Lubbock Power Grab

At the last Electric Utility Board meeting on March 20th, we learned that LP&L has sustained operating losses of 4.9 million dollars from September 1, 2011 to date. Operating losses are projected to continue without a rate increase because of wholesale power increases by Excel Energy which the City Council has not passed through to Lubbock citizens. If that news isn’t bad enough, now it appears that one member of the EUB cannot legally serve on the board because he has a conflict of interest. In a memo obtained by Lubbock Power Grab, City Attorney Sam Medina concludes that Carroll McDonald, a recent appointee to the EUB, cannot legally serve because of a conflict of interest. Medina’s memo is here.

The problem with the McDonald appointment is that Carroll McDonald receives $2,500 per month from the city as “deferred compensation” pursuant to a contract he signed in 2005 when he was a consultant for LP&L. Although Mr. McDonald is no longer consulting for LP&L, the city is still paying him $2,500 per month. According to Medina, McDonald’s appointment violates the City Charter which prohibits any member of the ECB from having an economic interest in the profits of any public utility operating in the city. Because the city pays McDonald $2,500 a month for his past services to LP&L, he is deemed to have an economic interest in the profits of LP&L and he is disqualified to serve on the EUB.

Despite Medina’s opinion that McDonald is disqualified from service as an EUB member, no action has been taken by the city or the EUB board to remove him from his appointment or to make a new appointment to the EUB board.

The City of Lubbock and Delbert McDougal will have a press conference tomorrow at the Pioneer Hotel (tentatively renamed Pioneer Condos) to announce the beginning of the construction of the underground utilities relocation for downtown, the Pioneer remodel and plans for a potential downtown movie theatre. According to an e-mail dated 1-20-2012 from former City of Lubbock Chief Financial Officer Andy Burcham, the announcement will serve as a kickoff to publicly celebrate the utility relocation project. A good overview of the downtown redevelopment project is contained in this letter written to AT&T by Rob Allison, former Assistant City Manager, on November 29, 2010.

To summarize the downtown redevelopment project, the City Council entered into a five year contract with McDougal in December 2008 for McDougal to act as the “master developer” of the Downtown Revitalization Action Plan. He receives $30,000 a month, plus expenses, for his services. During the past three years McDougal and the City have adopted a plan for the redevelopment, passed a comprehensive downtown zoning ordinance for the redevelopment and have adopted a three phase plan for relocating the utilities from overhead to underground. The projected time frame for the design and construction to relocate the utilities is ten to fifteen years. Phase one of the utility relocation project will be announced tomorrow and includes a “utility duct system” in which all of the utilities will be moved from their present location and placed in a giant underground duct. The first portion of the duct begins at Ave. Q and runs down Main Street to Ave. O. It runs the length of Ave. O south to 19th Street. It runs the length of Ave. O north to 4th street then proceeds east to Ave. L and then south for one block where it ends. Plans, funding and a timeline for the other two phases of the relocation project have not been released.

The problem with the project is that the City expects each private utility to pay for the cost of relocating its utilities from the present location, whether the utilities are underground or above ground, to the utility duct. The cost of relocating the utilities is substantial and some of the private companies impacted have raised questions about the project. Connie Wharton, a representative of Suddenlink, sent a list of questions about the project to Rob Allison on February 25, 2011. A copy of the questions and his responses is here. The important points raised by Allison’s response relates to the cost of the project and AT&T’s participation. For phase one of the relocation the City has appropriated 7.5 million in funds and has a grant for 1.5 million bringing the city investment to 9 million. AT&T has communicated to the City that it will cost 40 million to relocate its utilities for all of downtown and that the initial phase will cost 1 million. AT&T has refused to participate in paying any of these costs.

According to Allison, representatives of the City have met with AT&T representatives Cameron Monroe (Amarillo), Robb Thetford (marillo), Bob Garza (Richardson) David Nichols (President, Texas) and Joseph Cosgrove (Associate General Council) and have failed to reach an agreement on reimbursement. It appears that AT&T broke off negotiations with the city on April 6, 2011 by e-mail from AT&T representative Robert Digneo in which he states, “We are not in a position to absorb any of the costs of the telecom facility relocation in this project.” In response to the e-mail, Allison threatens to turn the city lawyers loose upon AT&T. After telling Digneo that the city intends to go forward with the project anyway, he says, “It appears this will become an issue with the attorneys. I will notify our Team of your position.” A copy of the e-mail is here.

