Text of Grievance Against City Attorney Filed with State Bar of Texas

The following is the text portion of a grievance filed with the State Bar of Texas by Larry Akers against the City Attorney of the City of Austin in June, 2011, relating to positions the City Attorney has taken regarding the Town Lake Park Community Events Center Venue Project.

Summary

This complaint against the City Attorney of the City of Austin concerns malfeasance in the Law Department’s work related to the Town Lake Park Community Events Center Venue Project. The City Attorney has on multiple occasions issued opinions to the Austin City Council and City of Austin staff that are without basis or are complete misrepresentations of State of Texas law regarding venue projects. In doing so, it has asserted positions that, if true (which they are not), would establish that the City of Austin has conducted the venue project and related work illegally under state law for many years, exposing the City to challenges and sanctions that could endanger the project and its funding stream.

Specifically,

1) The Law Department has asserted, without any foundation in Council policy action and in direct conflict with years of City of Austin public presentations, boundaries for the venue project that false constrict the scope of the project. This in spite of the fact that well in excess of $1 million of venue revenues have been spent over a period of twelve years on both planning efforts and on actual construction outside their fabricated boundaries of the project (but within the area generally and historically understood to be the intended venue district). Had these expenses occurred outside the venue, a clear violation of Chapter 334 of the Local Government Code would have occurred.

2) The Law Department has plainly misrepresented Chapter 334 of the Local Government Code, asserting that ad valorem tax revenue may not be expended within a venue project district when that district is composed of dedicated City parkland, and that recent expenditures must be refunded from the venue to the City’s General Fund. This, in spite of the fact that significant ad valorem tax revenues have been spent within the same district for ten years.

By virtue of these two unfounded opinions in 2011, the Law Department sets conditions that would establish the City of Austin has acted illegally and exposed the City to legal action. The City Attorney, while knowing, or being easily able to ascertain, these actions had occurred, did not inform the City Council of these historical violations. In fact, as both opinions are unfounded, these violations never occurred.

Furthermore, the City of Austin Law Department, which is responsible for ensuring the propriety of the City’s budget, overlooked what appears to be a clear violation of Chapter 334 in the current City budget. Specifically, $130,000 of venue revenues are being transferred to the City’s Tourism and Promotion Fund, a use that has no relationship whatsoever to the goals or the physical reality of the venue project. I do not know whether this kind of transfer has been done in prior years, but no language of Chapter 334, which prescribes the eligible uses of venue revenue funds, would support such a transfer.

These recent opinions form a pattern by which the Law Department is attempting to conduct fiscal policy by seemingly ad hoc legal fiat, attempting to overrule policy formally established by public vote and by the prior actions of the City Council. The City Attorney, by virtue of the Law Department’s position of legal expertise and authority, is constraining City departmental staff from legitimate courses of action, thereby placing the City Council in the uncomfortable position of needing to heed their attorney’s advice even though it is at best questionable in the context of past City actions and an objective reading of state law, and at worst completely bogus.

The backdrop for all these maneuverings has been to defend the City of Austin Convention Center Department’s maximized use of the car rental tax authorized to support the venue project. Though the ballot proposition only specified that the car rental tax would fund venue project (including parkland) development and construction, the covenants governing the bond sale to finance a portion of the construction of the Palmer Events Center part of the project gave facility maintenance and operation (which was not specified as a valid use of the tax) priority over park construction (which was specified).

The City Attorney has strenuously defended the legal grounds for these terms of the bond covenants, using reasoning that completely avoids the fundamental question of whether the funding priority conforms to the ballot proposition passed by public vote and is therefore legitimate. Their reasoning is based solely on adherence to process involving the State of Texas Attorney General, a process wherein the City’s claim of this legitimacy were never to be questioned. By failing to address the apparent inconsistency between the ballot proposition and the fiscal direction embedded in the bond covenents, the Law Department has left the City Council uninformed, exposed to legal action that could invalidate the core financial instruments of the project, and with a false sense of security that the City’s contracts are legitimate when the question is far from settled.

The Opinion Regard Boundaries

Since the Town Lake Park venue project was enacted in November, 1998, the City of Austin has represented that it includes all the City of Austin parkland west of South First Street, north of Barton Springs Road, and south of Lady Bird Lake (then called Town Lake), including the area known as Auditorium Shores. The western boundary of the area has been portrayed at various times as including the parkland known as the Butler Pitch & Putt Golf Course west of the Union Pacific Railroad right-of-way and east of Lee Barton Drive, as well as the western portion of Auditorium Shores between the railroad and South Lamar Boulevard. Other promotional graphics indicate the district extends only to the railroad. But in every City publication, the Auditorium Shores tract between Riverside Drive and Lady Bird Lake has been considered part of the project.

