Beck Steel, Inc. v. City of Lubbock

Full title: BECK STEEL, INC. AND JOHN C. BECK, Appellants v. CITY OF LUBBOCK, DANIEL…

Court: State of Texas in the Fourteenth Court of Appeals

Date published: Aug 4, 2020

NO. 14-19-00060-CV (Tex. App. Aug. 4, 2020)

Opinion

NO. 14-19-00060-CV

08-04-2020

BECK STEEL, INC. AND JOHN C. BECK, Appellants v. CITY OF LUBBOCK, DANIEL M. POPE, IN HIS OFFICIAL CAPACITY AS MAYOR OF THE CITY OF LUBBOCK, W. JARRETT ATKINSON, IN HIS OFFICIAL CAPACITY AS CITY MANAGER FOR THE CITY OF LUBBOCK, AND CHERYL BROCK, IN HER OFFICIAL CAPACITY AS EXECUTIVE DIRECTOR OF FINANCE FOR THE CITY OF LUBBOCK, Appellees

Meagan Hassan Justice

On Appeal from the 237th District Court Lubbock County, Texas
Trial Court Cause No. 2015-516,881

MEMORANDUM OPINION

Appellants Beck Steel, Inc. and John C. Beck (collectively, "Beck") sued appellees the City of Lubbock, Daniel M. Pope, in his official capacity as mayor of the City of Lubbock, W. Jarrett Atkinson, in his official capacity as city manager for the City of Lubbock, and Cheryl Brock, in her official capacity as executive director of finance for the City of Lubbock (collectively, "the City"). Beck asserted claims and requested injunctive relief in connection with certain assessments levied against the fee revenue collected by the City's storm water drainage utility. The trial court granted the City's motion for summary judgment and Beck appealed. For the reasons below, we affirm.

BACKGROUND

The Municipal Drainage Utility Systems Act ("the Act") permits municipalities to establish drainage utility systems and charge fees for storm water drainage. See Tex. Loc. Gov't Code Ann. §§ 442.041-.054. The City of Lubbock adopted the Act in 1993 and set the following rates for drainage fees: for residential property, $1.71 per month per water meter and, for non-residential property, $11.35 per month per water meter.¹ These drainage fees are collected by the City's Storm Water Utility Fund. The Fund is an "enterprise fund", which the parties define as: "A governmental accounting fund in which the services provided are financed and operated similarly to those of a private business. The rates for these services are established to insure that revenues are adequate to meet all necessary expenditures."

1 The facts recited in this section are drawn from the statements and evidence contained in the parties' "Joint Stipulation" filed in the trial court.

Both the residential and non-residential drainage fees have increased over the years and, in 2011, the residential rate was $14.00 per month per water meter and the non-residential rate was $92.92 per month per water meter. In January 2015, the City adopted a tiered rate structure for drainage fees based on the amount of impervious area located on each property:

Impervious Area	Residential
Less than or equal to 2780 square feet	$8.80 per month

Greater than 2780 square feet and less than or equal to3680 square feet	$13.48 per month
Greater than 3680 square feet and less than or equal to4770 square feet	$17.05 per month
Greater than 4770 square feet	$25.58 per month

Impervious Area	Non-ResidentialProperty
Each equivalent residential unit of 5700 square feet ischarged $25.58 up to a maximum cap of 150,000 squarefeet or $673.16	$25.58 per each 5700sq. feet

Accompanying these increased rates was an increase in the amount of drainage-fee revenue collected by the Storm Water Utility Fund. For example, in fiscal year 2011, the total revenue received by the Fund was $5,440,696 - by 2016 this amount had grown to $13,598,862. In Beck's words, the Fund had become a "cash cow."

Beck sued the City in 2015, alleging that the City improperly levied certain assessments against the Storm Water Utility Fund.² Beck asserted claims for reimbursement, money had and received, unconstitutional taking, and injunctive relief.

