James Robert Jones and Allen Watson v. John Whitmire, in His Official Capacity as Mayor of the City of Houston, Texas, and Sallie Alcorn, Twila Carter, Martha Castex-Tatum, Mario Castillo, Willie Davis, Carolyn Evans-Shabazz, Fred Flickinger, Mary Nan Huffman, Tarsha Jackson, Abbie Kamin, Joaquin Martinez, Amy Peck, Letitia Plummer, Edward Pollard, Julian Ramirez, and Tiffany D. Thomas, in Their Official Capacities of City Council Members of the City of Houston, Texas.

Reversed and Rendered and Opinion filed April 23, 2024.

In The

Fourteenth Court of Appeals

NO. 14-23-00550-CV

JAMES ROBERT JONES AND ALLEN WATSON, Appellants

V.
JOHN WHITMIRE, IN HIS OFFICIAL CAPACITY AS MAYOR OF THE
CITY OF HOUSTON, ET AL., Appellees

On Appeal from the 281st District Court
Harris County, Texas
Trial Court Cause No. 2019-76931

OPINION

The City Charter requires City Council to allocate a certain amount of ad
valorem tax revenue to the Drainage Fund. The question presented in this case is
whether City Council has been making the required allocation. The short answer is
“no.”
BACKGROUND

The Dedicated Drainage and Street Renewal Fund—sometimes known simply
as the Drainage Fund, or alternatively, as ReBuild Houston—was established to
change the way that the City of Houston finances its public drainage projects. The
City’s former practice was to issue bonds and incur new debts, but with the initiation
of the Drainage Fund, the City has shifted to a “pay-as-you-go source of funding”
that relies on developer impact fees, drainage charges, third party grants, and
property taxes.

This last source of funding is the focus of the current dispute. Under the terms
of the City Charter, the City Council must approve an annual budget that allocates
to the Drainage Fund “an amount equivalent to proceeds from $0.118 of the City’s
ad valorem tax levy minus an amount equivalent to debt service for drainage and
streets for any outstanding bonds or notes issued prior to December 31, 2011, and
bonds or notes issued to refund them.” Houston City Charter art. IX, § 22(b)(iii).

For Fiscal Year 2020, the City Council determined that the Charter required
an allocation of approximately $46 million in ad valorem tax revenues to the
Drainage Fund. The City Council approved a budget with that allocation.

That budget prompted a challenge from the two plaintiffs below, both of
whom are property owners who reside within the City’s limits and who pay their
share of ad valorem taxes (collectively, the Taxpayers). Relying on the same
provision in the Charter but applying a different methodology, the Taxpayers
believed that the City Council should have budgeted an allocation of more than $96
million in ad valorem tax revenues to the Drainage Fund.

2
The Taxpayers sued the mayor and members of City Council in their official
capacities (collectively, the Officials).1 The Taxpayers sought a declaration that the
Officials must fund the Drainage Fund according to the formula stated in the City
Charter. The Taxpayers also sought injunctive and mandamus relief against the
Officials, insofar as the Officials were allegedly acting ultra vires by underfunding
the Drainage Fund.

The Officials filed a plea to the jurisdiction in which they asserted their
governmental immunity. They also argued that the Taxpayers could not establish the
ultra vires exception to this immunity. The Officials explained that they had not
actually underfunded the Drainage Fund. They also explained that the appropriations
process entailed a complex series of calculations, which in turn afforded them a
certain level of discretion. And due to that discretion, the Officials argued that their
actions were within their legal authority, and not ultra vires.

The trial court denied the plea to the jurisdiction, and the Officials brought an
interlocutory appeal to this court, where they argued for the first time that the
Taxpayers lacked standing to bring their suit. This court agreed with the Officials’
standing argument and rendered judgment dismissing the Taxpayers’ suit for want
of jurisdiction, without ever reaching the question of governmental immunity.

