AMARILLO, Texas (KAMR/KCIT) – The legal teams involved in the ongoing Amarillo Civic Center Complex funding-related lawsuit in the 320th District Court in Potter County gathered in a digital fashion Monday morning, discussing the various motions brought forward to “modify, correct or reform the final judgment” after the final judgment was made in late October.
This comes after retired Judge William Sowder brought down the ruling on Oct. 25, stating that the city of Amarillo could not use $260 million in tax notes to fund the expansion and renovation of the Amarillo Civic Center Complex. Amarillo Businessman Alex Fairly challenged the legality of the tax notes in a lawsuit filed in Potter County in June, a suit which was eventually combined with an action brought forward by the city, asking for a judge to validate the use of the notes.
According to previous reports, Sowder ruled that the city violated the Texas Open Meetings Act in regards to two ordinances: Ordinance 7980, the ordinance which amended the Tax Reinvestment Zone No. One project plan to include the Amarillo Civic Center Project, along with Ordinance 7985, the ordinance which approved the use of the tax notes for the project. Sowder also ruled that the notes themselves violated portions of the Texas Government Code and the Texas Tax Code.
After this final judgment, the city asked for Sowder to reconsider the ruling through a motion to “modify, correct or reform the final judgment,” stating their belief that the judgment was “not supported by the law and/or the evidence.” After the city provided its motion, Fairly’s team provided its own motion to modify, asking Sowder to include a declaration that the city of Amarillo failed to impose a tax in Ordinance 7985, a ruling that Sowder did not cover in his final judgment.
During Monday’s virtual hearing, Sowder took the issues raised by both parties in order, giving the legal teams for both the city of Amarillo and Fairly one more chance to argue whether or not they agree with that respective portion of the judgment.
Involvement of the TIRZ No. One Board
Paul Trahan, a member of the city of Amarillo’s legal team, claimed that the actions of the TIRZ No. One board was not relevant in the lawsuit. This comes after Sowder determined the action of the TIRZ No One board was void under the Texas Government Code, stating that the public did not have sufficient notice of the subject of the meeting surrounding the amendment of the zone’s project plan.
Trahan said that the TIRZ is a separate entity from the city because it is made up of various jurisdictions. The action that occurred during the May 5 meeting of the TIRZ No One Board only requested that the Amarillo City Council officially take action to amend the project plan for the zone, including the Amarillo Civic Center Complex project as part of the zone.
Chris Diamond, a member of Fairly’s legal team, said that the law does not establish that the TIRZ No. One Board is a separate entity that the city, stating that it serves as a political subdivision of the city and does not have any authority independent of the city. The representative from the Texas Attorney General’s Office, Alyssa Bixby-Lawson, agreed with Fairly’s team about this, stating it appears that the board is under the city’s umbrella.
In a rebuttal, Trahan continued to stress that the only reason the TIRZ One project plan needed to be amended was to acknowledge that the Civic Center Complex was in the boundary, therefore reflecting the project’s inclusion and describing what activities are happening in the zone.
Diamond responded that Fairly’s legal team believes the city solely made the amendment to the project plan to move the tax impact from the Civic Center project from the maintenance and operations portion of the tax rate to the interest and sinking portion of the rate. Diamond claimed this aimed at “(running) up the taxes” as much as the city can and ultimately dodging an election for this matter.
Later in the hearing, during discussions on whether or not the city of Amarillo violated Chapter 311 of the Texas Tax Code, Trahan stressed that debt qualifies as debt, but he did not believe that the tax-related argument was “ripe” until the city sets its tax rate next fall.
However, Fairly’s team argued that under that portion of the Texas Tax Code, the amendment of a project plan within a TIRZ Board triggers specific notice requirements if an amendment incurred an increase in project costs within the zone. T. Lynn Walden, a member of Fairly’s legal team, said the amount the city was going to spend on a project within the zone did increase, which should have caused the city to have to host a public hearing and submit a notice of the meeting to the local newspaper of record, both of which did not occur.
Trahan argued that the amendment was only to the project plan for TIRZ No. One, with no action being taken regarding cost and financing in relation to the reinvestment zone. Trahan went on to say that Ordinance 7980 specifically stated that no action was taken in regard to financing this project.
Texas Government Code 1431 Violations
In the judgment, Sowder ruled that Ordinance 7985 violated Chapter 1431.008(a) of the Texas Government Code. During Monday’s hearing, Trahan argued that the ruling centers on the portion of the code surrounding bond anticipation notes, not the tax anticipation notes which were passed by the Amarillo City Council during the May 24 meeting.
Fairly’s team previously claimed that because the city had discussed refunding the bonds after the tax notes were passed by the City Council, this bond-related portion of the code applied. Trahan said that was not the case, stating that refunding bonds and bond anticipation notes are separate entities. Refunding bonds can be spread out over 40 years and are covered by Chapter 1207 of the Texas Government Code while bond anticipation notes have to be approved in an election, the rules of which are outlined in Chapter 1431.008(a) of the Texas Government Code.
