Court Opinion

ID: 4303061
Source: CourtListenerOpinion
Date Created: 2018-08-13 08:15:15.055015+00
Date Added: 2024-06-11T14:30:58.227289
License: Public Domain

COURT OF APPEALS
                        SECOND DISTRICT OF TEXAS
                             FORT WORTH

                            NO. 02-17-00211-CV

CITY OF WESTWORTH VILLAGE,                                        APPELLANT
TEXAS

                                      V.

CITY OF WHITE SETTLEMENT,                                           APPELLEE
TEXAS

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        FROM THE 141ST DISTRICT COURT OF TARRANT COUNTY
                  TRIAL COURT NO. 141-290750-17

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                                 OPINION

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                               I. Introduction

     Appellant the City of Westworth Village and its neighbor, Appellee the City

of White Settlement, negotiated an economic development plan to locate a Wal-

Mart and a Sam’s Club on undeveloped property, 66% of which was located in

Westworth Village, where the stores would be built, and 34% of which was
located in White Settlement, where the parking lot would be built. This plan led

to a contract between the two cities and a property developer that bore fruit when

Wal-Mart and Sam’s Club selected the proposed site, resulting in an increase in

Westworth Village’s retail sales tax revenue, some of which, under the parties’

agreement, was payable to White Settlement.

      Twelve years later, when Westworth Village suffered buyer’s remorse

based on the “inordinate amount of its police and EMS resources” that it had to

devote to the Wal-Mart and Sam’s Club without assistance from White

Settlement, Westworth Village notified White Settlement of its decision to

terminate the agreement.

      White Settlement sued Westworth Village for breach of contract. Arguing

immunity from suit, Westworth Village filed a plea to the jurisdiction, which the

trial court denied. In a single issue in this interlocutory appeal, Westworth Village

appeals that denial. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(8) (West

Supp. 2017). We affirm.

                                 II. Background

A. Economic Development in General

      Based on our review of the state constitution, statutes, and case law, we

understand “economic development” to generally consist of a goal sought or a

process used to improve an area’s tax base and keep it economically productive

by attracting and retaining businesses and jobs through various financial and

other incentives. See generally Tex. Const. art. III, § 52-a (focusing on state

                                         2
economy’s development and diversification to eliminate un- and under-

employment and permitting the legislature to enact legislation for economic

development); Tex. Loc. Gov’t Code Ann. §§ 373.002(a), 374.002(b) (West 2005)

(focusing on community development and urban renewal), § 501.004 (West

2015) (focusing on promotion and development of new and expanded business

enterprises and job training); Tex. Tax Code Ann. § 311.003 (West 2015) (tax

increment financing), § 312.002 (West 2015) (tax abatement agreements); In re

City of Dallas, 501 S.W.3d 71, 74 (Tex. 2016) (orig. proceeding) (describing

conflict between two governmental entities in which one claimed that the other’s

economic development recruitment effort had caused it to lose approximately

200 jobs, affecting the entity’s taxing authorities and businesses); EP Hotel

Partners, LP v. City of El Paso, 527 S.W.3d 646, 658 n.11 (Tex. App.—El Paso

2017, no pet.) (“[C]ommentators have recognized that it is a common practice for

governmental entities to offer ‘economic incentives’ as a means of attracting

corporations to develop projects within their purview in the hope of stimulating

local growth and ensuring prosperity.”); Jamro Ltd. v. City of San Antonio, No.

04-16-00307-CV, 2017 WL 993473, at *1 (Tex. App.—San Antonio Mar. 15,

2017, no pet.) (mem. op.) (describing tax increment financing as a development

tool used by municipalities to finance public improvements and infrastructure by

leveraging private investment for certain types of development activities); Mantos

v. City of Mansfield, No. 02-09-00315-CV, 2011 WL 476776, at *1 (Tex. App.—

Fort Worth Feb. 10, 2011, no pet.) (mem. op.) (“The City eventually entered into

                                        3
an economic development agreement affecting the property that included

$63,000,000 in tax incentives.”); Tex. Bay Cherry Hill, L.P. v. City of Fort Worth,

257 S.W.3d 379, 386 (Tex. App.—Fort Worth 2008, no pet.) (reciting that city

council, to promote a project through economic development incentives,

authorized negotiation of a public-private partnership, tax abatement, and tax

increment financing); see also Martin E. Gold, Economic Development Projects:

A Perspective, 19 Urb. Law. 193, 193 (1987) (observing that economic

development projects are characterized by state, city, and local governments’

provision of “various concessions to induce private industry into locating, staying,

or expanding within their borders by providing assistance and subsidies for such

private development,” such as tax exemptions or abatements, for “long-term

benefits for the municipality”); Patricia J. Askew, Comment, Take It or Leave It:

Eminent Domain for Economic Development—Statutes, Ordinances & Politics,

Oh My!, 12 Tex. Wesleyan L. Rev. 523, 527 (2006) (defining “economic

development” as the “process of site selection and community marketing used to

attract and retain businesses and jobs, and ideally prevent, but at least impede,

the cycle of economic decline and urban decay” through influencing “the location

decisions of private corporations for the benefit of some particular geographic

area, . . . local, regional, state, or national” (footnotes omitted)).

      Local government code chapter 380, “Miscellaneous Provisions Relating to

Municipal Planning and Development,” covers economic development programs

and grants by certain municipalities. See Tex. Loc. Gov’t Code Ann. §§ 380.001,

                                            4
.003 (West 2005), § 380.002 (West Supp. 2017). Section 380.001 allows a city

to set up a program for loans and grants of public money “to promote state or

local economic development and to stimulate business and commercial activity in

the municipality.” Id. § 380.001(a).

B. The Contract

      Pursuant to local government code chapter 380, on December 15, 2004,

Westworth Village, White Settlement, and Allegiance Commercial Development

LP entered a contract entitled, “Economic Development Program Grant

Agreement Between and Among The City of Westworth Village, the City of White

Settlement, and Allegiance Commercial Development, LP.”          In the contract,

Allegiance was listed as the grantee, Westworth Village was listed as “the City,”

and White Settlement was listed as the assignee. One of the contract’s stated

purposes was “to promote local economic development and to stimulate

business and commercial activity” in Westworth Village.

