AMARILLO, Texas (KAMR/KCIT) – The legal teams involved in the ongoing Amarillo Civic Center Complex-related litigation in Potter County District Court are continuing their arguments through documents.
According to documents filed this week in Potter County by Amarillo Businessman Alex Fairly’s legal team, the city of Amarillo’s legal team and the legal team from the Texas Attorney General’s Office, the parties are arguing whether or not Fairly should pay a bond, and if so what amount, for what the city claims is an increased cost to the overall Civic Center project because of the lawsuit.
How did we get here?
The city of Amarillo’s legal team filed a motion on July 15, asking William Sowder, the judge for the case, to consider its request for “Security Against Suit,” a motion requiring Fairly to pay for the claims of increased cost to the overall project. According to previous reports, officials said a bond amount of at least $5.9 million would cover those increased costs related to inflation, interest rates and construction.
This comes after Fairly’s initial lawsuit, filed in late May, which argues that the Amarillo City Council’s vote to use $260,525,000 in anticipation notes to fund the Civic Center Complex project was illegal. In response to the lawsuit, the city’s legal team filed its own, asking a Potter County Judge to validate the use of the notes under portions of the Texas Government Code. Because of the similar subject matter, the two lawsuits were combined and a trial is scheduled for 9 a.m. on Oct. 4 in Potter County District Court.
In an in-person hearing hosted on July 21, the legal teams for the parties presented arguments on whether or not Sowder should require a bond in this case, and if so, how much it should be. During the hearing, the legal teams questioned multiple witnesses, including:
- Laura Storrs, the city of Amarillo’s assistant city manager and chief financial officer;
- Steven Adams, a financial advisor for political subdivisions including the city of Amarillo through Specialized Public Finance;
- Fairly, himself.
At the end of the hearing, Sowder said that he had not made a decision on the motion, encouraging the parties to continue their respective arguments through documents filed in the district court. As such, each party filed a series of documents on Wednesday and Thursday morning.
What did Fairly’s team say?
In the documents filed Wednesday afternoon, Fairly’s team outlined three main arguments:
- No bond should be issued because the city of Amarillo violated the Texas Open Meetings Act;
- No bond should be issued because the Texas Attorney General has not approved the use of the notes, therefore proving that Fairly is not causing the delay;
- No bond should be issued because there is no evidence of financial damages to the city of Amarillo because of the delay.
Alleged Open Meetings Act Violations
Similar to the team’s in-person arguments, Fairly’s legal team claimed that the Civic Center Project is an item of “special interest,” requiring a governmental body to abide by stricter notice requirements for topics related to said item.
The team claims that the item included in the May 24 City Council agenda regarding the vote on the use of anticipation notes did not disclose that the item was about the Civic Center Complex. The item reads:
“DISCUSSION AND CONSIDERATION OF ORDINANCE NO. 7985
Discussion and consideration of an ordinance authorizing the issuance of the City of Amarillo, Texas Combination Tax and Revenue Notes, Series 2022A resolving other matters incident and related thereto including the approval of a paying agent/registrar agreement and a purchase contract.”
However, the transmittal memo that accompanied the May 24 agenda states that the item was about the Civic Center Complex project, reading that the ordnance authorizes the city to issue the “Combination Tax and Revenue Notes… acquiring, constructing, improving, expanding and equipping the City’s convention center facilities, to-wit: the City’s civic center complex…”
Fairly’s team also cited Storrs’s testimony, stating that she mistakenly added the phrase “revenue notes” to the item, when in reality, the item would only be covered by tax notes.
“(The item) did not in any way alert the citizens of Amarillo that it was tied to the civic center, that the City was contemplating issuing $260,525,000 in anticipation notes or that the anticipation notes would be only paid by ad valorem taxes,” the documents said. “Additionally, (the item) mislead the public into believing that the notes would be paid by a combination of tax and revenue, which they would not.”
Texas Attorney General’s Approval
Fairly’s legal team also claims that because the notes had not been approved by the Texas Attorney General’s office, Fairly’s lawsuit is not the reason why the project has been delayed.
Officials cited the Note Purchase Letter from Frost Bank between the bank and the city of Amarillo in regards to the timeline for the use of the anticipation notes. The letter states that prior to closing, the bond counsel must issue its approving legal opinion and that the use of the notes is also required to have been approved by the Attorney General’s office.
During her testimony, Storrs said that as of July 21, the office had not approved the use of the notes, therefore not completing the timeline set out by Frost Bank prior to closure.
“Because the requirements in the Note Purchase Letter from Frost Bank have not been met, Fairly has not caused delay,” the documents read.
How cost of the project will be impacted
Lastly, Fairly’s legal team outlined data that they claim shows that the city will not lose money because of the delay, but rather save it. Because of the shortened timeline caused by the lawsuit, even at a higher interest rate, Fairly’s team claims that the city could save more than $2 million, assuming that both the same timeline and same agreement with Frost Bank are in place.
