For the past year, the Dilley’s city council has discussed action to independently re-appraise CoreCivic’s South Texas Family Residential Center, believing the true valuation to be more than double the Frio County Appraisal District’s current $45 million dollar figure. As a result, most taxing units in Frio County may be collecting far less revenue than possible, thereby affecting property tax rates, services, and operations.
Dilley’s city council has raised the question several times, but the dependence on CoreCivic for local jobs and tax revenue, as well as an outmatched legal team leaves the city in a weak negotiating position.
A story in three council meetings…
PART III – JULY 2017
AT STAKE FOR THE APPRAISAL DISTRICT
Luciano Gonzales, Chief Appraiser of the Frio County Appraisal District at the center of the valuation debate, would not comment on the district’s appraisal of the South Texas Family Residential Center. He did however, offer a glimpse into the stakes of his job, and why he is confident any Appraisal District valuation would stand up to scrutiny.
“We’re monitored by the state every year… audited evaluations to see where we stand,” he said. “If the values are not there, they give you a grace period the first year. The second year, if you’re not there, there will be no funding for the schools.”
The margin of error Gonzales has for property valuations is only 5%. If the appraisal district is not within a 5% margin of error when the Texas Comptroller double checks their work, the district schools are at risk of losing state funding.
According to Gonzales, the appraisals are not a matter of opinion, and given the risks, the appraisers adhere to strict standards. He noted: “We follow procedures. We have a book we need to follow: Uniform Standards of Professional Appraisal Practice. We have to be re-certified every two years to be able to keep on appraising. We’re monitored every which way.”
If the city of Dilley challenged the appraisal district’s valuation of STFRC, there was a chance the number wouldn’t change. And by July 10th, the risk was no longer an independent appraisal at the cost of $1,800 , but a much larger one ringing in at $50,000. To give some context, $50,000 represented 10% of Dilley’s general fund projected revenue for that year. But the reward was potentially enormous- over $400,000 in additional property tax revenue for the city of Dilley annually.
JULY 10th, 2017 – DILLEY CITY COUNCIL MEETING
Nearly one year after the first notice from city attorney Bobby Maldonado and a vote by the council, no action had been taken on the independent appraisal of the South Texas Family Residential Center by the city of Dilley.
This fiscal year, budgets were tightening around the county. If the city attorney was right, and CoreCivic was undervalued by $60 million dollars, not only would the city of Dilley benefit, but so would the other taxing units in the county; namely, the school district and Frio County. Frio County in particular was engaging in some bruising budget workshops with several jobs on the line.
At the July 10th Dilley city council meeting, city attorney Bobby Maldonado brought up the STFRC appraisal once again. “What I wanted to talk about was essentially, getting the number from the appraisal district, but we are pretty comfortable knowing that, they still haven’t appraised CoreCivic,” he said.
“They’ve already appraised it for this year,” said City Councilwoman Esmeralda Cano.
Maldonado asked for clarification. “A physical appraisal? Going out there?”
“No,” said Mayor Mary Ann Obregon.
Maldonado went on to explain that it wasn’t just about an appraisal, but an appraisal from someone that has actually been on the property. “Meaning they come up with a number. Correct? Which probably means it has still never been priced. Physically.”
“Weren’t we going to go in with our own appraisal?” Mayor Obregon asked.
Cano answered, ”That’s what we talked about.” Actually voted on one year prior, to be precise.
Mayor Pro-Tem Ray Aranda, also on the Frio County Appraisal District board of directors, shared some insight from the board meetings and Chief Appraiser Luciano Gonzales. “Looking at the values from Frio and Karnes [detention centers], he doesn’t recommend us doing it. We can do it but… he doesn’t know- the costs could run us $40,000 or $50,000. But, it’s our call if we want to do it.”
Maldonado pressed for the independent appraisal, with more urgency than the previous meetings. “I don’t understand where is the harm in getting the appraisal done? I mean, if you pull a permit for $102 million dollars in improvements… they pulled the permit for that.”
