LCEC Appeal Supreme Court

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August 15, 2011

No. ________

In the

Supreme Court of Texas

EX PARTE:THE CITY OF IRVING,TEXAS

On Petition for Review from the Court of Appealsfor the Fifth District of Texas at Dallas

No. 05-11-00036-CV

CITY OF IRVINGS PETITION FOR REVIEW

Charles R. AndersonState Bar No. 01170500

Office of the City Attorney825 West Irving BoulevardIrving, Texas 75060972.721.2541972.721.2750 (facsimile)[email protected]

Lisa Bowlin HobbsState Bar No. 24026905

VINSON &ELKINS LLP2801 Via Fortuna, Suite 100Austin, Texas 78746512.542.8593512.236.3275 (facsimile)[email protected]

Michael L. RaiffState Bar No. 00784803

GIBSON DUNN &CRUTCHER LLP2100 McKinney AvenueDallas, TX 75201214.698.3350214.571.2927 (facsimile)[email protected]

E. Ray HutchisonState Bar No. 10352000

Thomas S. LeatherburyState Bar No. 12095275

Marc A. FullerState Bar No. 24032210

VINSON &ELKINS LLP2001 Ross Ave., Suite 3700

Dallas, Texas 75201214.220.7792214.999.7792 (facsimile)[email protected]@[email protected]

Attorneys for City of Irving
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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IDENTITY OF THE PARTIES AND COUNSEL

Petitioners

City of Irving, Texas

Trial and Appellate Counsel

Michael L. Raiff

Gibson, Dunn & Crutcher LLP2100 McKinney AvenueDallas, TX 75201-6912214.698.3350214.571.2927 (fax)

E. Ray HutchisonThomas S. LeatherburyRobert R. Collins IIIJulie Melton Partain

Marc A. FullerVinson & Elkins LLP2001 Ross Avenue, Suite 3700Dallas, TX 75201214.220.7700214.999.7792 (fax)

Lisa Bowlin HobbsVinson & Elkins LLP2801 Via Fortuna, Suite 100Austin, Texas 78746512.542.8593512.236.3275 (fax)

Charles R. Anderson, City AttorneyOffice of the City Attorney825 West Irving Blvd.Irving, TX 75060972.721.2541972.721.2750 (fax)


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Respondent/Plaintiff

The Office of the Attorney General ofTexas


David J. SchenckDavid C. MattaxJennifer S. Jackson

Office of the Attorney General of TexasP.O. Box 12548Austin, TX 78711-2548512. 936.1342512.936.0545 (fax)

Intervenors

Las Colinas Group, LP Frank L. BransonEric T. Stahl

Law Offices of Frank L. Branson, P.C.4514 Cole Avenue, Suite 1800Dallas, TX 75205214.522.0200214.521.5485 (fax)

B Concessionaire-Las Colinas, LLC Mikel J. BowersBell Nunnally & Martin LLP3232 McKinney Avenue, Suite 1400Dallas, TX 75204-2429

214.740.1400214.740.1499 (fax)

Greater Irving-Las Colinas Chamber ofCommerce

Robert D. MartinezCotton, Schmidt & Abbott, LLP550 Bailey Avenue, Suite 600Fort Worth, TX 76107817.338.4500817.338.4599 (fax)

Dallas County Utility and ReclamationDistrict

John F. Boyle, Jr.Boyle & Lowry, L.L.P.4201 Wingren, Suite 108Irving, TX 75062-2763972.650-1700972.650.7105 (fax)


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Pro Se Intervenors Thomas BlakewellSteve BronnerJames W. CasselsCousins Properties Services LLCTeresa E. Crow

Gables ResidentialHines Las Colinas L and LPIrving Convention and Visitors BureauCarl KlinkeJacky KnoxClementine C. LearDanny OpitzNancy OptizMel RobinsonRobert N. Stewart

Carlton E. Turner, Ph.D., D.SC.Rob Witte


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Amicus Curiae

City of Dallas

City of San Antonio

Christopher B. BowersBarbara E. RosenbergAssistant City Attorneys

Office of the City AttorneyCity of Dallas, Texas7BN Dallas City Hall1500 Marilla StreetDallas, Texas 75201

Michael D. BernardCity Attorney

P.O.Box 839966San Antonio, Texas 78283210.207.8940210.207.4004 (fax)

Thomas K. SpurgeonMcCall, Parkhurst & Horton L.L.P.700 N. St. Marys, Suite 1525San Antonio, Texas 78205210.225.2800

210.225.2984 (fax)

Robert G. NewmanRosemarie KanuskyFulbright & Jaworski L.L.P.300 Convent, Suite 2100San Antonio, Texas 78205210.270.7138210.270.7205 (fax)


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Petitioners in No. 11-0168

Joe Putnam and the Irving TaxpayersOpposed to Illegal and Wasteful Use ofTax Money


James B. HarrisScott P. StolleyRichard B. Phillips, Jr.

Thompson & Knight LLPOne Arts Plaza1722 Routh Street, Suite 1500Dallas, TX 75201-2533214.969.1700214.969.1751 (fax)


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TABLE OF CONTENTS

IDENTITY OF THE PARTIES AND COUNSEL ...........................................................ii

TABLE OF CONTENTS...............................................................................................vii

INDEX OF AUTHORITIES...........................................................................................ix

RECORD REFERENCES...............................................................................................xi

STATEMENT OF THE CASE ......................................................................................xii

STATEMENT OF JURISDICTION ............................................................................. xiv

STATEMENT OF ISSUES PRESENTED.....................................................................xv

STATEMENT OF FACTS...............................................................................................1

A. The Citys Proposed Project and the Proposed Bonds.................................1

B. The City Files a Declaratory Judgment Action under Chapter1205, and the Trial Court Enters Final Judgment in the CitysFavor. .........................................................................................................1

C. The Court of Appeals Reverses in Part, but Fails to Answerthe Legal Question of Whether the State Is a GovernmentalBody.........................................................................................................2

D. In the Wake of the Court of Appeals Decision, the City IsUnable to Determine the Final Financial Structure of itsProposed Bonds..........................................................................................3

SUMMARY OF THE ARGUMENT ............................................................................... 4

ARGUMENT AND AUTHORITIES...............................................................................6

I. By Declining to Answer Whether the State Is a GovernmentalBody, the Court Abrogated its Duty under Chapter 1205 toDetermineAll Legal Questions in the Case and Placed the City in anIntolerable Dilemma..............................................................................................6

II. The State Is Plainly a Governmental Body underSection 2303.5055 of the Government Code. ........................................................9

A. The Plain Meaning of Governmental Body Includes theState. ..........................................................................................................9

B. The Doctrines ofEjusdem Generis and Noscitur a Sociis DoNot Require a Narrower Construction.......................................................12


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C. Neither The Legislative History Nor the Overall Structure ofChapter 2303 Supports Limiting Governmental Body toLocal Governments. ................................................................................. 13

CONCLUSION.............................................................................................................. 15

APPENDIX

A: Ex Parte City of Irving, No. 05-11-00036-CV, 2011 WL 1902210 (Tex. App.Dallas May 20, 2011, pet. filed)

B: Final Judgment

C: TEXAS GOVERNMENT CODE 1205.021, .025, .065, .068

D: TEXAS GOVERNMENT CODE 2303.502,.503,.504,.505,.5055


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INDEX OF AUTHORITIES

CASES

Albertsons, Inc. v. Sinclair,984 S.W.2d 958 (Tex. 1999) ........................................................................................9

Doyle v. State,148 S.W.3d 611 ((Tex. App.Austin 2004, pet. refused) ..........................................12

Ex Parte City of Irving,No. 05-11-00036-CV, 2011 WL 1902210 (Tex. App.Dallas May 20, 2011, pet.

filed) ........................................................................................................................3, 7

Hotze v. City of Houston,339 S.W.3d. 809 (Tex. App.Austin 2011, no pet.) ....................................................8

In re Estate of Nash,220 S.W.3d 914 (Tex. 2007) ......................................................................................12

Monsanto Co. v. Cornerstones Mun. Util. Dist.,865 S.W.2d 937 (Tex. 1993) ......................................................................................11

Smith v. Wortham,157 S.W. 740 (Tex. 1913) ..........................................................................................13

United States v. Mescall,215 U.S. 26 (1909) .....................................................................................................13

STATUTES

TEX.AG.CODE 41.052................................................................................................10

TEX.EDUC.CODE 62.003(2) .......................................................................................10

TEX.ELEC.CODE 251.001...........................................................................................10

TEX.FIN.CODE 14.063 ...............................................................................................10

TEX.FIN.CODE 16.010 ...............................................................................................10

TEX.GOVT CODE 1205.021(2).....................................................................................6

TEX.GOVT CODE 1205.021(2)(F) ................................................................................6

TEX.GOVT CODE 1205.025(2).....................................................................................6

TEX.GOVT CODE 1205.065(1).....................................................................................7

TEX.GOVT CODE 2009.002........................................................................................10

TEX.GOVT CODE 2252.091........................................................................................10

TEX.GOVT CODE 2303.502........................................................................................14

TEX.GOVT CODE 2303.503........................................................................................14

TEX.GOVT CODE 2303.504........................................................................................14


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TEX.GOVT CODE 2303.505..................................................................................14, 15

