HUTTO — The city this past week lost an appeal in a $17.4 million lawsuit that has stretched on for three years over money it borrowed in 2018 to develop the Hutto Co-op District.
The lawsuit was originally brought by the city and River Creek Development Corp. against companies that funded the development. In filings, the city basically claimed the contracts were not valid and therefore it did not have to repay the money.
On Aug. 22, Justice Thomas J. Baker of the Texas Third Court of Appeals affirmed a trial court’s final judgment against the city and overruled all objections, dismissing the city’s appeal.
River Creek Development Corp. was created by Hutto as a funding vehicle for development associated with the Hutto Co-op District. Many cities do this for larger developments to partially insulate the city from any liability that may occur, including financial liabilities.
According to testimony, in December 2018, with the city’s authorization, River Creek borrowed $17.4 million from the Public Finance Authority, which issued bonds to fund the loan.
After the money was handed over and other aspects of the contract executed, Preston Hollow Capital purchased the bonds and debt repayment was to be made to them, according to court documents.
During this time, the city went through financial duress, forcing layoffs of over 40 employees and resulting in a change in leadership, court records indicate. The new City Council, led by Mayor Mike Snyder, questioned the legality of the original agreements.
A request for an opinion from the state attorney general on the validity of the agreements was not answered.
The city then filed legal action against Preston Hollow Capital and three other businesses involved in the funding.
Preston Hollow Capital filed a counterclaim seeking judgment that the loan agreement and promissory note were valid and enforceable, among other things, and argued the city lawfully entered the agreement. It also asked for attorney fees and costs.
The other three companies joined Preston Hollow in the countersuit.
On Oct. 4, 2021, 425th state District Court Judge Betsy F. Lambeth ruled in favor of Preston Hollow Capital and the other three litigants, directing repayment of the loan and awarding them legal fees and expenses.
The city’s petition was dismissed with prejudice, but then Hutto and River Creek Development Corp. appealed.
The total amount the city will have to pay has not yet been released.
No response was available from Hutto officials as of press time.
