AMARILLO, Texas (KAMR/KCIT) — After the legal teams for the city of Amarillo, Amarillo Businessman Alex Fairly and the Texas Attorney General’s Office presented their respective opening arguments Tuesday morning, the Amarillo Civic Center Complex funding-related lawsuit continued throughout the rest of the day with testimony, both from Amarillo City Council members and city of Amarillo staff.

According to previous reports by MyHighPlains.com, this litigation began Tuesday morning, leaving it up to retired Judge William Sowder in the 320th District Court of Potter County to decide whether or not Ordinance 7985, an ordinance that passed during the May 24 Amarillo City Council meeting that approved the use of $260 million of anticipation notes to fund improvements and the expansion of the Amarillo Civic Center Project, is legal.

What happened Tuesday morning?

According to previous reports by MyHighPlains.com, the opening arguments portion of Tuesday’s hearing gave each of the entities’ legal teams the chance to establish their opinions and their views regarding the overall case.

Through the city of Amarillo’s opening argument, Paul Trahan, a member of the city’s legal team, provided background on what he said were relevant topics, including whether or not the Civic Center-related ordinance was valid, whether the tax impact would surpass the cap provided in the Amarillo City Charter along with claims by Fairly’s team of Texas Open Meetings Act violations.

T. Lynn Walden, a representative from Fairly’s legal team, continued to stress through Fairly’s team’s opening argument their belief that through the use of anticipation notes in this case, the city of Amarillo used the wrong tool, for the wrong purpose, in the wrong way and in a secret fashion. Because of this, Walden said the city allegedly was imposing taxes on Amarillo residents without their permission for a project they did not support.

By acting as a representative from the Texas Attorney General’s office, Alyssa Bixby-Lawson questioned the city’s use of the finance statutes, stressing that their approach does not appear to be in the spirit of the law. She also spoke about the office’s opinion that there is no guarantee that the city’s request for tax notes would be approved, because of pending litigation with the outstanding petition.

What did representatives from the Amarillo City Council have to say?

During Tuesday’s proceedings, the following members of the Amarillo City Council testified as part of this bench trial:

• Eddy Sauer, city of Amarillo councilman;
• Howard Smith, city of Amarillo councilman;
• Cole Stanley, city of Amarillo councilman.

Sauer testimony

During his testimony, Sauer said he received the draft of Ordinance 7985 during the May 24 meeting, understanding at the time that it surrounded the use of tax notes for the Amarillo Civic Center project after meeting with representatives from city staff specifically surrounding the ordinance.

The fact that the May 24 meeting was the first time Sauer saw the draft of the ordinance was “not unusual,” Sauer said. Sauer also said it was not unusual for the Amarillo City Council to take up debt issuances at a single meeting, comparing the issue to the recent vote on improvements to the Amarillo City Hall in late 2021, a project which also used anticipation notes.

While it was spoken about that the city of Amarillo had the option to refinance the notes after they were approved for a longer period of time, Sauer told Fairly’s legal team when asked that it was not the city’s “plan” to do so, with only the seven-year tax notes payment schedule being listed in the ordinance itself. Sauer cited a number of other potential revenue streams for the project, including naming rights to the facility, a potential increase in hotel occupancy tax collected within the city along with revenues from the city’s fleet vehicles.

Smith’s testimony

As a member of the Civic Center’s subcommittee, Smith said he received the draft of Ordinance 7985 the night before in an email. Smith went on to deny that there were any violations of the Texas Open Meetings Act, with him saying there was never a time where a quorum occurred outside the May 24 meeting surrounding this particular agenda item.

Fairly’s legal team continued to question the motion Smith made during the May 24 council meeting, where he stated that “tax and revenue notes” were going to pay for the notes, a motion which Smith said was provided to him by representatives from the city’s staff and a statement he reviewed during the meeting. Fairly’s legal team continued to stress that the motion was ultimately incorrect because the notes used in this case were only tax notes.

Stanley’s testimony

The last councilmember who testified during Tuesday’s litigation was Stanley, who, like Sauer, said he received the agenda for the May 24 meeting the Friday before. However, in his testimony, Stanley claimed that he did not have a draft of the ordinance during the May 24 council meeting and did not have a copy until the next day, when Laura Storrs, the chief financial officer and assistant city manager for the city of Amarillo, emailed it to him.