      In the first section of the contract, “Authorization and Purpose,” Westworth

Village specifically found and acknowledged that participation by Allegiance and

White Settlement was essential to the success of the economic development

program:

      that the economic benefit to be derived from the business operations
      on the Property, as defined below, could not have been achieved
      and will not continue without the cooperation, assistance,
      performance, and involvement of [Allegiance] and of [White
      Settlement]. The purpose of this Agreement is to document the
      terms and conditions under which [Allegiance] will provide land and
      cause Wal-Mart and Sam’s Club retail stores (the “Project”) to be

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       developed and located in [Westworth Village,] which will generate
       more than the amount of financial incentives which [Westworth
       Village] has herein granted to make such development possible.

White Settlement also specifically acknowledged that the economic benefit to be

derived by it from the business operations on the property “could not have been

achieved and will not continue without the cooperation, assistance, performance

and involvement of Westworth Village.”

       The essence of the contract is found beginning with the fourth section of

the agreement, wherein Westworth Village agreed to make certain periodic

payments to White Settlement, first through Allegiance by assignment and later

directly.   In that section, Westworth Village obligated itself to make monthly

program grant payments to White Settlement within fifteen days after receiving its

monthly tax payments from the State of Texas. Section five of the agreement

covered how the program grant payments would be computed: For the first

twelve years of the agreement, the program grant payment would be equal to

50% of Westworth Village’s tax collections—defined as the 2% share of all gross

sales taxes collected from sales made on the property. This amount would drop

to 34% after the first twelve years.

       Under the agreement, Allegiance assigned to White Settlement 34% of its

50% share of the applicable retail sales tax collection made by Westworth

Village, payable directly to White Settlement. After the first twelve years of the

agreement, when Allegiance’s 50% share would drop to 34%, Allegiance’s

shares would be irrevocably assigned from Allegiance to White Settlement for the

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remainder of the agreement, with Allegiance having no further obligation to either

party.

         The contract listed the program term as “a period of thirty years and

thereafter for so long as there exists on the Property an entity paying city sales

tax.” By its terms, the agreement would otherwise terminate only upon mutual

written agreement of all of the parties to the agreement, except that Allegiance’s

written agreement would not be required after the first twelve years.         The

agreement itself was contingent upon approval by both Westworth Village and

White Settlement of all plats and the issuance of all permits necessary to build

the stores on the property and upon the stores’ opening within two years of the

agreement’s effective date.

         Both cities also agreed that if the portion of the property within White

Settlement’s boundary was ever further developed or redeveloped in such a way

as to result in sales taxes being produced from it, they would revise the

agreement to provide that White Settlement would receive 34% of all sales tax

revenues payable to the two cities from the sales occurring on that portion of the

property, and Westworth Village would receive 66% of those sales tax revenues.

         The agreement further provided that if any party defaulted on the

agreement, within 30 days after delivery of written notice of default, the

complaining party, “by action or proceeding at law or in equity, may be awarded

specific performance for such default.”      And it stated, “There are no other

agreements among the parties hereto.”

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C. Contract Termination and Lawsuit

      On March 14, 2016, Westworth Village gave approximately six months’

advanced notice that it would stop making the agreed payments effective

September 30, 2016. In its notice, Westworth Village described the agreement

as “unconscionably unfair to [its] citizens” and the payments as “egregious,” and

it stated that it believed the agreement to be void for inadequate consideration,

terminable at will based on the agreement’s perpetual term, and void as against

public policy.

      White Settlement sued Westworth Village for breach of contract and

sought specific performance, with alternative relief in the form of actual damages,

attorney’s fees, and court costs.    It alternatively claimed that injustice would

occur if Westworth Village were not equitably estopped from denying the

agreement.

      Westworth Village answered with a general denial and, in addition to the

grounds set out in its March 14, 2016 notice, Westworth Village raised lack of

subject matter jurisdiction based on governmental immunity. In its subsequent

plea to the jurisdiction, Westworth Village contended that it was immune from suit

because it had acted in its governmental capacity based on the collection and

distribution of sales taxes and redevelopment of property for economic

development purposes. Westworth Village also cited to local government code

section 271.152 to argue that the statutory waiver therein did not apply.

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      Local government code section 271.152 provides:

             A local governmental entity that is authorized by statute or the
      constitution to enter into a contract and that enters into a contract
      subject to this subchapter waives sovereign immunity to suit for the
      purpose of adjudicating a claim for breach of the contract, subject to
      the terms and conditions of this subchapter.

Tex. Loc. Gov’t Code Ann. § 271.152 (West 2016). A “contract subject to this

subchapter” is one that is in writing and either (1) states the essential terms of

the agreement for providing goods or services to the local governmental entity

and is properly executed on the entity’s behalf or (2) involves the sale or delivery

of not less than 1,000 acre-feet of reclaimed water intended for industrial use. Id.

§ 271.151(2)(A)–(B) (West 2016). Because the contract was not for the provision

of goods or services, Westworth Village argued that sovereign immunity was not

waived under this section.

      White Settlement responded by arguing that Westworth Village had

entered into the contract in its proprietary, not governmental, capacity, that the

agreement was for “goods and services,” and that immunity did not apply

(1) because the agreement was not about tax collection per se but rather about

periodic payments for infrastructure construction, the calculations for which were

based on the amount of sales tax and (2) because economic development is not

generally considered a governmental function under the Texas Tort Claims Act

(TTCA). See generally Tex. Civ. Prac. & Rem. Code Ann. § 101.0215(a) (West

Supp. 2017) (setting out a nonexclusive list of a municipality’s governmental

functions).

                                         9
      White Settlement further argued that even if the agreement was purely

governmental and not a contract for “goods and services,” Westworth Village

“should be equitably estopped from denying the existence of the 380 Economic

Agreement” because Westworth Village had received the full benefits of the

agreement, without which the retail development would not have been possible.

To its response, White Settlement attached the affidavit of its former mayor,

James O. Ouzts, who averred that because Westworth Village could not provide

Wal-Mart and Sam’s Club with commercial infrastructure—water and sewer—and

services that the stores demanded, Westworth Village sought the assistance of

White Settlement so that the Wal-Mart and Sam’s Club would relocate in the

proposed site.     Thus, Ouzts explained, under the 380 agreement, White

Settlement agreed to provide those benefits.      However, contrary to Ouzts’s

contention, the 380 agreement in evidence does not explicitly state that White

Settlement was obligated to perform this function. See Great Am. Ins. Co. v.

