Ken Paxton demanded Odessa freeze its tax hike. Then, he went silent.

By Carlos Nogueras Ramos, The Texas Tribune
May 7, 2026

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ODESSA — Last October was like any other for most Odessa city employees. Parks employees unveiled a new sign. The police department gave a tour to homeschooled kids. A council member attended a fundraising event for culinary students.

But amid everyday responsibilities, top local officials were scrambling to respond to Texas Attorney General Ken Paxton’s demand that they justify a recently approved tax rate hike. The state had just passed a law that prohibited cities from raising taxes without completing financial audits. Paxton had singled out four cities, and Odessa was among them.

“To uphold my duty as the Attorney General to ensure that municipalities are following audit laws, I am formally launching an investigation into the City of Odessa to determine whether the new tax rate is illegal,” Paxton wrote. “Furthermore, I am demanding that the new tax rate not be implemented until I complete my investigation.”

City officials moved quickly, gathering hundreds of pages of documents, including minutes from relevant City Council meetings and evidence that the tax rate was published in a newspaper. By December 2025, Odessa had handed over the documents Paxton requested.

Then, Paxton went dark.

In the seven months since issuing the first order, Paxton has not responded to the city — not to documents nor letters. Since deploying that first order, Paxton, who is running in a high-profile U.S. Senate race, has sent at least 1,000 additional inquiries to other Texas cities. The move advances Austin’s effort to crack down on property taxes across Texas, one of the few remaining mechanisms municipalities have for raising revenue.

Local officials in Odessa said they are unclear whether they can cancel a tax rate increase, even if they agree with Paxton’s rationale.

“There’s no mechanism for what he’s asking us to do,” said Odessa Mayor Cal Hendrick. “It’s impossible. There’s no way to do it.”

At least one fiscal and county government expert said Paxton got it wrong. The law Paxton was using to make his demand did not apply in Odessa, said Bill Aleshire, an attorney, former county tax collector and county judge.

“As much as I respect the professionalism of the career lawyers at the AG’s office, by its own terms, SB 1851 has not taken practical effect yet,” Aleshire, who served as a Democrat, said.

Paxton’s office did not return requests for comment.

“I’m sorry, I just don’t agree”

Odessa’s proposal to raise the tax rate caused unease among at least one political watchdog, who warned officials the city could be running afoul of a new law. The city, with the support of some local Republicans, stood by its reasoning.

Kris Crow, a frequent critic of the city, told council members that passing the higher taxes without first filing the audits could mean breaking a law authored by state Sen. Robert Nichols, R-Jacksonville. The law became effective Sept. 1.

“This isn’t about opposing needed city services or infrastructure,” Crow said in a September council meeting, as council members debated whether to raise the tax rate. “It’s about ensuring that decisions are made in compliance with the law and allow for full accountability.”

Dallas Kennedy, precinct chair for the Ector County Republican Party, said that a previous council was at fault for the missing audits. He said the city should still pass the new tax to continue funding city services.

Hendrick and other members of the council have said raising the tax was a necessary step to fund public safety departments and avoid cutting staff, and to keep salaries in line with inflation for all employees. He said over the last few years, the city’s costs have shot up.

City officials have said they inherited the late audits from a previous administration.

In the wake of a 2024 race that elected two new city councilmembers and a new mayor, Odessa has also dramatically changed its approach to using the money in its coffers, said Craig Stoker, the city’s at-large councilmember. Stoker, who defeated an incumbent, said the council has purchased equipment to repair broken trash trucks and new fire engines. The city also added back 300 staff positions, jobs that were previously frozen, and authorized millions of dollars in road and infrastructure projects that have been deferred for years, Stoker said.

“These projects had been budgeted for in the past, but many of the dollars were never actually spent,” Stoker said in a statement. “Despite cries for austerity, the city had a healthy fund balance, and this council made the decision that instead of acting like a piggy bank, the city needed to deliver the improvements and services that had been neglected for far too long.”

He said the city also increased salaries to attract top talent and pay employees above the poverty line. 

“The bigger issue would have been to continue sitting on millions of dollars in the bank while the city continued to crumble,” he said. “We took a hammer to the piggy bank and started giving that money back to the citizens through the services they expect.”

On the night that Crow and Kennedy addressed the council during a debate in September, the city’s attorney said the law didn’t apply to that tax year but did apply to future ones. In September 2025, the city approved the new tax as part of its annual budget approval. They passed it later that month, as part of the overall budget approval.

About a month later, in October, Paxton sent a letter demanding that the city halt the new tax until his office investigated.

The letter sparked an internal debate among city employees, who said they were doubtful the city had broken the law.

“I’m sorry, I just don’t agree with the AG’s interpretation of the Senate Bill,” one staffer said in a text message obtained by The Texas Tribune via an open records request. “Neither does our interim city attorney, or our auditor who we requested an opinion from.”

Hendrick, the city’s mayor, said they handed over the extensive documentation Paxton requested. Shortly after receiving the demand, the city sent a letter of its own, arguing that the decision to raise taxes fell within legal bounds, as the law would take effect the following tax year — 2026.

In December, Hendrick sent Paxton another letter. He defended the city’s position and partially explained why the audits had not been filed.

“We were surprised by the tone of your letter in addition to not being notified prior to the issuance of your letter,” Hendrick wrote. “We believe a meeting would be beneficial to clarify any facts and allow the City to state its position. We would be glad to host you and or your staff in Odessa or we could travel to Austin at a convenient time for all.”

Paxton did not reply, nor did he acknowledge the documents the city sent to his office.

In Texas, the tax year begins in tandem with the calendar year, said Aleshire, the former county government tax collector and judge.

The tax rate the city approved applied to the 2025 tax year, which begins on Jan. 1 and ends on Dec. 31 — in other words, before the law took effect. The tax year that begins on or after September 2025, when the city passed the tax, is the following January.

“The earliest application of the Act possible is for 2026 taxes,” he said.

Nichols, the law’s author, said he wasn’t familiar with Odessa’s situation. But he said the city shouldn’t have raised taxes without first knowing the results of its audits, regardless of the dispute. Absent a meeting with the attorney general, Nichols said the city should try the Texas Comptroller’s office next.

“It sounds like they’re going to need a lawyer,” he said.

This article first appeared on The Texas Tribune.