Anda di halaman 1dari 93

No.

05-11-00036-CV

IN THE COURT OF APPEALS


FOR THE FIFTH DISTRICT OF TEXAS
AT DALLAS

EX PARTE THE CITY OF IRVING, TEXAS

REPLY BRIEF OF APPELLANTS JOE PUTNAM AND


IRVING TAXPAYERS OPPOSED TO ILLEGAL AND
WASTEFUL USE OF TAX MONEY

JAMES B. HARRIS
State Bar No. 09065400
STEPHEN F. FINK
State Bar No. 07013500
SCOTT P. STOLLEY
State Bar No. 19284350
RICHARD B. PHILLIPS, JR.
State Bar No. 24032833
THOMPSON & KNIGHT LLP
One Arts Plaza
1722 Routh Street, Suite 1500
Dallas, Texas 75201
Phone: (214) 969-1700
Fax: (214) 969-1751

COUNSEL FOR APPELLANTS


JOE PUTNAM AND IRVING TAXPAYERS OPPOSED TO
ILLEGAL AND WASTEFUL USE OF TAX MONEY

ORAL ARGUMENT REQUESTED


TABLE OF CONTENTS

Page

Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Index of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

Summary of the Arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1. The Taxpayers are properly before


the Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2. The trial court’s judgment must be


reversed because the Entertainment
Center is not a “hotel project.” . . . . . . . . . . . . . . . . . . . . . . . 3

A. This Court’s decision in the previous appeal


under the temporary injunction standard does
not control its determination in this appeal. . . . . . . . . . . . . 3

B. The Entertainment Center Project is not a


“hotel project” just because it includes a
hotel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

3. The district court’s judgment must


be reversed because the City is not
entitled to the State’s portion of the
mixed-beverage tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

A. Section 2303.5055 of the Government Code


has never been understood to authorize a
refund of the State’s share of the mixed-
beverage tax.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

-i-
Page

B. When read in context, the term “govern-


mental body” does not include the State. . . . . . . . . . . . . . 11

C. The City and Las Colinas Group disregard


key legislative history and structural support
for the Taxpayers’ construction of section
2303.5055.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

D. The City’s and Las Colinas Group’s alleged


aids to construction do not support their
interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

4. The trial court’s judgment must be reversed


because the parking tax and admission tax
were not properly levied. . . . . . . . . . . . . . . . . . . . . . . . . . . 15

A. The City’s proposed interpretation of its charter


is fatally flawed.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

B. The City cannot avoid of the trial court’s judgment


by belatedly levying the parking tax and admission
tax in accordance with the City’s charter . . . . . . . . . . . . . . 18

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Certificate of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Appendices

O — Legislative History of S.B. 1247 . . . . . . . . . . . . . . . . . . . Tab O

P — Additional Legislative History of S.B. 1247. . . . . . . . . . . . Tab P

Q — Map of House District 103 . . . . . . . . . . . . . . . . . . . . . . Tab Q

-ii-
R — Renderings of hotel projects from other cities . . . . . . . . . . Tab R

S — Excerpts from bonds issued by the


City of Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tab S

T — Excerpts from the bonds issued by the


City of San Antonio . . . . . . . . . . . . . . . . . . . . . . . . . . Tab T

U — Excerpts from the bonds issued by the


City of Dallas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tab U

-iii-
INDEX OF AUTHORITIES
Page
CASES

Brown v. De La Cruz,
156 S.W.3d 560 (Tex. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Burks v. Yarbrough,
157 S.W.3d 876 (Tex. App.—Houston [14th Dist.]
2005, no pet) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

C & H Nationwide, Inc. v. Thompson,


903 S.W.2d 315 (Tex. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

City of Bells v. Greater Texoma Util. Auth.,


790 S.W.2d 6 (Tex. App.—Dallas 1990, writ denied) . . . . . . . . . . . . . 19

Entergy Gulf States, Inc. v. Summers,


282 S.W.3d 433 (Tex. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 14

Farmers Cnty. Mut. Ins. Co. v. Romo,


250 S.W.3d 527 (Tex. App.—Austin 2008, no pet.) . . . . . . . . . . . . . . 13

Hammond v. City of Dallas,


712 S.W.2d 496 (Tex. 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

In re Doe,
19 S.W.3d 346 (Tex. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Kasten v. Saint Gabion Performance Plastics Corp.,


