Open Letter to the Citizens of South Padre Island:

As you may be aware, Property Owners Who Care – South Padre Island, as an organization, and certain individuals, have filed a lawsuit relating to the recent action by the Board of Aldermen authorizing the Town to pay in excess of $5,000,000 for a mostly wetlands tract of land adjacent to the Birding Center.

The lawsuit that has been filed relates to a relatively narrow – but very important – point of law; namely, would the Town be paying more than fair-market value if it paid over $5,000,000 for the tract of land in question. (The Texas Constitution prohibits a municipality from paying more than fair-market value for an asset, as it is against the law to enrich a citizen at the expense of the taxpayers of a municipality.)

A summary of the Property Owners Who Care – South Padre Island lawsuit relates to whether the process that the Board of Aldermen followed was proper in determining that a value in excess of $5,000,000 constituted “fair-market value” for the tract of land in question. The major points questioned in the lawsuit are as follows:

• The appraisal that the Town relied upon was not conducted by a registered MAI (Member of the Appraisal Institute) appraiser.
• Were the “comparables” (i.e., other sales of comparable tracts of land) used in the appraisal proper for the mostly wetlands tract of land in question?
• The appraisal document itself contained a major “qualification” saying that the value quoted by the appraiser would change if the Corps of Engineers failed to grant a waiver for development of that portion of the tract considered to be mostly wetlands. Was this “qualification” to the appraised value properly considered by the Board of Aldermen when the figure in excess of $5,000,000 was selected as being the “fair-market value” of the property?
• Were the dates of “comparable sales” used in the appraisal timely?
• Were the “comparable sales” appropriate given the nature of the land the Town is considering acquiring (i.e., the land being purchased is mostly wetlands and the question is whether the comparable sales were mostly wetlands)?
• Is the current depressed state of the real-estate market reflected in the appraisal being relied upon by the Board of Aldermen?
• Did the appraisal upon which the Board of Aldermen relied take into account the sale price of the property in question when it was purchased two years ago by the party who is now proposing to sell the tract of land to the Town for over $5,000,000?
• Was the fact that the Cameron County Appraisal District carried this particular land parcel on its tax rolls at $585,994 properly considered when the Board of Aldermen determined that the “fair-market value” of the mostly wetlands tract was in excess of $5,000,000?

The points above relate to the very specific (and relatively “narrow”) question of whether the $5,000,000-plus purchase price represents the true “fair-market value” of the mostly wetlands tract of land being purchased. If the true “fair-market value” is in excess of $5,000,000, then it should be assumed that the Board of Aldermen is acting in the Town’s best interest in purchasing the land for that value. Alternatively, if the true “fair-market value” of the land in question is less than the $5,000,000-plus figure being assumed by the Board of Aldermen, then a purchase by the Town at that price would violate the Texas Constitution in that it is against the law for a municipality to pay more than “fair-market value” for an asset, as it would be deemed to “enrich” the individual who was selling the asset to the municipality.

There are other points that are relevant, however, that are not referenced in the lawsuit, and Property Owners Who Care – South Padre Island believes that these points are also important, as, in the aggregate, they constitute the “environment” in which this transaction was approved by the Board of Aldermen. “The rest of the story” is as follows:

• A valid question exists as to what constitutes good governance in the context of conflicts of interest. Query: Did personal, business and/or political relationships between the Aldermen who voted for this transaction and the seller of the property exist that would have made it appropriate and desirable for the conflicted Aldermen to recuse themselves from this vote?
• Those who voted in favor of the $5,000,000-plus purchase price also chose to finance the purchase price of the mostly wetlands tract utilizing Tax Anticipation Notes, as contrasted to utilizing General Obligation Bonds. (The vote on this issue was 3 “for” and 2 “against.”) The major difference between the two financing techniques is that Tax Anticipation Notes do not require a vote by the general public for approval, whereas General Obligation Bonds do require a vote of approval by the general public. Tax Anticipation Notes were created under the law to meet the needs of a municipality when a very short time period was involved (e.g., some form of “emergency” or a situation where extremely quick action was required by the municipality). There appears to be no urgency involved in this situation and, thus, a valid question exists as to whether the use of Tax Anticipation Notes is appropriate for this land purchase, as contrasted to the Board of Aldermen allowing the public to vote to approve whether the Town should issue General Obligation Bonds in excess of $5,000,000 to purchase the tract of land.
• While not a requirement, a “best practice” for municipal acquisitions of this nature is to obtain the services of more than one appraiser (i.e., possibly three appraisers) and average the values of those appraisals. In this case, only one appraisal was obtained – and the appraiser whose appraisal was used is not a registered MAI (Member of the Appraisal Institute).
• A valid point of interest is the fact that the appraiser of this tract and the seller of this tract office in close proximity to one another in the same strip center in the Town of South Padre Island.
• Lastly, while not a legal question, one has to ask the question of what is in the best interest of the Town of South Padre Island with respect to over $5,000,000 being spent for the purchase of a tract of land that is mostly wetlands. The $5,000,000 plus to be spent for a tract of land that is mostly wetlands is $5,000,000-plus that is not available to support other legitimate municipal needs or activities (e.g., beach renourishment, sidewalks or other municipal infrastructure, enhanced capabilities for the police and fire department, etc.).

There may be good and proper answers for all of the questions above and there is no proof that a conflict of interest exists amongst any party. However, regardless of the answers, the questions above are valid – and, collectively, they constitute the environment in which the legal action was filed by Property Owners Who Care – South Padre Island.

Sincerely,

Property Owners Who Care –
South Padre Island