Primo, 512 S.W.3d 890, 893 (Tex. 2017) (explaining that, following traditional

contract construction principles, a court should look to the plain language of the

contract to determine the parties’ true intent, not what one side or the other

alleges that they intended to say but did not).

      Ouzts attached to his affidavit a copy of the November 18, 2004 White

Settlement City Council meeting minutes at which the agreement with Westworth

Village was considered. The minutes reflect that Ouzts had informed the council

that the Westworth Village-White Settlement site was the location preferred by

                                         10
Wal-Mart and Sam’s Club, but that “they are also looking at a secondary site in

Fort Worth, if we d[o] not come to some kind of agreement with Allegiance

Development and West Worth Village then it would mean zero dollars for us as

well as West Worth Village.”

      The trial court denied Westworth Village’s plea to the jurisdiction.

                                  III. Immunity

      Westworth Village argues in its single issue that the trial court erred by

denying its plea to the jurisdiction when it showed as a matter of law that it was

immune from suit under the doctrine of governmental immunity, that the local

government code section 271.152 waiver did not apply, and that White

Settlement’s equitable estoppel argument was meaningless because it had never

denied the agreement’s existence.

A. Standard of Review

      A plea to the jurisdiction challenges the trial court’s authority to determine

the subject matter of the action. Tex. Bay Cherry Hill, L.P., 257 S.W.3d at 387

(citing Tex. Dep’t of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999)). Whether

a trial court has subject matter jurisdiction, whether a plaintiff has alleged facts

that affirmatively demonstrate a trial court’s subject matter jurisdiction, and

whether undisputed evidence of jurisdictional facts establishes a trial court’s

jurisdiction are questions of law that we review de novo. Tex. Dep’t of Parks &

Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004); see also Tex. Nat. Res.

Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002).

                                        11
      When a plea to the jurisdiction challenges the pleadings, we determine if

the pleader has alleged facts that affirmatively demonstrate the court’s

jurisdiction to hear the cause, construing the pleadings liberally in the plaintiff’s

favor and looking to the pleader’s intent. Miranda, 133 S.W.3d at 226. If the

pleadings do not contain sufficient facts to affirmatively demonstrate the trial

court’s jurisdiction but do not affirmatively demonstrate incurable defects in

jurisdiction, the issue is one of pleading sufficiency and the plaintiff should be

afforded the opportunity to amend. Id. at 226–27.

      If, however, a plea to the jurisdiction challenges the existence of

jurisdictional facts, we consider relevant evidence submitted by the parties when

necessary to resolve the jurisdictional issues raised, taking as true all evidence

favorable to the nonmovant, indulging every reasonable inference and resolving

any doubts in the nonmovant’s favor.        Id. at 227–28.    The burden is on the

governmental unit as the movant to meet the standard of proof. Id. at 228 (“By

requiring the state to meet the summary judgment standard of proof . . . , we

protect the plaintiffs from having to ‘put on their case simply to establish

jurisdiction.’”). If the evidence creates a fact question regarding the jurisdictional

issue, then the trial court cannot grant the plea to the jurisdiction, and the fact

issue will be resolved by the factfinder. Id. at 227–28. However, if the relevant

                                         12
evidence is undisputed or fails to raise a fact question on the jurisdictional issue,

the trial court rules on the plea to the jurisdiction as a matter of law. 1 Id. at 228.

B. Governmental Immunity

      Often incorrectly used as interchangeable terms, sovereign immunity and

governmental immunity involve two distinct concepts.           Travis Cent. Appraisal

Dist. v. Norman, 342 S.W.3d 54, 57–58 (Tex. 2011) (“Sovereign and

governmental immunity are . . . related common law concepts that differ only in

scope.”); Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc., 526 S.W.3d
693, 702 (Tex. App.—Houston [14th Dist.] 2017, pet. granted).                 Sovereign

immunity, which refers to the state’s immunity, protects the state and its various

divisions, including agencies, boards, hospitals, and universities. Travis Cent.

Appraisal Dist., 342 S.W.3d at 57–58; Rosenberg Dev. Corp., 526 S.W.3d at

702. Governmental immunity, on the other hand, protects political subdivisions

of the state such as counties, cities, and school districts when they perform

governmental functions.       Travis Cent. Appraisal Dist., 342 S.W.3d at 58;

Rosenberg Dev. Corp., 526 S.W.3d at 702. But governmental immunity does not

extend to political subdivisions, such as municipalities, for acts committed in the

      1
        Although Westworth Village stated that its plea challenged White
Settlement’s original petition, it also stated in its plea that it had attached a copy
of the parties’ 380 agreement as an exhibit. The record does not contain an
exhibit attached to the plea, but White Settlement attached a copy of the
agreement to its original petition and to its first amended original petition, which it
filed after Westworth Village filed its plea to the jurisdiction. White Settlement
also attached a copy of the agreement, along with other items, to its response to
the plea.

                                           13
performance of proprietary functions.         Wasson Interests, Ltd. v. City of

Jacksonville (Wasson I), 489 S.W.3d 427, 429–30 (Tex. 2016). This so-called

proprietary-governmental dichotomy is premised on the derivative nature of

governmental immunity.      Id. at 436 (stating that because a city derives its

immunity from the state, it is cloaked in the state’s immunity, but “only when it

acts as a branch of the state”). The dichotomy applies not only to tort claims but

also to breach of contract actions against municipalities. Id. at 430.

      Thus, under the doctrine of governmental immunity, a municipality that

enters into a contract in the performance of its governmental function enjoys

immunity, unless that immunity is specifically waived by the legislature. Tooke v.

City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006). As to waiver in the context of

contract claims against cities, the legislature’s determination of which

distinctions, exceptions, and limitations should apply is based on, among other

things, policy choices regarding what remedies to allow and how to respond to

changing conditions for the public welfare, particularly as to the reconsideration

of “prior policy decisions reflected in long-term or ill-considered obligations.” Id.