Stanley testified that he voted against the ordinance without seeing it, saying that he did not request to see a draft of the ordinance until after the vote.

Stanley told members of Fairly’s legal team that he was first made aware of the city’s potential use of tax notes for this project during a meeting with city staff. Stanley said that he started asking questions to city staff during the informational meeting, along with his line of questioning during the May 24 meeting. Stanley stressed that he was not prepared to vote during the May 24 meeting, requesting at the time to table to measure.

After Stanley was questioned by Fairly’s legal team, the city’s legal team questioned whether or not Stanley had any communication with Fairly’s legal team during this litigation, a question which he denied. Stanley was also asked whether or not he discussed the Civic Center topic with Fairly prior to the vote. Stanley said he had a “brief conversation” with him, knowing that Fairly was involved in prior plans for the complex. Stanley said that the conversation consisted of letting him know what he knew at the time surrounding potential debt issuance and the potential use of tax notes.

At the end of the city’s questioning of Stanley, Stanley confirmed he was a member of the referring committee of community members that brought forward the Civic Center funding-related petition, aimed at preventing the ordinance from moving forward. Stanley said he was proud to have signed the petition.

What did representatives from city of Amarillo staff have to say?

Along with the three members of the council, a number of representatives from the city of Amarillo’s staff also testified during Tuesday’s proceedings. Those members of the city’s staff who testified included:

• Stephanie Coggins, city secretary for the city of Amarillo;
• Andrew Freeman, assistant city manager for the city of Amarillo;
• Laura Storrs, chief financial officer and assistant city manager for the city of Amarillo;
• Jerry Danforth, director of facilities and capital improvement for the city of Amarillo as an expert witness;
• Jared Miller, city manager for the city of Amarillo.

Coggins’ testimony

As the city secretary for the city of Amarillo, Coggins said she prepares for council meetings by putting together agendas and serving as a link between the Amarillo City Council and the citizens. To fill out agendas, Coggins said she receives information from city staff through agenda transmittal memorandums, which she takes that information from to create agenda items for a particular meeting.

Coggins confirmed that the agenda for the May 24 City Council meeting was posted publicly the Friday before the meeting, which follows the Texas Open Meetings Act. She said the memo centered on the tax notes was initially written by Storrs, using that memo to create the agenda item. After that, a number of city representatives were sent the agenda to make edits and Coggins could not recall if there were any edits made, a fact that Fairly’s team highlighted because the agenda continued to say “tax and revenue notes” rather than just tax notes.

The remainder of Coggins’ questioning centered around her verifying the authenticity of a number of documents, including various City Council meeting agendas, the resolution which canvassed the Nov. 2020 bond election along with documents surrounding the notes from both Frost Bank and Amarillo National Bank.

Bixby-Lawson centered her line of questioning on Coggins surrounding the Civic Center-related referendum petition. Coggins reiterated that the petition did not conform to the Amarillo City Charter, citing the issues with the affidavit of circulator along with there not being a printed/written copy of the ordinance included. Coggins said that the petition is no longer valid and the process has to start over.

Freeman’s testimony

Much of Freeman’s testimony centered around the role of the Tax Increment Reinvestment Zone No. 1 in this litigation. Freeman said that the TIRZ is used by the city of Amarillo as an economic development tool, encouraging growth in particular areas in the city.

Freeman confirmed that the Amarillo Civic Center Complex, and its subsequent projects, are located within TIRZ No. 1, giving the city the ability to approach the zone’s board with a request to amend its project plan, which the city did during its May 10 meeting with Ordinance 7980.

Freeman said the amendment ordinance only added a bulleted list of the planned projects to the TIRZ project plan. Freeman stressed there were no changes to the zone’s financial situation, with the cost of the projects being undertaken by the city of Amarillo.

The amendment to the TIRZ plan, Freeman said, gives the city flexibility to fund the project on the interest and sinking portion of the city of Amarillo’s tax rate, instead of the maintenance and operations side, under House Bill 1869. However, Fairly’s legal team stressed their belief that there was not enough notice to the public this amendment was related to the Civic Center project.

