Losing Ground

by John Tedesco
A Section

An obscure Texas law written for developers has cost San Antonio millions of dollars, stripped parts of the scenic Hill Country of trees and blocked attempts to protect the region’s water supply.

The “vested rights” law stops cities from imposing new restrictions on a real estate project once a developer files virtually any kind of plan for it.

From that point on, the project is “vested” and frozen in a time warp of more lenient city codes.

The industry portrays the statute as protection for the little guy from overbearing government. It’s a message that resonates in Texas, where property rights are held sacred.

In reality, the law almost always is used by large development companies, which have invoked it hundreds of times to trump efforts by citizens to tame explosive growth, a yearlong investigation by the San Antonio Express-News has found.

Thanks to the law, developers bulldozed wide swaths of the Hill Country, wiping out hundreds of acres of trees that residents fought hard to protect through two tree-preservation ordinances.

The law also is widely used by developers to avoid a 1995 ordinance intended to protect the Edwards Aquifer.

Passed amid thunderous applause in a packed City Council chamber, the water quality rules were hailed as a hallmark of planning for a city not known for its foresight.

Yet in the name of vested rights, developers avoided the ordinance in four out of five cases in the past decade. Urban sprawl continues unabated, bringing dense development over the fragile watershed that the city intended to protect.

With so many developers ignoring the local ordinance, aquifer protection is left largely to state regulators, who can enforce some pollution controls but can’t limit the size of housing and commercial projects. Their budget in San Antonio has been slashed by more than half since 2002, from $324,000 to $141,000.

The Texas law also hit local taxpayers in the pocketbook.

In October 1997, San Antonio was poised to charge developers new fees to control storm water runoff and prevent flooding.

But the day before the drainage fees kicked in, developers flooded City Hall with nearly 200 planning documents known as plats — the most ever filed in a single day in San Antonio.

In the span of a few hours, the developers successfully exempted themselves from at least $2.3 million in drainage fees, according to an Express-News analysis of a city database.

In recent years, tax-shy San Antonians voted to spend $135 million in two sales tax propositions to buy vacant land over the aquifer’s recharge zone.

The goal was to stem development and pollution.

Texas law hinders the buyout program because vested, or grandfathered, sites can turn more profit. Some owners of the exempted tracts are demanding top dollar for their properties, reducing the amount of land the city can buy.

While there are many factors that go into each land purchase, records reviewed by the Express-News suggest the city has paid an extra $2 million for grandfathered properties.

Susan Spegar, the city official responsible for the property purchases, agreed with the Express-News analysis.

“There’s no doubt that vested rights contributed to an increase in land values,” Spegar said.

By almost every measure, critics say, the statute has been a boon to developers while hampering efforts by residents, community groups and officials to make San Antonio a better place to live.

“Anytime a city wants to do anything, the developer can always beat you to the gun,” said Terry Morgan, a Dallas lawyer who describes the Texas statute as the most lenient in the United States.

Developers say the law prevents cities from unfairly imposing expensive new rules on them.

While acknowledging hundreds of exempted projects cover San Antonio, they insist most are built responsibly, even without city oversight.

And they credit the law for promoting growth, saving costs for homebuyers and boosting the city’s tax base.

“Real estate is an inherently long-term industry,” said Norm Dugas, a housing developer and president of the San Antonio Real Estate Council.

“It takes a lot of upfront planning and a lot of upfront budgets and investment to do a project. If you’re not able to finish the project under the same rules under which you started, you are going to bust your budget.”

Paper projects

A venture is considered “vested” when developers start work on a shopping center, a neighborhood or some other project. From that point on, a city can’t change land-use controls on them.

For decades, courts held a high standard of vesting, usually ruling that projects weren’t truly grandfathered until construction started.

But a Texas twist on vesting lowered that threshold.

The 1987 statute was written for developers who were unhappy with strict land-use rules in Austin, said Richard Suttle, a lawyer who helped lobby then-House Speaker Gib Lewis, the law’s founding father.

