Cities Conroe v. Paxton (In re City of Conroe)
| Decision Date | 31 August 2018 |
| Docket Number | NO. 03-17-00014-CV, NO. 03-17-00087-CV,NO. 03-16-00785-CV,03-16-00785-CV |
| Parties | The CITIES OF CONROE, MAGNOLIA, AND SPLENDORA, Texas, Appellants v. Ken PAXTON, Attorney General of Texas; Quadvest, L.P.; Woodland Oaks Utility, L.P.; and San Jacinto River Authority, Appellees In re City of Conroe, Texas ; City of Magnolia, Texas ; and City of Splendora, Texas In re Quadvest, L.P.; Woodland Oaks Utility, L.P.; Everett Square, Inc.; E.S. Water Consolidators, Inc.; Utilities Investment Co., Inc.; and T&W Water Service Company |
| Court | Texas Court of Appeals |
Mr. Joshua Godbey, for Appellees Ken Paxton, Attorney General of Texas.
Mr. Marvin W. Jones, Mr. C. Brantley Jones, Amarillo, for Appellees Woodland Oaks Utility, L.P., Quadvest, L.P.
Mr. Richard B. Farrer, San Antonio, Ms. April Lynn Farris, Mr. James Zucker, Mr. Wyatt Dowling, Mr. Charles R. Parker, Houston, for Appellees San Jacinto River Authority.
Leonard V. Schneider IV, Mr. Ramon G. Viada III, Houston, Ms. Amanda Cottrell, Mr. Michael V. Powell, Dallas, for Appellants The Cities of Magnolia, and Splendora, Texas.
Mr. Michael V. Powell, Dallas, Ms. Amanda Cottrell, Mr. Ramon G. Viada III, Houston, for Appellants The Cities of Conroe, Magnolia, and Splendora, Texas.
Before Justices Puryear, Pemberton, and Goodwin
Although the Uniform Declaratory Judgments Act (UDJA)1 is calculated to aid efficient resolution of legal disputes and accompanying uncertainty,2 those salutary goals do not override recognized statutory and jurisdictional limitations on the UDJA’s reach.3 In these three related causes, we must ascertain the extent of similar limitations on another statute that authorizes a form of declaratory relief to resolve legal uncertainty, but with greater impact on the procedural framework that would ordinarily govern a civil action—Chapter 1205 of the Government Code, titled "Public Security Declaratory Judgment Actions"4 but commonly known as the "Expedited Declaratory Judgments Act" (the EDJA).5 More specifically, we must address—apparently as a matter of first impression—the extent to which a river authority that has issued bonds paid and secured by revenues pledged from its water-sales contracts may invoke the EDJA as a vehicle for litigating subsequent rate disputes with customers under those contracts. Other key questions, also of first impression, concern whether the claims implicate the governmental immunity of municipal customers of the river authority and whether the EDJA permits venue in the Travis County district court below.
We conclude that a claim under color of the EDJA that would directly declare a customer liable for breaching its water-sale contract through its refusal to pay increased rates lies beyond the proper scope of that statute. However, we have determined that other claims, which seek in rem declarations regarding the legality and validity of the water-sales contracts and rates, are within the EDJA for the reasons we will describe herein, do not implicate government immunity, and may be brought in the Travis County venue.
Each of the three causes—an interlocutory appeal and two mandamus petitions—arises from a single underlying trial-level action that was initiated under color of the EDJA by the San Jacinto River Authority (SJRA), the appellee and real party in interest. The appellants and relators each appeared in the action in opposition to SJRA. The broader context of this action is formed by legal and policy disputes concerning groundwater in Montgomery County.
Montgomery County, the county encompassing Conroe (its seat) and The Woodlands, is situated on the northern edge of what today is termed the "Greater Houston" metropolitan area. Historically, the primary source of water in Montgomery County has been groundwater extracted from the Gulf Coast Aquifer. As that county has experienced significant population growth in recent decades, professed concerns about long-term depletion of the aquifer prompted formation of the Lone Star Groundwater Conservation District, which has since required large-volume users, such as municipal utilities and private water-supply corporations, to formulate and ultimately implement plans for achieving significant percentage reductions in their respective groundwater usage. Implementation of this regime took place over several years, culminating in mandatory groundwater-usage cutbacks that took effect in January 2016.
