Current City Council members have been substituted for the ir prede cessor s. See Tex. R. App. 1 P. 7.2(a) ( automatic substitution when public office r is party in official c apac ity). Section 54.016(f) was added in 1979. See Act of May 25, 1979, 66th L eg ., R.S., ch. 796, § 1, 2 1979 Tex. Gen. L aws 2026, 2026. The parties do not urg e, and we do not find, subst antive cha ng es in the rele vant sec tions of the water code. A ccor dingly , the cur rent c ode is cited for

convenie nce. 

### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-0 4 -00 240 -CV

No r th wes t A ust in M unic ipa l U ti lit y D ist r ic t N o. 1, Do n Z im m e r m an, William C. F erguson, and Alan R. Weiss , Appellan ts

v . Ci tyof A ust in; M ay or Wil l Wy nn, B r e wst e r M c Cr ac ke n, Le e Le ffingwe ll, Mike Mar tinez, Randi Sh ade, Laura Morr ison, an d Sh eryl Cole , in their Of

fi cial Capacities as City Council Mem bers , Appellees 1

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 53RD JUDICIAL DISTRICT NO. GN20337 8 , HO NORAB LE LORA J. LIVI NGSTON , JUDGE PRESIDI NG

O P I N I O N Appellants Northwe st Austin Muni cipal Ut i l i ty District No. 1, Don Z immerman, Willi a m C. F e rgus on , a

nd Al an R. W eis s app e a l f

ro m th e jud g me nt a g a ins t th e m in the ir su it t o de c lare that an a g re e ment ex ecut e d b y the Di str ic t and

a pp e lle e s Ci ty

of Au sti n a nd City Counc il members ( collectively , “the City ”) is an “ allocation ag ree ment” under section 54

. 0 1 6 (f

) of the Texas Water Code and that the ag ree ment violates section 54.016(f ) by allowing both the City

and the District to assess and c ollect their full rate of prope rty tax es . T h e trial court g rante d partial

2A municipal utility district, or “MUD,” i s a p o l i t ical subdivision of the State with limi ted 3 g overnme ntal power s relate d to the provision of wate r, wa stewate r, and dr ainag e ser vices. See Te x. Wat e r C od e Ann. § 4 9. 21 1 (W e st 2 00 8) ; see also id. § 54.012 (West 2002), § 54.201 (West Supp. 2008). The Texas Water Commi ssion be came part of the Texas N atura l Re s o u rc e C onservation 4 Com mis sio n, no w re name d the Te xas Comm iss ion on En vir on me nta l Qua lity . F or sim pli c ity , a ll the var iations of the entity will be ref

err ed to as the Commission.

2 summary judgme nt in fa v o r o f t h e City , upholding the City ’s prope rty tax l evy and collec tion of ta xes. B e c a

us e we ho ld t

hat th e a g re e me nt is an a llo c a tio n a g re e me nt a s a ma tte r o f l aw, we re ve rs e the district court’s or der in pa rt and re nder summar

y judgme nt in favor of the District on this issue. Ho we ve r, be c a

us e su mma

ry jud g me nt i s imp ro pe r a s to the pa rt ie s’ re ma ini ngde c lara

tor y c la ims , we re ve rs e thi s p or

tio n o f t he jud g me nt a

nd re mand fo r f ur the r p ro c e e din g s.

BACK GR OUND I n 1984, rea l estate developer Nash P hillips /Copus (“N PC”) purcha sed 2,348 ac res in n or thw e st T ra

vis County , lo c a te d in

the City of Au sti n’ s e xtrate rr ito ri a l juri sdic tio n. NPC petitioned the City for water and wastew ater service s and soug ht to cre ate a municipal utilit y

district 3 to p ro vid e wate r a

nd wa ste wate r se rv ic e s to the pr op e rt y , kn ow n a s the Cany on

Cr e e k d e ve lop me nt. Th e City op po se d the c re a tio n of the No rt hw e st Au sti n M UD pr op os e d b y NPC , a rguin g that th e City had rece ntly approve d a number of MUDs in its extraterritorial jurisdiction and expressing conce rns that the prolifer ation of MUDs c an have “a substantial impac t on the City ’s fisca l integr ity .”

Whe n a c ity de nie s a re qu e st to inc lud e land wi thi n its e xtrate rr ito ri a l juri sd ic tio n in a propose d MUD, the water c ode provide s that au t h o ri zation may be soug ht by

petitioning the Texas Water Commis sion without securing the written c onsent of the c ity

. See Tex. W ater Code 43

Ann. § 5 4. 01 6( b) -( d) (We st Supp . 2 00 8) . U nd e r t he se pr ov isi on s, wh ic h a

pp ly “ on ly to l and wi thi n the extraterr itorial jurisdiction of a city ,”

the commiss i o n shall allow cre ation or inclusion of the land in a proposed district upon a finding that the city either doe s not have the r easona ble ability to serve or

has fa ile d to make a

le g a lly bin din g c omm itm e nt w ithsu ff ic ie nt f un ds a va ila

ble t o provide water a

nd wastew ater service adequate to se rve the proposed de velopment at a r easona

ble cost to the landowne r.
Id. § 54.016(d). “ The provisions of this section shall apply whether the land i s p ro p osed to be included in the district at t h e t i m e o f cre ation of a district or to be included by annexation to a district.” Id. Any

party may appea l the Commi ssion’s decision in district court. Id. Af te r t he City re fu se d to g ra

nt p e rm iss ion

fo r t he inc lus ion

of land wi thi n it s extraterritorial jurisdiction in the proposed district, NPC petitio n ed t h e C ommissi on for

a uth or iza tio n. F oll ow inga c on te ste d c a se he ari ng , th e Com mis sio n g ra nte d p e rm iss ion

to c re a te th ree MUDs (Nor

thwest Austin MUD Nos. 1, 2, and 3) . The City then filed suit in district court to a pp e a l th e Com mis sio n’ s d e c isi on . Wh ile the Ci ty ’s a dmi nis tr a tiv e a pp e a l w a s p e nd ing , N PC and th e Ci ty

r e s ume d n e g o ti a ti o n s an d

u lt im a te ly

r e a c h e d a s e tt le me n t r e g ar d in g th e c r e a ti o nof the No rt h we s t Au stin MUDs. The Austin City Council voted for the f

ormation of the District on J anuar y 15, 1987, and conf

irmed its decision with the passag e of O rdinanc e 870514-Xon May 14, 1987. I n addit ion to providing the City ’s “wr itten consent to the cr eation of a district,” see id. § 54.016(a) (written c onsent to be provided by resol u t i o n o r ordinance) , Ordinanc e 870514-X authorized the city

manag er “ to execute, on behalf of the City , the Ag ree ment ConcerningCreationTh e Ag re e me nt w a s in iti a lly e nte re d in to b y

the City and NPC in D e c e mbe r 1 98 7. Th e Di str ic t, 5 afte r it w as cr ea t ed by

order of the Commission t he following y ear , approve d and executed the Ag re e me nt. 4 and Ope ration of the Northwe st Austin Municipal Utility District No. 1” ( the “Ag ree ment”). The 5 A g r e e me n t s tate s th a t th e p arti e s u n d e r s ta n d an d a c kn o w le d g e th a t “ a ll th e la n d to be included within the D is tr ic t i s to b e an n e xe d f o r f u ll p u r p o s e s b y th e Ci ty p r io r to f in a l a c ti o nf

o r c r e a tion of the D is tr ic t b y th e Co mm is s io n . ” U n d e r th e A g r e e me n t, th e Ci ty w o u ld p r o v id e r e ta il water,

was tew ate r, an d d rai nage se rvi ces t o cu st om ers wi th in th e Di st ri ct, whi le t he D is tr ict and NPC wo uld fi na nc e and c on str uc t th e wate r, wa ste wate r, and dr a ina g e inf

ra str uc tur e and

fa c ili tie s a c c or din g to the City ’s deve l o p m en tre gu l at i o n s ; u p o nco mp l et i o n , t h e f

ac i l i t i es wo u l d

b e o wn ed , m ai n tained, and operated by

the City . The Ag ree ment further provides, in sec tion 7.2:

I t is un de rs too d and a g re e d by the pa rt ie s he re to that the City

sh a ll h a ve the a

uth or ity to assess and c ollect ad va lorem taxes at the City ’s full tax rate within the District as for a ny other prope rty

within the Cit y

of Austin and the District sh al l h ave the a uth or ity to a sse ss and c oll e c t the a d va lor e m ta x e sta bli sh e d b y

the Di str ic t un le ss eit h e r th e Ci ty o r th e D is tr ic t ar e p r o h ib it e d b y a c o u rt o f la w f r o m a s sessing and collectingall or a por

tion of the City ’s or the D istrict’s ad valor em tax rate.

After the Ag ree ment was e x ecute d, the City pas s ed an or dinance to annex the

su bje c t pr op e rt

y int o th e c or

porat e lim its of

the c ity . T he re a ft e r, the City fi le d th e Ag re e me nt i n district court, which r emande d the petitions for cr eation of the Northwe st Austin MUDs to the Commi ssion for re consideratio n . Am o ng the cha ng es ag ree d upon by

the par ties were the dissoluti on of the thre e ex isting MUDs approve d by the C ommissi on, the creation of two rathe r than5

three districts, and corresponding boundary chang es. The district court issued an orde r appr oving the Ag ree ment, settling the City ’s suit ag ainst the Commis sion.