The Taxpayers then challenged this court’s standing decision in a petition for
review, which the Texas Supreme Court granted. The Supreme Court reversed this
court’s judgment and concluded that the Taxpayers had standing. In the interest of

1
At the time of the Taxpayers’ original petition, the mayor was Sylvester Turner. Because
he no longer holds that office, we have substituted Sylvester Turner with his successor, John
Whitmire. See Tex. R. App. P. 7.2(a). The remaining members of City Council, after making
similar substitutions where necessary, are Sallie Alcorn, Twila Carter, Martha Castex-Tatum,
Mario Castillo, Willie Davis, Carolyn Evans-Shabazz, Fred Flickinger, Mary Nan Huffman,
Tarsha Jackson, Abbie Kamin, Joaquin Martinez, Amy Peck, Letitia Plummer, Edward Pollard,
Julian Ramirez, and Tiffany D. Thomas.

3
judicial economy, the Supreme Court also considered the question of governmental
immunity. Due to gaps in both the briefing and the evidence, the Supreme Court
opined that the Officials had not conclusively established “precisely how [they]
calculated the allocation, whether they did so in the manner they themselves argue
the Charter requires, or whether their calculation method conforms to the Charter’s
requirements.” The Supreme Court then remanded the case to the trial court to
consider whether the Officials were properly allocating ad valorem tax revenues to
the Drainage Fund. See Jones v. Turner, 646 S.W.3d 319, 327–28 (Tex. 2022).

Upon remand, each side produced evidence and moved for summary
judgment. The trial court granted the Officials’ motion, which was also styled as a
plea to the jurisdiction.

The Taxpayers now appeal from that final ruling.

ANALYSIS

The Officials based their dispositive motion on an assertion of governmental
immunity. That immunity generally deprives a trial court of jurisdiction, except
where a claimant has sought prospective relief against an officer of the government
whose actions are ultra vires—i.e., occurring outside of the officer’s legal authority.
See Houston Belt & Terminal Railway Co. v. City of Houston, 487 S.W.3d 154, 161
(Tex. 2016).

The Taxpayers invoked that exception in the trial court. They alleged that the
Officials had no legal authority to violate the City Charter and that the Officials had
acted ultra vires by not allocating the proper amount of ad valorem tax revenues to
the Drainage Fund, as required by the Charter.

4
The Officials challenged this allegation in their motion. They argued that their
methodology complied with the City Charter, and they produced evidence showing
that their allocations conformed with their methodology.

In their opposing motion, the Taxpayers argued that the Officials’
methodology was incorrect. The Taxpayers also argued that the evidence
conclusively established that the Officials’ allocations were improper.

The parties do not dispute each other’s evidence. Rather, they dispute which
side has employed the correct methodology. Resolution of that dispute turns on an
interpretation of the City Charter, which is a purely legal question for this court to
decide.

Before we answer that question, we first present a detailed discussion of the
parties’ competing interpretations, followed by a comparative demonstration of their
respective methodologies.

I. The Officials’ Methodology

The Officials arrive at their allocation using three steps.

A. Step One

The starting point is Article IX, Section 22, Subsection (b)(iii), which is the
provision in the Charter that requires an allocation to the Drainage Fund in “an
amount equivalent to proceeds from $0.118 of the City’s ad valorem tax levy.”

All parties agreed in their underlying motions that this language employs a
term of art. The standard method of designating the amount of a tax levy is in terms
of an amount per $100 of the value of the property being taxed. Thus, the reference
to $0.118 means 11.8 cents for every $100 of the tax base.

5
With that technical understanding in mind, the Officials calculate the proceeds
due under Step One by multiplying the tax base by $0.118, and then by dividing the
product by $100. So, for a brief example, in Fiscal Year 2012, when the tax base was
$132,686,318,383, the Officials calculated the proceeds due under Step One at
$156,569,856. And in Fiscal Year 2013, when the tax base had grown to
$136,060,915,932, the Officials calculated the proceeds due under Step One at
$160,551,881.

B. Step Two

The next step is much longer and requires a consideration of Article III,
Section 1 of the Charter, which is otherwise known as the Revenue Cap. This
provision limits the City’s collection of ad valorem tax revenue, and the process by
which it achieves that limitation is somewhat complicated.