It now appears that the city has two choices on how to handle AT&T. They can absorb the cost of the relocation which will cost taxpayers 1 million in the first phase and 40 million for the entire project, or they can sue AT&T to force them to reimburse. Neither choice is acceptable. Making taxpayers pay for the AT&T relocation is not an option because it is not fair to Suddenlink, Atmos Energy, NTS and others who have agreed to incur substantial costs for the relocation project for AT&T not to pay its share of the costs. Yet, the last thing the city needs is another lawsuit. At any given meeting of the City Council there are behind the door discussions of numerous lawsuits that never seem to end, including the infamous AAG suit that has been ongoing for almost six years and has consumed more than 3.5 million in taxpayer funds to pay attorneys. Just recently the city was sued for 9 million over the Republic Power Partners failed partnership with High Plains Diversified and lost on appeal of a lawsuit filed by an employee who claimed she was denied a promotion because of retaliation. That suit will cost $500,000 in damages in addition to the attorneys fees incurred to defend the losing effort. Needless to say, the city does not handle litigation well. Nonetheless, the City Council has decided to proceed with the project so taxpayers should gird up for another lawsuit and protracted litigation with a well funded and aggressive opponent. It is a 40 million dollar bet that the city cannot afford to lose, but probably will.

In a twist of irony that could only occur in the politics of our city, the Lubbock City Council met behind doors on March 5, 2012 to discuss the Republic Power Partners lawsuit filed against the city. Former judge Sam Medina, who as District Judge signed a judgment authorizing the WTMPA to form High Plains Diversified and gave it the ability to issue public debt, is now the City Attorney advising the City Council on how to defend Republic’s suit against the city; a suit which alleges that Republic invested 9 million in the power project only because it relied upon Medina’s ruling that it could issue public debt. Where else but Lubbock could this be happening?

Another twist of irony is the quote from Mayor Tom Martin regarding the lawsuit in today’s edition of the Lubbock Avalanche-Journal, “I think it’s totally without merit; we intend to obviously fight it.” This is the same Tom Martin who enthusiastically indorsed the Hi-Plains / Republic Power Partners deal only one year ago and told a local talk radio host that it was a good public-private partnership with little risk to the Lubbock taxpayer.

Republic decided to go ahead with the lawsuit even though it must be anticipating that the city will raise the “Kent Hance” defense to get the case thrown out of court. As most of you know, the Kent Hance defense came about when it was used by Tech in the Mike Leach suit against Texas Tech. Leach acknowledged that the general rule in Texas is that public entities like Tech are immune from suits for breach of contract. However, Leach alleged an exception to the rule stating that because Tech acted in bad faith in terminating him, immunity does not apply and he should be able to get a jury trial on the bad faith issue and if successful, the doctrine barring suit does not apply. The Court of Appeals wrote an opinion stating that regardless of how badly the public entity treats you, you still cannot sue them. The Texas Supreme Court approved the Court of Appeals opinion and refused to hear the case. Thus, the Kent Hance defense has been approved as a powerful new weapon that public entities will use when sued for breach of contract. Expect it to be raised early and often in this case.

My take on this case is that Republic Power Partners is not going to go away quietly. They have the money and time to fight the city on equal terms. And like most lawsuits in which the city is involved, expect to see this one hang around a long time sucking tax payer money and time from the city like a giant mosquito. The investors in Republic Power Partners are very rich and politically connected and don’t like to lose. And they really, really don’t like it when they are made to look foolish. Republic Power Partners feel like the city supported their deal when it was politically feasible to do so, and then pulled the rug out from under them at the first sign of political heat. Don’t underestimate Republic Power Partners’ ability to use their money and political power to shoot down the Kent Hance defense and get their day in court. If that day occurs, anything can happen.

