November 22, 2022

Wilco launches tax break investigation

Exemptions granted by entity outside of county 


Earlier this month, Williamson County Commissioners discussed a future investigation into the Texas Essential Housing PFC — a group based in Travis County — applying its low-income housing tax credits or exemptions to properties being developed within Williamson County. 

The result of the alleged action would allow the entity’s developments to avoid paying property taxes to local governments like Georgetown and Williamson County, without having to qualify locally for low-income housing tax exemptions.

This limits how much tax revenue the county and city can generate from the property, while county residents likely wouldn’t see any potential low-income housing benefits offered by the development, since those requirements are being met elsewhere. 

On November 1, commissioners approved a motion to authorize the submission of a supplemental brief on a pending request to the Texas attorney general, which had previously been submitted by Texas Senator Paul Bettencourt in October. 

The inquiry regards the authority of a public facility corporation sponsored by a municipal management abstract to purchase and acquire property outside the district’s boundary. 

Precinct 2 Commissioner Cynthia Long said that commissioners had been briefed on the situation from a legal standpoint. 

“It does have significant potential impact in Williamson County,” she said. 

Precinct 3 Commissioner Valerie Covey emphasized the importance of the issue, and her interest in related developments in the county. She said Z Modular formed the Texas Essential Housing PFC, which was established in Travis County as a public finance corporation. The corporation has allowed companies to purchase property outside of its physical Travis County jurisdiction, give it to this finance corporation, and lease it back for a term of 99 years with the corporation’s tax-exempt status applied. 

“Basically what’s happening is it’s a scam to the taxpayers,” Ms. Covey said. 

She said the initial inquiry by Mr. Bettencourt was to discuss concern over the workings of Z Modular, in particular in Williamson County. 

“This is a Travis County company deeming property in other counties as tax exempt without any city, county or school district having a voice in that,” Ms. Covey said. “I don’t know how that’s possible.” 

Most tax exemptions for large property developments must go through a legal process of approval. Ms. Covey said the public finance corporation has found a way around that using legislation passed by state lawmakers. 

The amendment made under Section 303.042(f) of the Texas Local Government Code makes it possible for a private apartment developer to transfer land to a public facility corporation — in this case Texas Essential Housing PFC— which then leases the land back to them for a tax-exempt status normally given to affordable housing developers.

Precinct 4 Commissioner Russ Boles said that the group is not behaving like an actual organization that would build affordable housing. 

“Those groups [that want to bring affordable housing units] come to have conversations with the taxing entities and seek their approval and cooperation,” he said. “That is not what’s happening here.” 

At least 30 apartment complexes in Texas have been developed using this exemption since 2016. Future projects may fall within Williamson County, according to commissioners. 

Commissioner said they will continue to investigate projects by the company in the area and may take further action in the future. 

“Today is just the preliminary action that we want to be a part of this discussion,” Ms. Covey said. “We are trying to get to the bottom of it. We’re going to be very involved in this, and there will be more to discuss in the future.”