2 Beck's third amended petition also sought class certification and stated that Beck sued as representative of (1) all persons and entities that paid storm water drainage fees for residential property, and (2) all persons and entities that paid storm water drainage fees for non-residential property. See Tex. R. Civ. P. 42 (outlining procedures and requirements for class certification).

Beck filed a third amended petition in March 2017 and moved for a partial summary judgment. The City also filed a summary judgment motion. In an order signed January 11, 2018, the trial court denied Beck's motion for partial summary judgment and granted the City's motion; the trial court's order does not specify the grounds for its ruling. The trial court's order states that it "is a final and appealable Judgment and disposes of all claims brought by [Beck] against [the City]." Beck timely appealed and its case was transferred to this court by Supreme Court of Texas Transfer Order, Misc. Docket No. 19-9010.³

3 Because of the transfer, we must decide the case in accordance with the precedent of the Seventh Court of Appeals if our decision otherwise would have been inconsistent with that court's precedent. See Tex. R. App. P. 41.3.

STANDARD OF REVIEW

When, as here, both parties move for summary judgment on the same issues and the trial court grants one motion and denies the other, the reviewing court considers the summary judgment evidence presented by both sides and determines all questions presented. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); Sw. Bell Tel. Co. v. Combs, 270 S.W.3d 249, 259 (Tex. App.—Amarillo 2008, pet. denied). Because the trial court's order granting summary judgment does not specify the basis for its ruling, we must affirm the summary judgment if any of the asserted grounds are meritorious. Sw. Bell. Tel. Co., 270 S.W.3d at 259-60 (citing W. Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005)).

Here, the parties primarily rely on statutory provisions to support their entitlement to summary judgment. In general, matters of statutory construction are questions of law rather than issues of fact. See City of Garland v. Dallas Morning News, 22 S.W.3d 351, 357 (Tex. 2000). Therefore, we review the trial court's decision to grant summary judgment de novo. See, e.g., Sw. Bell Tel. Co., 270 S.W.3d at 260.

ANALYSIS

I. The Parties' Arguments

In its motion for partial summary judgment and on appeal, Beck argues that under the Act, the City could not properly levy certain assessments against the Storm Water Utility Fund's drainage-fee revenue. Beck's challenges are based on the Act's provisions and definitions addressing drainage charges.

The Act permits municipalities to "levy a schedule of drainage charges" and defines "drainage charge" as:

(A) the levy imposed to recover the cost of service of the municipality in furnishing drainage for any benefitted property; and

(B) if specifically provided by the governing body of the municipality by ordinance, an amount made in contribution to funding of future drainage system construction by the municipality.

Tex. Loc. Gov't Code Ann. § 552.044(4). As used above in subsection (A), the Act defines "cost of service" to include seven categories:

(A) the prorated cost of the acquisition, whether by eminent domain or otherwise, of land, rights-of-way, options to purchase land, easements, and interests in land relating to structures, equipment, and facilities used in draining the benefitted property;

(B) the prorated cost of the acquisition, construction, repair, and maintenance of structures, equipment, and facilities used in draining the benefitted property;

(C) the prorated cost of architectural, engineering, legal, and related services, plans and specifications, studies, surveys, estimates of cost and of revenue, and all other expenses necessary or incident to planning, providing, or determining the feasibility and practicability of structures, equipment, and facilities used in draining the benefitted property;

(D) the prorated cost of all machinery, equipment, furniture, and facilities necessary or incident to the provision and operation of draining the benefitted property;

(E) the prorated cost of funding and financing charges and interest arising from construction projects and the start-up cost of a drainage facility used in draining the benefitted property;

(F) the prorated cost of debt service and reserve requirements of structures, equipment, and facilities provided by revenue bonds or other drainage revenue-pledge securities or obligations issued by the municipality; and

(G) the administrative costs of a drainage utility system.

Id. § 552.044(2).

