AUSTIN, Texas — Around 1,400 residents of the Lost Creek neighborhood in southwest Austin are suing the city over property taxes they say they shouldn’t have to pay after voting to disannex from the city last year.
The Lost Creek Neighborhood Association and two property owners filed the lawsuit in December against the City of Austin, arguing that they’re still paying property taxes despite the neighborhood’s vote to leave the city’s jurisdiction in May 2024.
In that election, 91% of Lost Creek voters approved disannexation, citing dissatisfaction with city services like police and fire protection, and road maintenance.
“When they had police calls, they weren’t getting a response. They looked around at what city services they were receiving versus the taxes they were paying and just thought it was absolutely not worth it,” Bill Aleshire, the lead attorney representing the neighborhood association said.
The disannexation took effect on Sept. 9, 2024, after which the city discontinued services in the area.
The vote was made possible by House Bill 3053, allowing certain neighborhoods annexed by municipalities with populations of 500,000 or more between March 3, 2015, and Dec. 1, 2017, to vote on leaving the city. Lost Creek was annexed in December 2015.
However, last November, Aleshire said his clients continued to receive property tax bills from the City of Austin despite disannexation.
“They also were denied a chance to vote in the November mayor’s election,” Aleshire said. “When they received those tax bills, that is a clear example of taxation without representation.”
KVUE took a look at Proposition A on the May 4 election ballot where it says the city would continue to impose a property tax on the Lost Creek properties each year until they collect enough to cover Lost Creek’s share of the city’s debt before they disannexed. The city estimated that to be over $7 million over the next two years.
However, Aleshire says that number is wrong and the city doesn’t need that money to pay its bills, according to a Texas local government statute.
“The statute conditions their ability to tax them for that prior debt. If they don’t, it puts the city in a position they’ll default,” Aleshire said. “…Based on the taxable value of the city at the time– and I think I calculated that Lost Creek’s taxable value compared to the city is something like 4/100ths of 1%– there’s no threat to the city’s debt, so therefore they lack authority to tax them.”
Aleshire says they hope to prevent the city from collecting further taxes and ask the city to return the taxes already collected since disannexation. The City of Austin responded to the lawsuit with a general denial.
KVUE reached out to the city and received a statement that read, in part that “they will respond to the lawsuit through appropriate court channels” and that “the lawsuit relates to a new statute and the City looks forward to a judicial ruling on the matter.”
Aleshire says in two months they’ll have a discovery period where both sides will present evidence to defend their arguments.