DAVID W. ROSS
April23,2008
San Antonio, Texas
Martha Doty Freeman, Interviewer
San Antonio River Authority Oral History Project, Phase II
This is Martha Doty Freeman. The date is April23rd, 2008. I'm interviewing David W
Ross as part of the San Antonio River Authority Oral History Project. The interview is
taking place in San Antonio, Texas.
Give me some background information.
Well, I was born in Dallas, and my father was going to seminary at Perkins School of
Theology at SMU. And shortly after I was born, he got his ftrst appointment at Jefferson
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United Methodist Church as the education associate, so we moved to San Antonio, lived on
Cincinnati and then Donaldson. And then shortly before I started ftrst grade, we moved to
Ingleside, and so we'd move every few years after that. We went from Ingleside to Kenedy
to Floresville, and then Bishop is where I graduated from high school. Then went to
Southwestern University in Georgetown for my undergraduate degree and then law school
here at St. Mary's in San Antonio and have been here since then.
And when did you join the firm ""y""' ou're with right now?
(......
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In 1986. I graduated from law school in '85 and took the bar that summer and got licensed in
the fall. I had been clerking with a lawyer while I was in law school and worked for him
originally, and then moved to work with Ralph in July of' 86, I believe it was.
I noticed that your initial work was with personal injury and workers ' camp, and I wondered
how you made that shift over to water and land, real estate?
Well, it wasn't so much a subject matter shift. The lawyer I was working with that I was
clerking with, it was he and an associate, and then I was a law clerk. That associate left when
I was in my second year of law school, and the plan was for me to pass the bar and then be
that associate. He felt that he needed to hire somebody in the interim and so did, and then
hired me as an attorney when I got out.
But there just wasn't enough work for the three of us, and I was kind of twiddling my thumbs,
and he didn't want me taking a lot of initiative and working on things he was working on and
4 s~was looking for something else to do. Somebody that I had started law school with was
" working as a clerk for Ralph, and in fact another law school friend was an associate with
Ralph, and he decided to terminate that relationship. And so Ralph was looking for someone,
and I got information that way.
And at the time it was more of a general civil litigation practice which tied in with personal
injury litigation and workers' comp litigation that I'd been doing. And then over time that
moved into me doing more and more work for the River Authority to where I am now.
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How do you develop the kind of background or expertise that 's necessary to be involved with
something that 's as complicated historically as water law?
Well, the great benefit I've had is the role model and mentoring of Ralph and then Harvey
Hardy as well and being able to learn from them and in assisting them as I went on through.
Also, starting from a heavy litigation practice and personal injury and then general civil
litigation matters, then moving into real estate and representing developers and others who
deal with municipalities or governmental entitiey trying to get permissions to do the projects
they want to do, it gives you more of a background and a framework from that.
And the way I started doing work for the River Authority is I started doing their litigation
work, and then when special things would come up out of the ordinary routine, I would do
those as well, and took over doing the election stuff and on and on and on, so just gradually
worked on through that.
So was Harvey Hardy still active in the firm when you started?
Well, he rented space from Ralph at the building that they had for a while when I first got
there and then moved over to the GPM Building at the Central Park Mall location. But he
and Ralph had always been close, and Harvey was always a good person to ask about any
arcane subject matter that might come up, and he would know all the history and be more
than willing to share that history with you.
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You mentioned something about working with developers, and I know that SARA has had a
certain interface with developers in terms of providing wastewater services and that sort of
thing. Have there been any particular relationships that come to mind?
Well, not really. The work for people that I did at the start, back in the mid- and late .)80s;
was not so much focused on the large residential subdivision development but more of a mral
subdivision, acreage tracts, either manufactured homes or homes that they built themselves
but didn't buy from a tract builder or anything like that. And then more of either the initial
stages of setting it up and going through from there, but not to the point of, you know,
dealing with municipalities to either extend utilities or otherwise.
Most of what we would have done would have been large farm and ranch properties that
would be divided up into smaller tracts, have septic tanks and maybe in a few occasions did
create water systems for them, for those particular communities to do that. So they would
have been outside the city limits and generally outside of the ETJ of the cities.
So in your capacity of working for SARA, have you had any of those kinds of relationships
with developers?
Some, and more where they are requesting or needing service in a particular timeframe to do
what they're doing, although the staff, the SARA staff, is very active in not necessarily
promoting SARA's ability to service but making sure that any community needs that are
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there are able to be met. And so they meet periodically with elected representatives,
concerned citizen groups, and community groups or activists who are looking for service to
be provided in a new area, and so they have most of that day-to-day contact and discussion
on what is needed, how it can be provided, when it can be provided. And then I'll get
involved when the project actually starts moving forward to document the basis of that
agreement and how the service will be provided.
Okay. What kinds of- over the period of time that you've been dealing with water law, what
kinds of changes have you seen in state water law that have an impact on SARA and on other
similar agencies in the state?
Well, just as the geographical region has grown and the Edwards Aquifer Authority was
formed and we went through the growing pains of that and the whole idea of you couldn't
necessarily withdraw all the water that you wanted to withdraw and the idea that the actions
that you took in your area had an impact on people downstream or upstream from the flow of
the aquifer and its impact on the springs and how much water was left over to feed the people
who would have taken water out ofthe rivers. Just that it is much more interconnected, and I
think that people have a much better understanding of that, and I think the regulatory scheme
has followed along through that.
Do you see it as creating an increasingly restricted sort of milieu for SARA in which they
have to be more inventive in dealing with those regulations and laws, or have they been at
the forefront in that or ...
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Well, it certainly could restrict an entity if they took the point of view of trying to be - stay
within the box that - the box that others are trying to put them in. I think the effect it has had
on the River Authorit;;because ofthe point of view of the management and the board of
directors is that the River Authority staff has become quite adept and quite recognized as
expert in a number of these areas that allows them to use that expertise to help other entities
navigate their way through those. Certainly the larger entities, you know, SAWS and CPS
and any of those, have a lot of resources that they can use and do that. But where the River
Authority has been able to be of assistance is helping other governmental entities, the smaller
municipalities, the smaller water systems, to be able to share the expertise the River
Authority has in trying to navigate their way through that system.
Do you know enough about other river authorities to know how SARA compares with them in
those areas?
Yeah. SARA's kind of unique both in a number of different organizational ways. SARA is
one of the few - only river authority with an elected board of directors and is one of the few
that actually has the authority to levy an ad valorem tax, and it actually does. Most all of the
other river authorities have a source of revenue from either water rights that they have,
reservoirs that they have created and own and control the water release from, or hydroelectric
projects that produce electricity that generate revenue for the river authority, and they're
more focused on operating the utility they have, electric or water, for that.
