{"id":44801,"date":"2025-11-11T11:49:10","date_gmt":"2025-11-11T11:49:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-tx\/44801\/"},"modified":"2025-11-11T11:49:10","modified_gmt":"2025-11-11T11:49:10","slug":"cash-strapped-texas-city-defies-ag-warning-not-to-raise-taxes","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-tx\/44801\/","title":{"rendered":"Cash-strapped Texas city defies AG warning not to raise taxes"},"content":{"rendered":"

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

When Barbara Holly evaluated La Marque\u2019s financial reports on her first day as interim city manager in August, she was shocked: the city had nearly no money.<\/p>\n

The city of nearly 19,000 residents in Galveston County, which operates on a nearly $20 million annual budget, was down to just $1.2 million in September. For a city that spends about $60,000 a day, that meant La Marque had just over two weeks before it was out of money.<\/p>\n

Holly said it felt \u201clike being on the Titanic.\u201d<\/p>\n

\u201cI\u2019ve never seen anything like it, I was horrified,\u201d said Holly, a certified urban planner of 40 years. She worried \u201cthat the community was just going to fold.\u201d<\/p>\n

After the city sent a notice out<\/a> to the community in September, warning of its \u201cserious financial situation,\u201d Residents have grown increasingly frustrated with city leaders, and trust seems to be eroding: A tense town hall meeting last month turned into a shouting match<\/a>. <\/p>\n

\"\"La Marque City Hall. Annie Mulligan for The Texas Tribune<\/p>\n

After that meeting, the city council approved a multi-pronged emergency response plan to reduce spending and bring in more revenue, including a 2-cent property tax increase for every $100 of property, which would add about $364,000 to the estimated $5.64 million the city would have collected before the tax increase, Holly said.<\/p>\n

Then Texas Attorney General Ken Paxton<\/a> stepped in.<\/p>\n

Citing a new state law<\/a> signed by Gov. Greg Abbott<\/a> in May, Paxton sent letters in October to city officials in La Marque, along with Odessa, Tom Bean and Whitesboro, demanding that they rescind any planned property tax increases<\/a>.<\/p>\n

The new law prohibits local governments from raising property taxes if they don\u2019t comply with state auditing requirements. The audits are financial statements cities file with the state every year detailing how much money they collected and how much they spent; the law was designed to improve transparency<\/a> among Texas\u2019 municipalities.<\/p>\n

Paxton claims the four cities either missed key financial reporting deadlines or have incomplete audits. <\/p>\n

In Paxton\u2019s letter to La Marque leaders<\/a>, he said he \u201creceived a complaint\u201d alleging that the city was breaking the new law, but didn\u2019t name the source. The attorney general said he\u2019s launching an investigation into the city, and until he completes it, he\u2019s \u201cdemanding that the new tax rate not be implemented.\u201d <\/p>\n

Holly said the city was late sending its audits to the state. She also said that while the new law took effect in September, she and the mayor understood that it\u2019s set to be implemented next fiscal year \u2014 which begins October 2026 \u2014 and isn\u2019t retroactive. So the city is going to move forward with a two-cent increase, she said. <\/p>\n

\u201cIt\u2019s done,\u201d she said. \u201cI mean, the tax bills have already gone out.\u201d<\/p>\n

In Whitesboro, City Administrator Phil Harris said the city also filed its audits late and intends to proceed with a plan to raise property taxes by 20 cents for several city projects, including a new water tower and hiring more firefighters, despite Paxton\u2019s letter.<\/p>\n

But State Sen. Robert Nichols<\/a> in East Texas, who wrote the law, said it took effect on Sept. 1, not next fiscal year.<\/p>\n

Paxton\u2019s letter is the only form of communication the city has received from the attorney general, La Marque Mayor Keith Bell said. The city has made multiple attempts to talk things through with Paxton, Bell added, \u201cAnd as far as my understanding goes, we have not received any correspondence from the Attorney General\u2019s office.\u201d<\/p>\n

Paxton\u2019s office did not respond to requests for comment. In a news release<\/a>, Paxton said his motive is to keep Texans\u2019 property taxes low. <\/p>\n

\"TexasTexas Attorney General and U.S. Senate candidate Ken Paxton at a campaign rally in Conroe on Oct. 29, 2025. Mark Felix for the Texas Tribune<\/p>\n

\u201cI have grave concerns that municipalities across Texas have blatantly violated the law in an attempt to crank up people\u2019s property taxes,\u201d Paxton said. \u201cMy message to these cities is this: don\u2019t mess with Texas taxpayers.\u201d<\/p>\n

\u201cIf they had not done their audit at the time the law became effective, then they cannot raise their taxes higher \u2026 no new revenues,\u201d Nichols said.<\/p>\n

\u201cI really think that was just political showmanship,\u201d Holly said. \u201cIt was just a very big splash. But with limited substance.\u201d<\/p>\n

Mayor says bad budgeting created current mess<\/p>\n

Whether Paxton will try to take action against the city isn\u2019t La Marque\u2019s most pressing problem right now, Bell said. The city is in a dire financial situation and is focused on finding solutions. <\/p>\n

The city is surviving on a patchwork of temporary solutions, and Bell said there are \u201chard decisions\u201d ahead and the road to financial recovery is going to be long. <\/p>\n