Legislative control ensures that current policy makers are not bound by, or held

accountable for, policies underlying their predecessors’ long-term contracts. IT-

Davy, 74 S.W.3d at 854. And to ensure that legislative control is not lightly

disturbed, such a waiver of immunity must be clear and unambiguous. Tooke,
197 S.W.3d at 332–33.

                                         14
      Accordingly, the court must determine, in the first instance, whether

immunity exists and its boundaries.      Wasson I, 489 S.W.3d at 434–35.          If

immunity exists, then we next consider whether the legislature has waived it. Id.

at 435; Wheelabrator Air Pollution Control, Inc. v. City of San Antonio, 489
S.W.3d 448, 451–52 (Tex. 2016) (“[S]hould we determine the action arose out of

the municipality’s governmental function, immunity applies and it must be

overcome by a claimant establishing a valid waiver.”). However, if we determine

that the action arose out of a municipality’s performance of a proprietary function,

rather than a governmental function, we need not consider waiver.              See

Wheelabrator, 489 S.W.3d at 451. Instead, the case proceeds as if the claim

were asserted against a private person. Id.

      1. The Proprietary-Governmental Dichotomy

      The question before us is whether the agreement here served a

governmental or proprietary function. To determine this, we first fix the relevant

date of inquiry. In that endeavor, the supreme court has instructed us to look to

the nature of the function the municipality was performing when it entered into

the contract, not at the time of breach.       Wasson Interests, Ltd. v. City of

Jacksonville (Wasson II), No. 17-0198, 2018 WL 2449184, at *5, *8 (Tex. June 1,

2018). Thus, “[i]f a municipality contracts in its proprietary capacity but later

breaches that contract for governmental reasons, immunity does not apply.” Id.

at *5. “Conversely, if a municipality contracts in its governmental capacity but

breaches that contract for proprietary reasons, immunity does apply.” Id.

                                        15
      Next, we look to the nature of the function itself. See id. The legislature

has defined “proprietary functions” as those that a municipality may, in its

discretion and in its private capacity, perform in the interest of the inhabitants of

the municipality itself. See Tex. Civ. Prac. & Rem. Code Ann. § 101.0215(b). In

contrast, “governmental functions” generally are those that are public in nature

and performed by the municipality as the state’s agent in furtherance of the

interest of the public at large. City of White Settlement v. Super Wash, Inc., 198
S.W.3d 770, 776 (Tex. 2006); see also Tex. Civ. Prac. & Rem. Code Ann.

§ 101.0215(a).

      The legislature and the state constitution have set out definitional tools to

aid our inquiry of whether immunity exists under the proprietary-governmental

dichotomy. Wasson I, 489 S.W.3d at 438–39 (referencing Tex. Const. art. XI,

§ 13(a) and the TTCA). While the TTCA supersedes the common law definition

of “governmental function” only in claims that fall within the TTCA itself—which

does not occur here—the statute is nevertheless helpful because it contains a

nonexclusive list of specific, municipal functions that the legislature has deemed

to be governmental. City of White Settlement, 198 S.W.3d at 776–77; see Tex.

Const. art. XI, § 13(a) (“[T]he legislature may by law [from 1987 onward] define

for all purposes those functions of a municipality that are to be considered

governmental and those that are proprietary, including reclassifying a function’s

classification assigned under prior statute or common law.”); City of Dallas v. City

of Corsicana, Nos. 10-14-00090-CV, 10-14-00171-CV, 2015 WL 4985935, at *2

                                         16
(Tex. App.—Waco Aug. 20, 2015, pet. denied) (mem. op.) (“[T]he Legislature has

given deference to the judiciary to interpret what constitutes a proprietary

function only to the extent it is not listed in the statute.” (citing City of Boerne v.

Vaughan, No. 04-12-00177-CV, 2012 WL 2839889, at *2 (Tex. App.—San

Antonio July 11, 2012, no pet.) (mem. op.)), mand. granted, In re City of Dallas,
501 S.W.3d at 74 (directing county court to determine its jurisdiction as to

amount in controversy).

      Although the list is nonexclusive, the TTCA has identified only three

proprietary functions:

             (1)    the operation and maintenance of a public utility;

             (2)    amusements owned and operated by the municipality;
                    and

             (3)    any activity that       is   abnormally    dangerous      or
                    ultrahazardous.

Tex. Civ. Prac. & Rem. Code Ann. § 101.0215(b).

      On the TTCA’s nonexclusive list of governmental functions, however, the

legislature has enumerated 36 functions:

             (1)    police and fire protection and control;

             (2)    health and sanitation services;

             (3)    street construction and design;

             (4)    bridge construction and maintenance and street maintenance;

             (5)    cemeteries and cemetery care;

             (6)    garbage and solid waste removal, collection, and disposal;

                                          17
(7)    establishment and maintenance of jails;

(8)    hospitals;

(9)    sanitary and storm sewers;

(10)   airports, including when used for space flight activities as
       defined by Section 100A.001;

(11)   waterworks;

(12)   repair garages;

(13)   parks and zoos;

(14)   museums;

(15)   libraries and library maintenance;

(16)   civic, convention centers, or coliseums;

(17)   community, neighborhood, or senior citizen centers;

(18)   operation of emergency ambulance service;

(19)   dams and reservoirs;

(20)   warning signals;

(21)   regulation of traffic;

(22)   transportation systems;

(23)   recreational facilities, including but not limited to swimming
       pools, beaches, and marinas;

(24)   vehicle and motor driven equipment maintenance;

(25)   parking facilities;

(26)   tax collection;

                                18
            (27)   firework displays;

            (28)   building codes and inspection;

            (29)   zoning, planning, and plat approval;

            (30)   engineering functions;

            (31)   maintenance of traffic signals, signs, and hazards;

            (32)   water and sewer service;

            (33)   animal control;

            (34)   community development or urban renewal activities
                   undertaken by municipalities and authorized under Chapters
                   373 and 374, Local Government Code;

            (35)   latchkey programs conducted exclusively on a school campus
                   under an interlocal agreement with the school district in which
                   the school campus is located; and

            (36)   enforcement of land use restrictions under Subchapter E,
                   Chapter 212, Local Government Code.

Id. § 101.0215(a). If a function is included in the TTCA’s nonexclusive list of 36

governmental functions, the legislature “has deemed it governmental in nature,”

and we are left with “no discretion or authority to hold otherwise.” Tex. Bay

Cherry Hill, L.P., 257 S.W.3d at 388–89.