The Commission create d the District as a n i n -city MUD on Mar ch 16, 1988. A subsequent ele ction confirme d the Dis trict’s creation and authorized $21.1 milli on in bonds for the

c on str uc tio n o f w a te r, wa ste wate r, and drai na g e fa c ili tie s. Un de r t he wate r c od e , th e Di str ic t is

re qu ir e d to le vy

and c oll e c t ad va lor e m ta xes s uf fi c ie nt t o p ay

fo r t he de bt s e rv ic e s to the se bo nd s. Id. § 54.601 (West 2002) (district boar d shall levy continuing dir ect a

nnual ad valore m ta x eac h y ear while all or pa

rt of bonds ar e outstanding on all taxable property within dist rict in amount sufficie nt to pay interest as it bec omes due, to cr eate sinking fund f or pay ment of principa l or rede mption price

a t any e arl ie r r e qu ir e d r e de mpt ion date , a nd to p ay e xpe ns e s o f a sse ssi ngand c oll e c tin g ta xes) ; see also id. § 54.602 (non-e x haustive list of factors board shall consider in deter mining ac tual rate to be levied ea ch y ear ). In revie wing the bonds, the Commi ssion f ound that “the cre ation of the District wi ll n ot u

nr e a so na bly a ff e c t to ta l ta x ass e ssm ent s on a ll l and and pr op e rt ie s lo c a te d w ith in the proposed D i s t ri ct
. ” The Commission further conc luded that “a ll of the requir ements of section 54.016 of the T exas W ater Code, as ame nded, have been f ully co m p l i ed with, met and

acc omplished.”

I n Se pte mbe r 2 00 2, the Di str ic t and va ri ou s in div idu al ho me ow ne rs fi le d s uit challeng ing se ction 7.2 of t he Agr eeme nt. They soug ht decla rations t hat (1) section 54.016(f) of the water code pr ohibits t he City

from charg ing its full tax rate to the residents of the District, and (2) the residents’ continuing duty to pa y taxes to the District to r etire the debt incurre d by t h e D i s t rict require s the City

to reduc e its own tax rate imposed on the re sidents of the District. In the District6

an d taxpay ers’ view, the Ag ree ment is an “a llocation ag ree ment” within the meaningof section 54.106(f

), re quiring the Ag ree ment to ens u r e th at “the total a

nnual ad va lorem taxes collected by the city and the district fr om tax able pr opert y wi t h i n the district does not exceed a n amount g reater than the city ’s ad va l o re m t ax u p o n such prope rty .” See Tex. W ater Code Ann. § 54.106(f) (2). T h e District and ta x pay ers a lso sought injunctive re lief fr om the “illeg al and

e xce ssi ve ” ta xes i mpo se d b y the City , a s w e ll a s atto rn e y ’s fe e s a nd c os ts. By counter claim, t he C ity soug ht its own declar atory judgme nt that the Ag ree ment is not an “allocation agr eeme nt” under the wate r code , that section 54.016(f ) is not applicable, a

nd t h a tt h e D i s t r i c t h a d b r e a c h e d t h e A g r e e m e n t b y s e e k i n g t o d e c l ar e s e c t i o n7

. 2 i n v a l i d

. A l t e r n a t i v e l y, if the c ourt fo un d th a t th e Ag re e me nt w a s su bje c t to the re qu ir e me nts of se c tio n 5 4. 10 6( f) , th e City soug ht a dec laration that the water code pr ovision was null and void “to the exte n t i t reduces the amount of the City ’s prope rty taxes owed by

the re sidents of the District or g rant s t h em an illeg al tax ex emption from the pay ment of the City ’s prope rty taxes.” The City also asser ted a number of aff irmative def

enses ag ainst the District’s claims, including lache s and the statute of limit ations, and filed a ple a to the jurisdiction on the basis that the pla i n tiffs lacke d standing and the City had not

wa ive d it s im mun ity

fr om s uit fo r w hat w a s, in e sse nc e , a br e a c h o f c on tr a c t c la im. The pa rties filed c ros s -m o tions for partial summary judgme nt on the merits. The trial court denied t he Dist rict’s mot ion for partial summary judgme nt and g rante d partial summary judgme nt in favor of

the City , finding that the District’s cla ims are barre d by the statute of limitations and lac hes and de clar ing that the Ag ree ment betwee n the City and the District is not a n “allocation ag ree ment” under

section 54.016(f

) of the water code. The trial court made further decla rations thatTh e City do e s n ot c omp la in o n a

pp e a l a bo ut t he de nia l of

its ple a to t he jur isd ic tio n a s to 6 the Di str ic t. 7 (1 ) t he City ’s pr op ert y tax lev y wa s v a lid un de r t he Ag re e me nt a

nd pr op e rt y ta xes w e re pr op e rl y collecte d from re sidents of the District under the Ag ree ment, and (2) section 54.016 (f) of the

wate r c od e do e s n ot c re a te a ta x exemption

un de r t he Te xas C on sti tut ion . T he tr ia l c ourt a lso gra n t edt h e C i t y ’s p l ea t o t h e j u ri s d i ct i o n wi t h re s p ec tt o t h e i n d i v i d u al p l ai n t i ff

s fo r l ac k o f s t an d i n g, denied the Cit y ’s pl ea as to the District, and g rante d the City ’s motion for par tial summary

judgme nt 6

on a tto rn e y ’s fe e s, c re a tin g the fi na l ju dg me nt f ro m w hic h th e Di str ic t and ta xpay e rs no w a

pp e a l.

STA ND AR

D O F RE VI EW The propr iety

of a summar

y judgme nt is a question of l aw that we review de novo. Va le nc e Ope ra tin g Co . v . D or se tt , 1 6 4 S

. W

. 3 d

6 5 6 , 6 6 1 (T ex . 2 0 0 5 ). W h en re v i ew i n g a summary judgme nt, we take as t rue all evidenc e favorable to the nonm ovant and we indulge ever y

rea sonable inferenc e and resolve a ny doubts in the nonmovant’s favor

. Id. When both parties have filed motions for s ummary judgme nt and the district cour t gr ants one motion and denie s the other, the re vie wi ngc ourt

loo ks to t

he su mma

ry jud g me nt p ro of

pr e se nte d b y

the partie s, de te rm ine s a ll questions presente d, and i f the re viewing court de termines that the tria l court er red, r ender s the j udg ment that the t rial cour t should have re ndere d. FM Pr op s. Op e ra tin g Co. v . City of A us tin , 22 S.W.3d 86 8, 87 2 ( Te x. 20 00 ); Commissioners Court of Tit us County v. Agan , 940 S.W .2d 77, 81 (Tex. 1997). We aff

irm the s ummary judgme nt if any of the theor ies prese nted to the trial cour t and pre serve d for a

ppellate r eview a

re me ritorious. J

oe v . Two Thi rty

Nin e J oin t V e nt ur e , 145 S.W .3d 150, 157 (Tex. 2004).As do the par ties in their briefs, w e will ref er to the a ppellants collect i v el y as “t h e Dist rict,” 7 ap ar t fr o m where the a

pplicable law

require s us to dist inguish be tween the claims broug ht by the MU D a nd the ind ivi du a l pl a int if

fs

. 8 DI SCU SSIO N The District bring s five issues on appe al. I n its first issue, the District ar gu es that

7 the Ag ree ment is an “a llocation ag reem en t ” s u b ject to the re quirements of se ction 54.016(f) of the Texas Water Code, mandating that the City reduc e the ad valore m ta x rate it c harg es taxpay ers i nt h e D i s t r i c t
. T h e D i s t r i c t ’ s s e c o n d i s s u e a s s e rt s t h a t , c o n t r ar y t o t h e C i t y ’ s c ou nte rc la im,

se c tio n 5 4. 01 6( f) do e s n ot c re a te an unc on sti tut ion a l tax e xemp tio n. I n the Di str ic t’ s thir d issu e , it argues that neither

the statute of limit ations nor l ache s bars the District from obtaining a dec laration of its rig hts. The District asser ts in it s fourth issue that the in dividual homeowner s have standing to c ha lle ng e the c on se nt a g re e me nt be tw e e n th e City and Di str ic t to ob ta in a

de c lara tio n o f t he ir rig hts, a nd there fore the district c ourt err ed in gr anting the City ’s plea to the jur isdiction with respect to the in d iv id

u a l p la in ti f

f s . F in a ll y , in it s f

if th is s u e , th e D is tr ic t ar g u e s th e aw ar d o f th e City ’s attorney ’s fe es should be re verse d beca use it is “inequitable and unf air.”

