Opinion ID: 3008277
Heading Depth: 1
Heading Rank: 6

Heading: The District Plant

Text: The City also took possession of Block 38 to build District Plant 2 for use with its chilled water program. We assess separately the City’s determinations of public use and necessity as to the district plant.
We must first decide whether the City’s determination that the district plant was necessary for a public use was fraudulent. The parties agreed to define fraud as “the taking of property for private use under the guise of public use, even though there may be no fraudulent intent on the part of the condemnor.”17
In 2001, the City Council authorized a condemnation lawsuit “for the construction of . . . a district cooling plant for Austin Energy . . . .” The Whittingtons assert that the taking was fraudulent because district cooling is not a public use. We disagree. We have defined public use in similar circumstances as when the public obtains some definite right or use in the undertaking to which the property is devoted. Pate, 309 S.W.2d at 833. “‘It is immaterial if the use is limited to the citizens of a local neighborhood, or that the number of citizens likely to avail themselves of it is inconsiderable, so long as it is open to all who choose to avail themselves of it.’” Higginbotham, 143 S.W.2d at 84 (quoting West, 238 S.W. at 978). Public use, however, does not include a benefit to the public welfare or good under which 17 See supra note 10. 24 any business that promotes the community’s comfort or prosperity might be benefitted from the taking. Pate, 309 S.W.2d at 833. A home rule municipality that provides electric service is serving a public use.18 While the Local Government Code does not expressly authorize takings for district cooling, it does authorize takings “as necessary to efficiently carry out” its purposes of providing public utilities and “for any other municipal purpose the governing body considers advisable.” TEX . LOC. GOV ’T CODE §§ 251.001(a)(5), 552.002(b). The City considered district cooling as a method of efficiently assisting the electric utility by shifting demand from peak to off-peak times, thereby avoiding having to build more power plants. Moreover, the chilled water service is available to any customer that applies, though pricing for the service is determined by the cost of connecting the customer to the chilled water loop. While district cooling may be limited in its geographic scope, it is available to all who apply and agree on pricing with the City. We hold that the district plant here was serving a public use. See Pate, 308 S.W.2d at 833; Higginbotham, 143 S.W.2d at 84.
The Whittingtons assert that the City’s determination of necessity for District Plant 2 was fraudulent because the City misrepresented to the Whittingtons that it was necessary to serve the convention center expansion and the hotel project. The City’s final offer letter to the Whittingtons stated the “plant will be used to provide chilled water necessary to operate the air conditioning systems of the Convention Center expansion and” the hotel project. As evidence of fraud, the 18 See T EX . L OC . G O V ’T C O D E § 251.001(a)(1) (authorizing home rule municipalities to “exercise the right of eminent domain for a public purpose” such as providing, enlarging, or improving electric power systems). 25 Whittingtons point to an email from the project manager for District Plant 2 to the author of the final offer letter stating: “to be completely clear, someone’s pointed out that actually those buildings are currently going to be served from [District Plant 1] until the new plant is built . . . . So this new plant is not absolutely necessary for operation of the buildings mentioned but a redundancy is much better.” (emphasis added). District Plant 1 still provided service to the convention center expansion and the hotel project for some time even after District Plant 2 became operational due to a decrease in customer demand as a result of economic market conditions. The project manager’s statement is not evidence of fraud for multiple reasons. First, the statement that the district plant was not absolutely necessary was in a class of communications not ordinarily relevant to the inquiry of whether the City Council’s determination of necessity was fraudulent, in bad faith, or arbitrary and capricious. To assess the City’s determinations, we look to official materials such as orders, resolutions, and minutes. See Horton, 468 S.W.2d at 878. Our purpose in restricting our review to these materials is that the words of one city council member or city employee do not ordinarily bind the entire city council. See, e.g., AT&T Commc’ns of Tex., LP v. Sw. Bell Tel. Co., 186 S.W.3d 517, 528-29 (Tex. 2006) (“But the statement of a single legislator, even the author and sponsor of the legislation, does not determine legislative intent”). Therefore, emails by City employees are not among the items we ordinarily consider in undertaking this review. Here, the Whittingtons argue that the City Council ratified the acts of its employees, adopting the email as its own. Specifically, the City’s 2006 resolution stated that the public necessity to acquire Block 38 in its entirety . . . is hereby confirmed and ratified . . . and all acts done or initiated by employees, attorneys or representatives of the City to acquire or condemn Block 38 in its entirety . . . are hereby authorized, 26 ratified, approved, confirmed and validated and declared to be valid in all respects and purposes as of the respective dates thereof for the public