One man, said to be living in a trailer on 600 acres of Collin County farm land, cast the single vote this month to give a developer taxing power. The developer, who needed $63 million to build a subdivision, put the trailer there. The voter, who has a home miles away in McKinney, began renting the trailer shortly before the election.

Meanwhile in Dallas, another one-man election this month decided whether a developer would get taxing power to finance a $700 million office-retail project. The person casting the ballot was the 24-year-old son of a vice president at the developer’s company. The company owned the home where he was, at least on paper, living. You can probably guess how that turned out.

The two elections, if you can really call them that, remind me of a 2001 Newsinvestigation that I wrote with Brooks Egerton called “Government by Developer.” We found that developers across North Texas were quietly winning hundreds of millions of dollars in taxing power from voters and elected officials to whom they provided homes, jobs or other benefits.

The power came through governmental taxing districts created in elections required by Texas law. Developers bought raw land for their projects, drew proposed district boundaries to exclude existing residents and then moved the only voters into rent-free mobile homes. The elections had as few as one voter and no more than 10. The voters were sometimes employees of the developer.

In two elections, our reporting raised doubts about whether the lone voters had ever stayed in their temporary quarters. One, for example, told us that he never lived in the district he helped form and was told to sign paperwork to make the election seem legitimate.

After the elections, the temporary voters usually became members of the district’s governing board, making important decisions about financing and contractor hires under the direction of the developer’s lawyer. In effect, the developers ran the government.

The Texas attorney general’s office had once scrutinized these conflict-ripe elections, checking voters’ residency claims and questioning them in person. But the agency quit doing that in 1995 because the policy was “resource-intensive.” Just a few years later, the wave of new taxing districts began.

Developers told us back in 2001 that the way special taxing districts were created may have seemed peculiar. But the elections were a necessary step in an otherwise long-accepted process for financing good housing in undeveloped areas. Prospective homeowners, they added, would be told about the taxes ahead of time and eventually have the opportunity to sit on the district boards.

These days, some of the districts we wrote about have thousands of homeowners. They pay tax rates around $1 per $100 in property valuation, much higher than those of cities or counties. The tax money goes to repay the bonds that were sold to finance construction of roads, water lines and other infrastructure.

Our original investigation isn’t online these days. So I’ve posted the text to some of the major pieces below this post.

If you’re living in one of these districts now, I’d be interested to know how it’s operating these days. You can email me at rdunklin@dallasnews.com or leave a comment.

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.”

 

 

June 10, 2001

One man, one vote, one free laptop

By Reese Dunklin, Brooks Egerton

DENTON – Dell Computer wanted a taxing district. Denton wanted
Dell. And Jerry Drake wanted a laptop.

From that convergence of interests came a 1996 election in which
Mr. Drake, as the lone voter, created a government potentially
worth millions to the computer giant.

City officials provided Mr. Drake a rent-free travel trailer to
call home in the district, which covered a vacant industrial plant
Dell was eyeing. The company gave the assistant city attorney a
laptop and other gifts for his trouble, according to city records
obtained by The Dallas Morning News.

At the time, Mr. Drake and other officials would not publicly
discuss such details of the arrangement. In private memos, all City
Council members were told that Dell not only gave Mr. Drake the
computer and a cellphone before the vote but also offered to pay
his income taxes if the IRS considered the gifts income.

“Because of the unexpected controversy and press coverage over the
election, and because the city took an active role in putting
together the deal that Jerry accepted, Jerry has agreed to allow me
to share these matters with you,” City Attorney Herb Prouty wrote.
Mr. Drake “has also asked each of you to respect his privacy by
keeping these personal matters confidential.”

The Texas attorney general’s office recently ordered Denton to
release Mr. Prouty’s memo and dozens of related records, which The
News had sought in an open-records request. The attorney general
allowed the city to black out large portions of some documents,
saying they constituted privileged attorney-client communications
or economic development information.

All involved in the Dell deal say they did nothing wrong.

“The law was we couldn’t tell him how to vote,” said company vice
president Tom Armstrong, who led Dell’s efforts in Denton. “I think
a token of appreciation is fine as long as it’s not influencing the
vote.

“It was not for influence. It was for the inconvenience of moving
out there.”

Mr. Prouty said he had reservations about the financial
arrangements, but was reassured after seeking counsel from the
Haynes and Boone law firm. He would not discuss the advice.

Denton officials, Mr. Prouty said, considered the taxing district
covering the old Texas Instruments plant essential to luring Dell
and were determined to find a voter. “You had to have a body out
there,” he said. “It could have been anyone willing to do it.”

Mr. Prouty’s memos were copied to Ted Benavides, then city manager
of Denton and now of Dallas. “I don’t think they were paying him,”
Mr. Benavides said last week. When pressed, he acknowledged knowing
about the gifts to Mr. Drake and added: “I don’t think there’s
anything improper about that.”

Mr. Drake said he volunteered to take part because he wanted his
community to land a big corporation. Dell “appreciated my
willingness to step forward and work for the cause,” he said. “You
know, ‘thank you very much – have a laptop.’”

Mr. Drake, who returned to his Denton townhouse the day after the
election, said he did not research laws that govern
election-related payments and establish voter residency
requirements.

“When I’ve got four or five attorneys saying everything’s legal,
everything’s cool, I just went by what they said,” he said. “It’s
not against the law to vote, and it’s not against the law to accept
gifts.”

In his memos to the council, Mr. Prouty made it clear that the
computer was not an unexpected gift, but rather something Dell was
offering “to any potential resident.”

It was also something Mr. Drake required, he wrote. When a city
employee asked Mr. Drake whether he was still interested in
participating, “he indicated that he was, provided that the
computer was still part of the deal.”

Mike Bucek, who was Denton’s first assistant city attorney at the
time, said he urged Mr. Drake to consider the arrangement because
he knew the employee wanted a laptop.

“That was the bait to get him out there,” said Mr. Bucek, who now
works for the city of Irving. Mr. Drake’s questions about the
arrangement, he recalled, focused on “what kind of computer he was
getting.”

Not the first

Jerry Drake wasn’t the first person on Dell’s dance card. Aimee
Tucker was.

