Amarillo voters thought they had made themselves very clear: They weren’t interested in funding a new convention center. Two years ago, they shot down a $275 million bond proposal. No thanks, they said.
To get around the voters, Amarillo city hall came up with a complex financing scheme that hinged on the issuance of $260 million in tax anticipation notes (TANs), a tool that is supposed to help governmental entities bridge short-term revenue gaps and that doesn’t require voter approval. With its financing secured, the city then allegedly orchestrated a series of events involving a tax increment reinvestment zone that it hoped would shift the debt from the maintenance and operations (M&O) side of the ledger to “the interest and sinking [I&S] portion of the city tax rate.” In so doing, the city was seeking to avoid going over the state-mandated 3.5% revenue limit which is specific to M&O but not I&S.
We wrote about the Amarillo scheme here in July.
None of this sat well with Amarillo businessman Alex Fairly who challenged the city’s elaborate scheme in court and was drug through the mud over it. But yesterday, he won.
In the case, a state district judge ruled decisively against the city and its machinations, thereby voiding the issuance and ordering officials to pay Fairly more than $350,000 plus an additional $25,000 in attorney fees.
“I’m just so thankful for living in a country with this system,” Fairly told The Texan.News. “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.”
Even still, city officials seemed unrepentant after the ruling.
“The City received the court’s final judgement issued on October 25, 2022,” officials said in a statement. “We respectfully disagree with the judgement in this case, and we’re reviewing the decision with our legal counsel to determine our next steps.”
Setting aside the city’s reaction, the entire episode reveals a gaping hole in how and why Texas allows cities to use nonvoter approved debt instruments. Especially in relation to projects that have been rejected by voters. Next session, state lawmakers need to strengthen the laws surrounding their use and purpose so that no other municipality is tempted to concoct anything similar in the future.