DALLAS — The Dallas suburb of Irving could issue up to $250 million of bonds for a new entertainment center within two months if a judge’s ruling stands, Mayor Herbert Gears said.
Dallas County District Judge Craig Smith ruled Tuesday that Irving could use tax revenue from liquor sales to service bond debt for the entertainment center, despite a challenge from the state attorney general’s office.
Texas officials contend that the tax revenue belongs to the state and cannot be used for local purposes. Attorney David Mattox, representing the AG’s office, also argued that the city’s use of the revenue would require an act of the state legislature.
Former Irving Mayor Joe Putnam, who also opposes the project, was a party to the suit but has been dismissed from the case. Putnam was ruled to have lost his right to appeal for failure to put up a $10 million appeal bond.
The entertainment center is a major component of the city’s new convention center that is nearing completion in the Las Colinas business and residential district near Dallas-Fort Worth International Airport. The city plans to use the entertainment center as a year-round attraction and an adjunct to the convention center.
Barring further legal challenges, the city could proceed with a bond issue in two months, Gears said after the ruling.
The city, which carries triple-A credit ratings, had intended to use Build America Bonds to build the entertainment center, which would have carried lower ratings. However, the federally subsidized BAB program is scheduled to end next week.
Mike Raiff, an attorney representing Irving, told Judge Smith that without a favorable ruling, no bonds would be issued for the project. He noted that similar projects in San Antonio and Houston did not draw state opposition. A similar structure was used for the Dallas convention hotel now under construction, he added.
Mattox said the other Texas projects did not seek a final court judgment but only an attorney general’s ruling about their legality. In Texas, an issuer can pre-empt lawsuits with an attorney general’s ruling that no lawsuits stand in the way of issuance or seek a court ruling that lawsuits are invalid.
Requiring legislative approval every two years for the state to share liquor taxes at the entertainment center would also make bonds unmarketable, the city contended.
“The simple reality is, this issue will defeat the ability of municipalities to borrow money because it creates a condition that is not marketable,” said Ray Hutchison, bond attorney at Vinson & Elkins in Dallas.
Current plans call for a 600,000-square-foot entertainment center with a 5,200-seat concert hall surrounded by restaurants and bars. The site would be served by a stop on Dallas Area Rapid Transit’s light-rail Orange Line that is under construction.
Financing plans include $50 million in private investments for construction costs. The private Las Colinas Group will also rent and operate the center on behalf of the city.