Additionally, the tax appraisal district relied on a personal property rendition (a list of all taxable equipment and items) supplied by CoreCivic, which is standard practice by businesses. According to Maldonado, there is probably more taxable property that could only be found by a physical visit. Receipts from the tax appraisal district show that at least $8,800,000 of personal property were already appraised in 2017.
“Office equipment, computer equipment, medical equipment. I’ve flown over that facility. It’s huge.”
Mayor Obregon said, “When they went in, I understand that they didn’t even let them get all the way to the back.”
To complicate matters, the discussions among the city council continued to misunderstand the memorandum of understanding signed in 2014, expecting $900,000 in property tax revenue each year from CoreCivic to the city alone. The $900,000 was the estimated figure that would be paid to all tax entities, not just the city of Dilley.
And in 2016, CoreCivic and the site manager, Target Logistics, paid $1.3 million on the property to all obligatory taxing entities, well over the $900,000 estimate, giving them the right to protest their $45 million dollar appraisal. In a twist, CoreCivic did not protest their appraisal, possible evidence of a valuation favorable to the detention center.
Maldonado pushed for a physical appraisal, which, if correct about unreported property on site, could be a generative line of action. “That’s what we based it on,” he said. “If, you know… we just get someone to poke around a little bit.”
“We need to do that,” Mayor Obregon agreed. The council had voted on this matter eleven months prior.
After nearly one year of failing to move the city council, Maldonado outlined the revenue implications. “I’m looking at shortfalls in the hotel occupancy tax fund. And having to pay back debt service out of the general fund obligations.”
To Mayor Pro-Tem Aranda, a re-appraisal was a gamble. According to Aranda, there was a chance the valuation could come in lower, and all the taxing entities in the county would lose revenue.
Maldonado answered. “Your appraisals are always going to be a function of how much litigation you’re willing to endure.”
And here is the risk of a small town self-negotiating an agreement with an institution as large as CoreCivic. The next fiscal year budget for the city of Dilley would propose $135,000 for legal fees. This covers all legal fees for the city for the year, which means only a portion of that would go to a potential legal battle over the appraisal. Unless, of course, Maldonado convinces the City of Dilley to amend their budget and approve additional expenses for his law firm.
And CoreCivic? CoreCivic is a publicly traded multi-billion dollar corporation that not only staffs full-time attorneys, but contracts various law firms as necessary.
Arguably, by the time the city entered the original agreement, it was already too late for Dilley to take a stand.
“What now?” City Councilwoman Esmeralda Cano asked.
NOT THE END
One month later, the city council approved the Appraisal District’s $40 million dollar appraisal of the South Texas Family Residential Center, despite their $100 million dollar dreams.
The City of Dilley passed a budget in October, and the lower valuation does not appear to affect minimum city operations. Frio County, however, would have gained $330,000 in revenue- a significant amount considering county commissioners chose to cut five active positions in the county staff.
In the meantime, CoreCivic hauled $267 million for the year ending December 31, 2016. A Washington Post article stated that 14% of CoreCivic’s 2015 revenue came from STFRC alone- a year of record profit.
Last month, the Austin Statesmen reported that US Immigration and Customs Enforcement is scouting a potential eighth detention center on I-35 between San Antonio and Laredo. La Salle County, which borders Dilley, will not be submitting any proposals, burned by the experience with Emerald Corrections.
“The thing is that many of these facilities, the private companies say, ‘Hey this is the best thing for you,’ but the contracts don’t look at the impact to the infrastructure and so many things,” County Judge Joel Rodriguez told The Statesman. “The intentions are well, but you end up with bad decisions, poor decisions, because you want the jobs.”
-written by Jose Asuncion.
Jose received an MFA from University of Southern California in 2008, a BA from the University of Illinois at Chicago in 2003, and currently lives in Dilley, TX, home of his grandparents.