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Re-election of EDC president violates Texas local government laws

By Carolyn B. Edwards BCC Staff Writer

In addition to holding a public hearing in December that apparently violated the Texas Open Meetings Act, the Bandera Economic Development Corporation (EDC) may have violated Texas Local Government Code, Chapter 501, when electing their slate of officers of the board at their meeting held Jan. 18.

As reported in last week's Courier, the public hearing was attended by only two members of the EDC's board, Horst Pallaske and Binky Archer. On Jan. 18, while discussing approval of the minutes of that hearing, Archer questioned the legality of the hearing since it lacked a quorum.

Pallaske claimed that he had received an OK for public hearings to be held without a quorum.

The Texas Attorney General's Handbook for EDCs clearly states that an EDC is a governmental body and, as such, must abide by the Open Meetings Act.

The OMA requires a quorum.

In addition to ignoring a fundamental article of the OMA, the EDC board may have violated another Texas law by re-electing Pallaske as president.

At the Jan. 18 meeting, the EDC board re-elected Pallaske, Joe Hearn as vice president, and Linda James as secretary. Don Clark made the motion to re-elect the trio of current officers. Hearn commented that he really didn't want to serve, saying that he had said three years ago he didn't want the position. Archer asked that the board consider electing some "new blood" to the leadership positions. However, the motion carried.

In looking back through the Courier archives, Pallaske was identified as the chairman, or president, of the EDC board as early as December of 2007.

According to Chapter 501.065 (b) "An officer of the corporation is elected or appointed at the time, in the manner, and for the term prescribed by the certificate of formation or bylaws, except that an officer's term may not exceed three years. In the absence of provisions in the certificate of formation or the bylaws prescribing the selection or terms of officers, the board of directors shall annually elect or appoint officers." [Underline mine].

The Courier has not been able to obtain a copy of the Bandera EDC's by-laws. If the by-laws set a term longer than three years for an officer, they violate yet another portion of Chapter 501 which says the local by-laws must follow state law.

As regards the necessity of a quorum to validate an action by the board, Sec. 501.070 states: "ACTION OF BOARD; QUORUM. (a) A quorum of a board of directors is the lesser of: (1) a majority of the number of directors: (A) established by the corporation's bylaws; or (B) stated in the corporation's certificate of formation, if the bylaws do not establish the number of directors; or (2) the number of directors, not less than three, established as a quorum by the certificate of formation or bylaws. (b) The act of a majority of the directors present at a meeting at which a quorum is present is an act of the board of directors, unless the act of a larger number is required by the certificate of formation or bylaws of the corporation."

In other words, in order for an action by the board to be valid or effective, it must be approved by a majority of a quorum.

According to Sec. 501.071 of the code, under special circumstances, the EDC board may take action without a meeting. The pertinent section of the code states: "ACTION WITHOUT MEETING. (a) An action that may be taken at a meeting of a board of directors, including an action required by this subtitle to be taken at a meeting, may be taken without a meeting if each director signs a written consent providing the action to be taken. (b) The consent has the same effect as a unanimous vote and may be stated as such in a document filed with the secretary of state under this subtitle."

Section 501.072 deals with the issue of the Open Meetings Act as follows: "OPEN MEETINGS AND PUBLIC INFORMATION. A board of directors is subject to the open meetings law, Chapter 551, Government Code, and the public information law, Chapter 552, Government Code."

The Texas Local Government Code is available through a number of sources, most conveniently on-line.

Anyone who serves on the board of a governmental entity, one that receives and spends taxpayers' dollars, might be expected to be aware of the laws governing the operation of that board.

(The Courier does not make this stuff up.)