Trinity East's First Mistake Was Trusting Dallas City Hall
Sure, there has been some local news coverage of the fact that a Fort Worth gas drilling company called Trinity East is suing the city of Dallas over some kind of drilling/fracking deal that went south. But man, let me tell you. When you drill down into that lawsuit, it has one hell of a story to tell about how Dallas City Hall really operates.
I don't feel like I'm on anybody's side in the suit itself — who's right, who's wrong, who shot John. Let the courts decide. But as an utterly engrossing window on day-to-day doings at City Hall, this lawsuit is better than anything you can find on reality TV.
The story starts in 2007 when the city was facing a $90 million budget shortfall in an operating budget of about $1.8 billion. That's 5 percent. If it were you and you had an annual disposable family budget of $50,000, that would be the same as being short by $2,500. Maybe not the end of the world, but where do you get the $2,500?
Dallas City Hall
Dallas City Manager Mary Suhm was looking, and one way to get the extra money quick was by selling gas drilling rights on city-owned land. The City Council said OK, but they told her they would not go along with any "surface drilling" in parks, meaning there could be no drilling rigs on parkland. She could sell somebody the right to put a rig on some other kind of city land and drill sideways under a park, but there could be no rigs on the park itself.
Suhm said she got it. But then she went ahead and signed a contract with Trinity East explicitly including parkland, and she signed a letter of agreement with them saying she was "reasonably confident" she could win them the right to put up rigs and to surface drill on those park sites. At that point Trinity East wrote the city a check for $19 million.
But in August 2013, Suhm failed to get the votes she needed at council, and Trinity East was effectively denied the right to drill on those park sites. So Trinity is now suing the city for violating its contract but also for fraud, basically painting the whole deal as a scam.
And here is where it gets squirrelier and squirrelier. The only reason anybody even knew Suhm was trying to sell surface drilling rights in parkland was that council members Scott Griggs and Angela Hunt basically whacked the information out of the city secretary with pickaxes and dynamite. Suhm was doing everything she could to keep the deal quiet, and it sure looked like Trinity East was too.
The leases the city signed with Trinity East gave specific locational descriptions for all of the drilling sites that were not on parkland but referred to the two parkland drilling sites only by vague nicknames. Weird, eh? Wouldn't you think Trinity East would want to see those sites nailed down better in the contract? They nailed everything else down. Why refer to the two park sites only by code names?
In a May 15, 2013, interview with a Dallas Observer reporter, the president of Trinity East referred coyly to "certain documentation" he held dealing with "a discussion with the city" that led him to believe he was entitled to drill the way he wanted. OK, but if Trinity East had a written agreement with the city, why did that have to be a closely guarded secret?
City Council member Philip Kingston has suggested that both parties, Trinity East and Suhm, kept the deal secret because they knew their entire agreement was "ultra vires," a legal principle meaning they all knew Suhm was doing something outside and beyond her authority as city manager. Kingston thinks the city should at least consider that as a defense. The city would tell Trinity East, in effect, "You did a secret deal with Suhm that she and you knew was dirty when you did it. If you don't like what you got, sue her, not us."
He knows he won't get very far with that idea because of the extreme loyalty of the staff to the staff. Sure, it might be a good way to protect the taxpayers, but that is not what the staff is all about. The first thought in the head of the city attorney will be "How do I protect Mary?" And that's what I'm talking about here.
I don't know from ultra vires. It's over my head. But I know that ultimately the city staff answers only to itself, regards the council with contempt, cuts its own deals all the time all over the map and then ducks for cover behind the council if flak starts to fly. And I can cite more examples than you would ever want to hear.
But the example I like best is the case of Josh and Jenn Terry, a young couple I wrote about four years ago who wanted to rehab a small apartment building in North Oak Cliff. I have always felt their story was especially moving, because they were not some big drilling company with lots of lawyers and consultants who presumably know how the game is played and how to cut the corners. They were a young couple who wanted to invest some money and control the outcome by putting in their own sweat equity.
They checked with city staff first to make sure it was OK to fix up their building. The city not only said it was OK, officials sent them a copy of the ordinance saying it was OK and a map of the neighborhood showing their property as bearing the right zoning for what they wanted to do with it. So they poured in $200,000 of their own money.
After the renovations were complete, after the city had already entered into the final permitting process for occupation of the building, the staff changed its mind. I never found out why. I believe another property owner in the neighborhood got to them — somebody with a different use in mind for that property. But the staff called up the couple, said it's all off, you don't have the zoning, you can't rent the building, you wasted your 200 grand, get outta here.
The couple couldn't afford a court battle with City Hall, because nobody but a drilling company can afford a court battle with City Hall. But they were smart people. They found a way to sell the property and get their money out.
Here is the larger lesson in both their case and the Trinity East case. However you do your deal with Dallas City Hall, behind closed doors over a glass of scotch or standing in line at the Jefferson Avenue service center, your deal is never a deal. All ink is disappearing ink. The whole place is a house of smoke and mirrors. Go ahead and buy somebody, if you think that will cover you. You better hurry, because they won't stay bought for long.
There is a huge disconnect between the way Dallas City Hall perceives itself and the way it is perceived from afar. City Hall thinks of itself as a punctilious bastion of public integrity, one of the largest cities in the United States with a professional city manager system. But an Austin lobbyist for a number of trade and industrial associations repeated something to me recently that I have heard many times over the years — that people associated with the capital consider Dallas to be the most crooked city in the state.
Not all of that can be heaped on City Hall's head. Everybody in Austin knows the story of the SALT Group, friends of Dallas County Commissioner John Wiley Price who went to a major land developer nine years ago and demanded $1.5 million and a 15 percent cut of his company in exchange for a promise of political peace. The FBI's still working on that one.
The SALT group saga expressed a certain mentality — something you'd expect more from an all-cousin hick town than a major city — by which all newcomers and outsiders must pay a toll in order to do business here. When you put that mentality together with a complete absence of ultimate accountability at City Hall, I think you do get what Trinity East is claiming in its lawsuit — a kind of fraud. The whole thing is a fraud. City Hall purports to be efficient, fair, predictable and reliable, and it is none of those things. Be especially careful to keep your appendages free from the wringer.
Put yourself in Trinity East's position, and I'm not arguing for or against Kingston's ultra vires thing, mainly because I can't figure it out. But whenever somebody comes in to a big organization like the city of Dallas to do a deal with the CEO, they're going to take the CEO's word for how that organization works. If she says the deal has to be secret, they'll either not do the deal or do it and keep it secret. If she says she can take care of the board and they give her a check for $19 million based on that assertion, they must believe she can take care of the board.
If she says later, "Oops, it wasn't supposed to be a secret, and I couldn't take care of the board, and your $19 million is bye-bye," then they feel they have been treated wrongly — very wrongly, just as Josh and Jenn Terry felt after their apartment rehab project fell apart.
It's a system that just does not work reasonably, satisfactorily, fairly or productively. The one good thing that can come out of this lawsuit, if it ever does get heard and tried, is that it may bring these lessons home to us.
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