Judge Bill Sowder ruled that the city failed to provide sufficient public notice on a host of different components, including the ordinance ordering the issuance of $260 million in Tax Anticipation Notes (TAN).
He also found a lack of public notice for the addition of the civic center project to the Tax Increment Reinvestment Zone #1 plan, which allowed the city to shift the debt to the Interest & Sinking side of the tax rate equation. That incredibly convoluted distinction is important because had it been applied to the Maintenance & Operations side, it would have been subject to the state’s 3.5 percent tax increase limit without voter approval.
Sowder also ordered the city to pay $351,000 in attorney fees to plaintiff Alex Fairly, the Amarillo businessman who has dumped more than half a million dollars into fighting this debt issuance. The judge sided with Fairly on nearly every cause but has not issued an opinion explaining his reasoning on each item.
Last week, without getting into the merits of the case and claims against the city by Fairly, Sowder issued an order granting the city’s jurisdictional plea on certain contentions made by Fairly — specifically that the court had no jurisdiction to rule on the claim that the TANs were not properly classified as debt.
Regardless, unless Amarillo appeals further, the city is prohibited from following through on its debt issuance, leaving it back at square one for financing the project.
“I’m just so thankful for living in a country with this system,” Fairly told The Texan. “I made many attempts to talk with the mayor and her crowd on this but got nowhere and unfortunately this [lawsuit] was my only option left.”
“I’m glad it’s over, honestly. I’ve been in some fights before but this was exhausting.”
When asked for comment, the City of Amarillo provided the following statement: “The City received the court’s final judgement issued on October 25, 2022. We respectfully disagree with the judgement in this case, and we’re reviewing the decision with our legal counsel to determine our next steps.”
Two years ago, voters rejected a $275 million proposal from Amarillo for the project. Rather than wait the three-year moratorium on Certificates of Obligation (CO) after a ballot failure, this year, the council passed the issuance of $260 million in TAN.
TANs function like a bridge loan to compensate for a gap in revenues and are rarely if ever used to finance capital expenditures.
The city planned to issue the TANs and then refinance the debt with COs, another form of non-voter-approved debt, to pay off the sum over decades rather than a handful of years.
Going forward, the city may appeal or even try to issue the TANs again but fix the public notice violations that caused its downfall.
“We won because they did multiple things wrong and rushed the process, but the hole is there in statute for them to do this,” Fairly said. “What’s next is seeing if the legislature can block this opening. If we don’t get that, even with this win, then I wouldn’t feel like we’ve succeeded.”
Legislators have vowed to address this “most egregious abuse of Texas financing law” highlighted by Fairly’s suit, and the businessman said he has already been on the phone with multiple legislators about the victory and the prospect of following through during the 2023 session.
Read more about the trial that occurred earlier this month here.
Editor’s Note: This article has been updated to include comment from the City of Amarillo.
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Brad Johnson
Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.
