Lost Creek neighborhood sues city over tax efforts

The Lost Creek Neighborhood Association and two property owners in the area that disannexed from the city of Austin last September have sued the city after residents discovered that the city is still expecting them to pay property taxes. According to attorney Bill Aleshire, who is representing the plaintiffs, the city says it will continue to send tax bills for the next two years to help the city pay for bonds issued while Lost Creek was part of the city.

Lost Creek voted to disannex from the city in May, with 91 percent of voters in favor of disannexation. The area was disannexed as of Sept. 9, 2024, at which time the city discontinued any services in the area. Residents were not part of the city during the November election and therefore could not vote in City Council elections.

However, according to the lawsuit, Lost Creek property owners have received tax bills since then. Aleshire said the city claims Lost Creek taxpayers owe $7.7 million to help the city pay for bonds that were approved while Lost Creek was part of the city. However, the lawsuit says that instead of allocating all of the taxes collected to pay for debt service, the city has put that money into the city’s fund for maintenance and operations.

Aleshire said in an email, “The City Council’s action is illegal and without authority and is a classic example of Taxation Without Representation. It is also another example of lawless behavior by the (Mayor Kirk) Watson City Council.”

He added, “The statute under which this area voted to disannex (91% to 9%) conditions any City tax on the area after disannexation on it being necessary to tax the area to avoid the City defaulting on its debt obligations. The area has less than ½ of 1% of the City’s taxable value, and the Tax Code formula the City must use to set its Debt Service Tax Rate will automatically produce sufficient revenue for the City to make its bond payments in the future … without Lost Creek.”

According to the lawsuit, even if the Lost Creek property owners must still pay taxes, they are entitled to the same exemptions as other property owners. Their current tax bills do not reflect reductions such as the over-65 exemption, the lawsuit says. Aleshire said there are currently about 1,400 property owners in Lost Creek.

The plaintiffs in the lawsuit are seeking an injunction to prevent the city from collecting taxes and to force the city to return the taxes it has collected since disannexation. Aleshire said they will likely have a hearing on the suit in May. A spokesperson for the city told the Austin Monitor via email, “The City is aware of the lawsuit and is currently reviewing it. This lawsuit relates to a new statute and the City looks forward to a judicial ruling on this matter.”

Photo by Winston Samuel, CC BY-SA 4.0, via Wikimedia Commons.

The Austin Monitor’s work is made possible by donations from the community. Though our reporting covers donors from time to time, we are careful to keep business and editorial efforts separate while maintaining transparency. A complete list of donors is available here, and our code of ethics is explained here.