::Brazos River Authority::

What is divestiture?
Divestiture refers to the potential transfer of title or sale of the property owned by the Brazos River Authority (BRA) and leased to private citizens at Possum Kingdom Lake (PK).

What steps is the BRA taking to move forward with divestiture?
As an initial step in developing a divestiture process the Board directed staff to investigate how a sale could proceed and what the BRA must do to begin the process. Next, staff developed a preliminary draft divestiture policy which can be found on the BRA website. This policy has not been implemented, as the BRA is also exploring other options, such as a third party sale and legislative solutions.

What is the Draft Divestiture Policy that is available online and why is it not being implemented?
When BRA began initially exploring divestiture, it looked at a voluntary, lot-by-lot process, similar to that envisioned in the failed divestiture legislation. As part of its investigation, staff developed a draft policy outlining many of the steps that would need to occur for a lot-by-lot process to take place.

In its continued investigation of the draft policy, staff began creating a “to do” list of items that must be accomplished in order to sell the leased property directly to lessees. The list included numerous issues such as platting and dedication of road ownership and maintenance, property surveys, appraisals, and legal costs for the development and implementation of the policy.

As the list continued to grow, it became apparent to the Board that in attempting to extract the BRA from land management, the process would, in fact, require an expansion of property management duties. As a self-funded, public entity whose primary goal is to provide water for the Brazos River basin, the BRA does not have the expertise or man power necessary for real estate management and development. Moreover, since the actual number of lots which would sell in a lot-by-lot process cannot be accurately predicted, the BRA would have no way to guarantee recovery of the expenses required to implement such a process. This would likely affect the rates that the BRA would need to charge customers for water throughout the basin.

With this in mind, the Board noted that it would be prudent and necessary to explore every option for divestiture and passed a resolution directing the staff to investigate the option of a third party sale of the BRA-owned properties at PK through a public bid process. In doing so, the Board did not rule out the possibility of a lot-by-lot process, but instead put consideration of that process on hold until it could look at other possible options. This is why the Draft Divestiture Policy is still available online for review.

Why does the BRA own large quantities of land at PK?
In 1929, the Brazos River Conservation and Reclamation District (District), the predecessor agency to the BRA, was formed by the Texas Legislature to conserve the waters of the Brazos for water supply purposes and to control flooding within the Brazos River basin. The District’s first project, a hydroelectric reservoir in Palo Pinto and Johnson Counties, was begun during the Great Depression of the 1930s.

As the District began obtaining property for an inundation area for the reservoir, they found that a large number of land owners did not want to sell only the portion of their property needed to build the reservoir; rather, they preferred to sell entire tracts of land in amounts over and above that actually required.

As a result, the District (later renamed the Brazos River Authority) held ownership of more than 14,300 acres of land encircling the lake. Over the years, the BRA began leasing some of this land for fishing and hunting purposes. These “cottage site leases” later evolved from cabins and trailer homes to large, permanent vacation or retirement homes on the lake.

When did the BRA Board of Directors begin considering the option to divest of PK leased property?
In 2003, at the request of a number of PK lessees, the BRA Board of Directors (Board) directed staff to investigate the potential of offering leaseholds for sale to the current lessees. As the staff began researching the potential for divestiture, they learned that there were a number of legal issues facing the BRA from state and federal law, including the Texas Constitution, the Texas Water Code, and of particular significance, the Federal Energy Regulatory Commission (FERC).

Once the Board reviewed the intricacies of these issues, it was determined that divestiture of the property was overly cost and time intensive for both the Authority and the lessees. As a result, the Board voted to discontinue fact finding efforts and move toward establishing a longer and more realistic leasing contract and lease rate methodology.

Why is the BRA moving forward with divestiture even though the BRA previously determined that divestiture was not a realistic option?
In 2007, legislation was filed in the Texas Legislature which would have required the BRA to divest of its residential leased property at PK. In response, the BRA Board passed a resolution stating they would not oppose the legislation. When the proposed divestiture legislation failed to become law, the Board acknowledged that divestiture was unavoidable and passed a resolution to begin a voluntary divestiture process.

What are the advantages of divestiture for me? What are the advantages to the BRA?
The divestiture of BRA-owned properties at PK offers lessees the opportunity to be released from their BRA leasehold contract and fully own their land.

For the BRA, the option to divest of properties would provide capital to begin building the necessary water infrastructure required to meet the needs of the Brazos River basin. The process may also remove the BRA from the business of leasing property and allow the organization the opportunity to concentrate on the Authority’s primary directive of providing water supply and services to the Brazos River basin.

What will BRA do with the money earned from the sale?
The 2002 State Water Plan determined that in 50 years Texas would not have enough water supplies to meet the needs of the entire population of the state.

The BRA would use the money from the divestiture of BRA-owned leaseholds to begin building necessary water supply infrastructure such as the Allen’s Creek Reservoir, which is estimated to cost in excess of $200 million.

What is a third party sale?
A third party sale would involve the sale of all BRA-owned property not necessary for the operation of the reservoir to one buyer rather than to individual lessees.

In April 2008, the Board passed a resolution directing the BRA staff to begin investigating the logistics of a third party sale. Later, in response to lessee concerns, the Board passed a second resolution stating that should the Authority choose to move forward with a third party sale, certain protections for lessees would be included in the sales contract. To view these protections, please click here.

