Texas State Capitol Building in Austin | Photo by Noah Dawson
A bill introduced by State Senator Kevin Sparks (R-Midland) in response to the lawsuit over funding for improvements of the Amarillo Civic Center was referred to the Texas Senate’s Local Government Committee earlier this week.
If passed, the bill, SB 1810, would prevent local governments from issuing anticipation notes for the same purpose as a bond rejected by voters within the previous five years. Anticipation notes would also be prohibited if the amount of the notes would total more than “five percent of the governing body ’s total outstanding bonded indebtedness at the time of the issuance,” or if “a petition signed by at least five percent of the registered voters of the issuer that protests the issuance of the anticipation note” is submitted to the taxing entity.
This bill appears to have been prompted by the City of Amarillo’s attempt to issue $260 million in tax anticipation notes to fund renovations to the Amarillo Civic Center last year. Businessman Alex Fairly then sued the city, citing similarities to the $275 million 2020 Proposition A bond, which voters had rejected. While Fairly won in court last year, the City of Amarillo has appealed the decision to the Seventh Court of Appeals.
Had Sparks’ bill been in effect when the city authorized the notes, the city would have had an even tougher time arguing their case in court due to the fact that the authorization was passed by the council less than two years after the 2020 Prop A election. The notes would have also failed the second portion of the test, as the $260 million notes equal to roughly half of the city’s outstanding bonded indebtedness, according to the Texas Bond Review Board.
The bill does offer some exceptions to taxing entities, such as in the case of a public calamity, protection of public health, or unforeseen damage to public property. Taxing entities may also be exempt if the issuance of the notes is “to comply with a state or federal law, rule, or regulation if the issuer has been officially notified of noncompliance with the law, rule, or regulation.”
The bill would also extend the timeframe when a taxing entity is barred from issuing certificates of obligation for the same purpose as a failed bond. Currently, a taxing entity must wait at least 3 years. Sparks’ bill would extend that to 5 years.
An identical bill has also been introduced in the state house by Carl Tepper (R-Lubbock). Tepper’s bill, HB 4808, was referred to the Pensions, Investments & Financial Services Committee.
Updated 3/23/2023 2:25 pm to reflect HB 4808 being referred to a committee