By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
When the day to close the deal came, the couple had a typically large number of documents to read and sign. One involved the disclosure of taxes on the property, and that's when Cheryl Bass noticed that something wasn't right. What exactly are these two odd taxes? they asked the closing agent. The mysterious taxes, almost as high as the city and county taxes combined, were for roads and levees and would decrease every year and then go away when debts were paid, they were assured. The surprising appearance of the extra tax load on their future home was unnerving but not enough to quash the deal, Bass says.
So, they signed the papers and bought their house. And, just like their neighbors who had moved into the 1,344-acre subdivision about 19 miles north of Dallas, they started paying the obscure taxes for two specially created entities: a road district and a levee improvement district.
What the Basses didn't know when they bought their house is that the two tax districts had been quietly racking up debt for 12 years. During that time, until the road district's new residents figured out what was going on, district directors were never challenged, so no elections were held. Road district directors gave legally required public notice of their meetings by posting a note at a pump house few people ever frequented. The other notice was posted at the official district meeting place, which was at the offices of the neighborhood's developer, Centex Development Co., until 1998, when homeowners took over the board and Centex kicked them out.
The Basses didn't know they were paying a premium for their house just because it happened to be located inside the boundaries of the two special taxing districts. They didn't know that property owners a couple of miles away didn't have to pay for major highways and in truth got their property much cheaper. They didn't know that Centex soon would be demanding millions of dollars from taxpayers for land the developer first promised to donate to Texas. And, they didn't know that millions of dollars in more debt were tucked away and slowly called in so that future homebuyers and commercial property developers wouldn't be scared off too soon by a big tax burden, one homeowner advocate says.
The Bass family and others who moved into the area should have paid more attention to the details when they bought their property; they admit that. But even if they had asked more questions about the odd tax districts, they probably would not have been able to figure out how much they would owe once they bought district property. That's because even the people running the districts today, Cheryl Bass among them, don't know for sure and can't find out. The "road utility district" that encompasses the Bass family home and about 600 others, owes $14.5 million in outstanding bonds, and Centex wants at least $9 million more that would not show up on the tax disclosure statement given to homebuyers at closing.
The levee district owes $1.9 million in outstanding bonds. The district also owes Centex another $8.6 million--a debt that will fall directly on the shoulders of about 600 homeowners when Centex comes for it. Bass says that last year when her board of directors tried to figure out how much tax burden the road district could take and what the district's total debt was, Centex sued them.
"Reasonable, that's what we thought we were being until we were sued," she says. "We were blindsided."
Meanwhile, just to the north, developers acting with the blessing of developer-friendly politicians in Denton County scrambled to snag a similar kind of deal that lets them spend millions of dollars of public money with no real oversight from those who will eventually foot the bill. They want to use taxpayer money to pay themselves back for developing their own property. Eventually, homeowners will move in. When they do, Bass might have a word of advice about buying a house in developer-friendly Texas.
"The developers say we're only going to do what's good for us today, and we're not going to worry about what's happening tomorrow," she says. "The developer is going to do what the developer needs to do to make more money."
In the mid-1980s, the 1,344 acres south of Round Grove Road was a mix of swampy pasture and woods. Developers, who called themselves Vista Mortgage and Realty Corp. at the time, hoped to make the area suitable for a mall, light industry, and houses. But, unlike conventional developers who typically obtain private financing to build roads and sewers and then get their money back when they sell lots at market prices, Vista Mortgage looked to new legislation that would let them do things very differently.
Vista Mortgage, headed by Wayne Ferguson (who did not return telephone calls) and others, used a law that allowed them to create a road utility district, a political entity that can collect taxes from its residents just like a school district can. Once that kind of district is created, it can borrow money, millions of dollars, to pay for roads and sewers. The Department of Transportation must approve the creation of a road utility district. But, after the district is formed, it's up to the district's "elected" officials to make sure taxpayer money is being wisely spent even if the taxpayers haven't arrived at their new houses yet.