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Schertz moving against utility district loan

December 25, 2018

At a specially called emergency meeting Dec. 19, the Schertz City Council unanimously voted to authorize legal action “to seek injunctive relief” from a loan application to the U.S. Department of Agriculture by Marion-based Green Valley Special Utility District.

The federal loans to Green Valley are at the heart of a conflict that has been going on for more than four years. The issue is who has the right to provide wastewater services to portions of southern Schertz, areas now largely empty but that have the potential for great growth.

Green Valley had two certificates of convenience and necessity, or CCNs, issued by the Texas Public Utilities Commission to exclusively provide water and sewer service to the mostly rural land, including a stretch along Interstate 10 in the southern reaches of Schertz and Cibolo. The utility partially funds its water operations with federal loans from the U.S. Department of Agriculture.

In October 2014, Schertz informed Green Valley that the city intended to provide sewer service to around 405 acres of land near I-10 and FM 78, and the PUC, following state law, shifted responsibility for sewer service there from Green Valley to Schertz. Part of the Hallie Heights subdivision, operating primarily on septic systems, is in the area, but the property is mostly vacant farm and ranch land.

Cibolo, also eyeing potential new development along I-10, had already filed the same paperwork for acreage within its city limits and was granted the right to provide wastewater services there.

By law, the PUC had to transfer the certificates of convenience to the local cities, explained Dudley Wait, executive director of operations for Schertz, but it also has to decide compensation.

“It’s not a ‘Mother, may we please have it?’ It’s PUC decides what the compensation level is for both entities,” Wait said. “And the PUC determined that, in the areas we were asking for CCN transfer, there was no wastewater infrastructure in place belonging to Green Valley, so the compensation level was zero.”

Green Valley separately sued both communities in federal court, saying the terms of its federal loan dictated it had the sole right to provide those areas with both water and wastewater services. Schertz and Cibolo separately responded that the loans were granted only to build Green Valley’s water service, not wastewater, and both insisted the suits were without merit.

A federal court agreed and dismissed the suit, Wait explained. But Green Valley appealed to the 5th Circuit Court of Appeals. That court’s decision said that even though the loans were for water service, they potentially could apply to the wastewater side and that the suit should be sent back to the federal court.

Because there are differences in appeals courts’ decisions and conflict between state and federal statutes, Cibolo decided to appeal the 5th Circuit’s decision to the U.S. Supreme Court. It will be early next year before the justices decide whether to hear the case, and a decision would not come until late in 2019, at the earliest.

Meanwhile, Wait added, Green Valley has applied for another USDA loan, “and, not surprisingly, this loan application has one wastewater project in it.”

“We believe that loan is being sought to interrupt our ability to get the CCN and serve our citizens,” he said.

Letters opposing the loan application have been filed with the Agriculture Department, he added, but there has been no response.

“So what the city has done tonight is authorize our legal council to start taking steps with the USDA to prevent that loan application from being acted upon until the lawsuits of the two communities are settled,” Wait said.

Another aspect of the issue, not addressed by the lawsuit, is that Schertz and Cibolo have partnered to build a wastewater treatment plant in the area in question. Bids for that project went out last month.

With Green Valley applying for another federal loan, Schertz city leaders decided they had to start the new legal action before the end of this year and called the emergency meeting.

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