Diamond continued to state however that Chapter 1431.008(a) of the Texas Government Code talks about all bonds, including refunding bonds, a fact that the Texas Attorney General’s office agreed with. Bixby-Lawson went on to say that the issuance of short-term tax notes with the intent to refund them to avoid an election is “incompatable” and “inconsistent” with Chapter 1431 of the Texas Government Code.
Because the city had not taken any action to move the refunding bonds forward, Trahan said there is no relevant issue as to whether or not the city was planning to refund the bonds after the tax notes were issued. Trahan said the only debt issuance relevant to the overall case is tax notes, which is covered in Chapter 1431.008(b) of the Texas Government Code.
Violations of the Texas Open Meetings Act for Ordinance 7980
In Sowder’s ruling, he said that the city violated the Texas Open Meetings Act in both the May 10 and the May 24 meetings of the Amarillo City Council surrounding Ordinance 7980, the ordinance that amended the project plan of TIRZ One.
Trahan said the agendas for that specific ordinance, which went through the first reading on May 10 and the second reading on May 24, could not have been clearer. The agenda includes the ordinance as a draft, a track changes document on where the amendment was in the project plan. The supplemental materials were part of the transmittal agenda memos included with the agenda for each of the meetings.
But because the Civic Center was not specifically stated in the agenda item, Diamond claimed that there was a lack of proper notice in the Ordinance 7980-related items, stating that it shows that the City Council was “bent on going around the voters.”
Violations of the Texas Open Meetings Act for Ordinance 7985
Sowder also ruled that the city of Amarillo violated the Texas Open Meetings Act during the May 24 City Council meeting surrounding notice for Ordinance 7985, the tax notes ordinance. However, Trahan challenged that ruling, stating that members of the community came to the meeting to speak about that specific ordinance.
Trahan cited the testimony that Don Tipps gave during the trial. Tipps, who is a member of the Amarillo community, testified in court that he saw the agenda, saw that the council was discussing an ordinance surrounding the Amarillo Civic Center project and attended the meeting to comment on it.
In response, Diamond said there was no proper notice given for the ordinance, specifically citing that the city did not include a figure of how much the anticipation notes would be. The Texas Attorney General’s Office agreed with Fairly’s team on this portion of the judgment.
Trahan argued that a figure was not included in the item, along with there not being a draft of the ordinance, because the item was still being negotiated until the last minute with Frost Bank. Trahan said the city could not have put an accurate number when the agenda was published because it was not known until the day before the May 24 meeting.
Civic Center’s status as a public work
In response to Sowder’s judgment that the notes were invalid because they were authorized for a project that was not an officially authorized use of tax notes per the Texas Government Code, Trahan argued that the Amarillo Civic Center Complex, in its current form and its updated form, is a public work.
Citing testimony from Laura Storrs, the city of Amarillo’s chief financial officer and assistant city manager, Trahan said the updated complex would be used in the same manner as how the current facility is used, including hosting rodeos, graduations, youth sports and the Amarillo Farm and Ranch Show. The city just needs more room and space in the facility to do what they are already doing.
In response to claims that the city was going to contact a private entity to serve as the main tenant of the facility, Trahan said there is no agreement that exists. However, even if an entity serves as a tenant, it is allowed under the Texas Constitution, as long as the primary purpose of the facility is for public use by the city’s citizens.
Walden argued that the Amarillo Civic Center Complex does not fit the definition of a public work under Chapter 1371 of the Texas Government Code, which pertains mainly to infrastructure projects. However, Trahan argued that the city issued tax notes to finance its City Hall project without opposition, a project that would not fall under Walden’s definition of a public work.
Legality/Validity of Tax Notes
To sum up the arguments previously made in Monday’s hearing, Trahan said the city has met its burden, based on law, that the Civic Center funding-related tax notes were legal. Trahan went on to say that the city is authorized to issue the notes and that a duly elected City Council approved the notes, which makes it legal.
Diamond said that the previous arguments, including the violations of the Texas Open Meetings Act and portions of the Texas Government Code and the Texas Tax Code, gave the court “ample grounds” to find that Ordinance 7985 was not a valid issuance.
Fairly’s argument surrounding if the ordinance imposed a tax
After the city presented its concerns surrounding the judgment, Walden brought forward Fairly’s motion to modify, stating Fairly’s claim that Ordinance 7985 did not impose a tax being pledged to secure the tax notes. Walden said the city is required to impose a tax in the ordinance, stating that simply pledging to impose a tax in the future does not cover the law.
Trahan said the city of Amarillo did everything it could do at the time in terms of imposing a tax when it passed the ordinance, going on to say that the ordinance clearly levies a tax. Trahan referenced testimony during the trial that the city only sets a tax rate once a year, not knowing what impact the city’s debt will have on the overall rate.
Bixby-Lawson, as a representative of the Texas Attorney General’s office, agreed with the city’s legal team on this point, stating that often, entities do not know the rate they can set at the time of approving a debt issuance.
What’s next?
At the end of the hearing, Sowder did not make a ruling on whether or not any of the portions of the judgment will be modified. Officials stated that Sowder will have 75 days from Oct. 25 to determine if the judgment will be modified from its current form or not. Sowder is also expected to release an order which would include Sowder’s factual findings and conclusions in the lawsuit.