In the summer of 1996, she was working in the city’s economic
development office to finance her studies at the University of
North Texas. Her bosses were quietly but feverishly working to lure
the Austin-based computer giant with a tool state lawmakers had
recently crafted: the county development district, which authorizes
a half-cent sales tax that is supposed to build infrastructure for
tourism.

The residents of a proposed district, however, must vote to create
it and to levy the tax. And this district, as drawn, included only
the uninhabited TI property.

How, then, to have an election?

“They were looking for a college student,” Ms. Tucker said
recently. Her meager finances made free rent and a laptop sound
attractive, she said, even though living alone at the plant didn’t
seem particularly safe.

Her supervisor, Linda Ratliff, who heads the economic development
office, first pitched the idea to her. Dell’s attorney sent a
proposed contract that noted: “The continued validity of the
project is dependent upon a successful outcome in the election.”
And an assistant city attorney assured her everything was legal,
Ms. Tucker said.

“But my own conscience,” she added, “felt like it wasn’t right.”

Enter Mr. Drake. He volunteered, he said, after overhearing a boss
describe the city’s needs to a secretary.

And so, a month before the election – the legal minimum – he
changed his voter registration address from the townhouse he was
renting to a donated camper-trailer that had no phone line, no mail
delivery and no water except what a garden hose could bring.
Records show that he also changed his driver’s license, with Dell
reimbursing the $20 fee.

About the same time, the company announced that it was scrapping
plans to use the TI plant for a telecommunications marketing
operation. Yet Dell continued to support the election process – in
case it wanted to use the site for other purposes later, the
company’s Mr. Armstrong said.

The city had proposed buying the plant from TI and leasing it to
Dell, using the taxing district to finance a $27 million
renovation. Today, TI still owns the land, and no business has used
the district.

The day after Mr. Drake changed his voter registration, Dell
attorney Bill Methenitis faxed him a memo at City Hall noting that
the camper was “not the Ritz.” And he advised him to fax a “wish
list” of laptop features to Mr. Armstrong. The company’s laptops
were selling for a minimum of $2,800.

“We are hoping to make your life as a CDD resident as comfortable
as possible, which is probably not saying much,” Mr. Methenitis
wrote. “Be sure to let me know how things are going and what else
you need.”

In a letter to Dell, Mr. Drake emphasized that he was participating
as an individual, not as an officer or employee of the city.

Mr. Methenitis, who still represents Dell, said he focused on doing
“whatever was necessary to make the election work” without
affecting its validity. Asked whether what Dell had done for Mr.
Drake was an attempt to guarantee the election’s outcome, Mr.
Methenitis declined to comment.

In another fax, Dell pledged to repay Denton officials for any
costs associated with finding the camper. “Thank you for the heroic
efforts in getting Jerry situated,” Mr. Methenitis wrote to Ms.
Ratliff.

Ms. Ratliff said she didn’t do that much for the cause. Her work,
she said, simply involved “some deadlines that needed to be met for
the election to go off.”

In the end, it was Jeff Krueger – then a City Council member and
later a county commissioner – who arranged for use of the trailer.
He said that it belonged to a friend, whom city documents identify
as James Roden, then head of the North Texas State Fair
Association. The city, Mr. Krueger said, paid nothing for it.

“Did we stretch the law? Absolutely,” said Mr. Krueger, who said he
is now working as a consultant to developers interested in creating
special taxing districts in Denton and Fannin counties. “Did we do
everything legally? Absolutely.”

Both Mr. Krueger and former council member David Biles – an
attorney who also served on the development district board – said
they did not know that Dell had given Mr. Drake gifts. They were
interviewed before The News obtained the documents showing that the
city attorney had briefed council members on the subject.

Dallas-based TI lobbied Dell to not abandon plans for the district,
TI real estate broker Holmes Davis said. He said the company did
not know about the gifts.

‘It wasn’t that bad’

Although Mr. Drake kept his townhouse, he said he spent the
majority of his nights at the trailer.

“It wasn’t that bad,” he said. “If I needed to do laundry, I could
go back to the townhome and do that. I was living by myself and my
needs were very simple. It’s not really that much different from
dorm life, if you ask me.”

State election law says that a person is not eligible to vote at an
address if he moves there “for temporary purposes only and without
the intention of making that place the person’s home.”

No problem there, Mr. Drake insisted.

“I did settle down on the TI property,” he said. “I did intend to
make it my home.”

At another point in an interview, he said that “I don’t think I
would have wanted to stay out there indefinitely.”

Mr. Drake said Mr. Bucek, the former first assistant city attorney,
advised him that he was establishing legal residency at the plant.
So, he said, did Tom Leonard, the Austin lawyer-lobbyist who helped
get the development district law passed and who was advising Denton
County on economic development matters at the time.

Another issue that affects legal residency: Under the site’s
light-industrial zoning, the only single-family housing allowed is
that “designed to be used by the owner or by an employee.” Mr.
Drake was neither.

“Maybe I violated the zoning law. Thank God the statute of
limitations has run,” he said, laughing. “I assumed other people
had checked that out.”

Deputy City Attorney Ed Snyder said he believes Mr. Drake met the
requirements of the zoning code. “That issue was looked into,” he
said.

On the day of the vote, Mr. Drake set up a polling station outside
in the August heat, securing paperwork with a rock. At one point,
about a dozen protesters gathered – “they thought it was all a big
sham,” he said.

He read the election judge’s oath to himself, verified his own
voting eligibility, disqualified a protester who sought to vote,
cast his own ballot and counted it.

“The whole thing seems really silly,” Mr. Drake said, suggesting
that there should be another way to create a district. “It’s a
silly law. What can I say?”

Most special taxing districts that require voter approval are
sought in uninhabited areas, said Mr. Bucek. Texas legislators, he
said, must know that.

“Putting someone out there is a legal fiction you do to try to
honor the statute,” he said. “That’s how it’s worked
historically.”

On the day after the election, Mr. Drake gave up on the TI plant
for good. He was motivated, he said, by a storm that blew over a
tall tree, blocked entry to the property and made him realize that
life in a trailer isn’t as safe as it might be.

“I thought,” Mr. Drake said, “‘I’ve lived here long enough.’”

 

June 11, 2001

Districts multiply in ‘amoeba effect’

Developers defend paying for land annexation, spinoff of new governments with
power to tax

By Brooks Egerton, Reese Dunklin

If you own raw land and know the right people in North Texas, you
can buy your own government. The going price is $100 per acre.

