When one of the most innovative cities in America takes its first crack at mass transit you can bet it won’t be buses, trains or streetcars.
No, Round Rock, Texas, elevation 709 feet, is thinking about a gondola system, like those crawling up and down the ski slopes of the world.
While the average mope on a Round Rock street might ask, ‘Are you really serious?’ the mayor of the city, Alan McGraw, is quick with a reply. “Why not?”
“The problem with government in general is the thinking is not very innovative,” McGraw told Texas Watchdog. “I am fascinated at this being a viable transportation alternative.”
In keeping with the kind of thinking Forbes Magazine recognized when it named Round Rock the second most innovative city in America in 2010, McGraw said he got the idea a couple of years ago.
Every time McGraw turned around the city was faced with a right-of-way issue that, invariably, cost money and time. Wouldn’t it be great, he thought, if you could plan over the top of everything already here?
The creative nucleus at Frog Design in downtown Austin were thinking about it, too. They put together a proposal for Austin. They couldn’t get an audience in spite of ongoing transit troubles, in particular with the city’s little loved commuter train to and from Leander.
Round Rock has no corresponding troubles because it has no bus system, no train, no entrenched transit union. But with a population of about 105,000, the city is one of the fastest growing in Texas.
And so McGraw welcomed Frog Design to City Hall last week for a multimedia presentation that had a lot of Austin and no Round Rock.
The presentation was a little light on specifics. After realizing most commuters would not be wearing ski clothes and would be scudding along in the Texas heat, Frog’s factoring in of climate control for gondolas quadrupled its low-end estimated cost from $3 million to $12 million a mile.
That figure could go as high as $24 million a mile, a figure that compares favorably to the $100 million Austin is estimating it will cost to complete a mile of urban rail. Which doesn’t compare favorably to much of anything.
At a top speed of 15 mph, the gondola system can be ruled out as a regional transportation alternative, McGraw said. At fewer than a dozen people to a gondola, dangling one behind another in a loop, there remain the problems of traffic density and of maximizing pickup and dropoff opportunities.
Michael McDaniel, the principal designer of what he likes to call “The Wire,” said Round Rock has a big advantage over Austin in that the city isn’t saddled with the political baggage of existing mass transit.
“We think it would be pretty hilarious that Austin, the city that likes to keep things weird, wouldn’t do this, but Round Rock, the place that keeps things normal, would,” McDaniel said.
Neither is McDaniel worried that the residents of a suburb in a state known for its individual vehicle culture would be reluctant to park their pickup trucks somewhere on the cable circuit and grab a gondola.
The designers have even toyed with an elaborate design allowing for door-to-door service, a sort of ski in and ski out system, he says.
“It’s really up to the city to decide what they want to do,” McDaniel said. “Round Rock would be starting fresh, from the ground up.”
McGraw’s undimmed enthusiasm begged the question, could there be an ulterior motive for considering an untried transit method with technical hurdles that threaten to make it costlier and less efficient than a bus or a train?
There is the coolness factor of having the only gondola system of its kind in the country, McGraw said. But he promised that wouldn’t color any cost/benefit analysis the city would need to do.
Although the Frog presentation never mentions it, could the gondola system open the door to the state’s first indoor skiing park? McGraw freely admitted he likes to ski. One of the planning team at Frog Design came up with the gondola concept, in part, because he is a ski bum, McGraw says.
There are stranger places to plan such a complex. In 2009, Snow Sport Entertainment Ltd. was all set to build Texas Alps, a $70 million complex as part of a proposed $1.6 billion World Villages of Grapevine, right next to the Grapevine Mills Mall, when the world economy collapsed.
The investors, including former Texas Rangers hitting star Rafael Palmeiro, later filed for bankruptcy.
Could the Texas Alps arise from the gently rolling hills of Round Rock? Alec Sohmer, who headed the original Alps project, told Texas Watchdog his group had no plans for Texas, and a deal for a similar skiing complex in Georgia has stalled.
Sohmer wasn’t aware that anyone else was moving ahead on a skiing village in Texas.
But are you sure, Watchdog asked McGraw. “No, not at all,” he said, amused at the question.
At the end of the presentation, McGraw told Frog Design the city’s line of communication would be open, nothing formal, nothing set for an upcoming agenda. McGraw, he said, is always ready to listen.
“It’s open-ended. I like the idea of having another arrow,” he said, mixing his skiing and archery metaphors, “in our quiver of transportation.”
Around the clock, seven days a week, in a plant 233 miles away, a full complement of energy professionals stands at the ready to provide wood-fired power to Austin Energy customers.
The staff isn’t sure when they will be needed next. The $128 million plant has produced electricity for less than two of the seven months it has been in operation.
But for the next 19 years a little less than $2 will be added every month to the bill of the average Austin Energy customer to pay for a plant that, when it does produce energy, produces energy too expensive for any energy company to want to buy.
“It is one of the biggest boondoggles I’ve seen in modern history,” an obviously agitated Tony Bennett says. Bennett is the acting director of the Texas Forest Industries Council. “Just thinking about how they pulled this off makes me mad.”
Bennett was among those who tried to persuade Austin Energy five years ago to think a little bit harder before trying to pull off building a new biomass-burning generating plant in the pine woods of East Texas.
The Council was part of a once-in-a lifetime coalition of consumer and good government advocates, environmental activists, and commercial and industrial interests who came together in 2008 to plead with the Austin City Council to reject the plan.
The City Council unanimously approved allowing Austin Energy to charge its customers to build the plant. The plan allowed for the energy company to enter into a guaranteed contract for 20 years for energy valued at the time at $2.3 billion.
“What is the most disturbing thing to me was that they put this contract through in about two weeks, almost in secret,” Bennett says. “I can tell you it shocked the forest products community at the time, the way they hurried it along.”
The reason for its urgency was that Roger Duncan, then head of Austin Energy, considered the plant a necessary component in his plan for Austin Energy to get 35 percent of all of its energy from renewable sources, spokesman Ed Clark says.
Unlike solar power and wind power, wood or biomass is a source of energy that could be called on in the dead calm of night, Clark says.
“Roger wanted that renewable component that would allow us to have power to dispatch 24-7,” he says.
Roger Duncan and Austin Energy could not at the time the contract was signed in 2008 have anticipated the explosion of hydraulic fracturing that created a buyer’s market for a seemingly endless supply of cheap natural gas, Clark says.
They could have had they listened to several industry experts who were part of a generation plan task force formed by former mayor Will Wynn in 2007, Trey Salinas, a spokesman for the Coalition for Clean Affordable Renewable Energy, says.
At least three of those experts who later helped form the coalition told the task force that most every reliable forecast predicted a protracted period of low natural gas prices driven by technological breakthroughs like hydraulic fracturing.
“They can’t say they couldn’t know because they were told,” Salinas says.
More than two years ago, while the plant was under construction, Michael Webber, who supported the plant as associate director of the Center for International Energy & Environmental Policy at the University of Texas, admitted to Texas Tribune the plant was controversial to begin with and no longer made economic sense.
In spite of the failure of additional federal tax breaks to materialize that would have made biomass more competitive, construction pushed on. Not long after the plant fired up for the first time this past summer Southern Power, a subsidiary of the Southern Company in Atlanta, acquired it.
By agreement, Southern Power has the plant fully staffed around the clock, ready to serve Austin Energy’s needs, spokesman Tim Leljedal says. In spite of the substantial lack of work, Leljedal confirmed that the company has not reduced staff nor has it been asked to by Austin Energy.
Leljedal declined to say - per the contract - how much Austin Energy customers were paying by the day, week or month when the plant is idle.
Clark confirmed Austin Energy is paying a capacity fee to Southern Power, but would not say what it was, per the contract. But the fee and the contract are little different from those signed with other renewable energy companies in generation arrangements that are increasingly complicated.