No. 09-834, 2011 WL 977061 (U.S. March 22, 2011) . . . . . . . . . . . . . . 12

LTS Charter School, Inc. v. Palasota,


293 S.W.3d 830 (Tex. App.—Dallas 2009, pet. filed) . . . . . . . . . . . . . 5

Lower Colorado River Auth. v. City of San Marcos,


523 S.W.2d 641 (Tex. 1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

-iv-
Page

Mid-Century Ins. Co. v. Tex. Workers' Compensation Comm’n,


187 S.W.3d 754 (Tex. App.—Austin 2006, no pet.) . . . . . . . . . . . . . . 18

Moore v. Coffman,
200 S.W. 374 (Tex. 1918) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Ohnesorge v. Winfree Academy Charter School,


328 S.W.3d 654 (Tex. App.—Dallas 2010, no pet.) . . . . . . . . . . . . . . . 8

Putnam v. City of Irving,


No. 05-10-01269-CV, 2011 WL 259478
(Tex. App.—Dallas Jan. 27, 2011, pet. filed) . . . . . . . . . . . . . . . . 4, 16

Smith Cnty. v. Thornton,


726 S.W.2d 2 (Tex. 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Vosburg v. McCrary,
77 Tex. 568, 14 S.W. 195 (1890) . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Welch v. McLean,
191 S.W.3d 147 (Tex. App.--Fort Worth 2005, no pet.) . . . . . . . . . . . . 5

STATUTES

IRVING TEX., CHARTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

TEX. GOV'T CODE ANN. § 1205.021


(Vernon 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

TEX. GOV'T CODE ANN. § 1205.068


(Vernon 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

TEX. GOV'T CODE ANN. § 1205.102


(Vernon 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

TEX. GOV'T CODE ANN. § 1205.104(b)


(Vernon 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

-v-
Page

TEX. GOV'T CODE ANN. § 1205.105


(Vernon 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

TEX. GOV'T CODE ANN. § 2303.501


(Vernon 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

TEX. GOV'T CODE ANN. § 2303.502


(Vernon 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

TEX. GOV'T CODE ANN. § 2303.503


(Vernon 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

TEX. GOV'T CODE ANN. § 2303.504


(Vernon 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

TEX. GOV'T CODE ANN. § 2303.505


(Vernon 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

TEX. GOV'T CODE ANN. § 2303.5055


(Vernon 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 15

TEX. GOV'T CODE ANN. § 2303.506


(Vernon 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

RULE

TEX. R. EVID. 201 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

-vi-
SUMMARY OF THE ARGUMENTS

The City’s proposed development, to be built with public money, may be a

performance hall project or a restaurant project or an entertainment project. But

with only twelve hotel rooms designed to sleep 32 (3 RR 83), it is not a hotel

project. And if it is not a hotel project, it is not entitled to receive under Tax Code

section 351.102(c) the approximately $141 million in State taxes that the City has

pledged to repayment of the bonds to be issued to finance construction and that

the final judgment would allow.

Even if the Entertainment Center were a hotel project, it would still not

qualify for a refund of the State’s share of the mixed-beverage taxes it generates.

The record here does not show that any hotel project has ever received a refund

of the State’s share of the mixed-beverage tax under Government Code section

2303.5055. That fact is consistent with the Comptroller’s longstanding position

that section 2303.5055 does not provide statutory authority to refund such taxes

from general revenue. It is also well supported by the words that surround the

phrase “governmental body” in section 2303.5055, by the structure of

Government Code chapter 2303, and by the legislative history for this section.

The final judgment nevertheless incorrectly validates and requires the refund of

the State’s share of mixed-beverage taxes.

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 1
Finally, before City taxes can be used to repay the bonds, they need to be

levied in accordance with the City’s charter. Here a parking tax and admission

tax were adopted at a special meeting of the city council, not a regular meeting as

the charter requires. Because the final judgment validates and protects that

illegality, the judgment must be set aside.

ARGUMENTS

1. The Taxpayers are properly before the Court.

Although this Court has already denied the City’s motion to dismiss, the

City insists that the Taxpayers should not be parties to this appeal. (City’s Br. at

29-32.) The City’s only new argument is that the Taxpayers delayed filing their

petition for review in the Supreme Court. (Id. at 31.) But the Taxpayers asked for

and received only a two-week extension. The petition for review was filed on

March 28 and is under consideration by the Supreme Court. Moreover, the

Taxpayers asked for the short extension because of a long-planned family trip,

and the City did not oppose the motion. Therefore, the City should not now be

heard to complain about it. The rest of the City’s arguments were raised in their

motion to dismiss, and have already been rejected. Because the Taxpayers have

appealed the security bond and dismissal orders, they are permitted to

participate in this appeal of the final judgment, as the Bond Validation Act

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 2
provides. TEX. GOV’T CODE ANN. §§ 1205.068, 1205.104(b), 1205.105 (Vernon

2000).