No boundaries for the venue district have ever been formally established by City Council.

On April 7, 2011, the City Attorney represented to City Council and staff that the boundaries of the Town Lake Park venue project do not extend north of Riverside Drive, and therefore the City may not expend car rental tax revenues, which are devoted exclusively to the venue, in that area.

This assertion has no foundation whatsoever and represents an attempt to de-scope the project now, after the fact, and redirect its car rental tax revenue stream for other purposes.

The Law Department’s assertion that the Town Lake Park Venue Project extended only from Barton Springs Road to Riverside Drive prompted me to do exhaustive research into its physical definition.

Four Council actions comprise the definition of the venue. These are:

Resolution 19980902-017, adopted September 2, 1998, which adopts a City Manager recommendation “to finance the construction of the Town Lake Park Community Events Center with related parkland development and parking facilities through the use of additional revenues created on the imposition of a five percent tax on short term motor vehicle rentals.”

Ordinance 19980903-J, adopted September 3, 1998, which specifies Proposition 11 (the venue project definition, creation of car rental tax, bond authorization for construction) and Proposition 12 (Long Center lease authorization) and their ballot language.

Resolution 990729-30, from July 29, 1999, approves the Master Plan for the venue project developed by the EDAW partnership and directs the City Manager to initiate amendments to the City Code to accommodate the plan, which is incorporated as an Exhibit.

Ordinance 19991028-088, adopted October 28, 1999, which authorizes issuance of the project bonds, incorporating the bond covenants. (As this ordinance runs to 50 pages, it is included by reference with a web link below. Attached, though, are the critical pages specifying the funding priority I mention.)

None of these actions identifies the boundaries of the venue. Nor do any of them define the physical size of the venue. Neither do either of the bond packages (1999 and 2005), though as secondary documents those would not be define the venue or its geographical boundaries in any case.

A notion had crept into the folklore of the project in 1999 that the venue was sized at 54 acres. A departmental memo from Planning Director Austan Librach in May, 1999 (attached) had mentioned the 54 acre size, also passing along the Law Department’s feeling that the venue lands could extend north of Riverside Drive. But there is no foundation anywhere in City policy action for the 54 acre limitation.

The closest the City has come to actually specifying the boundaries is the scope of the Master Plan for the project, which included Auditorium Shores, the current Riverside ROW, and the parkland south of Riverside exclusive of the Long Center lease site. The plan prescribes park development for all these tracts, though the current use of the Butler Pitch & Putt was deemed appropriate. Prescribed improvements on Auditorium Shores extend west of West Bouldin Creek as far as the an extension to Lady Bird Lake of the alignment of Lee Barton Drive. This suggests appropriate boundaries for the venue would be the Lady Bird Lake south lakeshore, South First Street, Barton Springs Road, and the western edge of parkland bounding the line defined in part by Lee Barton Drive.

An exhaustive search of City documents establishes that the meets and bounds of the venue project have never been set and that the size of the venue has never been formally specified in a policy action.

Significant venue funds were expended in the development of the Master Plan, including the Auditorium Shores area north of Riverside Drive. Furthermore, in 2006-2007, the City spent $935,000 on project construction between Riverside Drive and Lady Bird Lake, building a lake water intake and distribution system integral to the park. Both the planning expenses and the construction expense would be an illegal use of venue revenues if Auditorium Shores were not part of the project. The Law Department by its opinion exposed the City to sanction for these supposedly illegal expenditures.

The City actions cited above may be found in their entireity on-line at:

Resolution 980802-17 Authorizing Rental Tax

Ordinance 980903-J Setting Proposition 11 Ballot

Resolution 990729-30 Accepting Town Lake Park Master Plan

Ordinance 991028-88 1999 Bond Package

The Use of Ad Valorem Tax Revenues on Venue Parklands

According to a Parks and Recreation Department staff briefing of a Parks Board committee on May 9, 2011, the Law Department maintained that ad valorem tax revenues may not be used to support parkland development or maintenance within the Town Lake Park venue project. Furthermore, the Law Department asserted and that the venue project must therefore reimburse the City’s General Fund for maintenance expenses it incurred on the Liz Carpenter Fountain that were triggered by changes in state guidelines for public water features and financed by a bond issue to respond to those changes. The reimbursements would come out of the pool of venue funds belatedly proposed for the next phase of Town Lake Park development.

