Conflicts and Interests

To limit the power of the Legislature, the state constitution calls for its members to be part-time lawmakers who can hold full-time jobs in their districts. So what happens to the world of ethics when public policy collides with private ambition and legislators write bills that affect their own pocketbooks? Let’s ask Senator John Carona.
Photograph by Jeff Wilson

The Brookfield subdivision in Pflugerville, north of Austin, lies two miles from Interstate 35 in a bland patch of suburban sprawl, the kind that sprouts like clover on the edge of cities. Cookie-cutter homes line winding streets with tea-themed names like Earl Grey Lane and Darjeeling Drive. Two playgrounds, erected in the middle of circular intersections, fill with children when school lets out. In the summer a fenced-in swimming pool—for Brookfield residents only—provides a break from the punishing Texas heat.

Shawn Riggs lives on Sally Lunn Way in a beige two-story house that he bought for $137,559 in 2003. Like all his neighbors—and a growing number of people across the state—Riggs belongs to a homeowners’ association, which charges monthly or annual fees to care for common areas, enforce deed restrictions, and, at least in theory, maintain property values. One day this past February, Riggs went to the post office to retrieve a certified letter. He had been in a long-running spat with the Brookfield Owners Association over some mistaken fines levied against him for not taking care of his lawn. Riggs believed the letter would contain good news. For almost two years he’d been waiting for the property managers to acknowledge what he’d been saying since he’d received a nasty little notice warning him to cut his grass or else: they had gotten the wrong yard.

As Riggs had explained, it was his neighbor’s house that had been pictured in the notice he had received in June 2011. So he printed out images from Google Maps to prove it. He had emails documenting his increasingly vociferous objections. He had even received a response from the property managers saying his protests had been “noted” in his file.

None of that was in the letter, though. Instead, typed in capital letters across the top of the page were the words “CITATION—FORECLOSURE.” Riggs, a trim 39-year-old technician at a semiconductor equipment plant, felt like his chest was going to pop open. Over time, $50 in disputed fines had ballooned into more than $2,000. Now they were coming after his house.

I first met Riggs in mid-March, a few weeks after he received the foreclosure letter. By then he had decided to fight back, even if it meant it would cost him more to sue than to settle. He wasn’t going to let the Brookfield Owners Association shake him down. “Your HOA should not have that much power,” he told me.

And yet, in many cases, an HOA does have that much power. According to estimates by the Community Associations Institute, the industry’s chief lobbying group, almost a fifth of the U.S. population—including 3.4 million Texans—now live in a residence that is managed by some type of property owners’ association. These associations, ostensibly created by and for the people in a neighborhood, usually operate more like mini-government agencies, assuming responsibility for duties that cities and counties typically perform: maintaining the parks and pools, providing utilities, repairing streets, and in some cases enforcing the speed limit. Which is exactly why there are so many of them; nowadays, cities and counties often require new developments to create property owners’ associations. In a booming state like Texas—and especially in suburbs like Pflugerville, which is one of the fastest-growing places in the country—outsourcing these services to an HOA management company may be the only option for a cash-strapped municipality.

Not surprisingly, HOAs have become a big business. They generate $40 billion in annual assessment revenue (the dues collected from individual homeowners) and $35 billion in reserves, representing a huge government-like contracting opportunity—only without all the procurement safeguards and transparency guarantees expected of taxpayer-supported entities. The largest HOA management company in the country is Dallas-based Associations Inc., better known as Associa. It oversees Riggs’s HOA, along with 9,000 others in 31 states, as well as Mexico and Canada. Over the past 34 years, the company has been transformed from a small business into an industry behemoth by its founder, John Carona.

But the Dallas millionaire isn’t just the president and CEO of Associa. He’s also a powerful state senator who chairs the Committee on Business and Commerce and who, back in 2001, authored the law that enshrined pro-industry HOA foreclosure practices in statute, ensuring that associations like Brookfield’s could continue to aggressively collect fees and dues from homeowners. And if you’re flabbergasted by that fact, well, you don’t know much about Texas politics. 

Texas, as any seventh grader can tell you, has a part-time Legislature whose members typically have full-time jobs in the private sector. The framers of the state constitution wanted it this way because they were suspicious of centralized government and saw a citizen legislature as a chief antidote. That belief still holds strong. Successive generations of Texans have insisted that their legislators, now paid $7,200 a year in salary, meet in regular session for only 140 days every other year and then return home to work in the communities they represent. But while that may limit the power of the state government, it also blurs the line between public responsibilities and private interests. And thanks to weak disclosure rules, voters are often clueless about the conflicts of interest that result. 

At the Capitol, lawmakers rarely recuse themselves from legislation that has an impact on their livelihoods for one simple reason: they don’t have to. They are asked to step away from the action only if it directly affects their own company. So insurance agents can pass bills for the whole industry, and pharmacists can carry drug bills that cover other pharmacists. But when it comes to a lawmaker being so closely tied to his industry, perhaps no one is as prominent as John Carona.

Mandatory HOAs took off in the early seventies as entire neighborhoods sprang up from old cotton fields and pastures in suburban areas. Today, an incredible four out of every five new homes in metropolitan areas are built in association-ruled communities. In Texas, whose population is growing at about 3 percent a year,

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