Public Improvement Districts

Presented to the Plano Homeowners Council

By

Cornerstone

Association Management

Services

January 7, 1999

We want to thank Jim Wilck and the members of the Plano Homeowners Council for allowing us to present our information on Public Improvement Districts on January 7th. Thank you for your gracious welcome and comments!

We also want to thank Jennifer Nichols, President-elect for the Dallas/Fort Worth Chapter of Community Association Institute and Kim Roberts, President of the High Pointe Public Improvement District for all of your help in this presentation.

If Cornerstone can be of any assistance to your neighborhood, please do not hesitate to contact us at (214) 559-7120.

As promised here are some of our notes from the meeting as well as a sampling of the questions and answers.

What is a Public Improvement District (PID)?

A PID is a defined geographical area established to provide specific types of improvements or maintenance within the defined area(s), financed by tax assessments against all of the property owners within the defined district area. Public Improvement Districts are created under the laws of the State of Texas, Chapter 372 of the Texas Local Government Code. This law allows Cities or Municipalities to create residential and commercial improvement districts by ordinance.

What will a PID do for your Community?

A PID will provide all of the property owners within a defined neighborhood the financial mechanism to fund maintenance of common area improvements, which the City or individual homeowners are not maintaining to acceptable standards. These improvements may have been constructed during the development of the community, without the developer having created a mandatory homeowners association to pay for the ongoing maintenance and future capital replacement of these improvements.

What improvements may be included in a PID?

The types of improvements maintained could include the replacement or new construction of common fencing, masonry walls, entry lighting, street lighting, landscaped beds, right-of-way landscaping, parks, recreational facilities, sidewalks, lakes or ponds, etc. A PID can also plan for projects that promote the health and safety of its neighborhood in the forms of enhanced street lighting, increased public safety, traffic and road improvements.

Can a PID enforce Covenants or Deed Restrictions?

While a PID cannot enforce Covenants or Deed Restrictions, Cities will generally allow PID’s to regulate development activities within the defined district and secure the PID’s approval as part of any development plans approved by the City, which include common area improvements that the District would ultimately maintain. This could include approval of plans for new construction of irrigation systems, entry features, parks and other similar improvements as mentioned. Having a PID organized also gives a centralized voice for the neighborhood in addressing area issues that affect the community, absent a strong volunteer association. The voluntary association can still do enforcement of deed restrictions.

Who pays for the operation of a PID?

All property owners within a PID, including homeowners and owners of undeveloped parcels will pay assessments. The assessments are billed to each owner by the taxing authority and collected as a separate line item on your property tax bill, then reimbursed back to the PID by the taxing authority or City. The funds are kept separate from the other City funds and the PID receives a financial statement each month from the City. The City will also generally reimburse the PID for services that they would have provided under the normal maintenance programs of the City’s public works, however they will charge for tax collecting and accounting services. The assessment rates are recommended by the Advisory Board of the PID each year with the City Council approving the annual assessment rate after a tax hearing is held.

 

Questions & Answers

Q: Any suggestions on how to introduce a PID and convince a neighborhood of primarily retired, even house bound homeowners, of the improvements that a PID brings to a deteriorating neighborhood.

A. You may be surprised that a homeowner who has watched their neighborhood deteriorate over the years may become one of your biggest supporters. It is a good idea to host informational meetings to openly hold discussions as well as question and answer sessions. You may in some cases form a door to door campaign in order to meet and discuss the plan with as many owners as possible. You will be able to address most concerns this way and build support and momentum for establishing your PID.

Q. How would you handle an apartment complex in terms of assessing the voting requirements?

A. You would determine (1) the appraised values of the property and (2) the owner of record on the tax roles. With regards to voting strategy, you would have to assess your ability to obtain that owner’s vote. If you could obtain that vote he would probably represent a significant land size, which would have greater value to your petition than having a single vote.

Q. How do you work with absentee owners?

A. Calls, letters, e-mail or any other way you have of contacting them to discuss the plan. You must be willing to research and "find" answers to the many questions various owners will ask.

Q. How would a PID determine an assessment base when a parcel of the area is taxed as agricultural and the rest is taxed as residential?

A. The assessment is still based on the property’s valuation and the landowner would still count as only one property owner. If you can obtain the vote of that landowner his contribution in terms of land size could be valuable. Each situation should be reviewed on a case by case basis to determine (1) would it be better for the PID to include this land area or (2) would it be better for the PID to draw the boundary to exclude this area

Q. Since there could be several neighborhoods and possibly several different developers, what happens to the developer’s liability?

A. The developer would still be held accountable to the charter they hold with the city, however, in many cases the developer has already pulled out of the neighborhood.

Q Who grants the charter for a PID?

A. State law creates the ability for Cities and their City Council to create the PID by City ordinance.

Q. Do PID's assume liability from the City? What type of insurance should a PID carry?

A. The type of insurance a PID should carry has not been determined. High Pointe PID is still working with insurance carriers how insurance coverage will work. The PID does not own any of the property; it is simply designed to oversee common area maintenance and this land is City owned land. As of right now, the City’s indemnify the PID for liability of the public areas.

Q. Is there a minimum community size required to make a PID viable?

A. No, but an association would want to consider the associated costs divided by the number of owners to determine if this arrangements meets the neighborhood’s needs and is cost effective.

Q. Once established, could a PID adjust the amount of its assessments?

A. Yes. A budget is submitted to the city council and public hearing is held each year to set the assessment rate.

Q. What happens to money that is not used within a budget year?

A. The funds can go into a reserve fund for future projects or offset the next years operating budget, similar to an HOA.

Q. How do you handle "double taxation"? Meaning would I now be paying for the neighborhood maintenance through taxation and would also pay additional tax due to the appreciation in property value due to the neighborhood improvements?

A. This question has not been an issue with the groups that Cornerstone Association Mgmt. has worked with to date. This is certainly a possibility that could be attributed, when a PID is formed and the appearance of the neighborhood improves.

Q. Who decides how the assessment will be spent. Such as whether to plant trees versus seasonal color, or install new lighting versus new fence, etc?

A. The advisory Board for each community will decide how funds are spent. There are certain limitations on engaging contracts, some of which the City’s will have to approve. The Board will also submit a budget and 5 year plan to the city counsel each year that outlines the planned expenditures. To determine the Advisory Board, the neighborhood can hold an election to select a board comprised of owners within the PID.

Q. If a PID has city park(s), bridges, or other city maintained areas, will the City still continue to provide maintenance and absorb the expense?

A. A PID can maintain public land. Whether or not the public land is included in the PID would have to be established at the time the PID is zoned. Associated expenses are included in the PID’s annual budget. Also, the City may choose to contribute the funds it would normally spend, for example for mowing, to the PID. The main purpose of a PID is beautification and enhancement of the neighborhood. The leadership of the PID would have to determine if the neighborhood is better served by adding maintenance of the noted items.

Q. Where would a PID ordinance hearing fall on the city council’s agenda?

A. Typically within the consent agenda and/or public hearings.

Q. What is the down side of forming a PID and why are there not more of them?

A. The down side would have to be that the PID does not have as much control over architectural issues as a mandatory association. However, mandatory membership is not an option for many community associations. The reason there are not more PIDs is due to the fact that residents and City Planners are not aware of this option.

Q. Is there a plan for all neighborhoods in Plano to be included in a PID?

Not that we are aware of. This would be a question for the City council to address. This is a self-help program that can only be initiated by the residents of a community themselves or at the inception of a community by a developer. A PID gives neighborhoods a way to help themselves and is not intended to be something that a City or Municipality can dictate to a neighborhood.