Quirk in ethics law frees Waco council members to vote on TIF Zone funds

  Rendering via Catalyst Urban Development

Rendering via Catalyst Urban Development

By J. B. Smith
Waco Tribune-Herald

As the Waco City Council has awarded millions of dollars of Tax Increment Financing Zone incentives to downtown business over the last few years, half the council has had to sit silently.

Mayor Kyle Deaver and Councilmen John Kinnaird and Dillon Meek have been disqualified from voting or discussing TIF Zone business because they have connections to business interests in the downtown zone.

But now, on the eve of a major decision on TIF funds for the city riverfront, all council members are free to vote on TIF incentives. They have Councilman Jim Holmes to thank for breaking the logjam.

Holmes, who was appointed to fill a council vacancy in June, had to file an affidavit of “substantial business interest” on a downtown property under the state’s conflict of interest statute. He works for a firm, FirstCity Commercial, that owns a one-third stake in the riverfront food truck court at Franklin Avenue and University Parks Drive.

Under a quirk of state ethics law, now that a majority of the council has a declared conflict of interest for TIF decisions, all are free to vote on the matter. On Oct. 4, all six council members voted on TIF items for the first time since 2012, voting 6-0 to approve money for Mary Avenue sidewalks and improvements at the West Campus Lofts.

Deaver said the council is simply following advice from City Attorney Jennifer Richie on how to comply with the state law.

“I recognize that it seems a little odd, that now we have four people with property in the TIF Zone, we can vote,” Deaver said. “But that’s the way the statute works. . . . It doesn’t seem logical, but I think we’re doing it right based on the legal advice we’ve gotten.”

Deaver said he’s glad to have the entire council participating in important downtown decisions.

“I think that has been a real limitation in the past, in that we were not able to get full council input,” he said.

Deaver and his brother lease office space downtown for their law firm and are majority shareholders in American Bank, which leases a building for a branch bank in downtown.

“I asked about that. I lease space, and that causes me to have a conflict?” he said. “But they ran through the whole analysis and said that I did.”

Meanwhile, Kinnaird is a vice president of Community Bank and Trust, which owns an interest in the Heritage Square property. Meek is general counsel for Rydell Capital, which has offices in the downtown TIF Zone and owns an old ice plant on Webster Avenue.

The affected council members still would be disqualified from voting on any matters affecting their specific business interests.

2012 change

Shortly after Richie arrived in 2012, she told council members they shouldn’t participate in TIF deliberations if they or their employer had any “substantial business interest” within the TIF Zone.

That was a departure from previous practice. The relevant state statute, Local Government Code Chapter 171, doesn’t specifically address TIF zones.

But Richie pointed to a 2011 case in Harlingen, where a council member who owned a business in that city’s TIF Zone was convicted of a Class A misdemeanor for participating in a TIF funding discussion without filing a conflict of interest form.

Richie said this week that she’s unsure of how many other cities follow the same practice, but she said she takes a “better safe than sorry” approach in her guidance.

The city of Austin also bars council members with TIF Zone holdings from voting on TIF projects, a city spokesman said, though he was unsure whether any council members are affected.

Kinnaird said he appreciates the city attorney’s caution in interpreting the conflict of interest law, though he thinks his supposed business interest in downtown is “tenuous.” And he agreed with Deaver that disqualifying three council members impaired decision-making.

“The effect was that half the council was unable to provide input on some really important economic development projects in our city,” Kinnaird said.

Councilman Meek, whose district includes downtown, said he’s glad to be able to participate in major decisions, including a proposed residential and commercial development on city-owned riverfront land.

Meek’s company has never asked for TIF funds but it has partnered with downtown developer Shane Turner on townhouse projects outside the zone on Columbus and Washington avenues.

Turner is a regular applicant for TIF funds for projects, including for the Waco Hippodrome and Altura Lofts. But, Meek is not disqualified from voting on such projects because his company has no stake in them.

Meek said it’s difficult in a city of Waco’s size to avoid having council members with some business interests in downtown. But he said he’s able to vote independently of pressure from friends or business associates, whether the matter is TIF awards, zoning or regulations.

“We just have to disclose any conflicts we have, and even when we don’t have a conflict, we have to vote in a way that we think is going to be best for the city,” Meek said.