AMARILLO, Texas (KAMR/KCIT) — The legal teams for both the city of Amarillo and Amarillo Businessman Alex Fairly have begun to outline their respective arguments in the Texas Seventh Court of Appeals in Amarillo, emphasizing what portions of Retired Judge William Sowder’s judgment each side believes he got wrong.

According to previous reports by MyHighPlains.com, the city and Fairly both filed respective notices of appeal to the Seventh Court of Appeals in November 2022 after Sowder ruled in the Potter County District Court case in late October 2022.

On Feb. 1, both sides presented their opening briefs surrounding the case in the Seventh Court of Appeals.

In Sowder’s decision, he ruled that the city of Amarillo violated numerous Texas laws, including violations of the Texas Open Meetings Act, the Texas Government Code and the Texas Tax Code, in its process of issuing $260 million in anticipation notes to fund the expansion and renovation of the Amarillo Civic Center Complex.

Since then, both sides have sought clarification on the ruling by issuing notices of appeal, with the city stating at the time that the ruling creates an “area of confusion” on how entities can issue debt. The city, through its request to modify the overall judgment, argued each portion of Sowder’s decision at the time, challenging specific violations of Article VII of the Texas Constitution, Chapter 1431 of the Texas Government Code and Chapter 311 of the Texas Tax Code.

On the other side, Fairly’s team also challenged the ruling, stating that Sowder should have stressed in his decision that the city of Amarillo failed to impose a tax in the Civic Center funding-related ordinance, violating 1431.008(b) of the Texas Government Code.

In the respective briefs filed on Feb. 1, both sides argued in favor of oral arguments in this case, with the city stressing that it would help the court understand “the specialized principles of law at issue in this appeal…” and assist the court in “understanding the sea change in Texas Open Meetings Act and public finance jurisprudence that would result if the trial court’s final judgment, findings of fact and conclusions of law are affirmed.”

Fairly’s team argued that because there is no Texas Case “directly addressing” section 1431.008(b) of the Texas Government Code, the oral argument “may be of assistance…” with the statute’s “significant impact on governing bodies in Texas.”

City of Amarillo’s Appeal Argument

Through its portion of the appeal, the city of Amarillo is presenting the following questions to the Seventh Court of Appeals in its argument:

Did the trial court make a mistake in its final judgment and findings of fact and conclusions of law in favor of Fairly and against the city?
Did the trial court invalidate the funding ordinance and the anticipation notes despite:
The city not violating Texas law or the Texas Constitution;
The trial court lacking jurisdiction to invalidate the ordinance and the notes.

Did the trial court invalidate the funding ordinance based on the trial court’s invalidation of the TIRZ No. One-centered ordinance?
Did the trial court make a mistake in awarding Fairly attorney’s fees after the city filed its lawsuit under Chapter 1205 of the Texas Government Code?

Despite the questions the legal team presented through the more than 100-page document, officials said they believe the question at the heart of the case is straightforward.

“Did the city of Amarillo properly enact Ordinance 7985, which authorizes the issuance of tax anticipation notes to finance the project?” the city asks in the brief. “The question is not whether the city got it right – the wisdom of the city’s decision to use tax anticipation notes for that purpose was ultimately City Council’s decision to make. Rather, the question is whether the city did it right under Texas law and the Texas Constitution. The answer is unequivocally yes.”

From there, the city’s legal presented a series of arguments that were presented during the trial and through subsequent filings. Some of the arguments include:

Mischaracterization of Anticipation Notes

Officials with the city first said that the ruling made a mistake in concluding that the city’s anticipation notes violated Chapter 1431.008(a) of the Texas Government Code based on the mistaken characterization of the notes as bond anticipation notes.

Officials stressed that the requirement of voter approval only applies to bond anticipation notes, not the tax anticipation notes authorized in the Civic Center funding ordinance. The ordinance is clear, according to the city, that the notes approved are secured by an ad valorem tax and not by bonds.

While the city indicated that it may decide later to refinance the notes with refunding bonds, officials with the city argued that there is no legal authority that supports the requirement to host an election because the notes “might at some point in the future be refunded with refunding bonds.”

“If the trial court’s erroneous ruling is allowed to stand, it would effect a sea change in public finance law by requiring voter approval of tax anticipation notes whenever there is a mere possibility that an issuer might at some point issue refunding bonds,” the brief read, “even though the statute governing refunding bonds clearly states that no election is required in connection with their issuance.”

Civic Center Qualifications as a Public Work

The city’s legal team continued to argue that the Amarillo Civic Center Complex should be considered a public work, despite Sowder’s ultimate conclusion that the complex is not considered a public work.

As they have done numerous times and in a variety of mediums, the city argued that the Texas Legislature and Texas courts have broadly defined a “public work” as a wide range of governmental projects, including civic centers. Officials also cited Chapter 2252 of the Texas Government Code as defining a public work as including “the construction, alteration or repair of a public building,” through outlining requirements for governmental contracts.