Na ture of the Agre e ment I n its first issue, the District asserts the trial court err ed in f inding that the Ag ree ment betwee n the District and the City is not an “allocation a g ree ment” under water code se ction 54.016(f)

and that se c tio n 5 4. 10 6( f) do e s n ot a pp ly to t he Ag re e me nt. Whether the Ag ree ment is an “a l l o ca t ion ag ree ment” is a leg al question that we revie w de novo. See Cit

y of Rock wall v. Hughe

s , 246 S.W .3d 621, 625 (Tex. 2008)

. I n construing9

statutes, we a scer

tain and g ive ef

fec t to the leg islature’s intent as e x p ressed by the lang uag e of the statute. Id. ; State v. Shumak e , 199 S.W .3d 279, 284 (Tex. 2006). We use def initions presc ribed by the leg islature and c onsider any technica l or particula

r mea ning that t h e wo rd s h ave a cquire d. Tex. Go v ’ t Co d e A n n . § 3 1 1

. 0 1 1 ( b ) ( We s t 2 0 0 5 )

. O th e r w is e , w e c o n s tr

u e th e s tatute ’s words

acc ording to their plain and c ommon meaning , Texas De p’t of Tran s

p . v. City of Sunset Valley , 146 S.W .3d 637, 642 (Tex. 2004), unless a c ontrary intention is apparent f

rom the conte x t, Taylor

v. Firemen’

s & Policeme n’s Civil Serv. Comm’n , 616 S.W .2d 187, 189 (Tex. 1981), or unless such

a construction leads to a

bsurd re sults, University of Tex. S. W . Med. Ctr. v. Loutzenhiser , 140 S.W .3d 35 1, 35 6 ( Te x. 20 04 ); see also Texas D ep’t of Protec tive &Regulatory Serv s. v. Me ga Child C

are, Inc. , 1 45 S.W. 3d

17 0, 17 7 (T e x. 20 04 ) (n oti ng that whe n sta tut or y te xt is una

mbi g uo us , c ourt s mu st

a do pt i nte rp re ta tio n s up po rt e d b y statut e ’s pla in l angua g e un le ss t hat in te rp re ta tio n w ou ld l e a d to absurd r esults).

We presume that the le g islature intended a just and rea sonable res u l t by enac ting t h e s t atute. Te x . Gov’t Code Ann. § 311.021( 3) (West 2005). When a statute’ s lang uag e is clea r and unambig uous, it is i nappropr iate to re sort to rules of construction or extrinsi c aids to construe the lang uag e. Hughes , 2 4 6 S

. W

. 3 d at 6 2 6 (c i t i n g St. Luke ’s Episcopal Hosp. v. Agbor , 952 S.W .2d 50 3, 50 5 (T e x. 19 97 ); Ex

pa rteRo lof

f , 510 S.W .2d 913, 915 (Tex. 1974)). We look to the entire ac t in determining the leg islature’s intent with re spect to a spe cific pr ovision. See Taylor , 616 S.W .2d

a t 19 0; W ilb ur n v . S tat e , 824 S.W .2d 755, 760 (Tex. App.—Austin 1992, no writ). The leg islature is p re su me d to e na c t a

statut e wi th c omp le te kn ow le dg e of the e xistin g law and wi th r e fe re nc e to i t.10

See Acke r v. T

exas W ater Comm’n , 79 0 S.W. 2d 29 9, 30 1 ( Te x. 19 90 ); Southwestern Bell Tel. Co. v. Public Util. Comm’n , 888 S.W .2d 921, 926 (Tex. App.—Austin 1994, writ denied).

Se c tio n 5 4. 01 6( f) of

the wate r c od e state s: (f ) Ac ity may provide in its written c onsent for the inclusion of land in a district that a c on tr a c t (“ a llo c a tio n a g re e me nt” ) b e tw e e n th e dis tr ic t and the c ity be e nte re d in to pr ior to t he fi rs t is su e of

bo nd s, no te s, wa

rr ants , or oth e r o bli g a tio ns of the dis tr ic t. Th e a llo c a tio n a g re e me nt s ha ll c on ta in t he fo llo wi ngpr ov isi on s: (1) a method by

which the district shall continue to e x ist following the anne x ation of all terr ito ry wi thin the district by the city , if the d i s t r i c ti s i n i t i a l l y l o c a t e d o u t s i d e t h e c o r

p o r a t e l i m i t s o f

t h e c i t y; (2 ) a n a llo c a tio n o f t

he ta xes o r r e ve nu e s o f th e di str ic t or the c ity whi c h w il l a s s u r e th a t, f

o ll o w in g th e d a te o f th e in c lu s io n of all the district’s territory

within the corporate limits of t h e city , the total an n u a l a d v a lo r e m t a xe s c o ll e c te d

b y th e c it y an d th e d is tr ic t f

r om taxable property within the di strict does not exceed a n amount g reater t h ant h e c i t y’ s a d

v a l o r e m t a x u

p o ns u c h p r o p e rt y; (3 ) an a llo c a tio n o f g ov e rnme nta l se rv ic e s to be pr ov ide d b y the c ity or the district f

ollowing the date of

the inclusion of all of the district’s t e r r i t o r y w i t h i nt h e c o r

p o r a t e l i m i t s o f

t h e c i t y; (4) suc h other terms and conditions as m ay be deemed appropriate by t h e c i t y.

Tex. W ater

Code Ann. § 54.016(f

). Acc ording to the District, section 54.016(f) define s an “a llocation ag ree ment” as a ny contra ct that is (1) provided f or by the city in its written consent to the cre ation of a district, a nd (2 ) en te re d in t o p r i o r

t o t h e d i s t r i c t ’ s f

i r s ti s s u an c e o f

b o n d s o r o t h e r o b l i g a t i o n s . P r o v i d e d

t he se two conditions are me t, the District asser ts, the contra ct i s an “allocation agr eeme nt” as a matter of law and must conta in the provisi ons set forth in the s ubsections (1) thr oug h (4) of section 54.016(f

).F or

e xamp le , th e City

argue s th a t se c ti on 54 .0 16 (a), whic h r e qu ir e s th a t a c ity pr ov ide its 8 written conse nt to the inclusion of land within a district, establishes the authority for a “conse nt ag ree ment” to be e ntere d into between a cit y an d a d i s t ri ct bec ause the provision refe rs to the “re strictions a

nd conditions” that a c ity

can pla ce on its written c onsent, thus impli catinga pre -bond c on tr a c t, o r “ c on se nt a g re e me nt, ” be tw e e n th e pa rt ie s. 11 The City challeng es this interpreta t ion as being too broad be cause it mandates that “i f any contra ct, of a

ny nature ” is enter ed into prior to a district’s f irst bond issuance, then it is an allocation ag ree ment. Citi ng various provisions within section 54.016 t hat purporte dly authorize the

e xec uti on of “ c on se nt a g re e me nts ” and oth e r c on tr a c ts be tw e e n a c ity and a dis tr ic t, t he City a sse rt s that the leg islature did not intend to make eve ry pre- bond contra ct between a city and a district a n “alloca tion ag ree ment.” I n addition, the City urg es that the pa

rties had “ continuously

identified” 8 the Ag ree ment as a “ consent a g ree ment” si n ce t h e ti me that it was executed, c hara cter izi ng the Di str ic t’ s a c qu ie sc e nc e to t he us e of thi s te rm a s an a dmi ssi on a g a ins t in te re st. Mo re ov e r, the City argues, the Ag ree ment cannot be decla red a n allocation ag ree ment by this or any

other c ourt bec ause, in the City ’s view, the leg islature invested c ities with the sole authority to decide w hether

an

a g r e e m e n t i s an a l l o c a t i o n a g r e e m e n t
. N o t i n g t h a t s e c t i o n 5 4

. 0 1 6 ( f ) b e g i n s , “ A c i t y may

pr ov ide in its written consent,” id. (empha sis added), the City maintains that there c an be no a llocation

a g re e me nt w ith ou t the e xpre ss co ns e nt o f t he City , a nd tha t th e e vid e nc e is u

nd isp ute d “ that th e City made the c hoice not to enter into an allocation ag ree ment” in this case. Ba sed on the plain lang uag e of subsection (f) of the statute a nd the over all statutory

sc he me c re a te d b y

se c tio n 54. 01 6, we c on c lud e that ne ith e r p art y ’s int e rp re ta tio n is e nti re ly c or re c t. I t is tr ue that th e wo rd “ may ” c re a te s dis c re tio na ry a uth or ity or g ra

nts pe rm iss ion

or a po we r, wh ile the word “ shall” imposes a duty

. See Te x. Go v’ t Co de Ann. § 3 11 .0 16 (We st 2 00 5) ; se e als o12

South w es t er n B ell

Tel. Co. v. Public Util. Comm’n , 3 1 S. W.3 d 6 31 , 6 37 -3 8 ( Te x. Ap p. —A us tin 2000), aff’d , 92 S.W .3d 424 (2002). The ref ore, we agr ee with the C ity that the statute invests cities with the power

to decide if

, when submitting their w ritten consent to the c reation of a municipal utilit y district, such a c ontrac t will be executed. Howe ver, in the event that a c ity ’s written c onsent does provide f

or the e x ecution of a

contra ct with a district spec i fi cally addre ssed to the allocation of taxes, reve nues, and g overnme nt service s befor e t h e fi rs t issuance of bonds, the leg islature has

c le arl y e xpre sse d th a t su c h a

c on tr a c t is an “ a llo c a tio n a g re e me nt” a nd ha s d e c lare d th a t c e rt a in mandatory

provisions must be included in the ag ree ment. See Tex. W ater Code Ann. § 54.016(f

) (“ Th e a llo c a tio n a g re e me nt sh all c on ta in the fo llo wi ng pr ov isi on s . . . .” ) ( e mph a sis a dd e d) . Wh ile a city is not required to e x ecute a contr act in conne ction with its c o n s en t t o t h e inclusi on of land within a district in ever

y instance, it is required to comply with subsection (f) when it is clea r that the c ity , in

su bmi tti ngits wr itt e n c on se nt, wi ll c on tr a c t w iththe dis tr ic t to all ocat e th e ta xes,

reve nues, and gove rnmental services between the two entities. Thus, the City is incorre ct that the q u es t i o n of whe ther the A g ree ment is an allocation ag ree ment is not subject to judicial review b e c a u s e t h e s t a tu t e l e a v e s t h e c h o i c e t o e x e c u t e s u c h ana g r e e m e n tt o t h e s o l e d i s c r e t i o no f t h e C i t y. I t is plain from the statute that a c i t y m ay o n ly decide whether

it will enter into an allocation ag ree ment. The entirely

differ ent matter of

whether a contr act is an a llocation ag ree ment was settled by the leg islature when it de clar ed that a pre- bond contra ct betwee n a city and a district g overning the allocation of taxes, re venues, and g overnme ntal service s is an “a llocation ag ree ment.” See id.

