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Noteware v. Turner

Court of Appeals of Texas, First District

May 21, 2019

JAMES NOTEWARE, Appellant
v.
SYLVESTER TURNER, MAYOR OF THE CITY OF HOUSTON, TEXAS AND CITY OF HOUSTON, TEXAS, Appellees

          On Appeal from the 269th District Court Harris County, Texas Trial Court Case No. 2017-83251

          Panel consists of Justices Keyes, Higley, and Landau.

          OPINION

          EVELYN V. KEYES JUSTICE.

         In this election contest case, appellant, James Noteware, challenges the sufficiency of the ballot language setting out a bond measure in the City of Houston's November 2017 election. The trial court granted the plea to the jurisdiction filed by the City of Houston (the City) and dismissed the election contest. In two issues on appeal, Noteware argues that the trial court erred (1) in ruling that the case was no longer justiciable and (2) in "failing to grant" his motion for summary judgment seeking a ruling that the ballot language was insufficient as a matter of law. Because we conclude that the election contest is moot, we affirm the trial court's judgment granting the City's plea to the jurisdiction and dismissing the case.

         Background

         To address shortfalls in certain City of Houston municipal pension systems, including the Houston Municipal Employees Pension System (HMEPS) and that Houston Police Officers' Pension System (HPOPS), the legislature passed a pension reform bill, referred to as Senate Bill 2190. Senate Bill 2190 was signed into law on May 31, 2017, and it made various changes to the troubled pension systems, including reducing certain pension benefits, increasing employee contributions, and adopting more conservative actuarial assumptions, among other things. The bill also required the City to hold an election to approve the issuance of over $1 billion in pension obligation bonds to fund a portion of the unfunded liability with respect to the HMEPS and the HPOPS.

         In addition to the legislative directives regarding pension reform, the City must also abide by the provisions of its charter. Relevant here, Article III, Section 1(a) of the City Charter provides:

The City Council shall not, without voter approval, levy ad valorem taxes at combined rates expected to result in total ad valorem tax revenues for the then current fiscal year that exceed the lower of (i) the allowable ad valorem tax revenues increased by the rate of inflation . . . plus the rate of growth in the City's population . . ., or (ii) the amount of total ad valorem taxes, both current and delinquent, actually collected during the prior fiscal year, increased by 4.5% of that amount and, as to the calculations in (a)(i) and (a)(ii) hereinabove, excluding ad valorem tax revenues required by state law to be deposited in a tax increment fund and adding those attributable to each annexation occurring after July 1, 2005, for the first year after such annexation.

         Thus, the City Charter places a "cap" on the amount that ad valorem taxes may be increased in any fiscal year (the "revenue cap").

         On August 9, 2017, the City passed Ordinance 2017-608 ordering an election to be held on November 7, 2017, to submit to voters a proposition for the issuance of pension obligation bonds for the purpose of funding a portion of the unfunded pension systems. Ordinance 2017-608 set out the following language for Proposition A:

Shall the City Council of the City of Houston, Texas, be authorized to issue bonds of the City, which may be called City of Houston, Texas, Pension Obligation Bonds in the amount of $1, 010, 000, 000, maturing serially or otherwise at such times as may be fixed by the City Council, not to exceed 40 years from their date or dates and bearing interest at any rate or rates, either fixed, variable or floating, according to any clearly stated formula, calculation or method, not exceeding the maximum interest rate now or hereafter authorized by law, and to sell said bonds at any price or prices, all as shall be determined within the discretion of the City Council at the time of issuance, and to levy a tax upon all taxable property in the City annually sufficient to pay the principal of and interest on the bonds (together with any bonds that may be issued to refund the bonds) as it accrues or accretes, and to provide a sinking fund for the payment of the principal of the bonds (together with any bonds that may be issued to refund the bonds) as they mature, as well as all payments under any credit agreements, such tax to be levied without being limited by any provisions of the City's home rule charter limiting or otherwise restricting the City's combined ad valorem tax rates or combined revenues from all City operations, for the purpose of funding a portion of the unfunded liability of the City with respect to the Houston Police Officers' Pension System and the Houston Municipal Employees Pension System as contemplated by the pension reform plan contained in Senate Bill 2190 (adopted in the 85th (2017) Texas Legislature, Regular Session), and all matters necessary or incidental thereto?

         The election was held November 7, 2017. The ballot included the following language regarding Proposition A:

City of Houston, Proposition A
The issuance of $1, 010, 000, 000 pension obligation bonds for the purpose of funding a portion of the unfunded liability of the City with respect to the Houston Police Officers' Pension System and the Houston Municipal Employees Pension System as contemplated by the pension reform plan contained in Senate Bill 2190 (adopted in the 85th (2017) Texas Legislature, Regular Session), and the levying of taxes sufficient for the payment thereof and interest thereon.

         The majority of voters approved Proposition A. The City's canvass reflected that 77% of voters supported the measure.

         On November 15, 2017, the City Council adopted Ordinance 2017-884, authorizing the City to issue the bonds, to prepare an official statement with respect to the bonds, and to seek approval of the bonds by the Texas Attorney General, as required by Texas law. The City then certified the results of the election on November 17, 2017.

         In order to seek the Attorney General's approval of the bonds, the City prepared and executed in December 2017 a "General, No-Litigation and Signature Identification Certificate." The Certificate provided information regarding the City's ad valorem tax value and the outstanding principal amount of obligations of the City payable from its ad valorem taxes. The Certificate further stated that "[t]he City is in compliance with Article III, Section 1 of the City Charter," and it provided calculations "showing the City's capacity to pay the principal amount of all of its authorized tax-support bonds, notes and other obligations in any fiscal year, plus interest," which it would do "through the levy of an ad valorem tax rate not in excess of the 'bond allowable' rate of $1.50 established by the Attorney General based on the lowest historical tax collection rate in the most recent three tax years" and "without providing for a 4.5% increase (or such lower percentage as may be prescribed by the City's Charter) in the total tax revenue of the City from one fiscal year to the next." The Certificate stated, "The City has levied, and covenanted to levy in each year in which the Bonds are outstanding, an ad valorem tax sufficient (together with other lawfully available funds) to provide for the payment of interest on and principal of the Bonds." The Certificate also made an "election certification" providing:

The City's bond election held on November 7, 2017 was conducted in accordance with the applicable provisions of the state and federal law, including the bilingual requirements of Chapter 272 of the Texas Election Code. The Bonds are being issued in compliance with the revenue limitations contained in Article III, Section 1 of the City Charter, and the payment of the Bonds will be made in ...

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