The Texas Supreme Court building.
By SEAN BATURA
The Texas Supreme Court announced Friday morning that it would decline to hear a lawsuit brought against the City of Buda by former Buda Mayor Jim Hollis and Buda realtor Christopher Juusola in response to a city land use amendment enabling US Foodservice to construct a distribution warehouse in the city’s eastern extra-territorial jurisdiction.
The Texas Supreme Court’s refusal to hear the case all but exhausts the options for a group of Buda citizens attempting to prevent the construction of the US Foodservice facility that could ultimately be as large as 500,000 square feet. The decision came seven months after a three-judge Texas Third Court of Appeals panel sided with the city against Hollis and Juusola, who argued that the city should have allowed voter referendum on the land use change.
The appeals court ruled that a change in a land use plan is not subject to referendum because the Buda city charter only specifies “ordinances” as being subject to referenda, and the land use change was a resolution, rather than an ordinance. The justices also ruled that a land use change is not subject to a referendum because it is not “legislative in character.”
In February, the appeals court denied a re-hearing for Hollis and Juusola. As is its custom, the Texas Supreme Court did not offer a reason for declining to hear the case.
“This is definitely good news,” said Buda Economic Development Corporation (EDC) Executive Director Warren Ketteman. “A bunch of us have been working with US Foods and their real estate representative out of Austin for almost four years. This summer will have been four years since they first came to Buda with a real estate representative and I had a meeting with them where they expressed an interest in a new facility in this area. So, four years, here we are down the road, and due to different issues and delays and the frivolous court cases, it looks like now, finally, we’re going to move forward on this facility, which would be wonderful for Buda and Central Texas.”
In their petition for writ of mandamus filed with the Texas Supreme Court, Hollis and Juusola argued that the city charter language seems to allow for both resolutions and ordinances to be referendable, saying it is the character of a city’s act, and not its label as an “ordinance” that governs whether the act is subject to a referendum. Hollis and Juusola argued that the State of Texas “liberally construes its citizens’ rights to review their municipal government’s actions by referendum,” and stated that the Texas Supreme Court “has consistently reaffirmed this rule.”
A writ of mandamus is an order from a superior court to compel a government office or lower court to correctly perform mandatory or purely ministerial duties.
Hollis and Juusola’s petition for the writ states that the Buda City Council’s land use change was legislative in character because it was a policy-oriented decision and permanent in character. The appeals court, quoting an opinion issued by a judge in 1976, held that “’legislative’ relates to subjects of a general or permanent character, as distinguished from those subjects which are transitory, temporary, or routine.” Hollis and Juusola maintained that a land use decision enabling the building of a 500,000 square-foot light industrial facility is neither transitory, temporary, nor routine.
“My thoughts are that we did what we thought was necessary,” Hollis said in response to the Texas Supreme Court’s decision. “Sometimes a person has to do what’s right. As John Wayne says, ‘A man’s just gotta do what a man’s just gotta do sometimes.’ I respect the opinion, and where we go from here I don’t know, don’t know that we have a lot of avenues, but we need to have time to digest it and see.”
Hollis and Juusola argued that a Municipal Utility District (MUD) consent agreement amendment with a city, such as the land use change pertinent to US Foodservice, is subject to referendum because it is legislative in character, though not subject to the same notice and hearing requirements as a zoning ordinance.
Juusola and Hollis argued that the city’s successful refusal to allow the referendum “could lead to similar confusion in growing cities across the state,” and the men called on the court to clarify the obligation of cities to allow referenda.
The respondents to the suit by Hollis and Juusola included Buda Mayor Bobby Lane, Buda councilmembers, and City Secretary Toni Milam. The respondents, in their response to Hollis and Juusola’s petition for writ of mandamus, said the issue of preventing the MUD consent agreement amendment “is (not) for referendum but for representative democracy,” and stated that “Interestingly, the citizens are not too upset with the City Council, as the May election was cancelled due to no opposition.”
The respondents accused Hollis and Juusola of utilizing the mandamus process to “sabotage various contractual agreements over which they are not parties and simply disagree … in order to promote their own self-interests.” One hundred Buda property owners filed an amicus curiae in support of Hollis and Juusola.
