to tighten rules on tax zones
New spinoff districts won't be recognized; existing ones unaffected
By REESE DUNKLIN / The Dallas Morning News
AUSTIN - Texas Attorney General John Cornyn said he was imposing
tighter restrictions to close "obvious gaps" in
the regulation of special taxing districts and called on the
Legislature to enact broader reforms.
The attorney general's actions will effectively put an end
to a tactic that several North Texas developers have been
using to create taxing districts without county or state oversight.
Mr. Cornyn announced the changes this week in response to
a state senator's request for a review of special taxing districts,
which recently have come under intense scrutiny. The attorney
general said his inquiry did not cover possible criminal violations
because that would be up to local prosecutors.
In recent years, developers have asked an existing Denton
County district to annex their land, which was sometimes in
another county, then split it off as a separate taxing authority
- all for the cost of $100 an acre. They would use bonds sold
by these districts to finance construction of luxury subdivisions
in the region's booming suburbs.
Mr. Cornyn said his agency, which approves all public bond
issues, would no longer recognize such districts or let them
take on such financing. The change, however, would not affect
existing North Texas districts because newly enacted state
laws validated any actions they have taken, he said.
He criticized those laws, saying they have also "cut
off and pre-empted" his office's ability to investigate
the districts' practices.
"The Legislature has pretty much tied our hands,"
Mr. Cornyn said.
Denton County Judge Scott Armey said he would meet with District
Attorney Bruce Isaacks to discuss whether the prosecutor should
launch an investigation. Mr. Cornyn's comments are his first
publicly since state Sen. Jane Nelson, R-Flower Mound, urged
him to act two months ago after a series of reports by The
Dallas Morning News.
series revealed that North Texas developers had won hundreds
of millions of dollars in taxing power from short-time voters
whom they housed in trailers shortly before elections and
provided financial benefits. Some developers had also placed
their employees on the districts' board of directors, despite
state law barring such connections.
week, The News also reported that in at least one instance,
the lone voter in a district election said he never lived
there and was urged to sign false documents to make things
appear legitimate. Representatives of the district's developer,
the family of former Dallas Cowboys owner H.R. "Bum"
Bright, denied the allegation.
Ms. Nelson said she was pleased with Mr. Cornyn's interim
measures and planned to propose new legislation that would
"correct what I still believe are serious problems with
special taxing districts." Her recommendations would
include more stringent conflict-of-interest provisions and
voter residency requirements.
"There is a woeful lack of public accountability here
that flies in the face of some of the most basic principles
on which our nation was founded," Ms. Nelson said in
a written statement.
Developers and their lawyers have said the practice of moving
voters into trailers has been long accepted as a way to conduct
required elections in otherwise uninhabited areas. They also
say taxing districts serve a good purpose: building water
lines, sewer systems and roads in areas that cities don't
want to serve but where people want to live. And those who
move in would bear the costs, not the general public.
Chris Bright, the son of Bum Bright and the architect of several
taxing districts, said through a spokesman Tuesday that the
attorney general's new measures would have "no effect
on our business interests," but that his family's company
would "comply fully."
One of the districts that supports Mr. Bright's Castle Hills
subdivision near Lewisville spun out more than a dozen new
taxing entities for other developers in the late 1990s. In
addition to paying the district annexation fees - which totaled
about $700,000 - those developers also made more than $400,000
in personal payments to Mr. Bright or his company for the
service, The News reported Monday.
Mr. Bright's representatives said he acted appropriately.
Mr. Bright said he had no plans to spin off more districts.
The developers have said that they pursued this route because
it was cheaper and quicker than seeking permission for a new
taxing district from the state or a county commissioners court.
Tom Leonard, an Austin-based lawyer who represents the Brights
as well as most new taxing districts in North Texas, did not
respond to an interview request.
The practices of taxing districts first came to Mr. Cornyn's
attention this summer after The News' reports and Ms. Nelson's
request for a review, he said. While doing his research, he
arrived at one observation: "I find some aspects of all
of this a little disconcerting. Some of it just seems a little
The scrutiny "served a useful purpose," he said.
"It caused us to go try to figure out what it is we can
do to try to be a little more aggressive in filling in some
of the regulatory gaps under current legislation."
The new rules
The attorney general's office is charged with approving the
districts' bond sales. Districts that are recognized by the
attorney general - those that haven't been spun off another
district - will face new restrictions: Developers must show
that they can finance their projects without raising district
taxes to excessive rates and overburdening homeowners, who
ultimately must repay the bonds.
As for broader changes, the agency was limited in what it
could examine and what it could recommend, Mr. Cornyn said.
He cited two new state laws that approved districts' previous
State Rep. Gary Walker, R-Plains, who wrote one of the bills
and sponsored the other, said lawmakers never intended to
shield special taxing districts from scrutiny. He said he
would support Mr. Cornyn's calls for legislative action.
"We'd certainly study that issue," he said.
The attorney general, as part of his legal review, did not
investigate potential criminal violations. He said his agency
lacked primary jurisdiction and could only assist county district
attorneys if asked to do so.
"Local district attorneys are authorized to do"
criminal investigations, Mr. Cornyn said. "If you or
anybody were to bring them evidence of false affidavits or
other criminal activity, I'm sure they would pursue it."
Mr. Isaacks, the Denton County prosecutor, did not return
calls seeking comment.
Mr. Armey, the county judge, said it would be "extremely
appropriate" for Mr. Isaacks to look into the matter.
"With this indication from the AG, I would want to meet
with the district attorney and see if there are some areas
we need to work at," said Mr. Armey, who has previously
supported the creation of some taxing districts.
Mr. Cornyn's office does not plan to reinstate an old policy
of conducting on-site election inspections for district creation
elections and bond sales.
Dating to at least the late 1970s, the agency would question
voters about their residency and possible connections to developers.
The policy was scaled back over the years, before ending altogether
in 1995. Today, districts are only required to submit sworn
affidavits attesting to a voter's residency.
Mr. Cornyn, who was not in office at the time, said he did
not know why the inspections were halted. But starting them
again "wouldn't be all that fruitful."
"If someone's going to lie on an affidavit, they're going
to lie on an interview," he said.