The Galveston City Council on Thursday needs to reject a twice-amended agreement that made sure a developer of a luxury beach subdivision was able to get an immediate $4 million gift of taxpayer money with even more in the pipeline.
In 2014, the Redevelopment Authority, or RDA, and Tax Increment Redevelopment Zone 13, or TIRZ 13, violated the Open Meetings Act while negotiating a new contract with developer Tofigh Shirazi. The board members even signed secrecy agreements that made sure there was no public input into the new contract that shed Shirazi of all responsibility and increased his take of tax dollars.
That agreement was cooked up after a then-Mayor Lewis Rosen and city council fired RDA board members who were trying to make Shirazi do what he said he would do under the Beachtown project plan he signed. The board had found that Shirazi was in violation of his agreement by not building the commercial and residential housing contracted in 2002. The city council then appointed new board members who crafted the new agreement in secrecy over six meetings.
Elizabeth Beeton, Jos Wristers and I filed a lawsuit against the RDA for the egregious open meetings violations hoping that the judge would void the new development agreement allowing a fresh start to negotiations with the developer that would be more friendly to taxpayers. However, the RDA decided to keep this bad deal. This time around the RDA learned its lesson by posting the vote on the second agreement properly, which will make our lawsuit moot.
If the city council rubber stamps this agreement then taxpayers will continue to subsidize a luxury housing development on the beach with no return on investment for an additional 25 years.
State law requires that although amounts in the project plan are estimates, those estimates “may not vary materially” from the plan. The agreement changed from the usual floating interest rate of about 3.25 percent to a fixed interest rate of 7.3 percent, and requires total payment of interest before principal. This over $4 million dollar change varies materially from the original estimate.
The new agreement also absolves the developer of responsibility for building the master planned community needed to generate the taxes that pay for the infrastructure. Even though Beachtown is a public-private partnership, the developer has said it is his right to build anything or not, and this new agreement concurs.
Not only is this a bad deal, it is an abdication of responsibility for oversight of taxpayer money and may leave the city or RDA open for future litigation.
The city general fund will not see any of the taxes from improvements until the TIRZ expiration in 2042. As it stands now, the taxpayers end up paying over $2,000 a day for interest to him for the next 14 years.
On Thursday, the council needs to reject this amended agreement or defer the vote on this agreement until they have time to review this properly.