No r a re we c on vin c e d by the City ’s c on te nti on that it may “ e nte r i nto a

c on tr a c t w ith

a dis tr ic t w ith ou t f

oll ow ing an y of the re qu ir e me nts of § 5 4. 01 6( f) ” be c a

us e c iti e s are statut or ily13

invested with the authority to enter into contra cts independe nt of the authority gra n t ed by

se c tio n 5 4. 01 6( f) . T he City ’s po we r to exe c ute c on tr a c ts— un de r the wate r co de or

oth e rw ise —is not in disput e. Rather , the i ssue i s whether the spec ific contra ct that the City enter ed into with the District is what the leg islature has te rmed an “allocation ag ree ment.” Whether the City could have

e xec ute d a

n a g re e me nt u

nd e r a dif fe re nt pr ov isi on in se c tio n 54 .0 16 ha s no be ari ng on thi s a na ly sis

. L ikewise, the fac t that the parties might have ref err ed to the Ag ree ment as something othe r than a n allocation ag ree ment does not by itself control whe ther the a g ree ment is, as a m at t er o f l aw, a n allocation ag ree ment. Such an interpr etation would re ad subsec tion (f) out of the statute entirely by

a llo wi nga

pa rt y to a vo id t he mand a tor

y pr ov isi on s th a t mu st b e inc lud e d in an a llo c a tio n a g re e me nt, simply beca use it calls the ag ree ment something diff ere nt or asser

ts that the agr eeme nt was ente red int o und e r d if

fe re nt a uth or ity . B e c a

us e we mus t gi ve e ff

e c t to a ll the wo rd s o f a

statut e and

a vo id constructions that treat statutory lang uag e as sur

plusag e, see Spradlin v. J im W alter Homes, I

nc. , 34 S.W. 3d

57 8, 58 0 ( Te x. 20 00 ), we mus t r e je c t th e City ’s argume nt. I nstead, we lo o k

to th e s tatute to d e te r

mi n e w h e th e r

th e A g r e e me n t i s w h at section 54.016(f

), by its plain meaning , defin es as an “a llocation ag ree ment”: a c ontrac t betwee n the District and the City , provided for in the City ’s written c onsent for the inclusi o n o f l an d in a district, that was e ntere d into prior to the first issue of bonds, and pr ovides (1) a method by

which the District shall continue to exist foll owing the anne x ation of its territory by the C ity , if the District was initially

located outside the corpor ate limits of the City ; (2) an a llocation of taxes or reve nues of the City

or the District e nsuring that the tot al ad v alorem tax es collec ted by the City and the Di str ic t f ro m pr op e rt

y in t he Di str ic t do e s n ot e xce e d t he City ’s a d v a lor e m ta x upo n th e sameA s t h e C i t y a c kn o w l e d g e s , t h e A g r e e m e n t “ i d e n t i f i e s t h e r e s p o n s i b i l i t i e s o f e a c h p a rt y” 9 reg ardingthe provision of water, wa s t ew at er, fire, police , EMS, drainag e, par k and fa cilities maintenanc e, and othe r m u n i ci p al functions, and these responsibilities are a lso set out in other 14 proper ty ; and (3) a

n allocation of g overnme ntal service s to be provided by the City or the District following the date of

the inclusion of all the Dis t ri ct ’s t er ri tory within the corporate limits of the City

. See id. § 54.016(f) (1)- (3).

He re , O rd ina

nc e 87 05 14 -X

—th e City ’s wr itt e n c on se nt f or the inc lus ion of land

in the District—states that “the City and the Applica nt for conse nt to creation have neg otiated a c onsent ag ree ment.” The n, in part one, the ordinance provides, “The City Manag er is authorized to execute,

on be ha lf of the City , the Ag re e me nt Con c e rn ingCr e a tio n a nd Op e ra tio n o f t he No rt hw e st Aus tin Municipal Utility

District No. 1, attac hed her eto as Exhibit ‘A’.” The Ag ree ment was e x ecute d betwee n the City

and the District p ri o r t o t h e first issuanc e of D istrict bonds. Thus, the District argues, the Ag ree ment is precise ly the so rt of contr act c ontemplated by the statute bec ause a ll of the “statutory

prer equisites” ar e met. Howe ver, this does not end the inquiry ; the terms of the Ag re e me nt m

us t a lso re fl e c t e a c h o f the su bs tanti ve re qu ir e me nts mand a te d b y the statut e . T he fi rs t

re qu ir e me nt, that an a llo c a tio n a g re e me nt i nc lud e “ a me tho d b y wh ic h th e dis tr ic t sh a ll c on tin ue to exis t following the annexation of all terr itory within the district b y t h e ci t y ,” applies only if the district is initially located outside the corpor ate limits of the city

. See id. § 54.016(f) (1). I n this case, th e ar e a in c lu d in g th e D is tr ic t w a s an n e xe d in to th e Ci ty ’ s c o r

p o r a te li mi ts b e f

o r e th e District

was c reated, so section 54.016(f )(1) does not apply . The third re quirement, that the a g reem ent allocate the gover

nmental s ervic es to be provide d by the city or the district, see id. § 54.016(f) (3), is c le arl y me t. 9ag ree ments and city ordinanc es. The Cit y ’s point that the Ag ree ment “is not an allocation ag ree ment me re ly be c a us e it ide nti fi e s the re sp on sib ili tie s of e a c h p art y ” is w e ll t a ke n; a c c or din g ly , it is o nly on e fa c tor we c on sid e r i n li g ht of

the statut e a s a

wh ole in d e te rm ini ngwh e the r t he Ag re e me nt i s wh a t th e le g isl a tur e ha s d e fi ne d a s an a llo c a tio n a g re e me nt. 15 The sec ond require ment—the ce ntral dispute in this appea l—require s an allocation

a g re e m e n tt o c o n t a i n“ ana l l o c a t i o no f t h e t a xe s o r

r e v e n u e s o f

t h e d i s t r i c to r

t h e c i t y w h i c h w ill

a ssu re that .
. . the tot a l annua l a d va lor e m ta xes c oll e c te d by the c ity and the dis tr ic t f ro m ta xab le proper ty withi n t h e d i s trict does not exceed a n amount g reater than the city ’s ad va lorem tax upon such prope rty .” Id. § 54.016(f) (2). The District argues that the Ag ree ment contains such a n

a llo c a tio n p ro vis ion , b ut t hat it a llo c a te s taxes in a wa

y that vio la te s the statut e and mus t be sim ply

a me nd e d to se t f

or th a pr op e r a llo c a tio n. Th is p ro vis ion , co nta ine d in sec tio n 7 .2 of the Ag re e me nt, state s that “ the City sh a ll have the a uth or ity to a sse ss and c oll e c t a d va lor e m ta xes at th e City ’s fu ll ta x ra te wi thi n the Di str ic t a s fo r any oth e r pr op e rt y wi thi n the City of Au sti n and the Di str ic t sh a ll have the authority

to assess and c ollect the ad va lorem tax establish ed b y t h e Di strict.” Thus, the Ag re e me nt f

a ils to a llo c a te ta xes i n th e manne r r e qu ir e d b y the statut e be c a

us e it a llo ws bo th taxi ng authorities to tax at t h ei r ful l ad valore m rate, w ithout reg ard to the othe r entity ’s rate. An “alloca tion” is a “de signation or apportionment for a spec ific purpose .” B lack’ s L aw Dic tionary 59 (7 th e d. ). Th e Ag re e me nt co nte mpl a te s no app or tio nme nt of ta xes be tw e e n the City and the Di str ic t, b u ti tc l e ar l y d e s i g n a t e s t h e t a x i n g a u t h o r i t y o f

e a c h p art y. The que stion, then, is whether the pa rties cou l d have e x ecute d an allocation ag ree ment when the A g ree ment does not prec isely trac k the lang uag e of se ction 54.016(f) (2). The District urg es that we must int erpr et the Ag ree ment as an a llocation ag ree ment in or der to preve ntAcc ording to the bill sponsor, 10 What [H. B ] 197 4 b a sic a lly do e s is a llo w the c ity and a wate r dis tr ic t be fo re the fi rs t bonds are issued to enter into an ag ree ment with the approva l of the [Com mission] wher eby the city , at some point along the way , can annex that water district but does not have to assume the b o n d s . T h e bonds wil l stay with the water

district, and the people livi ng in the water di strict will continue to pay their taxes to the water district and p ay a ll th e b o n d e d in d e b te dn e s s . B u t th e r e h a s to b e in th e a g r e e me n t tha t’s approve d by the S tate that the people will not pay taxes any highe r than what alrea dy a d v a l o r e m t a x e s f

o r a l l t h e o t h e r

c i t i z e n s i nth a tg i v e nc i t y. Se e He ar ing

s o n Te x . H .B . 1 974 B e

for e Ho us e Com m. on Natural R es. , 66th L eg ., R.S. (Apr. 18, 1979) (tra nscript ava ilable at L eg islative Refer ence L ibrary ). 16 the City fr om u nju stl y be ne fi tti ng fr om its fa ilure to c omp ly wi th t he statut e a t th e Di str ic t ta xpa y e rs ’ expense. As evidenc e that the leg islature did not intend to allow t he C ity to continue taxing District residents at its full ad valore m rate following annexation, the Dis trict cites the leg islative history of section 54.016(f)

