Legislative History
The past decade has seen a flurry of legislative activity to create dozens of special districts in the greater Houston area. The concept of special districts themselves harkens back a hundred years to when Section 59 Article XVI of the Texas Constitution declared a "public right and duty" to conserve and develop a whole list of natural resources including navigable waterways and storm drainage projects. This explains why so much of modern special district law refers to the Texas Water Code.
By the late 1980's the Constitution had expanded the mission to include economic development particularly as it applied to unemployment, transportation, and agriculture (Section 52 Article 3). About this time the Texas Legislature codified a base set of rules for districts in the Local Government Code. A sense of the proper role of districts can be gleaned from section 375.021 which states in essence," A district may be created only in an area devoted primarily to commercial development and business activity..." Governmental mission creep reached a new milestone with the establishment of the Harris County Improvement District No.11 which, as part of its 'Findings of Benefit of Public Purpose' found that "...street art objects are parts of and necessary components of a street..." (Sec 3878.004(f) Special District Local Laws Code).
The Montrose Management District has its roots in the 2005 regular session of the Texas Legislature. State Senator Rodney Ellis kicked off the proceedings with SB-1880 which amended 2003 legislation to facilitate the creation of the districts. State Representative Garnet Coleman then successfully passed house bill HB-3518 creating Harris Country Improvement District No. 6 (between Montrose and Spur 527) and HB-3517 creating Harris Country Improvement District No. 7 in an area southwest of Allen Parkway and Interstate 45. In the same session, Martha Wong authored house bill HB-3494 proposing a district encompassing the west Montrose area. Her bill died in committee but she did succeed in passing HB-1830 "Relating to the notice provided for the establishment of municipal management districts" (more on this later).
After the failure to impose a district on west Montrose in the previous session, Representative Coleman and Senator Ellis - joined now by State Representative Ellen Cohen — returned in the 2007 legislative session to author HB-4091 which sought to piggyback onto the successful creation of District 6 a revision of its borders to encompass the (much larger) west Montrose territory. Remarkably, this minnow-swallowing-the-fish strategy almost worked; the bill passed only to be vetoed by the Governor.
In dogged pursuit of its tax revenue potential, Representative Cohen, in the 2009 legislative session, authored HB-4722 - again sponsored by Senator Ellis - to create Harris Country Improvement District No. 11 covering west Montrose in an area essentially bounded by West Dallas and the Southwest Freeway to the North and South and Shepherd drive and District 6 to the East and West — plus a bonus area between district 6 and the museum district. This time the Governor signed the bill.
Interestingly, all this legislative activity did not make much noise. The vast majority of property owners in these areas only discovered a new taxing authority had been imposed on them after there was nothing they could do about it. Maybe this is why Martha Wong had so thoughtfully offered HB-1830 which proposed to require that "...[any] person who intends to apply for the passage of a law establishing a special district... shall notify by mail each person who owns real property in the proposed district..." This help would come too late for District 6, but what about District 11? As it happens, a funny thing happened on the way from bill to law. The text went unchanged from introduction, to the House Committee version, to the Engrossed version, then on to the Senate Committee version until it came to the conference committee where it was 'reconciled' to exempt any member of the legislature from what became section 313.006 of the Texas Government Code. Like district 6, district 11 was surreptitiously created under the noses of the taxpayers without a sound.
Consolidation
Since 2005, Harris Country Improvement District No. 6 has been operating under the authority of chapter 3843 of the Texas Special District Local Laws Code. In 2009, with the passage of Ellen Cohen's bill, chapter 3878 was added authorizing the new district 11. But this chapter included something new: "subchapter F, Consolidation". Here we find the explicit power to merge and so achieve, after ten years of planning, the Montrose Management District - with almost no one knowing about it.
However, District 11 had first to exist before it could merge and — as was required for District 6 before it - Section 3878.204 of the new law stipulates that, "The board may not impose an assessment or finance [anything]... under this chapter unless a written petition requesting the improvement or service has been filed with the board." So until the board was petitioned, District 11 would not effectively exist. But this was not too tall a step; the requirements for a petition for service are laughably low: "The petition must be signed by... the owners of a majority of the assessed value of real property in the district... or at least 25 owners of real property in the district ", which, for an area encompassing roughly 900 businesses, really meant just 25 signatures.
It's worth noting that this idea of a majority or some lower number is a recent idea. When Harris County Improvement District No. 1 was formed, there was no alternative count option— in that district it still takes a majority to successfully petition for a service. Even with this pathetically low requirement, District 11 operatives still took just under a year to discretely gather, on their petition, the few necessary signatures representing, in this case, roughly 3% of the affected property in that area.
On October 21, 2010 an organizational hearing was held for District 11. The statutorily required mail-out giving notice to affected property owners of the meeting was, for the vast majority, the first indication that they were subjects of a new taxing authority. A crowd of over 50 unhappy business owners and property owners spoke up on the lack of notification, the duplication of services, and the undemocratic notion that 25 signatories could compel the taxation of roughly 900 pieces of property. The board is under no obligation to acknowledge any protest from taxpayers - and it didn't. However, the meeting did provide an opportunity for like-minded property owners to meet and ultimately form the grass-roots organization "STOP the District" committed to abolishing the consolidated district.
Although it is rumored that the District 11 board met in December, the next publicly attended meeting was held on January 10, 2011 to discuss and vote on whether or not District 11 should form. While the directors have no legal obligation to answer to their taxpayers, they nonetheless provided at this meeting a public comment period allowing two minutes per person.
Approximately 35 property owners took their two minutes to speak ardently against formation. For over an hour, the board heard property owners protest that the services were not needed, the tax is not wanted, the formation of District 11 had been virtually secret, and that there were discrepancies with the signatures in their formation petition. While it is true that, in that hour, two people stood up to voice their support for the proposed district, it turns out they were both members of District 6 with no obvious stake in District 11. Tellingly, not one signer of the formation petition testified. So, as the last speaker sat down, the board proceeded to vote unanimously in favor of the district. Such is the nature of this taxing authority.
Following the January 10th resolution, the boards of District 6 and District 11 were free to consolidate the two districts into one. The next publicly attended meeting occurred on March 10, 2011. At this meeting, attendees learned that the districts had been joined in a meeting on February 7, 2011. At the March meeting it was also disclosed that disbursements were to be made to Vinson and Elkins in the amount of $249,000 for services rendered in creating the district. Back pay of $64,000 was disbursed to David Hawes whose firm, Hawes, Hill, and Calderon, will provide continuing services for $6000 per month. Additional administrative expenses are contemplated including salaries for full-time employees and consulting.
Following the consolidation, the new Montrose Management District collects a levy on fewer than 1400 properties in a geographical area encompassing approximately 10,000 properties total. Under the laws authorizing the district, this hapless group of taxpayers is provided only two mechanisms to address the actions of the board of directors. They can: 1) petition the district for additional services (and taxes), or 2) petition the district to dissolve; there is no other power or influence available under the law. Faced with this paucity of choices, STOP the District will vigorously pursue the only reasonable course of action available to it: dissolution of the Montrose Management District.