Opinion by: Sandee Bryan Marion, Chief Justice

MEMORANDUM OPINION

From the 224th Judicial District Court, Bexar County, Texas
Trial Court No. 2015-CI-21267
Honorable Stephani A. Walsh, Judge Presiding Opinion by: Sandee Bryan Marion, Chief Justice Sitting: Sandee Bryan Marion, Chief Justice Rebeca C. Martinez, Justice Luz Elena D. Chapa, Justice AFFIRMED

JAMRO Ltd. appeals the trial court's order granting a plea to the jurisdiction filed by the City of San Antonio and dismissing all of JAMRO's claims against the City. Although JAMRO lists three issues as being presented, JAMRO contends the trial court erred in granting the plea to the jurisdiction because the City was engaged in a proprietary function, and the City is not entitled to immunity when it engages in proprietary functions. We affirm the trial court's order.

BACKGROUND

On September 8, 2005, the City adopted a resolution expressing an intent to consider the creation of a tax increment reinvestment zone ("TIRZ") to finance public improvements in the Palo Alto Trails Development (the "Project"). The resolution authorized the City's staff to proceed with the statutory process for the consideration of the creation of a TIRZ. The resolution noted tax increment financing is a development tool authorized by the Tax Increment Financing ("TIF") Act which is used by municipalities to finance needed public improvements and enhanced infrastructure within certain areas of the municipality by leveraging private investment for certain types of development activities. The resolution further noted the city clerk received an application and application fees on July 8, 2005, from JAMRO seeking the use of TIF for the Project, and the application proposed public improvements for the Project, including streets, alleys, drainage, water, sewer, gas, electric, street lights/signs, lift station and force main, and open space improvements.

A staff memo to the city council regarding the resolution stated the adoption of a resolution expressing an intent to consider the creation of a TIRZ did not obligate the City to designate the TIRZ but only allowed the City's staff to continue the process necessary to consider whether the TIRZ should be designated. The memo described how the TIRZ designation would contribute to the revitalization activities in the area, noting: (1) it would implement the recommendations of a concerted planning effort; (2) it would support the development of a residential neighborhood to serve the demand created by the development of the Texas A&M campus and the Toyota manufacturing site; (3) it could contribute to improvements on regional infrastructure such as State Highway 16; and (4) it would increase the base value from $481,540 to $35,563,784 after the improvements. The memo also stated the Project would not occur without public assistance in the form of the creation of a TIRZ, and the Project would accomplish the goal of creating balanced growth in the City as a whole because the demographics in the area have made it difficult to encourage new housing development. Finally, the memo stated the area of the proposed TIRZ meets the statutory criteria for designation as a reinvestment zone set forth in section 311.005(a)(1) of the Texas Tax Code by constituting an economic or social liability and being a menace to public health, safety, morals, or welfare in its present condition and use because of the presence of unsanitary or unsafe conditions.

On May 18, 2006, the City adopted an ordinance designating the Project area as a TIRZ, noting the City's desire to support revitalization activities for the Project. The ordinance noted the creation of the TIRZ was in compliance with the City's master plan by encouraging community revitalization, infrastructure improvements, and market-rate housing within certain areas of the City. The ordinance included findings that the improvements in the TIRZ will significantly enhance the value of all the taxable real property in the TIRZ and will be of general benefit to the municipality. The ordinance also included findings that the TIRZ area met the criteria for a reinvestment zone contained in section 311.005(a)(1) and 311.005(a)(2) of the Texas Tax Code because the area: (1) substantially arrests or impairs the sound growth of the City, retards the provision of housing accommodations, or constitutes an economic or social liability and is a menace to the public health, safety, morals, or welfare in its present condition and use; and (2) is predominantly open, and because of obsolete planning, deterioration of structures or site improvements, or other factors, substantially impairs or arrests the sound growth of the City.

The next step in the process of developing the Project required a development agreement between the City, the TIRZ board of directors, and a developer. On August 21, 2012, a proposed development agreement was signed by NICDAR, Inc. as the developer; however, neither the City nor the TIRZ board of directors ever signed the agreement. Instead, on June 20, 2013, the City adopted an ordinance terminating the TIRZ. The ordinance noted "no development agreement has been executed between the City, the TIRZ Board, and the Developers, Jamro Ltd. and Nicdar, Inc., or with any other party."

On December 30, 2015, JAMRO filed the underlying lawsuit against the City alleging claims for breach of contract, quantum meruit, promissory estoppel, fraud, negligent misrepresentation, and negligence. JAMRO alleged it was in the process of developing property known as Las Missiones and Palo Alto when City officials and agents approached JAMRO and asked it to apply to have the area being developed declared a reinvestment zone. JAMRO further alleged it complied with the request and made changes to JAMRO's plans and specifications at the City's request and completed the construction but was never notified the TIRZ had been terminated. JAMRO sought compensatory and punitive damages.

The City filed a plea to the jurisdiction asserting it was immune from the lawsuit because it never entered into a contract with JAMRO and immunity is only waived for contractual claims not for quasi-contractual claims like quantum meruit and promissory estoppel. The City further asserted immunity is not waived for intentional torts like fraud, and immunity is only waived for negligence claims for damages arising from an employee's use of a motor vehicle.

JAMRO responded to the City's plea, asserting the City was not entitled to immunity because the City was performing a proprietary function. JAMRO asserted "the City was acting as a Developer and private citizen seeking to finance for one company and individual a portion of their construction" and the City's actions "could not be more proprietary in nature."