At one time, Austin Energy envisioned the biomass plant running 90 percent of the time. Officials have downgraded the outlook to 75 percent and promised the plant would be firing on all burners by this summer, Clark says.
When asked if Austin Energy customers would be expected to cover the shortfall in the $2.3 billion contract, Clark says, “We’re not going to come close to that $2.3 billion figure.”
The problem is, advocates have for five years been unsuccessful in getting Austin Energy to make the terms of the contract public. No one really knows what utility ratepayers are paying for.
“CCARE (Coalition for Clean Affordable Renewable Energy) has always strongly believed that Austin Energy should release the 2008 Biomass contract,” Salinas says. “We do not feel there is a legitimate reason that a signed contract should be kept confidential and held from the public for over four years.”
The Austin City Council is currently deciding on whether or not to hand oversight of Austin Energy over to an independent board.
“We view this biomass plant decision as Exhibit A for why we need an independent board overseeing Austin Energy,” Salinas says.
Viewed in one very particular way, carefully following the bureaucratic contours of a $327 million stimulus energy efficiency program, the weatherization of Brandi and Byron Hockaday’s south Austin home is a success story.
Rules and guidelines were followed. Contractors and inspectors returned again and again to check the work. And when things weren’t right Austin Energy made them right at its own expense. And none of it, or almost none of it, cost the Hockadays a dime.
And yet, after more than two years and well over $14,000 spent, no one involved, least of all the Hockadays, believes they should have gotten involved with the federal weatherization assistance program in the first place.
On Oct. 31, after the latest of dozens of complaints, Austin Energy customer service representative Ann Salerno put an official end to its relationship with the Hockadays.
“For many months while assisting you, Austin Energy has exceeded its role as the involved electric utility,” Salerno said in a letter, one of a fistful Brandi holds in her hand on the sofa in their living room. “Austin Energy staff has gone above and beyond its obligations, and, at this point, there is nothing else Austin Energy can do to assist.”
But what about the gas line left exposed and running right alongside the air conditioning line in the bedroom wall? The positive test for mold? And the incessant cycling of an air conditioning system that is supposed to be the best in the industry?
All of the contractor errors, the unexpected visits to fix things that never got fixed. The arguing that one time nearly led to a fistfight. The derision and condescension from at least one of the Austin Energy officials.
“They damaged our house, they put our family in danger and they’ve repeatedly said we need to be done with this,” Byron says, unable to stay seated next to Brandi. “That’s what’s flooring us here. We’re tired of this shit.”
Spend five minutes with the Hockadays, and you are convinced tired isn’t at all the right word. They have painstakingly filed every document - paper and electronic - generated by their case. They recorded phone calls with workers, contracting supervisors and Austin Energy program leaders. They’re already tag-teaming their latest contractor.
The Hockadays aren’t tired by a long shot.
Pulling up to the Hockadays’ home in a neat, middle-class neighborhood, it is difficult to grasp how, indeed, they ever got involved in the program.
There is an older model, silver Jaguar in the Hockadays’ driveway of a nicely maintained 1,400-square-foot home.
Brandi and Byron Hockaday
The Hockadays built this house themselves in 1999. Both of them had good-paying jobs with a commercial printing company until day care costs for their two children made it more cost effective for one of them to stay home.
“We flipped a coin, and I became Mr. Mom,” Byron says. “It worked out because I wanted to get my own mobile IT business started.”
It worked out until June of 2010 when Brandi was laid off after 13 years with the company. In an economy that a congressional majority thought only a nearly $1 trillion stimulus could help, the Hockadays’ combined work experience came from an industry in decline.
Brandi started investigating and found that the family now qualified for food stamps. They enrolled the children in Medicaid for their health care. And when she went to the Austin Energy website she spotted a house ad for a “Free Energy Program.”
She filled out a two-page application sometime in late July.
The program the ad referred to was part of the Weatherization Assistance Program, the U.S. Department of Energy's $5 billion contribution to the $862 billion American Recovery and Reinvestment Act of 2009. The goal of the program was to help low-income Americans save money on their monthly bills by making their homes more energy efficient at no cost to them.
Joseph Guerrero, now the weatherization program coordinatorfor Austin Energy, says his company dispatched the inspector based, according to the program’s guidelines, on little more than the Hockadays’ current combined income.
An interview with the Hockadays, a visit to the home, past earnings, the value of the home, even the Jaguar in the driveway was not part of the calculation, he says.
“We had no authority to question any of it. It’s not arbitrary,” Guerrero says. “Had we denied it for any of those reasons, you can bet TDHCA would have been notified.”
On August 4 an inspector came to the Hockaday home and did a series of energy tests.
“On his way out the door, he told us it was one of the nicest homes he had been in since he started doing the inspections,” Brandi says. “He said, if anything, we’d probably be eligible for low-energy light bulbs.”
Unknown to the Hockadays at the time, Austin Energy was under threat of having its $5.9 million stimulus grant yanked by the state Department of Housing and Community Affairs. Texas Watchdog reported Austin Energy had managed to weatherize just 56 homes in the 18 months since the stimulus bill passed. Only four of the 44 agencies in the weatherization program had done fewer homes.
In the first year of the stimulus contractors statewide had spent $3.7 million, mostly on administrative costs, and had weatherized a total of 47 houses. Program directors from all over the state complained they were under tremendous pressure by Housing and Community Affairs to spend their stimulus grants.
"Is time running out for this program? Absolutely," state program director Michael Gerber said of Austin Energy at the time. "We will de-obligate funds before we let one penny of this funding go unspent."
Two months after the initial inspection, Robert Meredith, the owner of a second contractor, Go Green Squads, came to the Hockadays’ door with good news. The initial tests showed they qualified for a new air conditioning system.
The air conditioning system they had was working fine, Byron says. The inside unit had been replaced in 2008, and the outer unit had been repaired in the past couple of years, he said.
Meredith, Byron says, pressed them to decide. A new energy-efficient system would help them realize hundreds of dollars in savings.
“He said we were about to lose this if we didn’t decide and that we had to get this done,” Byron says. “My initial reaction,” Brandi says, finishing his thought, “was ‘Wow. Awesome.’ Byron’s reaction was, don’t muck around with it. I love my AC. Byron gave in.”
A ‘deceptively complex’ government program
The decision to install a new air conditioning system in the Hockaday home was based on calculations punched into thresholds set by the federal government, nothing more, Guerrero says.
At no time did Austin Energy officials issue a directive to speed up or increase spending on the units they were weatherizing, he says.
Susan Meredith, Meredith’s wife and the company’s co-owner, says Austin Energy gave the company 10 days from the time a work order was generated to start work. Never did Austin Energy call for spending over and above that recommended on the work orders, she says.
On Oct. 8, 2010, Go Green Squads installed an new air conditioning system and thermostats. The $2,433.27 in expenses was paid for by the federal program, which allowed for a maximum of $6,500 to be spent on each housing unit.
“And for nine months we thought it was the best program in the world,” Brandi says. “We felt like we won the lottery.”
Until the day Byron came home and felt warm. The Hockadays regularly set their thermostat at 75 degrees. The temperature read 77 degrees, and to get there the air conditioning unit was running for hours at a time without cycling off.
Thus began a series of calls and responses from contract workers. They did temperature readings. Had Byron seal and insulate his attic door. The ductwork was checked. The plenum, an air circulation chamber in the attic, was rebuilt. Several times.
During these months of trial and error, the Hockadays reported condensation on their vents and a musty smell in the house.
Around one of the openings in the attic, Byron found black soot he thought was mold. The contractors insisted it be referred to as a mold-like substance. In January of this year the Hockadays had tests done that determined the mold-like substance was mold.
