Texas Cities, Developers Clashing Over De-annexation Law

A Texas law is empowering developers in their feuds with local municipalities on the outskirts of Austin.

Senate Bill 2038, which took effect Sept. 1, allows developers to remove themselves from a city’s extraterritorial jurisdiction, bypassing bureaucratic steps in de-annexation. With a number of large-scale projects on the way in rural, unincorporated areas surrounding Austin, several firms, such as MileStone Community Builders, are already working to take advantage of the law, the Austin Business Journal reported.

MileStone has been working to develop a 500-plus acre community called Hays Commons in the town of Hays, population 250. Local officials have pushed back against the project due to concerns over potential adverse impacts of dense development on the Edwards Aquifer, the city’s primary water source.

MileStone requested to de-annex the land, which is part of Hays’ ETJ — an area outside the city limits, where a municipality has some control — as soon as the law took effect.

“We’ve tried for the past two years, and another group before us tried for 15 years, to work out an arrangement on this land. To say we tried is a gross understatement,” MileStone CEO Garrett Martin told the outlet. “We stand ready to identify the best utility path forward for the project, but we can’t operate in an environment where we can’t even get phone calls returned, let alone get utility agreements worked out.”

MileStone is taking a similar approach with its 775-acre Persimmon development in nearby Buda, which has been in the works for six years without a shovel in the ground.

Similar de-annexation requests have started to permeate Central Texas, including areas near Georgetown, Uhland, Taylor, Pflugerville and Lockhart, with more applications increasing each week. Many developers are considering or have submitted petitions in cases where they’ve tried everything else to get their projects approved. The law’s proponents argue that it streamlines development in rapidly growing areas, while critics say it limits cities’ regulatory powers and future tax revenue.

In response to SB 2038, multiple cities in the Austin area have discussed strategies to minimize its impact, such as securing land for development or updating policies regarding special districts.

While developers like Grant Rollo from Randolph Texas Development see de-annexation as a last resort, the law’s impact on land development in Texas remains uncertain. In the meantime, conflicts between developers and municipalities are expected to intensify as they seek compromises or resort to de-annexation as a way to advance their projects.

—Quinn Donoghue