Creation of the District
On September
8, 1981 a petition to form the District was filed by South Shore Harbour
Development, a Joint Venture consisting of Andrem Corporation
and South Shore Harbour Investors, the holders of a majority in
value of the title to lands in the proposed District. The League
City counsel gave its consent pursuant to Resolution No. 141 on
March 26, 1981 for the creation of the District.
Testifying before the commission in favor of the District was
League City Mayor Joe Lamb. MUD 6 was created by order of the Texas Water Commission on July
13, 1982. Total area of the District at the time was
608.052 acres located wholly within the city limits of League
City, Texas. This acreage has been reduced by transfers of
land between MUD 6 and MUD 3.
The Water
Utility Agreement dated April 2, 1981(same as Mud 2 agreement)
[PDF Format]
On April 2, 1981 city counsel of League City approved and
adopted a Water Utility Agreement between the City of League
City, South Shore Harbour Development, Limited (Developer) and
the District, five months prior to the time the petition to form
the district was filed with the Texas Water Commission. This
contract was approved one week after the city gave its consent
to the formation of the District and was contemplated at the
time it gave its consent. The purpose of this contract was to
provide a water, sewer and drainage systems to the residents of
the District. According to the contract, the District was
responsible for the construction of the systems subject to
oversight by the city. As each phase of the system became
operable it was to be conveyed to the city. The city then
would provide water and sewer services to the residents.
The city was responsible for the maintenance of the systems.
Section 7.06 of the contract allocated 40% of the taxes the city
collected from the residents of the District over to the District and Section
7.08 authorized the District to assess ad valorem taxes.
The Water
Utility Agreement dated July 6, 1989
[PDF Format]
This contract rescinded the April 2, 1981 contract which was
never implemented. Although the District consisted of
608.052 acres, this contract only provided for water, sewer and
drainage systems to 535.376 acres in the District. The objective of the two contracts were
basically the same except in the manner the ad valorem taxes and
revenues League City received on the taxable property in the
District
were
divided with the District. (Section 6.06 of the contract
allocates the revenues and taxes the city receives from the
residents of the District over to the District pursuant to the
greater of a
complex "Formula" or "Percentage Formula". Section 6.08 authorizes the District to assess ad valorem taxes) A portion of the system was already
completed and the District was to issue bonds to provide the
funds with which to pay the Developer.
When the various water, sewer and drainage systems were being
constructed, they were financed by the taxes assessed by the
District on the residents of the District. As each phase was completed, the city accepted
title to the system and paid the District a portion of the
ad valorem taxes it assessed and collected from the residents in
the District rather than from the general tax revenues of the
city. On August 17, 1990 a document entitled "FIRST PHASE
SYSTEM CONVEYANCE BILL OF SALE" was executed conveying
properties of the District to the city. Again on September
20, 1991 another document entitled "FIRST PHASE SYSTEM
CONVEYANCE BILL OF SALE" was executed conveying properties of
the District to the city. As is obvious from this scheme, the
residents of the District paid for the systems twice, once when
they were constructed by the District and again when they were
sold to the city.
Bonds
Issued by the District
The following bonds were approved by the Attorney General of
Texas's office on the dates indicated and subsequently marketed
by the District:
1. Bonds in the amount of $6,100,000.00
were approved by Attorney General Jim Mattox on July 2, 1990;
2. Bonds in the amount of $3,970,000.00
were approved by Attorney General Dan Morales on August 6, 1993;
3. Bonds in the amount of $4,155,000.00
were approved by Attorney General Dan Morales on August 15,
1993;
4. Bonds in the amount of $7,945,000.00
were approved by Attorney General Dan Morales on March 26, 1997;
5. Bonds in the amount of $3,410,000.00
were approved by Attorney General Greg Abbott on March 11, 2003.
The Texas Water Code provides that no bonds may be issued
prior to approval by the attorney general's office.
The bond proceeds were to be used to pay for the construction of the
sewer and water facilities in the District. It is important to
note, for reasons hereinafter explained, that all of the bonds
which comprise the total indebtedness of the District were
issued after the execution of the Water Utility Agreement dated July 6, 1989
