Long-dormant Montrose Management District, still facing pushback, up and running again

Board members for the controversial Houston management district, which voted to dissolve itself in 2018 but did not end up doing so, are expected to vote soon on a new service plan and sending out new tax bills for a variety of neighborhood initiatives.

Montrose resident Roy Green photographs the rainbow crosswalk at Westheimer and Taft.
Gail Delaughter
Montrose resident Roy Green photographs the rainbow crosswalk at Westheimer and Taft.

Dimitri Fetokakis is expected to vote soon to send out new tax bills to his fellow business owners in Houston's Montrose neighborhood, who have not been subject to assessments from a local management district for more than half a decade.

The owner of Niko Niko's restaurant, who is a board member for the long-dormant and recently revived Montrose Management District, said he knows there will be some pushback. Legal challenges from impacted businesses and petitions calling for the district to dissolve led to its going dark in the spring of 2018, and some of the same detractors then remain opposed to its operation, with one longtime business owner and resident in Montrose saying the management district is unnecessary and unwanted.

Fetokakis said he understands not wanting to pay additional taxes to a management district – a governmental organization originally created by the state of Texas and intended to fill gaps in city-provided services – but he also considers it to be a worthwhile investment. The Montrose Management District plans to spend most of the tax revenue it collects on public safety and security measures, while also focusing on economic development as well as maintenance and beautification in a popular and bustling part of the city.

"I can relate to everybody who has a problem with it. I don't want to pay any assessment fee," Fetokakis said. "We just want to take care of our neighborhood."

A board meeting originally scheduled for Thursday afternoon was postponed in the morning because of two of the four holdover members were unable to attend and three are needed for a quorum, according to management district spokesperson Alan Bernstein, who said the next regularly scheduled monthly meeting is March 14. Along with planned votes on setting a tax assessment rate and roll, levying annual assessments to property owners within the district's boundaries and approving a service and assessment plan, the posted agenda for Thursday’s meeting also included considering the nominations of four new board members to join the four holdovers from 2018, including Fetokakis.

The Montrose Management District held its previous board meeting Dec. 14, which was the first time board members had met since March 22, 2018. That's when, amidst a years-long legal dispute between the district and a Montrose property owner, the board voted to dissolve the district in response to a petition to do so, according to a copy of its meeting minutes obtained through an open records request.

But the management district did not end up dissolving, according to Bernstein, who said the board's vote at the time was conditional.

"The board said it would dissolve if and when the judge issued an order to dissolve," Bernstein said. "That order was not issued."

Bernstein said the decision to become active again was in response to a request by the administration of former Mayor Sylvester Turner, whose office had heard from developers saying they wanted the Montrose Management District to provide services again, partly to complement the capital improvements being implemented by the Montrose Tax Increment Reinvestment Zone (TIRZ), another hyperlocal taxing entity that was created by the city in 2015. Among those developers were Skanska and The Hanover Company, Bernstein said.

Because the management district's service plan had expired, Bernstein said it had to petition business owners to become active again. More than 60 signatures have been gradually collected since 2018, according to Bernstein, who said the management district met its legal requirements to reactivate.

But Daphne Scarbrough, a former city council candidate and longtime management district opponent who owns a Montrose metal fabrication business called The Brass Maiden, questions whether the organization legally reformed and expressed that concern Tuesday to the Houston City Council. She also said the management district amounts to "taxation without representation."

"Something's rotten in Denmark," Scarbrough said. "If they never dissolved, then why didn't they just go on with business after they told us they were dissolving in 2018? So where have they been all this time? Why are they just now coming around to doing that again?"

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The Montrose Management District has been administered and managed since 2006 by Hawes Hill & Associates, a local consulting firm that serves the same function for nearly 10 other management districts in the Houston area. It put together an amended service plan that includes a lower assessment rate as well as some exemptions, including for businesses such as Scarbrough's that double as residential properties – single-family residences are exempted entirely as they were previously.

The new tax rate proposed by the management district – which is roughly bordered by West Dallas Street to the north, Interstate 69 to the south, South Shepherd Drive to the west and Texas Spur 527 to the east – is 9 cents per $100 of assessed value, down from the previous rate of 12 cents. Scarbrough said assessed businesses likely will end up paying more than they did before, though, because property values have significantly increased over the last several years.

Among other changes, multi-family residential complexes of 25 or fewer units will be exempt from assessments, as will mixed-use properties where the business portion accounts for less than 60% of its total valuation. Mid- and high-rise buildings are slated to pay assessments based on the value of four levels of their structures.

The management district has a projected budget of more than $2.1 million for the upcoming year and about $32.5 million over the next 15 years, with 60% of that revenue to be spent on public safety and security. The district also must pay a legal settlement of more than $500,000 to 1620 Hawthorne Ltd., the company that sued it more than a decade ago, with Bernstein saying that would be paid out in two installments over the next two years.

"I don't think there's any purpose for them," Scarbrough said. "Everything they do is replicative. We already pay property taxes. We already have police patrols. That is why when you talk to businesses, they have nothing to offer us."

Fetokakis, the Niko Niko's owner and district board member, disagrees with that claim. He said other small business owners like himself are supportive of the management district being reactivated because they want to benefit from the services it can provide that are not always carried out by the city.

Given the management district's history, he also said he wants it to be transparent, fair and efficient with its spending so it can rebuild public trust. Fetokakis said he wants the board to be representative of the diversity of businesses in Montrose, too, adding that he nominated both a small business owner and a big business owner to be fellow board members.

Any new board appointments must subsequently be approved by Mayor John Whitmire and the Houston City Council.

"Let's get in there and see if we can get this thing done right," Fetokakis said. "It's not easy, man. It seems easy, but when you've got a lot of people against it, got a lot of pushback, you've got to consider that stuff, too."