Paxton Says Flatonia Broke New Tax Law

Texas Attorney General Ken Paxton sent a letter to the City of Flatonia notifying them that they are prohibited from raising property taxes over an alleged violation of a new state law.

Flatonia is among more than 130 Texas cities that Paxton said violated the law.

The Texas Legislature passed SB 1851 last May and it went into effect on Sept. 1, 2025. The new law requires cities to file an independent financial audit no later than 180 days after the last day of their fiscal year. If they fail to file a timely audit, the law prohibits cities from raising property taxes beyond the no-new-revenue rate, which is the rate that would generate the exact same amount of property taxes that the cities collected the previous year.

The law applies to tax rates adopted on or after the date the law went into effect, which was Sept. 1. Flatonia’s fiscal year ends on Sept. 30. and begins on Oct. 1. Accordingly, the City only had a month to come into compliance with the new law.

However, Flatonia has struggled for years to complete an independent financial audit. The last one the City conducted was in 2022. That year and the two years prior, independent auditors gave the City “qualified” opinions. A qualified opinion is a step below an unqualified or “clean” opinion, although not as bad as an adverse opinion.

All three years the independent auditors cited their inability to substantiate portions of the City’s financial statements. This came at a time of turmoil in City Hall. In 2019, the City Council allowed former City Secretary Melissa Brunner to retire in lieu of termination over several allegations regarding financial issues. Since then, the City has gone through two mayors, two city managers, multiple city secretaries and a substantial shake-up on the City Council.

Current City Manager Ray Miller told the Record this week that he’s waiting on clarification about whether Paxton’s decision would affect the current budget that went into effect on Oct. 1. The City Council approved the voter approval property tax rate, which is the highest rate that could be set without calling an election. The approved rate was $0.28264 per $100 of property value, which was lower than the previous year tax rate of $0.28359 due to rising property values.

“You can imagine the mess that would be if we had to make refund payments,” Miller said in an interview with the Record last Monday.

Under Miller, the City hired a new independent auditor, Armstrong, Vaughan and Associates. Shortly before Miller joined the City, the Council hired a financial consultant to help improve the City’s financial practices. Miller said the new auditors hope to complete the 2023, 2024 and 2025 audits by early to late fall of this year.

“They know the position we’re in,” Miller said.