Dimitrios Pagourtzis

jenniferreynolds / JENNIFER REYNOLDS/The Daily News 

Jeth Jones

jenniferreynolds / JENNIFER REYNOLDS/The Daily News 

Nicholas Poehl

GALVESTON

The defense team representing Dimitrios Pagourtzis filed a motion of recusal Tuesday against 122nd District Court Judge Jeth Jones, arguing he showed bias and violated a state code and the U.S. Constitution in ordering a mental health evaluation for the accused Santa Fe High School shooter.

Attorneys Nicholas Poehl, Robert Barfield and Katy-Marie Lyles argue Jones showed bias and prejudice against Pagourtzis in violation of the Texas Code of Judicial Conduct and the Sixth Amendment to the U.S Constitution.

The Texas Code of Judicial Conduct demands an independent, fair and competent judiciary to interpret and apply the laws that govern citizens. The Sixth Amendment ensures defendants have the right to impartiality from a jury and the state.

The attorneys argue Jones violated Pagourtzis’ rights with last-minute notification of a March 8 status conference, by having the superintendent of a mental hospital evaluate Pagourtzis without notifying the state or defense and working to move his trial from Fort Bend County back to Galveston County.

Pagourtzis was committed Nov. 15, 2019 to North Texas State Hospital in Vernon, after state, defense and an independent expert, appointed by the state, concluded he was incompetent to stand trial, according to the lawsuit.

Pagourtzis was recommitted March 11, 2020 for a term not to exceed 12 months, after he was found to be incompetent again, according to the lawsuit. The commitment was renewed Feb. 23, 2021, Feb. 11, 2022, and Feb. 1.

The most recent competency report, issued Jan. 9, stated Pagourtzis should be recommitted for another 12-month term. The report was sent to the state and defense Jan. 23.

A meeting was held Jan. 26 among the defense team, District Attorney Jack Roady, Assistant District Attorney Kevin Petroff and Jones, according to the lawsuit. Jones said he would sign a recommitment order and appoint an independent expert to re-evaluate Pagourtzis, according to the lawsuit.

Poehl told Jones it was unlikely Pagourtzis would ever be declared competent if he was not restored to competency within about 18 months of commitment and treatment, according to the lawsuit. Jones told Poehl he was wrong and that Pagourtzis would be declared competent, according to the lawsuit.

The court signed documents Feb. 1 declaring Pagourtzis mentally ill, likely to cause harm to others and suffering from mental, emotional and physical distress and that this would continue for more than 90 days, according to the lawsuit.

Poehl learned in March from employees of the state hospital that Jones had contacted Superintendent Jim Smith and ordered a full competency evaluation by an outside expert, despite the Feb. 1 ruling, according to the lawsuit.

The defense and state were then blindsided March 8, with the announcement of a March 10 status conference, which didn’t allow ample time to arrange for Pagourtzis to participate via video conference, according to the lawsuit.

The defense argues Jones made factually incorrect statements about how often Pagourtzis was subject to evaluations and initiated the evaluation sooner than the 90-day threshold, according to the lawsuit.

Jones, who couldn’t be reached late Tuesday when the motion was disclosed, will have two options — to recuse himself or have the decision made by Administrative Judge Susan Brown, Poehl said.

JENNIFER REYNOLDS/The Daily News 

Bryson Frazier

Brian Maxwell

This article reflects corrections where it should have referred to the audit as one conducted by a third party.

GALVESTON

The Park Board of Trustees’ most recent audit report was riddled with miscalculations, causing city officials to question whether the board is properly spending hotel occupancy tax revenue.

Park board officials argue the organization’s books are in order, except for a calculation error that skewed some bottom lines.

City administrators argue the 181-page report, which details the park board’s 2021 fiscal year, is filled with errors and miscalculations.

City Manager Brian Maxwell in February sent park board Chief Executive Officer Kelly de Schaun and Chief Financial Officer Bryson Frazier a 29-page document outlining the math mistakes and seeking a corrected report by the end of this month.

City officials want to know whether the park board, which oversees island tourism and beach patrol, is spending hotel occupancy tax revenue, which is derived from fees collected from hotel and short term-rental stays, to earn a profit. They worry those funds aren’t being properly spent or tracked.

“You can’t transfer HOT to a HOT-eligible project, mix it with a few other dollars to have a surplus and say ‘That’s not HOT anymore,’” Maxwell said, summarizing the city’s concerns.

A formula error in the report caused grand total columns in the audit to add up incorrectly, although the individual fund totals were correct, Frazier said.

CLEAN AUDIT

“The park board has received a clean, unqualified audit opinion every year, and the results can be found on the park board website under financial transparency,” Frazier said. “I am working closely with city staff to ensure cohesiveness between the two organizations’ reporting structures.”

