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Multiple cities sue streaming services over franchise fees

This has been coming for awhile, it seems.

A lawsuit filed Thursday by 25 Texas cities claims that Disney, Hulu and Netflix have for years stiffed the cities out of dollars the streaming giants are required to pay under state law — and now cities are coming to collect.

Austin, Houston, Dallas and Fort Worth are among the cities that sued the streaming services in Dallas County to recover money they say they has been owed since 2007 and to require the services to pay each year going forward. Under state law, the services have to pay cities a franchise fee — which traditional cable providers also pay — in exchange for using communication lines over public rights of way to transmit their services into homes.

As more people abandon cable subscriptions in favor of streaming services, cities have lost franchise fee revenue — money that goes to fund city services like police and fire protection as well as roads, parks and libraries.

Cities haven’t made up that revenue with fees from streaming services, said Steven Wolens, a former Texas lawmaker and lead attorney for the cities. Even though state law classifies them as video service providers that must pay the fees, the major streamers haven’t paid cities a dime, Wolens said.

“They should have been paying this fee from the very beginning,” Wolens said. “Shame on them because they are using the public right of way that every other company pays the city to use.”

Exactly how much the streaming giants owe Texas cities isn’t known, Wolens said. For a smaller city, the losses could number in the hundreds of thousands of dollars, he said. For a larger city, that figure could be in the millions.

Other Texas cities that joined the lawsuit are Abilene, Allen, Amarillo, Arlington, Beaumont, Carrollton, Denton, Frisco, Garland, Grand Prairie, Irving, Lewisville, McKinney, Mesquite, Nacogdoches, Pearland, Plano, Rowlett, Sugar Land, Tyler and Waco.

The cities are seeking funds dating to when the services launched — Netflix in 2007, Hulu in 2008 and Disney+, The Walt Disney Co.’s streaming service, in late 2019.

The city of Beaumont, which as you can see is involved in this litigation, filed its own lawsuit against these three streaming services in February. I could not find any news about that lawsuit since then, so I don’t know if it has been dropped in favor of the current litigation or if there are now two separate actions. My searching did find that several cities were working on this at least as far back as last year. I’d sure like to see a more in depth story about this, but for now this is what we have. Any lawyers want to offer an opinion on their odds of success? The Chron has more.

Better cut your police budget now while you still can

That’s one possible takeaway from this.

The Texas House on Friday passed a bill to financially penalize the state’s largest cities if they cut their police budgets. The measure was sent to the Senate after two days of heated debate and emotional speeches, with the bill authors calling to “back the blue” and the opposition decrying the bill as political propaganda.

House Bill 1900 comes after a year of civil rights advocates calling on cities to reduce what they spend on policing and to reform police behavior. Those calls were spurred by high-profile deaths at the hands of police like George Floyd’s in Minneapolis and Mike Ramos’ in Austin.

Among Texas’ largest cities, only Austin cut its law enforcement funding last year, though almost all of that decrease came from an accounting shift of money that still allows traditional police duties to remain funded, but potentially in different city departments. Still, the city’s response to some activists’ calls to “defund the police” prompted harsh and immediate backlash from Republican state leaders, who have pointed to fast-rising homicide rates throughout the state and country as a reason to maintain police funding levels.

Gov. Greg Abbott became laser-focused on Austin’s budget and “backing the blue,” making legislation to punish cities that decrease police funding one of his emergency items this year.

After initial passage Thursday, HB 1900 was finally approved on a 90-49 vote Friday and sent to the upper chamber. The Senate’s related bill, which would require an election before cities could decrease police funding, passed out of the upper chamber last month. It’s unclear how either chamber will react to their counterpart’s proposal.

HB 1900 was authored by Republican state Reps. Craig Goldman, Will Metcalf, Greg Bonnen and Angie Chen Button and Democrat Richard Peña Raymond. If a city with more than 250,000 residents was determined by the governor’s office to have cut police funding, the bill would allow the state to appropriate part of a city’s sales taxes and use that money to pay expenses for the Texas Department of Public Safety. Such cities would also be banned from increasing property taxes or utility rates, which could have been used to compensate for the reapportioned sales taxes.

