13th Court of Appeals holds City sufficiently complied with TOMA and Tax Code in 2019 when it adopted its annual tax rate


Leftwich v City of Harlingen, 13-20-00110-CV (Tex. App. – Corpus Christi, Sep. 9, 2021).

This is a declaratory judgment suit to declare the city violated procedural requirements when it adopted its tax rate in 2019. The Thirteenth Court of Appeals held no alleged violation constituted a waiver of the City’s immunity.

Leftwich alleges the City violated several statutory requirements in 2019 when it adopted its tax rate, including (1) the published notice failed to conform to the “date, time[,] and location” requirements of Texas Local Government Code § 140.010(c),  (2) the City failed to meet the deadline to adopt the tax rate (requiring a vote on proposed tax rate “not be earlier than the third day or later than the [fourteenth] day after the date of the second public hearing”); (3) the City violated TOMA by not allowing public comment “before or during” the consideration of the of the tax ordinances and various other procedural deficiencies. The City filed a plea to the jurisdiction, which the trial court granted. Leftwich appealed.

The court first noted that TOMA’s waiver of sovereign immunity only extends to mandamus or injunctive relief for actual or threatened violations of TOMA, not to suits for declaratory relief.  Further, under TOMA, substantial compliance is sufficient. The location of a meeting may be sufficient without including the full street address, name of the city, or meeting room, so long as the notice sufficiently apprises the public of the location.  Here, the term “town hall” sufficiently put the public on notice of the location of the meeting. No general waiver of immunity exists under the UDJA.  Plaintiff sought a judgment “declaring that the[o]rdinances are invalid and void ab initio” due to appellees’ alleged TOMA and tax code violations. The alleged TOMA violation during the meeting focused on the City Council not taking public comments before voting on the first reading of the tax ordinance. However, the mayor was clearly heard on camera, prior to the final vote on the first reading of each ordinance, asking for discussion, to which no one responded. Assuming, arguendo, that the mayor’s call for discussion was not clearly directed to the public, Leftwich would remain unsuccessful as that was only the first reading. The ordinance was not adopted until the second reading. Only an action taken in violation of TOMA is voidable.  Under the tax code, no requirement exists that two publications exist for public hearings, only that two public hearings are held and that notice is published. Under § 26.06(e) of the Texas Tax Code, the City was required to hold a meeting to vote on the tax ordinances not “earlier than the third day or later than the [fourteenth] day after the date of the second public hearing.” However § 26.06(e) provides no authority for a court to enjoin the collection of taxes for failure to comply with § 26.06(e), which is what Plaintiff seeks.  Plaintiff further asserts the councilmember making the motion failed to follow the specific quoted language for the motion contained within the statute. However, after reviewing the record, the court concluded the motion followed the important parts of the statutory language, verbatim.  Leftwich next asserted the City failed to properly post the necessary tax information on the City’s website.  However, Leftwich failed to present evidence that would raise a fact issue as to whether the City previously posted the notice to the website. The court concluded the undisputed language which was present meets the requirements of Texas Tax Code § 26.05(b)(2), which requires the notice be published after the ordinance is adopted. Leftwich failed to allege jurisdiction under TOMA or the Tax Code for any alleged violation.  Finally, while Plaintiff attempts to bring a First Amendment claim, he failed to brief the claim and therefore waived it.

If you would like to read this opinion click here.  Panel consists of Justices Benavides, Hinojosa and Silva. Memorandum opinion by Justice Silva.

First District holds county attorney could not bring suit against commissioner’s court for budget policies


Hobbs, Williamson County Attorney v. Dan A. Gattis, et. al., 01-19-00025-CV (Tex. App. – Houston [1st Dist.], Oct. 15, 2020).

This is a declaratory judgment case where the First District Court of Appeals affirmed the dismissal of the County Attorney’s challenge to a commissioner court policy regarding the budget.

Hobbs, acting in his official capacity as the Williamson County Attorney, sued the Williamson County Judge and Williamson County Commissioners, all in their official capacities, seeking a declaratory judgment that certain policies and orders were void for exceeding the power of the Commissioners Court.  The County defendants filed a plea to the jurisdiction which was granted. Hobbs appealed.

Hobbs challenged a policy that appeared to limit the salaries of his employees, even though the budget allocated for his office had sufficient funds.  The County’s plea challenged the pleadings only and were taken as true. The County defendants argued that Hobbs had no authority to bring suit in his official capacity.  Since Hobbs was only complaining about budgetary issues, the defendants did not invade his elected sphere of control. However, the funds had been budgeted for the County Attorney’s office and Hobbs complained of the policies imposed on how those funds were spent (specifically regarding hiring and salary aspects of assistant county attorneys). A commissioner’s court has broad discretion on budgetary decisions, and such decisions are ordinarily protected from judicial scrutiny by the separation of powers doctrine. But it is limited by certain judicial controls. A commissioner’s court and county officers may not interfere with or usurp the duties delegated by the Texas Constitution and by statutes to independent county officials and their employees.  However, the live pleadings did not list a controversy where potential employees did not accept employment due to the limits or that any other employees were affected. Alleging the policies could hamper Hobb’s office is an allegation of an uncertain or contingent future controversy, not an allegation of a live controversy.  Further, the live pleadings do not show Hobbs, in his official capacity, suffered a distinct and individualized injury. Hobbs acknowledged in his pleading that the county attorney has no individual stake differing from that of other Williamson County elected officials since he is suing in his official capacity only.  A district court has certain constitutional supervisory controls of the commissioner’s court; however, those require an act that is illegal, unreasonable or arbitrary. The challenged policy does not necessarily reduce any employee salary as compared to the amount adopted in the budget. Given the broad budgetary discretion of the commissioner’s court, Hobbs failed to allege facts triggering the district court’s constitutional supervisory control. The plea was properly granted.