Representatives at Ham, Langston and Brezina, LLP, which conducted the audit, could not be reached for comment Tuesday.

City officials don’t know whether the park board has violated the charter in either of the described manners, but hope those questions will be answered in the audit correction, Maxwell said.

“We could not tell from what we saw,” Maxwell said. “Those are some things we put forth in our questions.”

It remains to be seen whether the park board will answer those questions, Maxwell said.

“We sent that to them not as a gotcha or a ‘you messed up’ thing,” he said. “We noticed these were issues and we would really appreciate it if you get this done correctly so we don’t have these errors carrying over year after year.”

ERRONEOUS AUDIT

Among the problems city officials found was an $111,238 miscalculation in the general government fund balance, according to Maxwell’s letter. The park board's third-party audit miscalculated its tourism development net position on Sept. 30, 2020, shorting it by $758,083 in hotel occupancy tax revenue, according to the letter.

In recent years, the park board’s annual comprehensive financial report has arrived so late is was impossible for city staff to apply the same level of care and due diligence as it applied to other information going into the city’s own comprehensive report, Maxwell wrote in the letter to park board officials.

“Last year, we received the park board’s financial report two days before we presented the city’s financial report to city council,” he wrote.

The errors and omissions range from simple math errors to structural errors in tables where columns do not add accurately across from left to right, according to the city’s letter.

“More substantive errors also hamper the transparency of the park board’s financial report with regard to interfund transfers,” according to the letter. “These errors are not of sufficient size and amount to be material when transferred into the city’s financial report, but apparently are of sufficient size and amount to pass materiality thresholds when it comes to the park board’s interfund transfers.”

The park board reported $1.8 million in interfund transfers from grant and hotel occupancy tax funds such as beach cleaning, Beach Patrol and sand replenishment, according to the 2021 audit report.

City officials originally requested park board officials deliver a corrected draft of their 2021 audit by March 10, according to Maxwell’s letter. City officials now expect it before March 31.

“The number of errors and/or omissions may result in a third-party user of your reports reaching inaccurate conclusions,” according to the letter. “The city highly recommends that you review the attached comments and schedules prepared by the city and its auditor with your financial auditor to determine what, if any, restatements or prior period adjustments must be made to accurately reflect the financial conditions as they existed at Dec. 31, 2022.”

REVENUE IN REVIEW

The park board takes in about $41 million in revenue, with money coming in from sources such as hotel occupancy tax collections, which amounted to about $8.5 million in 2021, according to the park board’s third-party audit of that year.

That tax, along with the $4.2 million taken in from state hotel occupancy tax collections, may be used by the park board for efforts like marketing the island’s tourism industry, paying for lifeguards and improving and maintaining beaches.

Any expenditure of that tax that generates a profit is referred to as “unrestricted” funds, meaning officials have more discretion over how to spend it. City officials in a March 9 workshop decided they want all unrestricted dollars in city coffers and could vote March 23 on a motion that would enact that will.

While money from sources such as parking fees for Dellanera RV Park — about $2.1 million in 2021 — are listed as unrestricted in the report, some are listed as neither restricted or unrestricted, but as “other revenue.”

The park board earned about $1.2 million in revenue from co-op advertising, contracts for service, reimbursements from county and city governments, insurance reimbursements and leasing space at the Park Board Plaza, 601 23rd St.

“That was the issue we had early on was trying to discern all those things,” Maxwell said. “The problem I have with it is that in my 30 years of government I’ve never used the term ‘profit.’

“It’s not a term that I would ever use. I would say that there are times when you run a budget surplus, but we never categorize it as a profit, and rarely is it recurring.”

LA MARQUE

After an hour-long debate Monday night, the city council tabled a vote to increase the cost of registration fees on rental property owners meant to combat slumlords and crime.

The proposal to join other Texas cities in increasing rental registration fees has sparked two long debates among city council members.

Although some members see the increase as a necessity to offset the costs of servicing multi-family dwellings, others argue the increase would be unfair to rental property owners.

The council on Jan. 9 also had tabled a vote on the proposed increase.

The city now charges owners of multi-family apartments, duplexes, triplexes and townhomes an application fee of $100 and $20 per rental unit or apartment.

The proposed ordinance would change that to an application fee of $30 and $100 per rental unit or apartment.

Some council members argue the increase, proposed by Councilman Michael Carlson, is necessary to push owners of large numbers of substandard rental properties out of the city.

“We do not want slumlords here,” Councilwoman Casey McAuliffe said.

“I understood this to be vital to a balanced budget,” she said. “It is not a too-cumbersome fee. We need to raise these fees, and we planned to raise them from the beginning.”