The law had a far-reaching impact across Texas. It said a project is born when early permits such as plats or master plans are filed with a city. Construction can begin years, even decades later, but the project will fall under the codes in effect at the time of the original filing.

In San Antonio, the law encourages the development industry to blur the line between legitimate projects and outright land speculation, records show.

The Express-News review found that:

–In a pattern repeated on at least three occasions since 1994, developers flooded City Hall with plat filings hours before council members approved new development rules, exempting thousands of acres from more stringent city codes.

–Developers and lobbyists helped write rules such as the water quality ordinance. Those same insiders then shepherded scores of clients through the exemption process to avoid those rules.

–The oldest permit ever used to trigger vested rights in San Antonio dates to the horse and buggy.

In December 2001, when H.E. Butt Grocery Co. wanted to expand a store on Hildebrand Avenue, the company found a hand-drawn plan for the site dating nearly a century before to 1908.

Texas law allows vesting to transfer between landowners. New owners can dig up plans filed decades ago by past owners to claim exemptions from current rules.

By relying on the old plan, H-E-B was required to follow only city codes in effect as of 1908. The company says it voluntarily followed current ordinances.

“We didn’t even have stores in San Antonio in 1908,” a surprised Kate Rogers, a spokeswoman for H-E-B, said when asked about the vesting case.

For years, local officials failed to do much to challenge this system.

Instead, they handed out vesting approvals “like they were candy,” said Ken Brown, a San Antonio lobbyist who represents developers.

While the city water department handed out blanket exemptions from aquifer rules, Brown said the Planning Department was just as lenient for all other city codes, such as tree preservation ordinances.

Between 1997 and 2001, planning officials exempted 500 projects — covering nearly 70,000 acres, about one-fourth of the city’s total acreage — that undermined efforts to manage San Antonio’s growth.

The city turned down less than 1 percent of all vesting requests during that period.

The projects keep their exempt status for years — many of those subdivisions and commercial projects are just now under way.

“Really, if you had anything where you said this is my permit or this is my project, the city would accept it and give you vested rights,” said Brown, whose law firm has handled vesting requests at City Hall on behalf of 120 clients since 2001.

Brown said most plans turned in by developers were valid. But he also saw the city accept vesting claims based on questionable documentation.

“There were some terrible ones. Really, really bad ones,” Brown said. “I was part of it. You’ll probably find my name on some of them.”

Today, the pendulum has swung the other way.

With the hiring of City Attorney Andrew Martin in 2002, San Antonio officials began challenging more grandfathering claims, although most still are approved. The development industry has turned to an old friend, the Texas Legislature, to seek a remedy.

In the past five years, members of the real estate industry who have publicly supported the vested rights law paid more than $4 million in campaign contributions to Texas lawmakers and spent at least $11.7 million in lobbying fees.

During that time, legislators filed several bills that broadened the type of plans that could trigger exemptions.

Developers and lobbyists acknowledge the law invites abuses. But they insist the exemptions offer a measure of sanity in a city that piles restriction after restriction on landowners.

“People get frustrated in the process,” engineer Gene Dawson Jr. said. “They get held up by the city arborist on a tree issue, so they just say, `Well heck, I’m going to get my property grandfathered and I’m going to go clear the whole (property).’

“I see that all the time.”

The scar

Drive along U.S. 281 North to Stone Oak Parkway and a project appears that fits Dawson’s description:

A gaping, 50-acre scar at the gateway to the Hill Country.

Earthmovers scrubbed a hillside covered with live oak and mountain cedar trees to bare limestone — wiping out a forest the size of North Star Mall.

Tract homes now are sprouting from the dusty landscape.

“I don’t see why in the hell they did that,” said Richard Villarreal, 63, who on a recent summer morning stopped with his family at a nearby Exxon Speedy Stop on their way to Canyon Lake from the city’s South Side.

“I understand it’s progress,” Villarreal said, shaking his head. “But did they have to tear all the trees down?”

