TCAA NEWS
(Volume 6, Issue 1 – January 2011)
"Your Source for Information About the Texas City Attorneys Association"
News and Updates

Lauren Crawford appointed as TCAA Assistant General Counsel:  On January 10, 2011, the TCAA Board of Directors appointed Lauren Crawford to the position of assistant general counsel in recognition of her work on the association’s behalf.  Lauren graduated from Texas Tech University in 2002 with a degree in history and Spanish, summa cum laude in honors studies.  In 2005, she received her law degree from the University of Texas School of Law.  While in law school, Lauren participated in the Texas International Law Journal, as well as internships for the Texas Railroad Commission, a Midland oil and gas firm, and the Texas Municipal League (TML).  Lauren joined TML as Legal Counsel in January of 2006.  Congratulations, Lauren!

2011 Riley Fletcher Basic Municipal Law Seminar to be held in Austin:  The Twelfth Annual Riley Fletcher Basic Municipal Law Seminar will be held in Austin on February 18, 2011.  For more information or to register, please visit www.texascityattorneys.org.

TCAA South Padre Conference to be held on June 8-10, 2011: The TCAA Board has set the program for this outstanding CLE opportunity for municipal attorneys.  Publicity and hotel and registration information for the conference will be available soon.

FREE CLE!  The 2010 TCAA Summer and Fall Conferences Available Online:  TCAA Online Seminars is a FREE SERVICE that allows TCAA members who are city attorneys, assistant city attorneys, or attorneys who regularly practice municipal law to purchase and view a video of past seminars in a single-session format. Viewing of the session, along with the completion of an evaluation and participation in the LisTCAA listserv, allows attorneys to receive participatory CLE credit with the State Bar. To view available seminars, please go to www.texascityattorneys.org, and click on “TCAA Online Seminars.”  (Use the password “FreeCLE” to gain access to the sessions.)   

Municipal Attorney Job Openings:  For the most recent Texas Municipal League classifieds postings, please click here.

TML/TCAA Legal Defense Program
Amicus Brief, Attorney General Opinion, and State Agency Comments Filed

Infrastructure: RQ-0923-GA; Whether the Eagle Pass Independent School District is subject to a municipal ordinance that requires the district to expend funds for certain kinds of infrastructure.  TML and TCAA argued that the attorney general has previously concluded that development regulations imposed by cities on school districts are permissible.

Federal Preemption:  Texas Central Business Lines Corporation v. City of Midlothian, No. 10-11041 (5th Cir. 2010).  TML, the National League of Cities, and the Texas Chapter of the American Planning Association joined in filing an amicus brief in the United State Court of Appeals for the Fifth Circuit supporting the City of Midlothian’s request for reversal.  Amici argued that the district court articulated a novel and an unacceptably low standard when it held that, so long as the activity of a third-party agent or contractor of a rail carrier acts with the “support of” the rail carrier, the third-party falls within the Interstate Commerce Commission Termination Act’s (ICCTA) preemption provision.  Amici also argued that the district court failed to properly apply the presumption against federal preemption.  ICCTA preemption does not extend to local health and safety regulations when those regulations do not unreasonably interfere with rail transportation.  When presented with city health and safety regulations, the district court failed to make the necessary factual findings and failed to impose on the third-party provider the burden of proving that compliance interfered with rail transportation.  The brief was filed with the Fifth Circuit on December 30, 2010.

Recent Federal Cases of Interest to Cities
Note: Included cases are from the period beginning on the 10th of the previous month through the 10th of the current month. These case analyses are reprinted with permission from the International Municipal Lawyers Association.

Moratoria:  BMTP Holdings, L.P. v. City of Lorena, No. 10-09-00146-CV (Tex. App.—Waco Dec. 22, 2010)In 2003, plaintiff’s preliminary plat for a development project was approved by the City of Lorena and the plaintiff began construction of the infrastructure for the project, including facilities to serve each lot with sewer service.  A final plat for the project was submitted to the city and approved on January 16, 2006.  Prior to the final plat’s approval, the sewer taps were required to be connected to the city’s sewer system and tested. 

In order to secure a residential building permit to build a residence on the lots, an application for a sewer connection was required.  But when the city delivered the final plat to plaintiff—on June 5, 2006—plaintiff was informed that the city had adopted a moratorium on the issuance of sewer taps earlier that same day because the city had insufficient capacity in its sewer system. 

Under Chapter 212 of the Local Government Code, a city has the power to institute a moratorium on “property development” if it demonstrates “a need to prevent a shortage of essential public facilities,” including sewer facilities.  In order to impose the moratorium, a city must find, among other things, that there is “evidence demonstrating that the moratorium is reasonably limited to . . . property that has not been approved for development because of the insufficiency of existing essential public facilities.”

Plaintiff’s final plat became effective on June 5, 2006, when it was recorded with the county clerk.  Plaintiff had completed the build-out of the infrastructure and sold several lots in the project by the time it was notified of the moratorium.