\"\"The new building housing the La Marque Economic Development Corporation, a nonprofit organization that aims to expand the local economy by supporting businesses, in La Marque on Nov. 10, 2025. Annie Mulligan for The Texas Tribune<\/p>\n

The city recently sold 16 acres of land for $2 million to the economic development center. The EDC also loaned the city $1.5 million, which must be paid back in five years at 1% interest. That\u2019s on top of about $500,000 the city expects every month in sales tax revenue. <\/p>\n

But the city is also facing $2.1 million of debt. <\/p>\n

Long-term solutions are going to require the city to look back and confront what went wrong, Holly said. <\/p>\n

While city leaders point to a variety of factors that have led the city to nearly draining its cash reserves, Holly said simply put, for years they \u201cwere not paying attention to how much they were spending.\u201d <\/p>\n

Bell put it more bluntly: \u201cIt was mismanagement more than anything else \u2014 not misappropriation, not anything that is illegal or criminal in nature.\u201d <\/p>\n

\u201cIt was a total failure on the city manager\u2019s part in the budget preparation process,\u201d Bell said, referring to former City Manager Cesar Garcia, who was hired by the council a few months after Bell became mayor in 2021 and held the job for around three years. <\/p>\n

La Marque uses a council-manager form of municipal government in which the city manager holds notable power. In council-manager style cities, city managers are responsible for running the day-to-day operations, said Bill King, a public finance fellow at Rice University\u2019s Baker Institute, and \u201cthe mayor and council are the overseers, like the board of directors for the city manager.\u201d<\/p>\n

\"\"A large poster lines a new tennis court in La Marque. Annie Mulligan for The Texas Tribune<\/p>\n

Bell, who supported hiring Garcia as city manager, said he quickly became skeptical of Garcia\u2019s ability to balance the city\u2019s budget. City council was forced to spend blindly, Bell said, because Garcia repeatedly failed to submit monthly financial reports that city managers are required to present during city council meetings. <\/p>\n

Since September 2022, the city manager\u2019s office has only published nine monthly financial reports<\/a> as of November. <\/p>\n

\u201cHis budgets were, in my opinion, unacceptable because they did not appear to be accurate reflections of the financial position of our city,\u201d Bell said. \u201cIt appears as though he was not proficient in that part of his role, and what we are dealing with today is the outflow or the consequence of his inability to provide us with accurate budgets.\u201d<\/p>\n

Garcia, who declined to comment for this story, is currently the city administrator for Kemah<\/a>, a city about 15 miles from La Marque. <\/p>\n

Just one missed monthly report should have been enough of a sign that something was wrong, said Randall Rice, a research fellow at the James Baker Institute Center for Tax Policy and Finance at Rice University.<\/p>\n

\u201cAny time you skip and start not putting out financial statements \u2026 something is not right at all,\u201d said Rice. <\/p>\n

\u201cNowhere near out of the woods\u201d<\/p>\n

Bell said he was hopeful Garcia would improve with time, but looking back, he wishes he pushed to replace Garcia sooner. City council was discussing whether to terminate Garcia when he resigned earlier this year<\/a>. <\/p>\n

\u201cIf I could have done it all over again, I would have pushed faster, sooner, for the replacement of that key member of the administration,\u201d he said. \u201cI would have, instead of trying to mentor and trying to get that person retrained to meet the moment that needed to be met.\u201d<\/p>\n

Bell said a major expenditure throughout the last few years was overtime for local law enforcement. He said it\u2019s not the fault of the police and fire departments that they spent so much on overtime, \u201cIt is the failure to properly plan.<\/p>\n

\"\"A carved wooden sign in front of La Marque City Hall. Annie Mulligan for The Texas Tribune<\/p>\n

\u201cWe have to find a way to become more efficient in our public safety sector,\u201d Bell said. \u201cThere is too much overtime being spent in our police and in our fire divisions, and we have to find a way to curtail that.\u201d<\/p>\n

In addition to finding ways to save, King said striving for transparency is going to have to be a key part of the city\u2019s long-term solution. La Marque\u2019s most recent monthly financial report was published in April<\/a>, which King said makes it hard for the public to get an accurate sense of the city\u2019s fiscal standing. <\/p>\n

\u201cIt\u2019s very difficult to reconcile and make any sense out of their financial statements because they\u2019re so old and they\u2019re so sporadic,\u201d King said. \u201cSomebody just sort of quit trying here about a year ago to manage all this.\u201d<\/p>\n

The city is penny pinching for now. Instead of its annual holiday parade, they\u2019re planning a walk-through exhibit of festive floats. They\u2019ve also declared a citywide hiring freeze. <\/p>\n

\u201cWe are nowhere near out of the woods, but we have a sense of direction as to the way out of those woods,\u201d Bell said. <\/p>\n

Disclosure: Rice University has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune\u2019s journalism. Find a complete\u00a0list of them here<\/a>.<\/p>\n

\"\"A little egret walks in the water at Highland Bayou Park in La Marque. Annie Mulligan for The Texas Tribune<\/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":44802,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[12597,26220,2063,27,29,28],"class_list":["post-44801","post","type-post","status-publish","format-standard","has-post-thumbnail","category-texas","tag-galveston-county","tag-la-marque","tag-property-taxes","tag-texas","tag-texas-headlines","tag-texas-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts\/44801","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=44801"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts\/44801\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/media\/44802"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/media?parent=44801"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/categories?post=44801"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/tags?post=44801"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}