The trees were bulldozed to make room for Encino Ridge, a dense neighborhood by national chain Pulte Homes, one of San Antonio’s largest builders. The Michigan-based company took in a record $11.7 billion in gross revenue last year.

“They worked day and night out here,” nearby resident Donna Biggs said. She stretched her arms to form a wide circle. “There were oaks this big cut down.”

Pulte’s local president, Bart Swider, said the company wanted to grade the hill to cut down on the cost of each home. But he admits the clearing was an environmental blunder — one that city tree preservation ordinances might have prevented.

“We did not develop in a manner that was environmentally sensitive,” Swider said.

Neither did the vested developers of Bulverde Village, where 270 acres of habitat for the endangered golden-cheeked warbler were leveled for new housing.

Nor the Encino Commons retail development, on Evans Road and U.S. 281, which flattened a tree-covered hill.

With no safeguards, the green hills of the North Side have been pockmarked over the years with barren clear-cuts, thanks in large part to the vested rights law.

An aerial tour by helicopter with an Express-News reporter and photographer came across a half-dozen sites.

Since 1985, San Antonio has lost 45,000 acres of dense tree cover to development, according to a November 2002 study by the nonprofit group American Forests.

The lost trees had more than aesthetic value. If preserved, the trees could have soaked up more than 3 million pounds of air pollutants a year, and saved the city $146 million in drainage costs to control floodwaters, the study found.

City Arborist Debbie Reid is certain that exemptions to the tree ordinance are responsible for much of that loss.

Yet even Reid can’t say for sure how many trees are being cut down in grandfathered projects. While city rules mandate tree surveys, developers aren’t required to conduct them if they’re exempt.

Resisting change

Many agree the city’s newest tree preservation ordinance, approved in 2003, is complicated and costly.

The industry complains that homebuyers are unfairly being forced to shoulder those costs, while most developers are going out of their way to save trees anyway.

But in projects such as Encino Ridge, nothing can stop developers from bulldozing everything in sight if they’re exempt from city ordinances, said Susan Wright, who chaired a mayoral task force that assessed the way San Antonio handles vesting issues.

“I don’t think vesting in and of itself is bad, or the motivator for bad development,” said Wright, who works as a development consultant. Pulte “used the law to get away with something that was wrong.”

Developers sat at the table with residents and environmentalists in crafting the city’s rules. Each ordinance took months — even years — to complete, and involved numerous public meetings.

But interviews and a review of industry newsletters show the industry feels besieged by the city’s new oversight and by “elitists” who don’t know the first thing about development.

One industry leader chafed at San Antonio’s open system.

“The democratic process allows any politician with an agenda, any organization with a big enough showing, even any bureaucrat with enough zeal to initiate legislation that impacts others more than themselves,” David McAllister, then president of the San Antonio Real Estate Council, wrote in a January 2000 newsletter.

National companies such as Pulte Homes are often blamed for coming to San Antonio and avoiding local codes.

But lobbyist Ken Brown said his clients from outside Texas have no problem with San Antonio’s rules.

City ordinances in other states, especially California, are considered more stringent.

Some local developers, accustomed to doing things their way, resist the city’s new codes, Brown said.

“We have developers in this town who have been here forever,” Brown said at a public forum on vested rights held last year. “And the whole thing about vested rights is, they don’t like to change. They don’t understand change. God, I wish they would.”

Land rush

In January 1995, the City Council was treated to a rare standing ovation when it unanimously approved, for the first time, controls to limit development over the aquifer’s recharge zone.

The ordinance mandated the preservation of major sinkholes, caves and other recharge features that feed the aquifer; required filtration basins to capture pollutants in storm water; and capped the amount of land that can be covered with buildings and streets.

A committee of residents and developers debated the rules for months. Council members said the final draft was long overdue.

“This is an ordinance that will help protect the quality of the city’s water supply,” promised Howard Peak, a councilman at the time who championed the rules and was later elected mayor.

