Government by Developer–Vested Interests

In Glynn County, I recently discovered, the county planning staff has been passing off amendments to the master plan, drawn up by developers, as their own. At least, we still have an elected County Commission involved. In East Texas, it turns out, developers set up new taxing districts that then sell bonds to finance their projects by holding elections in which a single vote is cast by someone who’s been moved onto the land just to satisfy a legal requirement. The Dallas Morning News has been covering the scam. No wonder voting has become a big issue in Texas.

It is part of a bigger issue.

The privatization of our public services is a direct consequence of public servants in our legislative bodies abdicating their obligations. It isn’t the various agencies that have been captured, it’s the legislative bodies. They’ve been taken over by the commercial class. If they can’t help themselves to the contents of the public purse directly, they do it by shifting functions wholesale to the private sector.

The lack of funds is a handy excuse which their cohorts in Congress facilitate by rationing the currency. Direct payments to individuals and service providers from the Treasury circumvents the rationing. Which is why the middlemen in Congress, sent there by the chambers of commerce hate Social Security and all other cash distributions. Congress is using the currency as a power tool –i.e. To exercise power and impose deprivation.

Why deprive the electorate? It’s punishment for having the gall to claim their rightful authority. If the people govern, legislators are nothing but public servants. That’s not what the commercial class is after. The commercial class has become a reservoir for human predators and parasites, people who serve no useful function. We could also call them the chattering class. “All talk;no action”

June 10, 2001

In Denton County and beyond, some voters are getting
free rent to move into mobile homes. Then they alone decide
to approve special taxing districts and millions of dollars
in bonds and to benefit …. Government by developer

By Brooks Egerton and Reese Dunklin

North Texas developers have won hundreds of millions of dollars
in taxing power from voters and elected officials to whom they
provided homes, jobs or other benefits, a Dallas Morning News
investigation has found.

The arrangements date at least to the mid-1990s, when a series of
new governments that serve powerful business interests began
proliferating at the fringes of suburbia. These special taxing
districts, birthed in elections that sometimes had a single voter
and always had fewer than 10, often escaped attention from
regulators and the public alike.

Typically, developers have drawn district boundaries to exclude all
existing residents of an area, then moved the only voters into
rent-free mobile homes shortly before elections. The newcomers
sometimes move on soon after approving huge sales of government
bonds for roads, water lines and sewer systems – which future
homeowners are expected to pay for in taxes.

Developers say the practice is a long-accepted way to finance
quality housing in undeveloped areas where people want to live
while minimizing the risk to outside taxpayers. They and their
representatives say they have acted properly and do not dictate
votes.

“I know how it looks kind of funny,” said James Mabrey, whose
housing projects are backed by Denton County taxing districts. “But
the reality is, this is the way it is done. This is the way it is
provided to be done by law. We’re not pioneering this.”

The votes can have enormous implications. One day last fall, for
example, a family of three authorized $277 million in bond sales by
two water districts covering the high-end Lantana subdivision north
of Flower Mound. That rivals the biggest bond propositions ever
proposed by the city of Dallas.

“It’s good to not pay rent,” said one of the voters, 20-year-old
Chad Wilson. The other two were his father and sister, who live in
a neighboring trailer and work at Lantana.

The water districts serve the same property as another type of
special taxing district, which Tiffany Jo Benefield voted to create
in 1999 after getting free housing for a few months. The
23-year-old said she participated in the election with this
attitude: “I’m leaving. What do I care what they build?”

Lantana developer Rick Strauss, who has put together several
high-end residential developments in recent years, said he wasn’t
familiar with the voters’ housing arrangements and saw no problem
with employing the Wilsons.

“They absolutely have the district’s best interests at heart,” he
said. “These aren’t people that have any problem voting what
they’re thinking.”

The Austin-based law firm that helped set up the Lantana districts,
and most others in North Texas, said housing is provided in return
for services that some first residents are required to perform
under “caretaker agreements.”

