Court Opinion

ID: 4399170
Source: CourtListenerOpinion
Date Created: 2019-05-22 08:43:52.708928+00
Date Added: 2024-06-11T14:52:20.073937
License: Public Domain

Opinion issued May 21, 2019

                                    In The

                              Court of Appeals
                                   For The

                         First District of Texas
                           ————————————
                            NO. 01-18-00663-CV
                          ———————————
                      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

                                OPINION

      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:

                                         2
      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

                                           3
      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.

                                        4
      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
                                          5
      revenue limitations contained in Article III, Section 1 of the City
      Charter, and the payment of the Bonds will be made in compliance
      with the revenue limitations contained in the Article III, Section 1 of
      the City Charter.

      Noteware filed his election contest on December 15, 2017, challenging the

“materially misleading ballot description for Proposition A in the November 2017

election.” Noteware asserted that Proposition A authorized the City to levy a tax in

excess of the revenue cap in order to pay off the bonds. He further alleged that this

authorization was a chief feature of Proposition A and that the ballot measure

presented in the election did not inform voters of the full import of their vote. See

Dacus v. Parker, 466 S.W.3d 820, 826 (Tex. 2015) (holding that ballot description

may be insufficient when it misleads voters by omitting certain chief features that

reflect its character and purpose).

      On December 19, 2017, Noteware filed an emergency motion for a

temporary restraining order and temporary injunction. See, e.g., TEX. ELEC. CODE

ANN. § 233.010 (providing that filing election contest does not suspend

implementation of contested measure that is shown by officially determined result

to have been adopted, except that in application of equitable principles, court may

suspend implementation of contested measure pending outcome of election

contest).

      The Attorney General issued his opinion approving the bonds on December

20, 2017. The opinion provided that the “Office of the Attorney General has

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examined the law and such certified proceedings and other papers as we deem

necessary to render this opinion.” The opinion further stated, “As to questions of

fact material to our opinion, we have relied upon representations of the Issuer [the

City] contained in the certified proceeds and other certifications of public officials

furnished to us without undertaking to verify the same by independent

investigation.” The opinion concluded that “the Bond has been issued in

accordance with law and is a valid and binding obligation of the Issuer,” that “[t]he

Bond is payable from the proceeds of an annual ad valorem tax levied against all

taxable property in the Issuer, within the limits prescribed by law,” and that the

“proceedings conform to the requirements of law.”                 The Attorney General

approved the bond.

      The Attorney General’s opinion accompanied the Texas Comptroller of

Public Accounts’ certificate registering the bonds, also executed and registered on

December 20, 2017. The transmittal letter from the Attorney General’s Office

accompanying the opinion and certificate stated: “Please note . . . for future tax

obligations, the outstanding amount of 2017 Pension Obligation Bonds must

continue to be included in the combined debt service schedule for purposes of

demonstrating compliance with the tax coverage test as well as tax limit

requirements of article III, section 1(a) of the city charter.”

                                            7
      On December 21, 2017, the trial court held a hearing on Noteware’s motion

for a temporary restraining order and temporary injunction. The trial court denied

the requested relief.

      On December 22, 2017, the bond closing occurred. The bonds were issued

and delivered: $750 million in bond proceeds were distributed to the HPOPS, and

$250 million in bond proceeds were distributed to the HMEPS. The remainder of

the proceeds were paid to the underwriter and the City to cover the costs of issuing

the bonds.

      On February 27, 2018, the City moved to dismiss Noteware’s claims based

on the lack of subject-matter jurisdiction. The City argued that Noteware’s election

contest did not present a justiciable claim:

      The Texas Attorney General’s opinion approving and validating the
      bonds and confirming that the bonds are payable from the proceeds of
      an annual ad valorem tax levied against all taxable property in the
      City “within the limits prescribed by law,” together with the City’s
      certification to the Attorney General that payment of the bonds will be
      made in compliance with the City Charter’s property tax revenue cap,
      render moot Noteware’s election contest claim.

The City argued in the alternative that Noteware’s claim was not ripe because “its

resolution depends on contingent or hypothetical facts and events that have not yet

come to pass.”

                                           8
      Noteware filed a motion for summary judgment, asserting that he was

entitled to judgment as a matter of law that the ballot language was materially

misleading under Dacus.