Payments in Lieu of Taxes and Payments in Lieu of Franchise Fees

Beck's appeal begins by addressing two specific assessments levied against the Storm Water Utility Fund: payments in lieu of taxes and payments in lieu of franchise fees. These payments are intended to be equivalent to charges a private utility would pay the City in property taxes and franchise fees. From fiscal year 2008 to fiscal year 2016, the City collected from the Storm Water Utility Fund approximately $5.1 million in payments in lieu of taxes and $8.7 million in payments in lieu of franchise fees.

Focusing on the statutory provisions regarding permissible "drainage charges", Beck argues that the City cannot collect these "fictional amounts" because "[o]nly actual costs can be included" in the City's drainage fee assessments. Beck contrasts these provisions with those where the Legislature gave municipalities express permission to collect certain payments in lieu of taxes. See, e.g., id. § 552.003(a) (with respect to a municipality's acquisition of an existing public utility, the municipality may assess "an annual payment from the income of the utility of an amount equal to the average annual taxes assessed by the school district"). Beck also contends that the methods for calculating these assessments are not directly related to drainage as required by the Act. See id. § 552.047(a) (the basis for drainage charges "must be directly related to drainage and the terms of the levy").

General-Obligation Debt

Beck also asserts that the City improperly used drainage-fee revenue to repay general-obligation debt. General-obligation debt includes certificates of obligation and general-obligation bonds: certificates of obligation "are debt instruments secured by the ad valorem taxing power of a city" and general-obligation bonds are backed "by the full faith and credit of the City." In contrast with general-obligation debt, revenue bonds are not broadly secured and must be repaid exclusively from the earnings of a designated enterprise fund.

In fiscal year 2010, the City began using drainage-fee revenue to repay general-obligation debt that had been issued for the City's Street Maintenance Program. In 2010, it was estimated that the Street Maintenance Program would cost a total of $78 million.

Beck's challenge on this point focuses on Texas Local Government Code section 552.044(2)(F), which lists one of the seven "cost[s] of service" that may be included in the "drainage charge":

(F) the prorated cost of debt service and reserve requirements of structures, equipment, and facilities provided by revenue bonds or other drainage revenue-pledge securities or obligation issued by the municipality [.]

Id. at § 552.044(2)(F) (emphasis added). According to Beck, this provision specifies that drainage-fee revenue can only be used to repay solely drainage-revenue-pledged debt — not general obligation debt.

Responding to these contentions in its motion for summary judgment and on appeal, the City cites to section 552.054 to show that these fees were properly assessed against the Storm Water Utility Fund. This provision, in relevant part, states: "This subchapter does not: . . . (3) preclude a municipality from imposing impact fees or other charges for drainage authorized by law." Id. § 552.054. The City argues that, because the City Council approved these contested assessments by ordinance each year, they constitute "other charges for drainage authorized by law."⁴ See id.

4 The parties agree in their joint stipulation that the City Council approved these payments via ordinance. Copies of these ordinances were included as exhibits to the joint stipulation.

II. Legal Principles

Black's Law Dictionary defines an "ordinance" as:

An authoritative law or decree; specif., a municipal regulation, esp. one that forbids or restricts an activity. Municipal governments can pass ordinances on matters that the state government allows to be regulated at the local level. A municipal ordinance carries the state's authority and has the same effect within the municipality's limits as a state statute.

Ordinance, Black's Law Dictionary (11th ed. 2019).

The City of Lubbock is a home-rule city that derives its authority to enact ordinances from the Texas Constitution.⁵ See Tex. Const. art. XI, § 5; Tex. Loc. Gov't Code Ann. § 51.072; see also City of Laredo v. Laredo Merchants Assoc., 550 S.W.3d 586, 592 (Tex. 2018) (home-rule cities "have all power not denied by the Constitution or state law" and "need not look to the Legislature for grants of authority"). A city ordinance is presumed to be final, conclusive, and valid; courts have no authority to interfere unless the ordinance is unreasonable and arbitrary, amounting to a clear abuse of municipal discretion. City of San Antonio v. Pigeonhole Parking of Tex., Inc., 311 S.W.2d 218, 223 (Tex. 1958); Barnett v. City of Plainview, 848 S.W.2d 334, 338 (Tex. App.—Amarillo 1993, no writ) (citing City of Brookside Vill. v. Comeau, 633 S.W.2d 790, 792 (Tex. 1982)). The party attacking an ordinance bears the burden to show that no fact or condition exists that would authorize passage of the ordinance. Quick v. City of Austin, 7 S.W.3d 109, 116-17 (Tex. 1998); see also Washer v. City of Borger, No. 07-16-00413-CV, 2018 WL 3637379, at *3 (Tex. App.—Amarillo July 31, 2018, no pet.) (mem. op.) (the challenging party bears the burden to prove an ordinance is invalid and "that burden is a heavy one") (internal quotation omitted).

