Two Galveston boards charged with overseeing a beachfront development at the center of a lawsuit on Friday agreed to replace a document that put the groups and the developer at the center of the legal challenge.

The new agreement between the Galveston Island Redevelopment Authority and the Tax Increment Reinvestment Zone 13 changes little from the 2014 plan that prompted the lawsuit, however.

Members of the boards that approved the agreements said they stand by their original deal, and its critics say they are still not satisfied that some planning of the development was done with public transparency.

The 2014 agreement is the subject of a lawsuit against the Redevelopment Authority, filed in 2016 by Galveston residents Jackie Cole, Elizabeth Beeton and Jos Wristers. The authority in 2014 approved an amended development agreement for Beachtown, a luxury development on the island’s East End, changing an agreement that was reached in 2002.

The lawsuit claims that the new agreement substantially changed parts of the deal without proper public notice after the authority met in a series of seven closed-door executive sessions.

Friday's agreement supersedes the 2014 agreement, according to the document. However, most of the language in the first amendment is present in the second.

Beeton and Cole both said they feared the approval of a new agreement would replace the first amended agreement and essentially moot their lawsuit.

“This is a sad day for the taxpayers,” Cole said. “This is costing the taxpayers millions of dollars.”

They had hoped the lawsuit would cause the redevelopment authority to re-examine issues around the zone from a clean slate.

Beachtown is being developed in Tax Increment Reinvestment Zone 13. A tax increment reinvestment zone, or TIRZ, is a special tax zone designed to spur development in an area. In one of these zones, developers build public improvements such as streets and drainage and are reimbursed by an increase in property taxes generated by the development. The city continues to receive the amount of tax revenue generated before the new development, while taxes on the new development values are used to pay for improvements.

The zone’s board and the Galveston Island Redevelopment Authority both passed off on the second amended agreement Friday. The redevelopment authority oversees the city's TIRZ developments.

The biggest change in the new agreement is the inclusion of an audit that was completed to settle a disagreement over $1.8 million in project costs that had not been reimbursed, Ware said. 

The new agreement is now effective and doesn’t need Galveston City Council approval, said Jim Ware, chairman of the redevelopment authority.

Still, the council is scheduled to discuss the issue at a meeting Thursday, according to a city council agenda posted on the city's website Friday. The agenda was posted after Friday's vote.

Beachtown has faced problems over its development agreement since 2012. A previous authority in October 2012 found Beachtown developer Tofigh Shirazi in default of an agreement to build a set amount of retail space, single-family housing units, multifamily housing units, retirement housing units and a hotel in the subdivision.

Shirazi contended that the authority misinterpreted the development agreement and said circumstances beyond his control, such as Hurricane Ike in 2008 and the housing market collapse in 2007, slowed progress.

In August 2013, the city council removed some authority members who were critical of Shirazi, including Beeton, and replaced them in the middle of their terms.

Beeton, Cole and Wristers’ lawsuit claims the authority’s agreement with the developer substantially changed over the course of seven closed-door meetings from January to July 2014. The public didn’t have the opportunity to contribute input to the changes, and the developer and authority agreed not to seek approval from the city council or other elected officials, the lawsuit claims.

Only TIRZ 13 board member Kevin Walsh, who is also the Galveston County treasurer, voted against adopting the new agreement.

“It’s inappropriate to change it in the middle of a lawsuit,” Walsh said. “I think we’re trying to do this to get around the posted agenda item thing the lawsuit is about.”

Walsh said he received a copy of the new agreement at the last minute. Shirazi countered that the board addressed every concern during the meeting.

The new agreement is not an admission that anything was incorrectly approved the first time around, Ware said.

"I think the board has always been satisfied that we followed all of the notice requirements and the open meeting requirements," Ware said. 

Samantha Ketterer: 409-683-5241; or on Twitter at @sam_kett 


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