In April 2008, plaintiff’s developer filed a declaratory judgment action against the city seeking a declaration that the moratorium did not apply to its development project, that the moratorium couldn’t be enforced against its project, and that the city couldn’t deny building permits for its project.  Plaintiff also filed an inverse condemnation claim (i.e., a taking pursuant to Article I, Section 17, of the Texas Constitution).  The trial court granted the city’s motion for summary judgment and denied plaintiff’s motion on the declaratory judgment action.

The court of appeals reversed the judgment of the trial court.  The court held that the term “property development,” as defined in Local Government Code Section 212.131, includes the full range of development (including construction and subdivision) contemplated by Section 212.131(3) and noted that its construction of this term is similar to the application of the term “project” under Chapter 245 of the Local Government Code (the “Vested Rights Statute”).  Because the developer’s project was approved for development before the adoption of the moratorium, the court held the moratorium did not apply to plaintiff, the city couldn’t enforce the moratorium against those lots that had already been approved for development, and the city couldn’t deny building permits on the lots because of the moratorium.

The appellate court reversed and remanded to the trial court the inverse condemnation claim and the issue of the award of attorney’s fees.

Tax:Putnam v. City of Irving, No. 05-10-01269-CV (Tex. App.—Dallas December 13, 2010).  The City of Irving sought a declaratory judgment to validate the issuance of bonds for the construction of an entertainment center and hotel complex.  The Irving Taxpayers Opposed to Illegal and Wasteful Use of Tax Money (the “Taxpayers”), led by former Irving Mayor Joe Putnam, intervened in the action to seek a temporary injunction against the issuance of the bonds.  The district court ordered the Taxpayers to post security in the amount of $10 million in order to continue participation in the proceeding pursuant to the statutory requirement in Section 1205.101 of the Government Code.  The Taxpayers failed to post security, and the district court dismissed the intervention.  The Taxpayers appealed on the grounds that the district court abused its discretion by both requiring them to post security and by dismissing the intervention.   

On appeal, the Taxpayers generally argued that they had a right to the relief being sought, and as a result, the district court abused its authority in granting the city’s motion to require security.  See Tex. Gov’t Code § 1205.102.  The Taxpayer’s first argument was that the city inappropriately pledged the state’s portion of hotel occupancy taxes and sales and use taxes to repay its bond obligations.  Section 351.102 of the Tax Code permits a city to utilize the state’s portion of hotel taxes and sales and use taxes generated at a qualifying “hotel project” in order to repay bond debt.  “Hotel” in Chapter 351 has the same definition as provided in Section 156.001 of the Tax Code, which defines “hotel” as “a building in which members of the public obtain sleeping accommodations for consideration.”  Tex. Tax Code § 156.001; see also Id. § 351.001(4).  The Taxpayers contended that because the project is primarily an “entertainment center,” it could not be characterized as a “hotel project”, and therefore state taxes could not be pledged.  The city presented evidence in district court that the hotel consisted of twelve suites behind the performance hall that would rent for $2,000 to $5,000 per night.  The court of appeals determined that the hotel at issue met the statutory definition of “hotel” in Section 156.001 of the Tax Code.   

The city also proposed to pledge the state’s portion of the mixed beverage taxes collected within the project to repay the bond debt pursuant to Section 2303.5055 of the Government Code.  That statute provides that “[f]or a period that may not exceed 10 years, a governmental body, including a municipality, county, or political subdivision, may agree to rebate, refund, or pay eligible taxable proceeds to the owner of a qualified hotel project at which the eligible taxable proceeds were generated.”  Tex. Gov’t Code § 2303.055.  The Taxpayers argued that the term “governmental body” did not include the state, and therefore the city could not pledge the revenue to repay the bond debt.  The court determined that even if the state were not considered to be a “governmental body,” there still is no evidence demonstrating the amount of revenue this would account for out of the total revenue for all sources.  The appellate court could not conclude that the district court abused its discretion to deny the Taxpayer’s injunction because an unknown amount of one of seven revenue sources could possibly be unavailable to repay the city’s debt.

Next, the Taxpayers argued that the city could not legally pledge admissions and parking taxes to repay the debt because the ordinance imposing these taxes was passed at a special meeting, and not a regular meeting as required by the city charter.  Although the charter expressly does not allow an ordinance to be passed at a special meeting, it does permit a resolution or order to be adopted at a special meeting:  “No ordinance, unless it be declared an emergency measure, shall ever be passed at a called meeting, but may be passed at any regular meeting of the council unless otherwise provided.  All resolutions or orders may be passed at any regular meeting or may be passed at any special or called meeting called for that purpose.”  Irving City Charter art. IV, § 17 (1952).  The city contended that an “order” is equivalent to an “ordinance,” and as a result the tax ordinance was lawfully adopted.  Although the appellate court questioned the city’s equating of the two terms, it determined that even if ordinances could only be passed at regular meetings, there would be nothing to prevent the city from passing the new ordinance at the next regular meeting to eliminate the concern.  Because the Taxpayers did not show that the admissions and parking taxes would never be available to the city, they failed to demonstrate their entitlement to an injunction on this basis. 