Frank Van Court, a partner in Leonard Hurt Frost Lilly & Levin,
would not describe the services beyond saying that “they’re
watching over the land.” He would not provide a copy of a contract.
Nor would residents interviewed by The News. Most said they did no
maintenance or security work.

The developers behind special taxing districts include some of the
area’s biggest names: Chris Bright, whose family once owned the
Dallas Cowboys; Don and Phil Huffines, whose family runs a large
chain of car dealerships; Mr. Strauss, whose father helped found
one of Dallas’ most prominent law firms; and Dan Tomlin Jr., whose
family controls vast tracts of land near the Denton-Collin county
line. For a time a few years ago, Dell Computer was also a player.

Mr. Tomlin and the Huffines twins did not return repeated calls for
comment.

“I think any time you are proposing something to be voted on,
you’re trying to convince people to vote the way that you want them
to,” said Mr. Bright, whose family’s old ranch near Carrollton and
Lewisville is served by several districts. “I think that’s what
everybody does in an election. If you’re suggesting that there was
a payment for it, that wasn’t true in our case.”

Is there a watchdog?

The entire process of creating and operating water districts is
closely and independently scrutinized, many developers and
attorneys for the districts insist. The News found several
indications to the contrary:

*Board meetings generally are run by districts’ attorneys, not
elected officials. Some of the attorneys also have represented the
developers. Several of the directors can’t explain what actions
they’ve authorized.

*Several directors work for the developers or have other financial
ties to them.

*Many people who got county permission to create water districts
did not meet residency or land ownership requirements. Similar
problems affect some voters and directors.

Few people even know about the existence of most special taxing
districts, which “may create the appearance of ‘hidden government’
and raise questions about accountability to local taxpayers,” a
recent Texas comptroller’s office report concludes. “Currently, tax
data and other information are not available in a central
location.”

The state Natural Resource Conservation Commission is supposed to
oversee the operation of all sorts of water districts, though its
blessing wasn’t needed for the North Texas ones to form. The
agency, by its own account, does little with these districts beyond
making sure required paperwork is filed and reviewing their
finances before all proposed bond sales. The attorney general’s
office performs a similar evaluation.

At the conservation commission, record keeping is so backlogged
that officials there didn’t realize many North Texas water
districts existed. They said they knew little about some
developers’ use of an obscure provision of state law that allows
them to form districts without county permission. Under this
method, developers pay an existing district to annex their land and
split it off into a new government.

But commission officials do acknowledge knowing that many district
voters materialize at the last minute on previously uninhabited
land.

“It’s just the way to follow the rules” requiring an election to
form a district, said Rob Cummins, a commission supervisor. “Some
of it doesn’t look perfect.”

Who’s in charge?

If external oversight is lacking, so is internal supervision.

Voters in at least six recently created North Texas water districts
– in Denton, Kaufman and Parker counties – have elected themselves
to board positions. Some said they were required to sit on the
board under their housing arrangements or as a condition of
“caretaker” fees they received.

“We basically go and sign the papers because we have to,” said
Jillian Bohac, 24, a director of one Denton County water district.
“I didn’t know we had any legal responsibilities.”

Mr. Van Court, whose firm represents the district, said board
service is voluntary.

In interviews, several board members could not remember what
elections they had called, did not know what taxes they had levied
and could not explain how bond sales would be repaid.

“A lot of the stuff the attorneys talk about in the meetings kind
of goes over my head,” said Chad Snodgrass, the 23-year-old
secretary of an eastern Denton County water district. “They use a
lot of words where it’s like, ‘You got a dictionary?’”

How, exactly, do developers find these folks? Sometimes they just
put an ad in the newspaper. Then they wait for people like Roy
Pennington and Lonnie Hilliard to respond.

“We thought it was a trick to move out here for nothing,” said Mr.
Pennington, a reserve sheriff’s deputy who began parking his mobile
home for free in a new water district a few miles east of Denton.

He said the developer, Mr. Mabrey, told him that living on the
property meant serving on a board and attending meetings. Mr.
Pennington agreed to do so. Now he is the district’s president.