TEX.GOVT CODE 2303.5055............................................................................... passim

TEX.GOVT CODE 2303.5055(a) ...............................................................................7, 9

TEX.GOVT CODE 311.005(13)...................................................................................12

TEX.GOVT CODE 311.011(a) .......................................................................................9TEX.GOVT CODE 311.016(2).......................................................................................7

TEX.GOVT CODE 33.030 ...........................................................................................10

TEX.GOVT CODE 391.003 .........................................................................................10

TEX.GOVT CODE 401.011(g).....................................................................................10

TEX.GOVT CODE 436.054(b).....................................................................................10

TEX.GOVT CODE 551.001(3).....................................................................................10

TEX.GOVT CODE 552.003(1)(A)............................................................................9, 10

TEX.GOVT CODE 559.001 .........................................................................................11

TEX.GOVT CODE 573.042 .........................................................................................10

TEX.GOVT CODE 614.003 .........................................................................................10

TEX.GOVT CODE 659.002(c) .....................................................................................11

TEX.HUM.RES.CODE 115.004 ...................................................................................10

TEX.SPEC.DIST.CODE 8842.102(b) ...........................................................................10

TEX.TAX CODE 151.027(c)(7) ....................................................................................10

TEX.TRANSP.CODE 456.001(2)..................................................................................11

TEX.TRANSP.CODE 458.001(4)..................................................................................11

OTHER AUTHORITIES

C.S.H.B. 2001, 75th Leg., Reg. Sess., 7 .......................................................................14


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RECORD REFERENCES

In this petition, the following record citation forms will be used:

Clerks Record (Vols. 16) will be cited as [volume]CR[page]. Reporters Record (Vols. 14) will be cited as 1RR.[page], when referencing thetranscript of the hearing on September 27, 2010, and 3RR.[page], when referencing

the transcript of the hearing on October 4, 2010.

The Citys trial exhibits will be cited as PX[number].


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STATEMENT OF THE CASE

Nature of the

Case:

Petitioner the City of Irving (City) filed a declaratory judgmentsuit under the Expedited Declaratory Judgment Act, Chapter 1205of the Texas Government Code (Act or Chapter 1205), seekingvalidation of proposed bonds to finance the construction of an

Entertainment and Hotel Project to complement its new conventioncenter.

Trial Court: Hon. Craig Smith, 192nd Judicial District Court, Dallas Co., Texas.

Trial Courts

Disposition:

After a two-day trial, the City and the Attorney General of Texas(Attorney General) filed separate motions for final judgment.Although the Attorney General did not object to most of thedeclaratory relief requested in the Citys proposed final judgment,the Attorney General argued that: (1) certain of the revenues the

City proposed to pledge as security for the proposed bonds weresubject to biennial appropriation by the Legislature and (2) theTexas Comptroller could not refund the States portion of the mixedbeverage tax to the Citys proposed Project because the State wasnot a governmental body under Section 2303.5055 of the TexasGovernment Code. 6CR1277-78. The trial court agreed with theCity on both legal questions and entered Final Judgment in theCitys favor. 6CR1281-87 (attached at App. B).

Court of Appeals: Fifth Court of Appeals; Opinion by Justice Lang-Miers, joined byJustice ONeill and Justice Lang. Ex Parte City of Irving, No. 05-11-00036-CV, 2011 WL 1902210 (Tex. App.Dallas May 20,2011, pet. filed) (attached at App. A).

Court of Appeals

Disposition:

Affirmed in part, reversed in part, and remanded. The AttorneyGeneral appealed the Final Judgment on both legal issues. As tothe biennial appropriation question, the court of appeals held thatthe revenues the City proposed to pledge as security for theproposed bonds were not subject to biennial appropriation by theLegislature. The court of appeals did not answer the mixedbeverage question, however, holding instead that the City was not

entitled to pledge the States portion of the mixed beverage taxbecause there was no evidence in the record of a written agreementby the State to refund its portion of the mixed beverage tax.


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Other Appeal

Arising from Trial

Court Proceedings

This is the second appeal from the trial proceedings in this case. Inthe first appeal, the court of appeals upheld the trial courtsdismissal of two Opposing Intervenors under Section 1205.104 ofthe Act for failing to post a security bond. SeePutnam v. City ofIrving, 331 S.W.3d 869 (Tex. App.Dallas 2011, pet. filed). TheOpposing Intervenors filed a petition for review in this Court. See

No. 11-0168. Despite having been dismissed from the proceedings,the Opposing Intervenors have improperly tried to participate inthis second appeal. The court of appeals correctly refused toconsider the issues raised in their appellate brief because they[were] not properly before [the] Court. Id. at 1 n.1. Moreover,there is no reason for this Petition to be considered together withthe Opposing Intervenors petition in No. 11-0168. The petition inNo. 11-0168 presents the question of the proper standard forimposing a security bond on an opposing intervenor in a Chapter1205 case, whereas this Petition does not concern the security bond

provisions under Chapter 1205. The Opposing Intervenors petitionin No. 11-0168 assumes that the City is not entitled to pledge theStates portion of the mixed beverage tax, and the Citys responseto that petition shows that, even if the court of appeals ruling onthe mixed beverage issue is correct, the City still obtainedsubstantially the judgment it sought in the case, which is thestandard under Chapter 1205s security bond provisions.


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STATEMENT OF JURISDICTION

This Court has jurisdiction under Sections 22.001(a)(3), (4), and (6), as well as

Section 1205.068(d), of the Texas Government Code.


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STATEMENT OF ISSUES PRESENTED

The City of Irving brought this case under Chapter 1205 of the Texas Government

Code, which gives governmental issuers of bonds the statutory right to obtain judicial

resolution of legal questions relating to proposed bonds, before the bonds are issued.

One of the legal questions in this case is whether the State is a governmental body

under Section 2303.5055 of the Texas Government Code and therefore has the authority

to refund its portion of the mixed beverage tax to the City, which has proposed to pledge

these revenues as security for its bonds. The trial court resolved this governmental

body issue in favor of the City, but the court of appeals declined to decide the issue.

Instead, it held that there was no record evidence of an agreement by the State to refund

these tax revenueseven though the reason why there is no such agreement in the record

is that the State does not believe it is a governmental body.

This Petition seeks review of that decision and presents the following issues:

1. Did the court of appeals disregard a statutory obligation to determine . . .

each legal question raised in this bond validation suit when it refused to resolve the

governmental body issue?

2. Is the State a governmental body under the plain meaning of

Section 2303.5055 of the Texas Government Code?

3. [unbriefed] Assuming the State is a governmental body under Section

2303.5055 of the Texas Government Code, is the City required to have an agreement

with the State in order to receive a refund of the States portion of the mixed beverage

tax, and, if so, what form must such an agreement take?


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STATEMENT OF FACTS

A. The Citys Proposed Project and the Proposed Bonds.Last year, the City of Irving completed construction of a $135 million convention

center. 1RR.100. To enhance the new convention center and to distinguish it from

competing venues, the City is planning an Entertainment and Hotel Project (Project),

adjacent to the convention center. 1RR.109. The proposed Project, which will be funded

by public and private investment, will include a boutique hotel, performance hall,

restaurants, outdoor stages, promenades, and parking facilities. 1RR.108-09; 1RR.121.

The City currently anticipates issuing three series of bonds, totaling approximately

$200 million in net proceeds (Bonds). 1RR.121. These proposed Bonds would be

secured by revenues from various potential sources (Potential Pledged Revenues),

including both local and state tax revenues, such as State sales and use taxes, State mixed

beverage taxes,1 State hotel taxes, City sales and use taxes, City parking taxes, City ticket

taxes, City mixed beverage taxes, City hotel taxes, and rent payments from the Projects

tenant. 1RR.129-141; PX23,25. These plans are not final. Rather, the current bond

ordinances are draft ordinances, as the City is still working through the final financial

structure of the proposed Bonds. 1RR.124; PX17-18.

B. The City Files a Declaratory Judgment Action under Chapter 1205,and the Trial Court Enters Final Judgment in the Citys Favor.

The final financial structure of the Bonds will depend on which of the Potential

1 As background, the State imposes a 14% mixed beverage tax. The State retains a portion of these taxrevenues and remits a portion to the City. 1RR.137.