2. The trial court’s judgment must be reversed because the


Entertainment Center is not a “hotel project.”

A. This Court’s decision in the previous appeal under the temporary


injunction standard does not control its determination in this appeal.

The Taxpayers have argued that a decision reviewing the denial of a

temporary injunction does not decide the case on the merits because the

standards of appellate review are different. (Taxpayers’ Br. at 9.) The City’s only

response is to claim (without citing any authority) that this situation is an

exception because the trial was complete when the district court entered its final

judgment.1 (City’s Br. at 33.) But the Bond Validation Act requires decisions

about imposing a security bond to be decided under a temporary injunction

standard whatever the status of the trial proceedings. TEX. GOV’T CODE ANN. §

1205.102 (Vernon 2000).

Moreover, in the previous appeal this Court did not decide whether Tax

Code section 351.102(b) requires that the City show that there is a “hotel project,”

not simply a hotel, to qualify for the refund of certain state taxes. The prior

The Taxpayers also explained that in this appeal, the final judgment must
1

be reversed if any portion of the proposed bonds is illegal. (Taxpayers’ Br. at 7-9.)
The City did not contradict this analysis.

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 3
decision assumed, without discussion, that so long as there was a hotel of any

size in the project, section 351.102(b) was satisfied provided that all of the non-

hotel components were described in that section and were within 1,000 feet of a

hotel or a convention center facility. Putnam v. City of Irving, No. 05-10-01269-CV,

2011 WL 259478 at *5-6 (Tex. App.—Dallas Jan. 27, 2011, pet. filed). This Court

found those conditions either satisfied or not disproved. Id. But the Taxpayers

have consistently argued that the presence of a hotel does not necessarily ensure

the existence of a “hotel project,” at least in the context of Tax Code chapter 351.

The City also ignores a key distinction between the two appeals. When the

Taxpayers attempted to meet the temporary injunction standard to avoid

imposition of the bond, they bore the burden of proof. Putnam, 2011 WL 259478

at *5 (noting that the Taxpayers had not put on evidence to support one of their

contentions). But with respect to the final judgment, it is the City that bears the

burden of proof. TEX. GOV’T CODE ANN. § 1205.021 (Vernon 2000) (noting that the

City is the plaintiff). That difference in the burden of proof is further reason for

this Court to revisit the ruling on “hotel project.”

B. The Entertainment Center Project is not a “hotel project” just because


it includes a hotel.

The City fails to address the first question that must be answered under

section 351.102(b) — whether the City’s development is a “hotel project.” The

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 4
City appears to assume that the Entertainment Center is a “hotel project” simply

because it includes a hotel. (City’s Br. at 34.) The Taxpayers’ earlier Disney World

example alone disproves that argument as a matter of grammar and ordinary

usage. (Taxpayers’ Br. at 12-13.)

Sidestepping once again grammar and ordinary usage, the City counters that

any hotel at a development, no matter how small, creates a “hotel project,”

relying on the statements of Senator Harris in a post-enactment letter generated

for litigation. (City’s Br. at 34.) That approach is fruitless for at least two reasons.

First, Senator Harris’ after-the-fact statements about the intent of the

amendments in S.B. 1247 are not legislative history and provide little guidance as

to what the legislature collectively intended. Entergy Gulf States, Inc. v. Summers,

282 S.W.3d 433, 443-44 (Tex. 2009) (citing In re Doe, 19 S.W.3d 346 (Tex. 2000));

Brown v. De La Cruz, 156 S.W.3d 560, 568 n.45 (Tex. 2004); In re Doe, 19 S.W.3d

346, 352 (Tex. 2000); C & H Nationwide, Inc. v. Thompson, 903 S.W.2d 315, 328 (Tex.

1994) (Hecht, J., concurring and dissenting) (citations omitted); LTS Charter

School, Inc. v. Palasota, 293 S.W.3d 830, 836 (Tex. App.—Dallas 2009, pet. filed);

Welch v. McLean, 191 S.W.3d 147, 169-70 (Tex. App.—Fort Worth 2005, no pet.).

Second, the statements in Senator Harris’ letter are at odds with the legislative

history of S.B. 1247. At the time S.B. 1247 was introduced by Senator Harris on

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 5
March 2, 2009, the development agreement between the City and the Las Colinas

Group made no mention of hotel rooms. (DX 3.) Therefore, S.B. 1247 could not

have contemplated a hotel that the Las Colinas Group was not contractually

required to build. Moreover, as introduced by Senator Harris, S.B. 1247 made

only one change to Tax Code section 351.102. (App. Tab P at 5.) It would have

changed the definition of “central municipality” to include cities with a

population of more than 325,000. (Id.) That change would not have affected the

City of Irving. (PX 3.) S.B. 1247 remained unchanged when it was reported out of

the Senate Economic Development Committee, which Senator Harris chaired.