His neighbor, Mr. Hilliard, became an assistant secretary the same
way. “Who’s going to take the time out to do this and help the
place out for free?” Mr. Hilliard said.

Mr. Mabrey, whose district is also represented by Mr. Van Court’s
firm, said some of the residents received free rent or free land
for parking their trailers in exchange for watching his land.
“You’d be surprised what can happen to properties with nobody
there,” he said.

He said the caretaker agreements were in place before he took over
the project and he continued to use them because he thought they
were a part of the process. “It was just more of a mix-up than
anything else,” he said.

But he and Tom Leonard, the lead partner in Mr. Van Court’s firm,
said they ended the agreements because of questions reporters were
asking districts’ elected officials.

In late April, Mr. Leonard called The News and said that the
developers involved “didn’t realize there wasn’t supposed to be a
contract between a developer and a resident. As soon as I learned
of it, I took steps to terminate the agreements.”

Last week, Mr. Van Court said that Mr. Leonard had spoken before
seeing a contract. The firm has since reviewed the contracts and
determined that they are legal, he said. Mr. Leonard did not
respond to subsequent requests for comment.

Several directors said their lawyers run board meetings, instead of
the presidents – a departure from the way most local government
bodies operate. The sessions generally last less than an hour, with
board members saying little or nothing.

Outsiders may attend the meetings – if they discover they are
happening. State law requires meeting notices be posted at a county
courthouse and somewhere within the district. The News found that
some were put up at the last minute on remote fences or not
displayed at all. In one instance, they were on the front door of a
private residence; in another, they were attached to a tree along a
gravel road, in a poison oak patch.

Many meetings are outside the districts’ home counties, at a law
office in downtown Dallas. Public records are stored as far away as
Houston.

When a Denton County commissioner recently called a public meeting
to address concerns about water districts, no board directors
showed up. Developers and one district’s attorney spoke on their
behalf to the audience of about 60 people. Directors of a related
type of taxing district near Forney likewise failed to appear at a
public meeting last year, said Kaufman County Commissioner Ken
Leonard. The businessmen and their attorney, he said, answered all
questions about the district.

“The developers run around as spokespeople for the government,”
said Mr. Leonard, Kaufman County’s former Republican Party chairman
and one of the few area politicians to challenge the districts.
“It’s a classic case of the fox guarding the henhouse.”

In some districts, developers nominate and voters approve directors
who live outside the district. These elected officials don’t
benefit from free rent or caretaker fees – but some have more
lucrative ties to the developers or their relatives.

Take, for example, the case of Charles Lawson. He is chairman and
chief executive of the Bright family’s national truck leasing
business, and he is a director of one water district that governs
Denton County land the Brights are developing. Mr. Lawson did not
return phone messages.

State regulations bar developers’ employees from serving as
district directors.

Five water districts and a county development district serve the
Castle Hills development on the Brights’ old ranch between
Lewisville and Carrollton. At least six of the districts’ current
or former directors also work for one of the family businesses or
have a relative who does.

Chris Bright said his use of friends and employees, such as Mr.
Lawson, is a standard practice in the business world.

“I just think when you are recruiting people for any board, you go
to those people that you know,” he said. “Usually these things
require an obligation and time and energy that is not probably
fully compensated by the amount of money that the boards of
directors get paid. It’s hard to recruit a stranger to do something
for you without fully compensating them.”

Many North Texas districts studied by The News formed as fresh
water supply districts, in which directors must reside. But the
boards have passed resolutions converting them to water control and
improvement districts, which operate with similar powers under
different state laws – and whose directors need only to own
property in the districts.

To meet the ownership requirement, some of these directors have
received small pieces of land from the developers or
intermediaries. Mr. Lawson, for example, got about a tenth of an
acre from a board predecessor, and a Bright company paid his $97
property tax bill for last year, according to county records.

Mr. Bright said directors paid market value for the property and
could return it if they didn’t want to pay the costs or stay on the
board. He said he wasn’t aware that one of his companies paid tax
bills for Mr. Lawson and other district officials.