The ad valorem tax revenue, or levy, is the product of two variables: the tax
base and the tax rate. The tax base is determined by the appraisal districts in the three
counties where the City exercises its territorial jurisdiction. The tax rate, on the other
hand, is determined by the Officials.

The Officials have some discretion in setting the tax rate, but that discretion
is limited by the Revenue Cap, which provides that, absent voter approval to the
contrary, the Officials may not levy taxes at rates expected to result in revenues that
exceed the lower of two different indexed amounts. The first indexed amount is the
amount of “allowable ad valorem tax revenues increased by the rate of
inflation . . . plus the rate of growth in the City’s population . . . but not less than
zero.” And the second indexed amount is the “amount of total ad valorem taxes, both
current and delinquent, actually collected during the prior fiscal year, increased by
4.5% of that amount.” Houston City Charter art. III, § 1.

6
What this all means is that if property values appreciate and the appraisal
districts determine that the tax base has increased from one year to the next, then the
Officials might be required to lower the tax rate from the previous year so that the
expected ad valorem tax revenue does not exceed a certain amount, as determined
by the lower of two indices. The City’s collection of ad valorem tax revenue can still
grow from the previous year, but the Revenue Cap operates by restricting the rate of
that growth.

There is an allusion to the Revenue Cap in Article IX, Section 22, Subsection
(d)—just below the subsection cited in Step One of the Officials’ methodology.
Subsection (d) provides as follows: “Funding for the Dedicated Drainage and Street
Renewal Fund that is not derived from ad valorem taxes levied by the City (i.e., that
portion derived from fees, charges and third party payments) shall not be included
in those revenues limited by this Charter.”

The Officials construe this provision to mean that the Revenue Cap applies
not just to the general collection of ad valorem tax revenue into the City’s coffers,
but also to the allocation of ad valorem tax revenue into the Drainage Fund. In other
words, the Officials assert that the Revenue Cap operates on Article IX, Section 22,
Subsection (b)(iii).

The Officials explain that if the Revenue Cap requires them to lower the tax
rate in order to limit the growth rate of ad valorem tax revenue, then Subsection (d)
also requires them to limit the growth rate of any allocations into the Drainage Fund.

The process by which the Officials determine these limitations is complex.
Because allocations into the Drainage Fund first began in Fiscal Year 2012, the
Officials use the allocation from that year as their base number. For each year
thereafter, the Officials increase that allocation according to the indexed calculations
set forth in the Revenue Cap, if the Revenue Cap is actually triggered.
7
In lieu of detailed worksheets, the Officials provide a chart containing a
glimpse of their calculations. We reproduce that chart here:

Amount
allocated to
Inflation/ (i) Inflation/
Fiscal Lower (ii) 4.5% DDSRF
Population Population 4.5%
Year of Calculation before debt
% Calculation
service
subtracted
2012 156,570 156,570 156,570
2013 5.433% 165,076 OR 4.5% 163,615 160,552
2014 2.585% 169,344 OR 4.5% 170,978 177,960
2015 3.270% 174,881 OR 4.5% 176,964 199,501
2016 4.777% 183,236 OR 4.5% 182,751 182,751
2017 1.871% 186,664 OR 4.5% 190,974 186,664
2018 3.201% 192,639 OR 4.5% 195,064 192,639
2019 2.362% 197,188 OR 4.5% 201,308 197,188
2020 2.941% 202,988 OR 4.5% 206,062 202,988
2021 1.046% 205,111 OR 4.5% 212,122 205,111
2022 0.000% 205,111 OR 4.5% 214,341 205,111
2023 3.574% 212,442 OR 4.5% 214,341 212,442

The numbers in columns three, six, and seven are truncated amounts
expressed in thousands of dollars. So, in row two, which corresponds to Fiscal Year
2012, those numbers are shorthand for roughly $156,570,000 (which is also the
number from the calculation in Step One, rounded up). As stated above, because
Fiscal Year 2012 is when allocations to the Drainage Fund first began, this amount
represents the base number in the Officials’ indexed calculations.