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The River Authority, because we don't have those water rights or those projects or reservoirs
in our name to do that, has created for itself a role of intergovernmental agreements and
contracts and consulting services for other entities that has, I think, allowed the San Antonio
River Authority and its staff to create an expertise level and servic~ that they provide to
11\SCA..la~
others that other river authorities don' t do. They generally deal (iAaw:~iele)'within
themselves for their projects and what they do, and they have pretty well-defined boundaries
of their service area and what they can do and not do. The River Authority really isn't
confined to just the amount of water that it can produce out of this one reservoir; it can take
its services and its expertise and go anywhere and share those and involve others in our other
activities as well.
What is your role in those cooperative arrangements and in the sort of relationships that
you've been talking about?
Mainly if they develop into a particular project that is going to be done on an ongoing basis,
then I would be involved in documenting that agreement, that interlocal agreement, and
going forward from there. But a lot of River Authority time and effort is spent on things that
don't result in an agreement. The staff, you know, will periodically visit with, consult with
other utility systems, the smaller utility systems, to just let them know how they're doing,
assist them on ways to improve those. Sometimes that leads to an agreement where the River
Authority will then contractually operate and maintain a utility system, water system, or
wastewater system for a smaller governmental entity, and if that transpires, then we'll
prepare the interlocal agreement that says who does what and when for how much.
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But those are fairly standard and fairly straightforward, and because they involve funding
from two pubic entities are subject to their annual appropriation process as they go through.
And so it's something that both entities look at each year, both entities decide if they're
getting a fair shake from it, if their citizens are being served by, and renew on a yearly basis.
You make your role sound, I suspect, more passive than it really is, you know, you just write
up the agreement (laughing). What sort of advisory capacity do you have?
Well, I guess that's probably a little bit more accurate is that whenever a project is proposed
or an idea is proposed or discussions are initiated between the SARA staff and anyone else,
I'll quite often get questions about, "What can we do? Can we do this? Why can't we do
that if you say we can't? Can we do it this way as opposed to that?" And it's easy to say yes
or no. But the thing that you try to do is say, "You can't do this, but if we approach it from
this way, we can accomplish something close to that." O~"Ifthey will assume these
obligations, we can pick up these other ones over here." Or)'Ifthey'll convey the property to
us so that we own it, then we can spend our public money for that public purpose in that
situation." And that's one of the benefits ofhaving the long-term relationship with the
SARA staff and the SARA staff being here on a consistent, long-term basis is that a lot of
them know the answers to th~estions because they've gone through them a number of " times. You know, it's not a big education process each time something comes up.
Do you ever look at other river authorities in Texas or nationally for precedents about some
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of these issues?
Certainly you do, and the interesting thing and the unique thing about the San Antonio River
Authority and the other ones as well is that it's created by a special act ofthe~egislature.
And so the powers that they hav,have to be found within that document, and that document
is different than all the other river authorities' documents. There's a lot of similarities, but
there're things that are present in ours that aren't present in others, and the other way around
as well; other river authorities can do things that we can't do. So that's kind of the first step.
And then if you find something that you can do and that others can and have done, then it's
always a good practice to see how they're approaching it, what do they do with that, what
limits if any they put on how they exercise that power.
You mentioned that being able to raise money through the ad valorem tax is unique to SARA,
and of course that happened while you were active in your role as counsel to them. How do
you - what do you see as your role in that?
Well, it was really more a decision of the board and before that the management of the River
Authority whether or not to impose the tax. Again, when the River Authority ftatute was
- revised in '61, they had the election and authorized the 2 cent tax. And the River Authority
" imposed that some years, didn't impose it some years, but pretty well did that untill980
when they decided to impose a zero tax. So the decision wasn't so much to reauthorize the
tax but just to impose the tax at an amount other than zero.
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And the question is, "Well, why do you need to do that, what do you need the money for, and
how is it going to be used?" And so as long as the entity can provide services to its
constituents, then that is the justification for how that money is used to a public benefit. And
my role in that is to advise them on the steps I need to do to make that effective, but then also
to make sure that the tax is used - the money raised by the tax is used for the authorized
purposes that it can be used for. The decision to impose the tax and the amount of that to be
imposed is one for the board based on the advice they get from the management and their
counsel.
Was there certain amount o51 hesitate to use the term "lobbying_," but explaining and
promoting that you were involved in with the public or with community leaders, political
leaders?
Not the public and not in any organized fashion for anybody else. The River Authority staff
did a lot of outreach and a lot of question-and-answers and getting feedback from the elected
officials and community leaders throughout the district to make sure that this was something ~
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they would support, something they saw they could benefit from and would be in favor of.
And because of those discussions, there was no strong or organized opposition to anything.
If there had been, then maybe there might have been a bigger role for that. But our role
traditionally as lawyers for the River Authority have been, you know, responsive to .J:I-...
" management and the board itself and not to usurp the role of the board or to make ourselves
the face ofthe River Authority.
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Have you seen any drawbacks to having initiated or brought the tax back into play?
I don't think of any. I think it has been an entirely positive thing. The work that the River
Authority staff has done to produce the flood mapping and models that they have just could
not have happened without the tax and is going to be - already has been of immense benefit
to the community using the information that they have. And I think from an entity standpoint
has helped the River Authority be able to be much more integrated in cooperative agreements
with Bexar County and the City of San Antonio and others to provide services that address
things that have not been before.
What eminent domain actions have you been involved with on behalf of SARA?
Not too many until recently with the Mission Reach of the River Improvement Project. Most
of the eminent domain work for the River Authority was for the conservation dams and then . .) /
for the Channel Improvement Project itself, which were completed back in the )70s, and then V
after that the two underground tunnels, but those were pretty straightforward as well. And
the River Authority's been pretty fortunate to be able to make agreements with people that
they need the property for. The utility sites, wastewater treatment plant sites that they have,
they've been able to acquire by willing sellers and do it that way. And so they have not been
in a position of having to do too many things adverse in that particular area.
What's been the character of the condemnation work at - you were saying the Mission Reach?
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Correct, and for the River Improvement Project? The downtown area and the Museum Reach,
.....
the North Reach, have all been done by agreements with the adjoining landowners who saw
the benefit of that. The Mission Reach is a little bit bigger, and it's not going to be
developed in a River Walk-like way and is much more flood control, ecosystem restoration-and
recreation-oriented. And there are a few landowners who we've just not been able to
agree on the amount to be paid, and because of the compressed time nature of needing to
acquire the properties so the project can start, we had to go ahead and file some
condemnation actions to acquire those properties.
Have you worked in concert with the Corps of Engineers on that particular end of the project?
The@ in relation with and in response to SARA staff, River Oversight Committee, and
local input will design and construct that project. And so the @s the decision-maker on
what properties are needed. We can acquire more than that for another public purpose or
betterments or enhancements that might be made with money other than th@ money,
but they identify the footprint that needs to be done for that. Now, the location and routing
and whether it goes 20 feet this way or 20 feet that way is all something that can be part of
the design process and modified as they go through. But once that decision is made, then we
acquire those properties; that's the responsibility of the River Authority under the agreement
they have with the, is to acquire the right-of-way necessary for the project.