North Overton’s signature street is Glenna Goodacre Boulevard. It is four lanes wide with a landscaped median in the middle and runs from University to Avenue Q. Curiously, the street narrows to two lanes one block before it reaches Avenue Q. The apparent reason for the sudden street narrowing is that when North Overton was being developed, the owner of the Travelers Inn chose not to sell his motel to developer Delbert McDougal at a price McDougal was willing to pay. The Travelers Inn sits in a prime location on the corner of Glenna Goodacre and Ave. Q. across from the Civic Center and is only a stones throw from the new Wal-Mart, a strip retail center and the new Walgreens drug store. All except the Civic Center were developed by McDougal.

When the City put in Glenna Goodacre Boulevard, it decided not to condemn the Travelers Inn to widen the road all the way to Ave. Q. It is my guess that the City realized it would be cheaper to just narrow the road to one lane each way for the single block occupied by the motel rather than purchase the motel and demolish it for a wider road. This was the correct decision and the proper use of taxpayer dollars because the narrowed road causes little inconvenience to drivers who use that portion of Glenna Goodacre. Most traffic on the street is toward the west closer to University and Texas Tech. The City also made the right decision for individual property rights. No government entity should take private property unless it is absolutely necessary for the public good. The City decided, when Glenna Goodacre was widened, that it was not in the public interest to take the corner where the Travelers Inn sits.

Somewhere along the way something or someone changed the City’s mind. In 2009, Mayor Tom Martin signed a resolution authorizing the condemnation of the Travelers Inn for the stated purpose of widening Glenna Goodacre Boulevard for one block to Avenue Q. The City hired Lubbock attorney Zach Brady to represent the City in the condemnation procedure and he filed suit against the hotel owner in 2010. A hearing was held before three private citizens as provided by law and the citizens determined that the property was worth in excess of $600,000. The City deposited the money with the Court hoping it could then immediately begin demolishing the motel. However, the owner appealed the award putting any demolition on hold.

On first glance, this all seems perfectly legitimate. The City apparently changed its mind and decided that Glenna Goodacre needed widening after all and that it would be a good and proper use of taxpayer funds to condemn the motel. But, as always when the City of Lubbock is involved, there is more to the story. While researching the downtown redevelopment contract, I ran across a couple of e-mails that shed a different light on the transaction. The first e-mail is from Delbert McDougal to Rob Allison, former Assistant City Manager. It is dated November 22, 2010. I will reproduce the e-mail here just as it was written:

Rob:

what is going on with the travlers inn?? can’t the city put some heat on the attorneys. this thing has gotten out of control. malouf is not happy nor am I. somebody needs to give zach a deadline??

Apparently when Delbert McDougal is not happy, the City of Lubbock is not happy.

Here is Rob Allison’s response. The e-mail is written to City Attorney Sam Medina with a copy to Delbert McDougal and Linda Chamales, an assistant city attorney.

Sam-as a follow up to our conversation yesterday. It has been several months since the condemnation hearing on the Travelers Inn was completed. It’s in appeal. Things are moving very slowly and I would like to ask for your help. First, could you check and see if their (sic) is some way to move the case forward at a faster pace. Second, the timing of this case becomes less sensitive if both parties could agree to demolish the building. The developer involved in a project with the adjacent property is not able to start a development until this case is settled or the property is demolished. This process has taken so long, I’m hearing this development may go away. Zach is aware of both of these issues. Let me know if you need more information.

Thanks for your help.

Several issues come to mind after reading the e-mails. The City of Lubbock is paying more than $600,000 in taxpayer funds for a corner of land for the stated purpose of widening Glenna Goodacre Boulevard to four lanes for a distance of only one block. Why is the project being done now? Is it a proper use of taxpayer money for such a short widening project? What is wrong with the street as it is currently designed? Also, why is a private developer involved in demanding that the City move faster on a road widening project? Was the road widening project just a subterfuge for the public paying to buy out the Travelers Inn so that McDougal could develop the adjacent property with Malouf Interests? If so, this is an illegal use of tax money. A public entity cannot condemn private property if the purpose is to benefit a private citizen. Private property can only be taken by a public entity if the purpose of the taking is to benefit the public. The e-mails seem to indicate that the real reason for the taking of the motel by the City was to benefit the adjacent property being developed by McDougal and Malouf. Nothing in the e-mails discusses the need to widen the road. The main push to complete the condemnation seems to be so that McDougal and Malouf can develop the pad for retail development.

