Castle Hills residents have Lewisville addresses, but are not Lewisville residents. The community is surrounded by a narrow strip of Lewisville territory, but its residents don’t get the same services, pay the same tax rates or participate in Lewisville’s city government. It’s not its own city, so what is it?
In the charter election on Nov. 7, Lewisville residents will have the option to vote on two amendments to the city charter, one of which outlines how City Council will adjust to a large annexation before 2023.
This is on the ballot because the annexation of Castle Hills, which has been in the works since the mid-’90s, may finally be imminent.
The development’s annexation is part of Lewisville’s 2025 plan, and an agreement has been in place to annex it since April of 1996.
The proposed charter amendment would change the way that Lewisville elects its city council members so that members must reside in specific districts that they represent but would still be elected by all of the city’s voters. This change would only go into effect if the city makes an annexation that increases its size by 8 percent.
Further details on the charter election can be found at ltjne.ws/charterelection17.
What exactly is Castle Hills?
Even a lot of the people who live there don’t know.
Castle Hills is a collection of unincorporated water districts under the authority of the Denton County Freshwater Supply District. The story of Castle Hills starts with former Dallas Cowboys owner Bum Bright, who owned the property that would become Castle Hills in what was then Hebron. Seeing that the DFW Metroplex was developing north toward Denton and Plano, Bright sought to develop the land into luxury residential property.
Per an agreement between Bright Properties and Lewisville signed April 1, 1996, Castle Hills established the first two water districts, 1A and 1B, which would split further into districts 1C through 1H as time went on, as well as public improvement districts. The combined powers of these districts allow Castle Hills to issue debt for public infrastructure and levy taxes to pay that debt off. As part of the agreement, the property was de–annexed from Hebron and became part of Lewisville’s extraterritorial jurisdiction.
“Kind of an easy way to envision ETJ is as a fancy way of saying ‘we have dibs,'” Lewisville community relations and tourism director James Kunke said. “We put dibs on that land. No other city can annex it unless we give it up, but it’s not actually part of the city.”
The resulting land was under a mix of jurisdictions between Lewisville and the freshwater supply district. By agreement, the Denton County Freshwater Supply District is in charge of paying for and maintaining Castle Hills’ infrastructure, but all of that infrastructure is owned by Lewisville, Castle Hills water district 1B president Guy Harris said.
“We pay our bond debt, but the assets that we buy belong to Lewisville,” Harris said. “So, the idea that we’re separate from Lewisville somehow is a little naive.”
Castle Hills agreed to abide by Lewisville’s 1996 development code, which they still abide by today, and designated zones for land use. The DCFWSD is in charge of issuing building permits and inspections.
Lewisville did annex a five-foot strip around Castle Hills as part of the agreement to ensure that it would remain contiguous with the city as the area north of Dallas continued to grow.
The services that would be provided by a city are also a mix between Lewisville and the DCFWSD.
Lewisville police and fire departments respond to 911 calls in Castle Hills, a service that the city is reimbursed for on a per-call basis. Castle Hills has also recently entered a contract with a private security firm to patrol the area, something they do not pay the Lewisville Police Department to do.
Castle Hills isn’t a city and can’t pass its own ordinances, so while there, police can only enforce state law.
Other services fall under larger jurisdictions. The county fire marshal is in charge of fire safety compliance, the county sheriff’s office handles animal services, and the state does health inspections.
The development itself is governed by boards of directors for each of the eight water districts. The main residential districts, 1B, 1D and 1E, essentially function as a normal, locally elected government, but for most other districts, there aren’t any residents and the developers maintain property in the area to maintain voting power. While most district boards have control over taxes and paying off the public improvement debt, District 1A, in which only the developer owns land, sets the budget for the entire development.
District 1B vice president Patrick Kelly and John Ehinger wrote a six–part piece about the details of how the development is governed in 2012, which can be found on the District 1B website at castlehillsgovernment.com
Why’s all of this happening now?
It has to do with paying off Castle Hills’ development debts without increasing taxes.
Over the past 20 years, Castle Hills’ various water districts have issued $163.1 million in debt according to the Texas Bond Review Board to build and maintain its infrastructure. This debt is being paid off by Castle Hills residents at various rates — each of the water districts have separate debts, payment plans and tax rates, all of which are much higher than Lewisville’s 43 cents per $100 valuation.
There is a theoretical point at which Castle Hills’ debts can be absorbed into Lewisville so that Castle Hills residents’ tax rates will be dramatically lowered, but it won’t affect Lewisville residents’ tax rates at all. That’s what the city’s been waiting for, and it looks like it could happen as soon as 2021.
“The caveat has always been that we have to wait until the debt load in Castle Hills can be absorbed by Lewisville without having an adverse impact on our city tax rate,” Kunke said. “If we annexed them today, it’d be about a 13 to 15 cent increase on our tax rate and we’d all be looking for new jobs.”
The city will need to work out how to take over the services currently provided by the county, such as animal services and health inspections, before annexation can occur.
How will this affect Castle Hills and Lewisville?
Harris said the tax rate made him nervous when he moved into Castle Hills, but his concerns were brushed off.
“The information I got from my realtor was, ‘Don’t worry about that, you’ll be annexed in two years,'” Harris said.
That was in 2001.
For Lewisville, annexing Castle Hills means bringing more wealth into the city and having the kind of upscale residential area that families would otherwise leave the city to find.
For Castle Hills, city officials said it’s a long-awaited move that would lower taxes and wipe away the area’s complex local governance.
Harris said his move-in experience is reflective of many in Castle Hills. Kelly said purchasing a property in the area means going through reams of paperwork, and not everyone who moves in knows exactly what they’re getting into.
The fact that District 1A, in which only the developer owns land, sets the budget allows the developer to maintain a degree of control over the entire development, which can’t vote for or against him. Though Kelly says this conflict has settled down in recent years, it came after several legal clashes with the boards of the residential districts.
District 1D president Bill Lux said the tension between Bright’s control over the development and how nice a place to live he’s built it into creates a complicated relationship between him and the residential districts.
“As much as it’s kind of a mess that keeps him in control, the job that they have done building this place is second to none,” Lux said. “I still wouldn’t live anywhere else.”
If the development gets annexed and Castle Hills comes under the governance of Lewisville City Council, this tension simply goes away. Lewisville will also take over Castle Hills’ city services, instead of them having to create it piecemeal through a combination of county, city and private contractor services.
It would also consolidate the development’s debts in with Lewisville’s and move the entire development into the city’s much lower tax bracket. Currently, each of Castle Hills’ districts has its own separate bonds and its own separate tax rates, but if they were annexed, they would all be pooled into Lewisville’s bonds and tax rates. The city has been waiting all along for the point at which they could do this without raising Lewisville taxes.
Early voting for Lewisville’s Nov. 7 charter election begins Oct. 23. Stay tuned to The Lewisville Texan Journal for more information about the propositions, voting locations, and dates and times.
Disclosure: Patrick Kelly, quoted in this story, is an investor in The Lewisville Texan Journal.