Wednesday, April 18, 2007

Texas developers can have their infrastructure funded by your property taxes


The Politics Of Tax Breaks And Land Development


Bob Dunn
Fort Bend Now
Copyright 2007

When Kevin Tunstall approached the microphone at Monday night’s Missouri City Council meeting, the District C council candidate hadn’t completed two full sentences before Mayor Allen Owen stopped him.

“Let me caution you,” the mayor said, “I will not allow a political speech” during a council session. It was as if everything that happens before a city council or county commission doesn’t carry political overtones, especially less than a month away from an election.

The subject of Tunstall’s comments, for instance.

He was there to talk about this arcane economic development tool called a Tax Increment Reinvestment Zone. And it turns out that the theory and practice of creating such TIRZs is fraught with political implications, since TIRZs go hand-in-hand with land developers. And in Fort Bend County, as everywhere else, it seems land developers go hand-in-hand with politicians.

Tunstall said he’d been prompted to study up on the concept of a TIRZ, after two other Missouri City residents – one a past political candidate and the other a current council candidate – had approached council at consecutive recent meetings to suggest a TIRZ should be used to attract business and development along Texas Parkway and Cartwright Road. Council members suggested the two citizens were short on facts about TIRZs and how they operate.

Just The Facts, Ma’m

All of which apparently prompted Tunstall to take a peek at Chapter 311 of the Texas Tax Code, which governs TIRZs.

Basically, a TIRZ is meant as a vehicle for financing structural improvements and infrastructure within a certain geographic area. Taxes paid by the property owners within that area are used to pay for those improvements. The theory is that by adding infrastructure and/or structural improvements, the value of the land in the zone will increase, benefiting both the landowners and the city.

The theory also is that a TIRZ is to be used to jump-start areas where growth and development is “impaired or arrested,” but more on that later.

Tunstall said he wanted to make sure he understood the laws governing TIRZs, so he sought out and spoke with one Patricia Bailey at the Texas Comptroller’s office, identified as a TIRZ expert. Among other things, Bailey told Tunstall her office is required by law to maintain a registry of all the TIRZs in Texas, and her office is required by law to obtain an annual report on the activities of each of the state’s TIRZs.

“A shocking fact,” Tunstall told the council, “is that this young lady had no record of the two TIRZs” Missouri City says it operates.

“I’m sure it’s just an oversight,” Tunstall told council members. “For your convenience, I’ve attached Ms. Bailey’s phone number…and she will be expecting your call.”

“I cannot say tonight that we do or do not” have any TIRZ reports filed with the state comptroller, Missouri City Manager Frank Simpson said as Tunstall walked away from the microphone. “But I’ll look at it first thing in the morning.”

Bailey was out of the office on Wednesday and couldn’t be reached. But you might find a peek at the Tax Increment Financing Registry, maintained by the state comptroller’s office for all TIRZs in Fort Bend County, somewhat revealing.

While I think compliance with the law is of rather major importance, what strikes me about the TIRZ is the reason it was invented in the first place.

According to the tax code, in order for a geographic area to qualify for TIRZ designation, that area is supposed to either:
  • Be someplace that has “substantially arrest(ed) or impair(ed) the sound growth of the municipality or county creating the zone…or constitute an economic or social liability and be a menace to the public health, safety, morals, or welfare in its present condition and use…” or;
  • “Be predominantly open and, because of obsolete platting, deterioration of structures or site improvements, orother factors, substantially impair or arrest the sound growth of the municipality or county.”
In Missouri City, they’ve designated an area including Houston developer Newquest Properties’ Fort Bend Town Center as a TIRZ. This is a planned retail development at State Highway 6 and the Fort Bend Parkway that likely will include a big Kroger store in its first phase, and the smaller retailers that typically follow a big grocery store into a strip center.

A report published by Missouri City in 2003 called this intersection the eventual center of the city, once its extrajudicial territory all is annexed. Expectations are that it will become one of the heaviest traveled intersections in the city once the parkway is completed – and it’s pretty heavily traveled already.

Meanwhile, the city is in the process of creating a third TIRZ, near Sienna Parkway and State Highway 6, only with a twist. In this case, the city has also approved creation of a municipal management district. The TIRZ would contract with the management district to build everything developers want within the district, and the TIRZ tax money would, according to a representative of Allen Boon Humphries Robinson, be “funneled” to the management district.

Obviously the above two geographic areas are not blighted and are not in any way arresting or impairing growth and development in Missouri City, Texas. These are probably two of the most desirable tracts of commercial land available in the area.

But they still can be considered for TIRZ designation because the Texas Legislature in its wisdom included a paragraph that gives just about any developer a shot at having his or her infrastructure paid for by property taxes.

You can be eligible for a TIRZ if your land is in “an area described in a petition requesting that the area be designated as a reinvestment zone” as long as 50% of the property owners sign the petition.

Does that still make it the right thing to do? Does anyone think the intersections of Sienna Parkway and State Highway 6, and the Fort Bend Parkway and State Highway 6 wouldn’t turn into big commercial developments all on their own without benefit of tax breaks that developers of other properties aren’t able to obtain?

To me, those questions are what makes the arcane TIRZ a political issue.

Toothless Tigers

It’s unclear what, if any penalties are incurred in the event a municipality forgets to file its annual TIRZ reports with the state comptroller.

So in that respect, the comptroller’s office may share something in common with the Texas Ethics Commission – which operates under the auspices of numerous regulations, but doesn’t penalize anyone who violates those rules.

For instance, candidates for public office, such as school board candidates, are required to file reports with the TEC showing how much money they took in as campaign contributions, and how much money they spent running their campaigns. And also who gave them contributions and where any money was spent.

This is presumably so that the Texas public may inform itself as to who is financing these candidates and campaigns.

The last of these required reports was due April 12, covering the period from Feb. 26 through April 2 of this year, as the candidates prepared for the May 12 election.

So I visited the Fort Bend Independent School District, mostly to see how much money it takes to conduct a campaign for an FBISD board slot.

I didn’t find much. As of April 16, four days past the deadline set by the law, only board Position 7 candidate David Reitz and Position 3 candidate Bob Broxson had filed their campaign contribution reports.

Incumbents Ken Bryant and Lisa Rickert, and challengers Noel Pinnock and Ann Hopkins, hadn’t turned anything in, according to FBISD officials.

As for how much it takes to run such a campaign – I guess not that much in the grand scheme of things.

Broxson took in $2,150 during the period, which is pretty much the month of March. The biggest contribution was from Mourhaf Sabouni of Sugar Land, who gave $500. Broxson’s largest expenditure was for $337.79 to “Mprinting Graphics” for printing and mailing costs.

Reitz took in $1,300, and listed himself as his biggest contributor, at $750. He reported not spending any campaign money during the month.

Now you know more about Broxson and Reitz’s campaigns than any of the others running.

So does that mean the smart thing politically is to keep your cards hidden, since the Texas Ethics Commission doesn’t really penalize candidates who file late?

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