      The trial court ultimately dismissed Noteware’s claim for lack of subject-

matter jurisdiction. It did not rule on Noteware’s motion for summary judgment.

This appeal followed.

                            Subject-Matter Jurisdiction

      In his first issue, Noteware argues that the trial court erred in dismissing his

suit for lack of subject-matter jurisdiction.

A.    Standard of Review

      Subject-matter jurisdiction implicates questions of law, which this Court

reviews de novo. Tex. Nat. Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849,

855 (Tex. 2002).

      The mootness doctrine implicates a court’s subject-matter jurisdiction,

which “is essential to a court’s power to decide a case.” See State v. Naylor, 466
S.W.3d 783, 791–92 (Tex. 2015); Travelers Ins. Co. v. Joachim, 315 S.W.3d 860,

865 (Tex. 2010). A controversy must exist between the parties at every stage of the

legal proceedings, including the appeal. In re Kellogg Brown & Root, Inc., 166
S.W.3d 732, 737 (Tex. 2005) (orig. proceeding); Bd. of Adjustment of San Antonio

v. Wende, 92 S.W.3d 424, 427 (Tex. 2002). “If a controversy ceases to exist—‘the

                                           9
issues presented are no longer “live” or the parties lack a legally cognizable

interest in the outcome’—the case becomes moot.” Williams v. Lara, 52 S.W.3d
171, 184 (Tex. 2001) (quoting Murphy v. Hunt, 455 U.S. 478, 481 (1982)). A case

is moot when a judgment cannot have a practical effect on an existing controversy.

Reule v. RLZ Invs., 411 S.W.3d 31, 32 (Tex. App.—Houston [14th Dist.] 2013, no

pet.); see also Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995)

(holding that “justiciable controversy” exists when there is “a real and substantial

controversy involving genuine conflict of tangible interests and not merely a

theoretical dispute”); Trinity Universal Ins. Co. v. Sweatt, 978 S.W.2d 267, 270

(Tex. App.—Fort Worth 1998, no pet.) (stating that justiciable controversy is “a

real controversy between the parties that will be actually determined by the judicial

declaration sought”). Without a justiciable controversy, a trial court must dismiss a

case for lack of subject-matter jurisdiction. Transp. Ins. Co. v. WH Cleaners, Inc.,

372 S.W.3d 223, 227 (Tex. App.—Dallas 2012, no pet.).

B.    Analysis

      Noteware filed the underlying election contest in December 2017 alleging

that the ballot language used by the City in the November 2017 election on

Proposition A was insufficient. Specifically, Noteware asserted that Proposition A

authorized the City to levy a tax in excess of the revenue cap in order to pay off the

bonds and that the ballot measure presented in the election did not inform voters of

                                         10
this provision, which he argues was a chief feature of Proposition A. See Dacus,
466 S.W.3d at 826; see also Rossano v. Townsend, 9 S.W.3d 357, 361–62 (Tex.

App.—Houston [14th Dist.] 1999, no pet.) (recognizing that election contest is not

ordinary lawsuit but is special proceeding in which district court’s authority to act

is limited to subjects or grounds expressly or impliedly authorized by Election

Code, and stating, “An election contest includes any type of suit in which the

validity of an election or any part of the elective process is made the subject matter

of litigation”).

       The City argues that, because the bonds have already issued, the taxes to pay

the bonds have been levied, and the required sinking fund has been created, there is

no justiciable controversy. The City asserts that even if this Court were to make a

judicial determination on the issue raised by Noteware’s election contest in his

favor, the determination would have no practical legal effect because “the Court

could not order a new election nor could it order the City to conduct a new

election.” Rather, the court could only void the results of the Proposition A

election. See TEX. ELEC. CODE ANN. § 233.011 (providing, in relevant part, that

court “may not order a new election to be held if the contested election is declared

void”). But because the bonds have been issued and sold, taxes to finance the

bonds have been levied, and a sinking fund has been created, even voiding the

election results would not have any impact.

                                         11
      The City presented evidence that it followed the statutory procedure for

issuing the bonds and that the bonds have, in fact, issued. Under Government

Code section 1202.003, the City was required to submit the bonds and a record of

the proceedings leading up to the bonds’ creation to the Attorney General for

approval:

      (a) Before the issuance of a public security, the issuer shall submit the
      public security and the record of proceedings to the attorney general.