Columns two and three relate to the first index. Column two represents the
sum of the rate of inflation and the rate of population growth. Column three
represents the increase from the previous year’s amount, as determined by the rate
in column two. So, for Fiscal Year 2013, the Officials took the base amount from
Fiscal Year 2012 and increased it according to the percentage in column two

8
(156,570 × 1.05433 = 165,076). That same methodology was continued for each
year thereafter. So, for Fiscal Year 2014, the Officials took 165,076 (the amount
from Fiscal Year 2013) and multiplied it by 1.02585 (the sum of 1 and the indexed
rate) to arrive at 169,344 (which was rounded up after the truncation). And so on and
so forth.

Columns five and six relate to the second index. Because this index fixes the
rate of growth at 4.5%, that percentage appears in the entirety of column five.
Column six applies that percentage to whichever number in column three or six of
the previous year happens to be lower. For most years, except at the very beginning,
this lower amount also appears in column seven of the previous year. In Fiscal Year
2012, the amounts in columns three and six were the same, because that was the base
year. So for Fiscal Year 2013, that base number was simply multiplied by 1.045 to
arrive at 163,615. Moving forward to Fiscal Year 2014, that same rate of growth was
applied to the number in column six of the previous year (163,615) because that
number was lower than the number appearing in column three of the previous year
(165,076). The indexed calculation accordingly returned a value of 170,978, which
is the product of 163,615 and 1.045. For Fiscal Year 2015, the growth rate was
applied to the number in column three of the previous year (169,344) because that
number was lower than the number in column six (170,978). This indexed
calculation returned a value of 176,964, which is the product of 169,344 and 1.045.
This comparative index continued year after year.

Column seven represents the allocation amount before the subtraction of debt
service obligations. The amounts in this column are determined by factors that are
not immediately apparent. For Fiscal Years 2012 through 2014, the Revenue Cap
was not triggered at all, so the amounts appearing in column seven were not
determined by either of the indexed calculations. They were instead determined by

9
the calculations performed in Step One. For Fiscal Year 2015, the Officials have
asserted that the Revenue Cap was not triggered, but the Taxpayers have asserted
the opposite. We cannot reconcile this conflict—on the one hand, the number in
column seven does not match either of the numbers from columns three or six, which
would suggest that the Revenue Cap was not triggered, just like in the previous years;
but on the other hand, the record also establishes that the tax rate dropped from
$0.63875 to $0.63108, which would suggest that the Revenue Cap was triggered.
Resolution of this conflict is ultimately unnecessary for our purposes. Moving on to
Fiscal Year 2016 and for every year thereafter, there is no dispute that the Revenue
Cap was triggered, and the allocation to the Drainage Fund was determined by
whichever number in column three or column six of the same year was lower.

For those years in which the Revenue Cap was not triggered, the Officials
applied the full 11.8 cents multiplier from Step One (not the indexed calculations of
Step Two). That multiplier equated to roughly 18.47% of the tax rate, which at that
time was $0.63875. But ever since the Revenue Cap has been triggered, the tax rate
has incrementally fallen. For example, in Fiscal Year 2016, the tax rate was reduced
to $0.60112, and for Fiscal Year 2017, it was reduced again to $0.58642. Had the
Officials continued to apply the full 11.8 cents multiplier in Step One (instead of
applying the indexed calculations of Step Two), the multiplier’s ratio to the falling
tax rate would have grown from that original 18.47% to more than 20%, meaning
that the Drainage Fund would have effectively occupied an ever larger share of the
Officials’ overall budget.

But by applying the indices of the Revenue Cap to the allocation formula for
the Drainage Fund, the Officials have effectively kept that multiplier in proportion
to the falling tax rate, using Fiscal Year 2012 as a base. For Fiscal Year 2015, the
Officials calculated the multiplier as being the effective equivalent of just 11.658

10
cents (18.47% of the tax rate of $0.63108). For Fiscal Year 2016, the Officials
calculated the multiplier as having effectively fallen to 11.105 cents (18.47% of the
tax rate of $0.60112). And for Fiscal Year 2017, that multiplier had effectively fallen
again to 10.833 cents (18.47% of the tax rate of $0.58642). The Officials have
dubbed these indexed multipliers as the “11.8 cents equivalent.”