At the same time, the Hockadays’ monthly utility bills were now exceeding the bills for the same months with their old air conditioning system.
In the absence of solutions, Byron offered troubleshooting suggestions like checking the coil that were routinely ignored, he says. It seemed as though the workmen were going through the same motions again and again. During one visit insults were exchanged and challenges made before Byron and a crew member could be calmed down.
“They were coming here all the time, all different times of day. They’d never call, they’d just show up. Then they never did anything. It was like watching monkeys hump a football,” Byron says.
From then on, Brandi systematically worked her way up alerting the chain of command at Austin Energy to their problems.
On Dec. 20, 2011, Austin Energy ordered another full inspection of the home and followed it with a systematic retracing of all the steps that had so far bedeviled the other contractors.
But not until March 20, 2012, did the company reach the conclusion that the air conditioning system installed by Go Green Squads needed to be replaced. The coil Byron had been pointing to was designed for a four-ton air conditioning system. It had been trying to cool the house in a three-ton system.
“There definitely was a problem with the system,” Susan Meredith says. “And we were very committed to fixing their system. But there are so many different factors involved. That is why I say this is a deceptively complex program.”
Austin Energy decided that it wouldn’t be Go Green Systems but McCullough Heating and Air Conditioning that would install not only a new air conditioning system but a new furnace.
The cost, $8,604.81, was more than three times the first system. The company did some additional calculating and cut two checks to the Hockadays totalling $453.58, an estimate of the cost of the additional energy consumed by the old system.
In all, Austin Energy turned over just $3,000 in bills for the Hockaday work to Housing and Community Affairs for federal reimbursement. Austin Energy assumed the rest.
Guerrero said he didn’t want the blot on a program he is proud of.
“I thought it was in the interest of everyone involved that we change out the equipment for a new system,” Guerrero says. “Our goal was to satisfy a customer who had some extreme concerns. I think that by looking at the facts of the case alone, this was not a normal course of business for us.”
By the overall standard of Austin Energy work, the Hockadays weren’t normal business. Of the 1,886 units weatherized with stimulus funds, Austin Energy went over the $6,500 budget 13 times, a check of the records by Texas Watchdog showed.
Nine of the thirteen were total bills under $7,000, one of them over the limit by 83 cents.
Despite its slow start and by the decidedly low standard set by a program beset throughoutwith administrative incompetence, poor workmanship and allegations of fraud Austin Energy was a solid performer.
(You can track the program’s performance and that of all the other local programs in the Weatherization Assistance Program in charts provided here.)
Once threatened with a loss of funding, Housing and Community Affairs eventually shifted more than $3 million more from laggard programs to Austin Energy. The program spent all but $1,100 of its $9.2 million, Guerrero says.
And while Texas Watchdog tracked a rather dismal record of workmanship problems statewide, Austin Energy performed better than most. (You can examine the results of eight spot inspections of contractor work done by the Department of Housing and Community Affairs did over two years here.)
“One house out of all those we worked on is a pretty good record, I think,” Guerrero says.
Utility: Responsibilities fulfilled
But what of the record at that one house?
In the weeks that followed, the Hockadays discovered a water buildup in a garage ceiling that showered water and sopping drywall on computer hardware Byron had stored there. Negotiation with the contractor for reimbursement came to an impasse when the Hockadays wouldn’t surrender the hard drives for replacement.
McCullough tracked the moisture problem and in July rebuilt the plenum, return and filter system.
The installation of the air conditioning system, Byron says, has juxtaposed an air line unsafely with a gas line running to the new furnace. The Hockadays have demanded an inspection. McCullough insists they already deemed the parallel lines safe.
The Hockaday home gets cool, with digital thermostats festooning the house to prove it. But Byron swears this new, top-of-the-line energy efficient air conditioner still cycles for hours.
It is December, and in the cool weather the Hockadays can’t be sure, but all of that cycling, Byron says, isn’t going to save them any money come summer.
And if something more should go wrong, Austin Energy has said it won’t be coming around any more.
In the hundreds of units done by Go Green Squads as one of the six contractors used by Austin Energy, Susan Meredith says she never experienced anything like the Hockadays.
Understanding the cold calculating of eligibility and rehabilitation, Meredith still wonders if this program ought to have been serving a family like the Hockadays. She thinks the couple knew what they were doing, that they “gamed the system.”
Austin Energy and its contractors, she says, were caught in the classic quandary: Was there too much government or not enough government?
“In hindsight we shouldn’t have bent over backwards,” she says. “We spent so many hundreds of dollars we didn’t bill for trying to make them happy. All we did was create a bigger problem.”
The weatherization assistance program, at least at the start, would not allow anyone to walk away from the Hockadays, Guerrero says. Austin Energy, he says, has more than fulfilled its responsibilities.
The Hockadays do not believe that. It takes them nearly three hours on the sofa to tell their story, and only because they are forced to leave out all sorts of details. The Hockadays are consumed by the details.
Brandi is working again, at home and as a virtual assistant at a fraction of her old salary, she says. Byron is still working to make a go of his business. Their combined income, Brandi says, would easily make them eligible for the Weatherization Assistance Program if it were available today.
Knowing what they know now, the Hockadays say they would have never applied. But having done it, having gone through it, they aren’t about to give up.
“From the time we applied, all we expected them to do is do their job right,” Byron says. “That’s all we asked all along. I don’t think that’s too much to expect. Do you?”
For decades, Texans have relied on special districts for services that local municipalities can’t provide. Water to an isolated settlement. Crime prevention in a region that can’t afford full-service cops. Flood control in susceptible areas.
But the web of special districts is at times marked by self-dealing and relationships greased with campaign cash, which passes from the firms and developers who make a living off the districts to the lawmakers who authorize them.
These deals result in government that is not always for the people by the people, but instead is driven by special interests --- lawyers, lobbyists, and management firms --- that make huge profits on the backs of residents.
A consultancy for special districts, Municipal Accounts and Consulting, is owned by attorney Joe Schwartz, whose law firm Schwartz Page & Harding handles the elections and management of several special districts, which give their business to Municipal Accounts.
Schwartz’s office said he sold the limited partnership to Mark Burton, a certified public accountant who was the registered agent of the operation when it began in 2002. Texas Watchdog was unable to locate any state records confirming the sale. The company has an address of 1300 Post Oak Blvd, Suite 1600, in Houston. Schwartz’s law firm occupies the 14th floor.
The legislation creating the district was sponsored by state Rep. Paula Hightower Pierson, D-Arlington, in April 2007. Eight months later, Hightower-Pierson received a campaign donation of $5,000 from Robert Kempel, president of Huffines, the first of three donations he would make to her through 2010. One fawning story pegs the total public “contribution” at $337 million, “if all goes as planned.”
In late 2006, state Rep. Hubert Vo, D-Houston, received campaign donations of $500 each from Hawes Hill Calderon and Allen Boone Humphries Robinson. Four months later, in March 2007, Vo and state Sen. Rodney Ellis, D-Houston, carried a bill creating the International Management District, which would become a client for both firms. Hawes Hill manages the district, and Allen Boone is a mega law and lobbying firm which handles legal affairs for districts across the state including International.
After the 2007 session, Vo received additional donations, $2,500 in August from Hawes Hill and $500 in September from Allen Boone.
Vo has since received one donation from Hawes Hill, $1,000 in May.
Perhaps even more cozy is the building on Bellaire in Houston that houses the offices of the International Management District; records show that it is owned by ERA Investment, a company registered in 1997 by Vo and his wife, Kathy.
David Hawes, of Hawes Hill Calderon, said the space for the district is donated by Vo, saving the district the $600 a month it was previously paying in rent.
The building was purchased in 2004 by Vo’s company although his financial disclosure for 2007 does not state his interest in the building at 11360 Bellaire. Vo did not return a call asking for a comment.
