Officials in Amarillo, Texas, are weighing their options after a state judge rejected the city's plan to issue $260 million of tax anticipation notes for a civic center project.
In a ruling last week, Potter County District Court Judge William Sowder voided the city council's May 24 approval of the TANs after finding there was insufficient notice of the subject of the meeting.
The judge also ruled the use of proceeds from the TANs was not authorized under the Texas Government Code "as the new construction of the civic center complex is not a public work."
That code allows cities with a population of 80,000 or more to issue anticipation notes "to pay a contractual obligation incurred or to be incurred for the construction of a public work." Other uses include operating expenses or to address a cash-flow deficit.
Sowder also awarded the plaintiff, Alex Fairly, attorneys' fees.
"We respectfully disagree with the judgment in this case, and we're reviewing the decision with our legal counsel to determine our next steps," the city said in a statement.
Fairly, an Amarillo property owner and taxpayer, filed the lawsuit on May 27, claiming the city council approved the TANs without prior notice to residents "as to the terms of the debt and the taxes that would be imposed and pledged to pay for it."
The lawsuit also accused the city council of attempting an end run after voters in November 2020 rejected $275 million of bonds to fund various projects involving the civic center complex.
Using Amarillo as an example, the Texas Public Policy Foundation called for a legislative crackdown on nonvoter approved debt instruments.
"Cities cannot be allowed to circumvent the democratic process with creative public financing tools when they get a result they don't like," Robert Henneke, the foundation's executive director and general counsel, said in a statement. "It's time we made it clear that respecting the will of voters is not optional."
David Clark, a senior advisor for budget and tax issues in the office of State Sen. Paul Bettencourt, who chairs the chamber's committee on local government, said Fairly made lawmakers aware of Amarillo's plan to sell TRANs when he testified at recent legislative hearings.
"Both the current chairman of the ways and means committee and my boss are going to file legislation to restrict that practice so whatever happened in Amarillo would be very difficult if not impossible to do in the future," Clark said.
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