Suit seeks to block Uptown Development
Attorney: Money collected through an ‘unconstitutional tax regime’
The city’s Uptown Development Authority and the economic development zone that feeds it were created in violation of the Texas Constitution, two critics allege in a lawsuit that seeks to void all resulting actions and block Uptown from collecting or spending another dime.
The Galleria-area agency’s controversial, $200 million effort to widen Post Oak Boulevard and add dedicated bus lanes down the middle is a key focus of the lawsuit. It was filed Wednesday on behalf of restaurateur Russell Masraff and condominium resident Jim Scarborough, who was also was a plaintiff in another, since-dismissed lawsuit seeking to block the bus plan.
The suit argues that Uptown officials repeatedly violated the Texas Open Meetings Act in pricing and purchasing land to widen Post Oak — including tracts in which some Uptown board members had a financial interest — and that the agency’s subsequent decisions should be voided or reversed, to the extent possible.
The plaintiffs’ attorney, Joe Larsen, said he views the filing as having broader significance beyond the bus plan.
“We’re asking the court to order Uptown to make no further payments because all the money involved has been collected through an unconstitutional tax regime,” Larsen said. “The bottom line is the Constitution requires equal taxation.”
Council delays vote
He added that the only reason tax increment reinvestment zones, or TIRZs, “are not unconstitutional is that there’s a different provision in the Constitution that allows them.”
“In order to meet that other provision in the Constitution that allows TIRZs to be constitutional, they have to be in an area that’s ‘blighted, undeveloped or underdeveloped,’ Larsen asserted. “That’s it.”
Larsen said he planned to ask a judge at a Thursday hearing to block Uptown from spending any more money or from issuing additional bonds; earlier Wednesday, the City Council delayed a vote on whether to allow Uptown to issue another $65 million in debt.
Uptown officials declined to comment on pending litigation.
Janice Evans, a spokeswoman for Mayor Sylvester Turner, said city officials had not seen the suit as of late Wednesday and declined to comment.
The Metropolitan Transit Authority, which will operate the bus system, was not a party to the lawsuit. As of Wednesday evening, Metro spokesman Jerome Gray had no comment on the filing.
Zones under scrutiny
The city formed the Uptown Tax Increment Reinvestment Zone in 1999, arguing in part that the area “substantially impairs and arrests the sound growth of the City” because it lacked adequate streets and sidewalks. An economic analysis at the time said Houston was losing its dominance of “regional population, employment, and retail sales to the urban fringe” and that failing to lessen traffic congestion in Uptown would erode its vitality.
In a TIRZ, a portion of property tax revenue is set aside for reinvestment within the zone, rather than sent to City Hall for citywide projects. Some of these zones — chief among them Uptown, by far the city’s richest — have come under scrutiny for being maintained in areas that city officials acknowledge are not in need of revitalization.
To support their argument, the plaintiffs included with their filing a report from University of Houston economist Steven Craig, who concluded that the Uptown zone could not be seen as meeting the “blighted” or “distressed” legal standards “under any reasonable definition of economic activity.”
Craig cited data from the 2000 Census to show that residents in and around the TIRZ had higher incomes, lower poverty rates and higher educational attainment than city residents as a whole, and that those who worked in the zone had higher incomes than Houston workers in general.
“There is no consistent way to show that the Galleria area was distressed at the time of the formation of the TIRZ when compared to the City of Houston average,” Craig wrote.
“As we see it, the unconstitutional birth of this TIRZ has tainted everything that’s gone since,” Larsen said. “The public is being a bit hoodwinked here, and I think it’s all of a piece: The way it was initiated and the way it’s being run.”
The efforts to acquire the land needed for the bus project, Larsen said, are just one example.
Uptown created guidelines for how it would acquire land, brought in an outside attorney to advise its leaders on conflicts of interest, and formed a committee to evaluate real estate transactions before they went to the full board.
Opponents fired up
But that committee included one member with a conflict and did not adhere to open-meetings rules, the suit argues, despite its role under the real estate guidelines of “establishing just compensation for each parcel.” The full Uptown board’s meeting documents also improperly obscure the parcels under discussion, the suit alleges.
The bus project, several years in the making, has fired up opponents of a previous Metro plan to build light rail along Post Oak and Richmond from the central business district, with critics saying the plan would disrupt economic activity along Post Oak.
The project would add a lane in each direction along Post Oak from a future transit center near Westpark Tollway to Loop 610 north of most of the development along Post Oak. A separate part of the project, along Loop 610, would carry the bus lanes to Metro’s northwest transit center, allowing continuous transit access that avoids Uptown’s traffic congestion.