Do you have relationships wit@ps lawyers_; with their legal stajj?
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Some. The most direct relationship is between the SARA staff and t~s staff on the
engineering and planning and design level. Th@rps generally only involves their lawyers
when they're reviewing their template agreement that they have approved or if there are any
revisions to that, and so almost all of the agreements with tt@-ps, the legal agreements,
are th&rps' standard fonnat that they have. So there's not as if it would be a private party,
a lot of lawyer give-and-take back and forth on what that document's going to look like. The
main thing is what the project's going to look like, which is a staff-level decision, and what
it's going to be funded to. And then once that happens, they have their standard(a;:ements
that you use to go through there.
There's some tweaks that you make to them in a particular instance and some amendments
that you have to do for them. For instance, for the Mission Reach, we're trying to get an
amendment done that allows the advance payment of local share by the county and the city to
be reimbursed over the life of the project, so that if we went the way it is currently prepared
on the annual appropriations by the federal government, it would take longer to do the project.
And so if we advance our local share, then we can start the project sooner and then get the
agreement modified so that in the future years when the federal funding comes, that can be
used to reimburse the advance payment of the local share.
What about - I 've never heard the term "inverse condemnation. " What is that, and in what
sorts of situations has that been applied?
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That is where the landowner claims that a government action or activity or regulation has
taken their private property for public purpose without being paid for it. The direct
condemnation is where the governmental entity says, "Farmer Jones, I need 50 acres for a
new site." And they go directly and they pay him and acquire that property. The reverse of
that is where a governmental activity winds up having the effect of either an actual
appropriation of land or an indirect appropriation of that land by either reducing its value or
its utility and then - or a regulation that says, "You can't build on this land without taking a
number of steps," and then you can make that allegation.
So have there been situations like that? Tell me about some of those.
The one that arose to the level of a lawsuit that actually went to trial that I tried, the San
Antonio Channel Improvement Project ends just south of 410, and that project deepened and
widened and straightened the rive~ which made it very good to convey floodwaters from San
Antonio. And so once you get back to the natural channel, which is narrow and winding and
overgrown with brush, it can create a backwater effect of a big pool of water that tends to
stack up very quickly there. A landowner adjoining the natural river or I guess just up from
the natural river where the project still was had a flood event, got water in their home, and
then sued the River Authority and the,.ty under the theory that their operation of the
floodgates on the river and then their decision to;;;;: River Authority's decision to stop the
project where they di~created the water to back up into their house more than it would have.
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(End ofTape 1, Side 1. Beginning ofTape 1, Side 2.)
That case survived our efforts to have a Motion for Summary Judgment granted that said - - -
there was no legal basis for it and went to a jury trial. The {rty got out on a directed verdict,
and we stayed in through the arguments to the jury, and the jury ruled in the River
Authority's favor that there was nothing the River Authority did wrong. And so that was one
that actually went through that. Generally, though, the River Authorit)j although they have
some regulatory authoritJdoesn't take ~regulatory role. Thejity and the founty and the
jtate all have regulations about what can be done, and we generally use those as the
enforcement mechanism on things. And so unless we're physically acquiring a property and
if we did, we would pay for it, there are - there have been a couple of claims that because of
flooding on their property we were somehow responsible, but none of them went anywhere
other than this one lawsuit.
What about in situations pertaining to water quality? Has anything like that come up where
there 's been a suit due to contentions about water quality?
Other than the suit by the River Authority against the yftty that resulted in the Dos Rios Plant
being constructed, there haven' t been any claims against the River Authority for that. And
all the discharges that SARA has are all permitted and operating within those permit
limitations, so I don't. ..
Nothing comes to mind?
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No.
What about thinking about new efforts involving water law and some of the new relationships
and partnering situations? Tell me about SARA 's role in the Region L water resource
planning efforts.
Well, the significant thing about that is that SARA is the administrator for the planning group,
not just a member of the planning group itself, but actually in charge of the meetings and the
minutes and making the contracts with the consultants that serve and provide information to
the group itself. And I think that's just been an extension of the role that SARA has played
historically as someone with expertise and resources that they can provide and share for other
entities in a regional cooperative manner to move forward.
Any one of the other members of Region L would have been viewed as having an agenda or
being in favor of one particular way of addressing water needs or another, and SARA really
has a unique reputation and position, not just because of their reputation of how they've
worked with people in the past, but because six of the directors are from Bexar County and
two each from Wilson, Kames, and Goliad County, the River Authority doesn't have a pro­urban
or pro-rura1or pro-let's-mine-the-Edwards-for-everything-it-i~or let's don't drink a
drop of water out of the Edwards and look for other resources. So it can really be - it really
is viewed as having a scientific basis and a neutral position where just factual and scientific
and expertise can be shared to benefit all.
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The Region L covers, though, many more counties than are allowed for in the underlying
legislation. How did that come about, or what is there in the legislation that allows them to
do that?
Well, an act of thejegislature is the cause of that, and that happens just because of politics
and how all that gets worked out.
You mean for the Region L?
The boundaries and descriptions ofwhere to go.
For the original four-county issue or for what Regional Lis, which is many more counties?
Correct.
In other words, where is the authority for that?
On a very direct answer, the authority is in the River Authority Act itself. A lot of the
powers that the River Authority has are not limited to being exercised within its district.
On a more practical level and a more - and a personal level, the staff and the expertise that
they have and what they have done is beyond just the boundaries ofthe four counties. They
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have done a lot within the four counties, but they have operated in a regional manner for a
number of years. And so people from outside of those four counties and entities outside of
those four counties know and understand them and respect them, and so not only do we have
legislative authority on our own to do those things, just their past actions and reputations
have been the groundwork for others to say, "Yeah, they're a neutral player, and they can
take this role, and we' re comfortable with them in that position even though they're not in
our watershed, even though they don't live in our county." They understand that the River
Authority staff knows enough of the issues at play and has in the past and is currently playing
in an even-handed manner.
It strikes me that both in terms of the expertise that the staff has developed over all these
years and the legal expertise that because it has occurred in an environment that 's primarily
a broad, regional environment that some of these things would be quite specific to this broad
South Texas area. To what extent do you think those sort of lessons learned are applicable
elsewhere in the state?
Well, I think all ofthe ability or the desire and the benefit of working on a regional basis can
be shared everywhere. I think the thing, as you point out, that makes this situation unique is
not every region has an entity that's equivalent to the River Authority. Most regions will be
dominated by the large urban suppliers, and so you'll have the large urban areas opposed to
and contrasting with the smaller or rural areas who feel a land grab or a water grab or a
power grab. And so there's generally not another entity that has both a regional legislative
basis and representational basis that's elected that can be dis-elected if they get off the
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reservation that does that.