If you would like to read this opinion click here. Panel consists of Justices Kelly, Goodman, and Countiss.  Opinion by Justice Kelly.

Public entities which issue bonds can utilize Expedited Declaratory Judgment Act for validation of contract execution, but not compliance says Texas Supreme Court


City of Controe, et al, v San Jacinto River Authority, et al, 18-0989, (Tex. March 27, 2020)

This is a case brought under the Expedited Declaratory Judgment Act (EDJA) involving proper compliance by the local government with bond requirements. The EDJA provides an “issuer” of “public securities” an expedited declaratory procedure to establish the “legality and validity” of public securities and “public security authorizations.” Tex. Gov’t Code § 1205.021.

The Lone Star Groundwater Conservation District was created to address concerns about inhabitance of an area and their reliance on groundwater drawn from the Gulf Coast Aquifer. In 2008, the Conservation District required all large-volume groundwater users—including the Cities—to develop and implement plans for reducing their usage substantially. Mandatory groundwater usage cutbacks took effect in January 2016. Respondent San Jacinto River Authority (SJRA) is a legislatively created conservation and reclamation district developed a Groundwater Reduction Plan (GRP) to draw surface water from Lake Conroe, treat the water, and sell it to large-volume users. SJRA issued seven series of bonds between 2009 and 2016 that had an outstanding principal balance of approximately $520 million. SJRA entered into bilateral GRP contracts with about 80 water-system operators. Although SJRA  can set, the GRP rates are governed entirely by contract. Several cities sued the Conservation District, which suit expanded to include SJRA. Several cities asserted they would not pay. SJRA filed suit   under the EDJA seeking a declaration regarding the contracts and rates. The cities opted into the suit, but then filed pleas to the jurisdiction alleging SJRA did not seek a declaration as to “the legality and validity” of a “public security authorization,” but instead seek to litigate what are substantively suits on contracts that properly lie outside the statute.  The trial court denied the pleas and the cities appealed. The intermediary court of appeals held primarily for SJRA and the cities appealed to the Texas Supreme Court.

The EDJA was enacted to “stop ‘the age old practice allowing one disgruntled taxpayer to stop the entire bond issue simply by filing suit.’”  The Court went through an analysis of the EDJA and its purpose in considering jurisdiction and definitions. SJRA and the Attorney General contend the GRP contracts, rate order, and rates themselves are public security authorizations because they are all connected to the bonds SJRA issued to finance the GRP Project.  The Court first held the Authority Declaration concerns the legality and validity of SJRA’s contracts with GRP Participants, as GRP rate orders and rates are creatures of the contracts.  As a result, the EDJA permits the trial court to exercise jurisdiction over this declaration.  However, the Court held the rate orders and rates lacked a proper connection with the bonds. Even though the rate order and rates may affect the amount SJRA is paid under the contracts, neither has an authorizing connection with the public securities. The EDJA treats execution of a contract to be connected but does not treat compliance with a contract as a public security authorization. As a result, SJRA can seek a declaration the contract was validly executed, but not whether it complied with the contract. As a result, the EDJA confers jurisdiction to declare whether the GRP contracts (as public security authorizations) are legal and valid, but it does not extend to declaring whether a specific rate amount set in a particular rate order is valid as it is controlled by the contract.  SJRA may not obtain EDJA declarations concerning the Cities’ in personam rights and liabilities. The EDJA permits only in rem declarations concerning property rights.

If you would like to read this opinion click here. Opinion by Justice Busby. The court docket page with attorney information is found here.

Fort Worth Court of Appeals holds no waiver of immunity for declaratory judgment relief against county for competitive bidding violation


Tarrant County, Texas v. Jeffrey D. Lerner, 02-19-00330-CV, (Tex. App – Fort Worth, Jan. 9, 2020)

This is a declaratory judgment/immunity case where the Fort Worth Court of Appeals held the County retained immunity for declaratory claims alleging violations of the competitive bidding statute.

The County had a contract with Dispute Resolution Services of North Texas (DRS) to manage the County’s alternative dispute-resolution services and was valued at over $400,000 per year. When renewing the contract, Tarrant County did not seek competitive bids for the contract. A competitor, Lerner, sued asserting after the last renewal the contract was invalid due to the lack of bidding. The County filed a plea to the jurisdiction which was denied.

