Raw deal

If John Ware, Ray Hunt, and Bill Clements have their way, Dallas taxpayers may foot the bill for turning 2,200 acres of Kaufman County lakefront property into a golf course

Wood, who is probably one of the most experienced city officials in the country in the art and science of annexation, says he watched Lanier enforce a tough but useful rule of his own on developers who came to him with the idea that Houston should annex their developments:

"He just said, 'If you're so sure all this development is going to take place, then you need to step up and take all the risk yourself and not ask the city to take it for you.'"

The amount of risk a proposed annexation poses to the annexing city varies a lot, Wood says, depending on what the developer wants to put on the land. The trick is to make sure the property will pay more than the tax revenue it takes for the city to provide services.

In figuring out whether a deal is good or bad, Wood says, there are a lot of pieces to the puzzle, but, taken singly, each piece is fairly straightforward.

A standard urban fire station, for example, costs about $1 million a year to operate. In Houston, it takes $150 million in property value to produce $1 million in taxes. So, to pay for the fire station alone, it would take two thousand $75,000 condominiums.

It gets easier, Wood says, if you're doing $350,000 homes. About 430 of them would pay for the firehouse. But then you still have to pay for the police substation; the traffic and street lights, which are very expensive; and a host of other required city services.

And then there is the issue of where. Wood says it takes a minimum coverage area of about seven square miles to operate a modern fire station at optimal efficiency. The area being proposed for annexation in Kaufman County, however, is less than half that size, and only a fraction of it may be usable for development.

Of course, it's also detached from the rest of Dallas, which adds enormously to the cost of providing services. People in the new area will have the same right as people in the city's established areas to speedy police and fire response. Giving it to them will require that the city create new, separate facilities for many services.

Fairly precise mathematical formulas help cities determine whether they will make money or get screwed by annexing an area. In Houston it's called the "Pizzitola Formula" after the planner who worked it out, and it provides a concrete way to put on paper what Lanier was always doing in his head--measuring what's coming in against what's going out.

Some of the developers whose properties have been annexed by Houston in recent years have even been forced to sign a deal that completely eliminates the city's risks: If the city really is making money on their annexed development, everything is fine. But for several years after annexation, if the Pizzitola Formula shows that the city is losing money by providing services to the area, the developer gets assessed for the amount the city is losing.

In other words, when Houston annexes, it only annexes when there is no risk to city taxpayers, and when the city is guaranteed it will make money on the deal.

So who is the tough-as-nails, street-hardened guru at Dallas City Hall who is going to make sure Dallas taxpayers don't get taken to the cleaners on the Clements-Hunt deal in Kaufman County?

Uh-oh.

Cheryl Peterman, head of the Plan Department and John Ware's point person on the Clements deal, is known outside City Hall mainly for the role she played in last year's assault on the city's preservation tax incentives. In that battle, she earned a name among the city's new generation of hip inner-city and downtown developers as an ill-mannered bureaucrat who will do anything to keep Ware off her back and to hold on to her job.

One of the ways in which the city has been able to revitalize aging inner-city neighborhoods and spur the development of downtown residential living is by offering tax breaks to people who renovate old buildings. The tax incentives are a key ingredient downtown in the conversion of old office towers.

When word went down the pipeline at City Hall last year that John Ware wanted to scrape up income and cut expenses wherever possible to make the arena and river deals look better, Peterman did her part by trying to gut a key provision of the preservation incentives.

Had she succeeded, she would have scoured up only a relative pittance in new income for the city. But a number of insiders think it was about more than just dollars.

"There's a new generation of developers in the city," says one developer, who asked not to be identified because he does business with the city "every day." The new breed is committed to moving back into downtown and the old neighborhoods and sorting through the political and financial complexities involved in redeveloping those areas by renovating properties--in other words, making money by making the neighborhoods we already have better.

Of course, the old generation of developers is still around--a few of them, anyway. And their preference has always been raw-land development, like the Renner deal in the late '70s, when Dallas was persuaded to annex the entire town of Renner before it was developed but after it had been purchased in toto by former Dallas Mayor Robert Folsom.

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