City hits landowners with $200K in ‘hidden liens’ on 40-year-old paving debts

News

Investigative Summary:

For 40 years, nearly 200 paving bills issued to landowners sat inside Granite Shoals city hall collecting hundreds of thousands of dollars in interest. The city continues collecting this money from landowners, but an attorney tells KXAN state law required the city to forgive these debts in 2006.

Editor’s Note: This article was updated to reflect a rebuttal from the City of Granite Shoals city attorney to the legal analysis included in this report.

GRANITE SHOALS, Texas (KXAN) – They found a buyer, agreed on a price and had just hours to go before closing the deal. But, a call from a land title company stopped everything.

It wasn’t, of course, good news.

Patty and Chris Hanson were selling off a piece of property along Twilight Lane in 2016 — a section of land in Granite Shoals Chris’ grandfather and father owned for generations.

The bad news: the Hansons couldn’t sell the property unless they cut the city of Granite Shoals a check for $7,859.18 to pay off a lien the city locked the property down with in 1986.  

The annual accounting shows Patty and Chris Hanson’s $765 paving bill exploded to $7,859 when they paid it off in 2016.

“How could that be possible? This property has been in our family since the property existed. And, we pay our bills. So, it just didn’t make sense that —how could there possibly be a lien that we didn’t know about or were never notified about over decades?” Patty Hanson told KXAN.

Hanson went to work to figure out how this happened and what bill the city claimed someone in their family didn’t pay. The city told Hanson the bill was for a 1986 unpaid “paving assessment,” but couldn’t provide her with much more information than that, she said.

Suspicious and confused by the city’s claims, the Hansons started their own investigation. Chris remembered an old family photograph taken decades before the city claimed it paved Twilight Lane in the mid-1980s. The picture shows Chris Hanson and his siblings sitting in an oak tree on his grandfather’s property at the paved, 90-degree bend that split the Hanson property along Twilight Lane.

The picture’s dated 1967.

That tree still stands today. The photograph bears a bit of proof the city had already paved Twilight Lane 20 years before the city placed a lien on the property for a 1985 paving job the city claims the family’s grandfather or father and father never paid.  

Based on the 1967 picture, it appears the 1985-1986 paving project was likely a re-pave.

The Hansons said they still have no way to prove whether their grandfather or father paid the original bill and the city could not provide them with any other record — other than the ordinance — to show he did or that he didn’t.

The Hanson lien sparked an investigation inside city hall to figure out whether any other Granite Shoals landowners were in the same shape as the Hansons. That investigation found 190 property owners with liens totaling more than $200,000.

Unpaid road paving bills

The city’s investigation turned up seven separate ordinances passed between March 1979 and October 1986. The ordinances showed the city council voted to pave several streets in Granite Shoals, then billed people whose property touched the road right-of-way.

The ordinances did not indicate the paving costs were voluntary. Instead, those costs were forced upon each landowner when the city council voted to pave the city streets. Because the city gave landowners no choice in the imposition of the charges back then, the Hansons said they considered the paving assessments the equivalent of the city imposing a tax on those landowners.

ORDINANCE-LANGUAGE
All seven paving ordinances showed city council voted to impose the paving charges on all landowners along the paving route.

The ordinances show the lot and subdivision locations with unpaid paving bills and the total amounts owed. Between 1979 and 1986, city records showed 182 property owners owed the city a total of $20,631 when the 1986 ordinance was passed.  

By September 2019, that unpaid total climbed to $203,000, according to figures provided to KXAN by the city manager’s office.

The Hanson’s bill started out at $765 in 1986, but with the 8% annual interest the city tacked on each year, that bill climbed to $7,859 by the time the Hansons found out about the lien in 2016.

Sometime in 2019, the city finished its investigation into the paving liens. That investigation led city council to order City Manager Jeff Looney to send 125 letters to property owners listed in the ordinances and whose addresses the city could track down.  

KXAN obtained the city’s records through an open records request. Those records show notes made on each letter where the city received a response. Those notes indicated angry responses in many cases, payments made in some other cases and a few promises from landowners to make payments in the future.

Looney noted on one letter that he stopped the interest accrual for a woman who promised to pay her $752.96 debt in March 2020.

InkedFREEZE-INTEREST-LETTER_LI
City Manager Jeff Looney signed this agreement with a Granite Shoals woman to stop interest accruals on her $1,984.85 unpaid paving lien if the woman “paid in full” in March 2020.

KXAN’s analysis of the city documents shows 14 property owners made $19,460 in lien payments after Looney sent the notice letters out on Aug. 20.