(App. Tab P. at 4, 6.)

The changes to section 351.102 on which the City relies were all added to S.B.

1247 in the House, under the sponsorship of Representative Paula Peirson. (App.

Tab P at 3.) Nothing in the legislative history of S.B. 1247 in the House supports

any of Senator Harris’ comments in his letter. (App. Tab O.) S.B. 1247 was

modified by the House and returned to the Senate on the second-to-last day of

the Session. (App. Tab P at 1.) It did not return to the Senate Economic

Development Committee. (Id.) The full Senate concurred in the House

Amendments. (Id.)

If S.B. 1247 had been intended by Senator Harris to accomplish what Senator

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 6
Harris says, those changes should have been included in the version he filed and

that was approved by his Senate committee. They were not. Because Senator

Harris was not involved with the House amendments, he is in no position to

describe from personal knowledge the intent of the amendments. In short,

although Senator Harris now claims that S.B. 1247 was specifically intended to

benefit Irving, he had nothing to do with the amendments that the City claims

were intended to benefit it, and the published legislative history does not

disclose the intended purpose of amendments adopted by the House.

Undisclosed intent cannot be treated as controlling legislative history.2

The Taxpayers do not dispute that if the project were a “hotel project,” then

funding under section 351.102(b) might be proper. Instead, the Taxpayers’

argument focuses on the threshold issue — whether the project can be

characterized as a “hotel project” at all. The Taxpayers’ argument is a matter of

plain usage. Because “hotel” is the adjective that modifies “project,” the project

can be a “hotel project” only if the hotel is the defining characteristic of the

2 The published bill analysis and fiscal notes for S.B. 1247 are attached at
Appendix Tab O. They can also be found at Texas Legislature Online
(http://www.capitol.state.tx.us) by searching for S.B. 1247 in the Regular Session
of the 81st Legislature.

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 7
project. (Taxpayers’ Br. at 11-12.)3

The Court’s recent decision in Ohnesorge v. Winfree Academy Charter School,

328 S.W.3d 654 (Tex. App.—Dallas 2010, no pet.) directly supports the

Taxpayers’ argument based on grammar and ordinary usage. The City responds

that if the Taxpayers truly thought Ohnesorge controlled this case, they would

have cited it in their motion for rehearing in the previous appeal. (City’s Br. at

35.) The Taxpayers did. (Motion for Rehearing at 15.) The City also argues that

the analysis in Ohnesorge is limited solely to its facts. (City’s Br. at 35-36.) In other

words, the City suggests that because this case does not involve a charter school

claiming to be a public school district, Ohnesorge provides no guidance. But the

Taxpayers rely on Ohnesorge for principles of statutory construction, and the City

has made no effort to explain why those principles do not apply here.

3. The district court’s judgment must be reversed because the City is


not entitled to the State’s portion of the mixed-beverage tax.
A. Section 2303.5055 of the Government Code has never been understood
to authorize a refund of the State’s share of the mixed-beverage tax.

The Comptroller has consistently taken the position that Government Code

section 2303.5055 does not authorize the refund of the State’s share of the mixed-

beverage tax. That was the Comptroller’s position in the district court, (3 RR 11),

3Presumably, the Entertainment Center could be called a “performance hall


project,” but not a “hotel project.”

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 8
and it was most recently reaffirmed at a hearing before the House Ways and

Means Committee on Monday, April 4, 2011. The House Ways and Means

Committee was considering a bill sponsored by a state representative whose

district includes a portion of Irving.4 Among the changes included in the bill was

a revision of the term “governmental body” in section 2303.5055 to include the

State. In other words, one purpose of the bill was to change the law to adopt the

City’s position in this appeal. A lobbyist for the City told the committee that the

proposed amendment would not change existing law. A committee member then

called on a representative of the Comptroller’s Office, who was present as a

resource person, to respond. That representative said the proposed amendment

would change the law, making the State’s share of the mixed-beverage tax

available for refund for the first time. 5

That Section 2303.5055 in its present form does not authorize the refund of

4The bill is authored by Rafael Anchia of District 103. A map of District 103’s
boundaries is attached at Appendix Tab Q. The text and current status of the bill,
H.B. 3341 can be found at Texas Legislature Online (http://www.capitol.state.tx.
us) by searching for H.B. 3341 in the Regular Session of the 82nd Legislature.
5 The audio recording of this hearing is available at Texas Legislature Online
(http://www.capitol.state.tx.us), by clicking on the link for House video
broadcasts, then clicking the link for the 82nd session committee broadcasts,
clicking the link for the Ways & Means Committee, and then selecting the April
4, 2011 hearing. The discussion cited above begins at 4 hours and 44 minutes into
the recording. The Taxpayers request that the Court take judicial notice of the
hearing recording. TEX. R. EVID. 201.