One of the largest district management firms in the state, Hawes Hill Calderon has been a major player in the explosion of special districts in the state. The Houston-based firm is an efficient and effective team of professionals, handling everything from security to graffiti removal for businesses often located in tough neighborhoods.
“Cities do what they can, but they can’t do everything,” Hawes said. “If I can provide security to drive into these district centers and help, it’s a service to the commercial community.”
Hawes said that in one district, they were able to cut burglaries of businesses by up to 70 percent in a given period.
For graffiti abatement, the city often cites a business if it does not clean up the spray paint in a given time period.
“As a business owner, if you have someone managing the removal, you avoid a fine.”
At the same time, Hawes Hill has contributed to the campaign funds of lawmakers and elected officials who authorize the districts.
“It’s become a cottage industry. There are people making their entire living off these special districts,” said Martha Wong, a former Republican state lawmaker from Houston.
She pointed to Hawes Hill, which wanted her to support a special district in the Montrose area to provide extra publicly-funded services such as police patrol and litter pickup.
“They wanted to me introduce legislation for their management district, but I found out there was a big resistance to it,” Wong said. “My goal was to have 75 percent of the landowners approve it and to make sure every land owner in that area was notified.”
Wong refused to carry the bill because of the overwhelming opposition.
“When you work it out and the neighborhood agrees, I’ll carry it,” Wong recalled telling the district organizers.
The organizers got a more sympathetic hearing from Ellen Cohen, Wong’s successor in the House, who sponsored the bill creating the Montrose Management District in 2009.
Today, that district is being sued by landowners who claim they submitted a lawful petition to dissolve the district’s mayor-approved board, but the board denied the petition’s validity.
Wong said special districts are “good for specific projects, but that’s all they really need to be used for.”
Yet the districts continue to bill residents and business owners for web services, landscaping, advertising; it’s a potpourri of services that often border on questionable, like the branded jump ropes the folks in Brays Oaks Management District ponied up for last year.
Trey Lary, uber-lobbyist to special districts and a lawyer with Allen Boone Humphries, received between $50,000 and $99,999.99 for his services to Hawes Hill Calderon in 2005, records show. Three other Allen Boone lawyers worked for Hawes Hill that year, including Joe Allen. All made in the $50,000 to $99,999.99 range.
That year the Legislature created the Greater Sharpstown Management District. The contract to manage it went to Hawes Hill.
Hawes, himself a lobbyist, in 2009 represented the Harris County Improvement District #10B and Harris County Improvement District#6 -- later known as the Five Corners and Montrose management districts -- as well as some investment groups.
Hawes also lobbied for INCAP Financial Group, which was in the final stages of creating the Dallas North Oak Cliff Municipal Management District in Dallas. Hawes Hill is the manager of that district.
Right now, there are lobbyists working on special district issues for the upcoming session, which begins in January.
Jody Richardson, a veteran lobbyist with Allen Boone Humphries, has helped create special districts since 1982. She has spent time every month this year since February lobbying for special districts, according to her filings with the Texas Ethics Commission.
“The consuming public wants stuff,” Richardson said. “They don’t just want a house. They want a house in a master planned community, with hike-and-bike trails and amenities. All of that costs the developers money. And they need to put them in place to attract homebuyers.”
As far as the campaign donations from district firms to lawmakers, Richardson said looking at it as trading favors is “simplistic.”
“The reason those lawmakers carry those bills is because that land is in their district,” she said. “If you think a senator or a representative is going to sell his soul for $500 or $1,000 or $2,000, then you must not respect your government very much.”
Richardson sees only a “network of specialists” that cater to the needs of a demanding district system, businesses that are filling a market demand.
Phillip Savoy, of Austin-based Murfee Engineering Co., said in a hearing regarding districts last year that his group has “built an entire engineering business on putting together the process to create these districts. We have found a mechanism to allow communities to expand their infrastructure. Without putting the tax burden on the whole community, it goes to the people who live in the [municipal utility district].”
* * *
Perhaps the granddaddy of special district largesse is state. Rep. Jim Murphy, who earns a six-figure salary to manage Westchase District in Houston. His deal as general manager calls for a monthly fee of $22,491 in addition to other payments for consultancy and an upfront payment of $7,711.
But instead of relying on lobbyists to advocate for Westchase, Murphy, who was voted out in 2008, handled the job himself.
In April 2009, state Rep. Scott Hochberg, D-Houston, carried a bill to give broader powers to Westchase, such as the ability to receive money from tax increment finance zones. It authorized the board of the district to change the number of voting directors, “provided the board determines that the change is in the best interest of the district.”
It also gave the district broader powers to tax for services, including infrastructure.
When it came time to hear testimony before the House Ways and Means Committee, there was one witness to testify for the bill: Jim Murphy, who was now a registered lobbyist for special districts and authorities. The bill was signed by the governor in June 2009.
Murphy was re-elected in 2010. In April, as Murphy struggled to retain his seat in the primary against challenger Ann Witt, the district became an issue.
The Witt campaign unveiled a web site and sent out a maileroutlining the numerous Westchase contracts handed out to Murphy donors, including Rehak Creative Services, whose owner, Robert Rehak, has donated at least $7,000 to Murphy’s campaigns since 2005.
Other contract-holding contributors include Phonoscope, BMS Management and Brown & Gay Engineers.
“Double Dipping. Skirting the Law. Bilking Taxpayers. Rewarding Cronies,” a banner at the bottom of one page of the mailer claimed in fairly standard attack ad format.
Murphy did not return a call for comment.
Rehak sued Witt for defamation, claiming Witt’s connecting of dotsconstituted an unlawful act. A district court judge in Harris County quickly dismissed the case, granting attorney’s fees to Witt. The decision is on appeal.
Witt’s daughter, Ellen Witt, was managing the campaign and felt she had found a wedge issue that would boost her mother’s chances of winning.
It didn’t work. Ann Witt lost 59 percent to 41 percent.
Ellen Witt, former deputy attorney general for legal counsel in the Office of the Attorney General of Texas, feels people aren’t aware of the power of special districts.
The districts often do a poor job of posting their public meetings, she said, and usually use a .com URL rather than the .gov that is used with other taxpayer-funded operations.
“People don’t understand that these are government entities,” Witt said. “For people to hold government accountable, they need to know that a group is a government entity to begin with. Many of these are operating under the radar. And they don’t seem to want the public to know they exist.”
Indeed, even though taxpayers in a municipal utility district in North Texas had paid off the district’s debt in 2010, the board continued to meet and tax residents. It took a court order and an election to undo the district, which, as far as some residents were concerned, had done nothing to let the public know of its existence.
“We had no idea there was a board that met every month,” said Mary Arceneaux, a resident of the district in Corinth, near Denton. “They had meetings, they were spending our money, they had elections, and we never did find out. That’s how they kept the same people in there on the board for 15 to 20 years.”
Once the districts are created, they’re hard to rein in.
Not even the governor could stop a move in 2007 to change the power structure of the Buffalo Bayou district in Houston. Democratic state reps. Garnet Coleman and Ellen Cohen co-authored legislation that reduced the number of board members from 31 to 9. The measure passed, but Gov. Perry vetoed it, pointing out that the amendment would not only decrease the number of board members but also name nine directors “without the approval of the local governing body.” Today, the board has nine members, anyway; three of those named in the vetoed legislation are among them. The other 22 spots are left vacant.
Over the years, lawmakers have reviewed internal, mostly academic reports on special districts that have confirmed their majority view that districts are a good thing. The most this 2002 Senate committee report could muster is that “there was not adequate oversight regarding certain activities by certain special districts … specifically, the ability to divide or convert to another type of district.”