That’s what Denton County Fresh Water Supply District 1A has been
charging developers to annex property, which it typically then
splits off into a separate district. The children, like the parent,
have more power than any city or school district: unlimited
property-taxing authority and the ability to add land far beyond
their borders – anywhere in Texas, in fact.

Developers say it’s all legal. And indeed, state law places few
restrictions on the originating district’s annexations and
spinoffs. No county approval is required, as it ordinarily is when
a water supply district forms.

The activity has created some curious situations. The 200-acre
Denton County Fresh Water Supply District 3, for example, is
entirely in northwest Ellis County.

Denton County officials said they didn’t know where the district
was. Ellis County’s top elected official, Al Cornelius, learned of
its existence from a reporter.

“I’m amazed and I’m also somewhat disturbed at the fact that this
could happen, and the county judge would not be aware of it,” Mr.
Cornelius said after the situation was described to him. “I thought
maybe this was a crank call, frankly.”

A number of spinoffs

District 1A is a piece of Denton County’s original fresh water
district, which serves an old ranch between Carrollton and
Lewisville that the family of former Dallas Cowboys owner H.R.
“Bum” Bright is developing. County commissioners approved District
1 nearly 20 years ago and four other independent districts last
year. In between, 14 others were spun off in six counties from the
original District 1 or one of its descendants.

“They almost franchise these things,” said Frisco City Manager
George Purefoy, who said the process encourages unregulated growth
while minimizing developers’ risk. “We call it the amoeba effect.”

Revenue source

Chris Bright, Mr. Bright’s 48-year-old son, said he discovered the
possibilities of spinning off districts after reading the state
water code.

“We looked at it as a means to a potential revenue-creating source
for the water district,” he said.

He sought money for the districts, he said, because “they’re taxing
me.” The new revenue would, in effect, help lower his property
taxes on the family’s former ranch, he said.

Mr. Bright said he would spell out the process when other
developers approached him. If they were interested in creating a
district, he would then direct them to Austin lawyer-lobbyist Tom
Leonard and his partners.

Mr. Leonard, whose firm has overseen the spawning of new districts
in Denton County and who represents many of them, has worked with
the Brights since helping form the original District 1. He did not
return calls seeking comment for this story, and one of his law
partners, Frank Van Court, said he was not familiar with the
process.

Rick Strauss, who has put together some of the Dallas area’s
largest high-end residential developments in recent years, bought
his first water district from Mr. Bright. Mr. Strauss currently is
developing the Lantana project north of Flower Mound.

“You pay the district a fee to take you in and spin you out,” Mr.
Strauss said. The method, he said, is far faster and cheaper than
seeking permission from the county. Petitioning the state, which is
required when forming some similar types of taxing districts, is
even more involved.

Chris Bright “was obviously the pro at figuring this out,” Mr.
Strauss said. “He had more knowledge in this area than anyone we
could find.”

Under state law, the district performing spinoffs must be in, or
next to, a county with at least 1.18 million residents and have no
bond debt. In addition, it cannot be levying property taxes -
although new districts that are created out of it can. Mr. Bright
said District 1A meets these conditions and probably always will.

Houston lawyer Clay Crawford, who has taken over representation of
the two Lantana districts from Mr. Leonard, said the process is
legal but could prompt questions from the state officials who must
approve district bond sales.

“I’ve never seen it done this way,” said Mr. Crawford, who has
represented similar entities in the Houston area for many years.

Rob Cummins, who oversees district practices for the Texas Natural
Resource Conservation Commission, said he was unaware of the
spinoffs until recently and could not comment in detail.

“If these districts come to us for bond review, we’ll look into
it,” he said. “I think it’s an issue that has to be dealt with. It
may require some rule changes.”

The attorney general’s office, which also must approve bond sales,
declined to comment.

Handful of voters

Whether a district is authorized by a county or simply spun out of
another district, it cannot operate unless its residents ratify the
creation. But The Dallas Morning News has found that most elections
involve only a handful of voters, who have financial ties to the
developers and cast ballots unanimously in their favor.

Take, for instance, the elections to approve the many offshoots of
Denton County Fresh Water District 1A. All had five or fewer
voters, most often including J.W. Tucker Jr. and his wife, Helen
Tucker. Mr. Tucker, who was the Brights’ ranch manager for nearly
40 years, said he never asked why 1A was adding and sometimes
subtracting land as far away as Hood County, about 40 miles
southwest of Fort Worth.

“I didn’t care,” Mr. Tucker said. “If that’s what the boss wants,
that’s what the boss gets.”

Some examples of the results: Denton County Fresh Water Supply
District 2 (now called 2A) included some land in neighboring Wise
and Tarrant counties, with its only two voters in the latter. And
the board members they elected met at the Dallas office of Mr.
Leonard’s firm.

Two years ago, Frisco’s Mr. Purefoy discovered that 1A had annexed
land and spun off a district in part of his booming Collin County
city. Frisco sued. The case was dismissed after the district
rescinded its annexation, which covered land for a Huffines &
Partners development. Huffines officials did not respond to
requests for an interview.

Angry exchange

Before it was all over, Mr. Purefoy said he exchanged angry words
at City Hall with Mr. Leonard, who he said threatened to go after
his job if he didn’t quit fighting the annexation. Mr. Leonard said
he once got an assistant city manager in Carrollton fired, Mr.
Purefoy recalled.

“Basically, he said the same fate awaited me,” Mr. Purefoy said. “I
told him where the door was.”

The cities of Denton and Argyle likewise initiated and settled such
cases, all of which argued that districts could not annex their
territory without consent. A similar suit, filed by Little Elm, is
pending in Denton County state district court.

“Every city in the state should be concerned about it,” Mr. Purefoy
said. “I think it’s the biggest threat to orderly development in
the state of Texas.”

 

June 11, 2001

District opponents find information hard to get

‘We’ve been very public,’ manager of project says

By Reese Dunklin, Brooks Egerton

KAUFMAN COUNTY – At first glance, Ken Leonard thought he’d seen a
typo.

But he soon realized that a Kaufman County development district had
indeed called a $340 million bond election and won a rubber stamp
from two voters in 1997 – all of which went virtually unnoticed
until Mr. Leonard’s discovery two years later.