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 9
the State’s share of the mixed beverage tax is also demonstrated by the bond

offerings of Houston, San Antonio, and Dallas for their bona fide “hotel projects”

under Tax Code section 351.102(b). Although those bond offerings are not part of

the record, they were included by the City as an appendix to its brief.6 None of

them includes a pledge of the State’s share of the mixed-beverage tax for

repayment, although in one case, the local share of the mixed-beverage tax is

pledged for repayment.7 Therefore, there is no evidence that any hotel project in

Texas has ever received a refund of the State’s share of the mixed-beverage tax.

With this background in mind, it is not surprising that Senator Harris’ letter

is at best equivocal about the City’s entitlement to the State’s share of the mixed-

beverage tax. That letter does say that Senator Harris thought the City’s project

6 The City also chose to be very selective in what it included. The Taxpayers
have attached relevant and material sections of the bond offerings left out by the
City. For instance, this Court may be interested in what a bona fide hotel project
looks like, so renderings that are part of the bond offerings are included at
Appendix Tabs R, S, T, and U. The full bond files comprise several hundred
pages each and are available at http://www.emma.msrb.org. The bond files can
be found by entering the proper CUSIP into the “Muni Search” box. The CUSIPs
are as follows: (1) for the Houston project: 44237N, (2) for the San Antonio
project: 796245; (3) for the Dallas project: 235417.
7 The official statement for the Houston hotel project, in which the City’s
attorney in this appeal, Vinson & Elkins, served as co-bond counsel (App. Tab S
at J-9) specifically discusses section 2303.5055 and provides that only the local
share of the State’s mixed-beverage tax will be refunded and used to repay the
bonds. (Id. at 35.)

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 10
would be “eligible for all refunds of state taxes covered by … 2303.5055 of the

Government Code including … mixed beverage taxes.” (PX 22.) But it never says

explicitly that the State’s share of the mixed-beverage tax is in fact covered by

Section 2303.5055. (Id.)

To remedy that omission, the City represents that section 2303.5055 was

amended in 2009 to allow municipalities to receive the State’s portion of the

mixed-beverage tax, and that Senator Harris’ intended the amendment to have

that result. (City’s Br. at 26-27) But section 2303.5055 was not amended in 2009. TEX.

GOV’T CODE ANN. § 2303.5055 historical note (Vernon 2008) (noting that the

statute was added in 1995 and has never been amended). In particular, S.B. 1247

makes no reference to any changes to section 2303.5055. (App. Tab P at 10-14.) If

there was no amendment to section 2303.5055, Senator Harris could not have

intended any result. Therefore, the City’s reliance on Senator Harris’ purported

intent is inexplicable.

B. When read in context, the term “governmental body” does not include
the State.

The City and the Las Colinas Group argue that the words “governmental

body” unambiguously include the State. (City’s Br. at 21-22; LCG’s Br. at 4-6.)

But the question for this Court is not the meaning of the words “governmental

body” standing alone. The Taxpayers have already shown that it can mean

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 11
different things. (Taxpayers’ Br. at 21-25.) Instead, the correct question is the

meaning of section 2303.5055 as a whole. In other words, what do the words

“governmental body” mean in the context of the statute in which they appear?

As Justice Scalia demonstrated in a recent opinion, the context matters

greatly to meaning. In Kasten v. Saint Gabion Performance Plastics Corp., No. 09-

834, 2011 WL 977061 (U.S. March 22, 2011), the issue was whether the phrase

“filed any complaint” includes an oral complaint. The plaintiff argued that “any

complaint” unambiguously includes every type of complaint. As Justice Scalia

observed, in dissent, although the words “any bank” standing alone may seem

unambiguously comprehensive, “the phrase ‘to cash a check in any bank’ does

not refer to a riverbank, or even a bloodbank.” Id. at *14. In context, even the

ordinarily unrestrictive “any” does not expand the meaning of the word “bank”

to include something other than a financial institution.