      At first blush, the contractual obligation here appears to be related to tax

collection, see Tex. Civ. Prac. & Rem. Code Ann. § 101.0215(a)(26), an activity

that is listed by the TTCA as a governmental function and that has long been

recognized in common law as a governmental function. See City of San Angelo

v. Deutsch, 91 S.W.2d 308, 309 (Tex. 1936). Indeed, this was the primary theory

                                        19
advanced by Westworth Village in its plea to the jurisdiction to support its

argument that entering into this agreement was a governmental function. But we

agree with White Settlement that in this agreement, tax collection comes into play

only as the basis for calculation of the periodic payments due under the

agreement. And, as the supreme court has instructed us, the mere “touch[ing]

upon” a governmental function is insufficient to render a proprietary action

governmental. Wasson II, 2018 WL 2449184, at *7. Thus, our analysis cannot

stop here.

      The underlying economic activity involved may also resemble another of

the enumerated governmental functions found in the TTCA, “community

development or urban renewal activities undertaken by municipalities and

authorized under Chapters 373 and 374, Local Government Code.” See Tex.

Civ. Prac. & Rem. Code Ann. § 101.0215(a)(34). But because chapter 373 of the

local government code, “Community Development in Municipalities,” is limited to

“the development of viable urban communities by providing decent housing and a

suitable living environment and by expanding economic opportunities for persons

of low and moderate income,” the agreement here does not implicate chapter

373. See Tex. Loc. Gov’t Code Ann. § 373.002(a).

      Chapter 374, “Urban Renewal in Municipalities,” addresses the need to

prevent and eliminate slum and blighted areas through “the combined action of

private enterprise, municipal regulation, and other public action through approved

urban renewal plans.”     Id. § 374.002(b).     One of the government code’s

                                       20
limitations on the use of eminent domain for economic development purposes is

that private property may not be taken for economic development purposes

unless the economic development purpose “is a secondary purpose resulting

from municipal community development or municipal urban renewal activities to

eliminate an existing affirmative harm on society from slum or blighted areas

under” local government code chapters 373 or 374. See Tex. Gov’t Code Ann.

§ 2206.001(b)(3)(A) (West Supp. 2017).         White Settlement described the

property as previously undeveloped and not blighted, and there is no evidence in

this record to the contrary. Nor is there any evidence in the record that indicates

that Westworth Village undertook this agreement pursuant to local government

code chapter 374. Cf. Tex. Civ. Prac. & Rem. Code Ann. § 101.0215(a)(34).

Instead, the undisputed evidence is that the program here was authorized under

chapter 380, not chapters 373 or 374.        Because it does not fall within this

express provision of the TTCA, we must look further.

      2. Application of Wasson II Analysis

      Because the parties’ agreement does not fall under the TTCA’s express

provisions, we must apply the proprietary-governmental dichotomy approach as

established by Wasson II. See 2018 WL 2449184, at *5. As the supreme court

has explained, the proprietary-governmental dichotomy approach—a “tool with a

particular purpose”—determines whether: (a) immunity applies because a

municipality was acting “as a branch” of the state, or (b) immunity does not apply

because the municipality was acting “on its own behalf.” Id. According to the

                                        21
supreme court, a proper analysis requires the application of a four-prong inquiry:

(a) whether Westworth Village’s act of entering into the contract was mandatory

or discretionary; (b) whether the contract was primarily intended to benefit the

general public or Westworth Village’s residents; (c) whether Westworth Village

acted on the state’s behalf or its own behalf when it entered the contract; and

(d) whether Westworth Village’s act of entering into the contract was sufficiently

related to a governmental function to render the act governmental even if it would

otherwise have been proprietary. Id. at *5–8; see also Tex. Bay Cherry Hill, L.P.,
257 S.W.3d at 388–89.

                a. Was entering into the contract discretionary?

      An act is discretionary if it requires exercising judgment and the law does

not mandate performing the act with such precision that nothing is left to

discretion or judgment. Tarrant Reg’l Water Dist. v. Johnson, 514 S.W.3d 346,

352 (Tex. App.—Fort Worth 2016, pet. granted) (citing State v. Rodriguez, 985
S.W.2d 83, 85 (Tex. 1999), overruled on other grounds by Denton Cty. v.

Beynon, 283 S.W.3d 329, 331 n.11 (Tex. 2009)); see Bd. of Trs. of Galveston

Wharves v. O’Rourke, 405 S.W.3d 228, 234 (Tex. App.—Houston [1st Dist.]

2013, no pet.) (“A discretionary act is one that requires the exercise of ‘personal

deliberation, decision and judgment.’”).     Chapter 380 allows municipalities to

enter into agreements involving economic grant programs like this one, but the

language of the statute—through consistent use of the word “may”—indicates

that doing so is a discretionary action—a city may take these actions, but it is not

                                        22
required to do so. See Tex. Loc. Gov’t Code Ann. § 380.001; see also Tex. Gov’t

Code Ann. § 311.016(1) (West 2013) (stating that “may” creates discretionary

authority or grants permission or a power). Neither side argues that the activities

contemplated in this agreement were anything other than discretionary ones.

      Based on the record before us, Westworth Village was not required to

enter into this agreement or perform the functions contemplated therein, and its

decision to do so was purely discretionary.

             b. Was the contract primarily intended to benefit Westworth
                Village’s residents?

      Chapter 380 provides that a city “may establish and provide” for the

administration of programs “to promote state or local economic development and

to stimulate business and commercial activity in the municipality.”     Tex. Loc.

Gov’t Code Ann. § 380.001(a) (emphasis added). Thus, according to the statute,

the purpose of this agreement could have been to promote state economic

development, to promote local economic development, or both. To determine

whether its purpose was to benefit the state, the municipality, or both, we must

next look to the agreement itself.

      The title of the contract provides the first clue as to its purpose—an

“Economic Development Program Grant Agreement” made pursuant to local

government code chapter 380 for “local economic development.”           [Emphasis

added.] Beyond the title, in the body of the contract itself, the agreement recites

that its purpose was “to promote local economic development and to stimulate

                                        23
business and commercial activity” in Westworth Village and White Settlement

through Westworth Village’s sales-tax-funded economic development grant. 2

Nothing in the agreement indicates that these municipalities entered into the

contract to benefit the general public or the State of Texas. Thus, even if the

development could produce spillover economic benefits to the surrounding areas

outside of both municipalities or to the state as a whole, based upon the

contract’s plain language, both cities acted primarily for the economic benefit of

their respective municipalities.

