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Goliad district operates under few state rules

Sept. 14, 2013 at 4:14 a.m.
Updated Sept. 15, 2013 at 4:15 a.m.

The code governing Municipal Development Districts contains few rules.

Even though Goliad City Council members with defaulted loans have voted on board membership in Goliad, it may not be illegal, according to the code. The law says an officer or employee of the city serving on the municipal development board "may not have a personal interest in a contract executed by the district." The code does not give rules, however, for an officer or employee of the city who is not serving on the board.

John Griffin, a Victoria attorney who represents governmental entities, said there are other statutes that should prevent City Council members from voting when there is a conflict.

"My view is that a council member who is in default of a loan to the district has a conflict of interest in voting on financial matters touching the district," Griffin said in an email.

The practice of issuing loans or grants is legal, said Bill Longley, legal counsel for the Texas Municipal League. However, exactly how those contracts are executed and what type of businesses can receive money is broadly defined, Longley said. He said the code authorizing cities to issue loans and grants has generally been interpreted to include retail and commercial development.

Goliad could also be violating the local government code by using the general fund for economic development money, Griffin said.

A statue in the law states the municipality needs to set up a fund for the sales tax revenue and may have several accounts within the fund.

Goliad City Council also approved new rules and regulation for the Municipal Development District Board on Sept. 3. Some of the new rules could be in conflict with state law.

Goliad added to the rules that five board members will serve one-year terms and four will serve two-year terms. However, according to the local government code, board members are to serve two-year, staggered terms.

Related stories:

Texas Rangers to investigate Goliad lending practices

Goliad Investigation: Legislators to review development districts law

How Victoria's economic development works



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