By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
Besides the districts they created near Lewisville, the Vista developers also presided over the creation of 10 other districts, called Municipal Utility Districts, or MUDs, mostly in the Houston area. The Texas Natural Resource Conservation Commission oversees any district like a MUD that involves the use of water or other natural resources. Of the 1,300 or so special districts under the conservation commission, more than 20 have gone bankrupt, according to state records. It is not possible to generalize the debt load of the districts because all of them are different. But, a conservation commission official says the districts are required to operate under rules that do not allow excesses in bond debt.
The latest financing legislation favored by developers creates something known as County Development Districts, or CDDs. The enabling legislation says that a special taxing district can be created to finance a major tourist attraction in counties with populations of less than 400,000. The legislation was introduced as a way of developing the Panhandle's Palo Duro Canyon into a tourist attraction.
Typically, developers move a trailer and one or two people onto the land where the proposed development will be located. Then the trailer residents become the district's voting population, and they approve the formation of the new tax district.
Developers have been selling the idea in Denton County in a big way with promises of donations of school sites and upscale developments. Before the Texas attorney general issued an opinion that said the districts couldn't be used primarily to build residential lots, developers had an even better deal than they did with road districts. That's because the road district for the Vista properties paid for major roads, and homeowners paid for the residential streets, sidewalks, and sewers. With a CDD, the developer could pass on all kinds of infrastructure costs. Developers said golf courses were major tourist draws, and one even said that a home is like a tourist attraction because aren't people visited by friends and relatives.
Ken Leonard, a Kaufman County commissioner, is one of the few elected officials who spoke out against the development districts as a flawed way of building houses. He fought a proposed CDD in his county because, he says, taxpayers would have eventually been stuck with a bill for costs incurred without public scrutiny. He did not have faith that taxpayers would really know what they were getting into, he says.
"I think they're going to see their tax bill and their water bill and everything else and shriek," he says. "I think it's as basic as it gets. It's taxation without representation." He described a familiar scenario. "Developers argued that [homebuyers] will be signing a waiver that they understand they are going to be responsible for those taxes, but I don't think that's ever going to dawn on people until they get their tax bill."
Not only that, he says, but taxpayers who bought a lot or home at market value (just like the Bass family) may not realize they are paying full price for property that comes with additional debt. In a conventional development, everyone who buys a new home in a neighborhood is paying a share of the cost of sidewalks, sewers, etc. Those costs and any others that the developer paid aren't typically tacked onto a tax bill as they would be in a development district, he says.
"In essence, the homeowner ends up paying for infrastructure twice if he buys it at market value because he's paying for the lot as if he was paying for the infrastructure. He's buying it at market value up front, and then he gets slapped with a big tax bill to pay off the bonds for the infrastructure again," Leonard says.
Before the houses were built there, big taxpayers in the Vista road district such as Vista Ridge Joint Venture, owners and developers of the Vista Ridge Mall, and big stores such as Sears and Dillard's department stores, paid the road and levee district taxes. Headaches for Centex began in 1998 when people began moving in. After tax bills started arriving, a couple of residents like road district board chairman Fortune started asking questions and attending the little-known road district meetings. Cheryl Bass says the district's directors and Centex representatives seemed a little too "cozy" to her. Residents learned that district directors planned to issue $5.9 million in new bonds and that the tax rate to repay Centex would be going up again, and this was after they were told it would go down. One of the selling points for special districts is that the taxes will go down as the value of the district goes up and more property owners share the tax burden. It's not happening that way in the road and levee districts.
"If you go back and look at the record of how the RUD was formed, back when they formed the district, these guys said we're proposing that the tax rate not be over 43 cents per 100 [dollars in property value]," Fortune says. "At one point, the RUD tax rate was like $2.25 per hundred." The tax rate for the year 2000 is about 47 cents per $100 of property value for the road district and about 13 cents per $100 of property value for the levee district.