After a hearing, the trial court signed an order granting the City's plea. JAMRO appeals.

STANDARD OF REVIEW

Immunity from suit implicates a court's subject-matter jurisdiction and is properly asserted in a plea to the jurisdiction. Houston Belt & Terminal Ry. Co. v. City of Houston, 487 S.W.3d 154, 160 (Tex. 2016). "As subject-matter jurisdiction is a question of law, we review a trial court's ruling on a plea to the jurisdiction de novo." Id. If the plea to the jurisdiction challenges pleadings, we liberally construe the pleadings to determine if the plaintiff has "alleged facts that affirmatively demonstrate the court's jurisdiction to hear the cause." Id. (internal quotations omitted). If the plea to the jurisdiction challenges the existence of jurisdictional facts which also implicate the merits of the case, "we consider relevant evidence submitted by the parties to determine if a fact issue exists." Suarez v. City of Tex. City, 465 S.W.3d 623, 632-33 (Tex. 2015). "We take as true all evidence favorable to the nonmovant, indulge every reasonable inference, and resolve any doubts in the nonmovant's favor." Id. at 633. "If the evidence creates a fact question regarding jurisdiction, the plea must be denied pending resolution of the fact issue by the fact finder." Id. "If the evidence fails to raise a question of fact, however, the plea to the jurisdiction must be granted as a matter of law." Id.

PROPRIETARY-GOVERNMENTAL DICHOTOMY

In regard to governmental immunity, the Texas Supreme Court "has distinguished between those acts performed as a branch of the state and those acts performed in a proprietary, non-governmental capacity." Wasson Interests, Ltd. v. City of Jacksonville, 489 S.W.3d 427, 430 (Tex. 2016). A municipality is immune for acts done as a branch of the state referred to as governmental functions. Id. at 433. Governmental functions are "functions enjoined on a municipality by law . . . to be exercised by the municipality in the interest of the general public." See TEX. CIV. PRAC. & REM. CODE ANN. § 101.0215(a) (West Supp. 2016).

"[S]overeign immunity does not[, however,] imbue a city with derivative immunity when it performs proprietary functions." Wasson Interests, Ltd., 489 S.W.3d at 439. Proprietary functions are "functions that a municipality may, in its discretion, perform in the interest of the inhabitants of the municipality." See TEX. CIV. PRAC. & REM. CODE ANN. § 101.0215(b). A city is not immune in performing a proprietary function regardless of "whether a city commits a tort or breaches a contract, so long as in each situation the city acts of its own volition for its own benefit and not as a branch of the state." Wasson Interests, Ltd., 489 S.W.3d at 439. Therefore, "the common-law distinction between governmental and proprietary acts — known as the proprietary-governmental dichotomy — applies in the contract-claims context just as it does in the tort-claims context." Id.

WERE THE CITY'S ACTIONS GOVERNMENTAL OR PROPRIETARY?

In its brief, JAMRO argues the City's actions were proprietary because it sought out a specific private developer "to spur development in a specific area of town for the benefit of only those inhabitants and the City itself." JAMRO asserts the City "asked [JAMRO] to alter an existing subdivision plan to meet the City's guidelines and [in] return promised tax benefits to [JAMRO]." The City responds its actions were governmental functions.

Chapter 311 of the Texas Tax Code also known as the Tax Increment Financing Act enjoins on the City the authority to create reinvestment zones to promote development or redevelopment of an area that would not occur solely through private investment. TEX. TAX CODE ANN. §§ 311.001, et seq. (West 2015). When the City adopted the ordinance creating the TIRZ at issue in this case, the ordinance contained express findings that the TIRZ met the criteria for a reinvestment zone contained in section 311.005(a)(1) and 311.005(a)(2) of the Texas Tax Code because the area: (1) substantially arrests or impairs the sound growth of the City, retards the provision of housing accommodations, or constitutes an economic or social liability and is a menace to the public health, safety, morals, or welfare in its present condition and use; and (2) is predominantly open, and because of obsolete planning, deterioration of structures or site improvements, or other factors, substantially impairs or arrests the sound growth of the City. See id. at § 311.005(a)(1), (a)(2). Section 311.008(e) of the Code expressly provides, "The implementation of a project plan to alleviate a condition described by Section 311.005(a)(1), (2), or (3) and to promote development or redevelopment of a reinvestment zone in accordance with this chapter serves a public purpose." Id. at § 311.008(e). Accordingly, the City's actions with regard to the TIRZ met the definition of a governmental function because Chapter 311 enjoined on the City the authority to create the TIRZ to serve a public purpose in the interest of the general public. See TEX. CIV. PRAC. & REM. CODE ANN. § 101.0215(a).

Also, the ordinance allowed the use of TIF for proposed public improvements for the Project which the ordinance defined to include the design and construction of storm water pollution prevention, streets and approaches, alleys, drainage, water, sewer, gas electric, street lights/signs, a bridge, street trees, and open space/park improvements. The legislature has defined governmental functions to include: (1) street construction and design; (2) bridge construction and maintenance; (3) sanitary and storm sewers; (4) waterworks; (5) parks; (6) maintenance of traffic signals and signs; and (7) water and sewer service. See id. Therefore, the City's actions with regard to the TIRZ were directed at financing public improvements which meet the definition of governmental functions.

We conclude the City's actions with regard to the TIRZ were governmental functions, and JAMRO's contention to the contrary is overruled.

CONCLUSION

The trial court's order is affirmed.

Sandee Bryan Marion, Chief Justice