This 2008 assessment by the Texas Senate Research Center offers a dry, academic look at districts, posing few questions but conceding they are an “invisible” layer of government.
A 2001 series in the Dallas Morning News, Government by Developer, exposed a number of questionable elements of the districts. Among them: The moving of money between developers and the lawmakers that author bills creating districts, the relationship between lawyers, lawmakers and developers and the practice of hiring voters to elect a board that suits the power structure of the district.
All three strategies are still rampant. For the third, one need only look as recently as 2010, when a 30-something entrepreneur, Alan John Lesselyong, moved into a FEMA trailer to elect officers and approve $400 million in bonds for a Denton County district.
Lesselyong was the sole voter in the district. He was de facto election judge, from the polling place set up behind the trailer.
Legislators have vowed to look into possible problems with the system of special districts, but so far, done nothing.
State Rep. Dennis Bonnen, R-Angleton, claimed in 2010 that the voter residency laws were “something that needs to be looked at.” Addressing residency laws could make it more difficult for some districts to be assembled.
But when pressed last month about it, Bonnen said he was going to be busy with other things in the upcoming session.
State Sen. Jane Nelson in 2011 tried to convince her colleagues to address the hiring of voters for special districts, giving a half-hearted plea in a hearing.
In 2001, though, Nelson, R-Flower Mound, had co-authored a bill creating the Frisco Square Management District in what has become one of the ritziest of north Dallas suburbs.
Nelson declined to speak to Texas Watchdog.
State Comptroller Susan Combs, eyeing a higher office bid and with great fanfare, recently announced a new web site that allows residents to track the taxing entities in and around their area, including districts. The site was applauded by the conservative Americans For Prosperity group.
Combs considered in March lobbying for a moratorium on the creation of special districts, although she has little jurisdiction in that regard. Nonetheless, she told the Fort Worth Star-Telegram last month that she now favors a more political - albeit likely results-free - path of talking with lawmakers.
Combs declined to talk with Texas Watchdog.
Wong, the former state legislator from Houston, said the whole special district process needs to be addressed in the legislature. “People have tweaked the rules” over the last few years, making it easier to create districts.
Austin is the only place that can change the situation that some feel has gotten out of hand, making taxpayers pony up millions that used to be part of the risk taken by an entrepreneur, a developer, even a lawyer.
“Legislators need to do a better job of letting people know that these are government entities,” added Ellen Witt, the former AG’s office lawyer. “I don’t know why more people haven’t raised this issue with their representatives. “
The Houston management district board that approves $37 million in property development tax breaks is packed with insiders from the local real estate community, including two people connected to major developer Hines as well as at least two who are already city vendors.
Others with ties include Leslie Ashby of Ashby LLP, whose firm handles real estate litigation; Frank Staats, a vice president with Moon Acquisition Holdings, a national development and real estate holding company; and Paul Layne, whose former employer, Brookfield Properties, was paid $7,218 by the city of Houston in February, shortly before he left Brookfield.
Meyer manages a number of properties downtown within the district boundaries. He had expressed interest in the area a few years ago before he was on the board, with buildings owned by one of his other companies, FKM Partnership, searching for tenants.
The ties between board members and the industry receiving tax breaks “underscores my opposition to this,” said Mike Sullivan, the lone city council member to oppose handing the tax break process over to the district.
The city council voted in August to allow the board to deliver up to a $15,000-per-unit tax rebate to developers of 2,500 residential units within a specified zone. The rebate will be paid from future property taxes and assessments. See the outline of the arrangement here and information from the district’s site here.
“These are tax dollars that will be rebated,” Sullivan said. “There are better uses for $37 million.”
Bob Eury, the Downtown Management District's executive director, said that the process for selecting developers who may receive the rebate is “tightly prescribed. … Obviously, this is really first come, first serve, and we have conflict-of-interest policies, so obviously the board members can’t participate in anything that they will directly benefit from.”
Anyone receiving the benefit of a public money abatement will have to “meet the critera defined by the city council,” added Andrew Icken, chief development officer for the city.
The plan was crafted underChapter 380 of the Texas Local Government Code, which permits municipalities to pay for economic development. It was created in 1989, when the state, with 16 million people, was about 36 percent smaller than today’s 25 million. A 1987 statewide vote that allowed the creation of economic development programs allowed the legislation.
In Fort Worth, this type of arrangement is considered anathema: “This incentive may only be used as a gap financing tool of last resort,”reads that city’s assessment of Chapter 380 arrangements. “The use of this incentive is for projects facing extraordinary impediments to development and offering significant positive impact to the community and surrounding neighborhood where the project is located. Limitations on how this incentive is used are predicated on the source of the funds and terms and conditions of the award to the City and the project.”
Icken said that the city has executed 14 such contracts now, and contends that Houston’s are among the more stringent. View the list here.
“Some cities give money up front or simply give grants through this program,” he said.
The 380 deal with Ainbinder turned into a protracted legal battle after a nonprofit filed a lawsuit against the city and Ainbinder. The action attempted to halt any 380 agreements by the city, claiming the city was “failing to provide sufficient controls to ensure that 380 agreements are not abused as either an end run around bond finance procedures or as political favors returned to well connected developers.”
The city prevailed.
Under the arrangement between the city and the Downtown Management District, the district will enter into agreements with the developers, calculate the funding to be remitted to the developers and send those calculations to the city for payment.
Sullivan pointed out that the original use of the 380 provision in the state was to spur development in areas that need a boost, “but the downtown has historically done well.”
Eury contends that the city of Fort Worth’s definition of the 380 agreement - “extraordinary impediments” - fits perfectly in the affected area around the George R. Brown Convention Center.
“It’s expensive land,” Eury said. “The whole way it is designed is to stimulate this area. It’s a front door for Houston.”
“Extraordinary impediments” to Ickens as well?
“I would not choose those words,” he said.
Among the locations on the district’s development project list are a city-owned warehouse at 1002 Washington, which was purchased by the city in January 2011 to be converted to its permit headquarters. The list, though, shows no indication that the interests of its board members are being appeased.
Lesselyong’s voter registration today shows the same address in Pilot Point, and he says he goes to the property frequently, though the trailer is long gone. His voting address is an empty lot, but he lives, he said, in the downtown Dallas apartment.
His case highlights the range of interpretation of Texas’ residency law, which defines “residence” as a place “to which one intends to return after any temporary absence.” While Lesselyong has never been challenged about his registration, seven Woodlands voters, who also moved temporarily into a utility district for voting purposes, are under indictment by the state’s top lawyer for voter fraud.
“I opened the place in the morning and was there all day,” said the 33-year-old Lesselyong. “I got the equipment, followed the instructions and when the polls were open, I voted.”
No one else came by because Lesselyong was the only person registered in the precinct. By a landslide vote of 1-0, every ballot measure under consideration was approved. By the same margin, each of the board candidates swept into office.
All the district needed was a tenant.
“I met the directors at a dinner they held for us all,” Lesselyong said.
A few months after the election, two people – an 18-year-old woman and a 24-year old man – moved into a trailer not far from the one Lesselyong used to set up their own district. The two voters in the Denton County Municipal Utility District #7, renamed the Four Seasons Municipal Ranch Utility District, approved $292 million in bonds for roads and water infrastructure.
While Lesselyong was holding a one-person election behind his FEMA trailer, a group of 10 Woodlands voters were also getting ready to vote, encamped at a hotel inside the boundaries of their utility district. The Woodlands voters said they were frustrated that the board members had not been challenged in an election for a decade.
The Woodlands voters initially prevailed, electing a slate of new board members. The results were later overturned in court.
The state’s case is based on residency: “Defendant voted in the May 8, 2010 Woodlands Road Utility District Board of Directors election, when he knew he did not reside in the precinct in which he voted,” the indictment states.
