AMARILLO, Texas (KAMR/KCIT) — The bench trial, which centered around the city of Amarillo’s use of anticipation notes for improvements and the expansion of the Amarillo Civic Center Project, came to an end Wednesday afternoon in Potter County District Court.
This comes after the legal team for the city of Amarillo, the legal team for Amarillo Businessman Alex Fairly and a representative from the Texas Attorney General’s Office came together on Tuesday for an in-person trial, where retired Judge William Sowder was tasked with making the decision on whether or not the city can move forward with an approved ordinance, using $260 million in tax notes for the Civic Center project.
What happened Wednesday morning?
After Tuesday’s hearings were full of both opening statements and testimonies from Amarillo City Council members and city of Amarillo staff, the Wednesday morning hearing consisted of more testimony, this time from expert witnesses and the final two members of the Amarillo City Council.
First, Sowder heard from two expert witnesses that gave differing opinions centering around the financial implications of the delay of the Amarillo Civic Center project. First, Fairly’s team called John Diamond, the director of the Center of Public Finance at Rice University, who spoke about the “massive tax increase,” a seven-year redemption schedule of the $260 million in tax notes for the project.
Diamond also challenged prior testimony surrounding increased prices and construction costs for the project, stressing his opinion that price increases have “subsided” and interest rates are expected to decrease starting in the middle or to the end of 2023.
Steven Adams, the city’s financial advisor for debt issuance from Specialized Public Finance, then provided a different view as the next expert witness. Adams said under the assumption that the same agreement remains in place with Frost Bank, and depending on whether or not the city wins the case or if there is an appeal, the delay could generate more than $3 million in interest, which could be added to the overall cost of the delay.
Next, Sowder heard from the two final members of the Amarillo City Council: Amarillo City Councilwoman Freda Powell and city of Amarillo Mayor Ginger Nelson. In Powell’s testimony, she was challenged by Fairly’s legal team regarding some misstatements she claimed she made surrounding meeting with city staff prior to the vote on the ordinance, first saying she did not meet with city staff in her deposition but recanting her statement during Wednesday morning’s hearing.
During Nelson’s testimony, many topics were covered including when Nelson was given a draft of the ordinance, how the $260 million figure was decided upon and why the figure was not included in the ordinance. Nelson was also asked about the use of the phrase “tax and revenue notes” on the agenda instead of it being “tax notes.”
In Nelson’s line of questioning, she was also asked to provide some insight, by Fairly’s legal team, surrounding the role of the Tax Increment Reinvestment Zone in this process. When she was asked about adding the project to TIRZ No. One, ultimately moving the tax impact of the Civic Center project to the debt side of the tax rate, Nelson said at the time she did not believe the debt incurred had anything to do with the TIRZ meeting and the related ordinance to amend its project plan.
Last testimony of bench trial
Prior to Wednesday afternoon’s closing arguments, Fairly’s legal team called one last witness serving as a perspective of a citizen in the city of Amarillo through this whole process. Don Tipps, an insurance agent, testified during Wednesday’s hearing, identifying himself as a property taxpayer and voter in the city of Amarillo.
Tipps, who testified that he spoke in the public comment portion of the May 24 Amarillo City Council meeting, said he first heard about the Civic Center agenda item from Amarillo Councilmember Cole Stanley. Tipps, who expressed his intention that he would like to run for Amarillo City Council, testified that when Stanley told him about the item, he was in disbelief, saying that he believed the city could not vote on a Civic Center-related measure. He stressed that he thought the city would abide by the November 2020 bond election vote, striking down the Civic Center-related bond.
Tipps testified that when he read the agenda item and the accompanying memorandum on the agenda, it was hard to discern, remembering that he did not believe there was any mention of the Civic Center within the text. In cross-examination, Paul Trahan, a member of the city of Amarillo’s legal team, had Tipps read the specific portion of the agenda that mentions the anticipation notes would be for the Civic Center project.
After this last testimony, the legal teams in the case rested and closed their specific arguments.
Prior to the entities presenting their respective closing arguments to Sowder, he requested that they specifically cover the following two topics:
- The role of the TIRZ No. One board, its significance and the timing of the project plan change;
- The status of the Civic Center funding-related referendum petition.
City of Amarillo’s closing arguments
Trahan referred back to his opening argument at the beginning of his closing argument on Wednesday saying, from the city’s perspective, the matter is as cut and dry as it was at the beginning of the trial – that the city of Amarillo satisfied the criteria for the notes to be verified under a Texas Government Code Chapter 1205 declaratory judgment.
Trahan said that this year alone, the city of Amarillo has issued anticipation notes for many projects, including the ongoing renovation of the Amarillo Hardware building for the new location of City Hall. He said the agendas and ordinances looked similar for these projects and there were no legal challenges.
Because of this, he emphasized that this particular case is of a “political nature,” something he stressed at the beginning of the trial that he did not think was relevant. Trahan said the trial centers around a citizen that took issue with one particular measure the Amarillo City Council took.
During his closing argument, Trahan reiterated that:
- The Civic Center is a public work and knows that it can’t be a public work if there is a sports team as a tenant of the facility;
- The ordinance issuing the tax notes imposes a tax, which will be outlined in the yearly process when the city goes through implementing the debt through a tax rate;
- Whatever tax is implemented because of the tax notes will remain under the rate cap outlined in the city charter;
- There was 0% evidence of violations of the Texas Open Meetings act at any of the meetings referenced during the trial.