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Pledged Revenues the City is allowed to pledge as security for them. To resolve this

issue, the City sought a declaratory judgment under the Expedited Declaratory Judgment

Act, Chapter 1205 of the Texas Government Code. 1CR1. In addition to the Potential

Pledged Revenues described above, the City requested judicial validation of various

agreements, ordinances, and approvals relating to its proposed financing plan and the

proposed expenditures of bond proceeds. 1CR23-24.

As a mandatory party under the Act, the Attorney General appeared in the case,

raising two legal objections to the Citys proposed declaratory judgment: (1) whether the

State Project Taxes and the City Mixed Beverage Tax were subject to biennial

appropriation by the Texas Legislature and (2) whether the State was a governmental

body under Section 2303.5055 of the Texas Government Code and therefore had the

authority to refund its portion of the mixed beverage tax to the City.2 6CR1277. After a

two-day trial, the trial court considered additional briefing by the Attorney General and

the City on these two questions. It agreed with the City on both of them, entering Final

Judgment in the Citys favor. 6CR1281.

C. The Court of Appeals Reverses in Part, but Fails to Answer the LegalQuestion of Whether the State Is a Governmental Body.

The Attorney General raised the same two issues on appeal as in the trial court.

The court of appeals affirmed the judgment in large part, granting the City substantially

the judgment it had originally requested in its petition. As to the biennial appropriation

2 The Attorney General did not challenge any other part of the relief requested in the Citys petition,including the various other Potential Pledged Revenues, the validity of the Citys 2007 Electionapproving the project, the Lease Agreement, and Development Agreement.


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question, it held that none of the Potential Pledged Revenues was subject to biennial

appropriation by the Legislature. See Ex Parte City of Irving, 2011 WL 1902210, at *2-

4. But although the issue was squarely presented to the court in the parties briefing, the

court of appeals did not answer the legal question of whether the State is a governmental

body under Section 2303.5055, and therefore has the authority to refund the States

portion of the mixed beverage tax to the City. Instead, the court held that there was not

any evidence in the record of an actual agreement between the State and the City. Id., at

*6.

D. In the Wake of the Court of Appeals Decision, the City Is Unable toDetermine the Final Financial Structure of its Proposed Bonds.

By not deciding the legal question of whether the State is a governmental body

under Section 2303.5055 of the Texas Government Code, the court of appeals ruling

puts the City in an untenable position. In order to determine a final financial structure for

the bonds, the City must know which revenues are available to repay them. But with

regard to the States portion of the mixed beverage tax, the City cannot move forward

with the Comptroller, given that the Comptroller does not believe that she has the legal

authority to refund the States portion of the mixed beverage taxbecause she does not

think the State is a governmental body. And that is precisely the legal question that the

court of appeals declined to answer.

Unable to determine a final financial structure for the Bonds, the City cannot draft

its final bond ordinances, much less obtain City Council approval of them. It cannot

obtain a rating for the Bonds, because that process involves an analysis of the total


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revenues pledged to the repayment of the bonds. 3RR.193. It cannot conduct a final

feasibility study. 3RR.192-93. And the City cannot make necessary changes to the

Project or its financing, e.g., by changing certain design details for the Project or

adjusting the relative amounts of private and public investment, because it does not know

how much money will be available for bond repayments. In short, even after having

prevailed on every other issue, the City has been denied the legal certainty necessary to

finalize its proposed Bonds.

SUMMARY OF THE ARGUMENT

Normally, a court of appeals opinion that relies on an evidentiary matter to avoid

a legal issue might not deserve this Courts attention. In most cases, the court of appeals

has no statutory duty to decide allof the legal questions raised in a case. And courts are

understandably reluctant to decide issues of first impression.

But bond validation cases are different. The Expedited Declaratory Judgment Act

expressly commands the trial court to determine each and every legal question raised in

the case, and the court of appeals has the same obligation. Indeed, the very purpose of

the Act is to allow government bond issuers like the City of Irving to obtain judicial

resolution of legal questions affecting the validity of proposed bonds when they are just

thatproposedbonds. Thus, it is customary for an issuer to file suit under the Act before

obtaining all of the approvals that are required for the bonds actually to issue. After all,

the entire purpose of filing a bond validation case is to obtain judicial resolution of legal

questionsso that the final financial structure can be determined and necessary approvals

and agreements obtained.


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The court of appeals decision, if left uncorrected, threatens to deprive all

government bond issuers of the most important benefits of the Act by (1) burdening them

with procedural formalities never contemplated by the Act, and (2) raising the possibility

that, even after an issuer incurs the expense of bringing and litigating a bond validation

suit in the trial court, a court of appeals will leave key legal questions unanswered and

therefore deny the issuer the legal assurances required to determine a final financial

structure for the proposed bonds. In essence, the Expedited Declaratory Judgment Act

would no longer be what it is todaya vital tool for the efficient resolution of all legal

questions affectingproposedpublic bonds.

The City of Irvings current predicament illustrates the harmful effect of the court

of appeals decision. The City has been told by the court of appeals that it cannot get

judicial resolution of whether the Comptroller has the legal authority to refund State

mixed beverage tax revenues because the City has not yet secured an agreement from the

Comptroller for such a refund. But the Comptroller has stated that she does not think she

has the legal authority to enter into such an agreement. The City respectfully disagrees

with the Comptroller on this legal question, but only a court can say who is correct, and

the court of appeals declined to answer that question. By granting this Petition, the Court

will not only help the City resolve this dilemma but also assure bond issuers across the

State that the judiciary, if requested, will serve the role the Legislature has given it under

Chapter 1205 to resolve disputes about the validity and legality of public securities.


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Finally, had the court of appeals discharged its statutory duty and decided the legal

question presented here, it should have held that the State is, in fact, a governmental

body within the meaning of the applicable statute, Section 2303.5055 of the Texas

Government Code, and may therefore refund its portion of the mixed beverage tax. As

the trial court properly determined, the plain meaning of governmental body includes

the State and its agencies, and none of the Attorney Generals arguments justifies a

departure from that plain meaning. In short, the court of appeals should have decided this

legal questionand decided it in the Citys favor.

ARGUMENT AND AUTHORITIES

I. By Declining to Answer Whether the State Is a Governmental Body, theCourt Abrogated its Duty under Chapter 1205 to Determine All Legal

Questions in the Case and Placed the City in an Intolerable Dilemma.

The Expedited Declaratory Judgment Act gives cities like Irving the statutory right

to obtain judicial resolution of legal questions relating to proposed bonds. TEX.GOVT

CODE 1205.021(2) (An issuer may bring an action under this chapter to obtain a

declaratory judgment as tothe legality and validity of each [proposed bond]). These

specifically include any legal questions relating to the pledge . . . of a tax [or]

revenue . . . to secure the public securities. TEX. GOVT CODE 1205.021(2)(F).

Importantly, the Act expressly provides that a city like Irving may bring the declaratory

judgment action before . . . the public securities are authorized, issued, or delivered.

TEX.GOVT CODE 1205.025(2) (emphasis added). Indeed, that is the primary purpose

of the Act: to obtain a legal determination as to all questions relating to a proposed bond

issuancebefore the bonds are finally approved by the issuer and sold to the market. For


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this reason, the Act imposes a duty on the trial court to determine each legal question

raised in the case. TEX. GOVT CODE 1205.065(1) (The court shall . . . hear and

determine each legal . . . question in the declaratory judgment action.) (emphasis added);

TEX.GOVT CODE 311.016(2) (Shall imposes a duty.). Of course, the same duty

extends to the court of appeals. Otherwise, the bond issuer ends up in the same situation

as before the action was fileduncertain as to legal questions relating to the proposed

bonds.

Here, the court of appeals disregarded its statutory duty to determine a legal

question raised by the Attorney General, namely whether the State has the authority to

refund its portion of the mixed beverage tax to the City. This question requires an

interpretation of Section 2303.5055 of the Texas Government Code, which provides that

a governmental body, including a municipality, county, or political subdivision, may

agree to rebate, refund, or pay such tax revenues to the owner of a qualifying hotel

project (like the City). TEX. GOVT CODE 2303.5055(a) (emphasis added). The

Attorney General argued that the State was not a governmental body within the

meaning of the statute, and therefore the Comptroller was not authorized to refund such

taxes. See, e.g., 6CR1277. But rather than answer this question, the court of appeals

demurred and held instead that there was no evidence in the record of an agreement by

the State or Comptroller. See Ex Parte City of Irving, 2011 WL 1902210, at *6.

In doing so, the court of appeals put the City in an untenable positionunable to

move forward with the Comptroller because the Comptroller does not believe that she has


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the legal authority to refund such taxes, yet also unable to get a judicial determination of

whether, in fact, the Comptroller is correct on this point of law. Such a result is

fundamentally at odds with the requirement under the Expedited Declaratory Judgment

Act that the court hearand determine each legal . . . question in the case, as well as the

whole purpose of the Act itselfto quickly and efficiently resolve legal issues that affect

the validity of proposed bonds. See Hotze v. City of Houston, 339 S.W.3d. 809, 814

(Tex. App.Austin 2011, no pet.) (The Legislature enacted the [Act] to provide issuers

of public securities . . . a method of quickly and efficiently adjudicating the validity of

public securities and acts affecting those public securities.).