      (b) If the attorney general finds that the public security has been
      authorized to be issued in conformity with law, the attorney general
      shall:

            (1) approve the public security; and

            (2) deliver to the comptroller:

                   (A) a copy of the attorney general’s legal opinion stating
                   that approval; and

                   (B) the record of proceedings.

      (c) Unless exempted by Section 1202.007, the issuance of a public
      security except in compliance with this chapter is prohibited.

TEX. GOV’T CODE ANN. § 1202.003; see also id. § 1202.001(3) (defining “public

security” as including bonds issued or incurred by issuer under issuer’s borrowing

power); id. § 1371.057(a) (providing that before “an obligation”—including public

securities—may be issued, “a record of the proceedings of the issuer authorizing

the issuance, execution, and delivery of the obligation or credit agreement and any

                                         12
contract providing revenue or security to pay the obligation or credit agreement

must be submitted to the attorney general for review”).

      The City presented to the trial court the record of proceedings that it had

submitted to the Attorney General for approval of the bonds, including the

ordinances passed by the City Council and the Certificate created and executed by

City officials pursuant to those ordinances. 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 and expressly stated that

“[t]he City is in compliance with Article III, Section 1 of the City Charter.” The

City demonstrated its ability and intention to pay its bond obligations “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, in relevant part, that

“[t]he Bonds are being issued in compliance with the revenue limitations contained

                                        13
in Article III, Section 1 of the City Charter, and the payment of the Bonds will be

made in compliance with the revenue limitations contained in the Article III,

Section 1 of the City Charter.”

      Relying on the information provided, the Attorney General issued an opinion

approving the bonds. The opinion concluded that the bonds were issued “in

accordance with law” and that they were “payable from the proceeds of an annual

ad valorem tax levied against all taxable property in the Issuer [the City], within

the limits prescribed by law.” The Attorney General opinion accompanied the

Texas Comptroller of Public Accounts’ certificate registering the bonds, also

executed and registered on December 20, 2017. The transmittal letter from the

Attorney General’s Office accompanying the opinion and certificate stated: “Please

note . . . for future tax obligations, the outstanding amount of 2017 Pension

Obligation Bonds must continue to be included in the combined debt service

schedule for purposes of demonstrating compliance with the tax coverage test as

well as tax limit requirements of article III, section 1(a) of the city charter.” Upon

receiving this approval, the City issued and sold the bonds, and the proceeds were

distributed accordingly.

      Once the bonds were approved by the Attorney General and registered by

the Comptroller, they became incontestable. Government Code section 1202.006

                                         14
addresses the “Validity and Incontestability” of public securities upon approval by

the Attorney General and registration by the Comptroller:

        (a) A public security and any contract the proceeds of which are
        pledged to the payment of the public security are valid and
        incontestable in a court or other forum and are binding obligations for
        all purposes according to their terms:

              (1) after the public security is approved by the attorney general
              and registered by the comptroller; and

              (2) on issuance of the public security.

        (b) In any action brought to enforce the collection of county or
        municipal bonds that are payable from ad valorem taxes and that have
        been approved by the attorney general and registered by the
        comptroller, the certificate of the attorney general shall be admitted as
        evidence of the validity of the bonds and the interest coupons
        pertaining to the bonds.

TEX. GOV’T CODE ANN. § 1202.006; see also id. § 1371.059(a) (obligations,

including public obligation bonds, are incontestable once approved by Attorney

General and registered by Comptroller); Leonard v. Cornyn, 47 S.W.3d 524, 527–

28 (Tex. App.—Austin 1999, pet. denied) (court lacks subject-matter jurisdiction

to consider challenge to validity of public obligation bonds that have been

approved by Attorney General and registered by Comptroller). Thus, even if

Noteware succeeded in invalidating the election approving Proposition A, it would

have no impact on the validity of the bonds, which have already been issued and

sold.

                                           15
      Furthermore, the bonds were approved, issued, and sold based on the City’s

ability to pay its bond obligations in compliance with the revenue cap set out in

Article III, section 1(a) of the City Charter. The City expressly represented that the

taxes to support the bond repayments were levied in compliance with the revenue

cap, and the Attorney General stated in both its opinion and transmittal letter that

the taxes levied for bond repayment must comply with the law, including Article

III, section 1(a) of the City Charter. Even if Noteware’s allegation is correct—that

the language of Proposition A would have permitted the City to levy taxes to repay

the bonds without being limited by the revenue cap—the subsequent process of

approving and issuing the bonds demonstrates that the City has fulfilled its

obligations while also remaining compliant with the revenue cap.