. Se e He ar ing s on Tex . H.B . 1974 B e

for e Ho us e Com m. on Natural R es. , 66th L eg ., R.S. (Apr. 18, 1979) (transc ript available at L eg islative Refer ence L ibrary ). House B ill 1974 was de sig ne d to a llo w a mun ic ipa l uti lity dis tr ic t to c on tin ue in e xiste nc e a ft e r b e ingann e xed by a c ity without forcingthe city

to a ssume the district’s debt obligations, as was the c ase unde r the prior law when districts automatica lly dissolved upon annexation. See Act of J une 13, 1979, 66th L eg ., R.S., ch. 796, 1979 Te x . Gen. L aws 2026, 2026. B eca use the district would survive po s t -a n n ex ati on, howeve r, the taxpay ers in the ne wly annexed district would rema in subject to t h e water district’s taxe s in o r d e r to p ay o f f th e d is tr ic t’ s b o n d e d in d e b te dn e s s , an d b e f o r c e d to p ay the city ’s ad valor em taxes; therefor e, ac cordingto the testimony befor e the House c ommitt ee, the allocationag ree ment statu te w o u ld n e e d to e n s u r e th a t t

h e r e s id e n ts o f

a d is tr ic t a n n e xe d u n d e r th e n ew l aw w o u l d

n o tp ay t a x e s an y h i g h e r

t h anw h a to t h e r

c i t i z e n s p a i d

i na d v a l o r e m t a x e s t o t h e c i t y. 1017

This conce rn is clea

rly ref lected in se ction 54.016(f) (2), whic h seeks to p re v en t t he total annua l ad valor em taxes collected by a city and a district f

rom exceeding

the city ’s ad va lorem tax upon

s u c h p r o p e rt y. The set of

circ umstances motivating the passag e of House Bill 1974 and the r esulting amendment to the wa

ter c ode is identical in this case , wher e the City has ag ree d to the inclusion of land i n t h e Di strict, annexed that terr itory , and now ha s tax ing a uthority over r esidents who ar e also fac ed with pay

ing the District’s taxes. J ust as the statutory scheme contemplates, the District is t o c on tin

ue in e xiste nc e a ft e r its ann e xati on int o the c or po ra te c ity lim its . In c on

jun c tio n w ithits written conse nt, the City

executed a c ontrac t that larg ely complies with the statute, outlining the post-annexation relationship betwee n the City and the District a

nd spelling out the r ights and duties of ea ch entity , including an allocation of gover nment service s that eac h will provide. Althoug h the Ag r e e m e n td o e s n o ta

p p o rt i o nt a xe s b e t w e e nt h e C i t y an d t h e D i s t r i c ti ns t r i c ta c c o r d an c e w i th section 54.016(f

)(2) , it clear ly

addre sses the taxing powe rs of b o t h t he City and the District a

nd

a c kn ow le dg e s that the ir re sp e c tiv e ta x r a te s may be lim ite d by statut e . An a g re e me nt su c h a s th is, which def ines the post -anne x ation relationship betwee n a city and a district a

nd addre sses ea ch of the subject-matter compone nts of section 54.016(f) , must be construed a s an allocation ag ree ment in or der to e ffe ctuate the leg islature’s intent. Where the par ties enter into a c ontrac t that provides fo r t he po st- ann e xati on

surv iva l of

the Di str ic t and the su

bje c t matt e r of

the c on tr a c t c or

re sp on ds to the eleme nts list ed in sec tion 54.016(f), that c ontrac t is an allocation ag ree ment as a matter of law

.Th e Ag re e me nt p ro vid e s, in r e le va nt p art : 11 Se c tio n 1 2. 1. Se ve ra bil ity

. Th e pr ov isi on s o f t his Ag re e me nt a

re se ve ra ble and , in the eve nt any

word, p h ra s e, cla

use, sentenc e, par ag raph, se ction or other pr ovision 18 There fore , in ligh t o f t h e history and purpose of the statute, a nd the fa ct that the Ag ree ment substantially confor ms w ith se ction 54.016(f) , we hold that the Ag reem en t i s an allocation ag ree ment and must be broug ht into conformity with section 54.016(f) (2).

Ta x Al loc ation P

ro v isions Th e Di str ic t f

ur the r a sse rt s tha t in

or de r f or the Ag re e me nt t o c omp ly wi th

se c tio n 5 4. 01 6( f) (2 ), it must b e a me nd e d to re qu ir e the City to r e du c e the a d v a lor e m ta x ra te it

c ha rg e s D istri c t ta xpay e rs . T he Ag re e me nt c ur re ntl y pr ov ide s th a t “ the City sh a ll h a ve the a

uth or ity to assess and c ollect ad va lorem taxes at the City ’s full rate ” and likew ise that “the D istrict shall have the authority

to assess and c ollect the ad valore m ta x established by the District.” The Ag ree ment permits such rates “unless e ither the City or the District a

re pr ohibited by

a cour t of law fr om assessing and collec ting a ll or a portion of the City ’s or the D istrict’s ad valor em tax rate.”

Under section 54.016(f

)(2) , the Ag ree ment must provide for an allocation “of taxes or revenues of

the district or the c ity

which will assure that . . . the total annual a d valore m tax es collecte d by

the cit y an d t h e d istrict from taxable proper ty within the district does not ex cee d

ana mo u n t g r e a te r

th anth e c it

y ’ s a d v a lo r e m t a x u

p o ns u c h p roperty .” Id. § 54.016(f) (2). B y the Ag ree ment’s o wn t erms, the tax allocation provision in section 7.2 must therefor e be se vere d and the par ties must “immediately

amend t h i s Ag ree ment” to conf orm with this C ourt’s holding that section 7.2 of the A g ree ment violates section 54.016(f ) of the T exas W ater

Code. 11of

thi s A g re e me nt, or

the a pp lic a tio n th e re of

to a ny pe rson or cir c ums tanc e , s ha ll ever be held or

deter mined to be i nvalid, illega l or unenfor cea ble for a ny rea son, the rema inder of this Ag ree ment shall remain in full for ce a nd eff ect a nd the application t h e r e o f t o an y o t h e r

p e r s o no r c i r c u m s t an c e s h a l l n o tb e a f f e c t e d t h e r e b y. Section 12.2. Enforc eability . I n the eve nt that the Commi ssion o r an y court of competent jurisdiction deter mines that any provision of t his Ag ree ment is bey ond the sc op e of the Te xas Wate r C od e , th e City , N PC and the Di str ic t a g re e to i mme diate ly amend this Ag ree ment to conform to such r uling or decision. 19 Th e Di str ic t a sse rt s th a t r e qu ir ing the City to re du c e its ta x ra te is the on ly po ssi ble way to bring the Ag ree ment into conformity with section 54.016(f) (2) be cause the District must maintain a t ax ra t e s u ff i cient to meet its statutory obligations. As discussed previously , the water code require s a dis trict to collect ad valore m taxes sufficie nt to service its bond debt. See id. § 54.601. The District must have sufficient tax reve nues t o pay interest on its bonds as it becomes due, to create a si nking fund for the pay ment of principal, and to pay the expenses of a ssessing a nd collectingtaxes. Id. Ho we v er, the City points out t hat it also has bonded de bt supported by tax

reve nues and othe r oblig ations under va rious statutes that are met with its t ax revenue s. Adopting the same r ationale as the District, the City argues that its tax rate cannot be reduc ed bec ause it too is statutorily require d to tax at a rate suf ficient to ser

vice its bonded de bt and meet its own statutory ob lig a tio ns . The statute itself doe s not ex plain how or at what rate the City ’s and District’s taxes should be set, but pr ovides only that there must be an allocation to ensure a spe cific r esult. Nor does the plain lang uag e of the statute signif y an intent on the par

t of the leg islature to mandate a re duction in a c ity ’s ta x ra te a lon e . A s th e City po int s ou t, t he us e of the ph ra se “ ta xes o r r e ve nu e s” su g g e sts that the leg islature could have anticipated ot her way s to comply with its i ntent to reduc e the bur den20

on tax p ay ers through, f

or example, a re venue- sharingscheme . Given the statute’ s silence on the issue, we disagr ee that the water code requir es that the City must reduce its tax rate by the amount the Di s t r i c tc h ar g e s , w h i l e t h e D i s t r i c ti s p e r m i t t e d t o t a x ati t s c u r

r e n tr a t e , o r

e v e np o t e n t i a lly incre ase its tax rate.