Another troubling aspect of the e-mails is the apparent control that a private citizen has over an assistant city manager, the city attorney and a private attorney hired and paid for by the City. No citizen should have so much power that he can demand that a public condemnation project, paid for by taxpayer funds, proceed at a pace that suits him so that he can benefit from the public taking of private property. This is simply wrong.

Hopefully, this article will result in an investigation of the facts behind the sudden need to widen Glenna Goodacre Boulevard. If it is determined that the real reason for the condemnation was to benefit a private developer at taxpayer expense, then every effort should be made to hold those responsible for this decision accountable.

For at least two years officials with the City of Lubbock and its Mayor Tom Martin have stated that Xcel is no longer willing to provide wholesale power to LP&L after its contract expires in 2019. Golden Spread, which operates under the trade name South Plains Electric Co-Op, was also told by Xcel that it would no longer be provided power. SPEC has taken steps to build its own generating plant and to plan for its future power needs by building the new Antelope Generating Station near Abernathy which has the capacity to provide power to 55,000 homes. The Golden Spread Panhandle Wind Ranch near Wildorado will open later this year.

With the demise of the High Plains / Republic Power Partners ill-fated attempt to provide for Lubbock’s need for electricity after 2019, the question arises as to how Lubbock will provide electricity to its citizens. As readers of this blog will recall, the city paid Xcel more than market value for the lines and meters that serviced approximately 25% of the city. This was explained to us as a good deal and efficient use of taxpayer funds because the purchase price was “cheap.” Michael Giberson, an energy researcher and instructor at the Texas Tech Center for Energy Commerce in the Rawls College of Business, has stated that LP&L paid 87 million to purchase assets that Xcel valued at 64.2 million and questioned the price paid by LP&L. His blog is located at knowledgeproblem.com.

When the LP&L purchase was announced, some citizens raised concerns that the low electric rates in Lubbock were a product of competition between Xcel and LP&L and that with LP&L in a monopoly position after the new purchase, the price Lubbock citizens will pay in the future for electricity will increase. The city denied that rates would increase and continued to maintain that Lubbock would have the lowest rates in the state. The concerns of the citizens turned out to be correct. In March, the LP&L board voted to raise rates 11% across the board. However, when the increase was presented to the council, the recommendation was voted down and LP&L was forced to dip into its reserve funds for 4 million to subsidize the rate increase. Last month, LP&L again recommended a rate increase to the city council, this time 8.2%. Once again the council refused to raise rates and tabled the request for three months. The refusal of the council to pass on the rate increase is not surprising. The Mayor and three council positions are up for election this spring. Nothing would be more unpopular to voters than a large rate increase, especially when members of this council denied that creating a monopoly would increase rates.

Anyone who has an elementary understanding of economics could have predicted a rate increase for Lubbock customers. In the past, whenever Xcel wanted to raise rates, it would be necessary to negotiate with LP&L to get LP&L to raise rates at the same time or else Xcel would lose their entire customer base in Lubbock. Electricity is a commodity and no one is going to pay Xcel a higher rate if they can make a phone call and switch to LP&L at a lower rate. The market competition kept rates low. Now that Xcel no longer needs to compete with LP&L, it can raise rates at will. Of course, Xcel is nominally regulated by the Texas Utility Commission, but the PUC is a notoriously utility-friendly entity and Xcel has little trouble getting rate increases approved. In short, the lack of competition between Xcel and LP&L will result in dramatically increased rates, just as many citizens predicted. In fact, as discussed above, the increase has already occurred; it is just being postponed.

The LP&L purchase was completed in October 2010 and less than four months later Xcel increased its wholesale price 6.94 per average household. Another increase of 2.51 per average household will take effect in February 2012. For the time being, LP&L is absorbing the increases. But this cannot last and after the election next spring, expect the new council to immediately approve rate increases. This brings us back to the original question, where are we going to get power after 2019? I asked this question of the Mayor last week and he told me that he was in negotiations with a wholesale provider to provide power to the City after 2019. He would not tell me who the provider was because of a signed confidentiality agreement. However, it’s not hard to figure out with whom the Mayor is negotiating. There is only one wholesale provider in our grid and that is Xcel. An insider at the city confirmed that indeed, the Mayor is negotiating with Xcel for a contract after 2019. As it turns out, Xcel isn’t getting out of the wholesale power business; like a major league pitcher after a good year, it just wanted a new contract with a higher price. How much higher remains to be seen. Don’t expect any announcement until after the election.