      As the supreme court has recently clarified, even though a contract may

benefit some nonresidents, the question here is whether it primarily benefits

residents or primarily benefits nonresidents. See Wasson II, 2018 WL 2449184,

at *6. Based upon this record and the agreement itself, the cities entered into

this agreement primarily for the benefit of their own residents, not the general

public.

             c. Did Westworth Village act on the state’s or its own behalf?

      There is no evidence in this record that Westworth Village took these

actions as a branch or arm of the state government. To the contrary, every

indication in this record is that Westworth Village entered into this agreement on

      2
       While the parties’ contract refers generally to the “cooperation, assistance,
performance, and involvement” of White Settlement, it never spells out of what
White Settlement’s cooperation, assistance, performance, and involvement was
to consist.

                                        24
its own behalf. 3 Thus, we conclude that Westworth Village acted primarily on its

own behalf in entering into this agreement.

             d.   Was this economic development sufficiently related to a
                  governmental function as to render the act governmental?

      The state constitution and statutes have identified some forms of economic

development as constituting a public purpose or goal, which in turn could—

depending on the facts—be construed as a governmental function for which

immunity from suit applies. A random sampling of the articles of our constitution

and our statutes demonstrates how frequently the concept of “economic

development” is tied to a state goal and purpose. For example,

          • Article III, section 52-a of the Texas constitution authorizes the
            legislature to “provide for the creation of programs and the making of
            loans and grants of public money . . . for the public purposes of
            development and diversification of the economy of the state, the
            elimination of unemployment or underemployment in the state” and
            related endeavors. Tex. Const. art. III, § 52-a.

          • Article VIII, section 1-j(a) of the Texas constitution authorizes tax
            exemptions of goods, wares, merchandise, other tangible personal
            property, and ores, other than oil, natural gas, and other petroleum

      3
        That is, Westworth Village does not argue that it entered the agreement
on behalf of the state. It only argues generally that the economic development
agreement led to formerly vacant real estate’s generating sales tax collections,
“resulting in the public good.” Cf. Tex. Agric. Code Ann. § 12.0271(b)(2)(D)
(West 2018) (providing that economic development funds may only be used for a
project relating to “nonretail private enterprises”); Tex. Loc. Gov’t Code Ann.
§ 505.155 (West 2015) (providing that economic development corporations are
allowed to undertake projects “to promote or develop new or expanded business
enterprises that create or retain primary jobs”), id. § 501.002(12)(A) (West 2015)
(defining “primary job” to include manufacturing, transportation, warehousing,
information, and others, but not listing retail).

                                        25
   products, “[t]o promote economic development in the State” if they
   meet certain qualifications. Id. art. VIII, § 1-j(a).

• Local government code section 501.004(a)(1) states that “the
  present and prospective right to gainful employment and the general
  welfare of the people of this state require as a public purpose the
  promotion and development of new and expanded business
  enterprises and of job training.” Tex. Loc. Gov’t Code Ann.
  § 501.004(a)(1).

• Local government code sections 504.107(b) and 505.106(b) provide
  that for purposes of the TTCA, a Type A or Type B economic
  development corporation “is a governmental unit and the
  corporation’s actions are governmental functions.”            Id.
  §§ 504.107(b), 505.106(b) (West 2015).

• Agriculture code sections 12.027 and 12.0273 allow the state
  department of agriculture to maintain an economic development
  program for rural areas. Tex. Agric. Code Ann. §§ 12.027, .0273
  (West 2018).

• Education code section 52.63 states, as to college savings bonds,
  that encouraging enrollment at postsecondary educational
  institutions “promotes the public welfare and economic development
  of this state and, consequently, serves an important public purpose.”
  Tex. Educ. Code Ann. § 52.63(2) (West 2012).

• Transportation code section 451.201 states, in a chapter dedicated
  to metropolitan rapid transit authorities, that “regional economic
  development facilities” involved in such projects include only those
  facilities that “will lead to the creation of new jobs, maintain existing
  jobs, or generally improve the conditions under which a local
  economy may prosper.” Tex. Transp. Code Ann. § 451.201 (West
  2013).

• Government code section 481.0069(d)(2) provides that money in the
  Texas Spaceport Trust Fund may be spent by a development
  corporation created under local government code chapter 507 if it
  has demonstrated the financial ability to fund at least 75% of the
  project. Tex. Gov’t Code Ann. § 481.0069(d)(2) (West Supp. 2017).

                               26
• Government code sections 481.166 and 481.167 required the Texas
  Economic Development and Tourism Office to establish a
  clearinghouse to provide information and assistance to businesses
  and communities in the state on federal, state, local, and private
  business development programs and rural and urban community
  economic development programs and services after finding that
  “economic development programs and services are located in a
  number of state agencies,” which “need to work together to provide
  outreach and assistance to local governments and businesses.” Id.
  §§ 481.166–.167 (West 2012).

• Government code section 489.101 provided for the creation of an
  economic development bank to ensure “that communities and
  businesses in this state have access to capital for economic
  development purposes.” Id. § 489.101 (West 2012).

• Water code section 152.151 defines “economic development
  program” with regard to river authorities engaged in distribution and
  sale of electricity as a program to encourage economic
  diversification, to contribute to the health and development of a
  community to improve its attractiveness to public and private
  enterprises, or to improve the quality or quantity of services essential
  for the development of viable communities and economic growth,
  “including services related to education, transportation, public safety,
  recreation, health care, training, community planning, or
  employment.” Tex. Water Code Ann. § 152.151 (West 2004).

• Tax code section 313.003 identifies large-scale capital investments,
  new, high-paying jobs, and expansion of the state’s ad valorem tax
  base as purposes for the Texas Economic Development Act. Tex.
  Tax Code Ann. § 313.003 (West 2015).

