Local NewsTaxes & Spending‘Wrong Tool, Wrong Purpose, Wrong Time’: Trial on Amarillo’s $260 Million Debt Maneuver Begins

A trial on this issue began Tuesday as the parties presented evidence and questioned witnesses in front of Judge Bill Sowder in Potter County’s 320th District Court.

Opposing counsels presented their opening statements summarizing the respective cases. The plaintiff’s attorneys summarized their argument, “The city used the wrong tool for the wrong purpose at the wrong time.”

“This case centers on the secret deliberative process done behind closed doors to circumvent voter approval.”

The city’s attorneys countered that what’s important is only whether the required steps were followed. “This case is not about whether you agree with the issuance of the Tax Anticipation Notes, Proposition A, or the political positions on this,” Amarillo’s attorney stated.

“It is about whether the issuance was valid.”

In short, the case of Alex Fairly — the Amarillo businessman funding the lawsuit out of his own pockets, recently hospitalized with multiple broken ribs after a mountain biking accident — is that the city’s actions violated the spirit of state law and breached open meeting requirements.

In turn, the city contends that no open meetings laws were broken and that the spirit of the law is inconsequential — only that the law grants localities the ability to issue this category of non-voter-approved debt at officials’ deference.

After initially remaining neutral, the Office of the Attorney General (OAG) cannonballed into the case, appearing to side with Fairly.

“Something doesn’t feel right here,” an OAG attorney stated during opening arguments. “Something feels amiss about what the city is doing here and how it is manipulating statutes to fund this project.”

“It appears to be thwarting the will of the voters and the spirit of how the legislature intended for the statute to be used.”

In its pre-trial brief, the OAG finally came off the sidelines, taking the city’s maneuver to task in writing as its attorney did in person. The brief also referenced a previous lawsuit in response to Amarillo’s related attempt to issue $35 million in non-voter-approved debt to move city hall. That lawsuit countered the city’s rejection of a petition to place that item on the ballot in 2021; eventually, the city pulled that maneuver entirely.

Rather than adjust their plan after facing resounding defeat at the ballot box in 2020, the Amarillo City Council decided to press on unabated in its effort to relocate city hall and use the land to expand its civic center.

By a vote of 4 to 1, the council approved a Tax Anticipation Note (TAN) — debt that doesn’t require voter approval but is intended to act like a “bridge loan” between revenues flowing in.

The agenda had neither a fiscal note associated with the item nor a plan associated with repaying the debt down the road. And according to witness testimony, specifically from Councilman Eddy Sauer, most if not all of the council received the ordinance on the day of the vote and not “prior to the date” of the meeting as the city charter requires.

Councilman Cole Stanley, the only “no” against the ordinance, testified on Tuesday that he did not receive a draft of the ordinance until the day after the vote.

Sauer further testified that one plan presented to the council for repayment of this $260 million debt was to issue Certificates of Obligation — another form of non-voter-approved debt to be paid off over decades — to refinance the TAN debt.

In this maneuver, the council found a loophole in state tax code that has so far allowed them to avoid the three-year moratorium on pursuing a bond rejected by voters.

Some Texas legislators have taken notice of the loophole, and multiple have pledged to close it for good during the next session in 2023.

The trial will continue through Wednesday and can be viewed here.