DALLAS - A state district judge ruled yesterday that a property-rich school district cannot circumvent a Texas school finance law and withhold millions of dollars in taxes from its poorer counterparts by extending a tax abatement to a large manufacturer.

Following a hearing a Austin yesterday, Judge Scott McCown declared any tax abatement extension provided after May 31, 1993, the law's effective date, would not change the state's assessment of a school district's property value or the amount of money it owes under equalized funding formulas.

"Judge McCown made it clear: You cannot use tax abatements to circumvent Senate Bill 7," the school finance law, said Rick Gray, an attorney for the poor school districts. "It was not even a close call."

The hearing stemmed from events earlier this month when Calhoun Independent School District tried to skirt the state's share-the-wealth school finance law by extending tax abatement to a large manufacturer, Formosa Plastics Corp., for three more years.

The tax abatement would have kept a $1.3 billion plastics plant expansion off the county's tax rolls. The abatement was intended to bypass the school finance law, which equalizes property wealth for school districts. In exchange, the school district along the Texas Gulf Coast was to receive millions of dollars in monetary gifts from Formosa.

"They were trying to create a loophole," said Craig Foster, executive director for the Equity Center, which represents more than 300 poor districts in Texas. "They would have the benefits, and it would cost everyone in the state."

Gray and Foster said the Equity Center and others wanted quick court intervention to prevent some of the almost 100 other wealthy districts from trying a similar tactic. Wealthy districts are defined as those having more than $280,000 in property value per student.

"I was scared to death that many other school districts would enter into tax abatement agreements," Gray said.

Last week, attorneys for poor districts were granted a request for a temporary restraining order to stop the Calhoun district form extending the tax abatement. It was followed by McCown's declaratory order this week.

Gray said his office is now preparing the written order for McCown to sign at the end of the week, following the ruling from he bench.

Calhoun Independent School District officials could not be reached for comment after the hearing.

However, Ron Dusek, a spokesman for the Texas attorney general's office, said, "We are happy with the court's order . . . . It will simply provide additional revenue for public school financing."

The confusion over whether districts could subtract tax abatement extension from tax rolls stemmed from a state letter issued by the Texas comptroller's office last year.

In the letter, the comptroller's office indicated that the amount of an abatement extension would be subtracted from the property values and not be subjected to a school funding formula. The opinion was requested by the Arlington, Tex., school district, which later decided not to change its tax abatement.

In the meantime, the letter prompted Calhoun County Independent School District to try to extend its tax abatement to Formosa. The district figured it could sidestep the school finance law and save up to $18 million annually that it would have had to provide to the state's poorer districts.

But McCowan said the comptroller's opinion was incorrect. He said that while districts have a right to give tax abatement extensions, they will not affect the amount of property tax valuation or the amount of wealth that needs to be shared under the school finance law, according to Gray.

"He declared that any extension of a tax abatement agreement for more time and more money would not change how the state comptroller's office does the property valuation study each year," Gray said.

In Texas, about $8.7 billion of school property tax abatements, or about 1.4% of the total state school property tax base, was in place during the past school year.

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