The immunity waiver contained in the competitive bidding statute is specific and narrowly drawn – “Any property tax paying citizen of the county may enjoin performance under a contract made by a county in violation of [the Act].” Tex. Loc. Gov’t Code Ann. § 262.033. The court held the Legislature intended to waive immunity for injunctive-relief claims arising from violations of the statute. However, that does not waive immunity for attorney’s fees or any other form of relief. As a result, the court found the County retained immunity for Lerner’s declaratory judgment claims. The plea should have been granted.

If you would like to read this opinion click here. Panel consists of Chief Justice Sudderth, Justices Gabriel, and Kerr. Memorandum Opinion by Justice Gabriel. Docket page with attorney information found here.

City Manager’s change to policy manual is not a unilateral employment contract, says Texas Supreme Court


City of Denton v Brian Rushing, et al, 17-0336 (Tex. March 15, 2019)

This is an interlocutory appeal from an order denying a plea to the jurisdiction in a breach of contract case. The Texas Supreme Court reversed the denial and dismissed the case.

Rushing, Patterson and Marshall were employees of the Denton Utilities Department. All three worked uncompensated on-call shifts between 2011 and 2015. Policy 106.06 of the City’s Policies and Procedures Manual defines the rights and responsibilities of an on-call employee.  On-call time was listed as uncompensated.  In 2013, the City Manager modified Policy 106.06 and defined an explicit pay schedule for on-call time. These amendments were not approved by the City Council.  Rushing and the others sued the City, asserting Policy 106.06 was a unilateral contract and that they were entitled to payment of on-call time dating back to 2011.  The Court of Appeals held the City Manager’s policy adjustments equated to a unilateral contract, and immunity is waived under §271.152. The Texas Supreme Court granted review.

The Court first held interpreting Policy 106.06 to be a unilateral contract regarding Rushing’s employment conflicts with the disclaimer in the manual that nothing in the manual “ in any way” constitutes terms of a contract of employment.  Further, Policy 106.06 is a provision of a policies and procedures manual and not an ordinance adoption of a contract. Although city ordinances may create enforceable contracts, the Court held it has not previously determined that a municipality’s policies and procedures manual can create an enforceable contract. The Court reversed and rendered a decision for the City.

If you would like to read this opinion, click here. Opinion by Justice Devine.

Texas Supreme Court holds pension board’s amendment to deferred retirement option account was not unconstitutional

Eddington v Dallas Police and Fire Penson Systems, et al.,   17-0058, (Tex. March 8, 2019)

This is a statutory construction case where the Texas Supreme Court held the City of Dallas’s amendment to its pension plan did not violate the Texas Constitution.

Article XVI, Section 66 of the Texas Constitution prohibits the reduction of benefits in certain local public retirement plans.  The Dallas Police and Fire Pension System (“the System”) amended its pension plan to reduce the interest rate paid on Deferred Retirement Option Plan (“DROP”) accounts. After a member is eligible for retirement, the member can choose to continue working and, when leaving active service, draw a higher monthly annuity.  However, a member’s annuity is fixed at retirement age and does not increase with continued service.  While a member continues to work, the System created the DROP option allowing monthly credits to his DROP account, accessible upon leaving active service. In other words, members working past retirement eligibility can choose between a higher annuity on leaving active service, or a lower annuity plus a forced savings account.  The petitioners sued, asserting the amendment to the changed interest rate was unconstitutional. The trial court and appellate court denied petitioners relief.

After analyzing the text of Section 66 and the uncontested facts asserted, the Court held that reducing the interest rate that as-yet-unearned DROP payments will bear does not affect a benefit accrued or granted to employees. Interest already credited to DROP accounts is not impacted. The reduction in DROP account interest is prospective only. Section 66(d) protects “accrued” benefits only. Accrued benefits are those that have been earned by service, not those that may be earned by future service.

Finally, the Court held the trial court did not err in excluding the legislative history evidence submitted and the fiscal notes of the Legislative Budget Board.  The Court reasoned that while the judiciary can consider such information, those are construction aides. Courts should rely heavily on the literal text. The Court determined the text of Section 66 is plain as it affects the parties, so no error was made by the trial court.

If you would like to read this opinion, click here. Chief Justice Hecht delivered the opinion of the Court. Justice Guzman and Justice Brown not sitting. The docket page with attorney information can be found here.

14th Court of Appeals holds $25 finance charge on criminal fines is facially unconstitutional


Devlon Johnson v State of Texas, 14-18-00273-CR (Tex. App. – Houston [14th Dist.], February 5, 2019, no pet. h.)

In this criminal case, the 14th Court of Appeals held facially unconstitutional a provision of the Texas Local Government Code regarding the amount of court fees that a criminal defendant can be required to pay upon conviction. This applies to all levels of criminal fines, from municipal court up to felony charges in district court. All other fees were upheld as constitutional.

