Rowlett Council authorizes legal action, urges state response to out-of-jurisdiction housing finance corporations

The Rowlett City Council on May 6 authorized the city manager to retain the law firm of David Iglesias to provide legal services related to housing finance corporations (HFCs) that purchase properties inside Rowlett and seek tax-exempt status. The council also approved a separate resolution objecting to HFC development outside sponsoring jurisdictions and urged a responsive opinion from the Texas attorney general.

Council authorized the legal engagement in open session after a closed executive session on legal advice. Councilmember Britton moved to authorize the city manager to execute the engagement with the Iglesias firm; the motion was seconded and carried, 5–0.

Mayor Pro Tem Jeff Winget and other members explained the concern: some HFCs formed in other cities or counties are acquiring multifamily properties inside Rowlett and obtaining tax-exempt status, which can remove property tax revenue from Rowlett and other local taxing entities. Winget described the impact on multiple taxing jurisdictions, saying the activity “pulls tax dollars out of our community in the blink of an eye” and noted the city has been coordinating with the Dallas County Appraisal District.

Council also moved and approved a resolution formally objecting to HFCs engaging in development outside their sponsoring local governments, urging the attorney general to respond to request for opinion RQ-0587-KP, and supporting House Bill 1585. The resolution directs the city secretary to transmit a certified copy to the attorney general and the city’s state legislative delegation.

Council member Reeves supported the action in public comment, saying, “housing finance corporations operating outside their jurisdictions, in my opinion, undermine local transparency and public oversight.” Reeves and other members said they want state-level clarification and possible legislative changes to prevent HFCs from capturing tax-exempt status for properties located in jurisdictions whose residents do not elect or control the sponsoring HFC.

Winget reported informal cooperation from the Dallas County Appraisal District: the district has placed related applications on hold while the issue is evaluated, and council members said they expect to pursue legal and legislative avenues simultaneously.

Actions taken at this meeting: authorization to hire outside counsel to evaluate and, if appropriate, file legal actions related to out-of-jurisdiction HFC activity; and adoption of a resolution objecting to the use of HFCs outside sponsoring jurisdictions and urging a state opinion and legislation (HB 1585). Council directed the city secretary to file the certified resolution with the attorney general and state legislators.