Texas Senate passes Amarillo inspired bill to stop local governments from thwarting will of citizens

The Texas Senate passed an Amarillo inspired bill to stop local governments from thwarting the will of citizens. SB 2035 protects the will of the citizens by prohibiting a taxing entity from issuing public debt to finance a voter rejected project within five years of a bond proposition’s rejection. 

“The City of Amarillo should never had gone behind their voters back to finance a project that their voters overwhelmingly voted down. It’s an appalling example of an Elected City Council and Mayor thwarting the will of the voters!” Texas State Senator Paul Bettencourt (R-Houston) said.

In 2020, the City of Amarillo put a $275 million bond on the ballot to finance a convention center expansion project. The bond was outright rejected, with more than 60 percent of voters against the expansion project. 

Under current law, the City of Amarillo could have used the three-year moratorium for bringing up the expansion bond again to alter their messaging to present a better case to voters. Instead, in May of 2022, the City Council of Amarillo ignored the will of the voters and continued with the expansion project by issuing a non-voter-approved $260 million in Tax Anticipation Notes (TAN). 

Typically, a TAN is short-term tool used as a bridge for funding. It was the largest TAN ever approved in Texas history. For context, the second largest TAN was a $60 million TAN passed by the city of San Antonio. 

Thankfully, a district judge halted the $260 million non-voter-approved debt after Alex Fairly filed a lawsuit against the city.

In response to the City of Amarillo’s attempt to bypass the will of its voters, Senator Bettencourt filed SB 2035, which passed the Texas Senate with bipartisan support 20-10. SB 2035 prohibits a taxing entity from issuing Certificates of Obligation and TANs to finance a voter rejected project within five years of a bond proposition’s rejection. 

Senator Kevin Sparks (R-Midland), the sitting Senator for Amarillo, showed his support for SB 2035. 

"Senate Bill 2035 puts Texas on a path of long-term sustainable growth and restricts local entities from overriding the will of the voters. For those reasons, I was proud to vote for this bill," Sparks said.

SB 2035 is waiting to be received by the Texas House where it will need to be passed and then signed by the Governor before becoming law. 

“SB 2035 makes it clear: the will of the voters should never be ignored again!” Senator Bettencourt concluded.

Judge William Sowder ruled against the City of Amarillo in a lawsuit over the bond maneuver, voiding its approval of $260 million in non-voter-approved debt to finance a convention center expansion that voters rejected in 2020.

Sowder also ordered the city to pay attorney fees to Fairly, the Amarillo businessman who has dumped more than half a million dollars into fighting this debt issuance. 

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.

“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 after Sowder's ruling. “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 vowed to address this “most egregious abuse of Texas financing law” highlighted by Fairly’s suit.

According to the final judgment issued by Sowder:

Item No. 5 on the agenda notice for the May 5 TIRZ No. 1 Board meeting did not provide the public with sufficient notice of the subject of the meeting;

The actions that were taken by the TIRZ No. 1 Board on May 5 regarding Item No. 5, including the recommendation for the amendment of the TIRZ No. 1 project plan, are void;

Non-consent item No. 3D, including consideration of including components of the Amarillo Civic Center Complex in the TIRZ No. 1 project plan, on the agenda notice for the May 10 regular City Council meeting did not provide the public with sufficient notice of the subject of the meeting;

The actions taken by Amarillo City Council on May 10 regarding Non-Consent Item No. 3D, including consideration of and voting upon the inclusion of components of the Civic Center Complex in the TIRZ No. 1 project plan, are void;

Consent item No. 2E, including consideration for including components of the Civic Center Complex into the TIRZ No. 1 project plan on the agenda notice for the May 24 regular City Council meeting, did not provide the public with sufficient notice of the subject of the meeting;

Non-consent item No. 3L, including the tax anticipation notes made the subject of this lawsuit, on the agenda notice for the May 24 regular City Council meeting did not provide the public with sufficient notice of the subject of the meeting;

The actions taken by the Amarillo City Council on May 24 related to Consent Item No. 2E, including the amendment of the TIRZ No. 1 project plan and Ordinance No. 7980, are void;

The actions taken by the Amarillo City Council on May 24 related to Non-Consent Item No. 3L, including the tax anticipation notes made the subject of this lawsuit, and Ordinance 7985, are void; all under 551.141 of the Texas Government Code;

City of Amarillo Ordinance 7980 is void under 551.141 of the Texas Government Code;

City of Amarillo Ordinance 7985 is void under 551.141 of the Texas Government Code;

Amarillo City Council violated Chapter 311 of the Texas Tax Code by failing to publish a notice in a newspaper regarding amending the TIRZ No. 1;

The City of Amarillo Ordinance 7985 is void under 1431.008 of the Texas Government Code;

The tax anticipation notes authorized under Ordinance 7985 were not intended for authorized use under 1431.004 of the Texas Government Code as the new construction of the Civic Center Complex is not a public work and therefore, Ordinance 7985 is void;

Article II of the Amarillo City Charter applies to ordinance 7985;

The City of Amarillo’s request for declarations as to the validity and legality of the public securities identified as City of Amarillo, Texas, Tax Notes, Taxable Series 2022A are hereby denied;

The City of Amarillo, Texas, Tax Notes, Taxable Series 2022A are invalid and void.

"We respectfully disagree with the judgment in this case, and we are reviewing the decision with our legal counsel to determine our next steps," the City of Amarillo said in a brief statement after Sowder's ruling.