State rep targets local tax districts
Real estate mogul’s effort to dissolve them called conflict of interest
Before state Rep. Gary Gates was elected to the Texas House, the Republican real estate executive launched a petition drive to disband the Southwest Management District, one of 39 special districts across Houston that collect taxes from commercial property owners to fund extra police patrols, sidewalk improvements and other hyper-local services.
Gates, who also has taken aim at a management district in the Hobby area where he owns apartment properties, has continued his efforts to dissolve the special districts since taking office early last year. In January, he filed a bill that would make it easier to dissolve most management districts, including the two he has targeted, then weeks later circulated petition forms to business owners in the Sharpstown area.
Under state law, a management district must disband if its board receives dissolution petitions from property owners who own at least two-thirds of the district’s assessed property value. Gates’ legislation, House Bill 1219, would lower the threshold from 67 to 55 percent for districts created before September 2017, meaning it would apply to the Hobby Area District and Southwest Management District that Gates has sought to dissolve.
The bill passed out of the House
Committee on Urban Affairs last week.
Houston Councilman Robert Gallegos, whose council district includes the Hobby Area District, has urged lawmakers to reject the bill and, in written testimony to the Urban Affairs Committee, highlighted the convergence of Gates’ roles as a property management owner and state representative.
“House Bill 1219 is misguided at best and may present a potentially serious conflict of interest at worst,” Gallegos wrote.
Gates, R-Richmond, acknowledged his business stands to benefit from the legislation, but he insisted the bill is needed because the current threshold to disband management districts is too high. Property owners often are reluctant to sign petitions because they fear retaliation from the district board or are board members themselves, Gates said, adding that many property owners are difficult to track down because they live in other states or countries, or are large multinational corporations that have little desire to meddle in local politics.
“What it's about is, in the event that the people that are subject to this tax, if they feel that that management district is not doing a good enough job, then it gives them the way to get out,” Gates said. “Reducing the bar to 55 percent seems reasonable. And if you are doing a good job, then you have nothing to worry about.”
Members of the Texas Legislature earn $7,200 per year and convene for only 140 days every two years, a system that fills state government with part-time lawmakers who hold other jobs as lawyers, consultants and, in some cases, business owners. Legislators commonly have a hand in bills that affect their livelihoods, but they rarely are reprimanded for doing so, said Andrew Cates, an expert in Texas campaign finance and ethics laws.
“Overall, it’s impossible to remove all conflicts of interest from these legislators,” Cates said. “They have to have employment or be independently wealthy in order to serve. They only make about $7,000 a year, so they have to make their money somewhere.”
State law bars lawmakers from voting on — but not authoring — bills that directly would benefit their businesses unless the measure affects “an entire class of business entities.”
Gates said he does not want to disband all management districts in Texas, noting he owns apartment properties in other districts he is not targeting through petition drives. He said management district boards generally lack accountability because they are difficult to disband and their members are appointed by mayors, city councils or commissioners courts instead of direct elections — which he argues leads some boards to spend tax revenue wastefully or on services that disproportionately benefit board members. He also has filed a bill that would make management district board members publicly elected.
“I'm responsible to my constituents because they can vote me out, but in this case, you can't do anything to get rid of them, and so over time, you warp into something that is not accountable to anyone,” Gates said.
Management district officials dispute Gates’ charge that they lack accountability or wastefully spend tax dollars, and argue their services complement those provided by the city and county. Alice Lee, executive director of the Southwest Management District, said about 37 percent of the district’s roughly $2 million budget goes toward public safety measures, including extra Houston Police Department patrols, private security teams and graffiti abatement efforts.
The management district assessed Gates’ company, Gatesco Inc., about $21,000 in 2019 on the $26.4 million worth of apartment units it owns at four properties in the district, according to a district spokesman.
The district has spent about $29,000 to operate a surveillance camera at one of those properties, Whispering Oaks Apartments, since December 2018, according to Lee. She said Gates’ company also uses a district-funded service that provides background screenings on tenants who apply to live at apartment units in the district. Management at Gates’ four properties also have called the districtfunded private security team “many times,” a district spokesman said.
Lee said Gates has sought for almost two years to dissolve the Southwest Management District.
“We thought that once he won a full term in office that he would focus more on his constituents in the Fort Bend County area,” Lee said.
Gates said the district does not fund background checks on potential tenants at his apartments. And he argued that his apartment complexes cannot use private security teams because doing so would violate insurance clauses.
He also said the amount the district spends on public safety is “immaterial” and “really for show,” arguing it is not enough to meaningfully reduce crime in the area. He pointed to the hundreds of business owners who have signed petitions to dissolve the district as evidence that those within the district generally agree with his efforts.
“If all that money, 100 percent, went to the police department to hire nothing but officers, to crime, I'm telling you, every one of us would enjoy that,” Gates said. “But we can't force that because we can't ever have a voice on these boards.”