The main focus behind investigation of a third party sale was to look at an option that could allow BRA to sell all of its property at once, instead of piece-by-piece, but at the same time, allow lessees to be protected in that sale and provide them the option to purchase their individual lots from the third party owner. Because BRA lacks the specific expertise and resources to successfully conduct lot-by-lot sales, a third party sale could allow the sale of individual leased properties to be streamlined and managed by real estate professionals knowledgeable in property sales and capable of working toward the positive growth of the community.

Is there currently a buyer for the property?
There have been several unsolicited offers for an all inclusive sale of BRA-owned property at PK. However, the BRA can not entertain any offer for the sale of PK leasehold properties until a number of things take place:

Staff must complete their study of the logistics involved with the potential third party sale and present their findings to the Board indicating that a third party sale is a viable option for moving forward.
The BRA Board, if it were to agree with staff’s assessment, must vote to designate the property as surplus.
Finally, the Board would direct BRA Staff to initiate the state’s formal bidding process to determine the purchaser of the property.

Why is there a moratorium on the issuance of new leases for financing purposes?
The moratorium on the issuance of new leases at PK was a business decision made the BRA Board to protect the value of the leased property.

How many cottage site leases does the Authority currently have?
The BRA has 1,564 cottage site leases.

How many leases are considered Homesteaded?
Approximately 229 of the1564 leaseholders have registered their PK leasehold as a primary residence with the county.

Why does the BRA no longer offer the “over 65” discount?
In 2002, the BRA Board established a discount in lease rates for those persons over the age of 65 who list their PK lease as their homestead. In 2007, while reviewing the BRA’s overall leasing policies, outside counsel for the BRA advised that the discount was unconstitutional and should be discontinued. Acting upon this advice, the Board discontinued the practice in July of 2007, and sought an Attorney General opinion on the matter. In January of 2008, the Attorney General issued its opinion which called into question the discount’s constitutionality. Therefore, the Board did not reinstitute the discount.

What if I don’t want to buy my leasehold from the BRA or a third party, or if I can’t afford to buy it? Could I still continue leasing?
If the BRA moves forward with divestiture in the form of a lot-by-lot process, a third party sale, or a combination of both, current lease contracts will be honored as they are today, and efforts will be made to allow continued leasing for those that wish to do so.

If the BRA is directed to divest of property by the Texas Legislature, how much should I expect my property to cost?
The value of each lot would be dependant on valuation language included in any future legislation. An Attorney General’s opinion on how the land could be valued for sale purposes has indicated that a lessee’s current leasehold would have to be factored into the valuation of the property. However, the opinion did not indicate whether the inclusion of leaseholds in the valuation would result in discounting of the property value.

I paid a lot of money for my lease and I have paid my regular lease fee to the BRA for many years. Haven’t I already bought the property?
When you purchased your current leasehold, the items conveyed in the sale included the improvements on the leasehold as well as the right to exclusive use of the land for a specific period of time. The transaction took place between you and the leasehold seller not the BRA. The BRA did not receive any compensation during this transaction beyond the fee paid to process the transfer of paperwork – usually about $300.

The property underlying the improvements on your cottage site lease belongs to the Brazos River Authority. Any deeded purchase of the property must include compensation to the BRA for the purchase of the underlying property.

Why can’t the BRA just deed the property to me?
As a governmental entity, the BRA can not give gifts of any type to private citizens. Simply assigning the BRA’s interest in the property to the leaseholders without compensation would be considered a gift of the property.

Will the BRA offer financing?
No, the Texas Constitution prohibits cities, counties and other entities from extending credit.

Will I receive credit for the amount of money I’ve already paid the BRA during my lease?
No, the BRA does not offer a lease to own option in our cottage site leases. The fees paid to the Authority as part of a lease agreement were directed toward that agreement only and will not be credited to the possible purchase of a leasehold.

If the BRA divests of its property at PK, will they continue to offer current services such as law enforcement, trash pickup and road maintenance?
The BRA currently provides these services in connection with its lake, land and lease management activities at PK. If the BRA divests of its property at PK, its land and lease management activities will be greatly reduced and in many cases probably cease, thus requiring a corresponding reduction, and even possibly an eventual discontinuance, of these services. However, some law enforcement services will continue in connection with on-water activity, public recreation areas, and protection of BRA infrastructure.

Additionally, the BRA has already begun the process of relinquishing law enforcement and road maintenance duties at PK back to the County, as these are services for which the County is traditionally and statutorily responsible, and for which the County collects tax revenues from our lessees.

Once the BRA leases are sold, will the BRA leave PK?
No, the BRA will continue to own and operate the dam and lake for water supply and hydroelectric purposes. The Authority will still be responsible for public recreation areas and the lake itself, and BRA lake rangers will continue to patrol these areas.

Should the BRA divest of the leaseholds at Possum Kingdom Lake, is there an estimate on the amount of time necessary to process the sale of the land?
At this point it is not possible to estimate the amount of time necessary to complete the divestiture process. However, the BRA expects such a process to span a number of years. For additional information regarding the potential for divestiture of properties at Possum Kingdom Lake, please contact the Public Information Department of the Brazos River Authority at 254-761-3103.

If I buy my lease, will I have the mineral rights or will BRA keep them?
It is unlikely that the BRA would convey any mineral rights that it currently owns in any sale process.