The ringleader of the group, Adrian Heath, has said he got the idea from reading about nine Tarrant County voters who were registered to an office building, figuring that if an office building could work for voting purposes in the eyes of the state, so could a hotel. The Tarrant voters were registered to the Drug Enforcement Agency’s address at Alliance Airport, although they did not live there full-time. Three of the nine had homes in other parts of Tarrant and Denton County.
When the matter was called to the attention of the Secretary of State’s voting division, a spokesman said the residency requirement can be determined “by the voter.”
Lesselyong was in full compliance with the law as were the DEA-registered voters. He paid rent to live in the trailer.
Recent efforts to change the state’s residency law have stalled.
In April 2011, state Sen. Jane Nelson, R-Flower Mound, filed a bill to address residency requirements in municipal utility districts, requiring a one-year residency before being eligible to vote.
In a hearing, Nelson looked with exasperation to her fellow lawmakers for some relief.
“You understand the problem,” she said in a hearing of the Senate Committee on Intergovernmental Relations. “The people I represent are very discouraged. They think all of this is being done behind curtains. I want more transparency, and I don’t know how to do that. “
Joe Allen, ofAllen Boone Humphries Robinson, a mega law firm that represents numerous special districts in the state, called Nelson’s legislation “a very damaging bill.”
He said developers are buying undeveloped land, “and there are no residents, and you simply have to have some initial votes to meet the constitutional requirement to have an election in order to vote these bonds,” Allen said at the hearing. “There’s no political subdivision in the state that are more scrutinized than these districts.”
He said any changes to the laws, including voting residency requirements, “will hinder home builders and prices in the state.”
The bill died quickly.
State Rep. Dennis Bonnen, R-Angleton, said in 2010 that residency laws and voting were “something that needs to be looked at.”
“This is an issue that needs to be resolved, and I hope it doesn’t get politicized if anyone tries,” Bonnen said at the time.
This week, Bonnen said he was finalizing his legislative goals for the coming session.
“But to be candid, I’m a little limited this session,” he said, as he is wrapping up an appointment as chair of the Sunset Advisory Commission and has a number of other issues before him.
Months after the grant that brought it to life ran out, Live Tobacco-Free Austin lives on.
Like many of the wellness programs started with $372.8 million in stimulus funding, Live Tobacco-Free Austin secured a new federal grant before the old one had run out and retained most of the staff hired to run the program.
Contrary to the billing of the $862 billion American Recovery and Reinvestment Act as a one-time infusion, the smoking and obesity programs branded Communities Putting Prevention to Work were never meant to be orphaned.
The fund is expected to spread $1 billion around to wellness programs this year and increasing every year after to $2 billion by 2016.
To augment that, the Centers for Disease Control and Prevention began the Community Transformation Grant program, pouring $103 million into wellness programs, several, including $1 million for Austin’s smoking program, started through Communities Putting Prevention to Work.
The Texas Department of State Health Services received a $10 million Transformation Grant for its wellness programs.
Michael Marlow, a California Polytechnic State University economics professor who has written critically on obesity and smoking crusades for the Cato Institute, says this sort of government paternalism is meant to be self-perpetuating.
“You have a one-size-fits-all approach to multi-faceted problems,” Marlow says. “There is no such thing as a temporary solution, just more money for more solutions.”
In the early part of 2010, about a year after the stimulus bill was passed, the Austin/Travis County Health and Human Services Department filed two of what would be 263 applications for Putting Prevention to Work through the Centers for Disease Control.
The CDC made 44 awards, including $7.5 million for a smoking program for Austin, rejecting its application for an equal amount for an obesity program. The San Antonio Metropolitan Health District was the only other Texas agency to get a grant, $15.6 million to combat obesity.
Los Angeles County got the largest grants, for smoking and obesity programs, $32.1 million; New York City got $31.1 million; Seattle/King County got $25.5 million; and Philadelphia, $25.4 million.
Cassandra Deleon had been working for the Texas Department of Health and Human Services when she applied for and was hired, along with eight others, to manage the Austin smoking program.
The grant was the largest of its kind secured by Austin/Travis County, and Deleon says staff saw in it a tremendous opportunity to change the social norms around smoking.
There was one problem. For years tobacco was a potent political issue in Austin, but with the passage of what was, in 2005, one of the strongest local anti-smoking ordinances in the country a kind of exhaustion set in.
Austin spent about $1 million incorporating tobacco use data into the medical records of its hospital and clinic partners, Deleon says.The program set up the Live Tobacco-Free Austin website. The Ash Trailer - a vintage Airstream covered entirely with ash trays - was designed for public service appearances, she says.
Most of the funding, about $3 million, went into a radio, television and billboard campaign touting the benefits of living tobacco-free.
Deleon says she is pleased with how they deployed the grant money. The community transformation grant is testimony to the commitment to fight smoking, she says.
But this kind of program, she says, resists efforts to correlate spending with fewer people using tobacco. “We’re in the process of collecting data and, of course, were hoping for a reduction in tobacco use across the board,” Deleon says. “It’s more like that what we’ll be able to track is awareness of our live tobacco-free message.”
This is an example of the diminishing return on the money spent getting people to give up tobacco, Marlow says. After billions in federal, state and local subsidies, hundreds of thousands of tobacco-related deaths, punitive ordinances and prohibitive taxes on cigarettes, more than 45 million adults choose to continue to smoke, according to CDC figures.
“After all that’s been done, people who smoke know it’s unhealthy,” Marlow says. “Continuing to tell them that is not giving them any new information. But that isn’t going to stop the paternalists from spending money on what is no longer effective.”
There is evidence that smoking cessation programs will have to fight for funding with obesity, the new darling of federal wellness. The CDC made $230 million in obesity grants, compared to $142.8 million for smoking through the Communities Putting Prevention to Work program.
San Antonio, which has found itself on several of those much anticipated lists of the nation’s fattest cities, was an ideal candidate for its obesity grant, by far the largest single grant ever awarded to the Health Department, Christine Rutherford-Stuart, assistant director for the Community Health Division, says.
Unlike Austin, San Antonio’s bid for a Community Transformation grant was turned down. After an extension runs out and the $15.6 million is spent, the last of 13 people hired through the stimulus will be let go, Rutherford-Stuart says.
Assuming the one-time windfall wouldn’t come again, San Antonio spent nearly half of its money on bike and walking lanes and outdoor fitness equipment for parks and libraries, infrastructure that could be maintained in the future by other municipal departments, she says.
A full quarter of the funding went to physical activity programs. Among them is Siclovia, an annual bicycling event modeled after a popular rally in Bogotá,Columbia. More than 15,000 people participated in the first Siclovia, 40,000 last year and 60,000 people are expected on Oct. 7, Rutherford-Stuart says.
Another 20 percent of the grant went into nutrition and health plans, including the installation of salad bars in 108 public and charter schools in the city.
Rutherford-Stuart says the YMCA, its partner for Siclovia, has agreed to continue funding the event in coming years. The Health Department is relying on partnerships to continue exercise, fitness and nutrition programs in the absence of the stimulus money, she says,
Having put all of this in place, Rutherford-Stuart says her department will be hard pressed to find proof of actual improvement in public health. Through questionnaires the department hopes it might be able to track changes in behavior.
“We’re happy for the opportunity to use the grant money, but it will be a huge challenge going forward.,” she says. “It took decades to get where we are in San Antonio and in this country with obesity. It’s going to take decades to alleviate the problem.”
Data from the CDC suggests what has been done at the federal level since the turn of this century has not worked. The current obesity rate of 35 percent - meaning nearly 110 million Americans are obese - is the nation’s highest ever.
In 2000, no state had an obesity rate greater than 25 percent. Today, two dozen have rates between 25 and 30 percent and a dozen top 30 percent, the CDC says. In 2000, 27 states could claim obesity rates of less than 20 percent. In 2010, none could make the claim.