“Since then, it’s been two years of shaking people and trying to
wake them up that this can happen to you,” said Mr. Leonard, a
county commissioner whose precinct includes the district.

Mr. Leonard, along with a group of constituents, has taken on
special taxing districts in a way unseen elsewhere in North Texas.
The controversy has led to a packed public hearing, a war of words
with the developer’s representatives and ultimately two legal
battles refereed by the state attorney general’s office – one of
which has been decided so far, in Mr. Leonard’s favor.

Mr. Leonard said the districts amount to private-interest
government, operated and controlled by developers. When he and
others ask questions, he said, they are “stonewalled every step of
the way.”

He points out that official meetings are outside the county, at the
Dallas law firm of the district’s attorney. When residents have
sought basic district paperwork, Mr. Leonard said, they’re told to
write an open-records request. That was the only way he discovered
the district had conducted its own bond election – for about $300
million more than any other in Kaufman County.

“This is the antithesis of what the founding fathers intended,”
said Mr. Leonard, a former government teacher at a Terrell private
school and the county’s former Republican Party chairman.

Randy Barnett, project manager for developers Jim Siepiela and Joe
McElroy III, said there have been few critics besides Mr. Leonard.
Mr. Barnett, in a recent letter to a local paper, described the
commissioner’s opposition and requests for an attorney general’s
opinion as “antics.”

“This isn’t some public outcry,” Mr. Barnett said in an interview.

Increasing tax base

Mr. Barnett has noted that a majority of the Commissioners Court
has backed the Windmill Farms golf-course community near Forney -
voting to authorize creation of the development district, and later
a fresh water district, to help finance it.

“The district will increase the tax base of the county by over $1
billion,” Mr. Barnett said. “Why would a commissioner vote against
that?”

Area resident Les McFarlin said he’s also had difficulty getting
information about the district. Mr. McFarlin once tried to visit a
district official living at the home where elections are held, but
the man – a student at the Dallas Theological Seminary – wouldn’t
come to the door. Later that same day, he said, Mr. Barnett called
him and warned him: “Don’t ever go back up there again.”

“I wanted to let them know how some people in the community felt,”
Mr. McFarlin said. “Apparently they weren’t open to hearing that
position.”

Mr. Barnett did not deny giving the warning. He said Mr. McFarlin
doesn’t live in the district, isn’t affected by it and “has been
involved in a non-constructive manner.”

“Everyone wants to act like we’re really secretive,” Mr. Barnett
said. “We’ve been very public.”

If that were so, Nick Morale and Ken Seabourn said, someone would
have told them their new homes were inside the Kaufman County
development district. Once they figured it out, they realized they
also hadn’t been informed of elections, including one to levy a new
tax.

Election notices are stapled to a gate on the development’s
northern end, miles away from homes on the south side. At one
point, Mr. Morale said, a no-trespassing sign was posted at the
entrance to the official polling place.

“How were we going to vote?” said Mr. Morale, who has frequently
complained at Commissioners Court meetings.

Mr. Seabourn was so worried about the potential tax liability he
would face if the $340 million in bonds were sold that he asked Mr.
Leonard to help him get drawn out of the district. The developers
did so last year.

“No one told us, ‘You’re buying into a $340 million bond,’” Mr.
Seabourn said. “There would have been a lot of us who
reconsidered.”

Districts are required to disclose their property-tax rates. But
the Kaufman County development district hadn’t set up such a tax -
and won’t after a key attorney general’s opinion last year.

The opinion delivered a blow to county development districts across
the state, saying that they could not levy property taxes, coveted
as a source to repay builders’ bonds. The attorney general also
questioned whether housing projects fit the intent of the law,
which was designed to encourage tourism.

Kaufman County’s developers subsequently created a fresh water
supply district, which would let them tax property in Windmill
Farms. The voters early this year included four more Dallas
Theological Seminary students living in a trailer provided by the
developers. Mr. Leonard fought back again, asking the attorney
general whether the new district was created properly.

Now the developers have converted into a third type of district,
one that gives them added powers to build drainage systems. Mr.
Leonard said the shuffling creates confusion.

“As soon as you do your due diligence and research the law and find
out what they can’t do,” he said, “they switch to a new district.”

‘That threw up a flag’

The recent flare-up over the fresh water district gave Gregory
Williams second thoughts about serving as an official and voter.
The theology student, who said “free living arrangements” were the
incentive for moving to Kaufman County, became uneasy about how his
decisions would affect future homeowners. He acknowledged he didn’t
even know what a fresh water district was until the developer’s
representatives and lawyers explained it to him.

“By me not having the knowledge of what was going on, how could I
make informed decisions?” he said. “It’s not that you’re coerced,
but at the same time, you know which way to vote for things to be
accomplished.”

Mr. Williams said his turning point came after Mr. Leonard sought a
second attorney general’s opinion.

“That threw up a flag for me – whether what I was doing was legal
or not,” Mr. Williams said. “It made me say, ‘hold on.’ I was just
thinking it was a formality.”

So Mr. Williams decided to resign and return to Dallas. But that
didn’t stop his former neighbors from re-electing him last month as
a director. Mr. Williams said he didn’t even know he was on the
ballot.

Mr. Leonard said he’s not sure what might happen next in Kaufman
County. He said he won’t stop challenging the districts, because he
doesn’t want the folks moving into the districts to wonder “who on
Earth has been looking out for our interest.”

“But my fear is,” he said, “all I’ve seen is the tip of the
iceberg.”

 

August 7, 2001

State cut its scrutiny of tax districts in ’95

Low-profile governments have since multiplied

By Brooks Egerton, Reese Dunklin

The state attorney general’s office quit investigating for signs of
impropriety in special taxing district elections six years ago,
shortly before North Texas developers began creating a wave of the
little-known governments by providing the only voters with jobs,
housing and other benefits.

The agency frequently questioned the voters in person and checked
their residency claims before 1995, according to documents obtained
by The Dallas Morning News in an open-records request. A spokesman
had previously said he knew of no policy requiring such scrutiny.

Attorney General John Cornyn, who took office three years after the
investigations ended, issued a brief statement late Monday saying
it was his understanding that “the policy was resource-intensive
and not calculated to lead to legally significant information.” In
recent days, the attorney general’s office said it could not locate
any documents that explained who authorized the 1995 change or why,
and officials declined to be interviewed about the matter.

