{"id":326334,"date":"2026-06-07T07:38:40","date_gmt":"2026-06-07T07:38:40","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-tx\/326334\/"},"modified":"2026-06-07T07:38:40","modified_gmt":"2026-06-07T07:38:40","slug":"new-auditing-requirement-is-stressing-small-texas-city-budgets","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-tx\/326334\/","title":{"rendered":"New auditing requirement is stressing small Texas city budgets"},"content":{"rendered":"

Audio recording is automated for accessibility. Humans wrote and edited the story. See our AI policy<\/a>, and give us feedback<\/a>.<\/p>\n

When Monte Walker took the reins as city manager of Howe, a town with a population of 3,686 some 50 miles north of Dallas, the city hadn\u2019t audited its books for two years \u2014 even though state law says they must be done annually. The town had seen turnover in its management, and past officials hadn\u2019t gotten those audits done before he took the job in 2023, Walker said.<\/p>\n

Some three years later, Howe is nearly caught up, Walker said.<\/p>\n

But last month, Howe got a letter from Texas Attorney General Ken Paxton<\/a>: because the city\u2019s behind on its audits, the attorney general had effectively frozen the city\u2019s property tax rate for the foreseeable future. That\u2019s owing to a new state law<\/a> that forbids cities from raising property taxes if they\u2019re not up-to-date on their financial audits \u2014 a law that appears to be falling disproportionately on smaller Texas towns as cities everywhere face tightening budgets.<\/p>\n

Howe wasn\u2019t the only one. Last month, Paxton told more than 130 Texas cities, most with fewer than 10,000 residents, to freeze their property taxes because they\u2019re breaking that law<\/a>.<\/p>\n

That determination leaves Howe in a bind, Walker said \u2014 looking for funds in an already slim city budget to pay for multiple audits while the state tells the town it can\u2019t seek more revenue. <\/p>\n

\u201cIt\u2019s kind of a Catch-22,\u201d Walker said.<\/p>\n

Howe is on a new front in Texas Republicans\u2019 war to rein in the state\u2019s high property taxes<\/a>: cities and towns that haven\u2019t kept their books up to date.<\/p>\n

State law requires cities to audit their finances each year<\/a>, requiring an independent reviewer to go over cities\u2019 financial records to make sure its monies are accounted for. Cities must also meet a deadline to release a financial statement based on that audit to the public. Before last year, there was no direct penalty for cities that didn\u2019t follow the law. Then, Texas legislators quietly passed a new law barring cities from raising more in property taxes than they did the previous year if they don\u2019t perform an audit.<\/p>\n

\u201cYou\u2019ve got a reasonable amount of time to get your audit in,\u201d said state Sen. Robert Nichols<\/a>, an East Texas Republican who carried the bill. \u201cYou shouldn\u2019t be raising taxes on people unless you understand your numbers and you feel very comfortable with your numbers.\u201d<\/p>\n

City officials interviewed by The Texas Tribune agree: they should have their books in order, and they\u2019re working to get current, but the new cap on their taxes puts them under further financial strain. The cost of performing an audit can be high relative to a small city\u2019s budget. For Howe, an audit costs about $40,000 against a $7 million operating budget, Walker said.<\/p>\n

Already, being late on their audits makes cities ineligible for state grants and federal funds for needed infrastructure projects. Howe lost out on a $10 million state water grant because their audits aren\u2019t complete, Walker said.<\/p>\n

The restriction on collecting more in taxes could threaten services and delay getting up-to-date on their audits \u2014 though cities won\u2019t know exactly how much of a disadvantage for a few months. Appraisal districts will calculate the size of the cities\u2019 tax bases over the summer, after which those cities will calculate the property tax rate that will allow them to collect the same amount of tax revenue as they did the previous year.<\/p>\n

Manvel, a fast growing town of about 20,000 about half an hour south of Houston, would have lost about $485,000, about 3.5% of the city\u2019s expected property tax revenue in its current budget, had the attorney general\u2019s order been in effect in time for this year\u2019s budget, Mayor Dan Davis said. That would\u2019ve likely meant fewer law enforcement hires, less money for drainage and road work, and other delayed improvements the city has been trying to make, he said.<\/p>\n