• Health and safety code section 75.001 states that one of the
  purposes of the regional or local health care programs for
  employees of small businesses is to “contribute to economic
  development by helping small businesses remain competitive with a
  healthy workforce and health care benefits that will attract
  employees.” Tex. Health & Safety Code Ann. § 75.001(3) (West
  2017).

• Utilities code section 58.201(a) states that “[i]t is the goal of this state
  to facilitate and promote the deployment of advanced

                                27
             telecommunications infrastructure to spur economic development
             throughout this state.” Tex. Util. Code Ann. § 58.201(a) (West
             2016).

          • Labor code section 303.004(b)(1)(B) requires each public community
            or technical college providing workforce training under chapter 303
            to “identify strategies for improving the delivery of workforce training
            in order to more effectively impact economic development in this
            state.” Tex. Lab. Code Ann. § 303.004(b)(1)(B) (West Supp. 2017).

      Case law, on the other hand, with the exception of tax-related issues, has

rarely addressed whether (or which) particular local economic development

activities are state governmental functions such that they would entitle a city—as

opposed to an economic development corporation 4—to immunity. In considering

whether the agreement here is sufficiently related to a governmental function as

to render the act governmental, we look to a few of these cases for guidance.

      For example, the San Antonio court has held that governmental immunity

applies when a city’s actions are directed at financing items that fall under one or

more of the TTCA’s definitions of governmental functions.        Jamro, 2017 WL
993473, at *4. In Jamro, our sister court considered whether the use of tax

      4
         Valuable discussion regarding the proprietary-governmental dichotomy
can also be found in cases involving the question of whether economic
development corporations enjoy governmental immunity when performing
governmental functions outside of claims under the TTCA. Compare Rosenberg,
526 S.W.3d at 706, with City of Leon Valley Econ. Dev. Corp. v. Little, 522
S.W.3d 6, 10 (Tex. App.—San Antonio 2017, pet. filed) (mem. op.), Weir Bros.,
Inc. v. Longview Econ. Dev. Corp., 373 S.W.3d 841, 843, 846 (Tex. App.—Dallas
2012, no pet.), Purdin v. Copperas Cove Econ. Dev. Corp., 143 S.W.3d 290, 304
(Tex. App.—Waco 2004, pet. dism’d) (Gray, C.J., dissenting), and Rayl v. Borger
Econ. Dev. Corp., 963 S.W.2d 109, 111, 114 (Tex. App.—Amarillo 1998, no
pet.). However, our focus is on the cases dealing with governmental immunity as
it relates to municipalities.

                                        28
increment financing to fund public improvements—streets, alleys, drainage,

water, sewer, gas, electricity, street lights/signs, lift station and force main, and

open space improvements—for a local development was governmental activity.

Id. at *1. Jamro, a property developer, urged that the city’s activities served a

proprietary function, but the court disagreed. Id. at *2, *3–4. In affirming the trial

court’s dismissal based on immunity, the court reasoned that tax code chapter

311 gave the city authority to create a Tax Increment Reinvestment Zone for the

benefit of the general public and that the TTCA’s list of governmental functions

included the items covered by the TIRZ—street construction and design, bridge

construction and maintenance, sanitary and storm sewers, waterworks, parks,

maintenance of traffic signals and signs, and water and sewer service. Id. Thus,

the court held that because “the city’s actions with regard to the TIRZ were

directed at financing public improvements which meet the definition of

governmental functions,” the city enjoyed governmental immunity for its actions.

Id. at *4. But Jamro predates Wasson II, and whether the court would have

necessarily reached the same result had it applied Wasson II’s four-prong inquiry

is uncertain.

      The Dallas court has held that the “crux” of the claims raised determines

whether a governmental function is implicated. Douglas v. City of Kemp, No. 05-

14-00475-CV, 2015 WL 3561621, at *4 (Tex. App.—Dallas June 9, 2015, no pet.)

(mem. op.). In Douglas, the court considered competing arguments regarding a

tax abatement to encourage construction of a nursing facility within city limits,

                                         29
which the business owner claimed he never received. Id. at *1–2. Douglas

argued that the tax abatement was only tangentially related to the city’s tax-

collection power, and, thus, entirely discretionary. Id. at *2. The City of Kemp

argued that the action centered on tax assessment and collection, which are

“purely and quintessentially governmental functions” for which immunity was not

waived. Id. at *2, *4. Because the court concluded that tax assessment and

collection was a governmental function and that “the crux of Douglas’s claims

[was] ‘invalid tax assessments,’” the court held that the claim “implicate[d] a

governmental function” and that the city was immune from suit. Id. at *4.

      However, in considering a tax abatement in a different context, the Waco

court held that such an agreement entered into for the purpose of recruiting a

business to relocate to Dallas was a proprietary act, not a governmental function.

City of Dallas, 2015 WL 4985935, at *3 & n.3, *5. The court reasoned that the

recruiting of businesses through tax abatements is a function that “a municipality

may, in its discretion, perform and that, in this situation, benefits the citizens of

Dallas, rather than the general public at large.” Id. at *4. Furthermore, the court

pointed out, “[b]usiness recruiting is also a function that private persons and

entities can and do provide. In other words, it is a proprietary function.” Id.

      We, too, have had an occasion to consider governmental immunity in the

context of tax abatements. See City of Fort Worth v. Pastusek Indus., Inc., 48
S.W.3d 366, 368 (Tex. App.—Fort Worth 2001, no pet.). But in Pastusek, we

conflated sovereign immunity, which applies to the state, its agencies, and its

                                         30
officials, with governmental immunity, which applies to political subdivisions—

such as counties, cities, and school districts—only when they perform

governmental functions, failing to acknowledge that different standards apply to

these terms based on their scope.       Id.; cf. Travis Cent. Appraisal Dist., 342
S.W.3d at 58 (noting that sovereign and governmental immunity are related

common law concepts that differ “only in scope” and observing that their

similarity sometimes causes the two terms to be used interchangeably);

Rosenberg Dev. Corp., 526 S.W.3d at 697, 702, 706 (explaining that sovereign

immunity protects the state, its agencies, board, hospitals, and universities, while

governmental immunity protects “political subdivisions of the state, including

counties, cities, and school districts, when they perform governmental

functions”). We also failed to address the proprietary-governmental dichotomy,

and the resulting opinion used “sovereign immunity” to hold that a claim for

breach of contract against a municipality, a tax appraisal district, and a school

district was barred. See Pastusek, 48 S.W.3d at 372. It also applied the concept

to a private corporation 5 without discussing how or why that could be. See id.