By the Ag ree ment’s o wn t er m s , the par ties must negotiate an allocation of tax es

or re ve nu e s b e tw e e n th e City and the Di str ic t and

a me nd the Ag re e me nt s o th a t it c omp lies wi th

se c tio n 5 4. 01 6( f) (2 ), su

bje c t to re vie w b y

the Com mis sio n. Th e re fo re , w e su sta in t he Di str ic t’ s f

ir st iss ue in p art , h old ingthat th e Ag re e me nt i s a n a llo c a tio n a g re e me nt and that it mus t c on fo rm wi th section 54.016(f

)(2) of the water code. Howeve r, we overr ule the District’s first issue with respe ct to its claim that the Cit y

is require d to r educe its a d valore m tax rate by the amount of the D istrict’s

rate and ho ld t hat th e dis tr ic t c ourt

did no t e rr in f a ili ngto d e c lare that th e City mus t r e du c e its tax rate.

“T ax Exemptio n” I n response t o t h e District’s sec ond issue, the par ties addre ss whether section 54.016(f

) cr eate s an unconstitutional tax exemption. The dis t ri ct cour t declar ed that section 54.016(f

) “doe s not cre ate a tax exemption authorized by the Texas Constit ution so Tex as Water Code § 54.016(f

) does not re quire the City to exemp t M UD re s i dents from the City ’s ad valore m property

tax.” Essentially , the parties do not disa g ree with the trial court’s ruling , but they apply differ ent interpre tations to the declar ation. The District interpr ets the ruling to mean that, we re this Court t o hold that the Ag ree ment is a n allocation ag ree ment, then the City would have to r educe the a d va lor e m ta xes fo r Di str ic t re sid e nts , and that re du c tio n wo uld no t be u nco ns tit uti on a l.21

Ac c or din g ly , th e Di str ic t a g re e s w iththe de c laratio n th a t se c tion 54 .0 16 (f ) d oe s n ot c re a te an unconstitutional tax ex emption. The City responds that the tria l court prope rly decla red that section 54.016(f) does not c reate a tax exemption author ized by the Texa s C o n s t itution, so section 54.016(f) d o es n ot require the City to exempt t he District’s r esidents from the City ’s ad valor em taxes. The City offe rs th e fo l lowing a dditional gr ounds to affirm the district c ourt’s order : (1) the City ’s taxes a re leg itimate ta x es of an overla pping political subdivisi o n ; and (2) the City ’s and District’ s tax es ar e no t “d o u b l e taxation.” The City further contends that if section 54.016(f

) applies to the Ag ree ment, then any fo rc ed re d uction in Cit y taxes would be

un c on sti tut ion a l.

We h a ve he ld t

hat th e Ag re e me nt i s an a llo c a tio n a g re e me nt a nd the re fo re mus t

c omp ly wi th s e c tio n 5 4. 01 6( f) , b ut t hat th e statut e do e s not ne c e ssa ri ly re qu ir e the City

to l ow e r i ts tax rate for pr operty

wi t h i n t he District. The ref ore, the statute does not cr eate a tax ex emption beca use no p ro p er t y i s made “ exempt” from taxation. Our resolution of the District’s f irst issue advanc es an interpre tation of the statute that avoids any conflict with the constitution, see Tex. Gov’t Code An n . § 311.021 (West 2005), and re nders it unnec essar y to addre ss the City ’s alter native g rounds for a ffirming the district court’s or der. B eca use the district cour

t corre ctl y

found that the statute does not cr eate an unconstitutional tax exemption, we sustain the District’s second issue and, having held that the statute doe s not require any reduc tion in C ity

taxes, further hold that the water code c reates no unconstitutional tax exemption.22

Sta ndi ng Be cause it is di spositive of the Dis trict’s remaining points re g ardingthe individual plaintiffs, we ne x t addre ss the District’s fourth issue asser ting that the City ’s plea to the jur isdiction should not have bee n g rante d on the basis that these individuals lacke d standing to sue. The District argues that the individual plaintiffs have a justiciable intere st in the interpretation of the Ag ree ment beca use the statute r equire s t h e Agre ement to contain a n appropr iate allocation “exclusively for the bene fit of those pay

ing a d valore m tax es to both the city and the district,” the reby confe rring sta nd ingon the ind ivi du a ls a s th ir d- pa rt y be ne fi c ia ri e s o f t he Ag re e me nt. There is a presumption ag ains t confe rringthird-par ty -bene ficiar

y status on noncontra cting parties. South Tex. W ater Auth. v. Lomas , 223 S.W .3d 304, 306 (Tex. 2007); MCI Telec omms. Corp. v. Texas Utils. Elec. Co. , 995 S.W .2d 647, 652 (Tex. 1999). I n deciding wh e the r a thi rd pa rt y may e nf or c e or c ha lle ng e a

c ontr a c t be tw e e n o the rs , it is t he c on tr a c tin g pa

rt ie s’ i n t en t that controls. Lomas , 2 23 S.W. 3d a t 30 6; s e e a l

s o C o r p u s C h r i s t i B a n k & T r u s t v . S m i th , 52 5 S. W.2 d 5 01 , 5 03 -0 4 ( Te x. 19 75 ). Th e int e nt to c on fe r a dir e c t be ne fi t up on a thi rd pa rt y mus t be cle arly and fully spelled out or enfor ceme nt by

the third party

must be denied. MC

I T e le c om ms . Corp. , 995 S.W .2d at 651. A t hird party may only enfor ce a contract when the contracting parties themselves intend to secure some bene fit for the third pa rty and ente red into the c ontrac t directly for the third party ’s bene fit. Id. ; Sti ne v . S te war t , 80 S.W .3d 586, 589 (Tex. 2002). To qualify as one fo r w ho se be ne fi t a con tr a c t wa s mad e , the thi rd pa rt y mus t be ne fi t mo re tha

n in c ide nta lly ; he mus t be either a donee or cr editor bene ficiar y . MCI Telec omms. Corp. , 995 S.W .2d at 651.23 I n this case, the A g ree ment provides for the construc tion, operation, and ma intenance of wate r and

wa ste wate r f

a c ili tie s in

the Di str ic t f

un de d b y the iss ua nc e of Di str ic t bo nd s th a t w ill be sec ured by

the District’s taxes and net re venues. The Ag ree ment does not mention the District residents e x cept a s they

are ref err ed to a s “t h e C i t y ’s custom ers” for r etail wate r deliver y and

w a s t e w a t e r

s e r v i c e s . In f

a c t , t h e A g r e e m e n te x p r e s s l y d e c l ar e s t h a t i t i s “ f o r t h e b e n e f i to f t h e C i t y, the Di str ic t, a

nd NPC , it s su c c e sso rs and

a ssi g ns , an d sh a ll n ot b e c on str ue d to c on fe r a

ny be ne fi t on any other party except as expressly provided he rein.” We conclude that there is nothing in the Ag ree ment that would confe r donee- or creditor- benef iciary standing upon the individual plaintiffs to s e e k a de c laratio n o f t

he ir rights u nd e r t his Ag re e me nt. Th e re fo re , th e dis tr ic t c ourt c or re c tly determ i n ed that the individual plaintiffs lack standingto assert that sec tion 7.2 of the Ag ree ment violates the wate r code

. Se e El Pa so Cm ty . Par tne rs v. B& G/ Su nr ise J oin t V e ntu re , 24 S.W .3d 620, 626 (Tex. App.—Austin 2000, no pet.) (holding that p erson who is not par ty to contrac t does not have sta nding to c halleng e contr act) . The District’s f ourth issue is overrule d.

Statu te of Limi tation s and Laches

I n it s th ir d

is s u e , th e D is tr ic t a s s e rts th a t n e it h e r th e D is tr ic t’ s n o r

th e individual plai n t i ff s ’ cl aims are barr ed by

the statute of limitations or laches. H aving deter mined that the individual plaintiffs lacked standing, we address these iss ues onl y as they relate to the claims broug ht by the Di str ic t. To be e nti tle d to su mma ry jud g me nt o n a

n a ff ir ma tiv e de fe ns e su c h a s li mit a tio ns , the movant must conclusively prove a ll of t he elements of t he def ense. See U

niversity of Houston

v . Clar k , 38 S.W .3d 578, 580 (Tex. 2000)

. Once the defe ndant has established a rig ht to summ ary24

judgme nt on an affirmative defense , the burde n shifts to the plaintiff to present issues which pr eclude summary judgme nt. Huck

abee v . Time W

arner Entm’t Co., L.P. , 19 S.W .3d 413, 420 (Tex. 2000); City of Houston v. Clear Creek Basin Auth. , 589 S.W .2d 671, 678 (Tex. 1979). The City asser ted in its m otion that the District’s claims “a re b ar re d b y t he two-y ear and/or four -y ear

statute of limit ations under Te x as Civil P rac tice and Re medies Code §§ 16.003, 16.004, 16.051. The two-y ear statute applies to issues relating to the pa y ment of tax es an d the four- y ear statute relates to the actions relating to the Consent A g ree ment betwee n the District and the City .” See Tex. Ci v. Prac. & Re m. Code Ann. §§ 16.003, .004, .051 (West 2002).

