In 2018 Houston voters amended the City Charter to establish a dedicated fund for drainage and street repair financed by the allocation of a fixed amount of the city’s property tax levy ($0.118, less debt service on outstanding bonds or notes for drainage and streets). In its 2020 budget, the City Council approved an allocation of $47 million to the fund. Two taxpayers sued the mayor and members of the city council, alleging that about $97 million should have been allocated under the charter formula. They sought injunctive and declaratory relief, as well as their attorney’s fees. The defendants filed a plea to the jurisdiction asserting governmental immunity. The trial court denied the plea. On appeal to the Fourteenth Court of Appeals, the defendants asserted the immunity plea but also argued that the taxpayers lacked standing to bring the suit. The court of appeals reversed the trial court, holding that the taxpayers had not established standing because they did not show that the expenditure of the disputed funds was illegal.
In Jones v. Turner (No. 21-0358), SCOTX reversed and remanded to the trial court. Citing its precedent that taxpayers have standing to sue “‘to enjoin the illegal expenditure of public funds’ without showing a particularized injury” (citations omitted), a unanimous Court determined that the taxpayers pleaded sufficient facts to establish standing. Those facts include the allocation of funds that by charter should be dedicated to drainage and streets to other parts of the budget and the expenditure of those funds for purposes other than drainage and streets. Contrary to the defendants’ argument that the taxpayers were challenging otherwise lawful expenditures because they didn’t like them, the Court held that “when the law requires that a certain amount of money be directed to a specific service, and the plaintiff alleges that it is being directed and spent elsewhere, the taxpayer has alleged an illegal expenditure sufficient to confer taxpayer standing.”
While the court of appeals did not reach the governmental immunity issue, the Court, exercising its discretion, did, holding that immunity “does not bar prospective relief against government officers acting ultra vires, i.e., outside their legal authority” [citations omitted]. To sustain an ultra vires claim, the plaintiff has to show that the public officer “acted without legal authority or failed to perform a purely administrative act.” Here the Court found that the taxpayers’ pleadings and jurisdictional facts adduced at the trial court hearing establish sufficient grounds for an ultra vires claim, since the defendants allegedly allocated money they were prohibited by charter from allocating. Although the parties dispute the methodology used by the taxpayers’ calculation of the amount of the allocation, that’s not enough for the defendants to negate the ultra vires claim. The Court thus sent the case back to the trial court for consideration of the taxpayers’ claims.
The defendants would have been a lot better off at SCOTX if they had shown precisely why the taxpayers’ method of calculation the allocation erroneously yielded an additional $50 million. Instead, they asserted that the taxpayers did it wrong (because they misapplied the revenue cap) without showing how they were right. If they had, the Court might have resolved the legal question right then and there. In any event, the Court seems pretty friendly to the idea of holding local governments to account if they can find a way to do it.
In a related case, Perez v. Turner (No. 20-0382), the Court held that a taxpayer challenge to the City’s pre-2018 Charter amendment method for assessing drainage fees failed because the taxpayer had not pleaded “a viable theory under which the disputed drainage fee exceeded the City’s authority.” It thus affirmed the court of appeals’ dismissal of the case pursuant to the City’s plea of governmental immunity but at the same time granted the taxpayer an opportunity to replead. Additionally, as in Jones, the Court held that the court of appeals erred in dismissing the taxpayer’s claims for lack of standing because a taxpayer has a concrete injury for the expenditure of illegally collected taxes or fees.