The court of appeals requirement of a formal agreement by the Comptroller

before it resolves the underlying legal question ignores the reality of bond practice.

There are nearly always agreements, approvals, and other formalities that must occur

before the bonds actually issue. As the Citys financial advisor explained at trial, it is

normal and customary for an issuer to seek judicial validation prior to completing these

necessary steps. 3RR.186-89. As in this case, it may not be feasible or advisable to

finalize these mattersconducting necessary financial analyses, obtaining credit ratings,

securing final approval from the City Counciluntil the legality of all the potential

revenue streams are judicially validated. 3RR.189. But the court of appeals decision

inverts this necessary order and, in doing so, contravenes the express command and clear

purpose of the Act. The Court should grant this petition and emphasize to the courts of

appeals the importance of their role in actually and fully resolving all legal issues that


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may be clouding the financing of projects local governments (and their constituents) have

proposed and developed.

II. The State Is Plainly a Governmental Body under Section 2303.5055 of theGovernment Code.

If the court of appeals had reached the question of whether the State is a

governmental body under Section 2303.5055it should have answered yes.3 The

plain language of the statute demands this affirmative answer, and nothing in the

legislative history or the structure of Chapter 2303 of the Texas Government Code

gives the Court any compelling reason to depart from the terms plain meaning.

A. The Plain Meaning of Governmental Body Includes the State.Statutory interpretation begins with the plain language of the statute. Albertsons,

Inc. v. Sinclair, 984 S.W.2d 958, 960 (Tex. 1999) (per curiam). Courts must construe

words and phrases according to the rules of grammar and common usage. TEX.GOVT

CODE 311.011(a). Here, the common meaning and usage of the term governmental

body is clear, and it includes both state and local government entities. Under Texas law,

this ends the inquiry. Because the State and its agencies are clearly governmental

bodies, Section 2303.5055 applies to them.

A review of Texas statutes further confirms the term governmental body is not

understood by the Legislature to be so limited. For example, Section 552.003(1)(A) of

3 As noted above, Section 2303.5055 of the Texas Government Code provides, in relevant part, that agovernmental body, including a municipality, county, or political subdivision, may agree to rebate,refund, or pay such tax revenues to the owner of a qualifying hotel project (here, the City). TEX.GOVTCODE 2303.5055(a) (emphasis added).


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10

the Texas Government Code defines governmental body to include both (i) a board,

commission, department, committee, institution, agency, or office that is within or is

created by the executive or legislative branch ofstategovernment and that is directed by

one or more elected or appointed membersand(iii) amunicipal governing body in the

state. TEX.GOVT CODE 552.003(1)(A) (emphasis added). And the Texas Tax Code

incorporates that definition of governmental body. TEX. TAX CODE 151.027(c)(7).

Similarly, in other state legislation, the term governmental body is used as a generic

term, which does not specify either local or state bodies.4 Indeed, when the

Legislature has intended to limit a statute to either local or state governmental

bodies, it has done so by expressly referring to either a local governmental body or

state governmental body, instead of relying on the generic, broader term.5 Here, the

4 See, e.g., TEX. AG. CODE 41.052 (commodity producers boards are state agencies andgovernmental bodies for purposes of Public Information Act); TEX. FIN. CODE 14.063 (Office ofConsumer Credit is governmental body); TEX.FIN.CODE 16.010 (Texas Department of Banking and

other state financial agencies are governmental bodies); TEX.GOVT CODE 33.030 (State Commissionon Judicial Conduct entitled to cooperation of any state or local government body or department); TEX.GOVT CODE 401.011(g) (inaugural committee for Governor and Lieutenant Governor is governmentalbody); TEX. GOVT CODE 436.054(b) (Texas Military Preparedness Commission is governmentalbody); TEX. GOVT CODE 551.001(3) (Public Information Act) (defining governmental body toinclude (A) a board, commission, department, committee, or agency within the executive or legislativebranch of state government that is directed by one or more elected or appointed members); TEX.GOVTCODE 573.042 (anti-nepotism rules apply to any governmental body to which a candidate, asdefined by TEX.ELEC.CODE 251.001, may seek election, e.g., the Comptroller); TEX.GOVT CODE 614.003 (peace officers entitled to legislative leave to serve in, appear before, or petition agovernmental body during a regular or special session of the body, which includes leave to appear beforethe United States Congress (Sec. 614.009)); TEX.GOVT CODE 2009.002 (directing all governmental

bodies in the State, including State agencies, to develop alternative dispute resolution procedures); TEX.HUM.RES.CODE 115.004 (Governors Committee on People with Disabilities is governmental body);TEX.SPEC.DIST.CODE 8842.102(b) (allowing groundwater district to contract with a state agency oranother governmental body); see also TEX. GOVT CODE 2252.091 (governmental entity means astate agency or a political subdivision of the state).

5See, e.g., TEX.EDUC.CODE 62.003(2) (noting that the board of regents of a state university is a stategovernmental body); TEX.GOVT CODE 391.003 (requiring support of locally elected governmental

(contd)


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11

Legislature could have easily used the narrower term local governmental body in

Section 2303.5055 if that had been its intent. It did not, and its actual use of the broader,

generic term should be dispositive of this issue. SeeMonsanto Co. v. Cornerstones Mun.

Util. Dist., 865 S.W.2d 937, 939 (Tex. 1993) (refusing to imply a meaning to state

beyond its plain and ordinary meaning, concluding [s]uch implication is forbidden

when, as here, the legislative intent may be determined from a reasonable interpretation

of the statute as written).

The Attorney General has not identified a single Texas statute in which the term

governmental body refers solely to a local governmental body, without expressly

saying so. Rather, the Attorney General relies on certain Texas statutes, including

Chapter 2303 of the Texas Government Code, which expressly refer to the governing

body of a municipality. The Attorney General then argues that the unmodified term

governmental body either inherently means local governmental body or, at least, is

ambiguous. This does not logically follow. The fact that the Legislature sometimes

modifies the term governmental body to include only local governmental bodies (just

as it sometimes modifies governmental body to include only state governmental

bodies) only proves that the generic, broader term governmental body (as it appears in

body); TEX.GOVT CODE 559.001 (defining state governmental body as a governmental body asdefined by Section 552.003 that is part of state government); TEX. GOVT CODE 659.002(c)(authorizing Comptroller to determine the priority of deductions for compensation paid by a stategovernmental body); TEX.TRANSP.CODE 456.001(2) (noting that a designated recipient of highwayfunds can include a local governmental body); TEX. TRANSP. CODE 458.001(4) (defining urbantransit districts as a local governmental body . . . that operates a public transportation system in highpopulation areas).


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12

Section 2303.5055) includesboth local and state governmental bodies.

B. The Doctrines of Ejusdem Generis and Noscitur a Sociis Do NotRequire a Narrower Construction.

The Attorney General has relied heavily on the related doctrines of ejusdem

generis and noscitur a sociis to defend his unduly narrow interpretation of the term

governmental body. These doctrines are sometimes used to narrow a general term

based on other terms that appear in the same statutory provision. But any reliance on

them to limit the term governmental body here is misplaced.

First and foremost, Texas law is clear that reliance on any doctrine of statutory

construction is inappropriate where, as here, the statute is unambiguous. See, e.g.,In re

Estate of Nash, 220 S.W.3d 914, 917 (Tex. 2007) (If a statute is clear and unambiguous,

we apply its words according to their common meaning without resort to rules of

construction or extrinsic aids.); Doyle v. State, 148 S.W.3d 611, 614 (Tex. App.

Austin, 2004, pet. refused) (rejecting use ofejusdem generis and noscitur a sociis to limit

an unambiguous term, tamper and instead look[ing] to the common meaning of the

oft-used term). Moreover, to the extent that any extrinsic aid is necessary, the Legislature

has expressly stated that the terms [i]ncludes and including are terms of enlargement

and not of limitation or exclusive enumeration, and use of the terms does not create a

presumption that components not expressed are excluded. TEX. GOVT CODE

311.005(13). The Attorney Generals interpretation ignores the plain meaning of

governmental body and the Legislatures clear instructions regarding how to interpret

the term including.


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13

The Attorney General also misconstrues the doctrines themselves. One of the

fundamental limitations ofejusdem generis (and the related doctrine ofnoscitur a sociis)

is that enumerated specific examples may not be used to wholly supplant the general

term. See, e.g., Smith v. Wortham, 157 S.W. 740, 742 (Tex. 1913) (doctrine has no

application where the specific words exhaust the class of objects referred to); see United

States v. Mescall, 215 U.S. 26, 31-32 (1909) (Whilst [the doctrine ofejusdem generis] is

aimed to preserve a meaning for the particular words, it is not intended to render

meaningless the general words.). In other words, even if the specific examples suggest

some limit to the scope of a general term, the general term must still be given a meaning

that is broader than the enumerated examples. See Smith, 157 S.W. at 742. But the

Attorney Generals application of the doctrine disregards this fundamental limitation,

taking one of the enumerated examples (political subdivision) to render the general

term (governmental body) superfluous.