Today, Mr. Cornyn’s office requires only that districts submit
sworn statements from the voters attesting to their eligibility.
The agency, however, generally does not check the truthfulness of
such affidavits, its officials have said.

Mr. Cornyn has not decided whether to investigate the practices of
taxing districts, which are being used to finance luxury
subdivision developments at the edges of the state’s booming
suburbs. Two months ago, state Sen. Jane Nelson, R-Flower Mound,
asked Mr. Cornyn to act – after The News revealed a pattern of
financial ties among water district developers, board members and
voters.

The developers typically have drawn district boundaries to exclude
any existing residents of an area, then moved in short-time voters
in trailers. The voters – never more than a handful, and sometimes
as few as one – have then approved hundreds of millions of dollars
in bond sales that future homeowners would have to repay in taxes.

Mr. Cornyn referred Ms. Nelson’s request to his public finance
division, which evaluates all government bond sales in Texas and
has let special districts take on billions of dollars in debt.

The attorney general’s office refused The News’ request for an
interview with the chief of the public finance division, Jim
Thomassen. He has served through various administrations since the
late 1980s and formerly worked for the law firm of Vinson & Elkins,
which has a large public-finance operation and many Houston-area
taxing districts as clients.

Mr. Thomassen announced the end of on-site election inspections in
a 1995 letter to attorneys representing governments that sell
bonds, but gave no reason for the change.

The investigations had dated at least to the 1970s and typically
involved water district bond elections with 10 or fewer voters,
according to the documents that The News obtained from the attorney
general’s office. Other types of elections, including ones to
approve taxes, were not scrutinized as closely.

1970s policy

In the late 1970s, the in-person interviews included questions
about whether voters were offered anything for living or casting
ballots in a district, whether they had any relationship with the
developer, and whether they understood the impact of the bond sales
and taxes on future homeowners.

“The purpose of the inspection policy is to avoid inadvertent
approval of bonds issued fraudulently,” according to a 1978 letter
by the attorney general’s office that outlined rules for the
election investigations.

But the policy was gradually scaled back over the years. Documents
provided by the attorney general’s office do not detail who signed
off on the changes, when they occurred or why inspectors were
instructed to stop inquiring about voters’ connections to
developers.

By the mid-1990s, inspectors were required to ask about half as
many questions – mostly yes-no inquiries about voters’ residency
and basic details of the districts’ elections, according to the
documents. Finally, in 1995, Mr. Thomassen announced that the
attorney general’s office would halt the investigations altogether
and seek only simple voter affidavits.

“I think we need more than [the affidavits],” Ms. Nelson said
Monday. She said she still hopes the attorney general takes up her
request for an investigation and helps her draft proposed changes
in the law.

In a June letter to Mr. Cornyn, she said the Legislature never
intended for special taxing districts “to be used as a mechanism
for subdivision developers to create their own governing boards
with access to millions upon millions of public tax dollars but no
accountability to the taxpayers.”

“At the very least,” she wrote, “these practices constitute gross
manipulations of the law.”

Practice defended

Developers and their lawyers have said the practice of moving
voters into trailers has long been accepted as a means to a good
end – building dependable water lines, sewer systems and streets in
areas that cities don’t want to serve.

Developers generally recoup their expenses through the district
taxes.

Housing construction hasn’t begun in many of the newer districts,
most of which have not sold bonds yet. Some in Denton County,
however, have started collecting taxes from new homeowners.

Tom Leonard, a longtime Austin lawyer-lobbyist whose firm
represents most taxing districts created in recent years in North
Texas as well as some in other parts of the state, did not return a
call seeking comment.

Ron Welch, a consultant who advised many Houston-area districts,
said developers and their lawyers are nervous about Ms. Nelson’s
request for an investigation.

“We can’t afford to have anybody criticizing special districts in
Texas,” he said. Developers, he said, “don’t want to kill this
goose that laid the golden egg.”

August 12, 2001

Paper voter created taxes

In Brights’ development, 1 ballot launched financing

By Reese Dunklin, Brooks Egerton

Election Day was looming, and the stakes were high: a tax that
could help finance a luxury subdivision being developed by the
family of former Dallas Cowboys owner H.R. “Bum” Bright.

There was just one problem – no one lived yet in the special
government district that was having the election.

Representatives of the Brights found a solution that required
little more than paperwork, according to the lone voter they used
for the job. Joe DeLeon says they assigned him an address in the
Denton County district, got him a voter registration card and had
him sign false election documents to make everything look
legitimate.

“I never lived at that address,” said Mr. DeLeon, a 27-year-old
lumberyard worker. “They used me as the guinea pig.”

Chris Bright, who runs his father’s real estate business and is the
architect of several special districts on the family land, said he
was too busy last week to discuss the matter with The Dallas
Morning News. “He said, ‘I know what they’re writing about, and I
just can’t accommodate their schedule,’” said Bright spokesman
Craig McDaniel.

Longtime Bright real estate executive John Baxter, who Mr. DeLeon
says pressed him to adopt the false address, said he had done
nothing wrong. “I don’t know what the hell he’s talking about,” Mr.
Baxter said.

Public records and interviews raise similar residency questions
about a later election in another water district the Brights’
control. The lone voter in that instance, Bum Bright’s grandson
Chris Reeder, approved a tax to support a golf course.

Mr. Reeder signed an affidavit saying that he had moved into the
district on Oct. 1, 1997, and lived there until the election on
Nov. 4. Yet three days before voting, when reporting a handgun
theft, he told Highland Park police he lived in Dallas. The address
he gave was a home he had purchased about a month earlier with
cousin Nathan Petty – who soon decided another one-man election in
yet another Bright district.

Mr. Reeder initially told The News that he didn’t know why he gave
police the Dallas address, then said it was easier to locate than
the one in Denton County and later refused to discuss the matter
further. Mr. Petty, who works in the family real estate business,
was honeymooning and could not be reached for comment.

Today, the golf course is up and running. And hundreds of homes
have been built in the surrounding Castle Hills subdivision, one of
the largest of its kind in Dallas’ booming northern suburbs.