The district court g rante d the City ’s af firmative de fense that the District’s cla ims are ba rr e d b y the fo ur -y e ar s ta tut e of

lim itatio ns , b ut d id n ot s pe c if y wh e the r i t w a s g ra

nti ngthe de fe ns e

asser ted under section 16.004 or 16.051. How ever , the District did not assert a ny claims g overne d by section 16.004, so that sec tion could not have provided a basis for the district c ourt’s ruling

. See id. § 16.004 (four -y ear

limit ations period for

specific perf

ormanc e of contra ct for c onvey ance of re al proper ty ; pe nalty

or dama g es on pena l clause of bond to convey

rea l property ; debt; fraud; br eac h of fiducia ry duty ; suit on bond of ex ecutor , administrator, or guardia n; and suit a g ainst partner for settlem en t of par

tnership ac counts). The ref ore, summar

y judgme nt could only

have be en g rante d on the basis that the District’s c laims are ba rre d by the residual limit ations period of section 16.051. See id. § 16.051 (“Eve ry action for which there is no express limit ations period, except an ac tion for the re cover

y of re al prope rty , must be broug ht not lat er t h an fo u r y ea rs af ter the da y the ca use of action ac crue s.”).25 As we unde rstand the City ’s pleading s, “the District’s actions relating to the Consent A g r e e me n t” r e f

e r s to th e D is tr ic t’ s r e qu e s t f o r a d e c la r a ti o no f it s r ig h ts u n d e r

s e c ti o n5 4

. 0 1 6 (f) of the wate r co de

. B e c a

us e a de c larator

y jud g me nt ac tio n is a pr oc e dura l de vic e us e d to vin dic a te substantive rig hts, it i s g ener ally g overne d by

the statute of l i mitations for the leg al re medy underlying the claim; conseque ntly , to dete r mi n e what statute of limitations should apply to an ac tion for a decla ratory judgme nt, one must look to the leg al reme dy underly ing the cause of ac tion. See, e.g. , Transpo r t a t i o n L ea gue, Inc . v. Morgan Ex press, Inc. , 436 S.W .2d 378, 387 (Tex. Civ. App

. — D a ll a s 1 9 6 9 , w r it r e f ’ d n . r . e . ) ( “ th e s tatute s o f li mi tati o n d o n o t a p p ly to
. . . a s u it f

or a decla ratory judgme nt, at least until the provisions of such are set in action by the ac tual occur

renc e of a c on tr ov e rs y ” ); Outlaw v. Bowen , 285 S. W.2d 280, 284 (Tex. C iv. App—Amarillo 1955, writ re f’ d n.r.e.) (holding same). G iven that the only applicable limit ations period plea ded by the City in this case is the residual four- y ear period under section 16.051, we must deter mine whether the City e sta

bli sh e d a s a ma tte r of law that the Di str ic t’ s su it wa s fi le d mor e tha n fo ur y e ars a ft e r i ts

cause of ac tion accr

ued. A c ause of

action ac crue s and the a pplicable limitations period beg ins to r u n w h e n a w r o n g f

u l a c t c a u s e s s o me le g a l injury

. S

. V . v. R.V. , 933 S.W .2d 1, 3 (Tex. 1996); Moreno v . Sterling Drug, Inc. , 787 S.W .2d 348, 351 (Tex. 1990). Put another wa y , a ca use of a ction

acc rues whe n fac ts c ome into e x istence by which a party knows, or should know , that it is entit led to seek a judicial reme dy

. Murray v . San Jacinto Age ncy, I nc. , 800 S.W .2d 826, 828 (Tex. 1990). Acc ording to the City , the Dis trict’s cause of action ac crue d on J une 18, 1989, whe n the District boar d president sig ned the Ag ree ment containing the non-co m p l y i n g tax allocation provision. Since that time, the City argues, t he Dist rict board has known that its residents have had26

to pa y ta xes to bo th the City and the Di str ic t “ a t th e fu ll amou nt, ” c iti nge vid e nc e that f

ro m a s e a rl y as 1991, District re sidents had complained to the boa rd about doubl e t ax at i o n and the boa rd had discussed the proble m of overla pping tax es wit h City repr esentatives. The District counter s that the underlying injury is not the parties’ initial execution of an unlaw ful contra ct term, but the c ontinuous and ong oing violation of a statute. C o n ce ding that the City might be a

ble to asser

t a limitations defe nse ag ainst the claims broug ht by the individual homeowner s for taxes improperly col l ecte d

mor e tha n f our y e ars pr ior

to f ili ngsu it, the Di str ic t ma int a ins that it c ann ot b e tim e -b arr e d in its reque st for dec laratory

j u d gm en t to determine whe ther the A g ree ment is curre ntly in violation of

se c tio n 5 4. 01 6( f) of

the wa te r c od e. I n su pp ort , th e Di str ic t c ite s to c a se s w he re c ourt s h a ve he ld that the statute of limitations m ere ly limit ed the number

of y ear s for whic h a plaintiff c ould rec over damag es for

the pay ment of illeg al fe es and ta x es , b u t d id not bar the plaintiff f rom bring ing

s uit to challeng e the leg ality of the fe e or ta x . See B owles v. Clipp , 9 2 0 S. W. 2 d 7 5 2 , 7 5 9

- 60 (Tex. App.—Dallas 1996, wr it denied) (in suit fi l ed m o re tha n ten y ear s after

county order was i m p l em en t ed t o allow collec tion of illega l fee , challeng e to leg ality of orde r wa s not barre d by statut e of lim itatio ns , b ut r e c ov e ry wa s li mited

to f e e s p a id p re vio us tw o y e ars ); Bowles v. Ree d , 91 3 S .W .2 d 6 52 , 6 57 -5 8 ( Te x. Ap p. —Wa c o 1 99 5, wr it d e nie d) (h old ingsame ); see also Dallas County Comm. College Dist. v. Bolton , 89 S.W .3d 707, 721-22 (Tex. App.—Dallas 2002), rev’d on other grounds , 185 S.W .3d 868 (Tex. 2005) (adoptingrea soning in Clipp ); City of A us tin v . A us tin Prof’l Fire Fighters’ Ass’n , 935 S.W .2d 179, 183-84 (Te x . App.—Austin 1996, writ g rante d w.r.m.) (fire fighters’ s u i tfo r d ec l ar at o ry j u d gm en tt h at ci t y ’s l en gt h -o f- s er v i ce p o l i ci es v i o l at eds t atute, filed27

19 y ear s after

change i n policy , was not bar red by limit ations, but recove ry under c ontrac t was limit ed to four y ear s of long evity backpa y ). The District a lso attempts to d i s t i n gu i sh the unpublished decision fr om this C ourt relied upon by

the City in its m otion for summary judgme nt f or the proposition that “ limit ations bars decla ratory judgme nt actions seeking to inva lidate ‘illeg al’ terms of a contra ct.” See B eadles v . Lago Vista Prop. Owners Ass’n , N o. 03 -0 2- 00 22 8- CV , 2 00 2 T e x. Ap p. L EX I S 79 40 (T e x. Ap p. —A us tin Nov. 2, 2002, pet. denie d) (mem. op., not desig nated f or publication). In that case , Be adles, a proper ty owner , filed suit for decla ratory judgme nt ag ainst the proper ty owner s’ association in 2000, seekinga dec laration that the m aintenanc e-f ee assessments levied by

the association were invalid. Id. at *2-3. His cha lleng e to the validity of the fe e asse ssments was base d in pa rt on his alleg ation that a 19 92 a me ndme nt t o th e a sso c ia tio n’ s v oti ngpr oc e dure s v iol a te d th e Te xas N on -P ro fi t Corporation Ac t, thereby

rende ring all subsequent actions of t he assoc iation invalid, including the fee assessments. Id. at *3. The association asser ted the af firmative de fense of limitations, arg uing that Be adles c ould not complain about chang es made to the voting pr ocedur es more than four y ear s afte r they wer e ame nded. Id. at *3-4. In defe nse to the statute of limitations, Beadle s argued that the entire corpor ate struc ture of th e as s o ci ati on, afte r the 1992 amendment, constituted an illeg al contra ct and, ther efor e, ea ch vote take n by the association perpe tuated the underly ing cause of ac tion and def eate d the running of the limitations period. Id. at *8. This Court rejec ted B eadle s’s argument that the 1992 amendme nt insti t uted an illega l voting mec hanism in violation of t he Non-Profit Corporations Act. Id. at *9. Ther efor e, we held that any

complaint reg ardingthe cha ng e in voting pr ocedur es “aro s e fr o m the proce dure28

of ame nding a

nd publishing them, which took plac e in 1 9 9 2 , ” more than four y ear s befor e Be adles broug ht his complaint. Id. Af te r thi s c a se wa s d e c ide d, B e a dle s a g a in b ro ug ht s uit a g a ins t the a sso c ia tio n, c ha lle ng ingthe ma int e na nc e fe e s it a sse sse d ag a ins t him in the y e ars sin c e his fi rs t suit. See Beadles v. Lago Vista Prop. Owners Ass’n , N o . 0 3

- 0 5

- 0 0 1 9 4

- C V , 2 0 0 7 T e x . A p p . LE X IS 3861 (Tex. App.—Austin May 18, 2007, no pet.) (op. o n re h ’g ) (mem. op., not desig nated f or publication). I n the second case , which was also appea led to this Court, we r eiterated our pre vious ho ldi ngtha

t th e vo tin g str

uc tur e wa s n ot il le g a l be c a us e it d id n ot v iol a te the No n- Pr of it Cor po ratio ns Ac t a

nd de te rm ine d B e a dle s wa s ba rr e d by re s jud ic a ta fr om br ing ing the same c la im. Id. at *9-10. B ut we we nt on to state that “[i] f this Court had determined that the votingproce dures

wer e not a llowed under the Act, we would have had to a ddress Be adles’s cla i m o f a conti nuing brea ch that would have tolled the statute of limitations.” Id. at *10.