Though Buda’s city secretary validated 788 signatures submitted by BudaFirst on a referendum petition intended to settle the matter at an election, the Buda city council voted, 6-1, last Sept. 15 to prohibit the referendum. Councilmember Sandra Tenorio cast the dissenting vote. BudaFirst had gathered signatures from more than the minimum 20 percent of residents required to trigger an election. City Attorney Susan Rocha advised the council that the land use change was not lawfully subject to a referendum.
“The political elite of Buda used my — our — tax money to prevent us from putting it on the ballot,” said BudaFirst member David Patterson. “This could have been on the ballot in November of 2009. But they used our tax money to prevent the majority of Buda citizens getting their say on this particular industrial park. And that’s just a black eye for this city.”
On June 2, 2009, the Buda city council voted 5-2 to allow light industrial land uses in a 95-acre ETJ zone formerly designated only for commercial, office and retail uses. Tenorio and Councilmember Ron Fletcher cast the two dissenting votes. The disputed land use change constituted the third amendment to a MUD consent agreement, the parties to which are the City of Buda, Sunfield MUD No. 1 and 2428 Partners, LP.
The land use change overrode the city’s comprehensive plan, developed and approved in 2002 based on surveys of Buda residents and input from a consulting firm hired by the city. The land use change paved the way for US Foodservice to locate a 287,000-square-foot regional headquarters and distribution center near the intersection of Turnersville Road and CR 118 (soon to be Firecracker Drive) on the east side of Interstate-35. Additional planned construction phases may result in a US Foodservice facility of about 500,000 square feet.
“Now that the Supreme Court has denied the petition, US Foodservice will proceed to meet all permitting and development agreements, leading to construction of the 287,000-square-foot first phase of the facility, with plans for additional phases as initially proposed,” said US Foodservice representative Howard Falkenberg. “Agreements with the city and county for development of roads next to the site were on hold pending the court’s ruling. The company will now move forward on those agreements. The company welcomes the determination of the court and appreciates the strong support of the city and the citizens of Buda and Hays County.”
Falkenberg said US Foodservice has not yet executed closing documents for the approximately 40 acres on which facility is to be built.
The Texas Municipal League and the Texas City Attorneys Association filed a brief of amici curiae in support of the city’s position. 2428 Partners, which owns the land that US Foodservice wishes to buy for its facility, filed a response to the petition by Hollis and Juusola’s for a writ of mandamus as a real party in interest. US Foodservice, as a real party in interest, also filed a response to the petition for a write of mandamus filed by Hollis and Juusola.
Hays County commissioners voted, 4-1, on Aug. 4, 2009, to draft a Tax Increment Reinvestment Zone (TIRZ) or Tax Increment Financing (TIF) zone, whereby the county could fund $1.8 million in road improvements to Turnersville Road and Firecracker Drive using ad valorem taxes collected within a specified boundary encompassing at least the planned US Foodservice facility.
US Foodservice offered to pay the difference if the property taxes generated within the zone during a certain period of time are not sufficient to pay for the road improvements. Hays County Judge Liz Sumter (D-Wimberley) cast the lone vote against improving the roads.
BudaFirst was funded mostly by members of the Herman Heep family, which owns land holdings near the proposed US Foodservice facility site. The Heeps’ plans for the area did not include light industrial activity, but two amphitheaters, multi-million dollar homes overlooking Onion Creek, high-class restaurants, a luxury hotel and spa and a small subdivision, according to Patterson in February.
Arguing on behalf of the land use change, the respondents maintained that legislative matters may be subject to referendum while administrative matters are not, and claimed the land use change via the third amendment to the MUD consent agreement is not legislative in nature, but administrative, contractual, temporary, routine, and cannot be unilaterally altered. The respondents stated that legislative matters are those of a permanent and general character that originate or enact a permanent law or that lay down a rule of conduct or course of policy for the guidance of the citizens or their officers and agents.
“If (the third amendment to the MUD consent agreement) were legislative, the City would have the power to unilaterally pass any restrictions and such passages, created by ordinance, would be undisturbed absent future legislative amendment,” stated the respondents in their response to Hollis and Juusola’s writ of mandamus. “Such is not the case with the Contract or any amendments.”
