For a second time in just two months, a District Court has slammed the Montrose Management District (“MMD”). In November, the 333rd District Court issued its final judgement that the MMD had illegally imposed over $6.5 million of assessments against property owners. It ordered the MMD to stop collecting the illegal assessments, refund the illegal assessments and prohibited the MMD from spending any of the illegal assessments that had not already been spent.
Because of the widespread dissatisfaction with the MMD, property owners collected the signatures of 75% of the property owners subject to the assessment to dissolve the MMD. Incredibly, under state law a management district can be formed by 25 property owners but 75% of all owners must petition to dissolve it. But, taking a page from the City of Houston, the MMD board ignored the petitions, making bogus challenges regarding the validity of the signatures. In response, the property owners filed a second suit, this time seeking to force the dissolution of the MMD.
The second suit was filed in the 269th District Court, which last week entered a strongly worded temporary restraining order. [Click here to read TRO.] The Court found that the property owners are likely to prevail in the action to dissolve the MMD and that the agenda for a meeting to be held on December 11 indicated that the board of the MMD intended to violate the orders of the 333rd District Court by continuing to spend and collect illegal assessments. It is a startling finding. But the agenda that was posted for the December 11 meeting seemed oblivious to orders issued in the first suit and gave every indication the MMD intended to continue to operate as normal. [Click here to read the agenda.]
After the Court issued the TRO, the meeting was cancelled and the agenda has since been removed from the MMD’s website. A few days later the board chair announced his resignation. Personally, I cannot imagine why anyone would continue serving on that board. All of the board members were sued individually, and the Court found in its TRO that they have likely committed ultra vires acts. That could potentially subject them to personal liability.
I think 2018 is going to be the year of the TIRZs and management districts and not in a good way. Increasingly, the shadowy dealings of these governmental entities are coming to light. We are discovering that the salaries and fees being paid to managers are staggering. Also evidence is emerging of self-dealing and conflicts of interest. In the past, serving on the boards of these entities has been mostly honorific. But based on the information coming out, a lot of these board members may soon be wishing they had declined the “honor.”
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