Specifically, regarding the Civic Center-related referendum petition, Trahan said it does not apply to this particular ordinance and if authorized it would be unconstitutional, based on the impairment of contracts clause in both federal and state law. Trahan also cited Coggins’ testimony that the petition in its current state was already not authorized because of the issues with the petition’s affidavit of circulator, claiming in the process that 40% of the signatures on the petition were fraudulent.
Regarding the TIRZ involvement, Trahan said because of the Civic Center’s location, it is already within the TIRZ No. 1 zone. The city began the conversation with the board about the importance of amending the project plan to reflect what projects are within the boundaries of the zone. Trahan also clarified that the project’s tax impact would be allocated in the debt portion of the tax rate if it is located in the TIRZ zone. If the project were located outside the zone, it would be allocated on the maintenance and operations side of the rate.
Through the span of this litigation, Trahan said Fairly’s legal team has “thrown everything on the wall,” and hopes that the testimony and the exhibits given through the trial show that “none of it sticks.”
At the end of his closing argument, Trahan said that after months and years of public discussion, an extensive study with Garfield Public Private LLC and a recommendation by a Civic Center citizens committee, a duly elected City Council approved the tax notes. Trahan said the notes should be found that they were valid, legal and in the best interest of citizens.
Fairly’s closing arguments
Christopher Diamond, a member of Fairly’s legal team, mainly focused on the two topics highlighted by Sowder during the closing arguments. Because the subject was of particular special interest, Diamond said the TIRZ meeting, along with the subsequent meetings where the City Council had first and second readings on the ordinance that amended the TIRZ No. One project plan should have had heightened notice requirements under the Texas Open Meetings Act and under the Texas Tax Code.
Diamond claimed that the violations of the open meetings act made the TIRZ project plan amendment invalid, which, they said, would ultimately move the tax impact of the Civic Center project to the maintenance and operations side of the city’s tax rate. That portion of the tax rate, which has a 3.5% increase cap, would ultimately trigger a voter-approval election if the project was moved to that side.
In relation to the referendum petition, Diamond stressed that citizens are not arguing whether or not the use of the notes are legal in this case, it is about whether the use of tax notes for this project is right or wrong in the citizen’s eyes. However, Diamond did question the city’s reference to the contract clause since the contract never closed with Frost Bank in the closing of the tax notes.
Ultimately, Diamond compared the city’s use of the tax notes for the Civic Center project as live testing tires. He said if a person blows up a tire to its maximum amount, they start to see weaknesses in the product. The Civic Center project is not what Texas Government Code 1431 is for, Diamond said. He then mirrored the statement Alyssa Bixby-Lawson, the representative from the Texas Attorney General’s office, made in her opening statement, claiming that the city manipulated a series of statutes to go around voter approval for the project.
Overall, Diamond said that Fairly “generously” brought this action forward and that he raised a serious issue with this lawsuit. At the end of his closing argument, Diamond, on behalf of Fairly’s legal team, asked Sowder to rule that the city’s use of the tax notes was not a legal issuance of debt.
Texas Attorney General’s Office’s closing arguments
In her closing argument, Bixby-Lawson cited three things. First, Bixby-Lawson mirrored Fairly’s team’s argument, saying that there was no evidence given that the TIRZ process by the city of Amarillo was in compliance with the Texas Open Meetings Act and the Texas Tax Code, with no publication or notice of the meeting given, other than the agenda.
Bixby-Lawson also cited the conflicting testimony surrounding the “public use” of the Civic Center, highlighting Nelson’s testimony that Nelson had preliminary thoughts and conversations surrounding a potential sports team for the facility.
Lastly, Bixby-Lawson questioned the current validity of the notes under the ordinance’s current terms. She cited Adams’ testimony that officials with the city had not communicated with Frost Bank about how the terms of the ordinance stand through the span of this litigation. She said if there is a new deal with the bank, there would have to be a new ordinance approved for tax notes, making the current one irrelevant.
Ultimately, based on these factors, Bixby-Lawson said her recommendation was to deny the relief the city was requesting.
In an opportunity for rebuttal, Trahan challenged Bixby-Lawson’s argument surrounding the public use of the facility, saying that an idea in someone’s mind for a facility that has not been built yet, should not invalidate the notes.
Trahan also tackled the subject of the petition once more, saying that Section 23 of the city’s charter, the portion which outlines the petition process, does not apply. If it did apply, he said it would prevent the city from issuing debt in any regard, if a petition was submitted.
Trahan ultimately continued to make the point that politics are not relevant in this case, even though he said that it appears to have been involved. Trahan continued to stress that the notes were issued for a valid reason and there was no evidence, in any case, of violations of the Texas Open Meetings Act.
“It’s just politics, your honor,” Trahan stressed to Sowder at the end of his rebuttal.
After the city’s rebuttal, Diamond said that the city has the duty to have public meetings and should have had one surrounding the TIRZ project plan ordinance. He said that this finding was “fatal” to the city’s case.
At the end of the hearing, Sowder stressed the importance of the timeliness of a decision for this litigation. He said that he expects to make a decision in less than 10 days.
This is a developing story. MyHighPlains.com will update this article as new information becomes available.
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