Meanwhile, against the backdrop of these legal and policy developments, SJRA—a conservation and reclamation district created by the Legislature under Texas Constitution Article XVI, Section 59, and whose jurisdiction includes Montgomery County7 —spearheaded development of a "Groundwater Reduction Plan" (GRP) that it championed as a collective solution for area municipalities and other large-volume water users who would be facing the impending groundwater-usage cutbacks. The GRP, simply described, has entailed SJRA constructing and ultimately operating a water-treatment and distribution system that draws surface water from Lake Conroe,8 which SJRA then sells to large-volume users, providing them an alternative to reliance on groundwater.
Over 80 entities, operating over 150 separate water systems, "participate" (as it is termed) as water customers under the GRP. Among them are the appellants and relators here—the municipalities of Conroe, Magnolia, and Splendora (the "Cities") and the private water utilities Quadvest, L.P.; Woodland Oaks Utility, L.P.; Everett Square, Inc.; E.S. Water Consolidators, Inc.; Utilities Investment Co., Inc.; and T&W Water Service Company (the "Utility Companies"). The relationship between SJRA and each of these GRP participants is founded on contracts formed against a statutory backdrop.
The Legislature has authorized SJRA to enter into contracts under which it sells water to "municipalities or other corporate bodies or persons, public or private" and establishes and collects rates and charges therefore.9 Under color of these delegated powers, SJRA has executed a bilateral contract with each GRP participant. Each such "GRP Contract," as relevant to this case, contains materially identical terms that include an obligation of the participant to pay SJRA monthly charges derived from the volume of water the participant either takes from the new system or pumps from the ground. The amounts due are to be determined principally by multiplying the volumes by rates set by SJRA through a separate "Rate Order" that "shall be amended from time to time." SJRA’s enabling statute requires that it set such fees and charges so as to generate revenues sufficient to cover its costs,10 and the GRP Contracts further prescribe that "[t]he fees, rates, and charges adopted under the Rate Order shall at all times be the lowest" that are "consistent with good management practices by [SJRA]"; "consistent with [SJRA’s] statutory and constitutional duties and responsibilities"; "just, reasonable, and nondiscriminatory"; and "necessary and proper" to meet specified financial needs of the GRP regime and project. The GRP Contracts also prescribe various procedural requirements with which SJRA must comply when promulgating a Rate Order.
Among the financial needs that must be met through the rates and charges is repayment of debt. By statute, SJRA is authorized to issue, and it has issued, bonds to finance construction of the new surface-water plant and related infrastructure, paid and secured by revenues it obtains from its water sales to the GRP participants collectively.11 Between 2009 and the 2016 inception of the proceedings below, SJRA had issued seven series of these revenue bonds, of which approximately $520 million in aggregate principal amount remained outstanding, most of which was held by the Texas Water Development Board. In connection with each bond series, SJRA’s board adopted a resolution that, inter alia , authorized the bonds' issuance and delivery, specified the bonds' purpose and terms, and pledged certain revenues received from the GRP water sales to the bonds' payment and security. The pledged revenues included those necessary to pay operation and maintenance expenses for the GRP and Project, service the bond debt, and maintain a bond reserve fund.
SJRA’s enabling act requires that its fees and charges from water sales shall be "sufficient to produce revenue adequate ... to pay the interest on or the principal of any bonds or other obligations issued by [SJRA] when and as same become due and payable and to fulfill any reserve or other fund obligations of [SJRA] in connection with such bonds," in addition to "pay[ing] expenses necessary to the operation and maintenance of [SJRA’s] property and facilities ... and such other expenses as the Board of Directors shall deem necessary and proper for any purposes."12 Further, each of SJRA’s bond resolutions included covenants that SJRA would set rates and charges so as to generate revenues sufficient to cover the GRP’s operation and maintenance expenses, debt service, and bond reserves, and would otherwise be in accordance with the GRP Contracts and enabling legislation. In turn, the GRP Contracts require SJRA to set rates and charges sufficient to "pay the principal of, interest on, and redemption prices or costs of any Bonds or other obligations of [SJRA] issued or incurred, or to be issued or incurred, in connection with the Project or the GRP" and "satisfy all rate covenants relating to any such Bonds or other obligations of [SJRA] relating to the Project or the GRP."
Prior to issuing each bond series, SJRA obtained statutorily required legal approvals from the Attorney General and registration with the Comptroller.13 More specifically, SJRA presented uncontroverted evidence below that it had submitted to the Attorney General, in connection with each bond series, the respective bonds, the corresponding bond resolutions, and underlying materials that...
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