For months the Lubbock Avalanche-Journal editorial board was silent on the High Plains/Republic Power Partners attempt to issue 1.5 billion in municipal debt to buy two Odessa power plants worth only 520 million. The editorial board was silent when High Plains filed for court approval of the plan; it was silent when Odessa legislators passed legislation in Austin taking away the tax exempt status of the plan, and it was silent when the Cities of Lubbock and Odessa hired attorneys to oppose the plan. It was not until a judge ruled that the formation of the partnership was illegal that the editorial board wrote its first and only editorial expressing its opinion of the deal.

By expressing its support for the “outside the box” thinking of Republic Power Partners, the editorial board expressed admiration for the “leveraging of private investment to create a project the freestanding HPDEC would own and could finance through public debt.” What the editorial board failed to mention was that Republic Power Partners would have walked away with 75 million in profit without putting any equity into the actual purchase price of the power plants. To the editorial board, this is “business acumen,” but to the rest of us it was a private company attempting to use pubic funds to enrich private investors. The City of Lubbock’s brief put it correctly when it stated: “This proposed acquisition is part of a plan to use special powers and benefits reserved for governmental entities to conduct private business transactions and enrich private parties.”

The Avalanche-Journal called the plan “stretching the law too far.” Putting aside the dubious nature of the partnership attempting to use pubic money to enrich private investors, the most troubling aspect of the entire plan was that the former head of the Lubbock Economic Development Alliance brought Republic and WTMPA together to create High Plains. LEDA is a tax payer funded corporation owned by the City of Lubbock and its board members are appointed by the city council. After the head of LEDA put the deal together, he resigned from LEDA and joined the Republic board as an investor and partner with High Plains and stood to benefit financially if the deal had been approved. This is a clear conflict of interest. No elected or appointed city official should use his governmental position for private financial gain. As the only newspaper in Lubbock, the Avalanche-Journal has a duty to serve as the public watchdog to expose such an obvious conflict of interest by a public official. By choosing to ignore the ethical breach, the A-J gives tacit approval to others who wish to engage in similar conduct in the future.

As citizens of Lubbock, we must be on guard for the next “new idea” to provide for Lubbock’s power needs in 2019. We are a city of 220,000 citizens with a monopoly market in which electrical rates are not regulated by the state or federal government. Because of the enormous potential for profits, this situation makes Lubbock a unique and tempting market for others who want to “think outside the box”. This blog will do what the A-J refuses to do. It will fairly, accurately and timely report on all future plans to provide electricity to our city.

Judge John B. Board of Randall County ruled today that the 2008 court ruling which created High Plains Diversified Energy Corporation was not valid and that W.T.M.P.A. did not have the authority to create High Plains. Because High Plains was illegally created, High Plains has no authority to issue 1.575 billion in bonds to buy two power plants in Odessa. The court dismissed the suit and effectively ended the purchase of the power plants. High Plains indicated to the court that it would appeal.

The long saga which began in January with the announcement by High Plains of its intent to purchase the two power plants ended in the court room today with a whimper and not a bang. And that is a fortunate thing for the taxpayers of Lubbock. My thanks to the Lubbock City Council and the Odessa City Council for protecting the citizens of their respective communities from this power grab.

Last week, the taxpayers of Lubbock began paying for lawyers on both sides of the lawsuit in which High Plains Diversified Energy Corporation seeks to issue 1.575 billion in bonds. On one side are the lawyers from the Houston law firm of Vinson & Elkins who were hired by the city to oppose the bond issue. On the other side are lawyers from the San Antonio law firm of Davidson and Troilo who represent WTMPA. The taxpayers of Lubbock will pay 100% of the legal fees to oppose the bond issue. The taxpayers of Lubbock will pay 85% of the legal fees to support the bond issue. How did this happen? It happened because the city is a member of the West Texas Municipal Power Agency and is obligated to pay 85% of WTMPA costs and expenses. Because the city has been forced to intervene and oppose the High Plains bond issue, it is now paying lawyers on both sides of the issue and the fight is shaping up to be a long and expensive one.