In the argument, the city’s legal team also discussed its “alleged intent” to house a professional sports team in the Civic Center. While officials stress that there is not any evidence that there are any agreements with sports teams, they argued that there is no language in Section 1431 that states there is an exception to the Civic Center being named a “public work” while hosting a sports team in the venue.

City’s violations of the Texas Open Meetings Act

The last major argument the city’s legal team brought forward was that Ordinance 7985, along with the notes, is invalid because the written notice for the May 24, 2022 meeting where the ordinance was voted on ultimately failed to comply with the Texas Open Meetings Act.

The city’s team continued to argue that the written notice was “more than sufficient” to meet the act’s requirements, stating they gave written notice of the date, hour, place and subject of the meeting. Through a transmittal memorandum, attached to the agenda, more details surrounding the ordinance were provided, explaining that

The note’s proceeds would be used to renovate and improve the Civic Center;
Identified the city employee whom citizens could contact with questions;
Identified the requested action;
Identified the city staff’s recommendation;
Summarized the community engagement informed.

In the city’s view, Sowder mistakingly disregarded this particular transmittal memorandum, stating at the time that because it was attached to the back of the May 24, 2022 agenda, it was “not sufficient notice to the public because it would be unlikely that an average Amarillo citizen would know or spend time to look at the back of an agenda notice…”

“Regarding the trial court’s unsupported opinion that TOMA requires that the ‘average Amarillo citizen’ would have known and spent the time to read a transmittal memorandum included as part of a notice, the trial court does not cite any TOMA provision or case law imposing such a standard,” the brief reads. “The trial court’s rule also is flatly refuted by the only testimony from an ‘average Amarillo citizen’ at trial. Don Tipps – an Amarillo citizen who attended the May 24, 2022 meeting – testified that he read the entire posted agenda, including the transmittal memorandum that the trial court held an average citizen likely would not review… The trial court’s rule is also refuted by the undisputed fact that multiple Amarillo citizens actually attended the May 24, 2022 meeting and expressed their concerns regarding the funding of the project.”

Overall, the goal of the city’s legal team through this appeal is to reverse all portions of the original final judgment, along with the original findings of fact and conclusions of the law ruling. They are also seeking that Ordinance 7985 is legal and valid and that the notes used for the Amarillo Civic Center Complex project are “legal, valid and incontestable.”

For a full look at the city of Amarillo’s opening brief, check out the link below:

Fairly’s Appeal Argument

Compared to the city’s appeal, Fairly’s appeal is asking for clarification on one particular point of the judgment:

Did the court make a mistake in its legal conclusion that the city’s Civic Center funding-related ordinance complies with Section 1431.008(b) of the Texas Government Code, which requires that the city impose a tax in the ordinance to pay for the anticipation notes?

Officials with Fairly’s legal team said while Sowder ruled in Fairly’s favor, this specific point was ultimately not covered in the judgment.

“Fairly files this cross-appeal to challenge the denial of one of his requests for declaratory relief – a declaration that the City violated section 1431.008(b) of the Texas Government Code by authorizing anticipation notes that did not impose any tax purportedly pledged to pay for the debt,” Fairly’s brief reads.

The ordinance stated that a tax on all taxable property in the city was levied and would be annually assessed and collected “in due time, form and manner.” The way that Fairly’s team reads that portion of the ordinance is that while it says a tax will be assessed at some time, it did not officially “impose” a tax, giving the city a chance to calculate the tax in the future.

Throughout the trial, and through additional filings, officials with the city argued that a tax cannot be levied within this particular ordinance, because it occurs outside of the tax rate process. However, Fairly’s team argues that it is necessary for the city to specify a figure within the ordinance, giving members of the community the chance to see the specific tax impact.

“By requiring the governing body to impose the tax in the ordinance, the Legislature provides the citizens with the rights to notice and hearing required by the Texas Constitution and Texas Tax Code before the imposition of any tax,” the brief reads.

“The City argued that to impose any specific tax, the City had to wait until the fall when the City undertook its process of setting property tax rates,” the brief goes on to say. “Imposing a tax in the Ordinance, the City argued, would be burdensome. Accordingly, the City passed an ordinance that authorized anticipation notes and anticipated a future tax, without providing the citizens of Amarillo proper notice and hearing on the future taxes the City purported to ‘impose’ in the ordnance.”

Officials argued that Chapter 1431.008(b) of the Texas Government Code does not apply to all anticipation notes, but stressed that it does apply in this case, because the city pledged to pay the notes with an ad valorem tax. Because that portion of the code is written in the present tense, Fairly’s legal team said it includes “the assessment, levy and collection of a tax.”

“The words in section 1431.008(b) required the Ordinance to impose a tax, which includes the assessment, levy and collection of a tax,” the brief concludes. “Because the ordinance did not impose a tax, the trial court erred in failing to award Cross-Appellant (Fairly) a declaration that the Ordinance violates section 1431,008(b).”

For a full look at Fairly’s opening brief, check out the link below: