Community activist Sharon Boyd, who led an unsuccessful campaign against giving tax dollars to the city's new sports arena, has filed suit to have the arena group's special tax exemptions declared illegal. Her suit argues the arena project does not match up with state law on who should get tax breaks and why.
State law says local governments can allow companies not to pay property taxes if in return the companies build in areas where nothing would have been built otherwise. Boyd says the area around the arena site was already one of the city's hottest real estate markets before the arena was even announced.
"Everything around the arena site is practically built out," she says. "There isn't even that much land available there. They are claiming this is a blighted area when, everywhere you look down there, all you see is construction cranes."
A spokesman for Brad Mayne, president of the Arena Group, says Boyd's suit is against the city, not the Arena Group, "so any response about the case will have to come from the city." City Attorney Madeleine Johnson on Monday said she had not seen Boyd's lawsuit and wouldn't comment on it until she had examined it.
Boyd says her main purpose in filing the suit is to force the developers of the arena to pay "their fair share" of city taxes, especially the costs to taxpayers of servicing the arena and related developments.
"We taxpayers are not going to get any benefit from the hotel or any of the office buildings being built there," she says. "Instead, it's going to cost us more for additional infrastructure, police, and so on, and they won't be paying their fair share of taxes that this kind of project should be generating."
Boyd was a leader of the "It's a Bad Deal" campaign, which tried unsuccessfully to defeat a January 17, 1998, election granting tax support for the city's new basketball and hockey arena. Voters -- in a tiny turnout of 125,000 ballots cast -- narrowly approved a measure calling for the city to chip in nearly half the cost of the $230 million arena project.
Pro-arena forces raised $2.5 million for their campaign, $2 million of it from team owners Ross Perot Jr. and Tom Hicks. Boyd's group raised less than $90,000. On a per-vote basis, the pro side outspent the anti side $38 to $1.55.
Perhaps little noticed in last year's campaigns, however, was an additional agreement to create a "tax increment finance district," or TIF, to forgive the arena developers a share of their property taxes over an eight- to 10-year period, in addition to the $125 million the city had agreed to kick in directly to the project. As originally proposed, the TIF was designed to deliver an approximately $19 million tax break to the developers.
Last summer, a year and a half after the election, the Arena Group complained that its costs had roughly doubled and that it wanted additional millions in tax exemptions. Dallas Mayor Ron Kirk said at the time he was glad the city had capped its participation in the Arena tax breaks at $12.5 million, in addition to similar breaks granted by other local government entities.
But Kirk and other city leaders immediately began campaigning to recruit the Dallas Independent School District -- which previously had not granted any tax breaks to the arena -- to kick in the additional $21 million the Arena Group said it wanted. DISD quickly agreed to grant the arena a $21 million tax break, in exchange for a $500,000 package of scholarships, free days at the arena, and other small inducements.
The district had to move quickly to get the tax break grandfathered under the existing law, before a new law went into effect. The last Texas Legislature revised state law specifically to keep school districts out of TIFs. State Sen. Teel Bivins, an author of the original TIF law, says that, before the recent changes, the complicated state-school money formula meant the money school systems like Dallas gave away to developers had to come out of school budgets somewhere else in Texas.
"It's a good deal for Dallas," the Amarillo Republican says, "but it's a lousy deal for Amarillo."
The new law says any money a school district gives to a developer after September 1 will come out of the district's own pocket. The state no longer will reimburse districts for taxes the districts have given away.
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Boyd's lawyer, James Murphy, concedes that one of the aims of Boyd's lawsuit is to force DISD out of the arena TIF. Because the September 1 deadline has passed, Murphy says DISD will be in a different position if anything goes wrong with the existing TIF and DISD is asked later to rejoin a new or repaired tax district later.
"The city may be able to fix the TIF in certain ways to meet the our lawsuit," Murphy says, "but DISD will be out of it. I assume they wouldn't join again if they weren't going to get the money back."
Murphy says he will prove the city council acted illegally in using the TIF law to deliver a tax break to Perot and Hicks. "And if we prevail," he asks, "what's going to be the reaction of the developers? If they lose $21 million in school money, are they going to pull out and not build the arena? Hell, no. And that will prove our point.
"They don't need the money."