The other river authorities are appointed by the governor, so there's no direct responsiveness
there. And those other entities have their own water supply interests that they want to make
sure, and justifiably so, are advanced through that and so are viewed by the other members as
having a particular position that may not be in agreement with theirs. And so other than
maybe an academic position or a nonprofit position and even those have their own perceived
agendas, it really is kind of a unique situation.
Okay. Now, two things come to mind. What you're describing suggests that there's a better
integration of urban and rural interests within this area than you might find, say, Dallas/East
Texas where there 's been a lot of conflict, and are you suggesting that that's because of the
makeup of the board or the political reality of how that happens and whom they're
accountable to?
Well, I think that this region has those conflicts just like every other region. I think the thing
that allows the River Authority to function as it does on a regional basis and as an example of
that as the administrator of Region L, is the makeup of the River Authority itself, having six
members from Bexar County and six from the other counties. No other governmental entity
is arranged that way. And because we don't have a big reservoir that we sell water out of,
we're not perceived as having a particular agenda on one side or the other of favoring one
resolution or the other. And that position allows the River Authority to be able to try to
bridge those differences and conflicts that do certainly exist.
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Okay. Because I was thinking Wilson County and Gonzales County don 't exactly think
kindly about SAWS right now.
Correct, correct. And because SARA has elected representation from Wilson County, people
in Wilson County view SARA as having a more impartial role or at least one that is more
concerned with protecting their interests as opposed to an entity that would be located and
mn entirely by people within Bexar County.
Sure. Thinking about the Regional Water Alliance, what is your perception ofwhat it 's
accomplished since its inception?
J;b
I don't know ifthere - well, there are not a number of projects that)g'has accomplished, but I
think just the fact it exists, just the fact that as a result of all the hard work of the River
Authority staff, all of these separate entities have taken to their boards, their councils, and
made a presentation, and those councils had said, "Yes, we want to be a part of that." And
then the representatives get together and meet and work on the things that they do and get the
briefings that they get and address the questions ~y do, just that existence alone allows
everybody to have input, allows everybody to have a place to bring an issue that they have,
and to know that they're not out there on their own, they're not going to get run over by
somebody, that there's a place that they can bring a grievance that they may have. Because
they all know that, I think there's a shared level oftrust and expectation among them on how
to operate in the future.
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~/s there overlap between the Regional L initiative and the Regional Water Alliance?
Well, to some to degree.
Is there redundancy there?
There - yeah, there certainly is. The Region Lis based in state law and has reports it has to
do every year. It has to come up with its recommendation on how to address all these needs.
The Water Alliance is not generally as broad as Region L, more around the Bexar County
and surrounding areas and more municipal water suppliers. There's some others that aren't
municipalities, but it's almost all small municipalities, and so there's a difference between
the two there. But the Region L thing is driven by the water plan that they have to produce
on an annual basis and the updates that they have to produce on an annual basis. The
Regional Water Alliance doesn't have that time frame, doesn't have that report it has to do,
and can go down other avenues or not as it sees fit.
So there's more flexibility there.
Correct, right.
Do both or either of those have - make for opportunities to influence state and federal
policies and regulations pertaining to water?
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Yeah. I think the one that has the biggest influence is obviously Region L because so far, the
Water Development Board has taken each regional plan and said, "Yeah, we'll include it in
the state plan and go forward." And so what Region L decides really does set the agenda for
what is available to be funded for future development, so that really has a direct impact on it.
The Regional Water Alliance doesn't have that direct route, doesn't have that established
statutory way they can do it, but certainly they can get the ear of anybody who they wanted
to and say, "It's not just my little city of3,000 who thinks this ought to happen, but it's
everybody that's been looking at this issue." So it's not "my little problem," but it's people
throughout the potential district:thJthey're talking to.
1\ 1\
Have you found legislators to be pretty receptive to the information that's coming to them
from those groups?
I think so, yes. The Water Alliance I don't think has done too much as far as trying to
influence things; it's more focused on practical ways to respond to the regulatory scheme that
they're in and the limits that they have and how to meet those more on a direct basis. But if
they ever decided to take a position on an issue, then that would certainly be something they
could accomplish.
~ rjouple of things that Karen had mentioned was SARA 's participation in brackish
" groundwater studies, and I hadn 't heard anybody else talk about this. What 's this about?
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Well, it's the result of a couple things. And particularly the city of Kenedy has some wells,
and I have fond memories of the water in Kenedy and Floresville and Bishop, and they all
have their unique characteristics. And my mother swears that the water in Kenedy makes the
best coffee, and she'd always stop at th~nd get a cup of coffee whenever she's
driving up and down 181. But some of their wells have an element of poor quality, and what
they would like to be able to do is take brackish water, which is saltwater, brine water, and
remove that, treat it, and use that as a drinking source.
And so the River Authority submitted a grant application in conjunction with the City of
Kenedy. The River Authority staff helped prepare that and helped underwrite and fund the
effort to get the grant application done. And once the grant application was done, they
helped participate in the local match necessary to make that happen. So there's an existing
project to study that as a way to do that. And this was in advance ott;:WS~rt on the
1\
brackish groundwater that they were doing there.
Oh, what was that?
Well, SAWS -
Had Kenedy gone to both agencies?
It was funded by the Texas Water Development Board. And so the grant proposal was put
23
together and submitted to the Texas Water Development Board, and they said, "Yeah, we
want to try to do that." And this was probably before the legislative session, state legislative
session that considered the seawater pilot projects for water desalination, and so it was one of
the first actual projects that was actually being done on a research basis. Certainly El Paso
and Brownsville had desalination projects up and running that they were doing, but as far as
trying to get some data to determine if it could happen or not and those things, this was one
of the first projects to do that.
Does this have any relationship with SARA's buying the Wilson County water system?
No.
What was -
Other than just SARA's role to try to help communities deal with and address their water
needs. The purchase of the water system in Wilson County was an instance where a private
owner of actually systems for three communities, three subdivisions, was looking to sell; he
~
was getting older and wanted to get out of the business. )le had approached SARA a number
.\
of times to try to sell that, and SARA decided to purchase that and be a retail water provider.
And how has that worked out?
Well, [think it's worked out fine from the standpoint of those receiving the water. I think
24
SARA did it both as a way to be a provider of water on a retail basis, but then also to make
sure that that water was being provided in a safe and quality manner. And the first couple ~
~--
years were spent trying to get the infrastructure improved and up to a standard that wrlf allow
it to be provided on a regular, firm, and reliable basis.
And also the board also authorized a rate structure that promoted conservation so that higher
water use would have a higher rate than just your basic water use. So that resulted in a
$-
decrease in revenues, and so that coupled with amount of money paid to improve the system,
1\
upgrade the system, has not resulted in a big money-maker for the River Authority, but I
think from a standpoint of wanting to be a service provider to the communities and to make
sure that a quality product is being provided, I think that has been a success.
Have there been any equivalent projects in the other counties?
