The multitude of parties with hands on a Rubik’s Cube that has become the Villas at the Hills sat down at the table Aug. 12 with the Village of the Hills Board of Aldermen to solve the puzzle.

Forged from a 1996 contract that established the village as an incorporated municipality with its own extraterritorial jurisdiction, the 30-unit Villas at the Hills condominiums are nestled in an area of the ETJ where residents do not pay property taxes to either the village or the City of Lakeway.
Because the City of Lakeway wanted to make a deal with Austin in the mid-1990s in which Austin would release The Highlands from its ETJ limits, the Lakeway City Council signed off on the contract that guaranteed the Village of the Hills and both Hurst Creek and Lakeway municipal utility districts would not interfere in Lakeway’s deal. In return, Lakeway would not object to the creation of the village and Hurst Creek MUD.
After recently reviewing areas adjacent to Lakeway city limits that were receiving city services but not paying taxes, Lakeway leaders on July 8 asked the village to release the area that contains the condos from its ETJ, thus allowing Lakeway to unilaterally annex it into its city limits.
As an alternative, Lakeway Mayor Dave DeOme proposed that the village could annex the Villas.
Village Aldermen Ron Dodd and Lloyd Troeltzsch studied the issue and presented their findings at the board’s Aug. 12 meeting that began with a public hearing in which condo owners expressed their displeasure with how they had been characterized.
“We take exception to the mayor of Lakeway’s claim that the Villas at the Hills residents are getting away with something,” wrote Ted and Nancy Groseth in reference to DeOme’s letters to the editor in the Lake Travis View. “We are law-abiding citizens paying our taxes and honoring the contract we signed as homeowners. We did not make up the rules, nor has there been any intent to circumvent them.”
DeOme and Lakeway officials attended the meeting, but did not address public comments there.
“I don’t fault any of the residents for the favorable situation that they have found themselves in. They moved in there, and they have found that are in a little island that doesn’t have to pay taxes to either city,” DeOme said Tuesday. “I don’t believe that they are trying to get away with anything. My issue is with equity. They are being treated differently. They are consuming the same services as the people in Lakeway and the people in the Hills. They should be obligated to pay for those services.”
Bert Dement, the original developer of the Villas, and Don Stevenson, president of the Villas at the Hills Condominium Owners Association, attempted to remind everyone of the area’s history at the board’s meeting last week.
“[The Hills ETJ] was conceived as an aligned course of action to achieve our mutual goal,” Dement said.
DeOme was not on the Lakeway City Council in 1996 when it agreed to allow the formation of the Village of the Hills and Hurst Creek MUD, but he commended those council members for doing what needed to be done to attain the larger objective of The Highlands.
“Lakeway was interested in annexing The Highlands, and the council members at the time were focused on that as the big fish. I give credit to the council of 1996 that made this all happen. This area [the Villas] was a small ancillary part of this whole agreement. The issue in 2010 is that you have 30 homes that are enjoying not paying taxes to either city.”
Stevenson said the condo owners were not a party to the original contract, so should not be blamed for the outcome.
“It was Lakeway’s own decision — not ours — for the Villas not to pay Lakeway city taxes. We were not a signatory to that agreement as they were,” he said.
About 50 percent of the condo owners recently gathered for an association meeting that produced a recommendation that the aldermen decline Lakeway’s offer, Stevenson said.
If the village were to turn down Lakeway’s offer, the Villas would then start talks with its aldermen, the Hills Property Owners Association and Hurst Creek and Lakeway MUDs to explore the consequences of being annexed into the village.
“This would allow us to make a formal decision on possible annexation by the Hills based on a better knowledge of all the relevant facts,” said Stevenson, who acknowledged that homeowners lacked complete information on their status.
As of the public hearing and meeting, the homeowners were awaiting the analysis of Jim Cameron, an attorney who they said has knowledge of the area’s history and who was searching for a letter from his archives. Cameron was traveling out of town at the time.
“We believe that the legal issues may be sufficiently complex for us to need a legal opinion,” Stevenson said.
After the public hearing, the board’s committee presented its report.
Dodd cited tax equity, clarity of municipal services and Lakeway’s offer to pay for all expenses associated with the proposed release as reasons for the village to agree to the plan.
The release would “continue to promote an excellent working relationship and spirit of cooperation between the two municipalities,” Dodd said, adding that it would reduce the village’s burden of providing health and safety benefits to the Villas.
Troeltzsch stated that if the village were to release the Villas, both Lakeway and the village should consider modifying present boundary lines on The Hills Drive north of Club Estates Parkway.
He also stated that part of the potential agreement should include Lakeway taking ownership of Hayden Ridge Road from south of Murfield Green Lane to Lakeway Boulevard and the Hills Property Owners Association retaining ownership of Hayden Ridge from Murfield Green to the gated entrance into The Hills.
If the village were to maintain the Villas’ ETJ status, it would respect the condo owners’ wishes, and were the residents to seek annexation, their lots would be added to the village’s property tax base.
“We would need to study the costs of annexation that would offset the tax gain,” Dodd said.
By pursuing annexation of the area, the village would be able to bring other parties with vested interests into the discussion, such as Hurst Creek MUD, The Hills Country Club and The Hills of Lakeway Property Owners Association.
Because it is a Class B general law city, the village may only annex areas with the consent of property owners through a petition. As a home rule city, Lakeway may unilaterally annex area without landowners’ consent.
“Getting this done right is a lot more important than getting it done,” Dodd said. “This situation has existed for a lot of years.”
DeOme said Lakeway is seeking open, honest discussion by everybody.
“This has been going on for 15 years. We’re not trying to rush anyone to judgment,” he said. “I compliment [the aldermen] for their deliberate, organized approach to all this.
Condo owner Holly Allen asked the aldermen to gather more information before taking action.
“I think the basic thing that I’d like to see would be time before any total decision is made for us to get all the answers,” Allen said.
At Village of the Hills Mayor Doug Lindgren’s suggestion, the board voted to draft an ordinance for possible release of ETJ territory for aldermen to consider and vote on at their Sept. 9 regular meeting.
“I promised we would get a prompt reply to Lakeway, and I would certainly like for us to work toward having a vote at our September meeting,” Lindgren said. “We don’t need to have a vote if issues come up that we’re not able to address in the meantime, but it would certainly be my desire to have a vote at the next meeting.”