Johnson asserts he pleaded guilty to a criminal charge for possession of cocaine in an amount less than 1 gram. At sentencing, he was ordered to pay an itemized listing of court costs. The costs assessed were a Sheriff’s fee, Capias Warrant fee, District Clerk fee, Jury Service Fund fee, Basic Criminal Legal Services fee, Administrative Transaction fee, and a $25 Time Payment fee for paying the judgment after 30 days. According to the opinion, Johnson challenged the facial constitutionality of the court cost charges and therefore appealed the sentence.

The State asserted the challenge to the constitutionality of the court costs was not presented to the trial court. However, the opinion did not address the consideration by the trial court, as it was a facial challenge.  The panel went through the constitutional standards applicable to criminal court fees.  For a facial-challenge analysis regarding court costs, courts will consider only applications the statute actually authorizes or prohibits, not how or where the collected fees might actually be spent. Two types of court-cost statutes pass constitutional muster: (1) statutes under which a court recoups expenditures necessary or incidental to criminal prosecutions; and (2) statutes providing for an allocation of the costs to be expended for any legitimate criminal justice purpose. The court analyzed each fee and determined all but the $25 Time Payment fee was constitutional. The Time Payment fee is a fee of $25 if the person pays “any part of a fine, court costs, or restitution on or after the 31st day after the date on which a judgment is entered assessing the fine, court costs, or restitution.” Tex. Loc. Gov’t Code § 133.103(a). The court viewed this as is simply a late fee assessed when a person convicted of a felony or a misdemeanor and takes longer than 30 days to pay a fine.  The court held that 90% of the fee is facially unconstitutional because it requires the funds be deposited into a general fund without limitation or restriction.

If you would like to read this opinion, click here. Panel consists of Justices Wise, Jewell, and Poissant. Opinion by Justice Jewell. The attorney listed for Johnson is Justin Bradford Smith. The attorneys listed for the state are Stacey M. Soule, Bob D. Odom, and Henry L. Garza.

14th Court of Appeals holds immunity is waived for refund of penalties and interest paid on delinquent taxes only if taxpayer requested waiver within 180 days



Harris County, et al. v. Falcon Hunter, LLC, 14-18-00247-CV (Tex. App. – Houston [14th Dist.], February 7, 2019).

This is a delinquent tax case in which the taxpayer company, Falcon Hunter, LLC. (Falcon), sued for a refund of penalties and interest paid.  The 14th Court of Appeals reversed the denial of the taxing entities’ plea to the jurisdiction and dismissed the case.

Falcon failed to pay property taxes after the tax bill was sent to an incorrect address. Upon discovering it was listed as delinquent, Falcon paid the taxes, including penalties and interest. Three years later, Falcon applied for a refund of the penalties and interest, but did not seek a refund of any property taxes paid. When Falcon did not receive a response, it sued for the amount in penalties and interest, plus collection fees and attorney’s fees. The taxing units filed a plea to the jurisdiction, which was denied. The units appealed.

Taking Falcon’s pleadings as true for purposes of the analysis, the Texas Tax Code §31.11(k) states that after a request for refund has been denied, the taxpayer may file suit against the taxing unit in district court to compel the payment of the refund within 60 days. However, it applies when a tax bill is returned to the taxing unit by the post office under certain conditions. To secure the benefit, the taxpayer must submit a request for waiver of penalties and interest under the code. The request must be made before the 181st day after the delinquency date. Since Falcon waited almost three years, it did not timely request a waiver and did not exhaust its administrative remedies.  Section 31.11 waived immunity for a refund of “taxes.”  However, the legislature took care to clearly distinguish the terms “penalty” and “interest” from the term “tax.”  A taxpayer has three years to seek a refund of the tax. However, if a taxpayer wants penalties and interest on a delinquent tax waived, the taxpayer has, as relevant here, 180 days from the delinquency date to request the waiver in writing. Falcon sought a refund of penalties and interest, not the tax. As a result, no waiver of immunity exists for a refund of penalties/interest outside the 180-day limitation. The plea should have been granted.

If you would like to read this opinion, click here. Panel consists of Justice Wise, Justice Jewell and Justice Poissant. Memorandum opinion by Justice Jewell. The attorneys listed for the appellants are Stephen A. Smith, Mary Lucille Anderson and Patrick Nagorski.  The attorneys listed for Falcon are Kory Ryan,  John Brusniak Jr. and Tracy Turner.

Texas Supreme Court disposes of various natural gas compressor taxation suits by holding taxing location is inventory yard, not temporary physical locations

Ward County Appraisal District v EES Leasing, et al, 15-0965 (Tex. Nov. 16, 2018)

The Texas Supreme Court issued several connected opinions relating to the proper taxing entity for compressor equipment and pipelines.

