Texas attorney general tells 4 cities to drop tax hikes amid investigations into incomplete audits

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ODESSA — Texas Attorney General Ken Paxton is demanding that four cities suspend their property tax increases as his office investigates whether they broke a new state law.

Paxton, in letters to city officials in Odessa, La Marque, Tom Bean and Whitesboro, said his office received complaints that the cities either missed key financial reporting deadlines or have incomplete audits.

A new law, signed by Gov. Greg Abbott in May, forbids local governments from raising property taxes if they are not complying with the state’s auditing requirements. It grants the Paxton’s office the power to investigate complaints.

“Texas auditing laws require cities to file their annual report and financial statements by a certain point in the fiscal year,” Paxton’s office said in a news release. “But several municipalities seemingly failed to do so and either submitted their reports late or not at all.”

City officials reached by The Texas Tribune on Thursday said they believed they were in compliance with state law and that Paxton is rushing to enforce a law that isn’t yet applicable.

The law, written by state Sen. Robert Nichols, R-Jacksonville, passed without much fanfare during this year’s regular legislative session. And it is part of a yearslong crusade by Republican lawmakers, who control the state government, to rein in the state’s high property taxes and keep cities in check.

The law allows Paxton to freeze a city’s tax rate for a year if he deems it out of compliance.

Barbara Holly, the interim city manager of La Marque, said the city submitted its most recent audit late. But officials there believed the law would apply to cities that were late as of January 2026. She said the city is submitting the documentation that Paxton requested, hoping he will agree.

The council approved increasing the tax rate by two cents per $100 of taxable property, according to news reports.

Just off the coast of Galveston, La Marque is home to 18,000 residents. Increasing property taxes is critical for the city, which faces financial strain, she said. The city has already frozen salaries and hiring, and is not spending money on new infrastructure projects.

“There’s a lot of work we’re trying to get done to save this city,” Holly, who became city manager in August, said. “And we’ll do everything we can within the law to get that done.”

Phil Harris, Whitesboro’s city administrator, similarly said the city submitted its audit late. Harris said the city is raising taxes to hire four additional firefighters, pay for a water tower housing one million gallons, replace a computer system within the emergency department and $200,000 for road repairs.

The City Council approved increasing the tax rate from 38 cents to 58 cents for every $100 of taxable property.

Whitesboro, home to 4,000 people, is about 70 miles north of Dallas.

“Prior to moving forward with the tax increase, the City of Whitesboro met with four different advisors, and all were supportive of our position that the law would affect future audit periods, as (Nichols’ bill) does not state it is retroactive,” Harris said in an email.

In a separate statement, city leaders in Odessa disputed Paxton’s letter, saying the law did not apply retroactively. Odessa is an industrial town in West Texas, known for its oil. More than 114,000 people live there. The city has not filed its 2023 audit.

“It seems odd that the Attorney General would reach a conclusion prior to examining the documents,” the statement read. “That is not the conduct that the people of Odessa expect from the Attorney General.”

Odessa added about $39 a month to the average homeowner’s property taxes, city officials said.

The city of Tom Bean, a town of about 900 people in North Texas, could not be reached for comment.

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