A legal challenge to a city annexation ordinance from the 1990s is headed for a September trial date.

The lawsuit by a group of Cordova-area apartment owners asks a judge to void the ordinance that annexed Countrywood and Eads into the city of Memphis. It contends the ordinance violated the state’s open meetings law and seeks years of back tax money.

The violation allegedly occurred sometime between the ordinance’s first vote and its final adoption by the Memphis City Council in 1995. The ordinance’s original language included the Bridgewater neighborhood among the soon-to-be annexed areas.

However, the final ordinance makes no mention of Bridgewater, and the suit’s supporters argue the public record shows the change was not made during an open meeting. The open meetings law reads in part: “Any action taken at a meeting in violation of this part shall be void and of no effect.”

Potential nightmare

Because the litigation seeks to strip the area back out of the city, millions of tax dollars are at stake. Attorneys for the apartment owners – who also want the case to become a class action – are demanding that the city return all taxes it has collected since the area was annexed.

No dollar amount is mentioned in the suit.

“It’s set for trial in September, and that’s all I can tell you,” said Evans Petree Bogatin PC attorney John McQuiston, one of the attorneys suing the city.

An amended version of the complaint was filed April 30, and it argues: “The actions taken by the city of Memphis, including the collection of taxes on the property therein … are unlawful.”

To get an idea of the amount of property tax revenue generated by just two of the apartments in the case – the Rockcreek Plaza and Woodchase Apartments – their combined 2009 property tax bills alone top $1 million.

It remains to be seen, however, if the case will hold up.

The city has never lost a single annexation case and the latest challenge has been pending in Shelby County Chancery Court since 2001.

Yet neither side in the Countrywood-Eads case appears to be taking things for granted.

The list of people who have been deposed, subpoenaed or who have given sworn affidavits in recent weeks includes several prominent names on both sides.

No stone unturned

City finance director Roland McElrath and city finance division staffer Valerie Snipes both provided affidavits in March.

Charles Carpenter, bond counsel for the city of Memphis, gave a deposition last month. Also in April, Memphis City Council administrator Lisa Geater provided an affidavit, and city comptroller Patrice Thomas was subpoenaed.

For the city, the stakes go beyond dollars and cents.

Because the city has issued millions of dollars in public debt to pay for public works projects in the annexed areas, that money would have been spent for things outside the city if the ordinance is nullified.

By law, the city can’t issue bonds for public works projects outside of its limits unless it has the consent of that other municipality.

The city didn’t get that approval since it was operating under the premise the areas were rightfully part of it.

“If the bond proceeds were spent outside of the city, then that would not be a valid purpose for the use unless there was some consent from the other jurisdiction, the county jurisdiction,” Carpenter said in his deposition. “And based on the affidavit of Roland McElrath, there was no consent. So that’s why it would (be) improper for the city to have expended public works bond proceeds outside the city limits.”

Among the possible fallout from nullifying the ordinance is a lawsuit or multiple suits from bond investors, according to the city.

“The city and underwriters of the bonds would be subject to numerous lawsuits from investors to make them whole,” one of the city’s court documents reads.