Arlington wins restraining order against town of Pecos it says cost it more than $2 million
The city of Arlington announced it has obtained a temporary restraining order against the small West Texas town of Pecos, halting deals that have cost the area more than $2 million in annual tax revenue.
"I'm going to go off script because I'm pissed. Can I say that?" said Arlington Mayor Jim Ross, briefing a Texas Senate committee on the dispute with the town more than 400 miles from the city.
It started when Pecos' Housing Finance Corporation, or HFC, approved a 100% tax exemption on the Jefferson North Collins apartment complex in north Arlington, since renamed Zenith, in exchange for an undisclosed amount of money.
"It caused my blood pressure to go up. My first question was, 'What in the world are they doing?'" Mayor Ross said during an interview last month.
The CBS News Texas I-Team first discovered what's now known as a "traveling HFC" in 2023.
The term describes a small local government's use of its HFC, a non-profit entity intended to promote affordable housing, to approve tax breaks on multi-family housing complexes outside of its geographical area.
Towns and small counties have offered these tax breaks, mostly in urban areas throughout Texas, in exchange for payment from commercial real estate developers.
CBS News Texas has tracked nearly 100 tax exemptions in North Texas by out-of-town HFCs, all based hundreds of miles away from the apartment complexes they've granted exemptions.
The practice has removed more than $2.5 billion worth of property from North Texas tax rolls, costing local governments more than $40 million in revenue.
That first deal Pecos HFC struck in Arlington, for example, cost:
- The City of Arlington, $447,000;
- Tarrant County, $149,250;
- Arlington ISD, $878,836;
- The Tarrant County College District, $89,374;
- The Tarrant County Hospital District: $145,270.
The total loss to the area? A combined $1.7 million.
Since then, Pecos' HFC has approved a total tax exemption on yet another Arlington apartment complex, and according to court records Arlington filed with a Tarrant County court, Pecos shared with a city attorney is "contemplating" several more.
"If left unaddressed, these transactions will continue to erode the tax bases for cities statewide, limiting our ability to provide essential services to our residents," Mayor Ross told state senators.
In its request for a temporary restraining order, Arlington cited CBS News Texas' past reporting as evidence of problems traveling HFCs have caused local cities.
Williamson County, just north of Austin, last month also cited our reporting in its request for a temporary restraining order against the Cameron County HFC in Brownsville after it approved a similar tax break on an apartment complex there.
A judge there granted the request.
Both Arlington and Williamson County have argued that HFCs cannot legally approve tax exemptions on real estate outside the geographical areas referenced in a line in the law establishing HFCs that reads "a residential development must be located within the local government."
If a judge agrees, hundreds of deals across the state could fall apart.
