Megatel sues Royse City over “unwritten” permitting process

In the novel Catch-22, fighter pilots desperately trying to escape the dogfights of World War II are stuck in a pickle: Only pilots deemed insane could be grounded, but the army considered it the sane choice to want to avoid flying missions, given their danger. The second an insane pilot asked to be grounded, therefore, he was considered well enough to keep flying missions.

Facing its own problem with no way out, a Dallas developer is suing to escape a real estate Catch-22. 

Bahamas Laguna Azure, a development entity tied to Megatel Homes, is suing Royse City, a municipality northeast of Dallas, mostly in Rockwall County. The developer claims the city’s opaque, unwritten permitting process has made it impossible to develop its 542-acre property, causing more than a year of delays and added costs. 

According to the lawsuit, the catch works like this: 

• In order to get final plat approval, the developer needs to show that there’s enough water and sewer capacity to serve the property
• But the development needs to obtain final plat approval before the city will provide it with water and sewer service

The LLC’s most recent tax bills were paid by Richard Wygle, Megatel’s chief financial officer. The entity also routes back to 2101 Cedar Springs Road, Suite 700, an address it shares with Megatel. The firm and its attorneys did not respond to requests for comment. 

Megatel claims that the city uses “unwritten customs, policies and practices” to handle requests from developers to hook up projects to its water and sewer lines. 

The lawsuit alleges Royse City requires developers to meet with the city engineer and his or her staff, which then makes the final call without written standards or published policies. That gives the city “an absolute veto right over any proposed development that does not satisfy the City – regardless of however arbitrary or capricious the City’s demands may be,” the developer claims in the suit.

Megatel says it spent more than a year trying to track down information about the process and that the city refused to acknowledge its request for a “will serve” letter, the standard document requested from utility providers to show they have the capacity to serve a proposed development. 

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In September 2022, six months after requesting the letter, Megatel petitioned the Texas Commision on Environmental Quality to disannex from the city limits and create its own municipal utility district. It also filed for a separate wastewater permit and proceedings with the Texas Public Utility Commission to force Royse City to provide the development process information. 

In November, the city disclosed its process for handling water and sewer utility requests for the first time, the lawsuit alleges. That same month, it formally responded to the developer’s will serve letter request, stating that it does not give them. The parties met that month, but the City refused to engage, Megatel alleges.

Instead, the city is accused of suing the developer and two of its corporate officials. A search of lawsuit records could not find that case. Royse City hasn’t responded to a request for comment.

Things have progressed in recent months: In March, the city responded to the TCEQ petition, saying that the developer had not clearly laid out how much water and sewer service it needed. Megatel resubmitted its request in May to “resolve whatever uncertainty the City feigned about the quantity of water and sewer service” it needed, and the city said it would meet. 

Megatel is suing anyway because of the damages it says it has already suffered, including foregone development profits and increased costs.

The lawsuit was filed July 7, and Royse City has not yet responded to it.