Likewise here, the words “governmental body” standing alone could seem

unambiguously comprehensive to that “ordinary citizen” invoked by LCG with a

statute book in one hand and a dictionary in the other who supposedly divines

the meaning of a statute by looking up each word in it independently. (LCG’s Br.

at 2.) But if the same citizen took the time to carefully and thoughtfully read all of

the words of the statute in which “governmental body” appears, she could only

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 12
conclude, as have the Taxpayers, that in the context of section 2303.5055,

“governmental body” must be limited to local entities and not the State.

C. The City and Las Colinas Group disregard key legislative history and
structural support for the Taxpayers’ construction of section 2303.5055.

The Taxpayers identified multiple reasons that “governmental body” in

section 2303.5055 does not include the State. (Taxpayers’ Br. at 21-31.) The City

addresses (and attempts to explain away) some of those reasons. (City’s Br. at 23-

28.) But the City ignores four of the Taxpayers’ arguments. The only reasonable

conclusion to draw from this omission is that the City cannot reconcile its

proposed construction with the arguments.

The City fails to address or respond to the following points:

• Government Code section 2303.5055 was enacted in the same bill as Tax
Code section 151.429(h). The City’s construction of Government Code
section 2303.5055 would render Tax Code section 151.429(h) redundant
because both statutes would address the State’s portion of sales and use
and hotel occupancy taxes. (Taxpayers’ Br. at 25-26.)

• The bill analyses for the bill that enacted section 2303.5055 repeatedly
emphasize that the bill would permit “local taxing entities” to rebate “local
hotel occupancy tax, local sales and use tax, local mixed beverage tax, and
local ad valorem taxes.” (Id. at 27 (the bill analyses are included in the
Taxpayers’ appendix at Tabs J, K, L, and M).)

• Because all of the taxes in section 2303.5055 are local taxes, there is no
reason to interpret “governmental body” to include the State. Only local
taxing entities can agree to rebate all of the taxes listed in section 2303.5055.
(Id. at 28.)

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 13
• The Austin Court of Appeals’ decision in Farmers County Mutual Insurance
Company v. Romo, 250 S.W.3d 527 (Tex. App.—Austin 2008, no pet.)
supports the Taxpayers interpretation of section 2303.5055. (Id. at 30-31.)
The case does not appear in either the City’s or Los Colinas Group’s index
of authorities. (City’s Br. at iv; LCG’s Br. at iii.)

D. The City’s and Las Colinas Group’s alleged aids to construction do not
support their interpretation.

The City and Las Colinas Group offer their own arguments based on

legislative history and the structure of chapter 2303, but these contentions are

unavailing. None of the City’s or Las Colinas Group’s points supports their

argument that “governmental body” must include the State.

Both the City and Las Colinas Group rely on a failed attempt to amend

section 2303.5055 (City’s Br. at 26; LCG’s Br. at 22.) This argument fails for two

reasons. First, the Texas Supreme Court has repeatedly held that un-enacted

legislation is of no help in ascertaining legislative intent. E.g., Entergy Gulf States,

Inc. v. Summers, 282 S.W.3d 433, 442-43 (Tex. 2009). Second, the fact that the

proposed amendment was removed from the bill is equally consistent with the

Taxpayers’ interpretation. If, as the City suggests, the 75th Legislature intended

to limit section 2303.5055 to local taxing entities, the proposed amendment may

have been abandoned simply because the Legislature concluded that the

limitation was already in place and the amendment was not necessary.

The City and Las Colinas Group misapprehend the overall structure of

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 14
Government Code chapter 2303 in arguing that the structure supports their

interpretation. They assert that because 2303.505 is explicitly limited to local

taxes, and other sections – 2303.502, 2303.503 and 2303.504 – are explicitly limited

to state entities or taxes, the inclusion of local entities in section 2303.5055

without mentioning the State, means that section 2303.5055 includes the State.

(City’s Br. at 27-28; LCG’s Br. at 17-20.)

But the structure actually supports the Taxpayers. Section 2303.501 applies to

both state and local regulation. TEX. GOV’T CODE ANN. § 2303.501 (Vernon 2008).

Then, sections 2303.502, 2303.503, and 2303.504 all address the state. Id. §

2303.502 (addressing state agency rules); id. § 2303.503 (addressing state

preferences); id. § 2303.504 (addressing state tax refunds). Sections 2303.505 and

2303.506 address local entities. Id. § 2303.505 (addressing local sales and use tax

refunds); id. § 506 (addressing reduction or elimination of local fees and taxes).

Sandwiching section 2303.5055 between sections 505 and 506 logically supports

— and, in fact, should compel — an interpretation that it, too, applies only to

local entities.