The bill does allow cities to cut police department budgets if such a decrease is proportionally equal to an overall city budget decrease. Cities can also get approval to cut police budgets if expenses for one year were higher because of capital expenditures or disaster response. The bill would also let neighborhoods annexed in the last 30 years to vote to deannex themselves from a city that has decreased funding to its police department.

[…]

Several other Democrats offered amendments Thursday to add exceptions for when a city could cut police department funding. State Rep. Trey Martinez Fischer of San Antonio offered leniency so city council members wouldn’t opt against a necessary increase in police funding for fear they could not turn it back the next year. And state Rep. Jarvis Johnson of Houston filed multiple amendments, including one to not punish cities for cutting civilian positions within law enforcement agencies. He said the Houston Police Department has more than 1,200 civilian jobs, including janitors and other positions he listed off.

“At any given time that Houston Police Department decides we no longer need a car attendant, we no longer need a car attendant supervisor, we no longer need a truck driver, we no longer need a typist, that does not mean that the city of Houston has decided to defund the police,” he said.

The amendments failed, as the Democrats denounced what they called partisan rhetoric and a move for state control over large cities.

On Friday, state Rep. Gene Wu, a Houston Democrat, offered up amendments to first eliminate the 250,000 population cap which Democrats argued only punished larger, more liberal cities. When that failed, he attempted to set the population cap at 50,000, then 200,000. Both amendments failed. His argument that the 250,000 limit was an arbitrary number and goes against the legislative intent of public safety for all Texans could buttress potential legal challenges if the bill is signed into law.

“If we’re true to our word to say why we are doing this … then we should accept this amendment to apply to all 30 million Texans,” he said.

Well, the real reason they’re doing this is because Greg Abbott was mad at Austin, but it’s not polite to bring that up. And not having a significant minimum population requirement means the law might have to apply to places that Republicans represent (*), and we can’t have that. So here we are. By the way, law enforcement agencies from the cities that this bill targets opposed it, and got the same result they got in opposing permitless carry. We have a strange definition of “backing the blue”, it seems.

Anyway. My suggestion in the title is not original to me, I got it from Grits for Breakfast post.

The Legislature gets to write the laws, but even they are not immune from the Law of Unintended Consequences. I don’t think legislators have considered the incentives they’re putting in place in HB 1900 punishing cities that “defund” police department (by which in Austin’s case they mean delaying cadet classes by one year). Going forward, cities that increase police spending can never again lower it. But they often need to do so. Now, cities will decline to spend more, knowing they won’t be allowed to spend less. Bill authors even rejected amendments so that overtime for one-off special events – like a Super Bowl weekend in Houston – would be counted against them the following year. If I’m right about the new incentives facing city councils under this legislation, the result will be to suppress police spending instead of bolster it. I predict that if HB 1900 becomes law, when we look back five years from now the growth rate in police budgets will have flattened, not rallied.

Indeed, the most delicious irony may well come if HB 1900 ends up itself defunding the police!

Note that this is the same logic that led to Harris County Commissioner’s Court proposing a property tax rate increase in 2019 as a way to hedge against the revenue cap law that the Lege passed that year, which would essentially prevent them from ever raising rates in the future regardless of situation or need. (This was only defeated because of an anti-majoritarian quirk in the law that allowed a minority of Commissioners to prevent the vote by breaking quorum.) I don’t actually think any city will take this action for the simple reason that it turns the heat on them in an uncomfortable way, but the incentive is there. I do think Grits is correct that the future effect will be to introduce extreme reluctance to approve any increase in police budgets, because it’s a one-way ratchet that can only have negative effects elsewhere. Indeed, it’s likely just a matter of time before city controllers and city managers start releasing five-year budget projections that warn of various consequences from this bill. Among other things – and I expect this is why the big city police departments opposed this – this will put downward pressure on wages and benefits for police officers, as well as a strong disincentive to approve overtime. Cities are going to do what they need to do. If you don’t like it, go yell at Greg Abbott.

