UPDATE (5:17 p.m.)

In a statement to MyHighPlains.com, Amarillo Mayor Ginger Nelson said the following regarding the most recent development in the Civic Center Complex litigation:

“In this volatile environment of rising construction costs and interest rates, any action that delays a building project creates a substantial risk of costs increasing. On Friday, the City filed a Request for Relief in accordance with Texas State law designed to protect the Amarillo taxpayers from these increasing costs.
State law allows the City to ask for a surety bond in an amount sufficient to cover the increased cost to Amarillo taxpayers associated with delays caused by the civic center lawsuit. We are seeking to protect the taxpayers of Amarillo from project cost increases that have resulted from this lawsuit.”

Amarillo Mayor Ginger Nelson

Original Story:

AMARILLO, Texas (KAMR/KCIT) — In new documents filed in Potter County District Court earlier this month, the city of Amarillo is requesting that Amarillo Businessman Alex Fairly cover the increased costs of the Amarillo Civic Center Complex expansion and renovation project after the ongoing litigation delayed the project from being started. A hearing surrounding this motion is scheduled for 9 a.m. Thursday in Potter County District Court.

The city of Amarillo filed a motion on July 15 for “Security Against Suit” in the ongoing Civic Center-related litigation. Through this motion, according to court documents, the city is requesting for William Sowder, the judge in this litigation, to host a hearing giving Fairly the chance to “show cause why he should not be required to post a surety bond in an amount sufficient to cover the increased costs to Amarillo taxpayers for delays he has caused.”

According to the National Association of Surety Bond Producers, “a surety bond is a promise to be liable for the debt, default or failure of another.”

How did we get here?

According to previous reports by MyHighPlains.com, Fairly filed a lawsuit in Potter County District Court, challenging the legality of the Amarillo City Council approving the use of $260,525,000 in anticipation notes to fund the expansion and renovation of the Amarillo Civic Center Complex.

The city of Amarillo then filed its own lawsuit, asking a Potter County Judge to validate the use of those anticipation notes under Texas Government Code Chapters 1431 and 1205, according to previous reports.

Due to the similarities in what both trials were covering, Sowder decided to combine both lawsuits in Potter County District Court. Sowder also ruled that the trial will be hosted in front of a judge at 9 a.m. on Oct. 4 in Potter County District Court.

What do the new court documents say?

In the court documents, filed on July 15, the city of Amarillo’s legal team cited the Expedited Declaratory Judgment Act (EDJA) laid out in Texas Government Code Chapter 1205. According to previous reports by MyHighPlains.com, this portion of the Texas Government Code outlines the process of how an entity can issue public securities, like the proposed use of anticipation notes.

The city’s legal team stressed in the documents that a delay in issuing the public securities can often have “dire financial consequences for the issuer,” which in this case would be the city. Documents state that under the EDJA, the city is allowed to file a motion requesting that an opposing party, in this case Fairly, “post bond in an amount sufficient to cover any damages or costs that may occur to the taxpayers because of the delay caused by the continued participation of the opposing party.”

The city’s legal team said in the documents that the delay caused by the litigation has resulted in the city not being able to close on the anticipation notes, and their subsequent interest rate, by its deadline. This has the potential to result in increased interest rates and inflation impacting the future cost of the project.

“In this volatile and rising interest rate and inflationary environment, these delays pose a substantial risk of significant price increases and rising costs, that should not be borne by the taxpayers,” the documents read. “…To prevent this substantial harm to the public – in particular to the taxpayers of the city of Amarillo, the Court should set a bond in an amount shown at the hearing, which the city anticipates will be at least $5,900,000. By filing this motion, the city does not seek to prevent Mr. Fairly from an opportunity to be heard at the trial of this matter – it seeks only to exercise its right to pursue security as permitted by Chapter 1205.”

The documents said that this bond is required under the motion unless Fairly’s legal team, as the opposing party, must prove the following things to establish a right to a temporary injunction:

  • 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.

Officials from the city’s legal team said in the documents that they believe Fairly’s legal team will not be able to prove those things. If Fairly’s team is unable to show that they are entitled to a temporary injunction, the city’s legal team said that the Court must grant the motion and set a bond, which “(plays) an essential role in ensuring that chapter 1205 as a whole achieves its intended purposes.”

“In short, the EDJA’s bond requirement is necessary to ensure that an issuer of public securities is not forced to sit idly by watching interest rates and construction costs rise while a taxpayer with an axe to grind holds up the issuance of valid securities,” the documents read.

Officials from the city’s legal team said a bond amount of at least $5,900,000 will compensate the taxpayers for the increased construction costs and higher interest rates that are expected to occur over the course of the delay.

How did the entities respond to this new motion?

Fairly said this motion is a significant development in this litigation process.

“Oh yeah. It’s definitely significant in that if they convince the judge to require me to put up $6 million, you know, I obviously won’t do that,” Fairly said. “So, it’s significant in that if they succeed, it ends the process, which is exactly what I think they’re hoping to do with it.”

However, Fairly said his team is confident in the arguments they plan to make at Thursday’s hearing. They plan to argue to the judge why they believe this motion is not appropriate, fair or needed in this process.

Fairly said this was a possibility that was brought to him by his legal team even before the lawsuit process began. He said his legal team has an alternative plan as to what would happen next if the judge said Fairly would have to pay the bond.

In a statement provided to MyHighPlains.com on July 12, officials with the city of Amarillo said “We’re not going to have any additional information to provide on this situation until it’s resolved in the courts.”

The hearing on this matter is scheduled for 9 a.m. Thursday in Potter County District Court.

Update: A quote has been removed from this story due to lack of clarity.

This story is developing. Check with MyHighPlains.com for updates