C. Step Three

In the final step, the Officials make a deduction for debt service obligations,
as required by Article IX, Section 22, Subsection (b)(iii).

The calculations in this step also depend on the Revenue Cap. If the Revenue
Cap has not been triggered, then the deduction is made to the amount produced in
Step One, and the calculations in Step Two are not considered. Otherwise, the
deduction is made to the amount produced in Step Two and the calculation in Step
One is not considered. The balance after the deduction is then deposited into the
Drainage Fund.2

II. The Taxpayers’ Methodology

The Taxpayers agree with the Officials that the proceeds of the ad valorem
tax levy should be calculated by multiplying the tax base by $0.118 and then dividing
by $100, which is the same operation that the Officials performed in Step One of
their methodology. The Taxpayers also agree with the Officials’ calculations of the
debt service obligations, which were considered in Step Three of their methodology.
But the Taxpayers disagree with any application of the indexed calculations from

2
For Fiscal Year 2016 only, the Officials claim that they made a supplemental allocation
to the Drainage Fund after all of these calculations were performed—notwithstanding the
limitations they claim are imposed by Article IX, Section 22, Subsection (d).

11
Step Two of the Officials’ methodology, which the Taxpayers would not perform at
all.

In effect, the Taxpayers would determine the allocation for each fiscal year by
using the following algebraic equation:

$0.118
𝐴𝑙𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 = (𝑇𝑎𝑥 𝐵𝑎𝑠𝑒 ∗ ) − 𝐷𝑒𝑏𝑡 𝑆𝑒𝑟𝑣𝑖𝑐𝑒
$100

The Taxpayers also present an alternative equation that does not use the tax
base as a variable because, as they assert, there might be collection problems with
delinquent portions of the tax base, or because the tax base can fluctuate as appraisal
contests are finalized or as properties are added or removed from the tax rolls. For
their alternative equation, the Taxpayers recall that the tax levy is the revenue that
has actually been collected, which is equal to the tax base multiplied by the tax rate
(expressed as a dollar amount for every $100 of property value).

𝑇𝑎𝑥 𝑅𝑎𝑡𝑒
𝑇𝑎𝑥 𝐿𝑒𝑣𝑦 = 𝑇𝑎𝑥 𝐵𝑎𝑠𝑒 ∗
$100

From this expression, the tax base can be isolated by multiplying each side of
the equation by $100 and then by dividing by the tax rate:

$100
𝑇𝑎𝑥 𝐵𝑎𝑠𝑒 = 𝑇𝑎𝑥 𝐿𝑒𝑣𝑦 ∗
𝑇𝑎𝑥 𝑅𝑎𝑡𝑒
And then from that expression, there can be a substitution of the tax base
variable in the earlier allocation equation:

$100 $0.118
𝐴𝑙𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 = (𝑇𝑎𝑥 𝐿𝑒𝑣𝑦 ∗ )∗( ) − 𝐷𝑒𝑏𝑡 𝑆𝑒𝑟𝑣𝑖𝑐𝑒
𝑇𝑎𝑥 𝑅𝑎𝑡𝑒 $100

Finally, that equation can be simplified by canceling out the $100, which is
common to the fraction’s numerator and the denominator:

12
𝑇𝑎𝑥 𝐿𝑒𝑣𝑦 ∗ $0.118
𝐴𝑙𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 = ( ) − 𝐷𝑒𝑏𝑡 𝑆𝑒𝑟𝑣𝑖𝑐𝑒
𝑇𝑎𝑥 𝑅𝑎𝑡𝑒

III. Demonstrative Calculations

In this section, we apply these competing methodologies to data from Fiscal
Year 2020, because that was the example given in the Taxpayers’ live pleading.

The Officials have not specifically identified the tax base for this year, but the
record contains one indication that the adjusted taxable value was $211,296,316,412.
For demonstrative purposes only, we will assume that this number represents the tax
base.

Under Step One, the Officials would multiple that tax base by $0.118 and then
divide by $100, to return an amount of $249,329,653.

Under Step Two, the Officials would perform the indexed calculations, and as
indicated by the chart above, the lower amount of those indexed calculations was a
truncated $202,988,000.