Storrs’ testimony

During her testimony, Storrs provided the legal teams with a timeline of how a tax entity approves a property tax rate year after year. She said the city of Amarillo’s property tax rate was recently set at $0.40 per $100 property valuation, a rate which did not include the potential impact of the tax notes.

While she expects the seven-year payout on the notes to potentially have a “significant impact” on Amarillo residents, she stressed, like Sauer, that other revenue sources were on the table, including naming rights and there being a third-party operator for the facility. Storrs also stressed that this is why discussions surrounding refinancing bonds did occur as well.

However, in data provided by Storrs, she said that she does not expect the property tax figure to reach the $1.30 per $100 of property valuation cap outlined in the city of Amarillo’s charter, even if the city paid for the whole project with property taxes over the seven-year payment plan.

Storrs said that if there was not any further change in home appraisal values or the maintenance and operations part of the tax rate, the highest she expected the property tax rate would get would be $0.82 per $100 property valuation.

Similarly to when Storrs testified in the “Security Against Suit” motion earlier this year, she once again discussed how she wrote the memo in the funding ordinance included on the May 24 meeting agenda. She said that she brought over some information from the similar City Hall ordinance passed by the City Council during the Dec. 14, 2021 meeting.

Storrs said that she did not intentionally do anything to mislead the public on the tax notes related item on the May 24 agenda.

Danforth’s testimony

Danforth was called as an expert witness in this litigation, providing insight regarding potential increased construction costs caused by the delay of the project. Danforth said prices have increased for items including structural steel, concrete and copper.

Danforth said he expects to see a 6% hike in construction costs for the project, saying that could potentially add around $15-15.5 million on the project.

Miller’s testimony

Miller was the last city staff member to provide testimony during Tuesday’s trial. During the testimony, he said he was “significantly involved” in the development of Ordinance 7985 including working with citizens groups to evaluate options for the project, present findings and facilitating deliberations.

In an email exchange between Miller and Amarillo Mayor Ginger Nelson, submitted as an exhibit during the litigation, it said that Nelson reached out to Miller after the city had received the final report from Garfield Public/Private on the complex and that she was ready to take action on the project.

In a response to that email, Miller mentioned the potential of using $260 million in tax notes for the project, the figure given to city officials by a lending agency related to how much the project could be done through a tax note.

However, Miller stressed that the initial proposal surrounding the project came from the citizens’ group and was forwarded to the Amarillo City Council by the Civic Center subcommittee. Miller said that it was not the recommendation by the subcommittee to move forward with the group’s recommendation, just that it be placed on the agenda.

Like many of the other city officials before Miller, he testified that he was a part of meetings with all the council members surrounding the ordinance. Miller stressed that the meetings were purely informational and there was no discussion on how the council members planned to vote. There were also no suggestions from city officials on how they should vote, Miller said.

What’s expected out of tomorrow’s bench trial?

Officials said at the end of Tuesday’s trial proceedings that Wednesday’s proceedings will begin at 9 a.m. in Potter County District Court. The city’s legal team said that the following witnesses are expected to conduct testimonies Wednesday:

• Freda Powell, city of Amarillo councilwoman;
• Ginger Nelson, city of Amarillo Mayor;
• Steven Adams, a financial advisor with Specialized Public Finance as an expert witness.

While Fairly had previously been listed as one of the city’s fact witnesses, Fairly was not listed at the end of Tuesday’s proceedings as a fact witness scheduled for Wednesday’s proceedings.

The only witness that Fairly’s team said they would bring forward on Wednesday is John W. Diamond, the Edward A. and Hermena Hancock Kelly Fellow in Public Finance and the director for the Center of Public Finance at Rice University. Diamond’s expert testimony is expected to begin Wednesday’s proceedings.

After witnesses testify in the case, all three entities are expected to conduct closing arguments and officials expect the case to be wrapped up by tomorrow afternoon. However, there is no indication whether there will be a ruling tomorrow afternoon or if Sowder will make his ruling via documents filed in Potter County District Court.