Her e, the District a sserts essentially the same a

rg ument that Be adles had raised: bec au s e t h e tax-allocation provision of the Ag ree ment violates the water c ode, ther e has be en a continuing brea ch that tolled the statute of limit ations, and thus the District’s claim is not barr ed by limit ations. We disagr ee w ith the City , howeve r, that our dec ision in Beadles stands for a rule that a d ec l ar at o ry -j u d gm en tac t i o nwi l l b e b arre d b y l i m i t at i o n s “e v en wh en t h er e [ i s ] a ‘ co n t i n u i n g’ vio la tio n of a state statut e .” On the c on tr ary , w e he ld t hat be c au se there was ne ver a violation of the statute in the first place , there was no continuing violation a nd there fore no basis for c oncluding that the statute of limit ations had been t olled. I n this case , howeve r, we have determined that section 7.2 of the Ag re e me nt d oe s v iol a te se c tio n 5 4. 01 6( f) of the wate r c od e . T he re fo re , a s we wo uld have inM o r e o v e r , th e r e is a ls o th e li n e o f c a s e s d e a li n g w it

h c o n tr a c ts th a t c o n te mp late c o n tinuing 12 ob lig a tio ns , fo r wh ic h the ru le is that lim itatio ns do e s no t be g in to ru n un til : (1 ) t he p art ie s’ ob lig a tio ns un de r t

he c on tr a c t are c omp le te ; ( 2) the c on tr a c t is te rm inate d in a c c or da nc e wi th i ts terms; or (3) the contract is anticipatorily repudiated by

one par ty and this repudiation is adopted by the other pa

rty , whicheve r event is ea rlier. See, e .g. , City of Cor pus Christ i v. Taylor , 126 S.W .3d 71 2, 72 5 (T e x. Ap p. —Co rp us Chr ist i 20 04 , p e t. d ism ’d ); Hubble v. Lone Star Contracting Corp. , 883 S.W .2d 379, 382 (Tex. App.—For t Worth 1994, writ denied). 29 Beadles if the voting proce dures had violated the Non-Profit Corporations Act, we turn to the issue of whe ther ther e wa s a continuing violation.

I n ass e rti n g th a t s e c ti o n 7

. 2 o f th e A g r e e me n t is in c o n ti n u o u s v io lati o n o f the water code, the District analog izes to case s involving challeng es to the leg ality of m u n i ci pal policies broug ht many

y ear s afte r those policies wer e adopted. For example, in Ha lib ur ton v . Ci ty of S an An ton io , 974 S.W .2d 779 (Tex. App.—Sa n An t onio 1998, no pet.), the c ourt held that limit ations did not bar police of fice rs’ claims ag ainst the city for failure to pay them in acc ordanc e with the statute during the period of l imitations , even thoug h the under pay ment had continued f

or at least 2 5 y ears, beca

use the c ontinued underpa y ment repr esente d a continuing violation of the g overningstatute. 974 S.W .2d at 783. L ikewise, in City of A us tin , this Court reje cted a n argument that the fire fig hters’ de clar atory judgme nt cause of ac tion arose whe n the city chang ed its policy and stoppe d in c lu d in g ti me s p e n t i nth e f ir e a c a d e my

a s “ s e r v ic e ti me ” f

o r p u r p o s e s o f d e te r mi n ing longe vity compensation. 935 S.W .2d at 183-84. We held instead that their claims wer e not bar red by the statute of limitations even thoug h they initially arose outsid e t h e ap p licable pe riod. Id. at 18 4. Simi larl y , th e Di str ic t argue s th a t it sh ou ld n ot b e pr e ve nte d f ro m br ing ingits c ha lle ng e to 12 the leg ality of section 7.2 of the Ag ree ment more than f our y ear s after

that contra ct provision was

a do pte d. We a g re e . B e c a us e the statut e of

lim itatio ns ha s n ot r

un on the Di str ic t’ s und e rl y ingc la imTh e City c ite s as e vid e nc e an a ff ida vit fr om i ts util iti e s f

ina nc e mana g e r s ta tin g tha

t th e City 13 ha s in g oo d f a ithc oll e c te d it s f

ull pr op e rt

y ta xes fr om re sid e nts of the Di str ic t and ha s pr ov ide d f ull municipal service s to the are a since 1989. Contrary to the C ity ’s assertion, this is not evidenc e of its c hang e of position as a result of the District’s delay in se eking a decla ration that the ad va lorem proper ty tax allocation in the Agr eeme nt violated the wate r code . The Ci ty ’s ar g ument presuppose s that the appropriate relief to redr ess t he Dist rict’s delay would be a ma ndatory reduc tion in the Ci ty ’s tax rat e; ho we ve r, a s h a s b e e n d isc us se d, the statut e re qu ir e s n o s uc h r a te re du c tio n th a t w ou ld s u p p o rtt h e C i t y’ s l a c h e s t h e o r y. 30 that section 7.2 of the A g ree ment is a continuing v i o l at i on of the water c ode, the District’ s de c larator y jud g me nt a c tio n is no t ba rr e d b y lim itatio ns . Nor did the City

establis h t h at the District’s suit is barre d by lache s. L ache s is an

e qu ita ble de fe ns e a kin

to e sto pp e l and

re qu ir e s a

sh ow ingthat ( 1) th e su ingpa rt y un re a so na

bly delay ed asse rting his rights, a nd (2) due to the d el ay , t h e opposing party has made a g ood fa i t h change of position to it s detriment. City of Fort W orth v. Johnson , 3 8 8 S. W. 2 d 400, 403 (T e x. 19 64 ). Th e re c or d is de vo id o f ev ide nc e that the City ha s ma de any

c ha ng e of po sit ion du e to the Di str ic t’ s p ur

po rt e d de lay

in s e e kin g a

de c lara tio n o f i ts r ig hts

. See id. at 403-04. More over, 13 it is well-e stablished that wher e a unit of g overnme nt is ex erc ising its g overnme ntal power s, it is not subject to the def

ense of lache s. City of Hutchins v. Prasifka , 450 S.W .2d 8 2 9 , 8 3 5 (Tex. 1970); Capitol Rod & Gun Club v. Lower Color ado River Auth. , 6 22 S.W. 2d 88 7, 89 6 ( Te x. Ap p. —A us tin 1981, writ re f’ d n . r. e. ). In Capitol Rod & Gun Club , this Court held that the L CRA, a political subdivision, could not be estopped from seeking a decla ration of its rig hts unde r a contr act pe rtaining to matters within the scope of its g overnme ntal functions. 622 S.W.2d at 896. L ikewise, the D istrict in this case seeks a decla ration reg arding its rig hts unde r an ag ree ment that bear s direc tly on t he D i s t r i c t ’ s o w n g o v e r

n m e n t a l f u n c t i o n s i ni t s c a

p a c i t y a s a

m u n i c i p a l u t i l i t y d i s t r i c tan d t a x i n g e n t i t y.31 W e sust ain the District’s third issue in par t, holding that summary judgme nt sh ou ld n ot h a ve be e n g ra nte d b e c a us e ne ith e r l imita tio ns no r l a c he s b arr e d th e Di str ic t’ s c la ims

a g a i n s tt h e C i t y.
Attorn ey’ s Fees I n its fifth issue, the District claims that the trial court err ed by awa rding attorney ’s fee s to the City . Be cause we have dete rmined that the trial c ourt err ed by decla ring that the Ag ree ment is not an allocation ag ree ment, we reve rse the trial court’s awa rd of attorney ’s fe es to the City and re mand t his issue to the t rial court to reconsider the par ties’ claims for

attorney ’s fe es. See Tex. Ci v. Prac. & Rem. Code Ann. § 37.009 (West 2008).

CO NC LU SION Be cause we hold that the Agre ement between the City and the District is an a llocation

a g re e me n tu n d e r

T e xa s W a t e r

C o d e s e c t i o n5 4

. 0 1 6 ( f

) an d t h a ts e c t i o n5 4

. 0 1 6 ( f

) a p p l i e s t o thi s Ag ree ment, we r ever se the summary judgme nt in part and re nder judgment in favor of the D istrict on this iss ue. F urthermor e, bec ause the District’s s uit for declar atory judgme nt was not bar red by the statute of limitations or laches, w e reve rse this portion of the summary judgme nt a nd rema nd the p a r ti e s ’ r e m a i n i n g d e c l ar a t o r y c l a i m s f

o r f u rt h e r p r o c e e d i n g s c o n s i s t e n t w i t h t h i s o p i n i o n . We conclude that the district court prope rly g rante d the City ’s plea to the j urisdiction as t o the individual plaintiffs for la ck of standingand af firm the district cour

t’s order dismiss ing the ir suit. I n light of

our dis po sit ion

re ve rs ingthe su mma

ry jud g me nt i n p art , w e re ve rs e the awa rd of a tto rn e y ’s fe e s to the City and re mand the issue of attorney ’s fe es to the trial cour t for fur ther c onsideration.32 W. Kenneth L aw, Chief Justice Be fore Chief J ustice L aw, Justi ces Pury ear and Onion* Affir med in part; Rever sed and Rende red in pa rt; Reverse d and Remande d in part Filed: Nove mber 14, 2008

* Be fore J ohn F. Onion, Jr., Presiding Judge (re tired), Court of Criminal Appe als, sitting by assig nment. See Tex. Gov’t Code Ann. § 74.003(b) ( West 2005).