In two elections, Mr. Petty single-handedly approved bond sales -
$20 million in one case – to finance the development’s streets and
water lines. At the same time, he approved the property taxes that
new homeowners now pay to cover the debt.

The allegations of ghost voting come as special taxing districts
face intense scrutiny in Texas. Lawmakers have called for
investigations and legislative reviews since June, when The News
revealed that developers have won vast taxing power from voters
they put in trailers shortly before elections and provided
financial benefits. Some developers, such as Chris Bright, have
also put their employees on the districts’ governing bodies.

Developers say moving in short-time voters has long been accepted
as a way of conducting elections in otherwise uninhabited areas.
They also say that the state’s more than 1,000 special districts
are highly regulated.

But the regulators, by their own account, apply little scrutiny to
district elections and governance. In mid-1995, for example, the
Texas attorney general’s office quit checking for signs of
impropriety in elections where a handful of voters created
districts and authorized bond sales.

The agency, which must approve all government bond issues, no
longer visits districts to check residency claims and interview
voters. Instead, it requires only brief sworn statements from them
- the sort of affidavit that Joe DeLeon signed in 1995, saying that
he was older than 18, had never been convicted of a felony and had
voted to approve a tax.

Attorney General John Cornyn wasn’t in office when the inspections
ended and won’t say who stopped them. He is expected to decide this
month whether to investigate district practices, as requested by
state Sen. Jane Nelson, R-Flower Mound.

Judge, clerk, voter

Mr. DeLeon’s dealings with obscure water district elections began
in summer 1995. He was serving in the Army and had come home for a
weekend visit with his family, who lived rent-free on the Bright
ranch. His father worked there as a laborer.

Mr. DeLeon said ranch manager J.W. Tucker and Mr. Baxter, the real
estate executive, offered to provide him a trailer so that he could
move into a water district covering another portion of the
2,500-acre property.

“We need you to vote,” he recalled the men saying. Mr. DeLeon said
he told them he was stationed at Fort Hood and didn’t need another
home, but “I guess they took it upon themselves to go ahead and
move me in there.”

Mr. DeLeon said he was visiting his parents again when the election
was held. Mr. Tucker, he said, asked him to serve as election judge
and clerk.

That meant spending a Saturday in August in a small construction
trailer – something that wouldn’t work as a residence, he said,
because it had no kitchen or bathing facilities.

“They said there’d be other people coming there to vote,” Mr.
DeLeon said. But no one did, he said. Water district records,
obtained under an open-records request, show that a single vote was
recorded: his.

Mr. Tucker “just told me to vote yes,” Mr. DeLeon said. “I was
like, ‘OK.’ I don’t remember filling out a ballot.”

Later, he signed the affidavit, which he said he did not read
closely. “I probably wouldn’t have done it for anyone who asked,”
Mr. DeLeon said. “Since I knew him and he was my dad’s boss, I went
ahead and did it. I thought everything we were doing was OK by the
way he was talking.

“Looking back now,” he added, “I probably wouldn’t do it.”

Mr. Tucker, who worked for the Brights for nearly 40 years and also
lived rent-free on the ranch, said he didn’t know what Mr. DeLeon
was talking about.

“Why don’t you talk to Baxter about that?” he added, declining to
elaborate.

Mr. Baxter acknowledged that he asked Mr. DeLeon to move into a
trailer and vote. “He said he’d be happy to do that,” Mr. Baxter
said.

He said he never went inside the trailer and could not say whether
Mr. DeLeon actually lived there.

Judy McAngus, a legal assistant who handles many election-related
matters for the district, expressed surprise when told that Mr.
DeLeon said he never lived at the address “because that’s certainly
what I was told.” She said she did not remember who told her.

Ms. McAngus – who works for the Austin-based law firm of Tom
Leonard, which represents many North Texas water districts as well
as the Bright family – said the tax that Mr. DeLeon approved was
not implemented.

The water district’s board had not planned to use Mr. DeLeon as
election judge and clerk, its records show. In July, when it
scheduled the election, the board named Charles and Margaret Baum,
who had lived for years at the ranch address later assigned to Mr.
DeLeon.

But the Baums had moved to rural Collin County two months earlier,
taking their mobile home with them. Ms. Baum said she was surprised
to learn that the couple had been appointed election officials.

They left the ranch, she said, because bulldozers that were
beginning to clear land for the development had destroyed the pond
that was their only source of water. There was no well, no water
line and no house in the area, Ms. Baum said, forcing them to haul
in water.

Another tax election was held in summer 1996. This time, the lone
voter listed was one of Bum Bright’s grandsons, Mr. Petty, who like
Mr. DeLeon also signed an affidavit listing the Baums’ former
address as his.

Mr. Tucker, the former ranch manager, said he remembers helping to
set up a trailer there for Mr. Petty but doesn’t know how long he
stayed.

House falling apart

In June 1997, Mr. DeLeon’s parents moved off the ranch, too.
Developers were beginning to clear land for the golf course, and
the family was in the way. Furthermore, Jose and Peggy DeLeon said,
the old farmhouse they lived in was falling apart.

Yet by October of that year, Chris Reeder was calling it home – at
least on voting papers. But by early November, he was also listing
a residence just outside the Park Cities – the house he and Mr.
Petty had purchased a few weeks earlier.

In one recent interview, Mr. Reeder gave this explanation: He had
been working in Carrollton, at one of his family’s banks, so living
on the ranch near Lewisville meant a quick commute. When he bought
the place in Dallas, the former owners needed extra time to clear
out, and he and Mr. Petty wanted to remodel before moving in. So he
continued to stay in Denton County until after the Nov. 4
election.

“I lived out there a couple of months, six maybe,” he said. He
described the house as being built of brick and wood.

If Mr. Reeder had lived at the house, he would have known that it
had no brick and was crumbling, the DeLeons said. Denton County
appraisal district records assessed its value before demolition, in
early 1998, at $174.

The DeLeons said the house was ransacked soon after they left. On a
return visit in the fall of 1997, daughter Lisa Craig said, she saw
windows broken, carpet yanked from the floor, cabinets pulled from
the walls. Crews were clearing the land to build a golf course.

“It was a shamble,” Mrs. Craig said. “It was really torn apart. It
was not livable. It was basically a bunch of empty rooms. You knew
it was vacant.”