necessity and for the public use as a City parking garage, a chilling plant, and other municipal facilities. Assuming without deciding that the ratification elevated the email to have the force of a City Council resolution, we disagree that it demonstrates that the City’s determination of necessity was fraudulent. As an initial matter, this argument equates “necessary” with “absolutely necessary.” The Local Government Code only requires that the condemnor consider the taking necessary for the public use. TEX . LOC. GOV ’T CODE § 251.001(a). The email the Whittingtons rely on states that the district plant was not “absolutely necessary” for the operation of the convention center expansion and the hotel project. See United States v. Comstock, 130 S.Ct. 1949, 1956 (2010) (differentiating “necessary” and “absolutely necessary” under the federal constitution’s Necessary and Proper Clause). Moreover, even had the email stated that the district plant was not necessary, the City Council expressed a clear belief in its 2006 resolution that the district plant was necessary. This determination of necessity was one of the two purposes the resolution accomplished (the other being the inclusion of a twenty-foot strip in the taking, addressed infra at Part VI). We interpret statutes and ordinances to avoid absurd results. Carreras v. Marroquin, 339 S.W.3d 68, 73 (Tex. 2011). The Whittingtons invite us to interpret the resolution in a way that negates one of its two purposes. We decline to do so. The evidence instead indicates that District Plant 2 was necessary to perform district cooling in the future. Consumer demand for the program increased over time, and the City needed additional capacity to meet not only the demand but also its contractual obligations. In addition, District Plant 2 was needed as a backup in the event that District Plant 1 required down time. This evidence 27 confirms that the City determined District Plant 2 to be necessary—even if we were to assume the City did not believe it was absolutely necessary.
Our second inquiry on the district plant is whether the City determined in bad faith that the plant was necessary. The charge defines bad faith as “more than negligence or lack of diligence. Bad faith implies an intent to injure, or some other improper motive. Mere bad judgment does not qualify as bad faith. Rather, the Whittingtons must show that the City knowingly disregarded their rights.”19 The Whittingtons argue that the City’s decision to take Block 38 was made in bad faith because the City misrepresented to the Whittingtons that the district plant was necessary to serve the convention center expansion and the hotel project. We disagree. As previously addressed, the evidence confirmed the City’s representation to the Whittingtons that the district plant was necessary to serve the convention center expansion and the hotel project due to future demand and the need for a backup for the existing district plant. See supra Part V.A.2. Likewise, we hold that the City’s determination that the district plant was necessary was not made in bad faith as it did not evidence an intent to injure the Whittingtons or a knowing disregard of their rights.
Our third inquiry as to the district plant is whether the City’s determination that the plant was necessary was arbitrary and capricious. The charge defined arbitrary and capricious as: 19 See supra note 10. 28 a decision not done according to reason or judgment and is a willful and unreasoning action, action without consideration and in disregard of the facts and circumstances that existed at the time the condemnation was decided upon. When there is room for two opinions, an action cannot be deemed arbitrary when it is exercised honestly and upon due consideration, regardless of how strongly one believes an erroneous conclusion was reached. A showing that alternate plans are feasible or better does not make the condemnation determination arbitrary or capricious.20 The Whittingtons assert that the City’s determination of the necessity for the district plant was arbitrary and capricious because the City Council failed to consider reasonable alternatives to condemning Block 38 for the district plant. We disagree. The evidence indicates that City staff investigated multiple alternative locations for the district plant and that the City Council determined the plant was necessary. See supra note 2. Because only the City Council has the power to condemn for the City, only it may make the determinations of public use and necessity. Burch, 518 S.W.2d at 543-45. But this does not mean that investigation of alternatives must be conducted exclusively by the City Council rather than by City staff. The Whittingtons cite no authority for this proposition, and we are not aware of any.21 We hold that the City’s determination that the district plant was necessary was not arbitrary and capricious. 20 See supra note 10. 21 Neither Newsom nor Houston Power and Lighting, on which the W hittingtons rely, indicate that a condemnor’s governing body cannot delegate some due diligence to the condemnor’s staff. Newsom involved a condemnor delegating all due diligence to a private developer that was interested in the condemnation decision. 171 S.W .3d at 272–73. Here, City staff investigated the alternative locations for District Plant 2. In Houston Lighting and Power, the condemnor ignored a potential health risk to students of taking school property for a high-voltage power line. 739 S.W .2d at 517-18. The failure by the condemnor to consider a risk is not at issue here. 29