5 The parties agree in their joint stipulation that the City of Lubbock is a home-rule city.

However, a home-rule city's ordinance that attempts to regulate a subject matter preempted by state statute is unenforceable to the extent it conflicts with the statute. Dallas Merchant's & Concessionaire's Ass'n v. City of Dallas, 852 S.W.2d 489, 491 (Tex. 1993); Washer, 2018 WL 3637379, at *3. But the Legislature's intent to impose such a limitation must appear with unmistakable clarity. City of Laredo, 550 S.W.3d at 593. Accordingly, "[a] statute and a city ordinance will not be held repugnant to each other if any other reasonable construction leaving both in effect can be reached." Barnett, 848 S.W.2d at 338-39.

We interpret statutes under traditional principles of statutory construction and our primary objective is to ascertain and give effect to the Legislature's intent. Colorado Cty. v. Staff, 510 S.W.3d 435, 444 (Tex. 2017). Our analysis begins with the plain and common meaning of the statute's words. See Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 642 (Tex. 2004). We consider the statute as a whole rather than its isolated provisions. City of Canyon v. Fehr, 121 S.W.3d 899, 905 (Tex. App.—Amarillo 2003, no pet.). "If a statute is unambiguous, we must adopt the interpretation supported by its plain language unless such an interpretation would lead to absurd results." Sw. Bell. Tel. Co., 270 S.W.3d at 260.

III. Application

We agree with the City's contention that the challenged assessments properly could be levied against the Fund's drainage-fee revenue under section 552.054.

As stated above, the stipulations and evidence show that these challenged assessments were approved each year by City Council ordinance. We presume city ordinances are valid, conclusive, and final, and we do not interfere with them unless they constitute a clear abuse of discretion. See Washer, 2018 WL 3637379, at *3; Barnett, 848 S.W.2d at 338. A statute will preempt a city ordinance only if that intent appears with unmistakable clarity. See City of Laredo, 550 S.W.3d at 593; Barnett, 848 S.W.2d at 338-39.

Here, as Beck points out, the Act provides definitions for the "cost[s] of service" that may be included with a drainage fee. See Tex. Loc. Gov't Code Ann. § 552.004(2), (4). But the specificity of these definitions does not circumscribe the broad grant of authority in section 552.054, which states that the subchapter "does not: . . . (3) preclude a municipality from imposing impact fees or other charges for drainage authorized by law." Id. at § 552.054 (emphasis added). The plain language of this provision — read in light of the deference afforded city ordinances — supports the conclusion that the payments in lieu of taxes, payments in lieu of franchise fees, and repayment of general-obligation debt fall within the phrase "other charges for drainage authorized by law." See Washer, 2018 WL 3637379, at *3; Barnett, 848 S.W.2d at 338; see also Ordinance, Black's Law Dictionary (11th ed. 2019) (defining "ordinance" as an "authoritative law or decree"). Because this "reasonable construction" of the relevant statutes and city ordinances permits both to remain in effect, the Act does not limit the City's ability to levy the challenged assessments against the Storm Water Utility Fund. See Barnett, 848 S.W.2d at 338-39.

We conclude the trial court properly granted the City's summary judgment motion with respect to Beck's claims.

CONCLUSION

We affirm the trial court's final judgment.

/s/ Meagan Hassan

Justice Panel consists of Justices Bourliot, Hassan, and Poissant.