Lubbock will settle out of court with a developer rather than fight over its decision to set Impact Fees to zero.
The deal still needs City Council approval, scheduled for a Tuesday vote.
Red Canyon Development, LLC, sued the city for $2.5 million in September wanting its money back for the construction of Quaker Avenue (two lanes of new roadway) between 146th Street and Woodrow Road. The stretch runs along the eastern border of Red Feather Golf & Social Club and Lubbock-Cooper Liberty High School. The settlement, if approved, is for $1.6 million.
The city will pay the settlement from its Risk Fund, which acts like self-insurance. The city purchases outside insurance for claims in excess of $500,000, but public documents were not clear if insurance would cover this specific out-of-court settlement.
Lubbock has not filed its side of the story in court records.
Red Canyon claimed it made a deal with the city in 2024 to participate in the cost of building out Quaker Avenue. Impact Fees were in place, and Red Canyon was counting on getting credit for the fees by spending money up front on the road project.
When the fees, which became controversial, came up for review last year, the council chose to keep them in place but set them to zero on a 4-3 vote.
The lawsuit said, “[The city] eliminated the very mechanism through which the Developers were to realize the impact-fee-credit … [Lubbock] had promised, rendering that promised consideration worthless.”
In simple terms, Red Canyon put up money to get credits, but those credits are now worth nothing.
The city got a lot of money for a project it needed, according to the suit.
“The project is now, and has since been, public infrastructure owned, used, and maintained by [the city] for the benefit of the public,” the lawsuit said.
What are Impact Fees?
Impact Fees are established in state law as a way for local government to charge builders or developers for the “impact” of new roads, water lines and sewer lines which are needed for new developments. The city implemented them in 2021 for roads but not sewer and water.
The fees were assessed when a development was platted but not actually paid until a construction permit was taken out.
Impact Fees raised $14.3 million for Lubbock as of August 2025.
Supporters said it was enough money to do a handful of important road projects that would have otherwise fallen short of budget. But they also said it was only fair that the people who need new roads for a housing development pay for them.
Opponents called them expensive, complicated and unfair.
Red Canyon demanded its money back in February. The city said no.
“By letter dated April 21, 2026, [the city] refused. [The city] stated that it ‘cannot agree to reimburse the developers for any perceived loss in value to Impact Fee credits at this time,’” the lawsuit said.
The city claimed a legal technicality, according to the lawsuit. Impact Fee credits were mentioned only in a part of the agreement called “recitals” and not repeated in the terms.
That would mean the deal was illusory in Red Canyon’s view.
Ordinarily the city is responsible for thoroughfares like Quaker Avenue. But state law allows the city to make deals with developers for up to 30 percent of the cost. In this case, the city put up a little less than $1.3 million for a $4.25 million road project.
That was also part of the city’s defense. State law allows the city to pay up to 30 percent in a deal like this, and that’s what the city paid.
The original agreement was specific that the city’s cost was “not to exceed 30 percent.”
Red Canyon argued the Impact Fee credits were separate and “distinct” from the city’s 30 percent cash contribution.
The lawsuit said, “Treating the two as a single ‘participation’ capped at thirty percent would read the impact-fee-credit promise out of the parties’ bargain entirely and would leave the developers uncompensated …”
In the original agreement, Red Canyon was getting two things. The project would start sooner and the company would get credit for the Impact Fees. The city was getting someone else to cover 70 percent of the cost of Quaker (two lanes wide) from 146th to Woodrow.
Chad Henthorn; Bushland Springs, LLC; 146th & Quaker, LLC; and 14 Texas Real Estate, LLC were all part of the original agreement. They too are named in the settlement.
As part of the settlement agreement, the city denies wrongdoing.
“This Agreement reflects a compromise of disputed claims. The city denies liability,” the agreement document said.
The deadline to get the deal done and make a payment is November 13.
