Council delays River Rock Estates improvement district after wastewater raises fee-collection and ownership concerns

The North Little Rock City Council on June 28 agreed to hold an ordinance that would establish Municipal Property Owners Multipurpose Improvement District No. 41, the River Rock Estates project, after the city's wastewater utility raised legal and financial concerns. Council members and the developer agreed to delay final action for two weeks to allow the utility and the developer to resolve language about fee collection and ownership of sewer lines.

Why it matters: The ordinance would enable the developer to form a special improvement district to finance and construct sewer infrastructure for a new subdivision, and it includes language allowing the North Little Rock Wastewater Utility to assess and collect connection fees for properties both inside and outside the district. Wastewater officials said that phrasing could obligate the utility to act as a collection agent and potentially bear costs or liabilities they have not agreed to.

The council called the ordinance for first reading and then heard extended testimony from wastewater officials, the utility's attorney, the developer and the developer's attorney. Michael Clayton, executive director of North Little Rock Wastewater, described the utility's concerns and said his commissioners had not yet had a chance to review the final draft of the ordinance: "We've not had a meeting. Well, it'll be tomorrow as our first meeting since we've got the ordinance. And so there has some questions about us acting as a intermediary or a collector for the district," Clayton said. Clayton and the utility's attorney, Sam Hilburn, said particular paragraphs in the draft assign the utility the duty of collecting assessment or connection fees that would repay the developer or district.

Developer representatives said passage of the ordinance is a required step before the parties can finalize a separate contract between the developer and the wastewater utility that would address operational details. Will Allison, attorney for River Rock, told the council: "The ordinance gives them the authority to who are approved. They don't have to approve them, but it does give them that authority. In addition . . . there's a subsequent contract entered between River Rock and North Little Rock wastewater to address the concerns that Mr. Hilburn and Mr. Clayton have said to this court. So there's a subsequent agreement that will address everything between those 2 parties, but that cannot happen until this ordinance is passed."

The developer, Josh Ferguson, said delay imposes cost: he told the council he already had heavy equipment and pipe on site and that the project has been delayed repeatedly by sewer issues. He said the 3,000-foot sewer run being installed required a 10-inch ductile iron pipe encased in concrete instead of a smaller 4-inch line, increasing costs significantly.

Council members said the situation combined two distinct issues: creating the improvement district and negotiating the operational and collection arrangements between the utility and the developer. City Attorney Lisa Farrell told the council she had not had notice of the specific legal concern before arriving for the meeting and could not give immediate legal advice. Several council members urged the parties to work with the utility and the city attorney and return with clarified language.

Outcome and next steps: The council and the developer agreed to hold the ordinance for two weeks to give North Little Rock Wastewater's commissioners and attorneys time to review and to allow the parties to negotiate a contract addressing collection, ownership and costs. The developer's attorney said the parties intend to return at the next council meeting. No final vote on O25 74 was taken at the June 28 meeting.

Discussion-only versus formal action: The council's action on June 28 was a postponement; it did not adopt the ordinance. The transcript shows the council explicitly agreed to hold the item for two weeks pending the utility's review.

Local context: Council members noted similar improvement-district language is sometimes used to allow developers to recoup construction costs from later connections, but wastewater staff said their usual practice is to own and maintain lines after inspection and not to act as a private collector absent clear statutory or ordinance authority and appropriate cost recovery. Wastewater and the developer said they have met on the project over several years, but wastewater officials said the particular draft ordinance that included the contested language had been provided only recently to their office.

Affected parties and potential impacts: The issue affects the developer, prospective lot buyers, North Little Rock Wastewater and any future neighboring subdivisions that might seek to connect to the line. Wastewater officials warned that unanticipated collection duties or ownership arrangements could require future rate adjustments if the utility must assume costs. The developer said holding the ordinance will delay construction and impose additional carrying costs.

What the council asked of staff: Council members asked the city attorney and the wastewater utility to meet with the developer and return with clarifying language or a contract that would resolve the utility's concerns before the council considers the ordinance again.

Ending: The council did not adopt the ordinance; members and counsel agreed to reconvene the item at the next meeting after the utility and the developer try to resolve the outstanding legal and operational questions.