(*) – Technically not true, though the large majority of State Reps from the cities this will apply to are Democrats. That may change in the near future, as places outside the big urban counties like Frisco, Grand Prairie, and McKinney become covered by HB1900. Maybe that will make their Republican representatives more receptive to the idea of modifying or repealing that law in the future, or maybe these cities will follow in the footsteps of places like Garland and Irving and just become Democratic cities themselves. The list on unintended consequences here could wind up being very long indeed.

Mayors to Abbott: Don’t mess with our cities

Good luck getting through.

Less than 24 hours after Gov. Greg Abbott blasted local government restrictions like tree ordinances as a threat to the “Texas brand,” city government leaders statewide are seeking a meeting with the Republican leader.

“We would like the opportunity to meet with you to discuss the role cities play in attracting jobs and investments to support the prosperity of the State of Texas,” a letter signed by 18 mayors, including Houston mayor Sylvester Turner to Abbott states.

[…]

The letter from the mayors makes clear that they fear the Texas Legislature is overreaching and doing too much harm to local governments.

“Harmful proposals such as revenue and spending caps, limiting annexation authority, and other measures preempting local development ordinances directly harm our ability to plan for future growth and continue to serve as the economic engines of Texas,” the letter states.

The mayors on the letter include those from Houston, Amarillo, Arlington, Austin, Corpus Christi, Dallas, Denton, El Paso, Fort Worth, Frisco, Galveston, Irving, Lubbock, McKinney, Plano, San Antonio, San Marcos, and Sugar Land.

You can see the letter here. You might note that some of the cities in question are Republican suburban kind of places. It’s not just us smug urbanites that would like to have our current level of autonomy left alone. I’m going to say the same thing to these Mayors that I’ve been saying to the business folk that have been working to defeat the bathroom bill, and that’s that they are going to have to follow up all these words with actions, because Greg Abbott and Dan Patrick don’t care what they have to say. If you’re not working to elect better leadership in 2018, which in this case means leadership that is not actively undermining and degrading Texas’ cities, then you’re part of the problem too, and your words have no meaning. The Current and the Press have more.

On big money high school stadiums

Texas Monthly is against ’em.

BagOfMoney

As a part of a $220 million bond package, McKinney ISD is adding an opulent events center and 12,000-seat high school football stadium that will cost a total of $62.8 million. According to the Dallas Morning News, the stadium, set to open in 2017, will cost $50.3 million itself with $12.5 million used from a previous bond package passed in 2000 that will go towards stadium infrastructure: roads, water, sewer, electricity. Manhattan Construction has been hired to build the stadium, and if that name rings a bell, it’s because they were behind Houston’s NRG Stadium, Globe Life Park, and AT&T Stadium—home of the Dallas Cowboys of Arlington. The bond package also includes $62.5 million for upgrades throughout the district, with $51.4 million allocated toward additions and renovations to six of the schools in the district.

There will be $30.5 million spent on technology, including a program that would give all entering freshman a laptop. Three of the schools will see renovations to fine arts facilities, which sounds good, sure, until you consider that it will only bring them up to par. Cockrill Middle School, Evans Middle School, and McKinney Boyd High School’s fine arts programs have been burdened with “overcrowding in the band halls, lack of storage, practice space and congested fine arts hallways.” Meanwhile, the sanctuary of gladiator arts will sparkle in McKinney.

Placing athletics over academics and the arts is a tale as old as time. Sports—well, male-dominated athletics, particularly football and basketball—have more eyes and glory involved than pretty much every other high school institution outside of prom, and even then there’s room for debate. But the fact of the matter is that high school football, though we tend to spend exuberant amounts of money on it, doesn’t yield great returns. In 2011, the Dallas Morning News’ sports section conducted an investigation of Dallas-area football teams and their profitability, and only three districts had a net profit. McKinney’s had a net loss of $208,889.35.

