GALVESTON

Magnolia Creek property owners awaiting refunds after being overcharged for Public Improvement District fees soon will get their money.

Judge Lonnie Cox of the 56th District Court made a final judgment Tuesday to disburse the refunds that total almost $1.4 million for people who owned residential property in the League City development.

The Texas 14th Court of Appeals in April remanded civil litigation involving the refunds back to the 56th District Court and suggested how League City should make the refunds.

The appeals court recommended making the refunds proportional to the time previous and existing property owners paid assessments. And, on Tuesday, the district court finalized how it would do that, according to court records.

The appeals court took the case after Cox ruled in March 2015 that the city should refund money to the existing owners of lots in the subdivision who were overcharged.

Cox had to decide whether to allow the property owners in March 2015 to get the refunds or whether it should go to all property owners who at one time owned land and overpaid assessments.

649 CLAIMS FILED

Determining who owned which piece of property at which time complicated the city’s efforts to refund the right people. The city got more than 649 claims on 319 properties, then asked the court to help sort it out in a 2014 legal action. Some of the claimants never even owned the over-assessed lots.

Cox ruled that the existing deed holders should get the refunds, but the appeals court declared the refunds should be proportionate to the time property owners owned the land and were overcharged.

In 2013, League City decided to reimburse homeowners in phases 1 and 2 of the Magnolia Creek subdivision because development costs were over assessed and because of an accounting error.

The city created Public Improvement District No. 1 in 1997 to develop Magnolia Creek, which is on the southwest side of the city, and levied an assessment on the homeowners — based on square footage of the property — to pay the developer for improvements.

Homeowners paid those assessments to the public improvement district, which the city administers, during the span of 15 years.

COST ASSESSMENTS

The cost assessments were overestimated, city staff said.

In 2001, the city levied an assessment of $1.32 per square foot for phase 1 of the subdivision. In 2002, the city levied an assessment of $1.68 per square foot for homes in phase 2 of the subdivision.

Those estimated costs were based on the city having to issue bonds, which it never did, city staff said.

The actual cost of development for the two phases was less than the amount assessed.

OVERPAYMENTS

The developer, Mag Creek LP, sold its investment in 2002 to two other entities, MHI Partnership and Andrew Delaney.

Because of an accounting error, the calculation of what was owed to Delaney was overstated. This miscalculation came to the city’s attention in 2010, then-City Manager Mike Loftin told the city council in May 2013.

The city overpaid the Delaney family about $1.4 million, Loftin said.

The Daily News reported in May 2013 that the Delaney Marital Trust would return about $1.4 million to the city. Those funds, as well as the balance of the 2012 assessment collections, will be refunded to property owners based upon the square footage of property owned.

The city in 2014 filed the interpleader petition in Cox’s court. In an interpleading procedure, a court determines the ownership rights of rival claimants to the same money or property.

Valerie Wells: 409-683-5246; valerie.wells@galvnews.com

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