      Noteware does not allege that the City is currently violating the revenue cap,

nor does he present any evidence that such a violation has occurred or is imminent.

Rather, he argues that the City could rely on the voter’s approval of Proposition A

to levy such a tax that exceeds the revenue cap in the future.          However, as

discussed above, the Attorney General approved the bonds based on the City’s

representations that it would levy taxes in accordance with the law, including the

revenue cap, and the Attorney General’s office expressly stated that “the

outstanding amount of 2017 Pension Obligation Bonds must continue to be

included in the combined debt service schedule for purposes of demonstrating

                                         16
compliance with the tax coverage test as well as tax limit requirements of article

III, section 1(a) of the city charter.”

       Noteware also argues that the representations by the City and the Attorney

General do not render his election contest moot. He argues that the Attorney

General’s review was done based solely on the City’s representations. Noteware

also argues that the City is not bound by the representations of its lawyers or other

individual officials, and, thus, the approval to levy taxes granted by the Proposition

A election presents a current legal controversy that can be addressed by resolution

of his election contest. But the documents submitted to the Attorney General for

approval of the bonds are not mere isolated “representations” of an individual City

official. The City is now bound by the terms of the bonds—including the taxes

levied to fulfill the City’s bond payment obligations—that were issued and sold

after approval by the Attorney General. See TEX. CONST. art. XI, § 5(a) (“[N]o

debt shall ever be created by any city, unless at the same time provision be made to

assess and collect annually a sufficient sum to pay the interest thereon and creating

a sinking fund[.]”); TEX. GOV’T CODE ANN. § 1202.006(a) (providing that public

securities and any contract with proceeds pledged to payment of public securities

are valid and incontestable in court or other forum and are binding obligations for

all purposes according to their terms after approval, registration, and issuance),

§ 1371.059 (providing that, on approval by Attorney General, registration by

                                          17
Comptroller, and initial delivery of obligation, such obligation “is incontestable in

a court or other forum and is valid, binding, and enforceable according to its

terms”).

      Thus, the City is bound by the representations and approvals made in the

process of issuing and selling the bonds, including its levying a tax within the

limits of the revenue cap to repay its bond obligations. Thus, even if the trial court

were to have considered the merits of Noteware’s election contest claim that the

ballot language was insufficient to warn voters that the City might exceed the

revenue cap, such a decision could have no practical effect. The City has already

implemented the bond ordinance in compliance with the revenue cap.

      Finally, Noteware argues that his case is not moot because the capable-of-

repetition-yet-evading-review exception applies. “This exception applies only in

rare circumstances.” Williams, 52 S.W.3d at 184.          To invoke the exception,

Noteware must prove that: (1) the challenged action was too short in duration to be

litigated fully before the action ceased or expired; and (2) a reasonable expectation

exists that the same complaining party will be subjected to the same action again.

See id. While the City may seek approval of new bond measures in the future,

Noteware presented no evidence that a similar discrepancy between the language

of the proposed proposition and the ballot language will necessarily be present, nor

                                         18
has he presented any evidence that allegedly insufficient ballot language cannot be

challenged and litigated fully. See id.

      Accordingly, we conclude that the trial court correctly dismissed Noteware’s

election contest for want of jurisdiction. See Naylor, 466 S.W.3d at 791–92;

Joachim, 315 S.W.3d at 865; Transp. Ins. Co., 372 S.W.3d at 227. We overrule

Noteware’s first issue.

      In his second issue, Noteware argues that the trial court erred in “failing to

grant” his motion for summary judgment on the merits of his election contest. The

record reflects that the trial court declined to rule on his motion for summary

judgment because it determined that it lacked subject-matter jurisdiction over the

claim. Because this Court has likewise determined that the trial court lacked

subject-matter jurisdiction over the election contest, we conclude that the trial

court did not err in refusing to rule on Noteware’s motion for summary judgment.

                                     Conclusion

      We affirm the judgment of the trial court dismissing Noteware’s election

contest for lack of subject-matter jurisdiction.

                                               Evelyn V. Keyes
                                               Justice

Panel consists of Justices Keyes, Higley, and Landau.

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