City of Abilene owes big money because of tax settlement with mystery taxpayer

The city of Abilene and the Development Corp. of Abilene are on the hook to pay over $3 million in the wake of a tax settlement with a mystery taxpayer.

The city and the Texas Comptroller's Office are seeking to keep the name of the taxpayer under wraps in response to open records requests from the Reporter-News.

During an April 11 City Council meeting, Hanna noted that an audit adjustment from the Texas Comptroller's Office has put some stress on Abilene's budget.

Auditors in the Texas Comptroller's Office charged adjustments in February to various local governments, including the city of Abilene and the DCOA. So they must pay money to the state.

"The adjustments came as a shock and further information revealed they were the result of a lawsuit settling between a single taxpayer and the State of Texas," Abilene City Manager Robert Hanna said in a memo for the April 11 meeting.

State, city want to keep info secret

The Reporter-News filed an open records request with the city of Abilene on April 4 to obtain the name of the company that sued the Comptroller's Office.

The city of Abilene sought an opinion from the AG's Office on April 17 to allow city officials to withhold the name of the company, citing confidentiality as the reason.

In response to the open records request for the name of the company, city attorneys stated that the company's identity should be considered confidential by law because the documents that reveal it contain tax return information submitted to the comptroller.

The Reporter-News filed a separate open records request with the Comptroller's Office to obtain the name of the company involved in the lawsuit on May 6. The Comptroller's Office, in turn, sought an opinion from the AG's Office on May 7 to allow it to keep the name under wraps.

The Comptroller's Office cited a Texas law 552.101 on open government. It defines "information considered to be confidential by law, either constitutional, statutory, or by judicial decision," as the reason to keep the name confidential.

Generally, the AG's Office issues an opinion within 45 days on whether a government entity can legally withhold information from the public in response to an open records request.

How much does the city owe?

Hanna said in an interview that Abilene will pay $77,000 per month for the next 42 months to pick up the tab for its portion of the settlement with this unnamed company.

The city of Abilene and the Development Corp. of Abilene together must pay approximately $3.14 million, according to the April 11 memo. The city's part is about $2.355 million.

Abilene was hit lighter than the city of Lancaster which "received an audit adjustment over $30 million for the same period," according to the memo.

Lancaster has a population of a little over 40,000 people, according to the U.S. Census Bureau.

'Audit adjustment' hits city, taxpayers

The requirement to start paying the money comes as the city grapples with cuts and a possible tax rate hike to deal with revenue shortfalls. The settlement with the mystery taxpayer and the subsequent audit adjustment from the Comptroller's Office plays a part in the city's budget woes — but not the main part.

"These budget changes have more to do with a drop in sales tax receipts overall rather than this item," Hanna said. "It's a contributor but not the primary force behind it."

Sales tax revenue is the real driving force behind the budget cuts and possible tax hike. It is down about 6.5% across the city.

Hanna also said residents are spending less in a time of an economic slowdown amidst rising food costs.

To accommodate the reduction in sales tax, as well as the payments to the Comptroller's Office, the City Council made adjustments to the previous year's operating budget at the April 11 meeting. Changes included freezing unfilled positions with the city and reducing contributions to the street maintenance fund.

These changes it seems were not enough. At the June 13 City Council meeting, Hanna suggested raising taxes and demolishing two recreation centers at once to help fix the current year's operating budget.

The Abilene City Council has heard all of Hanna's suggestions and will likely take them into consideration at the annual budget meeting toward the end of July.

More: 'We have to cut money somewhere'; Abilene budget cuts explained

This article originally appeared on Abilene Reporter-News: Reporter-News seeks info about costly tax settlement