The mayoral candidate profited from not having to comply with the SOS Ordinance
Investigative Report by Ken Martin
Part 6 in a series
Environmentalists sharply criticized mayoral candidate Stephen Ira “Steve” Adler for representing land owners who avoided compliance with current environmental ordinances, as The Austin Bulldog reported in Part 4 and Part 5 of this series.
A review of several hundred pages of public records obtained through research and public information requests indicate that Adler himself personally profited from not having to comply with the Save Our Springs Ordinance for development of a tract in Oak Hill.
The steeply sloped 16-acre tract that Adler and law partner Michael Barron bought in January 1995 carried with it a Restrictive Covenant executed in December 1987—more than 10 years before any development plans were filed. The Restrictive Covenant granted rights to 65 percent impervious cover on the tract. If subject to the Save Our Springs Ordinance, enacted more than two years before Barron and Adler purchased the tract, impervious cover would have been limited to 25 percent.
The site plan for development of the property was filed by Barron and Adler in May 1998, more than three years after they bought the land.
A post-bust bargain?
The raw land that Barron and Adler bought in January 1995 for an undisclosed price was one of hundreds, if not thousands, of tracts in Central Texas that were swallowed up in the great real estate bust of the 1980s. Homebuilders folded. Developers failed. Bankruptcies were common. Banks and savings and loan institutions crumbled. The federal government established new agencies to grapple with the mess that devastated the economy. Taxpayers were out billions of dollars to restore sanity to the market.
The 16-acre tract, which came to be known as Wesco Acres Lot 1, had been flipped numerous times before it wound up in default on a lien of $1,818,909 when owned by Saddleback Properties NV a Netherland Antilles corporation, and was sold at auction at the Travis County Courthouse in January 1988 for an undisclosed amount.
Brad Rockwell, an attorney with Frederick Perales Allmon & Rockwell, said, “Among the many things Adler apparently is, he is a real estate speculator who scooped up a foreclosed property in the Barton Springs watershed and took advantage of a bad deal the City cut with an owner several owners ago to develop at more than two times the impervious cover allowed by the SOS Ordinance. Adler sold (portions of) the property for development at an intensity that would not be allowed under the SOS Ordinance.
“As a result, Adler’s real estate transaction almost certainly contributed to the pollution of Barton Springs. Adler showed great cleverness in working the system to his own enrichment. I would hope that Austin can do better than to have a mayor who chose to make a profit off of the pollution of Barton Springs.”
Adler declines to reveal price
Adler explained how he came to be involved in the purchase. He told The Austin Bulldog that Bud Johnson of Dripping Springs pitched the property to Barron.
“(Johnson) was an old-time real estate guy,” Adler stated in a June 25 e-mail. “He brought the deal to my law partner who recommended we invest because he thought it was a good investment and I participated with him, subject to the interest of Bud Johnson.
“I really did not know very much about the property and did not purchase the property with intent to develop it,” Adler stated in the June 25 e-mail.
Adler said that Bud Johnson held an “equitable ownership” in the land that entitled him to “get half of any future income from the property.” Johnson died “about January 2007,” Adler said, and Johnson’s successor is now entitled to that income.
“Record title is in my name and Mike’s,” Adler stated in a June 24 e-mail. “But we hold it in trust or subject to this agreement and that has been how the property has been handled.”
Asked in an e-mail how much Barron and Adler paid for the 16-acre Wesco Acres tract in 1995, Adler, through his campaign manager, Jim Wick, replied, “As you know, there are many things that can impact the price of property and the market works in cycles. Steve has only a 25 percent participation in the property you inquire about and to protect the privacy of the others involved, who have not chosen to run for public office, will not disclose the prices paid for the property … almost 20 years ago.”
Given that that the man who had had 50 percent equitable ownership in proceeds from the property—Bud Johnson—is deceased, according to Adler, that leaves only Adler himself and law partner Barron whose privacy is being protected.
Wesco Acres sales and development
Westlake Equipment Service Inc. sold the 16-acre tract to Harold Scherz, trustee, July 6, 1978. A plat for the property (a map drawn to scale) was filed July 28, 1981.
The property was taken into the City of Austin as part of a massive full-purpose annexation in the Oak Hill area that was completed December 19, 1985.
A Restrictive Covenant executed December 16, 1987, by Saddleback Joint Venture in connection with Zoning Case No. C14-85-288.118, and filed of record November 30, 1988, permitted 65 percent impervious cover on the tract in compliance with regulations pertaining to the Williamson Creek Watershed.