EXLP Leasing owns and leases out compressor stations used to deliver natural gas into pipelines, with some of the pipelines located in Ward County and some in Midland County. EXLP began paying taxes on the compressors located in Ward County to Midland County, where EXLP contends it “maintain[s] a yard from which its inventory … is leased, to which leased compressors are returned after [the] leases expire[s], and where the inventory in the area is serviced.” But Ward County continued to tax full market value. EXLP Leasing filed suit arguing Tax Code provisions amended in 2012 are unconstitutional on their face and as applied because the statutory formula for valuing leased heavy equipment bears no relationship to any measure of market value as required by the Texas Constitution.  The Court, on October 10, 2018, issued an opinion in EXLP Leasing, LLC v. Galveston Central Appraisal District, 554 S.W.3d 572 (Tex. 2018), which disposed of the issues by holding taxable situs for dealer-held heavy equipment was the location where the dealer maintained its inventory, rather than the various locations where leased equipment might have otherwise been physically located.

The Court adopted its reasoning in EXLP Leasing to the varying claims and facts in the consolidated cases. The Court upheld the constitutionality of the Tax Code provisions but held EXLP neither expects nor intends for the compressors located in Ward County to permanently remain in Ward County.  Their “permanent” home is the inventory yard and therefore, the proper place for taxation of inventory.  However, specific to this case, the County argued the specific compressors were not “heavy equipment” as listed in the Tax Code. The Court held the definition of “heavy equipment” applied to self-powered machines. The Legislature intended “self-powered” to mean a piece of a machinery or equipment supplied with mechanical power through an internal motor or engine. As a result, EXLP Leasing’s engines are “heavy equipment” falling under the same Tax Code provisions.

If you would like to read this opinion click here. Per Curiam opinion. Companion cases of Reeves County Appraisal District v Midcron (opinion), Reeves County Appraisal District v Valereus Compression Services (opinion) and Loving County Appraisal District v EXLP Leasing (opinion) are linking.

Home-rule city’s franchise contract and right-of-way ordinance trumps pro-forma provision in a tariff, so utility must bear costs of relocation


City of Richardson v Oncor Electric Delivery Company, LLC, 15-1008 (Tex. February 2, 2018)

This case involves a dispute between a city and a utility over who must pay relocation costs to accommodate changes to public rights-of-way.

The City of Richardson (“City”) negotiated a franchise agreement with Oncor Electric Delivery Company LLC, (“Oncor”)  requiring Oncor to bear the costs of relocating its equipment and facilities to accommodate changes to public rights-of-way. Richardson later approved the widening of thirty-two public alleys. Oncor refused to pay for the relocation. While the relocation dispute was pending, Oncor filed an unrelated case with the Public Utility Commission (PUC), seeking to alter its rates. That dispute was resolved by settlement, but the settlement included Richardson passing a tariff ordinance. The Court had to decide whether a pro-forma provision in a tariff, which sets the rates and terms for a utility’s relationship with its retail customers, trumps a prior franchise agreement, which reflects the common law rule requiring utilities to pay public right-of-way relocation costs.

By nature, a franchise agreement represents the unique conditions a city requires of a utility in exchange for the utility’s right to operate within the city. Here, the Franchise Contract incorporated a conventional right-of-way ordinance (the “ROW Ordinance”) requiring the utility, upon written notice from Richardson, to remove or relocate “at its own expense” any facilities placed in public rights-of-way. The ROW Ordinance is typical of others throughout Texas. “Tariff” is defined as “the schedule of a utility . . . containing all rates and charges stated separately by type of service, the rules and regulations of the utility, and any contracts that affect rates, charges, terms or conditions of service.” 16 Tex. Admin. Code §25.5(131). A tariff filed with the PUC governs a utility’s relationship with its customers, and it is given the force and effect of law until suspended or set aside. However, the PUC’s rules also contain a “pro-forma tariff,” the provisions of which must be incorporated exactly as written into each utility’s tariff.  The City and Oncor sued each other over payment of the relocation costs, each citing the differences between the ROW Ordinance/Franchise Contract and pro-forma tariff. The trial court granted the City’s motion for summary judgment, but the court of appeals reversed and rendered judgment for Oncor.

Under the common law, a utility’s right to use a city’s public rights-of-way is permissive and is subordinate to the public use of such rights-of-way. The Texas Supreme Court has traced this principal back at least as far as 1913.  The Utilities Code mirrors the common law, but specifically apply to “streets.”   Oncor argues that the Legislature’s use of “street” and not “alley” is significant and precludes these statutes from applying to alleys. Under statutory construction principles, every word included and excluded by the Legislature has significance. Looking to the statutory scheme, the Court found particularly relevant the Legislature’s recognition of the broad authority afforded to home-rule cities. As a home-rule city, Richardson has “exclusive original jurisdiction over the rates, operations, and services of an electric utility in areas in the municipality.” Furthermore, the Court held that in the context of home-rule cities, the recognition of a specific power does not imply that the other powers are forbidden. The  Legislature did not intended to strip municipalities of their common law right to require utilities to bear relocation costs. The language in the Tariff does not unmistakably address the relocation costs. The Tariff addresses Oncor’s relationship with end-users, which, in this case, dose not include the City.  As a result, the City retains the power to address costs through its ROW Ordinance and its Franchise Contract. The Court reversed the judgment of the court of appeals and reinstated the judgment of the trial court.