C. Neither The Legislative History Nor the Overall Structure of Chapter2303 Supports Limiting Governmental Body to Local Governments.

The Attorney General relies heavily on legislative history and the purported

structure of Chapter 2303, but neither justifies a departure from the plain meaning of

governmental body. First, just as reliance on doctrines of statutory construction is

inappropriate in light of the clear meaning of the term governmental body, so, too, is

reliance to legislative history. Nevertheless, the Attorney General relies on legislative

history, which omits at least one compelling piece of history. Specifically, in 1997, the

Senate attempted to amend Section 2303.5055 by limiting the eligible taxes that could


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be recovered under the statute. In place of the current language, which refers generally to

mixed beverage taxes, the Senate amendment would have further limited the term to

mixed beverage taxes payable to a county or municipality under Section 183.051.

C.S.H.B. 2001, 75th Leg., Reg. Sess., 7 (available at

www.legis.state.tx.us/tlodocs/75R/billtext/html/HB02001S.htm) (underlined phrase

proposed as an amendment). If the statute were already limited to local governmental

bodies, as the AG contends, there would have been no need for the Senate to propose this

amendment.

Second, the Attorney Generals structural argument is equally unpersuasive. A

comparison of Section 2303.5055 with the other provisions within Chapter 2303

demonstrates that Section 2303.5055 should not be limited to local governmental

bodies. Sections 2303.502 and 2303.503, for example, are expressly limited to state

agencies. Section 2303.504 is expressly limited to state tax refunds and credits. In

turn, Section 2303.505 is expressly limited to local sales and use tax refunds. Yet,

Section 2303.5055 contains no express limitation to either local or state bodies. These

sections of the statute that immediately precede Section 2303.5055 show that the

Legislature knew how to limit the scope of a provision to either state or local

governmental bodies if that was its intent.

The contrast between Section 2303.5055 and Section 2303.505 goes further. Both

sections are structured similarly, allowing appropriate governmental bodies to refund

taxes in order to encourage development. Yet, when it comes to identifying the
http://www.legis.state.tx.us/tlodocs/75R/billtext/html/HB02001S.htm)http://www.legis.state.tx.us/tlodocs/75R/billtext/html/HB02001S.htm)


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appropriate governmental bodies, the two sections are markedly different. Instead of

using the generic term governmental body, Section 2303.505 repeatedly uses the

specific term governing body of a municipality or county. Similarly, instead of

generically referring to taxes, Section 2303.505 repeatedly specifies that it applies to

local sales and use taxes. If the Legislature had intended Section 2303.5055 to be

similarly limited, it could have easily said so through clear language like the language

that Section 2303.505 employs.

CONCLUSION

For the foregoing reasons, this Court should grant this Petition for Review and

reverse the portion of the court of appeals judgment that held that the State may not

refund its portion of the mixed beverage taxes to the City, affirm the judgment as to all

other grounds, and render judgment in the Citys favor. The City also requests any and

all further relief to which it is entitled.


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Charles R. Anderson

State Bar No. 01170500Office of the City Attorney825 West Irving BoulevardIrving, Texas 75060972.721.2541972.721.2750 (facsimile)[email protected]

Lisa Bowlin HobbsState Bar No. 24026905

VINSON &ELKINS LLP2801 Via Fortuna, Suite 100Austin, Texas 78746512.542.8593512.236.3275 (facsimile)[email protected]

Respectfully submitted,

/s/ Thomas S. LeatherburyMichael L. Raiff

State Bar No. 00784803GIBSON,DUNN &CRUTCHER LLP2100 McKinney AvenueDallas, TX 75201214.698.3350214.571.2927 (facsimile)[email protected]

E. Ray HutchisonState Bar No. 10352000

Thomas S. LeatherburyState Bar No. 12095275

Marc A. FullerState Bar No. 24032210

VINSON &ELKINS LLP2001 Ross Ave., Suite 3700Dallas, Texas 75201-2975214.220.7700214.999.7705 (facsimile)[email protected]

[email protected]

Attorneys for City of Irving
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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CERTIFICATE OF SERVICE

I certify that on the 15th day of August, 2011, the foregoing Petition for Review

was served by certified mail on the following counsel of record:

David J. SchenckOFFICE OF THE ATTORNEY GENERALP.O. Box 12548Austin, TX 78711Tel: (512) 936-1342Fax: (512) 936-0545

Attorneys for the Attorney General

Frank L. BransonEric T. StahlLAW OFFICES OF FRANK L.BRANSON,P.C.4514 Cole Avenue, Suite 1800Dallas, TX 75205Tel: (214) 522-0200Fax: (214) 521-5485

Attorneys for Las Colinas Group, LP

James B. HarrisRichard B. Phillips, Jr.THOMPSON &KNIGHT LLPOne Arts Plaza1722 Routh Street, Suite 1500Dallas, Texas 75201-2533Tel: 214-969-1700Fax: 214-969-1751

Attorneys for Joe Putnam and Irving

Taxpayers Opposed to Illegal and

Wasteful Use of Tax Money

Robert D. MartinezCOTTON SCHMIDT &ABBOTT,LLP550 Bailey Avenue, Suite 600Fort Worth, TX 76107Tel: (817) 338-4500Fax: (817) 338-4599

Attorneys for Greater Irving-Las

Colinas Chamber of Commerce

Mikel J. BowersBELL NUNNALLY &MARTIN LLP3232 McKinney Avenue, Suite 1400Dallas, TX 75204Tel: (214) 740-1400Fax: (214) 740-1499

Attorneys for B Concessionaire-

Las Colinas, LLC

Rosemarie KanuskyFULBRIGHT & JAWORSKI L.L.P.300 Convent, Suite 2100San Antonio, TX 78205Tel: (210) 270-7138Fax: (210) 270-7205

Attorneys for the City of San Antonio


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Christopher D. BowersCITY ATTORNEYS OFFICE1500 Marilla Street, Room 7B NorthDallas, TX 75205Tel: (214) 670-3519

Fax: (24) 670-0622

Attorneys for the City of Dallas

/s/ Marc A. FullerMarc A. Fuller

US 1003304v1


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APPENDIX


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App. ACourt of Appeals Opinion


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Page 1

--- S.W.3d ----, 2011 WL 1902210 (Tex.App.-Dallas)(Cite as: 2011 WL 1902210 (Tex.App.-Dallas))

2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

Only the Westlaw citation is currently available.

Court of Appeals of Texas,Dallas.

Ex Parte CITY OF IRVING, Texas.

No. 051100036CV.May 20, 2011.

Rehearing Overruled June 29, 2011.

Background: City brought declaratory judgmentaction regarding the legality and validity of city'sproposed revenue bonds to finance the expansion ofcity's convention center. The 192nd Judicial DistrictCourt, Dallas County, entered judgment for city. At-torney General appealed.

Holdings: The Court of Appeals, LangMiers, J.,held that:(1) city's pledge of state sales, use, and hotel occu-pancy taxes, as security for repayment of city's pro-posed revenue bonds, was not subject to state consti-tutional biennial-appropriation requirement for fundsheld in the general revenue fund;(2) city's pledge of its refunded portion of mixed bev-erage taxes was not subject to state constitutionalbiennial-appropriation requirement for funds held inthe general revenue fund; but(3) city could not, without state's written consent,pledge state's portion of mixed beverage taxes.

Affirmed in part, reversed in part, and remanded.

West Headnotes

[1] Declaratory Judgment 118A 393

118A Declaratory Judgment118AIII Proceedings

118AIII(H) Appeal and Error118Ak392 Appeal and Error

118Ak393 k. Scope and Extent of Re-view in General. Most Cited Cases

Attorney General's claims, in city's declaratory

judgment action regarding legality and validity ofcity's proposed revenue bonds to finance the expan-sion of city's convention center, that tax revenuespledged by city to secure the bonds were subject tobiennial appropriation by state legislature, and thatGovernment Code did not authorize city to pledgestate's portion of mixed beverage taxes, were at thevery least tr ied by consent in trial court, and thus,Attorney General preserved the claims for appellatereview; trial court held a hearing and rendered find-ings of fact and conclusions of law on those issues.Vernon's Ann.Texas Rules Civ.Proc., Rule 67.

[2] Appeal and Error 30 893(1)

30 Appeal and Error30XVI Review

30XVI(F) Trial De Novo30k892 Trial De Novo

30k893 Cases Triable in AppellateCourt

30k893(1) k. In General. Most CitedCases

Matters of statutory construction are reviewed denovo.