Not as far as purchasing an existing system. In Goliad County, the River Authority has
worked and helped form a water supply corporation that has provided water to several
communities there. And these were communities that had wells and septic tanks and had one
pretty close to the other and had samples showing up fecal coliform in some of the wells, and
nobody had the money to provide a municipal distribution system to them. So the River
Authority helped create a water supply corporation, nonprofit water supply corporation, and
provided a lot of the expertise and funding to get the grants, I think some from the federal
government, some from the state government to build a water distribution system for three
communities there.
25
You know, recently LCRA 's activities in terms of creating water supply has really initiated
this huge explosion of growt)and some people would say in areas where it really shouldn 't
occzJ and has committed them to supply that they may or may not be able to sustain. Do you
see that as - do you see any of that happening on a small scale where SARA goes in and tries
to help communities make sure that they have dependable, clean water?
Not from the projects that SARA has been involved with. The Wilson County subdivisions
are just about all fully built out, and it's - there's no room for growth in any of those. The
Goliad County ones, arguably, people would move to those areas to do that, but the existence
on the ground now is just to serve existing homes, not for any new subdivisions, and Goliad
County really isn't growing. So if the River Authority were going to do projects either in the
unincorporated areas of Bexar County or maybe Wilson County, that could lead to that
situation, but both of those are growing on their own without the River Authority having
much input on those.
So they're initiating their own water supply projects -
Correct.
- without you-all marketing to them or getting into that situation.
Correct. Where the economic dynamics justify doing that. The Goliad situation is where
26
there was no other way to get that than formation of a water supply corporation and getting
federal and state grant money to construct that and needed somebody to put in money to help
that happen. So that was the role the River Authority had there and acquiring just an existing
system to make sure quality service continued in the Wilson County scenario.
Was the River Authority's interest generated primarily by issues of water quality in a case
like that?
Well, in the Wilson County one, I think it's both a blend of a concern of not wanting the
water company that was there to fall into further disrepair and not being able to provide a
good system for that, but then also wanting to have the experience an~tion ofbeing able
t\
to provide water on a retail basis to its constituents. You know, it was a service they thought
they could do without adding a lot of new manpower with the people that they had.
What is your role as legal counsel vis-a-vis the board? What are your responsibilities in that
area?
Well, to represent the entity, not the individual board members, but to represent the entity
and to help them in any decision-making process they need to for the things that SARA does.
The relationship between the counsel and the board for SARA is a little bit unique from other
entities because most ofthe time, the board will hire the counsel. The River Authon.B
has a provision that the general manager is the one who hires the professional service
providers, and so the relationship is generally between the general counsel and the general
27
manager who then has much more interaction with the board. And so it's kind of a board­defined
thing of how much they want or need from me, which varies between board member
as they go forward.
That's interesting that you identified that structure because there's been such longevity and
consistency of service by one firm to the River Authority.
Right.
And so I suppose that's reflective of that structure -
Yes.
- and the responsibility of the general manager, whereas if it were up to the board members,
it might kind of jump around from law firm to law firm depending on ...
It certainly could, but I think just the history of the River Authority board pretty much
mirrors that as well. There's not - they have longer terms, six-year terms, so it's not a two­year
term, and it's not a term limit situation. And occasionally board members will resign or
lose an election, but generally there has been a pretty consistent membership of the board as
they go through. There's not a lot of turnover, and the board as a whole has had a pretty
consistent situation there. So it's not like a number of city councils or school districts where
one election can flip it from one side to the other, so it's been a very stable board. And you
28
know, because they meet once a month, because the projects are limited to River Authority
interested projects, not ftre, police, garbage, all the other things that other political entities
might deal with, it's been a pretty consistent and stable situation.
I would think it would be beneficial, too, though, in terms of the legal advice just because
there 's such a history of knowing the issues and the law.
Right. And it's not advice - or not topics or situations or issues that apply to just any entity.
They're fairly unique to the River Authority and not generally replicated without some effort
from other sources.
What about your work in the area of public utilities law? Facilities purchase, expansion,
public notification, permitting, all that sort of thing?
Most of the main facility situation is the Environmental Center purchase. The River
Authority formed the Public Facilities Corporation as a vehicle to -
(End of Tape 1, Side 2. Beginning ofTape 2, Side 1.)
The River Authority formed a public facility corporation to acquire the environmental center,
the Euclid &.ilding.
Which building?
29
It's on Euclid Street, so they call it the Environmental Center or the Euclidguilding or
Channel Nine ~ilding, which was the previous owner. And that really is just a vehicle to
issue bonds to purchase the building. So the River Authority board creates the SARA Public
Facilities Corporation~ues the bonds. They are the landlord that make a lease with the
San Antonio River Authority that pays rent that in tum pays the bonds,~t's the SARA
board wearing one hat and they take their other hat off to do that. So it's just a way to
accomplish that building acquisition and renovation.
Okay. And how do you work with that corporation?
It's a corporate entity like any other. They have annual meetings, they have the things that
they need to do, but once the original purchase was done, other than just the annual meetings,
there's really no more for them to do.
Whose idea was that, and what was the need for it?
Well, the idea probably came as a collaboration with the financial advisors and bond counsel
for the River Authority. And the need for it would be a way to get money to purchase the
facility without using SARA reserves and being able to use SARA revenues from its
operations to pay that back over a period of time, just a way to acquire it now and pay for it
over a time period.
30
And tell me again what the function - what goes on in the building?
It is an administrative building and houses the River Authority lab and financial and
administration services departments and serves as the meeting space for all River Authority
functions as well. Part of it is leased to the Edwards Aquifer Authority; they have some
offices there.
All these interconnecting, complicated relationships.
Right.
~d a flowchart to follow all these things through, and it seems to get increasingly
complicated, isn 't it? (Laughing.)
Right.
It becomes more current. Okay. What about the Tax Increment Financing initiative? Where
does it - what does it have to do with the community development initiatives?
Once SARA began imposing the tax again, set the tax rate at the rate they did as opposed to
zero, they then began to get requests from people who are interested in creating a tax
increment financing zone to participate. Because the SARA tax is so small, the general main
players in any of those TIF's are the pty and the ..¢'ounty. The school districts generally
31
don't participate because they need all the money they can get for their operations.
But developers would ask SARA and over a period of time depending on how big the project
was could result in some money to that developer. And the SARA board stmggled at first
with what - whether or not to participate in any, and if they were to participate in any, to
what degree, if they're going give 100 percent increment or 50 percent increment, and
directed the staff to come up with a policy of how to review these requests and over a period
of time worked out in detail a policy that mirrors the elements and values that SARA wants
to see accomplished, both through their entity and then through any development that they
sponsor so that they would not want to use or be part of a tax increment fmancing proposition
that resulted in degradation to water quality.
And so the staff reviews the proposal, gets information from the developer about how dense
the development is, what is going to be their source ofwater and wastewater, and just how
it's all going to work and has a way to rate each of those. And then they present that
information to the board, and the board can make the decision about whether or not to
participate and if so, at how much.
