City Lawsuit Damages: Consequential? Punitive? Necessary?

April 12, 2013 Number 14 City Lawsuit Damages: Consequential? Punitive? Necessary? Two legislative ideas recently considered one a Senate floor amendment and the other a House bill heard in committee would have subjected Texas cities to essentially unlimited money damages in court and, more importantly, would have done so needlessly. A floor amendment offered by Senator Brian Birdwell (R Granbury) to a firearms regulation bill would have allowed a person adversely affected by a city firearms regulation to sue the city for three times the person s actual damages, as well as for consequential damages. Two interesting points about the amendment: According to the amendment s author, we haven t seen widespread violations of the general state firearms preemption law in Texas to-date. In other words, cities aren t currently regulating firearms in improper ways. Presumably, the amendment was just in case cities one day decide to do so. Second, the bill to which the amendment was offered (S.B. 987 by Senator Glenn Hegar) would already permit the attorney general to bring an injunctive lawsuit to stop any improper firearms regulation by cities (of which, again, there are little or none). The other bad idea is H.B. 3088 by Representative Paul Workman (R Austin), which was heard in the House Committee on Land and Resource Management on April 8. The bill would provide 1

that a city may be liable for actual and consequential damages if a court finds that the city has improperly applied a new regulation in violation of Chapter 245 of the Local Government Code (the permit vesting statute ). The hearing focused on the actions of one particular city, but the bill would apply to all cities. Again, a couple of points about this proposal: Like the firearms bill above, violations of the vested rights statute can readily be addressed through injunctive relief (i.e., a court order). It is unclear why money damages are necessary on top of an injunction; in fact, the author pointed to only one city that had supposedly flaunted the permit vesting statute, and that city had recently repealed its regulations following an unfavorable attorney general opinion and court decision. Consequential damages are actually a breach of contract remedy, and thus aren t even legally appropriate in a suit challenging a city ordinance. The more appropriate legal term would probably be punitive damages. A simple desire to punish cities, in other words. A ray of sunshine: the Senate floor amendment was quickly withdrawn, and the House bill hasn t been voted out of committee yet (now would be a good time for city officials to express their opposition to H.B. 3088). But the question remains: why the rush to subject cities to unlimited money damages for problems that don t really exist? Tree Preservation Ordinances Part II: H.B. 1377 and Pay or Waive House Bill 1377 (Kolkhorst, R Brenham) is a bill aimed at limiting how cities enforce tree preservation ordinances. It states that a landowner owns all trees and timber located on the landowner s land as real property until cut or otherwise removed from the land, unless otherwise provided by a contract, bill of sale, deed, mortgage, deed of trust, or other legally binding document. At first glance, the tree ownership language seems innocuous: all landowners do in fact own their trees. From a legal perspective, though, the language of the bill would radically change common law relating to trees and property value. When H.B. 1377 was heard in the House Committee on March 27, the author explained it as simply codifying the current common (i.e., court cases) law in Texas, but it actually does the opposite. First, some legal background: for constitutional regulatory takings purposes (requiring a city to compensate a landowner, like it does when it uses eminent domain, if a regulation makes property valueless), trees are a factor that can be used to determine the value of land, but value is decided based on the total market value of the land. A tree preservation ordinance that prohibits a person from cutting down one or even several trees will not usually rise to the level of a regulatory taking that requires compensation, because it doesn t render property valueless or unreasonably interfere with the use of property. 2

H.B. 1377 would radically change that. The ownership provision would make each individual tree subject to a regulatory takings analysis. If the bill passed, it would mean that a prohibition on cutting down a tree works a taking on each tree on the property. This means that a city would either have to pay an owner for the value of each tree affected by the ordinance, or else waive its regulation. Cities can t afford to make those cash payments, of course, and will thus be forced to waive their tree regulations. The Georgia Supreme Court considered a similar argument from the Greater Atlanta Homebuilders several years ago. The homebuilders lost, and the court sensibly explained why: [T]he Tree Ordinance does not destroy [a developer s] ability to develop its land; it only regulates the way in which new and existing trees must be managed during the development process. [Developers] have failed to show that the Tree Ordinance destroys its ability to develop land While the Tree Ordinance may impose some additional costs and thus diminish the ultimate value of [developers ] land, [m]any regulations restrict the use of property, diminish its value or cut off certain property rights, but no compensation for the property owner is required. League staff and a number of city officials testified in opposition to H.B. 1377 at the committee hearing. City officials who wish to continue to enforce their tree preservation ordinances should contact their legislators to express their opposition to H.B. 1377, especially those who are represented by members of the House Committee on Urban Affairs: http://www.capitol.state.tx.us/committees/membershipcmte.aspx?legsess=83r&cmtecode=c 480 Bill Would Eliminate Municipal Authority Over Gas Transmission Pipelines and Facilities House Bill 2828 (Dale, R Cedar Park), a bill that would eliminate municipal land use authority over gas and other transmission pipelines and facilities, was heard in the House Energy Resources Committee on April 10. The bill would overturn a 2010 Fifth Circuit Court of Appeals opinion (City of Grand Prairie v. Texas Midstream Gas) that allowed the City of Grand Prairie to enforce various land use regulations against a Texas Midstream Gas Services (TMGS) compressor station. The Grand Prairie city code required a specific use permit, and various other permits, for the construction of a compressor station in certain zoning districts. The code also established conditions for the issuance of the permits, including minimum setbacks, roof pitch, building material requirements, architectural design compatibility with surrounding development, noise limitations, and a security fence of at least eight feet in height to enclose the area. TMGS sued the city, claiming that the federal Pipeline Safety Act (PSA) and state law preempt the city s requirements. The PSA prescribes safety standards not only for pipelines, but also for related structures, including compressor stations. 3