Since then, four out of five requests for exemptions over the recharge zone have been granted, according to records at the San Antonio Water System, the agency responsible for enforcing the ordinance.

Developers must ask if they have to follow the ordinance every time they start a project or a phase of a project, or once a project changes.

Out of nearly 1,300 requests in the past decade, SAWS agreed to grandfather projects almost 1,100 times.

As urban sprawl swallowed recharge land, at least 32,000 acres — about 40 percent of the recharge zone in Bexar County — were exempted from an ordinance many San Antonians pinned their hopes on, according to SAWS data.

“Our efforts to protect the aquifer have been practically nullified by grandfathering,” said environmentalist Richard Alles, a vocal critic of the way the city handles vested rights claims. “It’s something that happened under the radar.”

While officials say the aquifer is clean, they acknowledge traces of pollution have been detected in its only urban area: San Antonio.

“Work that we have conducted has shown pesticides and volatile organic compounds at very, very, very low levels in the aquifer system,” hydrologist George Ozuna of the U.S. Geological Survey recently told the City Council.

“So we’re starting to see a connection with man as we encroach out into the recharge zone, and that water quality is starting to get hints of degradation,” Ozuna said.

SAWS officials said their hands were tied.

“Certainly there was a very high percentage of grandfathering, especially right after the ordinance,” said Scott Halty, a SAWS manager who approved most of the exemptions.

Developers secured many grandfathered projects by flooding City Hall with plans before the new ordinance kicked in.

On Sept. 8, 1994, the City Council imposed a temporary moratorium on new plats, a type of planning document, over the recharge zone. The idea was to stop landowners from trying to get around the looming aquifer rules.

But in the week leading to the ban, engineering firms filed nearly 200 plats calling for the construction of 6,800 homes. Another thousand acres were to be used for stores, businesses and apartments, according to a city database of plat records.

Half the plats were filed on Sept. 7, hours before the moratorium started. On a single day, engineers filed more than a hundred plats covering 1,100 acres.

By comparison, in the eight months before the spike occurred, plat filings hovered at an average of 47 per month, according to the city’s database.

The rush didn’t stop there.

The city moratorium cut off the flow of plats on Sept. 8. But it didn’t say anything about a type of document known as a preliminary overall area development plan.

The maps show multiphase projects that often cover far more territory than a typical plat.

Engineering firms — especially Pape-Dawson Engineers Inc. — filed 20 preliminary plans during the plat moratorium, eventually locking in 7,300 acres before the City Council discovered its mistake and closed the loophole in December.

David Pasley, the city’s director of planning at the time, said city officials were outmaneuvered. No one had realized the preliminary plans might be used for grandfathering.

“It was a brilliant move on their part,” Pasley said of the development community. “They took something that was very benign, and were able to circumvent the city’s regulatory desires.”

The preliminary plans were specifically filed to avoid the aquifer ordinance, according to a Jan. 31, 1995, letter written by Stephen Kacmar, then a vice president at Pape-Dawson.

Writing to a client, Kacmar said Pape-Dawson Engineers had “been working behind the scene with respect to the new development regulations over the Edwards Aquifer recharge zone.”

Kindly note, Kacmar continued, that the aquifer ordinance said any preliminary plan filed before the new rules are approved can justify vested rights.

“As you know, we prepared a (preliminary plan),” Kacmar wrote, and Pape-Dawson filed it “just prior to council action on the new regulations.”

The client was James Lassiter, then senior vice president of real estate for Lumbermen’s Investment Corp., an Austin-based developer.

The land Kacmar referred to is the site for a PGA golf resort over the recharge zone that sparked years of controversy.

The exempted status of the 2,800-acre project became an important bargaining chip for Lumbermen’s. The company said if the city didn’t accept its resort plans, it could turn around and build thousands of homes at the property, since it wasn’t bound by the aquifer ordinance.

“Pape-Dawson has worked this issue as well as we could have anticipated,” Kacmar wrote.

