HOUSTON — A powerful and politically connected management district illegally collected $6.6 million in taxes and must return that money to taxpayers, a Harris County district court judge has ruled.
The decision against the Montrose Management District is a rare David and Goliath victory for a group of business owners who have been fighting the taxing district since 2011. Judge Daryl Moore of Harris County’s 333rd Civil Court also ruled that the district “is further ordered to refrain from attempting to collect further assessments” from taxpayers, as well as spending any of that money wrongly collected.
The assessments paid by property owners were done so under duress, according to Moore.
Andy Taylor, the attorney for the business owners fighting the special district, said that the management district needs to dissolve.
“This judge says, number one, what you did was illegal,” he said. “Number two, you have to pay us $6.6 million, the money that you stole. Number three, you cannot spend another dime. Put up your checkbook. Close your bank account and close down the district.”
He added that the judge’s order states that if the district does spend any more money “you’re in contempt of court. If you blow that, you could actually be incarcerated for contempt.”
Management district officials said in a statement they were “disappointed in the… ruling by Judge Moore and on November 2, 2017 immediately appealed the decision to the Fourteenth Court of Appeals in Houston.” Those officials also said that no “refunds for assessments collected” will be made until the ruling of the appeal.
“The district stands by its position that it is operating within its legal charter granted by the State of Texas,” according to a statement released by the management district.
Daphne Scarbrough runs a custom metalwork and furniture store in Montrose and has been leading the charge against the management district from the beginning.
“This is a Grade B horror film, the bad guys are not going to die easily, so there will be more to come,” she said.
Management districts created with little say from taxpayers
Along with many special taxing districts, the creation of the Montrose Management District — initially called the West Montrose Management District before the merger with a neighboring district — was controversial.
The district was created in 2010. And like all of these management districts, they are not created by a vote of the people, but rather in the State Capitol in Austin where the bills are pushed quietly with very little input from those who would be taxed.
Once lawmakers and the governor sign off on the district legislation, management district officials must collect the signatures of 25 real commercial property owners within the district’s specified boundaries. It’s the businesses that are taxed rather than homeowners.
The aim of the legislation to create these districts is to spur improvements, provide better policing, and economic development.
From there, a city council and a mayor handpick the board of directors, often making the management district chiefs cozy with the political elite.
Then the taxes are collected.
A majority of the original 26 signatures that helped establish the district were from small property owners who ended up on the board.
And a 2011 investigation of the Montrose Management District found that two-thirds of the 15 Montrose Management District board members appointed by then-Mayor Annise Parker had financial ties to Parker. On the board also sat Parker’s spouse.
And the district banks big money. It taxed business owners $2.1 million last year, records show.
Taxpayers angry, want district dissolved
Dozens of Montrose business owners who attended a Montrose Management District hearing Friday seemed to be clear they did not want the district to have a future, pointing to the judge’s Oct. 31 ruling.
“I receive absolutely no benefits for the money I have been paying,” business owner George Cela said at the hearing. “I always thought this was the completely wrong way to go. Discriminating and charging a tax on some of the people and excluding the other people, particularly since the ones who proposed the idea were the ones who were not going to be taxed.”
Philip Navratil is a business owner who has also long opposed the district.
“People like me back then told you ‘don’t,’ but you did it anyway,” he said. “And it’s taken us five-and-a-half years and you have done $6 million worth of damage by just plowing ahead. Don’t plow ahead anymore. We’re paying attention.”
Diana Marshall, an attorney in the district, also spoke at the hearing.
She faced the crowd and said, “They are required to have a couple of public meetings before they rubber stamp vote this additional assessment into existence. So be on alert. Why we are really here is because they have procedures they must follow before they use that irritating, absolutely insulting path.”
The next Montrose Management District meeting is scheduled for Nov. 13.
Trent Seibert can be reached at [email protected] or at 832-258-6119.