An investigation into the factors that led to a tax worksheet error that cost the city of Pearland $10 million showed the biggest factor that led to the error was a communication breakdown.

What you need to know

Strategic Government Resources, the consultant the city of Pearland hired in February to audit its tax calculation practices and advise on future best practices, presented its findings to Pearland City Council on May 22.

The backstory

A mistake between Brazoria County Tax Office and Harris County Appraisal District officials caused the error that cost the city of Pearland around $10 million.

In the fallout of discovering the error, then-City Manager Clay Pearson was fired. The consulting firm was brought on to investigate what happened and provide recommendations for future best practices.

At council, consultant Rodney Rhoades presented a timeline of the city’s interactions with both the HCAD and Brazoria County beginning in April 2022, alleging the fundamental issue that caused the error was primarily due to the taxable values presented to the city.

According to the timeline, on July 26 the Brazoria County tax assessor delivered the certified tax roll to the city. Upon the review of the roll, city staff began to question the $0.07 drop in the tax rate compared to the fiscal year 2021-22 adopted tax rate. Staff asked the Brazoria County tax assessor three times if the numbers were correct and were told the numbers were correct because of the increase in values, Rhodes said.

According to the presentation, the city’s finance staff were also assured by the Brazoria County tax assessor that other taxing jurisdictions were experiencing similar valuation increases.

On Aug. 31, the certified tax roll from the HCAD was uploaded and downloaded by the Brazoria County Tax Assessor with a tax rate of $0.732857 per $100 valuation without notifying the city.

According to the presentation, had the city known of the tax roll that was uploaded, city officials would have had time to make adjustments to the tax rate.

The Brazoria County tax assessor told the consultant it was not their responsibility to compare certified estimates to final certified rolls.

In their own words

“I just want to point out that your finance staff did an excellent job early on and throughout the process of asking questions, getting clarification and asking more questions,” Rhoades said. “I reviewed the email communication that took place throughout this entire process, and I want to give them kudos. There was no intentional deception that took place. I want to point that out. It was more of a communication breakdown.”

Rhoades then contended that there could have been better communication between offices about the tax changes.

“The Brazoria County tax assessor's office, in my opinion, could have done a little bit better job of communicating with the city of Pearland on any changes, significant changes that took place, and there were significant changes that took place,” Rhodes added.

The council and mayor also discussed future best practices to alleviate communication breakdowns.

“I think one of the things you're going to find in moving forward, you stop the process, period. Stop the process, and if somebody is not giving you the right answer, we scream from the high heavens to make sure I get us the correct information,” Mayor Kevin Cole said.

Another viewpoint

While Rhoades characterized city staff’s inquiries into the elevated tax roll as “thorough,” Council Member Alex Kamkar disagreed with that assessment, saying he had viewed the inquiries and characterized them as “one-line inquiries.” Kamkar also said he felt the city should have responded sooner once the change was discovered.

What’s next

In addition to presenting its investigation of the timeline of factors that led to the worksheet error, the consultant also provided the city with recommendations for avoiding future errors, which included contracting with a third-party to do tax calculations, training at least two city staff in the changes made to tax appraisals in Senate Bill 2 from the 2019 Texas legislative session and requiring city finance staff to attend all county appraisal district meetings.

In response to these recommendations, the city is now contracted with Assessments of the Southwest to finalize its tax worksheets and will train a minimum of three city staff on the appropriate tax appraisal changes.