As the director of the Department of Housing & Neighborhood Revitalization prepares a report on Dallas Public Facility Corporation’s performance since its creation two years ago, two North Texas political subdivisions have asked a district court to declare such entities unconstitutional.
The Lone Star Standard reported last week that the City of Plano and Plano ISD filed a lawsuit in Collin County in May alleging that public facilities corporations, or PFCs, violate the Texas Constitution by providing tens of millions of dollars in annual ad valorem exemptions.
“Housing developments in our community should provide the number of affordable units needed by our citizens instead of simply providing a windfall for developers through lucrative tax exemptions,” the two taxing entities said in a statement to Lone Star Standard.
Governed by boards of directors, PFCs are quasi-government entities that receive 100% property tax exemptions for the life of housing developments and 100% sales tax exemptions for construction materials in exchange for working with a developer to make a certain percentage of its units affordable. In 2023, state legislators amended the Local Government Code by requiring 10% of units to be “affordable” for renters at 60% of the area median income, or AMI, and 40% of units “affordable” at 80% AMI.
Additionally, acquisition deals “must dedicate at least 15% of the cost of the property for rehab” projects, according to Texas Housers.
In the Plano lawsuit, city and ISD officials claim the PFCs have not been able to produce records showing that housing developments have been in compliance.
Those are the kind of records Dallas City Council Member Cara Mendelsohn wants to see from the Dallas PFC. During a council meeting on June 12, she mentioned her colleagues’ propensity for long-term PFC agreements and voted against providing a $1.8 million economic development grant to help the developer pay for the installation of wastewater infrastructure.
“What you’re asking in this [proposal] is, in addition to the dollars and 75-year tax exemption that’s provided to the PFC, [for the City] to now also pay for sewer lines, is that right?” Mendelsohn asked Kevin Spath, interim director of the Office of Economic Development.
Spath responded that in 2023, the PFC board and the city council approved the PFC agreement with Savoy Equity Partners before the developer realized the project would require more funding.
“[It] started to go through plan review and [the developer] was told by the City that he was responsible for the replacement of 3,000 linear feet of offsite wastewater line in a survey basically from Heritage Village all the way down to the project site,” he said.
“So, the sewer shed that drains to the wastewater line is like 60 acres. It’s more than 300 other property owners. But the responsibility to deliver that project, that wastewater line, is this developer’s … if they want to get a permit for this project.”
It’s estimated the total wastewater infrastructure project would cost $3 million.
Called The Cedars Project, the multifamily development will include 76 mixed-income units at Marcus at Cedars, a four-story building on South Ervay Street, and 310 mixed-income units at Power & Light at Cedars, a five-story building on the same street.
“So, in this case, we are giving away the most generous benefit that this City offers, which is 75 years of a tax exemption,” Mendelsohn said. “Nobody in this room will still be alive when this expires. We’ll be giving up millions of dollars of revenue. We’re all looking very closely at the budget, realizing we need to be very careful with our dollars. And now, we’re going to pay for their sewage also for another $1.8 million.”
Mendelsohn was the only one to vote against the PFC agreement last year.
“And I’m not going to agree to pay even more for this,” she said during the June 12 meeting. “This is a very careless way, I believe, for us to spend our tax dollars. And I was really kind of astonished when I saw this.”
Council Member Chad West took exception to some of Mendelsohn’s comments.
“I normally don’t make the comments on the PFCs anymore,” he said. “There’s a couple inflammatory comments I feel like I need to respond to on those. So, PFCs in general don’t just take revenue from the City. [PFCs] also get revenue back generally through rent payments, correct? … The PFC deals are being recommended and approved for a reason.”
Albert Gonzalez, the Dallas PFC administrator, said the PFC “does receive revenue from every project.”
“And, of course, there is a lease payment made on an annual basis to the corporation during the term of the agreement, which would be 75 years.”
But “tremendous growth” in the “oldest parts of Dallas” should be reason enough for the council to support this project, Jesse Moreno (District 2) suggested.
“I hope my colleagues will support this not just for this particular project but for the additional economic impact that it will bring to the City of Dallas.”
Mendelsohn reminded the other council members that revenue garnered from The Cedars Project will go to the Dallas PFC: “[I]t won’t come to the general fund or debt service — it will go exclusively to the [PFC],” she said, “[meaning] the City will still have to provide services to that address but not collect any property tax. So, it’s effectively a tax increase to all our other taxpayers.”
And that scenario is why Mendelsohn votes against PFC agreements, she said.
“That is the ongoing issue that I have with PFCs. And make no mistake, [with] every single one of these [agreements] that are passed with no limit on the number or the dollar amount of revenue that we will exclude for 75 more years, we are creating a tax increase on everyone else. … I am actually being critical of this body’s tax policy as it relates to PFCs, as I have [been] repeatedly, almost every single time we vote on this. And I do have a philosophical difference [from] everybody else on this council, [as evidenced] by the repeated 14-1 votes. Sometimes, we go through the exercise. Sometimes, we don’t.”
Mendelsohn said that “more than a dozen” similar PFC agreements have been approved by the council, as well as “probably another six or seven that we have passed that aren’t going forward.”
Cynthia Rogers-Ellickson, interim director of Housing & Neighborhood Revitalization, told the council that “it is time to really look at what the PFC does, what it’s done over the two years.”
Ellickson said she expects the council to receive a briefing on the Dallas PFC in September.
Carolyn King-Arnold (District 4) said she also wanted to “chime in” on the 75-year agreement.
“It is very important that I get the data on these projects because it is, in reality, a loss to our tax base. So, I need that information so that I’m in a better position to make a decision moving forward.”
With Mendelsohn opposed, the $1.8 million economic development agreement was approved in a 14-1 vote. She posted on X that she hopes “my Dallas council colleagues will reconsider their support of these developer gifts.”