Under Step Three, the Officials would subtract the debt service obligations
either from the amount in Step One if the Revenue Cap had not been triggered, or
from the amount in Step Two if the Revenue Cap had been triggered. Because the
Revenue Cap had been triggered in Fiscal Year 2020—the tax rate dropped from
$0.58831 to $0.56792—the Officials would proceed with the amount from Step Two
and disregard the amount from Step One. According to their other calculations, the
truncated amount of the debt service obligations was $156,511,000. When that
amount is subtracted from the amount in Step Two, the balance is a truncated
$46,476,000, which the Officials actually allocated to the Drainage Fund.

In their live pleading, the Taxpayers approximated the tax base in Fiscal Year
2020 as being a truncated $214,060,000,000. But for the sake of consistency between

13
these demonstrative calculations, we will still assume that the tax base was
$211,296,316,412.

The Taxpayers would multiply that tax base by $0.118 and then divide by
$100, just as the Officials did in Step One, to return an amount of $249,329,653.
Then the Taxpayers would subtract the debt service obligations, which they
projected to be $155,855,000 in their live pleading, but for purposes of this
demonstration, we will still use the truncated amount supplied by the Officials,
which was $156,511,000. When that latter amount is subtracted from $249,329,653,
the balance is more than $92 million—which is not far from the $96 million that the
Taxpayers projected in their live pleading—and the Taxpayers believe that this
amount should have been allocated to the Drainage Fund.

We acknowledge that the numbers used in these calculations may not be exact,
but the point of the demonstration is that the difference in allocation between the
two methodologies is not de minimis.

The Officials acknowledge this point too. They have produced charts
comparing the Taxpayers’ methodology, which they characterize as allocating the
“full 11.8 cents,” with their own methodology, which only allocates the “11.8 cents
equivalent.” By the Officials’ own calculations, when the “11.8 cents equivalent”
methodology is used over twenty years, the Drainage Fund suffers a budget shortfall
of several billion dollars.

IV. De Novo Review

We construe charter provisions in the same manner that we construe statutes.
See Bd. of Adjustment of City of San Antonio v. Wende, 92 S.W.3d 424, 430 (Tex.
2002). Our primary objective is to ascertain and give effect to the intent of the
drafters, and in making that determination, we begin with the words that were

14
chosen. See Tex. Dep’t of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 642
(Tex. 2004). When those words are not defined in the charter itself, we assign them
their ordinary meaning, unless a different or more precise meaning is apparent from
the context. See TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 439
(Tex. 2011). Our review is de novo. See Am. Nat’l Ins. Co. v. Arce, 672 S.W.3d 347,
354 (Tex. 2023).

The main charter provision here is Article IX, Section 22, Section (b)(iii),
which requires an allocation of “an amount equivalent to proceeds from $0.118 of
the City’s ad valorem tax levy minus an amount equivalent to debt service for
drainage and streets for any outstanding bonds or notes issued prior to December 31,
2011, and bonds or notes issued to refund them.”

As stated earlier, the first half of this provision uses a term of art when it refers
to “proceeds from $0.118 of the City’s ad valorem tax levy.” That phrase does not
mean a total or gross allocation in an amount just shy of twelve cents. Rather, when
understood in its proper context of taxation, this phrase means an amount calculated
at $0.118 for every $100 of taxable property value, where taxable property value is
the tax base or the amount subject to the City’s ad valorem tax rate.

The parties have uniformly understood the phrase to have this meaning
through the course of the litigation. Both of their methodologies apply this
understanding. And the Supreme Court, in its discussion of this charter provision,
never suggested that the parties’ mutual understanding was incorrect. See Jones, 646
S.W.3d at 321 (“The standard method of designating the amount of the tax levy is
in terms of an amount per $100 of the value of the property being taxed (e.g., in
2010, the tax rate was $0.63875 per $100 of valuation). Accordingly, the parties

15
agree that Section 22’s reference to $0.118 means 11.8 cents per $100 of property
value.”).3

The parties also agree about the meaning of the second half of this provision,
which requires a deduction for debt service obligations. We agree with the parties
that their understanding comports with the text of the provision.