The tract is located within the City of Austin’s Drinking Water Protection Zone, and would be limited to 25 percent impervious cover if subject to the SOS Ordinance that voters approved August 8, 1992—more than two years before Barron and Adler bought it.
Barron and Adler sold portions of the 16-acre tract to the City of Austin, to Travis County, and to the privately owned Melwood Alliance LLC. Through Wesco Holdings LLC, they retain ownership of one lot.
City of Austin purchase—The City of Austin paid Barron and Adler $475,000 for 5 acres and a driveway easement of 0.337 acres January 6, 1997, according to the City of Austin Purchase Contract signed December 20, 1996. The City subsequently built a fire station on that tract. (The Austin Bulldog filed a public information request for a copy of the closing statement for the sale, which would provide a more accurate accounting of the cost, but the City’s response indicated the closing statement could not be found.)
Site plan application—Barron and Adler submitted a site plan to the City of Austin May 11, 1998, for development of the remaining 11 acres. Site Plan SP-98-0197C allowed 95,832 square feet of administrative/business office development, along with associated surface parking, drives, water quality/detention pond, and related improvements.
The site plan indicates the proposed impervious cover for the 11 acres was 54.05 percent. This is 11 percent less than the 65 percent allowed—but still more than twice the 25 percent impervious cover that would have been allowed by the SOS Ordinance, were it not for the Restrictive Covenant.
Travis County purchase—Travis County paid Adler and Barron $650,313 for 5.829 acres December 26, 2002, according to the closing statement, and the parties entered a joint development agreement. Travis County subsequently constructed a pair of two-story buildings on the tract, each 19,180 square feet, plus adjacent surface parking. These provide offices for the Precinct 3 Justice of the Peace and Constable, a tax office substation, a Community Care Health Center, and the West Rural Community Center.
Wesco Holdings formed—On August 25, 2006, Adler and Barron formed Wesco Holdings LLC. They are its sole directors. On October 18, 2006, the law partners issued a warranty deed to Wesco Holdings for the remaining 5.171 acres of Lot 1 of Wesco Acres, consisting of two lots of 2.5855 acres each.
Melwood Alliance purchase—Also on October 18, 2006, Wesco Holdings issued a warranty deed with vendor’s lien to Melwood Alliance LLC for 2.5855 acres. The sale price was not disclosed, but the deed indicates that Frost National Bank held a promissory note from the buyer for $172,000.
Adler, through campaign manager Wick, declined to reveal what Melwood Alliance actually paid for the land.
Melwood Alliance in 2008 constructed two single-story office buildings, each 4,500 square feet. The property is now valued at $1,300,239, according to the Travis Central Appraisal District.
Three-story building planned—Wesco Holdings still owns 2.5855 acres of unimproved land valued at $168,936, according to the Travis Central Appraisal District. The Site Plan, for which a six-year extension was granted March 25, 2014, indicates that a three-story building of 28,770 square feet is planned for that tract, along with surface parking, curbs, and a dumpster pad.
Travis County has the first right of refusal for the not-yet-constructed office building. The request for site plan extension stated that plans were to be finalized and submitted following approval.
Bill Bunch, executive director of the Save Our Springs Alliance, slammed Adler for using the Restrictive Covenant to avoid compliance with the SOS Ordinance, saying, “He is trying to say building under the Restrictive Covenant is different from grandfathering. It is not.”
“Whether or not it’s a plat note or a condition of zoning, the basic assertion is the same: that the earlier and weaker standard is locked in and trumps the SOS Ordinance,” Bunch said. “The rule had always been before that new ordinances could be more protective than zoning conditions and whatever was more protective would apply.”
Austin attorney Doug Young of Scanlan Buckle & Young PC is critical of the fact that development rights for impervious cover were retained on the Wesco Acres tract by a man who may be elected Austin’s next mayor.
“In disputes, when the city is effecting its duty to attempt to enforce the will of the people reflected in current law—and to treat everyone equally, as is the case when only the current law is evenly applied—it would not be helpful for developers to be able to point at the city’s mayor and whine than the city is unfairly denying the developer special rights and favors like those already taken by the city’s mayor.”
“If the ‘rights’ were established in the 1987 restrictive covenant, this is a prototypical example of how bogus Chapter 245 is: The theory of Chapter 245 is that a developer should not have to change its project or incur unforeseen cost of compliance with future regulations once a development project is commenced. There was no development project here—the original developer was foreclosed, the forecloser was an S&L that itself failed; speculators bought and sold the property with no intention to develop; and everybody was buying and selling the property at fire-sale discounted prices, not based on investment-backed expectations of a particular ‘project.’ I call bullshit here.”