The first payment noted on the city’s paperwork shows a $752 payment made on Aug. 27 to clear a lien on lot 255 of the Tanglewood Section of town. The original bill on that particular property started out at $55 in 1986.

City records do not show any attempts to collect the debts within the past 30 to 40 years. Looney confirmed that fact during an interview with KXAN.

“No, the way I understand it is they [prior city officials] just waited for them [property owners] to come up here for when they had a property sale and they would settle that when the property was being sold and it just kept rolling that way and other than that, I don’t think the city did a whole lot toward informing the public about it,” Looney said.

Meanwhile, interest continued to accrue, and bills totaling hundreds of dollars turned into several thousand dollars. The city continues piling interest onto those debts today.

InkedLARGEST-LIEN-NOW-LETTER_LI
City Manager Jeff Looney sent 125 of these letters out in August. This letter is addressed to a Horseshoe Bay woman who city records show owes the largest unpaid paving debt.

“We just wanted to make sure that folks had the information,” Looney explained, detailing the city’s intention when sending the letters out in August. Looney and the city maintain the letters were not attempts to collect the debts, although the letters “ask” that each debtor contact the city “to arrange payment.”

“When I look back at those ordinances and what the city did, they partnered with the county, they partnered with the developer and they tried to partner with the citizens to get some roads paved, and part of that was setting up these liens, and you have a lot of citizens who paid right away, but you had the ones that we’re talking about right now — they didn’t pay,” Looney said.

Looney confirmed the city hired a lawyer more than a year ago to help guide the city through the process of determining whether the liens were legal and whether the city could collect on them. Armed with that legal advice, Looney said the city decided to let the public know about those 30-plus-year-old liens.

That’s something city records show the city hasn’t done since passing Ordinance 220 in October 1986.

The city’s doing this with ‘nothing to lose’

“If the government tells you that you owe money; most people figure they’re right. In this case, Granite Shoals is wrong,” Austin real estate attorney Bill Gammon told KXAN.

Gammon reviewed the lien documents and the August letter the city mailed. Gammon said he knew right away the city was breaking the law.

granite shoals
Paving assessment records show 14 landowners paid nearly $20,000 to the city within days of the city sending “notification letters” to 125 landowners.

“They’ve got 20 years to collect a real property tax — 20 years. If you can’t get it done in 20 years, the legislature says, take it off the books,” Gammon said. Citing Chapter 33 of the Texas Property Tax Code, Gammon believes the city broke the law by not removing the liens within 20 years of the debts becoming delinquent.

That means the city would have been barred from collecting on any of the paving assessments in 2006 and should have removed the liens from the city’s books, according to Gammon. The city’s taking a gamble, according to Gammon, who explained there’s no legal penalty for any city official if they’re found to be in violation of the law.

“Of course. They’ve got nothing to lose,” Gammon said.

Personal Property may not be seized and a suit may not be filed … to collect a tax on a property that has been delinquent more than 20 years.”

TEXAS PROPERTY TAX CODE CH. 33, SEC. 33.05

Personal Property may not be seized and a suit may not be filed … to collect a tax on a property that has been delinquent more than 20 years.”

TEXAS PROPERTY TAX CODE CH. 33, SEC. 33.05

In an interview last week, City Manager Jeff Looney questioned whether the liens held the same meaning as a “tax” in the statute.

“I think the biggest difference is a tax versus a lien. Are they the same thing or are they different? And, that’s what we’ve got to determine,” Looney said.

During this Oct. 8 city council meeting, Mayor Carl Brugger announced the end of public discussions on the paving liens and took the item off all future agendas.

“That’s ridiculous,” Gammon said in a response to KXAN. “The city’s attempting to make a distinction without a difference. An assessment is a tax and a tax is an assessment.”

In an email to KXAN following the report, Granite Shoals City Attorney Josh Katz rebutted Gammon’s analysis that the paving assessments were “taxes,” “He [Gammon] is incorrect in his assumption that Section 33.05 of the Tax Code applies as a limitation on the enforceability of street paving liens, as they are not taxes,” Katz wrote.

As part of our review of Katz’s argument we reviewed each paving assessment ordinance passed by the city between March 1979 and October 1986. Each ordinance described the paving assessments as a tax. The ordinances stated:

…there shall be and is hereby levied, assessed and taxed against the respective parcels of property…”

-City of Granite Shoals Paving Ordinances

Despite the language in the ordinances, Katz said describing the paving assessments as “a tax” was incorrect, “What determines whether an ordinance imposes a tax or an assessment is not whether that ordinance mentions the word “tax” in passing once within its language, but rather the legislative authority that authorizes cities to impose street paving liens, and the cases that have interpreted this precise question:  For the purposes of the Texas Constitution, are street paving assessments a tax?  The answer, squarely, is “no, they are not,” Katz wrote in an email in response to a KXAN about the ordinance referring to the paving charges as a tax.