      5
        In the first paragraph of Pastusek, we identified the corporation as
“Sunbelt Industrial Development Corporation (SIDC),” but never referred to it
again. 48 S.W.3d at 368. Instead, thereafter and throughout the opinion, all
appellants—the City of Fort Worth, SIDC, the Tarrant Appraisal District, and the
Fort Worth Independent School District—were collectively referred to as
“Appellants” and were likewise treated and disposed of in a collective manner.
Id. at 368–73.

                                        31
      In a non-tax-related case, the Dallas court recently found no immunity in a

suit involving the leasing of mineral rights on city park land, rejecting the city’s

argument that because executing oil and gas leases involved the governmental

functions of regulation of parks, floodplains, building codes, and zoning, the

leasing activity was a governmental function. City of Dallas v. Trinity E. Energy,

LLC, No. 05-16-00349-CV, 2017 WL 491259, at *2, *5 (Tex. App.—Dallas Feb. 7,

2017, pet. denied) (mem. op.).      In reaching its holding, the court of appeals

pointed out that a city employee had testified that “the purpose of the leases was

‘developing the City’s minerals in a safe and efficient manner that both protects

the public safety and promotes the maximum revenue for the City.’” Id. at *4.

From this testimony, the court concluded that “[t]hese functions would benefit the

residents within the City’s corporate limits, but they would not benefit the public at

large, that is, the State.” Id. Applying Wasson I and addressing the proprietary-

governmental dichotomy (but without the benefit of Wasson II’s four-prong inquiry

framework), the court held that because the city’s leasing of minerals benefitted

the residents within the city’s corporate limits and not the public at large, or the

state, the city’s activity was proprietary, not governmental. Id. at *4–5.

      Because all of these cases predate Wasson II, and three—Douglas, City of

Dallas, and Pastusek—also predate Wasson I, we rely upon them cautiously.

Instead, we must look primarily to Wasson II, which reminds us that not all

activities “associated” with a governmental function are “governmental.” 2018
WL 2449184, at *7. True governmental functions encompass activities that are

                                         32
closely related to or necessary for the performance of the governmental activities

designated by statute, and the fact that a city’s proprietary action “touches upon”

a governmental function is insufficient to render the proprietary action

governmental. Id. A city’s proprietary action may be treated as governmental

only if it is essential to the city’s governmental actions. Id. (holding that leasing

lakefront property was not “essential” to city’s operation or maintenance of lake).

      The task of drawing the distinction between proprietary and governmental

functions “is not always . . . cut-and-dried.” See id. at *8. But what is clear is that

to prevail on its plea to the jurisdiction, Westworth Village bore the burden of

pleading jurisdictional facts sufficient to meet a summary judgment standard of

proof that the activities at issue were governmental, not proprietary, in nature.

See Miranda, 133 S.W.3d at 226–28. Westworth Village failed to do this: There

are no facts in this record to support a finding that any retail jobs that might be at

issue here benefitted the state rather than purely the local population. To the

contrary, White Settlement’s evidence showed that, without the agreement, those

retail jobs would have gone elsewhere in the region. See City of Dallas, 2015
WL 4985935, at *1; see also Wasson II, 2018 WL 2449184, at *6 (“A city’s

proprietary contracts will often benefit some nonresidents, and its governmental

contracts will often benefit some residents, but whether a contract primarily

benefits one or the other will often indicate whether it is proprietary or

governmental.”); Gold, 19 Urb. Law. at 194–95 (“Virtually all economic

                                          33
development projects are evaluated, in part, by the number of jobs that will be

created or retained.”).

      We conclude that in light of Wasson II, while the 380 agreement “touched”

on taxation and planning, see Tex. Civ. Prac. & Rem. Code Ann.

§ 101.0215(a)(26), (29), based on the record before us, taking as true all

evidence favorable to White Settlement, indulging every reasonable inference

and resolving any doubts in White Settlement’s favor, as we must, see Miranda,
133 S.W.3d at 227–28, the agreement’s primary purpose was to foster local

economic development to the benefit of the cities’ inhabitants rather than to the

general public of the state.

      Entering into the agreement itself was a discretionary act. Without any

evidence showing how the local retail development fostered a benefit primarily to

the state or the public in general, or that Westworth Village entered into the

agreement as a branch or arm of the state, or that the economic development

this agreement fostered was sufficiently related to a governmental function as to

render the act governmental, we cannot conclude, under the analysis required by

Wasson II, that the 380 agreement was undertaken in a governmental capacity.

See 2018 WL 2449184, at *6–7.

      Accordingly, we cannot say that the trial court erred by denying Westworth

Village’s plea to the jurisdiction, and we overrule Westworth Village’s sole issue

without reaching White Settlement’s chapter 271 and equitable estoppel

                                       34
arguments. 6 See Tex. R. App. P. 47.1; see also Trinity E. Energy, LLC, 2017 WL
491259, at *4 (holding that because city lacked governmental immunity for its

acts in its proprietary capacity, there was no need to reach whether local

government code chapter 271 waived immunity).

                                   IV. Conclusion

      Having overruled Westworth Village’s sole issue, we affirm the trial court’s

denial of Westworth Village’s plea to the jurisdiction and remand this case to the

trial court for further proceedings.

                                                    /s/ Bonnie Sudderth

                                                    BONNIE SUDDERTH
                                                    CHIEF JUSTICE

PANEL: SUDDERTH, C.J.; GABRIEL and KERR, JJ.

DELIVERED: August 9, 2018

      6
        As discussed above, we would only reach these arguments if Westworth
Village has governmental immunity that could either be waived under chapter
271 or be equitably estopped. See, e.g., Bexar Metro. Water Dist. v. Educ. &
Econ. Dev. Joint Venture, 220 S.W.3d 25, 32 (Tex. App.—San Antonio 2006, pet.
dism’d) (providing that for equitable estoppel to apply to prevent governmental
entity from asserting its immunity, the application of estoppel may not interfere
with the exercise of the entity’s governmental functions and the plaintiff must
show that the entity has accepted and retained the benefits arising from the
contract).

                                        35