Approved As To Form But Not Legality

I’ve been baffled over the years. Why do city attorneys sometimes sign ordinances and contracts “Approved as to form and legality” and others leave off the last two words? My sensitivity increased about 25 years ago when a city manager told me he didn’t ask the question but rather told the city attorney he wanted to include “and legality” on the signature block. The city attorney complied. Reluctantly.

Why would a city pay so much money for an attorney to draw up a legal document or to review a legal document and then not declare it as “legal” if the document is being declared to be in “form,” which one might assume to be in good legal form? Can a legal document be in legal form and not be legal? I suppose it could. If nobody is claiming it is legal.

A signal would be a challenge by someone suing the city for having an illegal document approved by the city council. I can just hear a city attorney saying to the council: “look, I never said it was legal. I just said it passed the legal-pretty test.”

But a red flag in my mind would be when the city attorney has reviewed a legal document where the author placed in the signature block “Approved as to form and legality” and then the city attorney or someone later changed the legal document to take off the last two words? Would that not make you wonder why an attorney would deliberately remove those important words?

That’s exactly what has happened at McKinney. The typical signature block in McKinney only includes the words “Approved as to form.” So at the next council meeting, there is an ordinance amending a previous ordinance involving two MUDs in McKinney’s ETJ. The MUDs want the ability to issue up to $262,800,000 in bonds when they already have the ability to issue $120,000,000 from the City before asking for more. They also want to automatically add more MUDs without having to bother the Council again.

Lastly, they want to have the cap adjusted 3% annually without further approval. That means the lid will be $353,181,225 in ten years before the development is built out. And this does include the refunding of the original bonds. With interest rates of 3.3% to 4.0% for the MMUD’s 2016 Bonds, you can be assured this will churn out a ton of business to the bond issuance community. What the heck, 29.1% of the $13.8 million issued is all going to soft costs rather than hard assets. MUDs are all about helping the developer and all of the supporting players engineering and debt issuance players.

I have already blogged about this particular MUD. Since then I  have driven through the MMUD. The first thing that caught my eye as you approach Trinity Falls is the huge elevated storage tank that has the same McKinney logo. There is no conspicuous sign that says the development is in a MUD, so it looks and feels very much like you are in McKinney. BTW, that water tank is not McKinney’s! In fact, I called a realtor who has been doing business in McKinney for many years. She said TF is in the City of McKinney. I said that it wasn’t. It’s in the ETJ and has a $1.05 tax rate. And there is virtually no legal limit on how high the tax rate could be raised. She knows me quite well but was certain that I was wrong since the MLS listing has the properties in the McKinney postal code designation.

While the houses appear to be cheaper in this MUD, the fact is the price is similar and could be more than the same house in McKinney. They are just paying part of the cost in their mortgage and part in a tax rate. It should be entertaining when they go back and re-read the documents they signed when they bought the house. But good luck if they want to complain to the City.

I am guessing if you walked down the street and knocked on the couple of hundred doors of occupied residences, you would find out most people think they are in McKinney. I dare the Council to send a staffer to take a survey! If they were to watch the last McKinney City Council meeting when this amendment was tabled, they would see that Councilmembers are on record as confirming it is not in the City and that from their viewpoint it is not likely to ever be in the City. The historical tug-of-war between MUDs and cities is that the MUDs want to be taken over when their debt is high and their tax rate is high. Just the opposite for cities.

But our City Council is pretty good about not asking too many questions when it comes to helping out a developer and is likely to rubber stamp this approval next week.

Also, this blog is about amending an agreement involving huge amounts of dollars with the appearance that the City Attorney does not want his signature on it if he has to vouch that it is legal. Don’t count on the Good Ole Boy Network, of which the City Attorney is a full-fledged member, to do anything about it. I’m surprised it is not on the Consent Agenda. However, there is no public hearing. It will be a drive-by item.

Besides, it’s in legal form. LFM

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