ARGYLE — The Canyon Falls developer will help pay Argyle’s portion of a major sewer expansion, since town officials agreed to a proposal that roads and other infrastructure in Canyon Falls be funded by bonds and backed by a special taxing district.

The Trinity River Authority plans a $16 million to $20 million sewer expansion project between Denton and Flower Mound in anticipation of growth along Interstate 35W. The tab for Argyle’s portion will be between $3 million and $5 million. In addition to the agreement with the Canyon Falls developer, another developer planning an Argyle-area project also has pledged to help pay Argyle’s share of the new sewer line.

Town attorney Matthew Boyle told the council that the agreement, which it ap­proved on Monday, “maximizes the town’s security and poses at, or near, zero risk” should the developer default on the bonds.

“In the worst-case scenario, you can take action with the developer,” to prevent the Trinity River Authority from coming to town officials and asking for payment, in case the developer defaults, Boyle said.

Interim Town Administrator Kay God­bey said that the town doesn’t know yet the exact dollar amount or the percentage each developer will pay.

“The agreement is contingent upon Flower Mound and Northlake agreeing to their portions as well,” Godbey said. “Once they sign on, then we’ll know how much it will be.”

Boyle and the town’s economic development consultant, Trent Petty, who also is Westlake’s city manager, hammered out the agreement between Argyle and McGinnis Real Estate, the Canyon Falls developer. McGinnis and its investors acquired 1,245 acres between Argyle and Flower Mound. They’ve announced a 2,700-home, mixed-use project that includes retail, office and apartments, too.

Pending approval of a similar agreement in Flower Mound, McGinnis representative Tim Green told the Town Council that the next step is to publish a notice of intent of forming the taxing district. Then they plan to get legislative sponsors for a bill in the Legislature authorizing the project.

“We’ll probably go as a water control and improvement district,” Green said. “This has been done a number of times in Denton County.”

Talks between Argyle and the developer went over several financing tools, including a freshwater supply district, a water control and improvement district or a special law district.

Water control and improvement districts were first authorized by the Legislature in the 1920s, according to the Handbook of Texas Online. The Legislature agreed to taxing authority for specific areas so that drainage, reclamation and related construction could take place. However, the districts have been used more often as financing tools for large developments than for managing water resources in recent years. The Legislature must approve each water control and improvement district.

While freshwater supply districts do not require special legislation to be formed, a water control and improvement district is similar to a freshwater supply district in that the developer needs an election to authorize the taxes of the district’s future property owners to finance the project.

Green told the council that the developer will be placing mobile homes on the property prior to a uniform election date, probably the May 2008 election, to bring in the residents who will vote for the taxing district. He also told the council that those residents will be asked to leave about 60 days after the election.

Several council members questioned whether the district’s formation would go smoothly, given the legislative hurdles and the possibility that Trinity River Authority could start spending money before the district is formed.

Boyle told them that the responsibility for paying the bills will remain with the property owner, and Argyle should not be responsible.

In addition to paying part of Argyle’s portion of the sewer line expansion, McGinnis also agreed to dedicate at least 6 acres for an elementary school site.

Godbey said an agreement with the other subdivision developer, Belmont Capital Realty, could be on the agenda as soon as the next council meeting, scheduled for Tuesday, Nov. 28. Town officials said they thought at least two more school sites would be needed in the Belmont subdivision to meet the population growth.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com .