Ms. McAngus said she saw no brick when she visited the house
shortly before the election but otherwise supported Mr. Reeder’s
residency claim.

She said she met Mr. Reeder outside the house to give him election
materials but did not go inside. “I had no reason to believe he was
not living there,” she said.

But Mr. Tucker, the former ranch manager, said he had no knowledge
of Mr. Reeder ever living at the house. One of Mr. Tucker’s
employees, Claud Caraway, likewise said he saw no signs of life at
the home.

“No one lived there, unless they snuck in there at night,” said Mr.
Caraway, who said work took him to that part of the property on
several occasions in the fall.

Meanwhile, in Dallas, the woman who sold the home to Mr. Reeder
also contradicted him. For starters, Amy Roberts said she moved out
almost immediately.

And Amy Roberts said she frequently saw the newcomers in the
neighborhood afterward, when she returned to visit her best friend
across the street. Each time, she would see their vehicles at her
old Southwestern Boulevard address – the same one Mr. Reeder gave
police when reporting his gun stolen, three days before his Denton
County election.

“I drove by lots of times,” Ms. Roberts said. “I saw both Suburbans
there.” When reporters tried to interview Mr. Reeder a second time,
he would not discuss the various ways that records and witnesses
contradicted his statements.

“I’ve told you all I’m going to tell you,” he said.

 

August 13, 2001

Nonprofit company touted in marketing of subdivision

Education foundation listed among perks for Castle Hills residents

By Reese Dunklin, Brooks Egerton

The Bright family has created a nonprofit corporation that it uses
as part of the marketing of its Denton County subdivision.

Chris Bright, who runs the family’s real estate operation,
persuaded the IRS to grant tax-exempt status to an education fund
that the family controls. The fund charges a one-half percent fee
on all land transactions in the Castle Hills development, then
gives some of the money to area schools.

The Brights use the Castle Hills Schools Foundation to promote the
perks of living in the luxury subdivision. On the official Castle
Hills Web page, for example, the trust fund is touted as a way to
assure that “the children of Castle Hills will have access to one
of the nation’s finest educational systems, thanks to the planning
and foresight of the H.R. ‘Bum’ Bright family.”

The IRS declined to comment on specifics, though spokesman Phil
Beasley said that the corporation’s fund-raising mechanism is
unusual. Using a nonprofit in a for-profit marketing campaign
“could raise questions with the IRS,” he added.

Chris Bright, the architect of several special taxing districts
that support Castle Hills, would not comment. His representatives
have said they’ve acted properly in developing the massive
subdivision.

Last year, the foundation told the IRS it had collected nearly
$400,000, about one-fourth of which was given to public and private
schools for equipment and supplies. The bulk went to Lewisville
public schools. But some of the beneficiaries, such as the
Prestonwood Christian Academy in Far North Dallas, were several
miles away.

All five foundation directors were identified as members of the
Bright family. “It is contemplated that control … will as soon as
practicable be transferred to an independent board comprised of
Castle Hills residents,” the family wrote to the IRS.

About 425 homes have been built in the development since 1998, when
the foundation was formed. Plans call for about 2,000 residences
eventually.

 

August 13, 2001

Developers paid family for districts Records show

Brights used government for private gain; aides say actions are
legal

By BROOKS EGERTON, REESE DUNKLIN

The family of former Dallas Cowboys owner H.R. “Bum” Bright
received more than $400,000 from developers seeking action by a
taxing district board that the Brights control, according to
records reviewed by The Dallas Morning News.

Board members – some of them Bright employees – delivered exactly
what was sought: creation of other water districts that, just like
the Brights’, can levy taxes to develop subdivisions. The payments
made to the family in 1998 and 1999 were in addition to fees a
Bright district charged the developers for the same actions.

Mr. Bright’s son Chris Bright, who runs the family’s real estate
business, has said he instigated the district fees as a way to
minimize taxes on his land. He declined to be interviewed for this
report, though his representatives said he has acted legally and is
proud of his accomplishments.

The fees and personal payments – totaling more than $1 million -
are among several ways the Brights have used government for private
gain, a review of district files and other public records shows.
They persuaded the IRS, for example, to give tax-exempt status to a
corporation that the family controls and uses in marketing its
water-district development.

The Brights have also built an especially close relationship with
Lewisville. It has sold tens of millions of dollars in bonds for
their water districts – even though these are separate local
governments that are outside of the city. The arrangement began
because the districts didn’t meet state requirements for selling
bonds themselves.

“That’s just the way Chris set it up,” Lewisville Mayor Gene Carey
said. “I haven’t seen anything that doesn’t look OK. It’s just a
different way of financing.”

Lewisville officials said they have acted creatively in the
long-term interests of the city and have protected it from
liability if the bonds default. They said they expect to absorb the
water districts eventually, which could bring the city its largest
bloc of upscale housing and add dramatically to the property tax
base.

Mr. Carey said he knew Chris Bright – a Highland Park resident who
is chairman of Lewisville’s Chamber of Commerce – and believed the
development would proceed as billed. So far, about 425 homes have
been built in Castle Hills, which lies in the booming suburbs
northwest of Dallas. Plans call for about 2,000 homes, a hotel and
commercial development, which could push the value of the project
beyond $3 billion.

The Brights have diverse business holdings and extensive real
estate experience, although they have never developed a
single-family subdivision before. They were believed to be one of
Texas’ richest families in the 1980s, with holdings ranging from
the football team to oil wells to banks, then lost an estimated
$250 million during the country’s savings and loan meltdown.
Federal regulators seized their Bright Banc chain in 1989.

They remain wealthy enough for their patriarch to have made huge
charitable donations in recent years, including $25 million to
Texas A&M in 1997.

“If it was someone I didn’t know and they came in and wanted to do
this, I might be a whole lot more concerned,” Mr. Carey said. “I
haven’t really worried about this at all.”

Lewisville did not examine the Brights’ books before financing debt
for their development, City Manager Claude King said.

Documents withheld

The News learned of developers’ payments to the Brights after
gaining access to water-district files under the state open-records
law.

But the districts’ law firm refused to make copies of checks and
related correspondence after consulting with the family, whom the
firm also represents. (It likewise has handled Lewisville’s bond
sales for the districts.)

