The city of nearly 19,000 residents in Galveston County, which operates on a nearly $20 million annual budget, was down to just $1.2 million in September. For a city that spends about $60,000 a day, that meant La Marque had just over two weeks before it was out of money.
Holly said it felt “like being on the Titanic.”
“I’ve never seen anything like it, I was horrified,” said Holly, a certified urban planner of 40 years. She worried “that the community was just going to fold.”
The city sent a notice out to the community in September, warning of its “serious financial situation.” Residents have grown increasingly frustrated with city leaders, and trust seems to be eroding: A tense town hall meeting last month turned into a shouting match.
After that meeting, the city council approved a multi-pronged emergency response plan to reduce spending and bring in more revenue, including a 2-cent property tax increase for every $100 of property, which would add about $364,000 to the estimated $5.64 million the city would have collected before the tax increase, Holly said.
Then Texas Attorney General Ken Paxton stepped in.
Citing a new state law signed by Gov. Greg Abbott in May, Paxton sent letters in October to city officials in La Marque, along with Odessa, Tom Bean and Whitesboro, demanding that they rescind any planned property tax increases.
The new law prohibits local governments from raising property taxes if they don’t comply with state auditing requirements. The audits are financial statements cities file with the state every year detailing how much money they collected and how much they spent; the law was designed to improve transparency among Texas’ municipalities.
Paxton claims the four cities either missed key financial reporting deadlines or have incomplete audits.
In Paxton’s letter to La Marque leaders, he said he “received a complaint” alleging that the city was breaking the new law, but didn’t name the source. The attorney general said he’s launching an investigation into the city, and until he completes it, he’s “demanding that the new tax rate not be implemented.”
Holly said the city was late sending its audits to the state. She also said that while the new law took effect in September, she and the mayor understood that it’s set to be implemented next fiscal year — which begins October 2026 — and isn’t retroactive. So the city is going to move forward with a two-cent increase, she said.
“It’s done,” she said. “I mean, the tax bills have already gone out.”
In Whitesboro, City Administrator Phil Harris said the city also filed its audits late and intends to proceed with a plan to raise property taxes by 20 cents for several city projects, including a new water tower and hiring more firefighters, despite Paxton’s letter.
But State Sen. Robert Nichols in East Texas, who wrote the law, said it took effect on Sept. 1, not next fiscal year.
Paxton’s letter is the only form of communication the city has received from the attorney general, La Marque Mayor Keith Bell said. The city has made multiple attempts to talk things through with Paxton, Bell added, “And as far as my understanding goes, we have not received any correspondence from the Attorney General’s office.”
Paxton’s office did not respond to requests for comment. In a news release, Paxton said his motive is to keep Texans’ property taxes low.
(Mark Felix for the Texas Tribune)
“If they had not done their audit at the time the law became effective, then they cannot raise their taxes higher … no new revenues,” Nichols said.
“I really think that was just political showmanship,” Holly said. “It was just a very big splash. But with limited substance.”
Mayor Says Bad Budgeting Created Current Mess
Whether Paxton will try to take action against the city isn’t La Marque’s most pressing problem right now, Bell said. The city is in a dire financial situation and is focused on finding solutions.
The city is surviving on a patchwork of temporary solutions, and Bell said there are “hard decisions” ahead and the road to financial recovery is going to be long.
The city recently sold 16 acres of land for $2 million to the economic development center. The EDC also loaned the city $1.5 million, which must be paid back in five years at 1% interest. That’s on top of about $500,000 the city expects every month in sales tax revenue.
But the city is also facing $2.1 million of debt.
Long-term solutions are going to require the city to look back and confront what went wrong, Holly said.
While city leaders point to a variety of factors that have led the city to nearly draining its cash reserves, Holly said simply put, for years they “were not paying attention to how much they were spending.”
Bell put it more bluntly: “It was mismanagement more than anything else — not misappropriation, not anything that is illegal or criminal in nature.”
“It was a total failure on the city manager’s part in the budget preparation process,” Bell said, referring to former City Manager Cesar Garcia, who was hired by the council a few months after Bell became mayor in 2021 and held the job for around three years.
La Marque uses a council-manager form of municipal government in which the city manager holds notable power. In council-manager style cities, city managers are responsible for running the day-to-day operations, said Bill King, a public finance fellow at Rice University’s Baker Institute, and “the mayor and council are the overseers, like the board of directors for the city manager.”
(Annie Mulligan for The Texas Tribune)
Since September 2022, the city manager’s office has only published nine monthly financial reports as of November.
“His budgets were, in my opinion, unacceptable because they did not appear to be accurate reflections of the financial position of our city,” Bell said. “It appears as though he was not proficient in that part of his role, and what we are dealing with today is the outflow or the consequence of his inability to provide us with accurate budgets.”
Garcia, who declined to comment for this story, is currently the city administrator for Kemah, a city about 15 miles from La Marque.
Just one missed monthly report should have been enough of a sign that something was wrong, said Randall Rice, a research fellow at the James Baker Institute Center for Tax Policy and Finance at Rice University.
“Any time you skip and start not putting out financial statements … something is not right at all,” said Rice.
'Nowhere near out of the woods'
Bell said he was hopeful Garcia would improve with time, but looking back, he wishes he pushed to replace Garcia sooner. City council was discussing whether to terminate Garcia when he resigned earlier this year.
“If I could have done it all over again, I would have pushed faster, sooner, for the replacement of that key member of the administration,” he said. “I would have, instead of trying to mentor and trying to get that person retrained to meet the moment that needed to be met.”
Bell said a major expenditure throughout the last few years was overtime for local law enforcement. He said it’s not the fault of the police and fire departments that they spent so much on overtime, “It is the failure to properly plan.
“We have to find a way to become more efficient in our public safety sector,” Bell said. “There is too much overtime being spent in our police and in our fire divisions, and we have to find a way to curtail that.”
In addition to finding ways to save, King said striving for transparency is going to have to be a key part of the city’s long-term solution. La Marque’s most recent monthly financial report was published in April, which King said makes it hard for the public to get an accurate sense of the city’s fiscal standing.
“It’s very difficult to reconcile and make any sense out of their financial statements because they’re so old and they’re so sporadic,” King said. “Somebody just sort of quit trying here about a year ago to manage all this.”
The city is penny pinching for now. Instead of its annual holiday parade, they’re planning a walk-through exhibit of festive floats. They’ve also declared a citywide hiring freeze.
“We are nowhere near out of the woods, but we have a sense of direction as to the way out of those woods,” Bell said.
This story first appeared in The Texas Tribune. Read the original here.
