State taxpayers, through the Texas Department of Health and Human Services, paid millions in rent to a company of which Speaker of the Texas House Dade Phelan is a manager and director.
The Phelan family is in the real estate business.
A March 2022 Southeast Texas Refined article called them “one of the founding families of SETX Commercial Real Estate.” The article contains a photo of Mark, Lan, and Dade Phelan. A search found the speaker himself as well as M.A. Lan Phelan II, Michael A. Phelan, and Mark Phelan on the website of Phelan Investments. Located in Beaumont, Texas, this company describes itself as “a private, fourth generation, diversified investment firm” that focuses on “the development and operation of investment real estate, oil and gas properties, and other equity investments.” Included as part of their real estate portfolio are shopping centers, apartments, office buildings, and commercial properties.
3105 Executive, LLC is another Phelan company. A 2023 Public Information Report from the Texas Comptroller reports Dade Phelan as a manager and director, alongside M A Phelan, M A Phelan II, Mark Phelan, and Michael A Phelan.
Through a Public Information Act request, Texas Scorecard obtained multiple Texas Health and Human Services Commission (HHSC) purchase orders that show lease payments to 3105 Executive, LLC. One of the purchase orders identifies 3105 Executive as in the care of Phelan Investments. A search of Phelan Investment properties found a building for warehouse or office use at 3105 Executive Blvd in Beaumont, Texas.
A search of the address confirmed that Texas Health and Human Services has an office at this property.
Payment Records
Texas Scorecard reviewed the purchase orders.
The HHSC purchase orders Texas Scorecard obtained covered from September 2017 to September 2023, but a note in the 2020 purchase order indicates this lease contract runs from January 2014 to December 31, 2023. Texas Scorecard asked HHSC to confirm whether or not this is accurate. “The original lease ran from Jan. 1, 2014 and ended Dec. 31, 2023,” replied Jennifer Ruffcorn, Press Officer for Texas Health and Human Services. “The lease has been renewed. The current lease expiration date is Aug. 31, 2029.”
Texas Health and Human Services Office at 3105 Executive Blvd, Beaumont, TX
Phelan was first elected to the Texas House in 2014 and began serving in 2015. He was elected Speaker by fellow House members in 2021.
The bottom lines of each of the purchase orders number in the hundreds of thousands.
The September 2017 HHSC purchase order for “FY18 Renewal Lease” is for $355,567.15. The one from September 2018 has a bottom line of more than $581,000, with more than $356,000 for “FY19 Lease Renewal,” and more than $224,000 with a memo stating “remaining amount” for the “FY19 Lease Renewal.” September 2019’s purchase order has a bottom line of more than $359,000 for “FY20 Renewal Lease.”
Both the September 2020 and 2021 purchase orders have a bottom line of $392,667.16.
The bottom line goes up in later purchase orders. September 2022’s is more than $400,000, while September 2023’s is more than $408,000. The latter purchase order says the payment is for “FY24 Renewal Lease.”
The September 2021, 2020, and 2018 purchase orders (PO) all were marked as having revisions. “The revisions were used to update the PO amount,” Ruffcorn told Texas Scorecard when asked for comment. She provided the following clarity on the revisions.
The 2018 PO revision was to reduce the PO amount by $132,019.68.
The 2020 PO revision was to reduce the PO amount by $101,686.71.
The 2021 PO revision was to reduce the PO amount by $5,600.40.
In response to Texas Scorecard’s question about these purchase orders, Ruffcorn said that from December 2017 to December 2023, HHSC paid $2.3 million to 3105 Executive LLC.
A review of Phelan’s 2016 and 2023 personal financial statements (PFS) to the Texas Ethics Commission found 3105 Executive listed in those reports. His 2016 PFS, filed February 11 of that year, reported that company as one of his five sources of income from interest, dividends, royalties, & rents that year. The reported amount from 3105 Executive was $25,000 or more. In his June 30, 2023 PFS, 3105 Executive is reported as one of his six sources of income from interest, dividends, royalties, & rents. The reported amount from 3105 Executive, LLC was “at least $47,220 or more.” For context, these PFSs also listed sources of occupational income for Phelan. In 2016, he reported having three such sources: attorney, real estate developer, and broker. In 2023, his role as state representative is reported as his fourth source of income.
Texas Scorecard sought comment from the Phelan campaign and the Speaker’s office multiple times about these records. They declined to answer questions.
“State lawmakers have the duty to responsibly steward the taxpayer money that is entrusted to them. Lawmakers, especially the Speaker of the House, have immense control and influence over the State budget, including agency budgets like HHSC,” Tony McDonald, an attorney familiar with state ethics laws, told Texas Scorecard. “Phelan’s control over the budget for HHSC, while he is charging them millions in rent, appears to present a serious conflict of interest.”
On January 24, 2024, an analysis from economist Vance Ginn examined the economic situation citizens are facing. He shared federal data reporting that while state “economic growth has picked up,” “personal income lags” behind the national average. “As Texans face an affordability crisis from high inflation, high property taxes, and an uncertain future with the U.S. economy likely in a deepening recession, the Legislature provided some tax relief but not nearly enough because of excessive spending,” Ginn wrote for Texans for Fiscal Responsibility. “Other states are cutting, flattening, and phasing out taxes, passing responsible budgets, and passing school choice, so Texas should have made bold reforms to support more opportunities to let people prosper, mitigate the affordability crisis, and withstand destructive policies out of D.C.”
Phelan’s campaign website claims that in the 2023 session, lawmakers passed a “record tax cut” of $18 billion. But Vance Ginn reported that “the amount looks to be only about $12.7 billion in new relief” of the $33 billion surplus. “Given that the largest property tax cut was $14.2 billion for 2008-09, the state would need to provide $21 billion in new relief this time for it to be the largest tax cut in Texas history, so Texans could have the same purchasing power of relief as they had then.”
Source Documents
For this article, Texas Scorecard reviewed multiple government documents.
Texas Comptroller’s 3105 Executive LLC Public Information Report
September 2017 HHSC Purchase Order
September 2018 HHSC Purchase Order
September 2019 HHSC Purchase Order
September 2020 HHSC Purchase Order
September 2021 HHSC Purchase Order
September 2022 HHSC Purchase Order
September 2023 HHSC Purchase Order
Dade Phelan’s Personal Financial Statements (2016 and 2023)
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