On one side of the suit are High Plains, Republic Power Partners and WTMPA who are supporting the authority of High Plains to issue the bonds and purchase the Odessa power plants. On the other side are the Cities of Lubbock and Odessa who oppose the bond issue and allege that High Plains was not legally created in 2008. It is not clear at this point where the Attorney General stands, but my guess is that he will join with Odessa and Lubbock in opposing the bonds.

Regardless of how the suit plays out, the taxpayers of Lubbock will be paying the bill, win or lose. This situation could have been avoided if the city had opposed the creation of High Plains in November 2008. The city should now correct its mistake by using this opportunity to terminate all relationships with the WTMPA. Membership in the WTMPA no longer makes economic sense for the City of Lubbock. The power interests of Lubbock verses the power interests of the cities of Brownfield, Tulia and Floydada have little in common. Lubbock is a growing city with a major university and a population of more than 229,000. The population of the other WTMPA cites combined totals less than 17,500. The non-Lubbock member cities have experienced dramatic population declines in the past 20 years and projections indicate that these population declines will continue in the future. The structure of the WTMPA governing board fails to recognize the huge disparity in population and economic power of Lubbock verses the non- Lubbock cities because it is made up of 3 members from Lubbock and 3 members from non-Lubbock cities. This 50/50 split does not accurately reflect the population or economic status of the WTMPA member cities. Lubbock’s unequal representation on the board was one factor in allowing the creation of High Plains to occur.

And unfortunately, this is not the first time that WTMPA has left Lubbock taxpayers holding the bag. In 2003 WTMPA owed Lubbock more than 5 million dollars and was accused of mismanagement. Back then, Tom Martin saw no reason for Lubbock to be involved in the WTMPA and advocated for Lubbock to pull out of the association. See the story here. Since 2003 Tom Martin has changed his position and does not support Lubbock withdrawing from WTMPA. He was right in 2003 and he is wrong now. The taxpayers of the City of Lubbock have the bills to prove it.

A Houston law firm hired by the City of Lubbock filed a trial brief opposing the High Plains bond issue stating that High Plains was illegally created and cannot issue 1.5 billion in bonds to buy two Odessa power plants. In blunt language, the filing sums up the position of the City of Lubbock and many of its citizens when it states as follows:

“This proposed acquisition is part of a plan to use special powers and benefits reserved for governmental entities to conduct private business transactions and enrich private parties. If the Court validates the bonds, the net effect will be that High Plains will have the legal authority to incur $1.5 billion of apparently insufficiently collateralized debt and the Dallas-based investment firm will receive bonds representing as much as $75 million in additional public debt.”

In brilliant fashion the City of Lubbock’s brief details how High Plains was illegally created in 2008 by the W.T.M.P.A. The City argues that because the WTMPA is a municipal utility rather than a municipality, it could not create High Plains as a municipal corporation because only a municipality has the authority to create a municipal corporation. The original court filing in 2008 which was approved by former Judge Sam Medina, has no legal effect, according to the City, because there was no real opposition to the filing making the court order an advisory opinion only.

The City brief is also highly critical of High Plains for filing a request for the court to approve the bond issue without first filing any of the necessary bond documents that are required by law to be filed, for attempting to perform acts outside of the bylaws which created High Plains and for failing to have customers lined up to buy the power produced by the two plants.

In response to the City of Lubbock’s brief, High Plains held a hastily called board meeting on May 18 without public notice or posting of an agenda, and approved the issuance of the 1.5 billion in bonds and the agreement to pay Republic 75 million to buy out its “interest” in the partnership. High Plains then filed the board resolution, the bond documents and the agreement with Republic in an amended filing on May 19, one day before the scheduled hearing. The first question the attorneys for Odessa, Lubbock and the Attorney General will be asking at the hearing on Tuesday is how High Plains could file a suit on April 18 asking for approval of 1.575 billion in bonds when its own board didn’t approve the issuance of the bonds until May 18 at a meeting that in all probability was illegally held because the public did not have proper notice of the meeting.