The city began contemplating the increases after noting a link between substandard housing and crime, Mayor Keith Bell said.

“We noticed that crime was happening in and around our dilapidated structures, around structures that needed to be torn down,” he said. “These were structures that were being leased to tenants and were not habitable.”

“These tenants were poor and, in many cases, were victims of or were associated with crimes,” he said.

At least 20 other Texas cities, such as Houston, Dallas, Fort Worth and Arlington, are adopting similar rental registration ordinances, according to the University of Texas School of Law.

The first reading of the rental registration program ordinance was approved by La Marque city council in May 2018.

Since then, the city has been processing rental application fees, and has since never denied an application, Kathleen Van Stavern, development services director of code compliances said.

The matter of proposed new rates is expected to come up again at a future meeting.

WASHINGTON

The Federal Reserve is facing stinging criticism for missing what observers say were clear signs that Silicon Valley Bank was at high risk of collapsing into the second-largest bank failure in U.S. history.

Critics point to many red flags surrounding the bank, including its rapid growth since the pandemic, its unusually high level of uninsured deposits and its many investments in long-term government bonds and mortgage-backed securities, which tumbled in value as interest rates rose.

“It’s inexplicable how the Federal Reserve supervisors could not see this clear threat to the safety and soundness of banks and to financial stability,” said Dennis Kelleher, chief executive of Better Markets, an advocacy group.

Wall Street traders and industry analysts “have been publicly screaming about these very issues for many, many months going back to last fall,” Kelleher added.

The Fed was the primary federal supervisor of the bank based in Santa Clara, California, that failed last week. The bank was also overseen by the California Department of Financial Protection and Innovation.

Now the consequences of the fall of Silicon Valley Bank, along with New York-based Signature Bank, which failed over the weekend, are complicating the Fed’s upcoming decisions about how high to raise its benchmark interest rate in the fight against chronically high inflation.

Many economists say the central bank would likely have raised rates by an aggressive half-point next week at its meeting, which would amount to a step up in its inflation fight, after the Fed implemented a quarter-point hike in February. Its rate currently stands at about 4.6 percent, the highest level in 15 years.

Last week, many economists suggested that Fed policymakers would raise their projection for future rates next week to 5.6 percent. Now it’s suddenly unclear how many additional rate increases the Fed will forecast.

With the collapse of the two large banks fueling anxiety about other regional banks, the Fed may focus more on boosting confidence in the financial system than on its long-term drive to tame inflation.

The latest government report on inflation, released Tuesday, shows that price increases remain far higher than the Fed prefers, putting Chair Jerome Powell in a tougher spot. Core prices, which exclude volatile food and energy costs and are seen as a better gauge of longer-run inflation, jumped 0.5 percent from January to February — the most since September. That is far higher than is consistent with the Fed’s 2 percent annual target.

“Absent the fallout from the bank failure, it may have been a close call, but I think it would have tipped them towards a half-point (rate hike) at this meeting,” said Kathy Bostjancic, chief economist at Nationwide.

On Monday, Powell announced that the Fed would review its supervision of Silicon Valley to understand how it might have better managed its regulation of the bank. The review will be conducted by Michael Barr, the Fed vice chair who oversees bank oversight, and will be publicly released May 1.

A Federal Reserve spokesperson declined to comment further.

Elizabeth Smith, a spokeswoman for the California Department of Financial Protection and Innovation, said, “We are actively investigating the situation and conducting a thorough review to ensure the Department is doing everything we can to protect Californians.”

By all accounts, Silicon Valley was an unusual bank. Its management took excessive risks by buying billions of dollars of mortgage-backed securities and Treasury bonds when interest rates were low. As the Fed continually raised interest rates to fight inflation, leading to higher rates on Treasurys, the value of Silicon Valley Bank’s bonds steadily lost value.

Most banks would have sought to make other investments to offset that risk. The Fed could have also forced the bank to raise additional capital.

The bank had grown rapidly. Its assets quadrupled in five years to $209 billion, making it the 16th-largest bank in the country. And roughly 94 percent of its deposits were uninsured because they exceeded the Federal Deposit Insurance Corporation’s $250,000 insurance cap.

That percentage was the second highest among banks with more than $50 billion in assets, according to ratings agency S&P. Signature had the fourth-highest percentage of uninsured deposits.

Such an unusually high proportion made Silicon Valley Bank highly susceptible to the risk that depositors would quickly withdraw their money at the first sign of trouble — a classic bank run — which is exactly what happened.

“I’m at a loss for words to understand how this business model was deemed acceptable by their regulators,” said Aaron Klein, a former congressional aide, now at the Brookings Institution, who worked on the Dodd-Frank banking regulation law that was passed after the 2008 financial crisis.