The federal response to this failure is to redouble its efforts and its funding, making it clear to what were once pilot Communities Putting Prevention to Work programs that money will be made available to do further battle with fatty foods.
After exhausting its stimulus grant, Los Angeles County got another $9.8 million from the Community Transformation fund. San Diego County spent its $16.1million stimulus grant on obesity and got another $3 million in transformational funds. Philadelphia, too, got another $1.5 million after spending $15 million on obesity and $10.4 million on smoking.
Amanda Dudley, spokesman for the CDC’s National Center for Chronic Disease Prevention and Health Promotion, says the CDC has no intention of continuing the Communities Putting Prevention to Work as a national program.
And although one of the primary goals of all stimulus programs was to create or retain jobs, Dudley was unable to say how many of those jobs CPPW created or retained or offer a generalized assessment of the impact the program had on government hiring.
Trying to count the jobs, she said, would be misleading because of the way Recovery.gov, the stimulus website tracking spending and job creation, collected the data.
Having also failed to negotiate Recovery.gov, Texas Watchdog contacted the recipients of the 10 largest CPPW smoking and obesity grants. Los Angeles County flatly declined to answer questions. Philadelphia officials said they were still analyzing what they had done with their grants. Four agencies did not respond to our inquiry.
What is clear from the four that responded - the Miami-Dade County Health Department, San Diego Health & Human Services Agency, the Seattle – King County Department of Public Healthand theSouthern Nevada Health District - was a commitment to continue on as long as the funding continued to come in.
Although almost all of its grant had been spent by July of this year, San Diego County hung onto all 13.7 full time equivalent positions, spokesman Michael Workman says.
A package of Community Transformation, Supplemental Nutrition Assistance Program Education and other grants and some county money has kept 6.7 jobs alive in a program that has been renamed Healthy Works.
“The program is considered a cornerstone of the County of San Diego’s Live Well, San Diego!, a 10-year initiative to improve the lives of San Diegans through healthy, safe, and thriving communities,” Workman says.
The other seven CPPW employees were re-assigned to other jobs on the county payroll, Workman says.
By Seattle-King County’s calculation, its grant paid the salaries for 134 jobs in the Public Health Department and with the community partners who participated in the obesity and smoking programs, spokeswoman Kathryn Ross says.
Roughly two-thirds of the Public Health employees brought on with CPPW money are staying, Ross says, through a combination of federal grants, some foundation funds and the reallocation of money in the department budget.
A good share of the work will involve developing a plan to make the one-time grant program sustainable, she says.
Of the 12 people hired by the Miami-Dade County Health Department funding had been found to hold onto more employees, although spokeswoman Rosa Oses-Prealoni says they are hoping to find more funding to keep several others.
The work will continue through other entities funded at least in part through federal, state and local taxes, Miami-Dade County, the Miami-Dade County School Board, the City of Miami, and the City of North Miami and the Consortium for a Healthier Miami-Dade.
Only in the Southern Nevada Health District, which kept its hiring to one person, was there an effort to make sure the CPPW money was spent on programs carried out largely by people already on staff, according to spokeswoman Jennifer Sizemore.
Regardless of the inability to account for or measure the effectiveness of these federal programs, which Marlow insists is dubious, the perception of crisis, in smoking and in obesity, creates an inertia difficult to halt. “It’s a bottomless pit,” Marlow says, “and it will never stop.”
The superintendent of the Tornillo Independent School District, Paul Vranish, benefitted by using his position to approve purchase of items that were not sanctioned by his contract, spent public money in a “reckless manner,” and submitted the same hotel invoice twice for reimbursement, according to a state audit.
The final investigative report from the Texas Education Agency notes financial lapses at the district and suggests at several points that Vranish may have violated numerous codes and laws.
The state agency examined $117,394 in reimbursements to Vranish and his wife, also employed by the district, in the 2011 fiscal year, finding $47,909 in questionable costs.
Several members of the district’s board of trustees and school system’s lawyer refute the state’s assertions.
"We are giving them feedback and expect everything to go away," said Jim Darnell, the attorney representing Vranish.
According to the state, which issued its final report Aug. 31, Vranish used travel for the district to earn frequent flier mileage points, then used those points for district travel.
“He then requests reimbursement for the miles used by submitting documents that show what that flight would have cost if the district had paid for a regular airline ticket, as well as the associated fees charged to use the frequent flier miles,” the report states. “Because the superintendent is charged with protecting the district’s assets and using them for the benefit of the district’s students, but instead used them in a reckless manner, he may be in violation” of several articles of the Texas Constitution.
Vranish declined to comment.
Among the other findings:
“PMV Services sold a 50’ DLP HDTV to (the Tornillo school district) for $1,200 in June 2007. The superintendent provided additional documentation regarding the self-dealing but this transaction is still questionable because it does not appear to be an arm’s length transaction.” PMV Services is a company owned by Vranish. In an interview with Texas Watchdog earlier this year, Vranish explained he operates it part-time as a certified board trainer for school districts.
Vranish “authorized a purchase order to purchase a cell phone for himself.” His contract provides that the district pay for his service, not his cell phone. Vranish also purchased a number of other tech items without the proper purchase authorization.
Vranish submitted two parking tickets for reimbursement, one at Houston’s Hobby Airport and the other at the El Paso airport. The tickets were issued in relation to a Texas Association of School Boards convention in which all travelers, including Vranish, rode together in a rental car. “Therefore, the reimbursement is questionable,” the report notes.
On several occasions, purchase orders were authorized after a purchase had already been made. Numerous items were shipped to Vranish’s home rather than his office, the report states.
Several trips were taken without an explanation of what they were for, and trips were reimbursed before they were taken.
TEA concludes the report by demanding new policies at the school district outside El Paso on the state’s western border. Among them, that the district implement new financial controls. The district must hire a forensic auditor to examine the district’s reimbursements to Vranish and his wife, Marla, for the years 2006 through 2011. The district must implement new measures to ensure Vranish reimburses the district for all expenses and ceases using his personal credit card for district-related expenses.
Records obtained by Texas Watchdog show the district has continued to defend Vranish. Several trustees in a March 9 letter claimed Vranish’s use of a personal credit card “was well known to everyone.”
“…Every year, auditors make a call to a trustee, private from the superintendent, to ask about board member knowledge of operations and possible fraud problems,” states the letter, which is not signed by the entire board but includes several past members.
Texas Watchdog reviewed a letter from Douglas Little, of the local accounting firm Little, Roberts and Company, refuting many of the TEA findings. The letter was written at the request of Darnell, Vranish’s lawyer.
Darnell calls the investigation and its reports “a crock of baloney.”
"I had a CPA go through the report, and he responds to every single one of the allegations," Darnell said. "We've got responses to every single one of the things they found. The report is sloppy to the point of incompentent."
In the April 23 letter, Little disputes the charges for the cell phone, saying the auditors ‘offer no argument why these items are inappropriate for Mr. Vranish’s job duties.”
He calls the auditor's questions about money Vranish spent to repair a snowmobile an “egregious overreach by the auditor” and says that a snowmobile – a 2007 Polaris - was damaged during a 2008 school trip to Colorado and that a repaid bill of $1,210.33 was put on Vranish’s expense report.
“Mr. Vranish owns two snowmobiles, a 1992 and a 1993 model which clearly do not match the description on the repair receipts,” he writes.
The school district’s lawyer, S. Anthony Safi, argued in an April 23 letter to the TEA that the selling of frequent flier tickets for district-related travel “actually resulted in savings to the district.”
Safi also questioned the necessity of a forensic audit, calling it a “very significant, unbudgeted expense” that “should be left to the discretion of the school board.”
