Who is to blame in the Dallas tax credit corruption scandal?

In response to a recent blog post I received the following comment from an anonymous reader…

Offering a bribe to a community group is not nearly as disgusting as a sham community group insisting on a bribe in order to support a tax credit project, then funneling some of the take to the elected officials while also insisting that only certain friendly contractors be hired in the process. The developer in this case may be a ——(insert insult here), but at least he had the courage to stop the shake down practice while other developers continue allowing the status quo. Which is worse?

The reader’s question “which is worse” is a legitimate one. Here is my answer…

It does not look like courage on the part of the developer to me as much as economic self interest.

The developer has sought to portray himself in the press as courageous for standing up to a corrupt process. But the testimony shows he was only too willing to play the game until the price became too high. (See my August 12 blog for details).

The community shakedown artists and corrupt officials in this case will be punished by the court. That is as it should be.

The policy question is whether we will continue to allow a tax credit system in Texas to operate in a way that sends board members of TDHCA (several years ago) to prison for taking bribes from developers and sends elected officials and pseudo community organization people to jail every few years for taking bribes from developers whenever the competition for tax credits makes one developer angry enough to turn on another developer and blow the whistle. The government’s own witness admits he was playing this payoff game himself until the price got too high (half of his $1.5 million developer fee).

This trial has taught us what we all knew — corruption is endemic in the Texas LIHTC program. There is too much money on the table. This excess money allows developers to use it to pay off people and all that excess money attracts shakedown artists.

As I said before, the courts will deal with the extortionists. But shame on us for trying to put all the blame on them. We must clean our own house of those whose personal ethics are so low that they play these games. And we must reform the system to wring out the excess money that funds the bribes.

Many in the housing tax credit business want us to look the other way and hope this blows over. But it is not going to blow over. This is not just a Dallas problem, it is a Texas problem. The public has now seen the insides of how this program operates. Support for continued funding of the housing tax credit program will not be long sustained in the face of these scandals.