Abilene, Wichita Falls and other cities will pay the price for a legal settlement

Wichita Falls is among multiple cities stuck with the bill as the result of a legal settlement between the state of Texas and a mystery sales taxpayer.

Sales taxes collected in Texas cities go to the state, which makes necessary adjustments and then sends back each city’s share. A city’s sales tax allotment is a major part of its total revenue.

In February, multiple cities received a notice of an “audit collection” to make up for an apparent overcharge to the mystery recipient.

For Wichita Falls, the amount was $230,000. That’s modest compared to the hit suffered by some other Texas towns.

For example, Lancaster, a city of 41,000 residents that enjoys the presence of several large companies on the south edge of the Dallas-Fort Worth Metroplex, got smacked with a $30 million adjustment. That wiped out its entire sales tax revenue share in February.

Abilene City Manager Robert Hanna called the adjustments across the state that stemmed from the settlement "unprecedented" in an April 11 Abilene City Council agenda memo.

Abilene and its development corporation were hit with a $4.6 million adjustment. The amount was later adjusted downward to $3.139 million. The impact comes as Abilene is dealing with a general drop in sales tax revenue.

Some cities appear to have escaped the ding altogether. Figures for San Angelo show no negative audit collection in February.

Stephen Calvert, Wichita Falls’ chief financial officer, said the state apparently realized the one-time adjustment would be too much for some cities to bear, so it gave the money back and will now reclaim it in monthly withholdings.

That equates to about $5,000 a month for Wichita Falls

But Abilene will lose about $77,000 a month over 42 months, according to an Abilene Reporter-News story.

The amounts will be withheld from the cities’ monthly sales tax allocations until paid in full.

The mystery sales taxpayer who apparently has reaped millions of dollars in the settlement will remain a mystery for now.

The Abilene Reporter-News filed an open records request to obtain the name, but the Texas Attorney General’s Office ruled the city may withhold the information since it is deemed confidential under tax law, according to a June 27 letter ruling from the AG's Office.