Safi did not return a call. Rachel Avila, president of the Tornillo shcool district board, did not return an email.
The TEA ordered the audit earlier this year after receiving complaints from several members of the school board, which is divided 3-3 in its support of Vranish.
Even though its debts were paid, a municipal utility district inCorinth in North Texas kept taxing residents, bringing in tens of thousands of dollars.
The district had retired its bonds in September 2010, which paid for water and sewage infrastructure to the town for three decades and were funded by a property tax of 65 cents for every $100 in value, a bill of $1,079 on a $166,000 home. But the district continued to tax residents at a rate of 15 cents per $100 valuation, bringing in$100,000 to the Corinth Municipal Utility District #1 after the services had been paid off.
District board members continued to receive $125 per meeting, according to Corinth City Attorney Debra Drayovitch, and “they paid $900 to rent chairs for those meetings.”
Once aware of the taxation without a cause, the city moved to dissolve the district, and within six months, lawsuits and an election had done the job.
“They said (the district) would last for about 10 years,” said Ruth Brosnan, who moved to Corinth from Long Island, N.Y., in the early ‘80s and was told by the developer of the district levy. “But it just kept going.”
Today, two specially created improvement districts in Houston are being besieged by disgruntled residents, both bent on their dissolution.
Business owners in Montrose say a new district there was passed by the Legislature without their knowledge.
“I was unaware that anyone in this state dissolved a district,” said Philip Navratil, one of a group of folks who submitted petitions with the Montrose Management District seeking to be rid of the district and the tax of 12.5 cents per $100 valuation it levies on commercial properties.
“But we are watching the Montrose case to see how that goes,” said Royce Mitchell, one of a group of the Five Corners property owners who gather regularly to discuss a strategy for removing themselves.
Both groups can look at Corinth, southeast of Denton, for cues on how to deal with a district management team that clings tenaciously to power. The MUD, as they are called, issued $3.75 million in bonds in 1987 to cover the cost of infrastructure in what was then a very rural area.
When the housing market in Texas took a tumble in the later ‘80s, “we had to pick up the slack on the bonds,” Brosnan said.
District board meetings had always been sparsely attended, so no one noticed when the members kept on meeting at the clubhouse of a local housing development after the bonds were paid.
“They met the minimal requirements for posting meetings,” said Corinth Mayor Paul Ruggiere, who was part of the city effort to get rid of the district. “But it was the minimal posting, and the average person really didn’t become aware of it right away, that this was not supposed to be going on.”
“Then we found the district was considering using the money to make improvements on a pool and tennis court that was associated with the neighborhood of the district that was its own non-profit organization,” Ruggiere said.
The district’s board vice president Marianne McKinley denied such a thing in November 2010, and Texas Watchdog found no record of any current non-profit connected to the board members.
McKinley promised the district would dissolve at the behest of the city, which had the authority to dismantle it. Council memberspassed an ordinance that month.
The city also arranged toreturn the tax money taken in by the district to the taxpayers. Eventually, residents received rebates of around $100. But the district still didn’t dissolve.
The residents, including at least one city council member, filed open records requests on the district, asking to see minutes and statements, requests that were never filled.
City Council member Bruce Hanson asked for all records of elections held by the district going back to 1990 - the same board had been in place for at least a decade, and residents had never heard of any election - but he never received anything.
“They didn’t have any answers and didn’t really even seem equipped to handle this kind of thing,” said Mary Arceneaux, a Corinth resident.
The agency doesn’t police expired districts. It simply shutters them if they are dormant for five years. But it has to come to the attention of the agency.
A flack at the TCEQ was vague about the process, and even the agency’s hand in anything regarding the administration of utility districts.
“It doesn’t happen that they are dissolved very often,” said spokeswoman Andrea Morrow. She said that her agency can handle the dismantling of a district, but even that “depends on how they are supplying water to their customers and what they have to do to make sure customers are not left without water.”
The Corinth district did not supply water, just infrastructure.
As far as districts that might be taking unauthorized money or engaging in otherwise unseemly activities, “we handle the rate; we don’t handle the operation of a MUD. … That is something between the board and the ratepayers,” Morrow said.
On May 14, 2011, six months after the city council vote, residents voted to get rid of the district. But folks are still mad about their dealings with the board and the discreet public notice provisions required for open meetings by such bodies.
“We never even knew when they met,” Brosnan said. “One of them didn’t even live here.”
Three of the board members have disconnected phone numbers, and two others could not be reached. Richard Abernathy, a lawyer from McKinney who represented the district, said in an email that he could not talk about the situation but wrote, “It is unfortunate that the city wasted taxpayer dollars forcing an unnecessary election.” *** Contact Steve Miller at 832-303-9420 or firstname.lastname@example.org.
State Sen. Tommy Williams played a key role as attorneys tied to the Woodland Road Utility District pushed for voter fraud charges against seven Woodlands residents who sought to usurp the sitting board of the district.
In an email on Sept. 15, 2010, Williams provided a step-by-step guide on filing a complaint to James Stilwell, the lawyer for three ousted board members, who accused the Woodlands residents of violating state residency laws to skew a vote in the district to remove them.
“A few moments ago, I concluded a conference call with the attorney general’s office on the voter fraud in the 23 June township election,” Williams said in an email to attorney Stilwell and Bruce Tough, a local lawyer and a Woodlands Township board member.
Both Tough and his father, Coulson, are political donors to Williams, a Republican who represents The Woodlands.
Williams personally shepherded the complaint to the AG’s office, email records show.
While Williams asserted that it was a case of voter fraud, at the time of the Septemberemail, no charges of voter fraud had been announced. In a December 2010 email between Ann McGeehan, director of elections at the Secretary of State’s office and Clete Buckaloo, director of law enforcement at the AG’s office, McGeehan refers to them as “alleged illegal voters.” By then, in an email to Williams’ office, Stilwell was referring to the case as the “RUD criminal investigation.”
Williams in the September exchange offered the use of his legislative director, Jason Baxter, in “making sure this is handed off to the right person,” offering that Baxter could “walk it over and put it in the right person’s hands at the SOS office.”
On the same date, Stilwell emailed Williams, advising him that he had sent a package of documents to him and to state election officials regarding the voter fraud allegations.
“Many thanks for all your help…” Stilwell signed off. It was five days after Stilwell sent his complaint to the Secretary of State’s office.
The accused voters were among 10 who registered at a hotel within the district north of Houston in order to vote in the May 8, 2010, election for the RUD board.
The coup was initially successful with the incumbents voted out, but a state district judge later ruled that the 10 voted fraudulently and handed the election to the incumbents.
Williams was also in possession of court documents generated in the case, according to the state Senate Secretary’s response to anopen records request.
Among the items provided to Texas Watchdog were theoriginal request for voter information for the 10 from lawyers for the ousted board members,court reporter transcriptions from hearings in a lawsuit filed by the temporarily unseated board members of the district against the newly registered voters, and the brief filed by the incumbent board members with the state appellate court that is part of the appeals file.
Several of those indicted earlier this year on voter fraud charges have alleged that Williams was working with the utility district to prosecute them.
A lawyer for one of the indicted individuals said the involvement of Williams, if true, shows that “big business is running the show.”
“That has been our concern all along,” said Kelly Case, who is representing Adrian Heath, who spearheaded the move to register at a hotel in the utility district after reading a Texas Watchdog story about voters registered to a vacant lot and a federal building. “We had thought that Williams had been pushing this along.”
Case said that “it seemed odd” that the attorney general’s office would take up the case “on his own.”
Williams declined to comment.
“We support the vigorous enforcement of our elections laws,” he wrote in the Sept. 15, 2010, email, to lawyers for the board members.
Stilwell did not return phone calls.
The next hearing in the case is schedule for November. The charges are a third-degree felony.