If you would like to read this opinion click here. Justice Green delivered the opinion of the Court. The docket page with attorney information can be found here.

U.S. 5th Circuit holds cities cannot use website service fee in calculating hotel occupancy taxes owed



City of San Antonio v Hotels.com 16-50479 (5th Cir, November 29, 2017).

This is a long and drawn out challenge by 173 municipalities as to the proper payment of hotel occupancy tax. For this appeal, the question was whether the service fee paid to an online hotel company (“OCT”), such as Travelocity, is included in the hotel occupancy tax calculation.

An OCT website allows a traveler to compare the rates for airlines, hotels, and rental-car companies, as well as request reservations. OCTs do not own, operate, or manage hotels; instead, they transmit information and payments between travelers and hotels. The hotel and the OCT enter into a contract by which the OTC agrees to display information about the hotel on the OCT’s website, and the hotel agrees to provide reservations at a discounted room rate.  Only the hotel can issue a reservation. When a traveler chooses to book a room through an OCT, it requests a reservation on the traveler’s behalf. If the hotel chooses not to make a reservation available, the OCT cannot make the reservation. If the hotel issues the reservation, it does so in the traveler’s name.  The OCT retains its service fee as compensation for its online services by deciding the total amount the traveler pays when booking. The hotel occupancy tax allows a municipality to “impose a tax on a person who . . . pays for the use or possession or for the right to the use or possession of a room that is in a hotel.”  When a traveler books a hotel through an OCT, they pay a higher amount than the discounted hotel room due to the OCT service fee. The original suit was broader in that it included a claim for the tax, which was initially denied by the hotels and OCTs. A jury awarded millions to the cities in unpaid taxes, but the hotels and OCTs appealed.

Sitting in diversity, the U.S. 5th Circuit held it must follow state law on the issue.  The 14th Court of Appeals previously determined the cost of occupancy [the scope of the tax base] is the amount for which three conditions are satisfied: (1) “the consideration at issue must have been paid or charged for the use or possession, or the right to use or possess, a hotel room”; (2) “the amount to be taxed must have been paid ‘by the occupant of such room’”, which includes “‘through the means, work, or operations of’ and ‘in behalf of’”; and (3) “the amount to be taxed must have been paid ‘to such hotel’”.  The rate paid by the OCT to the hotel and behalf of the customers qualifies, but the higher rate paid by the customer to the OCT (including the service fee) does not.  OCTs have websites and provide information, they do not own, manage, or operate hotels. The service fee paid is for the providing of that information, not for the room. Because the only amounts at issue for the appeal were the differences between calculations of using the fee for tax base calculations and not using the fee, the trial court order is reversed and judgment is rendered for the OCTs.

If you would like to read this opinion click here. Panel consists of Chief Barksdale, Dennis, and Justice Clement.  Memorandum Opinion by Justice Barksdale. The attorney listed for the Appellant is David E. Keltner. The attorney listed for the Appellee is Gary Cruciani.

4th Court of Appeals holds City’s “evergreen clause” in collective bargaining agreement does not create unconstitutional debt



City of San Antonio v. San Antonio Firefighters’ Association, Local 624, 04-15-00819-CV (Tex. App. – San Antonio, August 23, 2017).

This is a permissive appeal, which was allowed by the court, where the City requested the Court of Appeals review the denial of its motion for summary judgment seeking to hold the “evergreen” clause of its collective bargaining contract, void as an unconstitutional debt. The court determined the clause was not an unconstitutional debt.

The City and firefighter union enter into multi-year collective bargaining agreement.  Because the contracts require council and union member approval, which takes time, the contracts have contained “evergreen” clauses which state the effective contract would continue in effect until a specified future date unless first replaced by a successor agreement or terminated by mutual agreement. At the time of suit, the Union and City had not adopted a successor agreement or terminated the current collective bargaining agreement (“CBA”). The City sought a declaration the clause was void as an unconstitutional debt or, in the alternative, as against public policy. The trial court denied the City’s summary judgment motion, which prompted this permissive appeal.

Article XI, Section 5 and Section 7 of the Texas Constitution prohibit debts by a city unless a sinking fund with revenue tax commitments are in place. The drafters intended to require local governments to operate on a cash basis and to limit their ability to pledge future revenues for current debts.  The court analyzed the term “debt” as referenced in the Texas Constitution. After analyzing case law, the court held a “debt” for constitutional purposes is a pecuniary obligation which cannot be satisfied out of current revenues for the year or savings. A contract can avoid constitutional infirmity if it is conditioned on a yearly appropriation of funds.  However, this CBA does not contain such a provision.  The City asserts “[w]hen the CBA was created in 2011, an absolute debt was created at once with only the time of payment being postponed.” The amount of the “debt” is presumably the total expense of complying with the contract, including the value of all the wages and benefits estimated to be due from 2011 through 2024.  According to the Union employee wages and benefits are not “debts” within the meaning of the Texas Constitution because no amount will be owed for a future year’s wages and benefits until work is performed by fire fighters and an obligation to pay them is incurred. The CBA sets a schedule of payments for when work is performed but is not a contract for employment. In order to succeed in its claims, the City must establish either that the entire CBA constitutes a debt or that non-severable obligations imposed by the CBA are unconstitutional debt, rendering the CBA void in its entirety. Conversely, if there are any severable provisions of the CBA that are not void for violating sections 5 and 7 of article XI of the Texas Constitution, the entire CBA is not void and the trial court properly denied the motion for summary judgment.  After a very long analysis of different provisions of the contract, the court held the contract does not create a debt. The actual amount the City will owe in a given year for operating expenses depends on the number and classification of employees. The contract does not expressly obligate the City to pay wages and benefits and does not contain any minimum staffing or funding requirements. As a result, the trial court properly denied the motion.