Steve Beers, president of the Save Barton Creek Association, said, “This case exemplifies what’s still wrong with watershed protection in the Barton Springs zone. The powers-that-be mostly refuse to apply the current law.
“The voter-approved SOS law has been on the books now for over 22 years. Everyone who wants to build out there wants an exemption—no matter what the circumstances. And each would-be developer or builder always has abundant precedent from other prior cases that won exemptions—for whatever reason.
“Nearly every property owner out there wins their special relief, except for the owners of the region’s water supply—that is us, the public,” Beers said.
“If this land is indeed grandfathered, then how come the owners were just asking the City to lock in a site plan for a further 10 years? Was that merely a formality?”
Adler previously told The Austin Bulldog that the Restrictive Covenant granted 65 percent impervious cover on the tract and that limit would apply regardless of whether the site-plan extension had been approved.
Beers said, “Maybe it’s too much to expect self-interested private-sector persons not to take advantage of every available loophole, but it’s especially vexing that the City and County governments both developed parts of this tract—yet they themselves did not build out to the current best standards.
“How can these governments set an example to private sector builders that they regulate, if they won’t follow the law themselves?
“The City and County also could have bargained for additional protections on the remaining property that the Adler partnership retains, as a condition of doing business with them. Didn’t happen,” Beers said.
“Since none of that is possible anymore, my main hope is that Mr. Adler might now take a stand that he can voluntarily follow the City’s most protective current standard—that is, the Save Our Springs Ordinance.”
Record of Transactions Pertaining to Wesco Acres, Lot 1, 1978-1988 (50 pages) before the land was purchased by Barron and Adler
These records show the history of tranactions for this 16-acre tract in the years before Michael Barron and his law partner Steve Adler bought the property in 1995 for an undisclosed price.The property was taken into the City of Austin as part of a massive full-purpose annexation in the Oak Hill area that was completed December 19, 1985. These records show the property at its peak value in 1984 carried a lien of $1,818,909, or $113,681 per acre. After default the property was auctioned to the highest bidder in January 1988 for an undisclosed price.
Record of Transactions Pertaining to Wesco Acres, Lot 1, 1988-2014 (231 pages) after the land was purchased by Barron and Adler
Significant milestones in the history of developing this property are as follows:
• A Restrictive Covenant filed of record November 30, 1988, specified that development of 16 acres of land could proceed under regulations for the Williamson Creek Watershed and the maximum impervious cover allowed would be 65 percent. (See pp. 1-6.)
• Adler and law partner Michael Barron bought 16 acres of Lot 1, Wesco Acres, from Findlay Properties Inc. in a transaction recorded Jan. 31, 1995, for an undisclosed price. (pp. 7-12.)
• City of Austin bought 5.0 acres and a driveway easement of 0.337 acres for $475,000 Jan. 6, 1997 (p. 13-26).
• Barron and Adler filed Declaration of Condominiums Jan. 6, 1997 (pp. 27-49).
• Barron and Adler filed Site Plan for Wesco Acres, 11 acres, May 11, 1998 (pp. 50-78)
• Barron and Adler sold 5.829 acres to and entered a joint development agreement with Travis County Dec. 26, 2002, for $650,313 (pp. 79-175).
• Barron & Adler form Wesco Holdings LLC and are its sole directors Aug. 25, 2006 (pp. 176-185).
• Barron & Adler issues warranty bill of sale to Wesco Holdings Oct. 18, 2006 (pp. 186-188).
• Barron & Adler issues warranty deed to Wesco Holdings LLC Oct. 18, 2006 (pp. 189-193).
• Wesco Holdings issues warranty deed with vendor’s lien to Melwood Alliance LLC for 2.5855 acres Oct. 18, 2006 (pp. 194-199).
• Travis Central Appraisal District values Melwood Alliance’s 2.5855 acres at $1,300,230 for 2013 taxes (pp. 200-201).
• Filed Texas Franchise Tax Public Information Reports for Wesco Holdings LLC for 2007, 2009-2001, 2013 (pp. 203-206)
• Travis Central Appraisal District values Wesco Holdings’ remaining 2.5855 acres at $169.936 for 2013 taxes (pp. 207-208).
• Wesco Holdings applied for a fourth site-plan extension of 10 years, supported by Travis County to meet its future needs, Aug. 1, 2013 (pp. 209-231).
• City of Austin Planning Commission approves 6-year extension of the site plan on March 25, 2014.
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