That leaves the critical question for which the parties are not in consensus—
whether a different methodology that considers the indexed calculations of the
Revenue Cap is required by Article IX, Section 22, Subsection (d). We reproduce
that subsection here: “Funding for the Dedicated Drainage and Street Renewal Fund
that is not derived from ad valorem taxes levied by the City (i.e., that portion derived
from fees, charges and third party payments) shall not be included in those revenues
limited by this Charter.”

We agree with the Officials that the last portion of Subsection (d) refers to the
Revenue Cap, but we disagree with the Officials about the consequence of this
reference. By its plain terms, Subsection (d) establishes that three sources of revenue
for the Drainage Fund are not subject to the limitations created by the Revenue Cap.
There are only four total sources of revenue for the Drainage Fund—all of them

3
The Officials assert that the Supreme Court made a “very glaring error” when it
parenthetically likened the tax levy to the tax rate. The Officials insist that these two variables are
nothing alike because the tax levy refers to the revenue, whereas the tax rate refers to a multiplier
used for arriving at the revenue. We do not believe that the Supreme Court has made the blunder
that the Officials have insinuated. As we read its opinion, the Supreme Court was not suggesting
that the tax levy and the tax rate were the same. Rather, the Supreme Court was saying that the
charter provision’s reference to $0.118 was expressed in the same manner or units as a tax rate—
i.e., as an amount per $100 of property value—and that a portion equal to that tax rate multiplied
by the tax base must be set aside from the larger tax levy for allocation to the Drainage Fund. This
understanding should come as no surprise to the Officials. In their own worksheets for Fiscal Years
2012 and 2013—which, from what we can tell, are the only worksheets in the record that properly
detail with complete, non-truncated amounts every single calculation, step-by-step, used to arrive
at the Drainage Fund allocation—the Officials similarly labeled the 11.8 cents multiplier as the
“applicable tax rate.”

16
enumerated in Subsection (b)—and the only one of those four that Subsection (d)
declines to carve out from the Revenue Cap is the revenue derived from ad valorem
taxes. Subsection (d) effectively implies what the Revenue Cap already makes
explicit, which is that the revenue from the ad valorem tax levy must be capped.

The Officials would have us believe that Subsection (d) has an additional
effect—namely, that it makes the indexed calculations of the Revenue Cap
applicable to the allocation calculation of Subsection (b)(iii), which also concerns
the ad valorem tax levy. But there is no textual basis for such an interpretation.
Nothing in Subsection (b)(iii) references the indexed calculations of the Revenue
Cap, and nothing in Subsection (d) references the allocation calculation of
Subsection (b)(iii). These provisions are separate because they serve separate
functions. Subsection (d) and the Revenue Cap address the collection of revenue
through the ad valorem tax levy, whereas Subsection (b)(iii) addresses the allocation
of that revenue after it has already been collected.

The Officials still insist that their methodology is correct because the Supreme
Court recited the parties’ agreement that the Revenue Cap must be taken into
consideration in calculating the allocation amount for the Drainage Fund. See Jones,
646 S.W.3d at 326 (“Taxpayers and the City Officials agree that the revenue cap
must be taken into consideration in calculating the Fund allocation.”). But through
this recitation, the Supreme Court did not hold—or even hint—that the indexed
calculations of the Revenue Cap are applicable to Subsection (b)(iii).

The indexed calculations of the Revenue Cap must be considered when the
Officials determine the tax rate. And in that sense, the Revenue Cap does have an
impact on the Drainage Fund because $0.118 of the tax rate must be set aside for the
Drainage Fund. But the plain text of Subsection (b)(iii) requires this allocation after
applying the full 11.8 cents multiplier, not the Officials’ “11.8 cents equivalent.”

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This allocation method is demonstrated by the Taxpayers’ alternative algebraic
equation, which expresses the allocation formula in terms of the tax levy and the tax
rate, instead of the tax base.

The Officials also defend their methodology with Hotze v. Turner, 672
S.W.3d 380 (Tex. 2023), in which the Supreme Court upheld an unchallenged ruling
that the City had complied with the terms of the Revenue Cap. Id. at 388. But that
case considered election issues with the Revenue Cap. It was completely silent as to
the Drainage Fund, and it has no application here.