Finally, the Taxpayers contend that because four out of the seven revenue sources to repay the bonds were existing taxes, and were not approved by the voters, the city violated its contract with the voters to use only the three voter-approved revenue sources.  A city violates its contract with the voters if it uses voter-approved taxes in a way that the voters did not approve.  See Taxpayers for Sensible Priorities v. City of Dallas, 79 S.W.3d 670, 676 (Tex.App.—Dallas 2002, pet. denied).  The court determined that, because the ballot proposition did not state that the project would be funded using only the three voter-approved taxes, the city’s decision to pledge the other four revenue sources was consistent with the voters’ approval.

The court of appeals ultimately concluded that the district court did not abuse its discretion in determining that the Taxpayers were not entitled to an injunction against the issuance of the bonds and by requiring the Taxpayers to post security in order to continue their participation in the proceeding.   

Real Property: Wight Realty Interests, Ltd. v. City of Friendswood, No. 01-10-00442-CV (Tex. App.—Houston [1st Dist.] Dec. 23, 2010).  This case arose when the city terminated a construction contract with Wight Realty.  The city entered into a contract with Wight Realty to develop recreational facilities on land owned by Wight Realty.  The contracted provided that the city would purchase the land and the facilities after Wight had completed construction.  If the city did not purchase the land as promised, the city agreed to pay for the costs of the improvements.  The city terminated the contract after Wight Realty had already expended large sums of money on constructing the facilities.  Wight then sued the city for breach of contract and estoppel.  In the trial court, the city argued in its plea to the jurisdiction that it retained its governmental immunity because the contract was for the sale of real property, not for the provision of goods and services required for a waiver under Section 271.152 of the Local Government Code.  The trial court granted the city’s plea to the jurisdiction. 

Governmental immunity protects each city from lawsuits for money damages unless immunity has been waived.  See Ben Bolt-Palito Blanco Consol. I.S.D. v. Tex. Politication Subdivisions Property/Casualty Joint Self-Insurance Fund, 212 S.W.3d 320, 324 (Tex. 2006).  One statute that waives governmental immunity is Section 271.152 of the Local Government Code.   Section 271.152 states:

A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract, subject to the terms and conditions of this subchapter.

Tex. Loc. Gov’t Code § 271.152.  Contracts that are part of this waiver of immunity include those that: “stat[e] the essential terms of the agreement for providing goods or services” to the city. Id. § 271.151. The definition of “services” has has been found to include “any act performed for the benefit of another under some arrangement or agreement whereby such act was to have been performed.”  Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 838 (Tex. 2010).  In Kirby Lake, the Supreme Court of Texas held that an agreement to “construct, develop, lease, and bear all risk of loss or damage to the facilities” entailed services covered by Sections 271.151 and 271.152.  Id. at 839.  A contract must also contain definite terms that a court can understand before it can be legally binding.  Fort Worth I.S.D. v. City of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000). 

The city argued at the court of appeals that immunity had not been waived because: (1) the contract was for the sale of property, not for goods and services; and (2) in the alternative, the contract did not lay out the “essential terms” as required by Section 271.151.  The court of appeals held that the contract between the city and Wight Realty involved both the sale of real property and “services” as defined in Section 271.151 of the Local Government Code.  The court of appeals also held that the contract terms were sufficient to be legally binding and thus to waive immunity under Section 271.151.

(Note:  The city also argued that the city could not have entered into a contract for “goods or services” without going through the competitive bidding process, but the court of appeals did not review that argument because it was not supported by the record.)

The court of appeals reversed the trial court’s grant of the city’s plea to the jurisdiction and remanded the case to the trial court.

Water MetersCity of Wilmer v. Northwind Properties, Ltd., No. 05-10-00309-CV (Tex. App.—Dallas Dec. 22, 2010)The court of appeals held that the Northwind had not provided sufficient evidence that the city was acting discriminatorily when the city indicated to Northwind that it would be reading only the master water meter at the manufactured housing community instead of the individual meters. 

Public Information ActCity of Dallas v. The Dallas Morning News, LP., No. 05-09-00924-CV (Tex. App.—Dallas Dec. 30, 2010)The court of appeals held that a newspaper can be a requestor under the Public Information Act, and thus has standing to file a mandamus to require a city to comply with the Act.

Attorney General Opinions of Interest to Cities

Note: Included opinions are from the period beginning on the 10th of the previous month through the 10th of the current month.

Opinion No. GA-0833 (Transportation): Concludes that Sections 451.610 and 451.616 of the Transportation Code are not retroactive statutes in violation of article I, section 16, of the Texas Constitution. Capital Metro is therefore not prohibited by that constitutional provision from charging the City of West Lake Hills for transportation services provided to the city’s residents with disabilities pursuant to the Transportation Code.

You can view attorney general opinions at www.oag.state.tx.us. On the same site, you can also sign up to receive e-mail updates of opinion requests and newly released opinions.

As a supplement to TCAA News, please check the TML Legislative Update and TML's Connect News Service.
Please contact Scott Houston, TCAA General Counsel, with your news, questions, and/or comments by e-mail at legalgovt@tml.org or by phone at 512-231-7400.
TCAA members may use the information herein for any purpose. No other person may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas City Attorneys Association.
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