Hotel developers are seeking more than $1 million in damages in a lawsuit against Corpus Christi City Manager Peter Zanoni, prompted by a standstill in a settlement payment, according to court records.
Elevate QOF LLC, developers of the new Homewood Suites hotel downtown, is pursuing litigation against Zanoni in both his official and individual capacity, filing on Aug. 18 a petition seeking declaratory judgment and a request for a temporary restraining order.
The temporary restraining order granted by a judge bars Zanoni from what is described as “continuing to freeze, withhold, delay, or obstruct” release of the funds agreed to between the company and a city-associated board, or otherwise prevent city staff from doing so.
The order remains in effect
until Sept. 1, when a judge will hear arguments on whether or not a temporary injunction should be approved pending a trial, according to the document.
Elevate claims in its petition that Zanoni either had failed to move forward with the payment as required or had improperly overstepped his bounds to “freeze” the wire transfer of $1.5 million — as had been approved by the Type B board.
Filed by attorney Denny Barre, the petition also alleges that the move was personal and political.
“Zanoni’s interference was conducted with actual malice,” Barre contends in court records. “Zanoni acted with personal animus and independent motivation, deliberately subverting a legally binding settlement to appease political factions and directly injure Elevate’s business operations.”
Damages to Elevate asserted in the petition include “financial losses, default on construction loans, reputational harm, loss of business opportunities, and the harm to the Homewood Suites hotel development.”
Zanoni had the previous week raised questions about the contract approved by the Type B board with Elevate, including whether the City Council would be required to sign off on it, stating that he wanted to vet the agreement and the staff would not in the meantime wire transfer the funds.
He told the Caller-Times on Aug. 19 that he disagreed with the terminology that has been used related to the situation — for example, that he had frozen or blocked payments — describing that wording as “inaccurate.”
Legal opinion from both the city’s attorney and outside attorney is that the council would need to approve any payment, either because of the dollar amount or because it could be a new contract, Zanoni said.
He contended neither he nor anyone else had the authority to make a payment without the council’s approval.
“It’s really out of my hands,” Zanoni said. “I’m not interfering with anything. I’m just following the business policies that we have and state law as we understand them, and as our city attorney and outside attorney interpreting them.”
He added that allegations made against him in the Elevate in the lawsuit were false, asserting that “we’re just doing our jobs.”
“None of this is politically motivated; it’s not personally motivated,” Zanoni said. “It’s just basic business.”
The agreement
The Type B board oversees economic development initiatives via tax incentives drawn from a portion of sales tax revenue.
Although its membership is appointed by the City Council, it operates largely as an independent body, with the exception of the council affirming the board’s proposed tax incentive agreements.
Its independence is partially at the heart of the dispute — whether the board has the authority to execute a settlement in the manner it had outlined in documents or if it would require the blessing of the City Council.
Although the council had affirmed the Type B board’s $2 million tax incentive agreement with Elevate in 2024, the contract is between the Type B board and Elevate.
Board members have asserted that the council in the past has attempted to interfere with the contract in which the city is not a party.
The board on Aug. 10 had voted to terminate the existing agreement with Elevate in lieu of wire transferring $1.5 million from Type B funds to the company.
The vote was intended to help resolve a long-standing lawsuit in which competing hotelier Ajit David has been seeking to invalidate the contract with Elevate, board members said.
Mediation in the lawsuit had been expected to get underway the same day.
The $2 million agreement had in its terms annual installments of as much as $400,000 over five years, contingent on whether Elevate fulfilled certain criteria within certain time periods, according to the contract.
That work has been substantially completed, the board’s Aug. 10 resolution states, with investment of $2 million in reimbursable costs.
The board’s decision was made under the advice of legal counsel and is authorized by statute, according to statements made by board Chair Diana Summers on Aug. 10.
Attorney George Hyde, who represents the Type B board, had previously served both the city of Corpus Christi and the Type B board in the David litigation.
Hyde was recently substituted to represent the city in the matter.
The project
The Homewood Suites project has been at the center of dispute for several years, and notably became a prime topic in a recent removal hearing of Mayor Paulette Guajardo, in which a six-member council tribunal ultimately decided to issue a 30-day suspension of the mayor related to the controversial agreement.
Guajardo has denied wrongdoing.
Critics have accused developers of misrepresenting the project; developers have also denied wrongdoing.
The incentive agreement has been raised in at least three lawsuits appearing in a total of six civil courtrooms since it was approved by the Type B board and, subsequently, the City Council.
Although the Type B board was unanimous in its vote in favor of the settlement with Elevate, council members have voiced differing views over whether the agreement should be considered.
The council talked about the proposed agreement on Aug. 18, and it was expected they would likely discuss it again Aug. 25, Zanoni said.
Kirsten Crow covers city government and water news. Have a story idea? Contact her at kirsten.crow@caller.com.
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This article originally appeared on Corpus Christi Caller Times: Corpus Christi hotel developer sues city manager for $1 million-plus