If you would like to read this opinion click here. Panel includes Chief Justice Marion, Justice Martinez and Justice Chapa. Opinion by Justice Chapa. The docket page with attorney information can be found here.

Expedited public securities law cannot be used to challenge TCEQ permit says Third Court of Appeals


Guadalupe-Blanco River Authority v. Texas Attorney General, et al, 03-14-00393-CV (Tex. App. Austin, February 26, 2015)

The Guadalupe-Blanco River Authority (“Authority”) filed a suit against numerous entities asserting the San Antonio Water System (“SAWS”) improperly filed an application with the Texas Commission on Environmental Quality (the “Commission”) that would significantly diminish the amount of water available for a major project by allowing SAWS to reuse effluent that it had previously used and discharged.  The Authority alleged that SAWS’ application “creates a cloud over” the revenue pledge made by the Authority to secure bonds to pay for its project because there will be less water available to sell to its customers. All of the defendants filed pleas to the jurisdiction asserting the claims are not ripe, the claims do not fall within the enabling Act, because the Commission has exclusive or primary jurisdiction over the controversy, and because the claims are barred by sovereign immunity. The trial court granted all pleas to the jurisdiction and the Authority appealed.

The Expedited Declaratory Judgment Act (the “Act”) contained within Tex. Gov’t Code §§ 1205.001-.152  was designed to provide a method of adjudicating the validity of public securities in an efficient and quick manner. The Authority argues the Act is the proper vehicle to challenge the permit since allowing the permit would mean the $100 million bond expenditure cannot result in the required total of needed water. However, the court held the Act’s expedited purpose,  which relates to only a limited set of topics, is to prevent “one disgruntled taxpayer” from stopping “the entire bond issue by simply filing suit”. The relief sought by the Authority was not concerned with whether the securities were properly authorized or whether the procedures for issuing the securities were followed. Instead the relief centers on trying to force SAWS to return water to the Guadalupe River for the benefit of the Authority. The relief cannot fairly be construed as bearing on the “legality and validity” of the bonds at issue. As a result the trial court was without jurisdiction to hear the case and properly granted the pleas.

If you would like to read this opinion click here. Panel: Justice Puryear, Justice Pemberton and Justice Field.  Memorandum Opinion by Justice Puryear. The docket page listing all attorneys for all parties can be found here.


State statute authorizes self-waiver of immunity from suit in financial agreements says 14th Court of Appeals

National Public Finance Guarantee Corporation and MBIA Insurance Corporation v. Harris County-Houston Sports Authority and Harris County Sports and Convention Corporation, 01-13-00401-CV (Tex. App. – Houston [14th Dist.], April 15, 2014).

This suit is one I’m not sure can be categorized in one sentence but I’ll give it a try. Essentially, an insurance company sued to force a venue authority to raise taxes in order to cover minimum bond repayment obligations and the court held it contractually waived its own immunity.

Harris County and the City of Houston created the venue district under Tex. Loc. Gov’t Code. §335.021 (“Sports Authority”) which issued a series of bonds pursuant to a written Indenture of Trust. The Convention Corporation is a local government entity created to serve as the landlord of Reliant Stadium which was a subject for bond issuance. The funding agreement notes the bonds are to be paid by hotel occupancy taxes and taxes on admissions and parking; however, the taxes shall not exceed $2 per ticket and $1 per car. National insures the bonds. The Sports Authority also entered into Reimbursement and Indemnity Agreements which provided National would guarantee regularly scheduled principal and interest payments on the bonds. In exchange, the Sports Authority agreed to indemnify National against any failure by it to perform or comply with the covenants or conditions of the Reimbursement Agreements. On several occasions the revenues were insufficient for the minimum payments on the bonds and the Sports Authority made claims with National to cover the shortfalls. National claimed these impermissibly reduced the reserve fund and because state statute authorized ban admission tax up to 10% of ticket price and parking tax up to $3 per vehicle, the Sports Authority was required by the Indenture to raise admission and parking taxes to legislative maximums. The Sports Authority refused to raise these taxes on the grounds they were capped at $2 per ticket and $1 per car, and even if not capped, such a tax increase required voter approval. National sued the Sports Authority, claiming that it had breached the Indenture by refusing to impose admissions and parking taxes at the legislative maximum. The trial court granted the pleas to the jurisdiction filed by the Sports Authority and Convention Corporation based on governmental immunity and National appealed.