Such transactions are common, said legal aide Judy McAngus, who has
handled much of the paperwork for the Brights’ districts and the
many others represented by Tom Leonard’s Austin-based law firm.

“If someone didn’t have a piece of land, it was conveyed to them,”
she said. “They would convey it back after they left the board of
directors. … They aren’t going to end up with a benefit from it.”
Last year, for example, a Huffines-related company deeded about
two-tenths of an acre to each of the original directors of a Denton
County water district, county records show. Two months later, the
tracts were deeded back to the company.

The Huffines districts’ lawyer, Clay Crawford, said he didn’t know
how the directors obtained their land. His legal assistant
notarized affidavits in which they said they might have received
land from the developer.

Eligibility in doubt

When the six most recently created water districts in North Texas
sought permission to form, commissioners courts in Denton, Kaufman
and Parker counties gave their approval without discovering that
many of the people petitioning them were ineligible to do so.

Under state law, the petitioners must be resident landowners of a
proposed district. The News found that in five of the six cases,
they failed that dual test – those who signed were residents who
didn’t own property or landowners who didn’t live there.

The state attorney general is now studying whether such a failure,
along with other issues, voids the formation of a Kaufman County
district. A decision is probably months away, an attorney general’s
spokesman said.

The residents who petitioned for the Kaufman district don’t own
land in it, acknowledged Randy Barnett, project manager for the
district’s developer. But it doesn’t matter now, he said, because
county commissioners have voted to approve the request.

County Commissioner Ken Leonard, who voted against the district’s
creation, sought the attorney general’s opinion. In a recent letter
published by a Kaufman County newspaper, Mr. Barnett criticized him
for asking to have “someone in Austin interpret the law in order to
get around the vote of the Commissioners Court.”

Former Denton County Judge Kirk Wilson, who voted to approve four
new districts last year before leaving office, said he and his
colleagues did not try to verify the petitions’ accuracy. He said
the county’s legal staff doesn’t “have the manpower to go in and
check all of that.”

“I think that’s something that has to be looked at in the future,”
said Mr. Wilson, who now works as a business consultant.

Other eligibility questions cloud elections that some districts
have held to confirm their creation. In a pair held in Parker
County early this year, The News found that seven of nine voters,
including the election judge, hadn’t registered in time to
participate – though they signed affidavits swearing that they had.

Texas secretary of state officials say they don’t investigate how
elections are conducted unless someone complains. The governments
generally conduct their own balloting rather than relying on county
officials.

Less-regulated cousins

Across Texas, state officials say, perhaps 50 or 60 fresh water
districts have been created in recent decades, including about 20
since 1995 at the fringes of the Dallas-Fort Worth area.

They are less-regulated cousins of the far more common municipal
utility districts, which likewise provide water to emerging
developments outside city limits but require startup permission
from the conservation commission.

MUDs, as they’re called, fueled much of the growth around Houston,
where abundant groundwater supplies make development relatively
inexpensive. Many met city building standards and have been annexed
into it, an outcome some North Texas developers say they won’t seek
to repeat. A handful went bankrupt during the real estate crash of
the 1980s, leading state officials to require more up-front
investment by developers before districts could sell bonds.

And most were voted into existence by a handful of
here-today-gone-tomorrow trailer residents, said Ron Welch, a
consultant to many of the southeast Texas districts.

“That’s the way it’s always been done,” he said. “I thought it was
kind of strange at first.”

Dr. Welch said he came to accept the practice as a means to a good
end – cheaply financing quality development in areas that
municipalities don’t want to serve initially but where people want
to live. Future homeowners, he and others say, will pay for
building subdivisions one way or another, whether through taxes to
repay a district’s debt or through higher housing costs if
developers finance projects themselves. And the user-fee model of
districts, the advocates say, minimizes effects on outside
taxpayers.

Not that all the neighbors are happy. Don Garland, for one, is
about to lose part of his front yard – one of the Strauss districts
wants it for a water line, saying the move will be cheaper than
using district property.