\u201cThis is not just a political talking point,\u201d Davis said. \u201cThis has a real life impact on essential services for cities like Manvel that are still very much rapid growth cities.\u201d<\/p>\n

Officials representing cities whose taxes the attorney general froze faced circumstances unique to smaller towns that put them behind on their audits, making it difficult to meet the new requirements of the law, they said.<\/p>\n

Like Howe, some cities have seen staffing churn and difficulty courting qualified finance staff to move to a small town to replace them. In a small town, it can be difficult to find a replacement if a key executive like a city manager or finance director leaves, officials said. Alpine, a West Texas town about 25 miles east of Marfa, was two years behind on its audits when Henry Arredondo became city manager in January, he said. Alpine\u2019s last city manager had previously been the finance director, so when they left last year, they took their know-how of the city\u2019s books with them, Arredondo said.<\/p>\n

Arredondo saw something similar when he worked as Dilley\u2019s city manager. That city advertised for a finance director for four years but could never hire one, he said.<\/p>\n

\u201cYou don\u2019t have layers of knowledge,\u201d Arredondo said. \u201cYou have the finance director, you have the city administrator [or] the city manager, and when those two positions turn over, then the next level people are clerks.\u201d<\/p>\n

Manvel has been on-time with its audits in the past, Davis said. This year, officials discovered that past audits failed to add new infrastructure, spurred by the city\u2019s growth, to the city\u2019s balance sheets, he said. That put them behind on the city\u2019s current audit, which Davis anticipates the Manvel City Council will adopt sometime this summer. After that, the hope is to ask the attorney general\u2019s office to repeal their decision, Davis said. <\/p>\n

Nichols said that\u2019s not allowed. The attorney general\u2019s office did not return a request for comment.<\/p>\n

Other cities wound up on Paxton\u2019s list for other reasons. Officials in Cuero, a town of about 8,300 some 90 miles southeast of San Antonio, completed their audit just days after a late March deadline to publish the audit that triggered the attorney general\u2019s order, City Manager Wayne Berger said. Port Lavaca completed its audit on time but wound up on the attorney general\u2019s list owing to a miscommunication between the city and the attorney general\u2019s office, City Manager Joanna Weaver said. Port Lavaca officials intend to appeal the decision, Weaver said.<\/p>\n

Nichols says confusion comes with any law\u2019s initial implementation. It wouldn\u2019t make sense to carve out every special situation a city might face, or risk weakening the law, said Nichols, who did not seek reelection and will leave office next year. Now that these cities know they face penalties for not getting their audits done, they\u2019ll make sure they\u2019re done on time, he said.<\/p>\n

\u201cWe\u2019re not making them do an audit that they\u2019re not already required to do,\u201d Nichols said. \u201cWe\u2019re just trying to say, \u2018hey, you need some kind of a nudge to get your business straight and to get the audit done.\u2019\u201d<\/p>\n

Davis, the Manvel mayor, sees the law as the latest in a long series of moves by state lawmakers to target local governments.<\/p>\n

\u201cThere should be consequences, there should be ramifications, but the way that I parent my kids is through discussion and dialogue,\u201d Davis said. \u201cWe don\u2019t just come down and just constantly punish them, because that creates resentment, that creates distrust. And unfortunately, that\u2019s what we continue to see from the state.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Audio recording is automated for accessibility. Humans wrote and edited the story. See our AI policy, and give…\n","protected":false},"author":2,"featured_media":326335,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[4843,116691,27,29,28],"class_list":["post-326334","post","type-post","status-publish","format-standard","has-post-thumbnail","category-texas","tag-rural","tag-rural-cities","tag-texas","tag-texas-headlines","tag-texas-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts\/326334","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/comments?post=326334"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts\/326334\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/media\/326335"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/media?parent=326334"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/categories?post=326334"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/tags?post=326334"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}