[3] Statutes 361 181(1)

361 Statutes361VI Construction and Operation

361VI(A) General Rules of Construction361k180 Intention of Legislature

361k181 In General361k181(1) k. In General. Most

Cited Cases

The primary objective in construing statutes is togive effect to the legislature's intent.

[4] Statutes 361 181(2)


361VI(A) General Rules of Construction361k180 Intention of Legislature

361k181 In General


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Page 2



361k181(2) k. Effect and Conse-quences. Most Cited Cases

Statutes 361 188


361VI(A) General Rules of Construction361k187 Meaning of Language

361k188 k. In General. Most CitedCases

The plain meaning of the text is the best expres-sion of legislative intent unless a different meaning isapparent from the context or the plain meaning leads

to absurd results.

[5] States 360 119

360 States360IV Fiscal Management, Public Debt, and Se-

curities360k119 k. Limitation of Use of Funds or

Credit. Most Cited Cases

State constitutional provision generally allowingstate legislature to provide for creation of programsand the making of loans and grants of public moneyfor public purposes of development and diversifica-

tion of state's economy establishes an exception tostate constitutional prohibition on the lending of pub-lic credit, by providing that programs fostering eco-nomic growth serve a public purpose. Vernon'sAnn.Texas Const. Art. 3, 52a.

[6] States 360 130


curities360k129 Appropriations

360k130 k. Necessity. Most Cited Cases

State constitutional provision generally allowingstate legislature to provide for creation of programsand the making of loans and grants of public moneyfor public purposes of development and diversifica-tion of state's economy establishes an exception tothe state constitutional biennial-appropriation re-

quirement for funds held in the general revenue fund.Vernon's Ann.Texas Const. Art. 3, 52a; Art. 8,

6.

[7] States 360 130




Enabling legislation need not expressly refer tostate constitutional provision generally allowing statelegislature to provide for creation of programs and

the making of loans and grants of public money forpublic purposes of development and diversificationof state's economy, in order for funds relating to suchprograms, loans, or grants to be excepted from stateconstitutional biennial-appropriation requirement forfunds held in general revenue fund. Vernon'sAnn.Texas Const. Art. 3, 52a.

[8] States 360 130




State legislation creating an economic develop-ment program for qualified hotel projects, and au-thorizing the rebate of certain state taxes for period often years, was not subject to state constitutional bien-nial-appropriation requirement for funds held in thegeneral revenue fund. Vernon's Ann.Texas Const.Art. 3, 52a; Art. 8, 6; V.T.C.A., GovernmentCode 2303.003(8), 2303.504(a)(1); V.T.C.A., TaxCode 151.429(h).

[9] Municipal Corporations 268 919

268 Municipal Corporations268XIII Fiscal Matters

268XIII(C) Bonds and Other Securities, andSinking Funds

268k919 k. Provision for Payment or Re-demption of Bonds. Most Cited Cases


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Page 3



States 360 130




City's pledge of state sales, use, and hotel occu-pancy taxes, as security for repayment of city's pro-posed revenue bonds to finance the expansion ofcity's convention center, was not subject to state con-stitutional biennial-appropriation requirement forfunds held in the general revenue fund. Vernon's

Ann.Texas Const. Art. 3, 52a; Art. 8, 6;V.T.C.A., Government Code 2303.003(8),2303.504(a)(1); V.T.C.A., Tax Code 151.429(h),351.102.


268 Municipal Corporations268XIII Fiscal Matters

268XIII(C) Bonds and Other Securities, andSinking Funds

268k919 k. Provision for Payment or Re-demption of Bonds. Most Cited Cases

States 360 130




City's pledge of its refunded portion of mixedbeverage taxes, as security for repayment of city'sproposed revenue bonds to finance the expansion ofcity's convention center, was not subject to state con-stitutional biennial-appropriation requirement for

funds held in the general revenue fund. Vernon'sAnn.Texas Const. Art. 3, 52a; Art. 8, 6;V.T.C.A., Tax Code 183.021, 183.051(b).


268 Municipal Corporations

268XIII Fiscal Matters268XIII(C) Bonds and Other Securities, and

Sinking Funds268k919 k. Provision for Payment or Re-

demption of Bonds. Most Cited Cases

City could not, without state's written consent,pledge state's portion of mixed beverage taxes, assecurity for repayment of city's proposed revenuebonds to finance the expansion of city's conventioncenter. V.T.C.A., Government Code 2303.003(8),2303.504(a)(1), 2303.5055(a, c, e).

On Appeal from the 192nd Judicial District Court,Dallas County, Texas, Trial Court Cause No. 1011029.David C. Mattax, Jennifer Settle Jackson andDavid J. Schenck, for Attorney General.

Mikel J. Bowers and Clay Lewis Jenkins, for B Con-cessionaireLas Colinas.

Charles R. Anderson, Michael L. Raiff , E. RayHutchison and Robert R. Collins III, for City of Ir-ving.

John F. Boyle, for Dallas County Utility and RECL.

Robert D. Martinez, for Las Colinas Chamber of Ir-ving.

James B. Harris and Richard B. Phillips, for Joe Put-nan/Irving Taxpayers.

Frank L. Branson and Edward D. Burbach, for LasColinas Group, LP.

Karen Bailey Pettigrew, for Susan Combs and Wil-liam S. Ham.

Before Justices O'NEILL, LANG, and LANGMIERS.

OPINIONOpinion by Justice LANGMIERS.

*1 The Attorney General of Texas appeals fromthe final judgment in a declaratory judgment actionfiled by the City of Irving, Texas pursuant to chapter1205 of the government code relating to the issuanceof public securities. See TEX. GOV'T CODE ANN.


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1205.001.152 (West 2000). We affirm in partand reverse in part and remand.

BACKGROUNDThe City adopted a capital improvement plan for

the expansion of its convention center. The plan in-cludes the construction of an entertainment centerand hotel. The City proposes to issue three series ofmunicipal bonds in a total amount not to exceed $200million to fund the construction of the project. See id. 1371.001.106 (West 2000 & Supp.2009). Amongthe revenue sources the City proposes to pledge tosecure payment of the bonds are rebates of taxes thatwill be collected from within the project after it isopened for initial occupancy: state sales, use, andhotel occupancy taxes, and the State's portion and the

City's portion of the mixed beverage taxes.

In this action, the City sought a declaratoryjudgment stating that, among other things, the Cityhas the authority to issue the public securities, thepublic securities are legal and valid, and the proposedpledges of revenues are legal and valid. The AttorneyGeneral, as a necessary party to the declaratory

judgment action, see id. 1205.042, objected to theapproval of the City's proposal because it did notinclude a statement that these revenue sources weresubject to biennial appropriation by the legislature.He also objected to the City's proposal to pledge theState's portion of the mixed beverage taxes arguingthat the City hadno authority to pledge those taxes.

[1] The trial court found in favor of the City andissued a final judgment validating the City's proposalto pledge the various revenue sources to secure pay-ment of the bonds.FN1 The trial court also issued find-ings of fact and conclusions of law. On appeal, theAttorney General challenges those conclusions andcontends that the trial court erred by ruling that (1)the taxes pledged by the City to fund the project arenot subject to biennial appropriation by the state leg-islature and (2) the government code authorized theCity to pledge the State's portion of the mixed bever-age taxes.FN2

STANDARD OF REVIEW AND APPLICABLE

LAW[2][3][4] The Attorney General's two issues in-

volve matters of statutory construction, which wereview de novo. See City of Garland v. Dallas Morn-

ing News, 22 S.W.3d 351, 357 (Tex.2000). Our pri-mary objective in construing statutes is to give effect

to the legislature's intent. Galbraith Eng'g Consult-ants, Inc. v. Pochucha, 290 S.W.3d 863, 867(Tex.2009). The plain meaning of the text is the bestexpression of legislative intent unless a differentmeaning is apparent from the context or the plainmeaning leads to absurd results. See City of Rockwallv. Hughes, 246 S.W.3d 621, 62526 (Tex.2008); seealso Fitzgerald v. Advanced Spine Fixation Sys., Inc.,996 S.W.2d 864, 866 (Tex.1999) ([I]t is a fair as-sumption that the Legislature tries to say what itmeans, and therefore the words it chooses should bethe surest guide to legislative intent.). In construinga statute, we may consider the objective of the stat-ute, its legislative history, and the consequences of a

proposed construction. TEX. GOV'T CODE ANN. 311.023(1), (3), (5) (West 2005).

BIENNIAL APPROPRIATION

*2 In his first issue, the Attorney General arguesthat the trial court erred by concluding that the statetaxes and the City's portion of the mixed beveragetaxes are not subject to biennial appropriation.FN3 TheAttorney General argues that because these taxes arerequired to be deposited into the general revenuefund, and because the Texas Constitution prohibitsappropriations from the treasury for more than twoyears, the City's proposal to pledge these revenues for10 years is unconstitutional. The City argues that the

project falls within a constitutional exception to thebiennial appropriation requirement. We agree withthe City.