Mr. Garland, who lives in the tiny town of Copper Canyon, says the
best he can hope for now is a fair price for his property and a few
spared trees. “These people seem to have just absolutely unlimited
power,” he said.

Mr. Strauss, the developer, said the district will condemn the land
if it must. Like any government, he said, it must keep costs down
for taxpayers.

More broadly, critics say special taxing districts unfairly allow
developers to reduce their risks while promoting growth in areas
that aren’t ready for it yet. They also question whether homebuyers
are fully aware of what they’re getting into.

Districts are required to disclose their taxes to prospective
buyers, but Cheryl Bass of Lewisville said she didn’t find out
until spotting some unexpected numbers when closing on her new home
in 1997. She went forward, she said, after being assured the taxes
would drop.

“I felt I was between a rock and a hard place at that time,” said
Ms. Bass, who counts herself as a savvy consumer – she used to work
in state government with tax-exempt bonds. “I knew about these
taxing entities.”

Ms. Bass said she pays about $1,000 a year to a road utility
district. In 1998, she and other homeowners successfully ran for
the district’s board, which had been controlled by officials with
ties to the developer. Now the developer is suing the district,
trying to speed repayment of bonds.

Dr. Welch, the MUD consultant, said that the early buyers in a
district are essentially gambling that others will follow to share
the debt. “If you’re the first person living in one of these,” he
said, “you’re taking a hell of a risk.”

Debt not issued

Statewide, special taxing districts have about $4 billion in debt
outstanding, most of it from MUDs and most of it highly rated. Most
of the recently created North Texas districts have not yet issued
debt, which requires clearance from the conservation commission and
the attorney general.

The attorney general focuses primarily on financial data, spokesman
Tom Kelley said, and doesn’t scrutinize governance beyond requiring
affidavits to back up elections with fewer than 10 voters. He said
he knew of no investigations into whether those sworn statements
were truthful.

“We haven’t seen an occasion where we need to do that,” Mr. Kelley
said. He declined to comment on The News’ findings.

In the affidavits, voters certify that they knew what they were
doing. Kenneth Lee Artis Jr., who signed such a statement after two
district elections in Parker County, didn’t sound so sure when
asked recently what he’d approved.

“Shoot,” he said repeatedly, shaking his head, “I don’t know.”

Mr. Artis said he works as a ranch hand for developer Jim Martin
and lives on his property rent-free. He added that his neighbor,
district director Andy Jensen, also works there. Mr. Martin
maintained that he does not employ any district voters and
directors.

In Denton County, some voters speak freely about the ties that bind
them to developers.

Doyle Coulter is the only voter in a water district near Little Elm
that covers property controlled by the Dan Tomlin Jr. family. He
said he parks his mobile home on Tomlin land for free and pays
nothing for electricity. Shortly before a recent tax election, he
told The News he planned to vote yes.

Otherwise, he said, “they own the property and could say, ‘We’re
going to make you move.’ What choice do I have?”

Twice in recent years, Mr. Tomlin has failed to win county
commissioners’ support for creating another type of district. He
was able to form his water district without their permission.

J.W. Tucker voted several times under a scenario similar to Mr.
Coulter’s. For four decades, Mr. Tucker managed the Bright family
ranch. He lived with his wife in a house the Brights built for
them. Chris Bright said the new home was a favor for a loyal
employee whose residence was falling apart.

No one told him how to vote in water district elections, Mr. Tucker
said, but “any idiot knows if they’re having an election, they want
it passed. So I voted for it.”

The equation, Mr. Tucker said, is simple: “You scratch my back,
I’ll scratch yours.”

**********************
The East Texan behind the Altama scheme in Glynn County is one Ocie L. Vest, VP for entitlements at Stratfordland Company. It’s perhaps not surprising that an email from him shows up in the batch of communications to and from Stratfor released by Wikileaks. According to that, son Ocie C. Vest was a captain in the Marine Corps in 2011. That’s not the same son that cast the lone vote to authorize the selling of $97 million in development bonds for North Oak Cliff near Dallas. That was Austin Lee Vest.