The City of Plano and the Plano Independent School District (ISD) have filed a lawsuit against the Plano Housing Authority and five other public facility corporations.
In a statement shared with the Lone Star Standard, the city and ISD said “housing developments in our community should provide the number of affordable units needed by our citizens instead of simply providing a windfall for developers through lucrative tax exemptions.”
The lawsuit, filed on May 10th, alleges that these entities violated the Texas Constitution by granting tens of millions of dollars in annual property tax exemptions.
According to a lawsuit, the City of Plano and Plano ISD are requesting a Collin County District Court to declare Texas Local Government Code Chapter 303.042, which grants long-term, 100% property tax exemptions to private developers in exchange for affordable housing, "unconstitutional, void and unenforceable."
As part of the constitutional claim, the city and ISD say that “the PFCs have not been able to produce records showing the required number of affordable units are leased to citizens who qualify based on their income and, in some cases, that they are providing affordable housing at all.”
A 2020 report by the University of Texas School of Law, entitled Public Facility Corporations and the Section 303.042(f) Tax Break for Apartment Developments: A boon for affordable housing or a windfall for apartment developers, found that there has been a rapid growth of these tax exemptions across Texas, yet, the “marginal financial returns to PFCs are outstripped by the property tax losses” and the “exemption fails to serve the state’s affordable housing needs.”
The Texas Legislature responded with legislation during both the 87th and 88th Regular sessions. House Bill (HB 2071) by State Representative Jacey Jetton passed both chambers and became effective on June 18, 2024. HB 2071 included requirements to notify local elected officials of new PFC projects, requirements for public hearings, geographical limitations on new projects, and new requirements on the number of affordable units to be provided and the income levels.
In an interview with the Lone Star Standard in April, cosponsor of HB2071 Representative Gary Gates told us that in Harris County, the PFCs potentially removed $5 billion or more from local tax rolls.
Across Texas, local property taxes are used to fund schools and municipal services such as public safety, parks, and roadways.
Gates also told us that the developers who receive the tax exemptions mostly build one-bedroom units and do not provide affordable housing for families. Gates said "the true crisis in Texas is families can't afford homes. Most of these projects do nothing to provide two bedrooms or three bedrooms for families."
Although the reforms were made effective in June, Gates told us that loopholes and other programs still exist that are still being used in the same way by some developers. The next legislative session is set to begin in January 2025 where Gates and others will pursue additional legislation.
In the meantime, the City of Plano and Plano ISD lawsuit is challenging “the constitutionality of the prior law that seems to be a windfall for developers to the detriment of Plano taxpayers and may not be accomplishing a public housing benefit."