“This provision (Article III, Sec. 55 of the Texas Constitution) of the constitution says that a city may release delinquent taxes that have been due for at least 10 years, but does not require such action, and this exception only applies to taxes.  Longstanding Texas caselaw has held that special assessments for street improvements are not taxes for the purposes of the Texas Constitution.  Thus, Mr. Gammon’s assertion that the difference between a tax and an assessment is a “distinction without a difference” is legally incorrect,” Katz continued.

“This is not rocket science,” Gammon said. “This is straightforward stuff that’s straight out of the statute (Texas Property Tax Code). You don’t have to do a lot of research. This is not obscure case law. This is straightforward stuff. You’ve got 20 years, you sue somebody for it, if you don’t sue them, guess what — you take it off the books. End of story. That’s the way the law works. This is what the legislature decided — this is what the law is in Texas. Period.”

If there is no pending litigation … the collector for a taxing unit shall cancel and remove from the delinquent tax roll … a tax on real property that has been delinquent for more than 20 years.”

TEXAS PROPERTY TAX CODE CH. 33, SEC. 33.05

If there is no pending litigation … the collector for a taxing unit shall cancel and remove from the delinquent tax roll … a tax on real property that has been delinquent for more than 20 years.”

TEXAS PROPERTY TAX CODE CH. 33, SEC. 33.05

Looney admitted in our interview that he’d never considered whether the city might be in violation of the state’s property tax code. That’s because Looney said the city’s attorney never provided the city with that information during the legal review of the liens and collecting paving debts.

“I’ve never seen that at all,” Looney told KXAN investigator Jody Barr when asked about the law Gammon cited.

City records do not show that city officials ever filed a lawsuit against landowners to collect those debts after passing the ordinance to place liens on the properties. Looney confirmed during the interview the city has not — and has never — filed lawsuits against the city’s landowners.

“I don’t know all the circumstances, legally, the way that goes. I think, for me, I’d have to talk to our attorney more, but again, I don’t think a lien is the same thing as a tax,” Looney explained. Looney asked for a copy of the statute so he could question the city’s attorney about it.

JEFF-LOONEY-TWO-SHOT
Jeff Looney said the city’s hired attorney never mentioned the TX Property Tax Code or whether it might impact the city’s continued collection of those 30-plus year old debts.

As of this report, Looney has not responded with the details of the city attorney’s advice on that point.

Still, Looney and city officials contend the August letters were not intended to be collection letters. “The letters we sent out were informational letters, they were not demand-for-payment letters,” Granite Shoals Mayor Carl Brugger told the public during an Oct. 8 council meeting.

“All we were trying to do — was that people understand these liens were out there, OK?” Brugger told the public.

“Unless something else comes up, I don’t intend for this to be a future agenda item anymore,” the mayor said.  

Another problem for those landowners who paid the city after 2006 or who plan to pay in the future: Gammon said there is nothing in the law that would allow those debtors to get their money back from the city.

“Texas law says if you pay a tax that you don’t owe, you basically donated the money to the taxing authority,” Gammon said.

Gammon said the only possible legal action for landowners who’ve paid the city after 2006 is to sue the title companies involved in these cases. Gammon said those companies should have known the 20-year deadline law and should have told their clients about that when they found out about the city’s liens.

“It is my belief that that action is negligence on the part of the title company,” Gammon explained.

granite shoals
Granite Shoals officials appear to have identified each of the people who currently own the properties connected to the unpaid paving bills. City records show the count stands at 125 landowners.

“So, these people may have recourse against the title company, but they have no recourse against Granite Shoals,” Gammon explained as he pointed out the city’s sovereign immunity position with the state’s tort claims law, which prevents Granite Shoals from being sued in cases like this.

“That’s dishonest. And, I think that that’s what the electoral process is all about. And, I think that everyone who’s involved in this should be thrown out of office because they’re not discharging their obligation to do the greatest good for the greatest number of people within their city,” Gammon told KXAN.

“The citizens can expect this council to be honest and upfront about it and if we’ve made a mistake, we’re willing to look at that issue and deal with it head-on and not try to cover up or hide anything in regards to that,” Looney said.

Photojournalist Chris Nelson, Executive Producer Heather Irving, Digital Executive Producer Kate Winkle and Digital Special Projects Developer Robert Sims contributed to this report

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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