4. The trial court’s judgment must be reversed because the parking tax
and admission tax were not properly levied.

A. The City’s proposed interpretation of its charter is fatally flawed.

The City does not dispute that the ordinances levying the parking tax and

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 15
admission tax were passed at a special meeting. (City’s Br. at 37.) But the City

claims that this is permissible under the charter. (Id. at 37-38.) The City’s

argument is that an “order” is the same thing as an “ordinance” and the charter

permits orders to be passed at special meetings. (Id.) The charter states that “[a]ll

resolutions or orders may be passed at any regular meeting or may be passed at

any special or called meeting called for that purpose.” IRVING, TEX. CHARTER, art.

IV, § 17 (attached as App. Tab N to the Taxpayers’ Brief). But the City’s

arguments in support of this interpretation cannot withstand scrutiny.

First, the City’s interpretation violates the fundamental rule of construction

that when drafters use two different words, they are intended to have different

meanings. See, e.g., Hammond v. City of Dallas, 712 S.W.2d 496, 498 (Tex. 1986)

(holding that in construing a city charter, the court must “consider every word,

phrase, and expression as if each had been deliberately chosen and used for a

purpose”); Putnam v. City of Irving, No. 05-10-01269-CV, 2011 WL 259478 at *7

(Tex. App.—Dallas Jan. 27, 2011, pet. filed) (“[C]onstruing ‘orders’ and

‘ordinances’ to mean the same thing would render meaningless the use of the

word ‘order’ in article IV, section 17 of the City’s charter.”).

Second, the City’s interpretation would also render the prior sentence in

section 17 meaningless. That sentence states that “[n]o ordinance, unless it be

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 16
declared an emergency measure, shall ever be passed at a called meeting, but

may be passed at any regular meeting of the council unless otherwise provided.”

IRVING, TEX. CHARTER, art. IV, § 17. This sentence categorically bars the passage

of ordinances at called meetings unless the ordinance is an emergency measure.8

But this bar would be rendered meaningless by the next sentence in the charter if

the City is correct, because the next sentence permits all orders to be passed at

called meetings. Id.

Third, the City’s interpretation is internally inconsistent. To avoid making

one of the sentences meaningless, the City claims that the two sentences together

mean that all ordinances, orders, and resolutions can be passed at either regular

meetings or special meetings, but only emergency measures can be passed at

called meetings. (City’s Br. at 37.) But that interpretation ignores the plain

language of the last sentence, which states that “all orders” may be passed at

“any special or called meeting.” Therefore, if order and ordinance mean the same

thing, then even nonemergency ordinances could be passed at called meetings.

Fourth, the City incorrectly claims (without any citation to authority) that

“the City Council does not pass ‘orders’ at all.” (City’s Br. at 38.) This statement

ignores the cases cited in the Taxpayers’ brief describing a city’s adjudicative

8 The City does not contend that the tax ordinances were emergency
measures.

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 17
functions. See Vosburg v. McCrary, 77 Tex. 568, 14 S.W. 195, 196 (1890) (describing

the city council’s adjudicative function to resolve election contests); Moore v.

Coffman, 200 S.W. 374, 375 (Tex. 1918) (describing a city council’s adjudicative

function to direct that an election be held).

Finally, it is of no moment that the City has acted on its incorrect

interpretation in the past. (City’s Br. at 38.) Section 17 is not ambiguous, and this

Court need not give any weight to the City’s alleged prior construction of that

section. Cf. Mid-Century Ins. Co. v. Tex. Workers’ Compensation Comm’n, 187 S.W.3d

754, 758 (Tex. App.—Austin 2006, no pet.) (noting that an administrative

agency’s interpretation of a statute is not entitled to any deference if the

interpretation contradicts the statute’s plain language).

B. The City cannot avoid reversal of the trial court’s judgment by


belatedly levying the parking tax and admission tax in accordance
with the City’s charter.

Recognizing the weakness of its proposed interpretation, the City represents

that “it can and will place the ordinances on a future agenda and re-adopt them

in order to remove any suggestion that the original levying of these voter-

approved taxes was improper.” (City’s Br. at 40.) This might have sufficed to

correct the problem before the trial court entered judgment, but any action the

City takes now cannot affect the trial court’s judgment, which specifically

validates the August 25, 2010, adoption of the ordinances. The trial court’s

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 18
judgment expressly declares “that the City’s Ordinances levying the Parking Tax

and the Admission Tax have been duly and validly enacted by the City Council,

and the City is authorized to enforce the collection thereof pursuant to such

ordinances and in accordance with their terms.” (6 CR 1284 (attached as App.

Tab A to the Taxpayers’ Brief).) Because the trial court erred in validating the

August 25 ordinances, the judgment must be reversed.