That's just another tool that the community development staff has in talking to people about
how to - how SARA can assist and aid in future development. You know, if a city is talking
to a developer, a smaller city, and wants to put in a subdivisioi]and the developer wants to do
a TIF, then SARA can say, "Well, we can participate, and we can help you work through that
process."
32
What are examples of some ofthe projects that have been accomplished through this?
A number of ones that are in the city that came through that the City of San Antonio was the
TIF sponsor for that are within the city the River Authority participated in. Probably more
notable, though, is one that the City of Elmendorf participated in and was the sponsor for, the
Selma I, for the Retama TIF, and then a recent one, and I'm drawing a blank. I don't think it
was Selma, it may have been Schertz out by Randolph for one as well. The Retama one was
one of the earlier ones, and the plan was pretty well-developed and seen as the development
of all the property around the Retama area, and the SARA staff reviewed that just on an ad
hoc basis at that time.
The Elmendorf one was more of a situation where that development was going to be using
wastewater service to be provided by the River Authority, and so it was a combination of the
River Authority providing wastewater service and also participating in the tax increment
financing to get development offto provide some tax base for the City ofElmendorfwhich
had historically not had much development at all.
And then the one for Schertz is an effort by the City of Schertz to develop further south from
where they were and further away from 35 and then down 1604 towards 10 to develop that
part of their town. And so each one of those had some interesting goals and gave the staff
and the board an opportunity to review those and have their input on what that development
looked like to some extent.
33
Now, I had understood that at some point the Authority acted as a bonding agent for some
communities~ tiJs was years ago, and it sounds a little bit equivalent, in other words, I guess,
if a small town didn't have bonding authority?
Well, the River Authority back in the mid-, early )70s created the San Antonio River
Industrial Development Authority.
Right, I know what you're talking about.
And that entity issued bonds for industrial and manufacturing projects, some - most within
the San Antonio area, some outside of that.
That would have been an entirely different kind of initiative, I assume.
Right.
Okay.
Well, it would allow a smaller cit}) if for some reason they couldn't issue the bon~ to use
that entity to issue bonds. So if a new employer came to town and sai~ "I need a
¥
manufacturing facility be built," SARTO A could be a conduit to issue the bonds to fund that
construction.
34
Okay. Are most of these relationships now for residential or commercial development?
What kinds of development is going on under that umbrella?
Under the TIF umbrella, almost all are residential, and I'm not aware of any commercial for
that. And SARIDA has not issued any bonds in a number of years, mainly because the
Development Corporation Act was amended to allow cities and counties and other political
subdivisions to form those corporations and issue those bonds<;hey were on their own to
"
do that.
Okay. All right. What's been the character, $an;; of your relationships with thejegislature,
you personally? Do you visit with mernbers, do you lobby, do you inform, testify, what do
you do in that area?
Do not - have not lobbied for the River Authority, have not testified for the River Authority
generally because most of what the River Authority has been involved with has been pretty
straightforward, has been monitoring what is going on, what's happening. And so I will visit
with staff - legislative staff or even legislators just on an informal basis to see what's on their
mind and what's going on but not anything that is any kind of a lobbying effort or anything
kind of formalized for that. The River Authority has their own legislative representative
team that they us7 also have staff people that do that as well.
Do they come to you for information and suggestions?
35
Some, and review and comment on proposed legislation, you know, pro and con, and so
there's a lot of either drafting of what could be proposed legislation or comment and mark-up
of what somebody else is planning to introduce or has introduced. And then as it goes
through the process, just sharing with the SARA staff what effect, if any, that would have on
their activities.
And what about governmental relations with the City of San Antonio or any of the other
entities like SAWS or CPS or any other entities where there are overlapping interests?
Most of my contact and discussion would be with their legal counsel and not a position
where I'm talking to their elected board members or anything but more just staff to staff,
legal counsel to legal counsel.
When you're working on specific problems or ...
That or just asking about what's currently going on, what's on the horizon, those kinds of
things.
Are there any legal concerns that pertain to water reuse? I've been hearing a fair amount
about either the fact that there 's a lot more water coming out of San Antonio and going
downstream than is actually coming in, and there are possibilities in the future for reuse of
treated wastewater that would have an impact on flows downstream. What are some of the
36
legal concerns about issues like that?
The primary concern is who owns the wastewater, and currently the answer i9t depends
upon what the source ofthe water was. If it's a surface water source, there's a set of rules;
and if it's a groundwater source, there's another set of rules.
But the kind of overlapping thing that the River Authority has an interest in is the health and
viability of the river itself, and a lot of the flow of the river is made up from the discharge
~the Dos Rios Plant from SAWS. And so if, in theory, SAWS took all of that back and
used it all up and never got discharged, that could reduce the flow in the river. I think the
practical thing is there is always going to be some discharge, and the concern would be to
monitor the quality and the amount of that discharge to make sure it happens there.
And you're not going to be able to reuse everything, and just the plumbing problem of
getting the reused water from the treatment plant back to all the different golf courses that
you want to water it with or whatever you do with it is also going to be (inaudible).
So do you see issues of water rights being a particular challenge in the future?
~ I think as populations continue to grow and as we continue to reach the limit of what
you can have available even with good conservation measures, there's going to need to be -
well, there will be an increased scrutiny and demand upon all the other alternate sources, all
the way from rainwater harvesting to collecting the condensate from air conditioners to reuse
37
of grey water, reuse of treated water. And all of that is going to be something that gets more
and more scarce as it goes forward. And then coupled with the effect of that ecologically on
the health of the river as it goes through, and so you've got who's using the water, where
they're using it, and then also what the water's being used for, human needs versus
environmental needs, and bays and estua1ies as well.
Do you see any impact from people I sort of identify as water renegades, I guess, people who
kind of come in from left field with different plans for taking water from this aquifer, that
aquifer, and who don't seem to be interested in integration into larger plans? Do you think
they 're viable long term? If they are, what kind of impact would they have on the River
~
Authority? ~a lot of the sort of thing down towards Brackettville, for example.
Well, yeah, it's one of those things that, you know, kind of needs project-by-project review.
But just generally speaking, there can be good projects that kind of shift the available water
from the east to the west or underground water the other way. But the main concern for all of
that is how much is that project going to cost. SAWS has done a marvelous job of looking at
available options that might be there, and every option that they look at just increases in price
over time. So even though it might seem like a stretch to pipe water from a far distance away,
over time that may be a worthwhile project. So that's really the benchmark that's going to be
there is, you know, is the need there, and it obviously will be over time; and if so, then is it
economically viable.
I was looking at one of the charts about what the projected population growth was in the
38
area and then what the availability of water was under the best of circumstances, and there
seemed to be a fairly sizable gap. I guess that 's where innovative approaches come into play.
Well, and just the cheapest available water is conserving what you have, and so put water in
your St. Augustine grass and quit using water to do the things that we do with it and
(inaudible).
