The online version of this article has been updated since the printed version hit newsstands. The printed article mistakenly reported that City Administrator Phil Harris had not responded for comment as of press time. In actuality, his responses had been sent via email yet gone undetected in a sub-folder. The News-Record sincerely apologizes for the accidental oversight. The City Administrator's responses are included in the "Moving Forward" section of this article. We thank City leaders for responding to our questions and providing more information to our readers.
Just three days after the Whitesboro City Council adopted an increased property tax rate of $0.585800 per $100 valuation, Texas Attorney General Ken Paxton contacted the City Council to demand a freeze to the tax increase while he conducts an investigation into the legality of the Council’s decision.
In a letter sent to the members of the City Council and the City Secretary, Paxton wrote that he “received a complaint from Representative Shelley Luther alleging that the City of Whitesboro was non-compliant with Texas auditing requirements” and that the city allegedly “failed to publish notice of its budget hearing in a county newspaper, as required by law.”
As a result, the Attorney General is formally launching an investigation into the City of Whitesboro to determine whether the new tax rate is illegal.
“Furthermore,” his letter continued, “I am demanding that the new tax rate not be implemented until I complete my investigation.”
The First Public Hearing
The issue began at the City’s first public hearing held on Tuesday, Sept. 9 when citizens were invited to address the council regarding their proposed 51% property tax rate increase.
At that time, a military retiree named Jason Spencer approached the podium to introduce the council to a new Senate Bill that had passed on Sept. 1.
Since 2007, state law has deemed that a city’s “annual financial statement, including the auditor’s opinion of the statement, shall be filed in the office of the municipal secretary or clerk within 180 days after the last day of the municipality’s fiscal year” (Local Government Code Title 4, Subtitle A, Chapter 103, Section 103.003).
The newly-passed Senate Bill 1851, Spencer explained, would now penalize cities who didn’t comply with the audit requirements by ordering the adoption of a no-new-revenue tax rate.
When asked, Spencer explained he was not from Whitesboro but from a small town experiencing a similar issue. He was visiting other small towns to educate them on SB1851.
At that point, Major Jeff Butts excused Spencer from the podium, as he was not a Whitesboro citizen or property owner.
(Section 551.007[b] of the Texas Open Meetings Act requires governmental bodies to allow “members of the public” to address the body regarding items on the agenda during open meetings. There is no mention of citizenship being a requirement.)
That same night, Representative Luther also addressed the Council with the same concern as Spencer. She explained that the fiscal year for the City ends the last day of September. Therefore, the audit and financial statements must be completed and/or filed by the end of March. The City of Whitesboro’s most recent audit conducted for fiscal year 2023-2024 was dated June 30, 2025.
It appears the City’s audit was completed and/or filed outside the six-month window required by law. As such, the City would be in non-compliance and would (according to SB1851) be unable to raise the City’s property tax rate.
“I just want you to know that I will be sending a message to the Attorney General just to make sure that everything’s right before you raise the taxes,” Luther said.
With the legality of the tax increase in question, the Council tabled the decision (as well as the subsequent budget hearing) to allow their City Attorney to look into the situation.
A Special Called Meeting
The Council held a special called meeting on Sept. 16 to discuss moving forward with their proposed tax increase and to schedule a second public hearing. At this meeting, City Administrator Phil Harris shared that he and City Secretary Teresa Nino had been aware of SB1851 since May. Harris said the city’s 2023-2024 audit was issued on June 30 and posted in early July. Therefore, he said, as of the Sept. 1 passing of SB1851, the city is in compliance with the law.
Representative Luther disagreed and addressed the Council once more, stating, “I ask you again -- no-new-revenue rate.”
A Second Public Hearing
At its second public hearing on Sept. 29, Luther addressed the council a third time, voicing her concerns and confirming the Attorney General had been contacted.
“(The AG’s) not happy about it. His team is working out how they want to take care of this. We don’t have it in writing yet, but I assume that it’s going to cost you more money if you decide to raise the property taxes and then he decides in his office that you guys are not in compliance with the current law, and then you have to spend all this money to go back and fix what you’re doing,” Luther said. “My suggestion would be to not raise the tax revenue at all. Make sure next year that you are completely compliant with what you’re doing.”
After the hearing concluded, the City Council voted unanimously to adopt the higher tax rate.
Thursday morning, they received Paxton’s letter. In it, Paxton wrote that to conduct his investigation, he was requesting the City provide the following documents:
- Documents that demonstrate the city has had its records and accounts audited annually, pursuant to Texas law, from January 1, 2022 to present.
- Any and all drafts of the annual financial statement for the previous fiscal year, including initial and subsequently amended drafts.
- Communications related to the drafting process for the annual financial statement, including all communications related to non-finalized drafts and the finalized version of the annual financial statement.
- The finalized annual financial statement for the previous fiscal year, pursuant to Texas law.
- All recorded communications regarding the new tax rate.
- The minutes for the Sept. 9, 2025 Whitesboro City Council meeting.
- The minutes for the Sept. 29, 2025 Whitesboro City Council meeting.
- Documentation that explains or was otherwise used to justify the implementation of the 51.12% property tax increase.
- Any notice informing the public about the time, date and location of a hearing on the new budget.
- Evidence that the city published notice of the date, time and location of a hearing on the new budget in a newspaper of general circulation in the county.
Moving Forward
When asked last week how the City plans to respond to Paxton’s requests and how the Attorney General’s letter will impact Whitesboro citizens, Mayor Butts deferred to City Administrator Harris.
Harris said that while the City has no official statement regarding the AG’s letter beyond what has been stated previously, the City of Whitesboro holds that the law is not retrospective and that the City was in compliance prior to the enactment of the law on Sept. 1, 2025.
Harris confirmed that the City is in discussion with attorneys to evaluate the Attorney General’s “demand” of a tax rate freeze and the City’s appropriate response. The City is also in discussions with the Grayson County Tax Assessor to understand the impacts of the Attorney General’s letter on the citizens of Whitesboro, but no decision has been reached at this time.
“We have provided the requested evidence to the Attorney General in hopes that it will expedite the decision, but we have not been provided a timeframe,” Harris said, confirming there is no indication regarding how long Paxton’s investigation could take.
“We’re grateful for the upcoming clarity of SB1851 for us and other cities of Texas,” Harris said.
Whitesboro is not the only Texas city under investigation as a result of SB1851. The city councils of Tom Bean, Odessa and La Marque also received letters from AG Paxton.
“I have grave concerns that municipalities across Texas have blatantly violated the law in an attempt to crank up people’s property taxes,” Paxton said. “My message to these cities is this: don’t mess with Texas taxpayers. Local governments must abide by the law, and I will take every step to defend the people of Texas and their hard-earned dollars.”