State Sales, Use, andHotel Occupancy TaxesWe first address the Attorney General's conten-

tion in his first issue that the state sales, use, and ho-tel occupancy taxes are subject to biennial appropria-tion. We address his contention in his first issue thatthe mixed beverage taxes are subject to biennial ap-propriation later in this opinion.

It is undisputed that the law requires the statesales, use, and hotel occupancy taxes to be depositedinto the State's general revenue fund. See TEX. TAXCODE ANN. 151.801 (state sales and use taxes),156.251(a) (state hotel occupancy taxes) (West2008). It is also undisputed that the law allows theCity to pledge these taxes for the first 10 years afterthe hotel is open for initial occupancy. See id.


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151.429(h) (stating tax rebates to which owner of qualified hotel project is entitled for first 10 years);

351.102(c) (West Supp.2010) (stating municipalitymay pledge funds described in section 151.429(h)).But the Attorney General argues that any pledge ofthe funds must be contingent on a legislative appro-priation. He cites article VIII, section 6 of the TexasConstitution, which states: No money shall bedrawn from the Treasury but in pursuance of specificappropriations made by law; nor shall any appropria-tion of money be made for a longer term than twoyears. TEX. CONST. art. VIII, 6.

The City argues that article III, section 52a ofthe Texas Constitution is an exception to the biennialappropriation requirement and that its project falls

within that exception. The parties do not dispute thatsection 52a exempts section 52a programs from thebiennial appropriation requirement of article VIII,section 6; they dispute only whether section 52aapplies here.

Section 52a provides in relevant part:

52a. Assistance to encourage state eco-

nomic development

Sec. 52a. Notwithstanding any other provisionof this constitution, the legislature may provide for

the creation of programs and the making of loansand grants of public money, other than money oth-erwise dedicated by this constitution to use for adifferent purpose, for the public purposes of devel-opment and diversification of the economy of thestate,....

Id. art. III, 52a.

[5] As the Attorney General has stated in thepast, section 52a was passed in 1987 and created anexception to the constitutional prohibition on thelending of public credit by providing that programsfostering economic growth serve a public purpose.

TEX. ATT'Y GEN. OP. NO. JC0092, at 6, 8 (1999).Section 52a permits the legislature to enact legisla-tion providing for economic development.Id.; TEX.CONST. art. III, 52a. He has also stated thatsection 52a is a broad authorization to create pro-grams to promote economic development, and that itdoes not specify what the program must be as long as

the program serves the purpose of encouraging eco-nomic development. TEX. ATT'Y GEN. OP. NO.

GA0529, at 2 (2007).

*3 [6] The Attorney General argues that section52a does not apply here because the taxes at issue inthis case are deposited into the State's general reve-nue fund and section 52a applies only to funds thatare held in trust by the comptroller and have not beendeposited into the general revenue fund. We disagree.The Texas Supreme Court has held that when fundsare held in trust, they are not considered part of thegeneral revenue fund. See Friedman v. Am. SuretyCo. of New York, 137 Tex. 149, 151 S.W.2d 570,576, 57880 (Tex.1941) (excepting funds held intrust from appropriations limitation); Manion v.

Lockhart, 131 Tex. 175, 114 S.W.2d 216, 21819(Tex.1938) (same). These cases were decided wellbefore the section 52a amendment was passed in1987. Because funds held in trust by the comptrollerare not deposited into the general revenue fund, therewould be no reason to adopt a constitutional amend-ment exempting those funds from biennial appropria-tion. See Friedman, 151 S.W.2d at 576, 57880;

Manion, 1141 S.W.2d at 21819. Instead, we con-clude that section 52a was passed to provide an ex-ception to the biennial appropriation requirement forfunds that are held in the general revenue fund andthat meet section 52a's requirement for programs toencourage economic development in the state. See

TEX. CONST. art. III, 52a; Friedman, 151S.W.2d at 57880;Manion, 114 S.W.2d at 21819.

[7] The Attorney General also contends thatsection 52a does not apply here because the legisla-tion must expressly invoke section 52a or expresslyauthorize either the extension of the State's credit or agovernmental economic development program thatwill make loans or grants and that none of the stat-utes at issue here do so. We do not agree that theenabling legislation must expressly refer to section52a as long as it is clear that the legislature createdthe program with the intent to encourage economicdevelopment. Additionally, section 52a states that

the legislature may provide for the creation of pro-grams andthe making of loans and grants of publicmoney ... for the public purposes of development anddiversification of the economy of the state.... TEX.CONST. art. III, 6 (emphasis added). It does notstate that the economic development program has to


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make loans or grants of public money, as the Attor-ney General contends. See id.

Acting under its authority in section 52a, thelegislature has enacted statutes that created programsto encourage economic development by offering,among other things, tax incentives to eligible munici-palities. For example, in enacting the Texas Enter-prise Zone Act, a statute applicable to this case, thelegislature saw a need to encourage the development,growth, and expansion of the private sector withindepressed urban and rural areas of the state. FN4 Actof May 26, 1983, 68th Leg., R.S., ch. 841, 1, 1983TEX. GEN. LAWS 4771, 477172 (current versionat TEX. GOV'T CODE 2303.001.517 (West2008 & Supp.2010)). The Texas Enterprise Zone Act

authorized exemptions from certain local taxes andalso offered state regulatory incentives. See id. at478182, 114 S.W.2d 216. In 1987, the legislatureamended the Texas Enterprise Zone Act to includerebates of state sales and use taxes. Act of May 31,1987, 70th Leg., R.S., ch. 765, 1, 1987 TEX. GEN.LAWS 2720, 2720. In 1993, the legislature againamended the Texas Enterprise Zone Act and ex-panded it to include a qualified hotel project and arebate of 100% of the state sales, use, and hotel oc-cupancy taxes to the owner of a qualified hotel pro-

ject for the first seven years after the hotel project isopen for initial occupancy. Act of May 11, 1993, 73dLeg., R.S., ch. 231, 6, 10, 1993 TEX. GEN.

LAWS 480, 48283. Two years later, the legislatureexpanded the rebate from the first seven years to thefirst ten years after the qualified hotel project is openfor initial occupancy. Act of May 19, 1995, 74thLeg., R.S., ch. 977 1, 1995 TEX. GEN. LAWS4867, 4868. See GOV'T 2303.003(8); TAX 151.429(h).

*4 One of the purposes of the Texas EnterpriseZone Act, as expressly stated in the statute, is to in-duce private investment ... by removing unnecessarygovernmental regulatory barriers to economic growthand to provide tax incentives and economic develop-ment program benefits. GOV'T 2303.002. And a

qualified hotel project falls within the Texas Enter-prise Zone Act.Id. 2303.003(8).

The legislature sought to encourage economicdevelopment when it enacted similar statutes thatprovide tax rebates to municipalities and authorized

municipalities to pledge those tax rebates to securepayment of bonds. See TAX 151.429 (Tax Re-

funds for Enterprise Projects); 351.102 (Pledge forBonds). And the legislature used mandatory lan-guage in the legislation, such as an enterprise projectis entitled to (1) a refund of state taxes .... and theowner of a qualified hotel project shall receive a re-bate.... See GOV'T 2303.504(a)(1) (entitled to);TAX 151.429(h) (shall receive). The plain lan-guage of the statutes indicate that the legislature in-tended eligible municipalities to have the benefit ofthe state tax rebates for well over two years, and theuse of mandatory language reflects the legislature'sintent that the rebates were not subject to biennialappropriation.

[8][9] For these reasons, we conclude thatsection 52a does apply here and that the legislaturewas not limited by article VIII, section 6 when it cre-ated an economic development program for qualifiedhotel projects and authorized the rebate of certainstate taxes for a period of 10 years. SeeHarris Cnty.Flood Control Dist. v. Mann, 135 Tex. 239, 140S.W.2d 1098, 1103 (Tex.1940); Brazos River Con-servation & Reclamation Dist. v. McCraw, 126 Tex.506, 91 S.W.2d 665, 67374 (Tex.1936); City of

Aransas Pass v. Keeling, 112 Tex. 339, 247 S.W.818, 81921 (Tex.1923); TEX. ATT'Y GEN. LA132, at 3 (1977). Interpreting the statutes in this way,and in accordance with the plain language of the

Texas Enterprise Zone Act and the other statutes ap-plicable to this matter, supports the legislature's pur-pose in enacting the statutesto encourage economicdevelopment.FN5 Consequently, we conclude that thetrial court did not err by concluding that the City'spledge of the state sales, use, and hotel occupancytaxes are not subject to biennial appropriation by thelegislature. We resolve this subpart of issue oneagainst the Attorney General.