The firm certainly knew the issue. Gene Dawson Jr. co-chaired the committee that wrote the ordinance, and Kacmar served on it.

In an interview, Dawson described himself as torn between civic and professional duties. His firm’s clients were nervous about the aquifer rules — rules Dawson had endorsed.

“There was a panic by property owners,” Dawson said. His clients already had strong vesting claims, he said, but they asked his firm to file the last-minute plans to be safe.

“They wanted to do everything they could to protect their properties,” Dawson said. “And of course, being the largest engineering company, we had the majority of the projects. So it was our responsibility on their behalf to make those submittals.”

Dawson said he fought for the aquifer ordinance when the political will to pass it waned in December 1994. His advocacy made some of his firm’s clients uncomfortable, he said.

“You can’t imagine the pressure that was brought on to our company because of my personal commitment to the ordinance,” Dawson said, adding: “There are still people today who won’t work with Pape-Dawson.”

Kacmar’s letter was written to reassure Lumbermen’s that its engineers were still looking out for the company’s interests, Dawson said.

But he acknowledged the difficulty of explaining to the City Council why his firm had filed so many plans to avoid the very ordinance he championed.

“I had to stand up in front of the whole City Council and say that I did it,” Dawson said.

“And believe me, as someone who had been through the whole process promoting the ordinance, and then I had to say, `Hey, look what our firm did,’ it wasn’t a very easy thing to do.”

Just business?

Time after time, developers rushed to City Hall when a major ordinance was about to hit the books.

The city’s plat database, when analyzed to show filing patterns, looks like a medical fever chart, with the pulse of the development industry racing whenever new rules loom.

In 2001, the city was deluged with plats as it prepared to unveil a new city code that encourages parks, hiking trails and more livable neighborhoods. The rules took two years to write.

But in May of that year, the number of filings for the month shot up to 120 plats before the ordinances kicked in. After the code became effective on June 4, 2001, filings trickled to 16 for the entire month, according to the city’s database.

On Monday, Oct. 20, 1997, the city imposed its first flood-control measures on developers, who previously worried only about draining their own property with little regard for the effects downstream.

“The city had no drainage ordinance,” said Charles Conner, a member of the drainage committee. “As long as you drained your own property, you were fine.”

The new rules called for storm-water detention basins and drainage fees to be paid by developers.

But on Friday, Oct. 17, 1997 — the last business day before the ordinance became effective — the city suffered a different kind of flood.

Engineering firms filed 193 plats — the most that had been filed on a single day in San Antonio since 1990.

The city’s top engineering firms were involved in the rush.

They included Pape-Dawson, which saved its clients at least $287,000 in drainage expenses, according to city records.

The top firm, W.F. Castella, saved $840,000 for clients in 24 separate plat filings, records show.

According to an Express-News analysis, the sheer number of filings on Oct. 17 meant the city lost at least $2.3 million in flood-control fees, setting back the city program before it even started.

Messages left with W.F. Castella weren’t returned.

Dawson did not dispute the Express-News analysis but said the exempted fees don’t tell the whole story.

“I think what you’re trying to say is they got out of having to pay $280,000,” Dawson said of his clients. “Now, I will acknowledge that.

“At the same time, if you want to place blame or somehow say that that wasn’t right, then I also want to take credit for the $15 million (in drainage fees) that has been paid through our projects since the time of the ordinance.”

Nat Hardy had a ringside seat to the flood.

As an engineer at Pape-Dawson in 1997, Hardy witnessed the rush of filings. But Hardy left the firm, and until August worked in the city’s storm-water division, which enforces the drainage ordinance.

Some of the old plats filed in 1997 are still kept in cramped offices where Hardy oversaw the city’s efforts to control deadly flooding.

“Was it a good business decision? Sure,” Hardy said of the rush of paperwork.

“Was it in the best interest and welfare of the city?” Hardy asked. “No. I can look you in the eye and tell you that.”

jtedesco @ express-news.net

All content (c) San Antonio Express-News