I can’t say I approve of these big-ticket expenditures, either, but the voters did approve them. Obviously, only a few lucky (read: wealthy) school districts can provide this kind of extravagance for their students, but that’s not all that different than how we fund education in general, and we know what the Supreme Court thinks about that. I suppose many people would care less about how much McKinney and Allen and Katy spent on their football teams if our public schools were adequately and equitably funded in general, but we don’t live in that world. If everyone who is now complaining about McKinney’s event center worked towards that world, maybe we could.

More complaints against Paxton

From the Lone Star Project, spotted on the Quorum Report with the original press release forwarded to my inbox:

Ken Paxton

Lone Star Project research has compiled significant information regarding the involvement of Texas Attorney General Ken Paxton in a series of questionable property transactions in Collin County. Some of the information gathered by the Lone Star Project has already been made public in press reports, while other information has not yet been reported on at all.

In reviewing the information gathered by Lone Star Project research, I realized that the actions of Attorney General Paxton may have gone beyond activities that warrant only political criticism. In fact, the information points to the potential use of insider information and actions by Ken Paxton and his associates that could rise to the level of criminal activity.

In light of this, the Lone Star Project submitted a detailed complaint to the U.S. Attorney in the Eastern District of Texas, which has jurisdiction over Collin County, last month. We also submitted the complaint to the Grand Jury in Collin County which is currently conducting a criminal inquiry into Ken Paxton’s violations of Texas securities laws.

Given that the ongoing investigation into Ken Paxton’s violations of state securities law, we believe his close involvement in questionable land transactions in Collin County also warrant the review of law enforcement officials.

Background:
Last year, the Dallas Morning News reported on a land deal involving Ken Paxton and his business partners involving the purchase of property in the City of McKinney for $700,000. The property was quickly flipped for a selling price of $1 million. The News report details the creation of an appraisal district and zoning change which raised the value of the property before the subsequent sale of the land by Paxton’s company. While Paxton denied knowing about the new zoning designation, associates within Paxton’s business lobbied local officials to obtain the change.

The letters sent by the Lone Star Project to the U.S. Attorney and the Collin County Grand Jury includes additional facts on the land transactions and raise new questions regarding Ken Paxton’s involvement. The information focuses on four specific areas:

  • Even following the 2014 Dallas Morning News story, key questions remain unanswered about the extent to which Paxton and his associates used insider knowledge and political connections to profit from the development of the McKinney Property.
  • A land swap with the City of McKinney in which a narrow strip of property owned by Paxton’s company was traded for a separate property on a nearby street corner – the trade that appears to be of significant benefit of Paxton. The same day of the trade, Paxton’s company flipped the newly acquired property to a private entity for an undisclosed amount.
  • In addition to profiting from the resale of the property acquired by the trade, it appears that a title company connected to Paxton provided the title insurance for the two transactions.
  • Paxton and his associates continue to hold property in Collin County that may also result in a significant profit when it is eventually sold.

Documents Attached:
Letter to the Collin County Grand Jury
Letter to the US Attorney
Background Document

I did blog about that DMN story from last May, but I only noted Paxton’s refusal to release his tax returns during the campaign, since caring about such things was apparently so 2010. Perhaps this is why he was so secretive about it. I can’t find any news coverage of this, so draw your own conclusions about how big a deal it is.

The news release touches on the ongoing investigation in Collin County, whose deadline date is as yet uncertain. Yesterday we got an update on where this stands.

Special prosecutors assigned to investigate Ken Paxton’s alleged violations of state securities laws said this week that they plan to take their case to a Collin County grand jury next month.

The confirmation comes just weeks after a judge expanded the probe to include possible fraud allegations involving the first-term attorney general.

“We are going to the grand jury,” special prosecutor Kent Schaffer told the Chronicle on Wednesday. The process will begin in July when the new grand jury is chosen, and Schaffer said he expects it to take more than the typical three-month period juries sit in Texas.

That puts any possible resolution of the inquiry into at least the October/November time frame. At least we know it’s moving along, which is more than we could have said earlier this year. Trail Blazers has more.