Texas attorney general expands investigation into late city audits

Texas Attorney General Ken Paxton targeted some of the state's largest cities when he announced on Tuesday an expanded crackdown on tardy annual financial audits to stop "illegal tax increases."

After launching probes into four cities this fall, Paxton said he requested financial documents and information from nearly 1,000 others, including Houston, Galveston, San Antonio, Dallas, and Fort Worth.

A law that took effect Sept. 1 authorizes anyone to submit a complaint to the Texas Attorney General alleging that a city failed to comply with a state Local Government Code requirement to file an annual financial audit within 180 days of the end of its fiscal year.

If verified by the attorney general, the city would be prohibited from adopting a property tax rate that exceeds its no-new-revenue tax rate for the tax year that begins on or after the date of the attorney general's determination.

In addition to responding to complaints, Paxton said his office is actively requesting audit and other information from cities.

"Local officials will not be allowed to ignore the law, cover up their finances, and burden Texans with never-ending tax increases," Paxton, a Republican running for U.S. Senate in 2026, said in a statement. "Our cities and municipalities must prioritize transparency and minimizing the tax burden of every citizen across the state."

Of the 17 cities listed in the attorney general's announcement, San Antonio, Corpus Christi, Beaumont, and Texarkana exceeded the 180-day requirement for their fiscal 2024 audits by 12 to 52 days, according to Merritt Research Services, an Investortools company that provides municipal finance industry data. Dallas took 182 days for its audit.

Complaints initially targeted four cities ? La Marque, Odessa, Tom Bean, and Whitesboro, which were ordered by the attorney general in October to halt "potentially illegal" tax increases tied to their fiscal 2026 budgets until an investigation was completed.

La Marque, which approved an increase in its maintenance and operations property tax rate in September to help stabilize its shaky finances, was hit with a series of bond rating downgrades due to several factors, including weak management.

La Marque and Odessa, which have both exceeded the 180-day requirement for audits, contend the law can only be applied beginning with tax rates cities adopt in 2026 and not to rates approved this year.