City's Portion of Mixed Beverage TaxesThe Attorney General makes two arguments

about the City's proposal to pledge the mixed bever-age taxes. The first argument was raised as a subpart

of his first issue concerning biennial appropriationand we address it now. We will address the secondargument separately.

[10] The legislature established a 14% state taxon mixed beverages and authorized the comptroller to


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refund up to 10.7143% of that amount to the munici-palities and counties from which the taxes were col-

lected. See TAX 183.051(b). The Attorney Generalcontends that the City's portion of the mixed bever-age taxes is subject to biennial appropriation by thelegislature because the statute expressly contains ap-propriation language:

*5 (b) The comptroller shall issue to each ... incor-porated municipality described in Subsection (a) awarrant drawn on [the general revenue] fund in anamount appropriated by the legislature that may notbe greater than 10.7143 percent of receipts frompermittees within the incorporated municipalityduring the quarter.

Id. He contends that the language, in an amountappropriated by the legislature means that the mixedbeverage tax refund is subject to the two-year appro-priation requirement. Even if the language could beinterpreted in this way, we nevertheless conclude thatwhen a municipality chooses to pledge its portion ofthe mixed beverage taxes to secure payment of bondsfor a qualified hotel project, the refund is not subjectto the biennial appropriation requirement for thesame reasons that we previously concluded the statesales, use, and hotel occupancy taxes were not sub-

ject to biennial appropriation. We resolve this subpartof issue one against the Attorney General.

In summary, we conclude that the trial court didnot err by concluding that the state sales, use, andhotel occupancy taxes, and the City's portion of themixed beverage taxes are not subject to biennial ap-propriation. We turn now to the Attorney General'ssecond argument concerning the mixed beveragetaxes.

STATE'S PORTION OF MIXED BEVERAGETAXES

In issue two, the Attorney General contends thatthe City's proposal to pledge the State's portion of themixed beverage taxes is not authorized by statute. He

argues that the trial court erred by concluding thatthe State is a governmental body within the mean-ing of Section 2303.5055(a) of the Texas Govern-ment Code and by impliedly concluding that section2303.5055 authorizes the City to pledge the State'sportion of the mixed beverage taxes. FN6

As we just explained, the State imposes a 14%tax on mixed beverages and refunds to a municipality

up to 10.7143% of the amount of taxes collectedfrom within that municipality. TAX 183.021,.051(b). The City proposes to pledge both its re-funded portion and the State's portion of the mixedbeverage taxes to secure payment of the bonds. Itcites section 2303.5055 of the government code as itsauthority to pledge the State's portion of the mixedbeverage tax revenue:

(a) For a period that may not exceed 10 years, agovernmental body, including a municipality,county, or political subdivision, may agree to re-bate, refund, or pay eligible taxable proceeds to theowner of a qualified hotel project at which the eli-

gible taxable proceeds were generated.

...(e) In this section, eligible taxable proceedsmeans taxable proceeds generated, paid, or col-lected by a qualified hotel project ... including hoteloccupancy taxes, ad valorem taxes, sales and usetaxes, and mixed beverage taxes.GOV'T 2303.5055(a), (e). The trial court agreedwith the City and the final judgment validated theCity's proposal to pledge the State's portion of themixed beverage taxes.

*6 [11] The Attorney General argues that gov-ernmental body as used in this statute does not in-clude the State, but even if it did, [t]he State cannotassign local tax revenues, and local governmentalentities cannot assign state tax revenues. We agree.Unlike other statutory provisions at issue in this casethat state the City is entitled to or shall receivecertain tax rebates, section 2303.5055 states that agovernmental body may agree to refund the eligi-ble taxable proceeds to the owner of a qualified ho-tel project. Id. 2303.5055(a). Even if we were todecide that governmental body includes the State,section 2303.5055 cannot be interpreted to permitone governmental body, such as a municipality, tomake an agreement on behalf of another governmen-tal body, such as the State. See id. But we do not needto decide whether governmental body includes theState for purposes of this statute.

The Attorney General also argues that, even ifgovernmental body includes the State, the City did


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not offer any evidence that the State agreed to refundits portion of the mixed beverage taxes to the City.

Again, we agree. The statute states that the agreementbetween the governmental body (in this case the Stateif we presume that governmental body includes theState) and the owner of a qualified hotel project (inthis case the City) must be in writing. Id. 2303.5055(c). There is no evidence in the record thatshows the State agreed to refund its portion of themixed beverage taxes to the City. Consequently, thetrial court erred by concluding that the City was enti-tled to pledge the State's portion of the mixed bever-age taxes.

We resolve issue two in the Attorney General'sfavor.

CONCLUSIONWe reverse that portion of the judgment validat-

ing the State's portion of the mixed beverage taxes asa valid revenue source which the City may pledge tosecure payment of the bonds. In all other respects, thetrial court's judgment is affirmed. We remand thiscause to the trial court for further proceedings consis-tent with this opinion.

FN1. A group of taxpayers who opposed theissuance of the bonds and who intervened inthe City's declaratory judgment action also

filed a notice of appeal in this case. How-ever, the trial court dismissed their interven-tion and we affirmed the dismissal in an ear-lier interlocutory appeal. See Putnam v. Cityof Irving, 331 S.W.3d 869, 872 (Tex.App.-Dallas 2011, pet. filed). We do not considerthe issues raised in their appellate brief be-cause they are not properly before thisCourt.

FN2. The City contends that the AttorneyGeneral did not preserve these issues for ourreview. However, the trial court held a hear-ing and rendered findings of fact and con-

clusions of law on these issues. We concludethat the issues were, at the very least, triedby consent. See TEX.R. CIV. P. 67.

FN3. The Attorney General specificallychallenges the trial court's conclusion of lawnumber two that the City's receipt of the

State Project Taxes and the City's portion ofthe mixed beverage taxes is not subject to

biennial appropriation by the legislature.

FN4. The Texas Enterprise Zone Act statesthat its purposes

are to establish a process that clearly iden-tifies severely distressed areas of the stateand provides incentives by state and localgovernment to induce private investmentin those areas by removing unnecessarygovernmental regulatory barriers to eco-nomic growth and to provide tax incen-tives and economic development programbenefits.

GOV'T 2303.002.

FN5. The Court received two amicus briefssupporting the City's position on the issue ofbiennial appropriation. Each argued that theAttorney General's position on this issue iscontrary to the position he took in theircases.

FN6. This issue challenges the trial court'sconclusion of law number one.

Tex.App.-Dallas,2011.Ex parte City of Irving--- S.W.3d ----, 2011 WL 1902210 (Tex.App.-Dallas)

END OF DOCUMENT


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App. BFinal Judgment


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App. CExcerpts from Texas Government

Code, Chapter 1205


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Sec. 1205.021. AUTHORITY TO BRING ACTION. An issuer may bring

an action under this chapter to obtain a declaratory judgment as to:

(1) the authority of the issuer to issue the public

securities;

(2) the legality and validity of each public securityauthorization relating to the public securities, including if

appropriate:

(A) the election at which the public securities were

authorized;

(B) the organization or boundaries of the issuer;

(C) the imposition of an assessment, a tax, or a tax

lien;

(D) the execution or proposed execution of a contract;

(E) the imposition of a rate, fee, charge, or toll or

the enforcement of a remedy relating to the imposition of that rate,

fee, charge, or toll; and

(F) the pledge or encumbrance of a tax, revenue,

receipts, or property to secure the public securities;

(3) the legality and validity of each expenditure or

proposed expenditure of money relating to the public securities; and

(4) the legality and validity of the public securities.

Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1, 1999.

Page 1 of 1GOVERNMENT CODE CHAPTER 1205. PUBLIC SECURITY DECLARATORY JU...

8/15/2011http://www.statutes.legis.state.tx.us/Docs/GV/htm/GV.1205.htm
http://www.statutes.legis.state.tx.us/Docs/GV/htm/GV.1205.hhttp://www.statutes.legis.state.tx.us/Docs/GV/htm/GV.1205.h


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Sec. 1205.025. TIME FOR BRINGING ACTION; PENDENCY OF OTHER

PROCEEDINGS. An issuer may bring an action under this chapter:

(1) concurrently with or after the use of another

procedure to obtain a declaratory judgment, approval, or validation;

(2) before or after the public securities are authorized,issued, or delivered;

(3) before or after the attorney general approves the

public securities; and

(4) regardless of whether another proceeding is pending in

any court relating to a matter to be adjudicated in the suit.





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Sec. 1205.065. TRIAL OF ACTION. (a) The court shall with the

least possible delay:

(1) hear and determine each legal or factual question in

the declaratory judgment action; and

(2) render a final judgment.(b) Regardless of the pendency of an appeal from an order

entered under Subchapter E, on motion of the issuer, the trial judge

shall proceed under Subsection (a).





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Sec. 1205.068. APPEALS. (a) Any party to an action under this

chapter may appeal to the appropriate court of appe

LCEC Appeal Supreme Court

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