that we’ve been talking about job creation, no time is better than today,” Barton said. “What we have is an opportunity to recruit clean business to Hays County that won’t pollute, that’s in an appropriate area within the development zone of Hays County. It has the opportunity to jump-start an economic development area, it appears. It has the strong support of the City of Buda, our partner in the project, and that will bring both jobs and tax base, tax value to our county.”

Hays County Judge Liz Sumter (D-Wimberley) cast the sole vote against extending the Chapter 381 loan to US Foodservice. Sumter also cast the sole vote on the court against drafting the since-aborted tax increment financing document in August 2009.

“After my assessment of US Foods, after knowing that it’s a $19 billion company asking a $10 billion county — or, valued at $10 billion — for that kind of handout, it didn’t make any kind of sense,” said Sumter in February.

Fowler said the proposed regional distribution center will generate tax revenue for two emergency service districts, Hays CISD, Buda EDC, the City of Buda and Hays County. Fowler said the regional distribution center will be Leadership in Energy and Environmental Design (LEED) certified.

“So we plan to do not only harm, but good to the environment,” Fowler said.

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