Tell me just generally what you 've enjoyed the most about your work with the River
Authority over - it's been a lot of years now.
What is really just a joy to me is the people I get to work with. They're dedicated to what
they do, they know what they're doing, they don't have an agenda-driven process, they're
concerned about doing the right thing the right way, not "I want to get to this point and I
don' t care how you get there." That's the refreshing part and the part that makes it easy to
get excited about trying to get to the goal set by the board and directed by the staff. So it's
always a good process for that.
Have you seen significant changes during the time you 've been with them in approach or
priorities, that sort of thing?
Well, the priorities will change in definition or maybe focus, but the kind of biggest change
has just been ramping up to the decision to begin setting a tax rate and collecting the tax and
doing from there. And that change has really just been the growth and the size of the agency
39
and the scope of what they do. But the approach, and this is the neat thing, has really kind of
stayed the same as when it was the same old, same old. You know, it's still - it has a little
bit faster beat, a little bit more focus on moving things ahead, but it's still the same "We're
here to accomplish this mission, and let's go about doing that the best way we can."
So what would you identify as the core missions that are the main constant during that time,
regardless of the amount of money available?
Well, just the protection and use of the water resources for the benefit of the public and the
area has been the constant. And the other constant really has been not so much what those
policy goals are, but kind of the corporate mindset, if that's the right way to say it, is
approaching things in a professional manner without a preconceived agenda and with trying
to work cooperatively towards achieving that. You know, not making it be about a turf war of
"This is ours" or "We're going to go claim that for u5' but having the vision be towards
where you want to get and working towards getting that. And that's been the consistent
outlook.
It sounds as if SARA has been pretty successful at taking a leadership in setting a particular
agenda, though.
Yeah. I think that's true. I think that's possible because they have a broader constituency. If
it was ju~ted to this one municipality or this one subject area, then you're kind of
involvedjl(just that. But if you've got a broader base, a broader board that's directing what
40
you do and a broader range of what you can do, then it's much easier to understand and be
aware of in favor of regional approaches.
(Recording turned off and turned back on.)
Let's talk a little more about specific litigation issues in regards to ...
Let me just kind of run historically through the highlights, and we can visit about any of
those in any more detail if you want to.
That'd be great.
The first thing that I was involved with was helping Ralph with the first LULAC lawsuit
about the single-member districts. They filed a lawsuit shortly before the board election
in '87, which would have been in the first part of '87. They filem;igation in the fall of '86
to get an injunction. That was in federal court before Judge William Sessions. And I did the
research and Ralph tried the temporary injunction case and was successful in defeating that.
The election went forward, LULAC appealed that to the Fifth Circuit, and while that was on
appeal, they made their settlement to go with their current situation of four of the six Bexar
County members being elected from single-member districts.
The next big thing were kind of a series of litigation matters, one involving the Cassandra
Rodriguez drowning death where she - it was a period of heavy rainfall, and she drove across
41
an intersection at the Five Points intersection, car got swept away, and she drowned. She
sued the City, VIA, and the River Authority, sued the City for negligence and failing to warn
of the dangerous crossing; VIA because they adjoined - they owned the adjoining property
that was their bus station, and their allegation was by having a wide area of pavement it
created a lot of runoff that added to the flooding; and the River Authority under various
theories that we owned the water, that we owned the place where it happened, or that we had
an obligation of trying to fix that.
That was a big case, very heavily contested. We got out on a summary judgment that I
argued and won, Won tha!\~eal.triwith the Court of Appeals, and they appealed that to
the Texas Supreme Court and won that as well there. The plaintiffs went on and got a big
judgment against th;city that had to be done, which is an interesting story in its own. But
the River Authority involvement was to be able to get out of it at that point.
Why would they be able to be successful against the;tity but not against you-all, other than
the fact that the River Authority had better lawyers?
Well, the legal point was that when the King of Spain founded San Antonio, he created San
Antonio and established it as being the area within three miles square of the San Fernando
cupola, three miles north, east, west, and south, and that's theQ.ty of San Antonio. The area
where the accident occurred was within that three-mile area. So since we did not own that
property, we're not responsible for what, if anything, happens there, so that was how the
River Authority got out of that.
42
The _¢ty, if it was brought today, would probably p~e;ail, but the.t?J~islature ~ad just
Gu1l dt'f<e.,..,-.:::.~
amended the Government Immunity Act of the EinMdible7 Practice~ Code that " ~
listed specific items that are governmental functions as opposed to proprietary, and under the
earlier law, the,ty did not have the benefit of sovereign immunity for the allegations that
were made. And so the lawsuit got filed right before that law changed. It got tried under the
old law, and that's part of how they got to where they did.
I know at some point there were some major improvements that were done to that,
infrastructure improvements that were done to that Five Points area. Was that tied in with
this in some way?
Those were in the works and on the way when this happened, and that just helped to get the
funding available to do that. The San Pedro underground tunnel was constructed that took a
~
lot of floodwaters that would have been there and took care of those as well.
A
Shortly after that case was the Avar (phonetic) case where a family went to a private park on
the Medina River. A 16 year old who was having his birthday that day and friends were
jumping into the riveydecided to climb a tree and start diving from a branch into the river.
And unfortunately he dove and broke his neck and drowned. So the family sued the owner of
the park and then the River Authority. That went to trial, and we won at the trial stage. They
~
appealed that to the Court of Appeals, but droppedj(as they settled with the (inaudible)
people as well.
43
And then the Allen case, which is the flooding case at the end of the improved channel of the
river, was after that. That was the one where the family had the home next to the river, it
rose and got into their home, and they claimed that the operation of the gates and then the
stopping of the improved portion of the river was what was responsible for their harm.
So what was your role -I know you talked about doing the research for the L ULA C case.
What was your role in the other cases?
Oh, I tried them. I represented the River Authority and prepared the answers and did the
depositions and was the lead attorney on those and the rest of these as well.
(End of Tape 2, Side 1. Beginning of Tape 2, Side 2.)
The next big thing that I was involved in representing the River Authority with was the
Living Waters Artesian Springs matter, which is the catfish farm. They had produced that
well and were producing just an enormous amount of water. That started with a lawsuit filed
by the Edwards Aquifer Authority, thefity - I mean, San Antonio River Authority, and
Bexar County getting a temporary injunction against them. They agreed to the terms of that
temporary injunction and then began the process of getting a permit from thyitate to
authorize their discharge back into the Medina River. The well was produced here, and then
they ran it over the fish and then discharged it into the river.
44
The hearing before the, at that time, Texas Water Commission in Austin, was a month-long
hearing, and we went through just about every conceivable expert and every conceivable
argument that you could have, and they wound up with a permit that authorized them to
discharge the water. But what we accomplished was put some specific parameters on the
water quality that they had to be able to discharge, in particular fecal coliform limits.