The bank failures will likely color an upcoming Fed review of rules that set out how much money large banks must hold in reserve. Barr said last year that he wanted to conduct a “holistic” review of those requirements, raising concerns in the banking industry that the review would lead to rules forcing banks to hold more reserves, which would limit their ability to lend.

Many critics also point to a 2018 law as softening bank regulations in ways that contributed to Silicon Valley’s failure. Pushed by the Trump administration with bipartisan support in Congress, the law exempted banks with $100 billion to $250 billion in assets — Silicon Valley’s size — from requirements that included regular examinations of how they would fare in tough economic times, known as “stress tests.”

Silicon Valley’s CEO, Greg Becker, had lobbied Congress in support of the rollback in regulations, and he served on the board of the Federal Reserve Bank of San Francisco until the day of the collapse.

Sen. Elizabeth Warren, a Democrat from Massachusetts, asked him him about his lobbying in a letter released Tuesday.

“These rules were designed to safeguard our banking system and economy from the negligence of bank executives like yourself — and their rollback, along with atrocious risk management policies at your bank, have been implicated as chief causes of its failure,” Warren’s letter said.

The 2018 law also provided the Fed with more discretion in its bank oversight. The central bank subsequently voted to further reduce regulation for banks the size of Silicon Valley.

In October 2019, the Fed voted to effectively reduce the capital those banks had to hold in reserve.

Kelleher said the Fed still could have pushed Silicon Valley Bank to take steps to protect itself.

“Nothing in that law prevented in any way the Federal Reserve supervisors from doing their job,” Kelleher said.

jenniferreynolds / JENNIFER REYNOLDS/The Daily News 

The Island Community Center, 4700 Broadway in Galveston, last month was renamed after Walter Norris Jr., a former executive director of the Galveston Housing Authority.

jenniferreynolds / JENNIFER REYNOLDS/The Daily News 

A sign points people to Catholic Charities of the Archdiocese of Galveston-Houston’s Beacon of Hope Isle Market inside the Walter Norris Jr. Island Community Center, 4700 Broadway in Galveston, on Tuesday.

GALVESTON

Galveston Housing Authority might step up to provide something the island sorely needs — affordable workforce housing — but might have to demolish a community center used by numerous nonprofits to do so.

The housing authority has since the fall of 2022 been talking about housing designed for people who work in Galveston but can’t afford to live on the island, said Betty Massey, vice chairwoman of the Galveston Housing Authority.

“If you work on the island, you should be able to afford to live here,” Massey said. “There’s a group of people making this island function that can’t afford to live here.

“This will be for the medtech at UTMB, the housekeeper at a hotel or a waiter from your favorite restaurant.”

A thinning stock of rental housing and consequential increased prices force many Galveston workers to commute, Massey said. Workforce housing would help alleviate the problem, she said.

It might be possible to build such housing on what’s now the parking lot for the Walter Norris Jr. Island Community Center, 4700 Broadway, Massey said.

The authority on Feb. 27 renamed the center after its first Black executive director. The community center houses the authority’s offices along with various tenants including Catholic Charities of the Archdiocese of Galveston-Houston and Coastal Health & Wellness, the county health district’s clinic.

A workforce housing project might require demolishing the community center, however, Massey said, noting that no official plan had been formed to do that.

This is not the first time the Galveston Housing Authority has brought up the idea of demolishing the building.

In July 2020, the housing authority, citing costs, scrapped plans to replace some public housing units demolished after being flooded during Hurricane Ike in 2008 by demolishing the community center and constructing mixed-income housing there.

The community center, which takes about 9 acres, has a large parking lot that’s largely unused, Massey said.

“We’ve done parking studies, and on average, the parking lot has 70 cars in a sea of parking spaces,” she said.

At a housing authority meeting Monda, several people expressed concerns about demolition of the building, Massey said.

Linda Dailey, school director of FasTrac Job Training Center, which operates in the community center, was among the concerned.

Dailey signed a three-year lease agreement for space in the center in November, she said.

“None of us tenants knew anything about the housing authority wanting to demolish the building,” she said. “Even if they entertain the idea of tearing down the building, you’re not tearing down a building, you’re tearing down a community.”

The Catholic Charities has spent $200,000 renovating its food pantry, Dailey asserted.

“This is not a time to disrupt major community services,” Dailey said.

The concern was premature, Massey said.

“We have simply not made a decision about this,” Massey said. “We have to talk about potentially developing workforce housing for the community first. This is something that Galveston desperately needs.”

The Galveston Housing Authority will hold a public meeting at 3 p.m. March 27 to discuss the issue further, Massey said.