At the hearing on Friday, many members of the public did not attend because signs posted at the courthouse indicated that the bond hearing had been canceled. Despite the notice of cancellation, a hearing was held. Judge Les Hatch overruled a motion by the Attorney General to reset the hearing for a date later than Tuesday in order to allow the parties to respond to High Plains late filing. The court overruled the motion and ordered the hearing to proceed on Tuesday. Then, in a highly unusual move, the court stated that he knew some investors in Republic Power and for that reason he was removing himself from the case. This is unusual because when a judge believes he has a conflict and intends to remove himself, he doesn’t rule on pending motions. He leaves all matters for the new judge. Instead of following established procedure, Judge Hatch ruled in favor of High Plains having the hearing on Tuesday and then removed himself. The manner in which Judge Hatch found out the names of the investors in Republic Power also raises questions. When a judge acts as a fact finder, he can only consider the evidence presented at trial and the pleadings filed in the case. Unlike Federal court, Texas does not require corporations to disclose the names of interested parties when corporations file suit. High Plains has never listed the names of the Republic investors in its pleadings and no testimony was taken at the hearing on Friday regarding the names of the investors. The media has never posted the names of the Republic investors. It would be interesting to know how, when and in what manner the judge found out the names of the Republic investors.

I will update the blog on Tuesday after the hearing.

As reported by this blog earlier, High Plains filed suit on April 18, 2011 requesting court authority to issue 1.5 Billion in revenue bonds to purchase two power plants located in Odessa and for 75 Million in subordinate bonds to buy out the interests of its partner Republic Power. Its suit also requests that the court declare the entire transaction and operation of the plants to be free of government oversight and property tax. High Plains had smooth sailing without opposition when it was created by court order in 2008, and things do not appear to be any different this time around.

On May 6, 2011, on behalf of West Texas Municipal Power Agency, a San Antonio law firm filed a token petition in intervention in the suit to issue the bonds. In its pleadings, the WTMPA simply restates that it legally created High Plains in 2008 and that High Plains has authority to issue the bonds requested. In addition, WTMPA’s petition requests that the court issue an order that the financing documents issued by High Plains state in bold print that the indebtedness of High Plains is not the indebtedness of Lubbock or any other WTMPA city. This, of course, is nothing new. High Plains has always maintained these same legal positions making WTMPA’s intervention meaningless because there is no real dispute between the parties.

Not to be left out of the meaningless intervention business, the City of Lubbock hired one of the largest and most expensive law firms in the State to file the same type of intervention. According to the Avalanche-Journal, the Houston firm of Vincent & Elkins was hired to intervene in the bond suit and to ask for the same meaningless court declaration that the debts of High Plains are not the debts of the City of Lubbock. In 2007 the firm charged Dallas $300 an hour per attorney for its services. See what Dallas paid them here.

The net affect of both interventions is that the WTMPA and the City of Lubbock hired two expensive out of town law firms to rubber stamp the High Plains deal. Once again, the winners are High Plains and Republic and the losers are the tax payers of Lubbock.

To understand why the court declaration that the debts of High Plains are not the debts of the City of Lubbock is legally meaningless requires that you understand how the legal system works. Our system does not issue “advisory” opinions. What this means is that when you file a suit against another, there must be a real issue in controversy. If there is not, then any declaration of the court is meaningless. This has been the law in the United States for many years and was recently restated in a Federal case out of the Eastern District of Texas styled Texas v. City of Frisco, 2008 WL 828055 (E.D. Tex. Mar. 27, 2008). In that case the State of Texas filed a declaratory judgment against the City of Frisco asking the court to declare that it did not have to preserve certain documents held by the Texas Department of Transportation that Frisco wanted preserved for a potential lawsuit.

The City of Frisco moved to dismiss the declaratory judgment action arguing that the State failed to plead the elements of any viable claim and was essentially asking the court for an advisory opinion concerning what action it must take to properly preserve the documents subject to the litigation” hold.” The court agreed, and dismissed the complaint.

The facts of this case are the same. Neither the City of Lubbock nor the WTMPA opposes the issuance of the bonds, the request for non-tax status or the request for no government oversight. The expensive out of town lawyers are simply asking for an advisory opinion that the bond debt is not the debt of Lubbock. Since there is no real dispute between the parties such an opinion is meaningless and will easily be set aside if the bonds go to default and a purchaser wants to hold WTMPA cities responsible.