The City presents no authority for its argument that passing new ordinances

can somehow rectify the trial court’s error in validating the August 25

ordinances. The open meetings act cases cited by the City are inapposite. None of

the cases involved an appeal of a judgment purporting to declare the challenged

action valid. Instead, the cases stand for the proposition that actions taken in

violation of the open meetings act do not preclude the same action from being

taken in the future, if the action then complies with the open meetings act. See

Smith Cnty. v. Thornton, 726 S.W.2d 2, 3 (Tex. 1986); Lower Colorado River Auth. v.

City of San Marcos, 523 S.W.2d 641, 646 (Tex. 1975); Burks v. Yarbrough, 157 S.W.3d

876, 883 (Tex. App.—Houston [14th Dist.] 2005, no pet); City of Bells v. Greater

Texoma Util. Auth., 790 S.W.2d 6, 11 (Tex. App.—Dallas 1990, writ denied).

Moreover, in Lower Colorado River Authority, the Texas Supreme Court held that a

later ratification that did comply with the open meetings act could not act

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 19
retrospectively to validate the prior invalid action. 523 S.W.2d at 646-47. The

action could be valid only prospectively after it was taken in compliance with the

open meetings act.

The Taxpayers do not deny that the City may re-adopt the ordinances at a

regular meeting. But because the City did not do so before the judgment was

signed, the City would have to seek a new judgment validating the new

ordinances. Any future action cannot retrospectively validate the August 25

ordinances. And because those ordinances were specifically validated in the

judgment, the ordinances must stand or fall on their own merits.

The City also argues that chapter 1205 permits the City to seek a judgment

validating proposed ordinances. (City’s Br. at 40.) But that provision is

immaterial here, because the City did not obtain such a judgment. The judgment

does not purport to validate any proposed ordinances regarding the parking tax

or the ticket tax. It validates only the ordinances purportedly adopted on August

25.

Finally, this Court should not affirm the judgment based on speculative

future action by the City Council. The City has provided no evidence that the

ordinances have been set for consideration at a regular meeting. And even if they

are presented at some future regular meeting, there is no guarantee that the

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 20
ordinances would be adopted. The City should not be able to obtain validation of

these ordinances until they have actually been adopted in accordance with the

City’s charter.

CONCLUSION

At the end of the day, reasonable people can disagree about whether the

Entertainment Center is a good idea. Some may think it is unwise, but the law

does not prevent cities from doing unwise things. It does prohibit cities from

doing illegal things. And when a city is proposing to do something illegal,

Courts must step in regardless of how well intentioned the public project may be

from a municipal development standpoint.

Here, pledging State taxes to refund the city’s bonds where there is no

statutory authority to do so is illegal. Likewise, pledging local taxes that have not

been properly imposed is illegal. The Taxpayers ask that the Court apply the law,

find certain taxes are not legally available, and reverse the judgment validating

the bonds. The Taxpayers further request general relief.

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 21
Respectfully submitted,

THOMPSON & KNIGHT LLP

By: ______________________________
James B. Harris
State Bar No. 09065400

Stephen C. Fink
State Bar No. 07013500

Scott P. Stolley
State Bar No. 1928450

Richard B. Phillips, Jr.


State Bar No. 24032833

One Arts Plaza


1722 Routh Street, Suite 1500
Dallas, Texas 75201-2533
Phone: (214) 969-1700
Fax: (214) 969-1751

Counsel for Appellants


Joe Putnam and
Irving Taxpayers Opposed to Illegal
and Wasteful Use of Tax Money

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 22
CERTIFICATE OF SERVICE

On April 11, 2011, a copy of this brief was served on the following counsel by
certified mail, return receipt requested:

Michael L. Raiff David J. Schenck


Gibson Dunn & Crutcher, LLP Deputy Attorney General for Legal
2100 McKinney Avenue Counsel
Dallas, Texas 75201 P.O. Box 12548
Austin, Texas 78711-2548
COUNSEL FOR THE CITY OF IRVING
COUNSEL FOR THE ATTORNEY GENERAL
OF TEXAS, PUBLIC FINANCE DIVISION

E. Ray Hutchison
VINSON & ELKINS LLP
2001 Ross Avenue, Suite 3700
Dallas, Texas 75201

COUNSEL FOR THE CITY OF IRVING

_________________________________
Richard B. Phillips, Jr.

504915 000008 DALLAS 2728419.1

REPLY BRIEF OF APPELLANTS JOE PUTMAN AND IRVING TAXPAYERS


OPPOSED TO ILLEGAL AND WASTEFUL USE OF TAX MONEY PAGE 23
Tab
O
Tab
P
Tab
Q
Tab
R
Tab
S
Tab
T
Tab
U