And when they got back in operation, for whatever reason, they were producing fecal
coliform off of those fish, which are supposed to be coldblooded, not supposed to be able to
do that. But the theory was the water was warm enough and they overfed them enough so
that they wound up producing that. So we were able to use that as a way to shut them down
after that fact.
They then went on to sell that, get the right permrrfnd then sell that right to SAWS as part of
their withdrawal right from the Edwards.
So you-all went out and set up monitors there to ...
The River Authority staff tested the water on the site as it came out of the well and as it came
out of fish and then right before it entered the Medina River. The River Authority lab and
staff did all that analysis, and they were the expert witnesses that established that and were
responsible for having that in the permit as a parameter.
Interesting. I wonder who thought that clever thing up?
45
Well, the River Authority staff already did some monitoring on the Medina River just above
where the discharge was and then much further down, and they just checked it just to see
what was there. They weren't sure what they would find, but as a matter of course, did.
So did they already have historical records that they could look at prior to the -
Of what the parameters in the Medina River -
- operation of the -
- normally were in wet times and dry times, so they had a whole history of that. And they
did a much more detailed analysis ofthe water actually out of the catfish farm itself.
Ah, the value of records. (Laughing.)
And just a regional approach to problems, right, not having a specific point of information
(inaudible).
The next one would have been the second LULAC case. They filed another Voting Rights
Act case challenging the first settlement that was made, and that was made by a consent
decree. And I represented the River Authority, prepared the Motion For Summary Judgment
in the trial court, which was granted, saying that the first judgment was binding. They
46
appealed that to the Fifth Court of Appeals, and I prepared the brief on that. It was not
argued, but they agreed with the lower court.
What was their problem with the first?
I don't think it was so much a problem with the first. The attorney, Rolando Rios, just would
typically sue anybody who did not have single-member districts and make an allegation that
it was a violation of the one-person one-vote principle and everybody should go to single-member
districts. Part of why the River Authority was able to defeat the temporary
injtmction in the first place was that we're a special-purpose district over multiple counties
representing multiple constituencies, and one-person one-vote would overwhelmingly benefit
Bexar County to the expense of the other three counties, and so there's a rational reason to
have different people elected in different ways.
And fortunately a result of the first are - fortunately or not, but the result of the first was
declaring of everybody in the four counties a part of the class and having the class judgment
that bind all. And I think just from that point on, it has been a good result for) think;people
in Bexar County because they can vote on a commission or precinct basis for a single-member
person, and then they can also vote at large for two others, so I think it's worked out
well.
~
Would the other approach have resulted in a really huge~ situation?
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No. It would just be I think, a lot of- like a city council, everybody wants this for my
district and nobody has a larger point of view.
(Recording turned off and turned back on.)
The next big one, which is a pretty big one, was the Westcap litigation. The River Authority
has a number of project funds and bond funds that they invest until it's time to spend on the
project that they've been issued for. One of the brokers invested those in mortgage-backed
securities, which he represented as being govemmen7Itis sued and govemmentg. uaranteed A
bonds, and of course, they weren't. And when the - and it was not just a mortgage-backed
security, but ones that had been divided up into what they called different tranches, different
segments that have different characteristics, some that pay principal only, some that pay
interest only, some that pay interest when the London Interbank Rate is above or below a
certain amount, and so allows sophisticated investors to make choices about what they want
to do in a particular given point in time that are not good for a bond fund that you need no
matter what and will need in the future and is not a speculative investment.
When did this happen?
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That would have been in '95 when it first came to light. When the River Authority staff
would ask for money from the account because they need to spend it and would be told that,
well, that money is not all there because the market had moved on.
We filed a lawsuit against them alleging securities fraud. They then turned right around and
filed bankruptcy. And this group had done this with scores of other public entities across the
nation. And they moved the bankmptcy to Houston, and we went through the bankruptcy
proceeding there. We were the second largest creditor; the community colleges -<city
7
G>neges of Chicago were the first largest creditor. And they had a trial on their claim, and
then based on the outcome of that claim treated all the other claimants the same.
Our claim was originally for a little less than 10 million. Fortunately the markets changed,
and those securities came back, but our claim in the bankruptcy court was recognized as a
little less than 900,000, and then we actually got a settlement from them, a distribution from
them of a little more than - a little less than 500,000. And that plus the sale of the other
securities that we had made the River Authority whole. So we were able to get out of it
without losing any money.
So what kind of safeguards did the board then put in place?
Well, the safeguards had been there to begin with. The investment funds management policy
is there every - updated annually, and we have a list of approved broker-dealers that we deal
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with. And what happened in that instance is the one broker-dealer just told us that they were
government securities and they were not.
They went off the reservation.
Correct. And so ever since then, we've just made sure that not only did they say they're only
government securities, but they're not these others. That also led to a change in state law and
put in state law as part of the Funds Investment Act what can and can't be invested in by
public agencies. And so as an industry-wide thing, the broker-dealers came to understand
that you can only do these things with governmental entities.
Interesting.
And then the next big one was the lawsuit with Bexar County about how much they were
going to charge to collect the tax for the River Authority. They originally wanted to charge a
rate for each account, and because the River Authority collects from every account in Bexar
County, and at the time it was I forget exactly how many, but say half a million accounts, the
collection charge, the collection fee as a percentage of what we would collect would have
been roughly 18 percent of our tax, whereas our statute says that we'll pay them 2 percent of
what we do, they can retain 2 percent.
The interesting part about that was we had to deal with a tax assessor-collector who actually
collected the money and then the commissioner's court who would actually authorize the
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distribution. And fortunately we were able to work with them in a cooperative way to make
an agreement to go to thejtat~gislature and get the legislation amended and tax code that
authorizes the tax assessor-collector to use the 2 percent figure in our act. So we got the tax
code amended to make a special exception for river authorities who have an ad valorem tax.
What benefit would it be to the county, though, to go from an I 8 percent to a 2 percent? Why
would they agree to go to th;Jtegislature with you and get that changed?
Because of- they would - I think they generally wanted to assist the River Authority. They
recognized that the burden imposed on the River Authority was disproportionate to any other
entity. No other entity had that situation. The county was not charging itself for that fee.
They were charging themselves once. They have the Bexar County tax, they have the
hospital tax, then they have the flood tax as well, and they were only charging themselves
once even though they're collecting three taxes for the same thing.
The other reason is that there was anfttomey %eneral opinion, and our position in the
litigation was that they cannot collect more than what is in our legislation. So my assessment
of it was and it could be one reason why they agreed is that we would have prevailed in a
litigation and so might as well agree on what's going to happen anyway.
So did you actually file the suit to bring them to the table?
Filed a lawsuit, yes, and we spent some time ahead of that trying to get them to work with us
51
cooperatively. Wound up having to file a lawsuit, got an injunction from a Bexar County
district judge to enjoin the tax assessor from doing anything with that money until we got it
figured out, and so we were able to get that resolved.
So those are the highlights.
(End of interview.)
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