The respondents also stated that the land use change is not referendable because the city charter specifies ordinances as being subject to referenda, while the land use change was an amendment to a MUD consent agreement.
The respondents claimed that submitting the land use change to a referendum for invalidation could subject the city to not only a potential breach of contract claim, but also to a potential violation of the Texas Local Government Code, Chapter 245’s vested rights provisions.
“Petitions which serve the purpose of invalidating already existing contracts are not the proper subject for referendums or initiatives,” the respondents said. “Permitting citizens to invalidate a contract via referendum or initiative violates public policy and is contrary to Texas Constitution Article I section 16 which prohibits any law which impedes existing contracts. Invalidating an existing contract is exactly what the Relators (Hollis and Juusola) are attempting to do in this case, regardless of the legislative label the Relators wish to place upon it. They have no concern for the consequences such invalidation can have on the City.”
The respondents stated that the city council’s “minute investigation of facts and figures, the application of expert, skilled and technical knowledge, and a close and careful study of masses of facts” on which rest the terms of a MUD consent agreement entail a kind of analysis that cannot be efficiently initiated or passed by the public, no matter how intelligent and patriotic they may be.
“We have this myth that we’re a representative democracy,” Patterson said. “And in this particular case, that is not true.”
Progress on the US Foodservice facility has been held-up for almost a year, as the referendum petition was in the process of being certified in August 2009. Juusola and Hollis filed their petition for writ of mandamus at the Third Court of Appeals on Oct. 9, 2009. Ketteman first met with US Foodservice officials on Aug. 28, 2006.
Ketteman said the impending construction of the $51 million “state of the art” US Foodservice facility should be good news for local concrete workers, electricians, roofers and others in the construction business.
Ketteman said that although most employees at the US Foodservice facility will have relocated from the firm’s Austin location, future expansions of the facility in Buda will enable more locals to be hired. Ketteman said US Foodservice’s real estate investment in the facility “could be anywhere from $60 million up to about $75 million.”
The land use change took place in the Sunfield MUD No.1, an entity created by the state legislature years ago to build roads and provide water, wastewater and drainage services. An agreement between the city and the MUD allows the city to dictate land use in the MUD.
A limited purpose annexation agreement between Sunfield MUD No. 1 and the city allows the city to collect sales taxes within the MUD, though the city cannot collect property taxes there. The MUD uses the property taxes collected within its jurisdiction to pay off its debt. The MUD is unlikely to pay off its bond debt before 2037. After the MUD pays of its debt, it will cease to exist, and the city will be able to collect property taxes in the area.
Ketteman said that if the US Foodservice facility is assessed at $60 million under current property tax rates, then the Hays CISD would receive more than $800,000 from US Foodservice. Using the same assessment scenario, Ketteman said Hays County would receive about $280,000 from the US Foodservice. Ketteman said the annual state and local sales tax to be generated by the US Foodservice facility was estimated at $600,000.
Opponents of the land use change allowing light industrial uses say it will lead to more pollution and less sales tax revenue for the city than retail uses would have generated. Proponents of the land use change say the school district and county will benefit from property taxes collected from US Foodservice, and the city would benefit from the 157 jobs in 10 years US Foodservice said it would create. US Foodservice said it pays its warehouse personnel and truck drivers anywhere from $45,000 to $55,000.
Last fall, Fletcher estimated that the 95 acres of land to which the council added “light industrial” zoning could have accommodated “two or more” big box stores. Buda’s annual sales tax income increased from $774,000 to $1.4 million immediately after Cabela’s opened in 2005. The city’s sales tax revenue increased to $2.3 million after Wal-Mart opened near Cabela’s a year later. Last August, Buda City Manager Kenneth Williams said the US Foodservice facility would bring $100,000 in sales taxes annually to the city.
Last fall, Tenorio said that one reason Sunfield MUD No. 1 allowed the city to dictate land use and collect sales taxes within its jurisdiction is that the MUD wanted the city to extend road improvements on Main Street east of Interstate-35 into the MUD. Fletcher said city officials hoped to receive substantial sales tax revenue out of the MUD to retire some of Buda’s bond debt for the work on the Main Street east extension.
(Editor’s note: The image above has been changed to show, correctly, the Texas Supreme Court.)