The Water Flows Like Money – Part 2


March 4, 2011 | 3:54 PM

The Water Flows Like Money – Part 2

The Water Flows Like Money – Part 2

The Bill that keeps on giving
If you took the time to read through House Bill 3793 (HB3793), it may seem rather boring and without harm. However, the bill grants powers to the BRA that cannot be found in any other piece of Texas legislation. If someone can locate a similar bill for any of the other Texas water boards – please forward it to me. It gives the BRA broad powers on raising and finding funds, as well as eliminating any cap on the value of land that can be disposed of in any one year. What could unchecked ability on issuing debt do for taxpayers? Could this bill have any impact when the BRA sells off land around lakes they control? Could cronies of those that passed the bill profit?

Consider this – when the BRA started selling off land around Possum Kingdom in 2009, a planning process that went back 3 years, all of the land was sold to one group: Patterson Possum Kingdom Land Group headed up by Mike Patterson out of Arlington. The price was $52 million. Was that a  brother-in-law price on all that lake front property?  Rules of real estate is that land broken up into smaller parcels are worth more, so was this sale in the best interest of Texas?Well, let’s have a look. On April 11, 2006 the Staubach Company made a lengthy recommendation to the BRA Board to make changes to the Possum Kingdom Lake (PK Lake) portfolio. They recommended the BRA not sell of the assets. The reasons were pretty straight forward – loss of a paid for capital asset, loss of shoreline control, loss of water quality, and loss of environmental control. They stated the land value as of 2002 values were being assessed at $39 million. Staubach Company felt the value was $150 million and to make adjusted, gradual increases in fees to bring up rates. They also suggested that existing leaseholders get a break for time invested to be taxed at 35% of the real value based on case studies in other markets. If you take 35% of $150 million, that comes up to $52.5 million. That’s a scoche more than Patterson’s group paid for the land at PK. Then Patterson’s group announced that they would allow existing leaseholders to continue to lease or purchase based on 2008 assessed value. So much for the existing leaseholders getting that 35% of market.

Sound too weird? Here are the docs and links:, PK_Open_Bid_Process.pdf for PK Lake 2008, 072909_Approval-Contract-Final,

How did Patterson pull this off? It might have been who he knew. Patterson made a $5000 contribution to then State Senator Kip Averitt just months after the announcement of the sale. Averitt was the chair of the Natural Resource Committee at the time. Averitt also nominated then and current BRA President Chris DeCluitt, who I was told testified on behalf of Patterson in the “bid” process. That has not been confirmed, but I am still reviewing audio from the BRA meetings. Here is Averitt’s mid 2008 report to the Texas Ethics Commission.  Page 62 shows the contribution – KA FInance Report. Guess it’s not always what you know but who.

The real issue is why did the BRA allow the land to be sold when the Staubach Company presented a compelling study showing to keep the assets? If the decision was to sell, why not sell individually to the existing leaseholder as was also suggested by Staubach Company? Did the State of Texas just miss out on some serious cash? Did the BRA Board breach their fiduciary responsibility to the State of Texas and its taxpayers?

A river of money
Before you answer, factor in this as well – The BRA recently announced plans on a “conjunctive” water use project to “locate potential” groundwater supplies to augment water coming from Lake Granger. The first phase is $100 million. Total cost is estimated at over $500 million. Here is the link: Note the “low-interest loan” from the Texas Water Development Board. In business school they always teach that government entities can only raise money through bond issues.  Guess HB 3793 shoots that theory to hell. Wonder which state ledger this will all be reported under? Now it would appear HB3793 set the wheels in motion for the BRA to get money in whatever manner needed to keep operations in tact. Why would the BRA have to “take a loan” from a sister agency? I think part of the reason that this money was “loaned” by another Texas government agency has to do with fact the BRA might have an issue raising bond money or perhaps the interest rate they have to pay since they have outstanding unused funds from a 5 plus year old bond issue.

While I am hammering on the BRA in this writing, they are not the only Texas water board spending loads of cash. The Guadalupe Blanco River Authority just began the first phase of a $400 million dollar project. Wonderful reading on this – At least taxpayers are getting a pipeline out of it. The dollar amount seems a bit steep.

However, whether its is interest on bonds, interest to an intrastate agency, or interest to a loan shark – the State of Texas taxpayers are on the hook for the principle balance and the interest. If an agency has no oversight on spending, how can you truly balance a budget? Also, how do you know the money borrowed is being used as applied for?

It was a little over a year ago that I conducted a town hall for the Lake Granbury Waterfront Homeowners Association over issues related to water levels in Lake Granbury.  From research, communications from the BRA, and other information obtained there was no question that a stink was occurring over exactly why the hydroturbines had been shut down at Morris Shepherd Dam on Possum Kingdom Lake. For residents of Granbury, they just wanted the unit’s operating again to avoid the conditions on the lake in 2009. At the time of the meeting on February 22, it was still unclear as to what had been spent on repair of the facility and its condition. BRA refused to allow anyone at the site, claiming Department of Homeland Security protocol. As such, I presented options on how the get the facility up and running again. The BRA had decided in a 10-26-2009 Board Meeting to de-commission the hydro units pending the lawsuit outcome. Here is the link for the audio: The residents at the meeting were none too happy when that was played the audio. At that meeting, I gave a presentation on how to fix the hydros and get the dam going. I utilized knowledge of retrofits of other dam projects around the nation, the 30% energy grant as enacted under the 2009 Stimulus, and prevailing wholesale electric rates. My presentation was intentionally high (150 mil) on retro fit costs and we still had an illustration that made money with prevailing electric rates, an estimate of allowable hours for production, and debt service on all this. Actual costs came in after the presentation around $60 million to build new units before any tax credits of 30%. This number would have knocked the debt service I projected by more than half, adding to profitability.  This is the document I presented at the time before the actual costs came in: Possum Kingdom Lake

A few days after the presentation to the group I received information on the bond issues done on the hydro units and the dam since 1991. In short over 35 million in bonds issued since 1991 for maintenance on the dam and hydros. OK, wait a minute, the BRA shut down the hydros on the dam for maintenance, but have been issuing bonds for maintenance. I now had evidence that a whole load of money was issued in bonds, one issue for over $24 million in 2005 alone, for the very reason the BRA is claiming needed repair. So what gives? I issued a press release on it and pointed a big arrow towards BRA President DeCluitt. He panicked and penned a lousy response that admitted $3.8 million of the 2005 bond issue had not been spent. Really Chris? Where might that money be? These are the bond documents and DeCluitt’s admission that 3.8 million is outstanding on the 2005 issue – BRAos91 BRAos01 BRAos05 Z7143_DeCluitt_Letter

Here is where my beans get steamed – it is a federal crime to not use bond funds for their issued purpose. If you or I did it, we go to jail. Will someone explain to me why DeCluitt and the whole BRA Board are not before an investigative panel for holding this money? Where the hell is this money? With budget issues, talk of raiding the state “Rainy Day” fund, murmurs of raising taxes and such, is anyone looking at this and other state water boards?

The lawsuit between BRA and BEPC was kicked out by the 10th Circuit Court of Appeals in Waco on June 25, 2010. Reference my earlier blog That re-opened the door on the de-commissioning issue. The BRA did a hearing once again on the issue on 10-25-2010.

I’ll cover the snow job that the BRA pulled on the citizens of Texas next week.