The Austin-based firm, headed by Tom Leonard, denied further access
to the documents, saying that they covered private matters and had
been included in public files by mistake. The Texas attorney
general’s office is now studying whether to order release of the
materials.

At least one of the checks was written to Chris Bright personally,
while another went to the family’s Castle Hills Development Corp.
One contained the notation “district fees”; another, “consulting.”

In most instances reviewed by The News, the family received $100
per acre of a developer’s land in connection with an unusual
transaction: One Bright water district would annex the developer’s
property, which was miles away, then immediately split it off as a
free-standing taxing authority of its own. (Unlike cities, water
districts can annex land that does not touch their boundaries.)

The water district itself charged $100 an acre for the same
transactions, as The News reported in June. That revelation, among
others, led state Sen. Jane Nelson, R-Flower Mound, to ask Texas
Attorney General John Cornyn for a broad investigation of special
taxing districts. Mr. Cornyn is expected to respond to Ms. Nelson
this month.

In some cases, developers signed spinoff agreements and paid fees
before district board members voted on the matter. After the board
unanimously approved the deals, it scheduled elections to ratify
creation of the new districts. Then the only voters – generally the
Brights’ longtime ranch manager and his wife – cast ballots to make
it all official.

Other Bright districts have had elections in which a single voter,
living rent-free on the land, approved taxes and
multimillion-dollar bond sales. On Sunday, The News reported that
in at least one election, the lone voter says he never lived in the
district and was urged to sign false documents to make things
appear legitimate.

Some of the area’s most prominent developers bought districts from
the Brights, including Rick Strauss and Dan Tomlin Jr. Mr. Strauss,
whose father helped found a prominent Dallas law firm, is using his
district to finance infrastructure for a subdivision near Flower
Mound. Mr. Tomlin, whose family controls large tracts of land in
Denton County, is trying to do the same near Frisco.

Mr. Strauss has said that he dealt with Chris Bright because it was
faster and cheaper than following the usual route of getting
approval for a district from Denton County commissioners or the
Texas Natural Resource Conservation Commission. “He was obviously
the pro at figuring this out,” Mr. Strauss has said.

Other well-known names who bought a district include Don and Phil
Huffines, although they later dissolved it to settle a lawsuit in
which Frisco alleged that some of its land had been annexed
illegally.

Don Huffines declined to comment on whether he and his brother were
refunded money they paid to the Brights and the Brights’ district.

“I don’t think it benefits me to answer,” said Mr. Huffines, whose
family owns a chain of car dealerships. “If I answer it one way, it
might make the Brights mad.”

Financing maneuvers

The Brights have formed five water districts to serve the
2,500-acre Castle Hills development, all of which have the power to
tax and spend for roads, water lines and other infrastructure.

But in the mid- to late 1990s, none was eligible yet to finance
such construction with tax-exempt bonds. The natural resource
commission, which is charged with overseeing water districts,
requires developers to build the infrastructure with their own
money and have some houses constructed before bonds can be issued -
a safeguard instituted after several districts near Houston
defaulted on bond sales in the late 1980s.

Lewisville gave Chris Bright a way around the rule. In 1996, its
City Council began setting up public improvement districts covering
the same land as the water districts and selling bonds for them,
before any ground had been broken. Two other neighboring towns,
Hebron and Carrollton, also talked with Mr. Bright about such a
deal.

Mr. King, the Lewisville city manager, said he knew the arrangement
would mean that the bond sales would not have to be approved by the
natural resource commission.

“I don’t know if it’s all that problematic,” he said. “Adding more
entities would add to the bureaucracy.”

The attorney general’s office, which must approve all public bond
sales in Texas, signed off on Lewisville’s arrangement. It did not
address the question of whether the usual water-district rules
should apply, office records show.

Legislators authorized public improvement districts a
quarter-century ago as a tool for cities trying to revitalize
decaying downtowns. Such districts could use a special assessment
levied in the district to help merchants prosper “instead of
fleeing to huge regional shopping centers, thereby eroding the
city’s tax base,” according to a 1977 House of Representatives
summary of proponents’ arguments.

“Only limited projects can be financed by this bill,” the report
said. “Grandiose schemes won’t fit within the permissible
categories.”

Years later, legislators allowed cities to form improvement
districts outside of their boundaries – as Lewisville has done for
the Brights’ development.

“That’s taxation without representation,” said Castle Hills
resident Rita Mongelli. “It’s against the Constitution.”

Mr. King disagreed, but said if residents share Ms. Mongelli’s
feelings, they have a remedy: “They could boot out their water
district board and elect another.”

The boards that established those taxes include no residents – but
they do have several Bright employees. Yet district officials have
told regulators that board members have no business relationships
with the Brights, public records show. State rules bar developers’
employees from serving as district directors.

The city bonds are to be repaid with property taxes levied in the
water districts. The tax rate of the most developed Castle Hills
district is $1 per $100 of assessed valuation, slightly more than
twice that of Lewisville.

Only eight cities in Texas have financed debt with public
improvement districts, according to the attorney general’s office.
It said Lewisville has sold $33 million in bonds this way – three
times as much as any other city, and all for the Brights.

Lewisville’s arrangement with the Brights “is a new one on me,”
said Mark Stein, a Dallas consultant who has helped create
improvement districts in other cities.

Lewisville officials say water district residents, not the city,
will be liable if the bonds aren’t repaid. That’s probably true,
said New York University law professor Clayton Gillette, a
nationally recognized expert on municipal finance.

But he cautioned that a default still could hurt the city’s image
in the bond market, translating to higher interest rates. And if
there were a “disaster” scenario, with bondholders alleging
securities fraud, “everybody involved in the bond issue is going to
be drawn into litigation.”

Mr. Carey, the mayor, said he’s not worried. Major rating agencies
recently reviewed the city’s finances, he said, and didn’t indicate
problems about the arrangement with the Bright districts.

“If they’d had any concerns,” he said, “I’m sure they wouldn’t have
raised the credit ratings.”

Lewisville will soon decide, as early as its council meeting on
Aug. 27, whether to approve a new round of bond sales for the
Castle Hills development. Officials have been discussing the matter
for the last few months and were briefed by Mr. Leonard in June,
following The News’ reports.

Mr. Carey said he hasn’t seen or heard anything that has made him
worried about dealing with the Brights.

“Let’s just say, not at the present time,” he said. “No.”