“This evidence alone, in the form of simple math… is enough for the court to deny the City’s Motion for Security,” the documents state. “…Because there is no damage or cost, the bond is not necessary. The City failed to provide, let alone prove, any other calculation for damages or costs associated with Fairly’s ‘continued participation’ (in the litigation).”
What did the city of Amarillo’s team say?
In its brief, filed Wednesday afternoon, the city of Amarillo’s legal team said that Fairly failed to meet the three elements required to avoid paying a bond under chapter 1205 of the Texas Government Code. According to previous reports by MyHighPlains.com, those three elements that Fairly’s team had to prove were:
- A cause of action against the city of Amarillo;
- A probable right to the relief sought;
- A probable, imminent and irreparable injury in the interim
The city’s response to alleged violations of the Open Meetings Act
In the majority of its 20+ page brief, the city of Amarillo’s legal team pushed back against Fairly’s team’s claims that the city violated the Open Meetings Act. The city’s team stressed that the agenda gave sufficient notice under the act, having the date, hour, place and subject of the meeting and the Civic Center-related item on the agenda, along with the accompanying transmittal memo.
The city stressed that it was obvious that the public knew about the item on the agenda, with numerous people specifically talking about the Civic Center project during the May 24 meeting. In the city’s brief, the legal team referred to multiple citizens who referred to tax notes specifically during that portion of the meeting, with one saying, “(y)ou guys have found another loophole called tax notes for the Civic Center. Tax notes have some other requirements that… you’re probably overlooking…”
“Accordingly, Fairly’s contention that the Agenda was insufficient to apprise the public of the subject matter to be considered at the May 24, 2022 City Council meeting is belied by the evidence in the record,” the documents read.
The city’s response to the wording on the agenda item
In response to the wording on the agenda surrounding what kind of notes were being secured for the project, the city’s legal team said while Storrs admitted in her testimony that there was a typo in the agenda item, officials said the agenda was clear that the notes that the council was voting on was secured “in part, by taxes,” according to the city’s brief.
The legal team stressed that the title of the notes, “Combination Tax and Revenue Notes,” is a reference to the source of payment and security under chapter 1431 of the Texas Government Code and can be paid “from any combination of taxes and revenues.”
The pledge of taxes for the notes does not mean that the project will be paid solely by property taxes, the team stressed.
“…The title does not signify the amount of the taxes or revenues that are pledged to the payment of the notes,” the documents read. “…While the Notes are secured by a pledge of ad valorem taxes, whether they end up being repaid with these ad valorem taxes or if the debt is serviced by other means will not be determined until the City sets its tax rate for the year.”
According to the documents, chapter 26 of the Texas Tax Code requires that a city set a tax rate once per year, giving citizens the opportunity to comment prior to the city setting the rate. Year after year, the actual tax being collected by the city changes, as property values change and as the city’s budget changes.
Based on the city’s financial position each year, the way the city is paying on the debt caused by the notes fluctuates, officials said in the documents. Fairly’s team’s interpretation “would put the City in the impossible position of having to set with certainty the exact tax to be collected for years to come before knowing what the assessed property values would be for those years, and before setting its budget for each year.
What the city believes the amount of the bond should be
At the end of the brief, the city’s legal team reiterated that Fairly should be required to pay $5.9 million in a bond, based on evidence presented by Adams during his in-person testimony on July 21. The city’s team claims that Fairly’s team “failed to offer any evidence to rebut this number at the hearing, (therefore) it is appropriate for the Court to set the bond amount at $5.9 million.”
What did the Texas Attorney General’s office’s team say?
Through its documents, officials from the Texas Attorney General’s office said they are not taking a position on the matter, instead providing Sowder with information to help with the court’s decision.
In the documents, the team laid out the approval process for anticipation notes, explaining to Sowder what entities go through public securities, as well as the court’s role in a lawsuit filed under the Expedited Declaratory Judgment Act.
“…The court’s role in these casus is to assure that the bonding authority is lawfully exercised and that the revenues pledged to secure the bonds are lawfully available for that purpose,” the documents read. “…The AG’s sole statutory duty is to identify potential legal deficiencies with the bonds at issue.”
Officials with the office said that the office will “generally not approve securities that are in pending litigation.” Specifically with Fairly’s lawsuit, they said the office will not approve the city’s anticipation notes until the judge “validates them after a trial on the merits” of the notes.
On the topic of whether or not Fairly should pay a bond during what the city claims is a delay in the project, the Texas Attorney General’s Office stated that they have recommended in other situations that the court require a “nominal bond” or ultimately “postpone the issue so taxpayers can have their day in court.”
“Here, because trial is set for October, the Court could reevaluate the necessity of a bond after the trial, or grant a temporary injunction and postpone the issue until the bench trial and, if there is an appeal, or it is delayed past October, could set the bond then,” the documents read.
According to previous reports by MyHIghPlains.com, Sowder said during the July 21 hearing that the deadline for further documents to be filed in relation to this motion is 5 p.m. Friday. Sowder also said during that hearing that he expects to make a decision on this motion by Monday or Tuesday, the documents of which will be filed in Potter County District Court.