The 14th District Court of Appeals first held that the Legislature added section 1371.059(c) to the Texas Government Code, which provides that “[a]n issuer in the proceedings to authorize obligations or a credit agreement, or in a credit agreement, may agree to waive sovereign immunity from suit or liability for the purpose of adjudicating a claim to enforce the credit agreement or obligation or for damages for breach of the credit agreement or obligation.” After analyzing the statutory language and amendments after Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) held the Sports Authority waived its immunity under the Reimbursement Agreement.  [Comment: Normally, a governmental entity cannot contractually waive its immunity from suit; however for financial instruments, there is an express statutory authorization for such a contractual waiver. ] As a result, the plea should not have been granted as to the Sports Authority.[Comment: contractual waiver or not, I’m not sure its permissible, separation-of-powers wise, to seek a declaration to force a legislative prerogative; i.e. mandatory raising of taxes].

National contends that as it was a third-party beneficiary, the Convention Corporation waived its immunity under its funding and lease agreements with the Sports Authority under subchapter I of Chapter 271 of the Local Government Code (dealing with waiver of immunity in contracts).  However, without analyzing whether the contracts were for goods or services (triggering the waiver under subchapter I), the court noted subchapter I only allows suit for breach of contract.  National did not assert a breach of contract claim against Convention Corporation and based on the alleged facts, could not. As a result, the trial court properly granted the plea as to Convention Corporation.

If you would like to read this opinion click here. Justice Higley, Justice Massengale, and Justice Huddle.  Opinion by Justice Huddle. The attorneys listed for National are N. Scott Fletcher, Ronald C. Lewis, Elizabeth Myers, Michael L. Rice.  The attorneys listed for the Harris County-Houston Sports Authority are Kelly Sandill, Gene L. Locke, and Scott A. Brister. The attorneys listed for the Harris County  Sports and Convention Corp. are Odean L. Volker, Stephen Burton Crain , and Kent Geoffrey Geoffrey Rutter.

County must deduct contributions to Association even though the payments went to a PAC says 4th Court of Appeals.


Bexar County Texas v. Deputy Sheriff’s Association of Bexar County, 04-13-00316-CV (Tex. App. – San Antonio, January 22, 2014).

This is an appeal from a declaratory action judgment where the trial court ordered the County to make certain payroll deductions which the County asserted were impermissible political action committee contributions. The San Antonio Court of Appeals affirmed the trial court judgment.

In the collective bargaining agreement between Bexar County and the Deputy Sheriff’s Association of Bexar County (“Association”), the County agreed to deduct association membership dues from payroll. The Association also formed a general purpose political action committee (“PAC”) which the deputies have the option of contributing to. When the Bexar County Auditor became aware that deputies were authorizing deductions which ultimately were given to the PAC, he refused to process the deductions. The Association sought a declaration the contributions were not unlawful and should be processed. After a bench trial, the trial court issued such a declaration and the County appeals.

The crux of the case turns on the interpretation of Tex. Loc. Gov’t Code §155.001(a)(2) noting that deductions can only be made for certain purposes. The County argued that it authorized deduction for membership dues and the PAC contributions do not qualify. While the Association can make PAC contributions from its general funds when the PAC contributions are reported in the names of the individual members, the County argued it exceeds statutory authority because it is deducting something other than “membership dues.” The Association’s position is that the ten dollars that is ultimately transferred to the PAC is a voluntary portion of its membership dues.

Using statutory construction principles the court determined that under §155.00a(a)(2), “membership” is the “status” of being a member and a due is the “fee . . . required” for that status. Nothing in the definition of “membership dues” forecloses that an organization can maintain multiple tiers of required and optional membership statuses.  Therefore, a “membership due” is any amount that is paid in exchange for the status or benefits of membership. As a result, the voluntary contribution is one of the options for membership that provides an opportunity for greater participation in the union’s political activity. Further, the statute concerns only the character of a payment at the time of the payroll deduction, not at the time of some subsequent disposition (such as into a PAC).  Here, the funds are membership dues at the time of the payroll deduction. The contribution transaction is an internal matter handled by the Association’s treasurer wherein membership dues are transferred from one union account to another. As a result, the judgment against the County is affirmed.

As to the attorney’s fees issued, the County argues that it is “equitable and just” for both sides to bear their own costs. It contends that it was not “equitable and just” to award fees to the Association because the County acted in good faith reliance on its interpretation of the law and a prior attorney general opinion interpreting a similar statute. The 4th Court disagreed noting that good faith reliance is not necessarily determinable. The County did not establish the award was arbitrary so the attorneys’ fee award stands.

If you would like to read this opinion click here. Before Justices Stone, Barnard, and Alvarez; opinion by Chief Justice Stone.   The attorneys listed for Bexar County are Albert Pena and Lowell Denton.  The attorney listed for the Association is David Van Os.