CAMERON COUNTY H.F.C. MAKES MILLIONS SHELTERING DEVELOPERS

By Andrea Lucia
CBS DFW

DALLAS - On a vacant south Dallas city block, a new apartment complex is going up, one that will pay no property tax.

In exchange for a promise to provide affordable housing, the dozen lots this development sits on near B Avenue and South Corinth Street Road have disappeared from the area's tax rolls.

Dallas County doesn't even track the lots' values anymore because of their "total exemption" status.

The tax breaks were deals struck not by the city of Dallas or any local entity, but by one more than 500 miles away in Brownsville.

The Cameron County Housing Finance Corporation's website says its mission is to finance affordable housing across Cameron County, but it touts projects all over the state.

County appraisal records we reviewed show the corporation owns property in Dallas, Fort Worth, McKinney, Irving, Lewisville, and Euless, as well as a dozen other Texas cities outside its jurisdiction.

"We would be very concerned to find that HFCs are established by a jurisdiction in one part of the state and putting units down on the ground in another part of the state," said Ben Martin, research director for Texas Houser.

Martin says Housing Finance Corporations (HFCs), are meant to take advantage of special rules to help create low-income housing for the communities they serve.

"The worst case is that these deals end up being kind of tax shelters for the developers while not really providing any benefit to the public or the households that desperately need this housing," said Martin.

The deals aren't just being used for new construction.

Within the last year, we found Cameron County's HFC has approved deals with two properties in Iriving that have been around since the 1980s.

Together, they paid almost a million dollars in property taxes last year.

Now, like the development in Dallas, they'll pay zero.

Residents we spoke to say the tax savings aren't being reflected in their rent.

"It's gone up. That's all it's ever done since I've been here. Gone up. I started off paying $1150, now I pay about $1500 a month," said Kobe Peyton.

Both properties, residents told us, have recently been painted. The potholes have been fixed. And, the Las Colinas Heights complex's website now advertises it as a "luxurious community."

But, if it were up to Peyton, he'd prefer that tax savings trickle down to the people who live there.

"The break on the rent, for sure. It would help a lot," he said.

Getting through to Cameron County's HFC itself was a challenge.

While it's run by a board, it has only a single employee to run its office and oversee all its projects.

The address and phone number on its website lead back to the county courthouse, where an employee eventually responded to our voicemails to let us know the HFC definitely wasn't located there. County administrators we e-mailed said the HFC is its own distinct entity.

And, although the HFC has a board that holds meetings, the most recent one listed online happened six years ago.

In August, though, Cameron County Commissioners summoned the HFC's board and asked it to explain the out-of-county deals it's been making with developers.

"We provide a tax-exempt entity," explained Mark Yates.

"You give them the shelter, the tax shelter, so that they don't… so that they're able to operate or invest in this housing project and not be taxed on it... Is that right?" said Cameron County Judge Eddie Trevino.

"Yeah," responded Yates.

"And then what does the finance corp get out of that?" asked Trevino.

"We get a certain amount of fees," said Yates.

Those fees are significant, although far less than the benefits developers walk away with.

Yates, the HFC's sole full-time employee, said it normally collects 15 percent of whatever developers would have otherwise paid in taxes.

In other words, it collects roughly 15 cents for every dollar of taxes it allows a local government to lose out on.

Details, though, differ from one contract to the next.

In one recent negotiation, Yates said the HFC agreed to accept half a million dollars upfront.

Within two years, the deals have earned the HFC millions.

"We grew our cash balance from $250,000 to $ 6 million," said its board president Sergio Gonzalez.

In a memo to county commissioners, he explained, "We participate in deals that are outside of Cameron County in order to take those funds and invest them here locally."

State Representative Gary Gates who led reform of a similar tax program was surprised to learn of the widespread deals.

"HOW'S THIS HAPPENING? How can… This is where I'm just taken aback," he said. "They are deliberately misusing what could be a good tool to provide affordable housing."

The HFC's board says communities like the ones in North Texas, where these projects are happening, benefit when developers use their tax savings to reinvest in the properties.

Gates, though, worries the ultimate price will fall on tax-paying homeowners forced to make up the difference.

"This is going to be costly to all the other property taxpayers in the state of Texas," he said.

Cameron County's HFC did not respond to our request for an interview, but once we were able to reach Yates by e-mail, he did provide us with public records, including a list of ways the entity is using its funds to benefit low-income families in South Texas.