In sum, we conclude that the Officials’ methodology is legally incorrect, and
the evidence conclusively establishes that their misallocations are ultra vires. The
Officials should be allocating an amount to the Drainage Fund that applies the full
11.8 cents multiplier, not the so-called “11.8 cents equivalent,” which is anything
but equivalent.

V. Remaining Issues

The Officials make two additional arguments.

First, in the event we hold that their methodology does not comply with the
terms of the Charter, the Officials argue that they are nonetheless entitled to their
governmental immunity because their methodology was fully within their authority
to interpret and enforce the Charter. The Officials are correct insofar as they suggest
that an act within their discretion is not ultra vires, even when the exercise of that
discretion happens to be erroneous. See Hall v. McRaven, 508 S.W.3d 232, 242–43
(Tex. 2017). But the Officials generally have no discretion to misinterpret the law.
See Houston Belt, 487 S.W.3d at 163. And as concerning the specific facts of this
case, the Supreme Court has already held that the “Officials have no discretion but
to allocate the funds as mandated: either they have properly allocated the funds, or

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they have not.” See Jones, 646 S.W.3d at 326. For the reasons explained above, we
conclude that the Officials have acted ultra vires by not making the proper
allocations.

Second, the Officials argue that they must retain their governmental immunity
because the Taxpayers have only alleged that City Council, as a collective body,
approved a budget that underfunded the Drainage Fund, without considering
whether any individual member of City Council voted for or against that budget. The
Officials believe that the Taxpayers have failed to plead a valid ultra vires claim
because, as they assert, “a legislative body’s collective action does not give rise to
individual waiver under the ultra vires exception.”

The only authority that the Officials cite for this argument is Kilgore
Independent School District v. Axberg, 535 S.W.3d 21 (Tex. App.—Texarkana
2017, no pet.). In that case, the plaintiffs sued the trustees of a school board for
voting to repeal a local option homestead exemption, which the plaintiffs believed
was beyond the trustees’ authority. The court of appeals determined that the
plaintiffs had only challenged an act by a collective body—i.e., a vote by the board
of trustees—not an act by an individual trustee, because no trustee had the authority
to independently repeal the local option homestead exemption. The court of appeals
then concluded that the plaintiffs had failed to plead a valid ultra vires claim because
the board of trustees, as a collective body, had the authority to act by voting. Id. at
31–32.

We are not bound by Axberg, and we decline to apply the Officials’ reading
of it here. Instead, we choose to follow the precedent of the Texas Supreme Court,
which has already recognized that a claimant can validly plead an ultra vires claim
against the members of City Council when that collective body fails to make
allocations that are required by law. See City of Houston v. Houston Municipal

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Employees Pension Sys., 549 S.W.3d 566, 580 (Tex. 2018) (concerning the City’s
obligation to make periodic payments to a pension fund).

CONCLUSION

We reverse the trial court’s judgment in favor of the Officials and render
declaratory judgment that:

a. The Officials cannot reduce the proceeds from the City’s ad valorem tax
levy allocated to the Drainage Fund under Article IX, Section 22,
Subsection (b)(iii) of the City Charter to an amount less than 11.8 cents per
$100 of taxable value, except to the extent such total amount of proceeds
is reduced by the amount of the City’s debt service obligations; and

b. While the Revenue Cap may affect the total tax rate (and thus, the total ad
valorem tax levy), the Officials cannot otherwise employ the Revenue Cap
in calculating the “amount equivalent to proceeds from $0.118 of the
City’s ad valorem tax levy” under Article IX, Section 22, Subsection
(b)(iii) of the City Charter.

We also enjoin the Officials from allocating to the Drainage Fund an amount
less than 11.8 cents per $100 of taxable value less the amount of the debt service
obligations.

Because the Taxpayers have obtained an adequate remedy by appeal, we deny
their request for mandamus relief.

/s/ Tracy Christopher
Chief Justice

Panel consists of Chief Justice Christopher and Justices Wise and Hassan.

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