Accordingly, even though the venue has never funded any maintenance expense for Butler Park, the Law Department is implying that the park’s maintenance cannot be supported from the City’s General Fund. Additionally, the suggestion is that even if all or part of Auditorium Shores were included in the venue (over the Law Department’s newly proffered objection that the venue does not include that tract), Auditorium Shores development and maintenance could not receive any funding support from ad valorem taxes, i.e., the General Fund.

The Law Department’s justification is supposely from Chapter 334 of the State of Texas Local Government Code, which governs venue projects.

Their assertion is completely false, as a straightforward reading of Chapter 334 clearly shows.

They apparently hang their hat on Section 334.041, “General Powers”, section (f):

§ 334.041. GENERAL POWERS.
…
(f) A municipality or county may not use revenue derived
from ad valorem taxes to construct, operate, maintain, or renovate
a venue that is part of an approved venue project. This provision
does not apply to:
(1) a venue authorized under Section 334.001(4)(D) or
(F); or
(2) a county or municipality for which the use of
revenue derived from ad valorem taxes to finance a venue project is
approved at an election held under Section 334.0241.

Here is what Section 334.001(4)(D) says:

§ 334.001. DEFINITIONS. In this chapter:
…
(4) “Venue” means:
…
(D) a municipal parks and recreation system, or
improvements or additions to a parks and recreation system, or an
area or facility that is part of a municipal parks and recreation
system;

The venue project is entirely on City of Austin dedicated parkland. Section 334.041(f)(1) specifically states that the ad valorem tax restriction does not apply due to the Section 334.001(4)(D) exemption.

Again, the Law Department was subverting the park component of the venue project on completely false grounds, illegitimately restricting the funds that had and could be applied to the park’s development and maintenance. Furthermore, the City Attorney again placed its client at risk by putting the City in the awkward position of already having since 2001 violated state law as they interpret it. This incorrect interpretation, if recognized, invites the City to be legally challenged regarding its actions, even if such a challenge would melt away under any reading of Chapter 334.

Chapter 334 of the Local Government Code may be found on line at http://law.onecle.com/texas/local-government/chapter334.html

The Tourism and Promotion Fund Transfer

In the City of Austin 2010-11 Approved Budget, Page 225 (attached) describes the Tourism and Promotion Fund, and states, “Additional revenue sources for the Tourism and Promotion Fund include interest earnings and a Palmer Events Center (PEC) Revenue Fund transfer of $.13 million.’

The Palmer Events Center is a core facility within the Town Lake Park Community Events Center Venue Project. The PEC Revenue Fund is a venue revenue fund, supported primarily by the car rental tax and revenues from the PEC and its parking garage. Eligible venue revenue expenditures are enumerated in Chapter 334 of the Local Government Code. No expenditure such as this one is described. The City of Austin 2010-11 budget may be found on-line at FY 2010-2011 Budget. The referenced Page 225 is on page 236 of this PDF file.

The Bond Covenants

The Law Department has offered a process-oriented justification (attached) for the propriety of using rental car tax revenues for the ongoing operations and maintenance of the Palmer Events Center.

Chapter 334 clearly allows operations and maintenance to be designated by ballot as an eligible expense of venue revenues. In this case, though, O&M expenditures were not authorized by ballot, which specified instead that the car rental tax would fund the planning, development, and construction of the venue. In no public discussion prior to the election or throughout the subsequent master planning process that culminated in July, 1999 was there any mention that car rental tax revenues could be used for this purpose. The historical precedent in the City was that bed tax revenues underwrote the operations and maintenance deficity of the public events facility, and the understanding was that this would continue to be the case.

That the bond covenants were adopted with the O&M funding taking priority over park construction is a sleight of hand that may be outside the purview of this grievance process. However, the Law Department’s steadfast opinion that operations and maintenance somehow fall under the definition of planning, development, and construction defies any understanding of the English language. Either their interpretation of the language is such, or they maintain that material inconsistency between a ballot authorization and its implementation is legal and acceptable. In this the Law Department would also be wrong.

Their defense seems to hinge on the State of Texas Attorney General’s blessing of the bond package. However, the Attorney General (AG) is not asked to rule on the consistency of the bond covenants with the ballot authorization. This falls under the AG’s explicit acknowledgement that the AG’s office took the City’s word on matters of fact (of which this was one) and made no attempt to independently verify such. The Law Department, by generalizing the AG’s certification as a blessing of all claims made, overreaches dangerously. A court might take a dim view of the attempt to include ongoing O&M as an element of construction. Yet the Law Department has exposed its client, the City, to an invitation to a court to force such consideration, which would place the entire financial underpinnings of the venue project at risk.