The court concluded that, with the exception of the security fence requirement, the city code does not address compressor station safety. Rather, it relates to general aesthetics and community enhancement and was designed to protect property values: Our decision today is the first to consider whether the PSA preempts a setback requirement for a compressor station. However, our decision is consistent with PSA preemption jurisprudence from our court and elsewhere Cases decided under the PSA s predecessor statutes have uniformly invalidated parochial safety provisions [but] [n]one of these cases foreclose laws primarily related to aesthetics or non-safety police powers. The PSA preempts safety standards for natural gas pipeline facilities. Grand Prairie s setback requirement is not a safety standard in letter, purpose, or effect. It may remain in force. The opinion was a good one for those cities that regulate natural gas compressor stations and other equipment. The author of H.B. 2828 explained his bill at the hearing as merely requiring uniform safety standards. Current law already provides for that, however. The bill would clearly preempt municipal land use regulations like those at issue in the court s opinion. City officials who wish to continue to enforce their gas ordinances should contact their legislators, and the members of the House Committee on Energy Resources, to express their opposition to the bill. Improved Fiscal Transparency Bill Passes Committee On April 11, the House Committee on Appropriations approved a committee substitute for H.B. 14, by Representative Jim Pitts, the fiscal transparency bill supported by the Texas comptroller. In its original form, H.B. 14 would have required a ballot in a city bond approval election to include various types of city debt information and would have placed serious limitations on a city s ability to issue certificates of obligation (COs). As of this writing, the League has not seen an official printed version of the committee substitute. However, discussions with the author s staff indicate that it will contain some beneficial modifications (other aspects of the bill may still be troubling to some cities). Here are the highlights. The bill: 1. eliminates the requirement that various types of debt information be included on the ballot proposition itself in a city bond election, but still requires a city to prepare and hold a hearing on a voter information document containing numerous categories of city debt statistics prior to a bond election; 2. requires all cities to produce an annual financial report containing city debt statistics and to publish the report on the cities Internet website or send the information to the comptroller s office for publication on the comptroller s website (cities under 2,000 population would have the option of posting the annual financial report on the city s Facebook page if it does not maintain an Internet website); 4

3. leaves the petition requirement to force an election on a CO at the current-law level of five percent of the qualified voters in the city, rather than lowering that number to five percent of the voters who voted in the most recent gubernatorial election, as the original version of the bill would have done; and 4. requires more debt information to be provided in the notice of issuance of a CO, and requires the notice to be published 45 days in advance of the approval (current law provides for 30 days notice). H.B. 14 may now go to the floor of the House of Representatives, where the bill could be susceptible to detrimental amendments. League staff will continue to closely monitor the bill as it moves through the process. Significant Floor Actions S.B. 1 (Williams), General Appropriations Bill. Passed the House. This is the state budget bill. Of particular interest to cities, the House version includes $307 million in mixed beverage tax reimbursements ($61.3 million more than the current biennium), $4.1 million in local library aid ($5.6 million less), $23.6 million in library resource sharing ($9.1 million more), $1.9 million in local parks grants ($987,500 more), and $29.8 million in automobile theft prevention funding ($15,059 less). S.B. 654 (West), relating to the enforcement of water conservation and animal care and control ordinances of a municipality by civil action or quasi-judicial enforcement. Passed the Senate. S.B. 965 (Williams), relating to the correction of employment termination reports for law enforcement officers. Passed the Senate. S.B. 987 (Hegar), relating to requiring the attorney general to obtain an injunction against a municipality or county that adopts prohibited regulations regarding firearms, ammunition, or firearm supplies. Passed the Senate. S.B. 1169 (Hegar), relating to water conservation. Passed the Senate. (Note: This bill requires water utilities that receive state funding to spend a portion of that funding on water loss mitigation.) S.B. 1297 (Watson), relating to written electronic communications between members of a governmental body. Passed the Senate. Significant Committee Actions H.B. 168 (Callegari), relating to the operation, powers, and duties of certain water districts. Reported from the House Committee on Natural Resources. 5

H.B. 252 (Larson), relating to water shortage reporting by water utilities. Reported from the House Committee on Natural Resources. H.B. 318 (Giddings), relating to prohibiting an employer from requiring or requesting access to the personal accounts of employees and job applicants through electronic communication devices. Reported from the House Committee on Business and Industry. H.B. 626 (Harper-Brown), relating to the number of hours certain employees must work to be eligible to participate in the Texas Municipal Retirement System. Reported from the House Committee on Pensions. As reported, this bill would allow a city by ordinance to change the definition of an employee, for purposes of participation in the Texas Municipal Retirement System, from one who works no less than 1,000 hours a year to one who works no less than 1,500 hours a year. The bill would apply only to an employee of a city who is hired on or after the effective date of the ordinance and does not apply to a person employed by a city as a law enforcement officer or firefighter. H.B. 801 (Munoz), relating to the discharge of a firearm across the property line of a school. Reported from the House Committee on Homeland Security and Public Safety. H.B. 824 (Callegari), relating to a volume-based exemption from reporting requirements for accidental discharges or spills from wastewater facilities. Reported from the House Committee on Natural Resources. H.B. 832 (Giddings), relating to the abatement of mosquitoes in stagnant water located on certain uninhabited residential property. Reported from the House Committee on Urban Affairs. H.B. 1076 (Toth), relating to certain firearms, firearm accessories and firearm ammunition within the State of Texas. Reported from the House Select Committee on Federalism and Fiscal Responsibility. (Note: This bill would prohibit police from enforcing certain federal laws related to firearms.) H.B. 1312 (Fletcher), relating to the reinstatement of a firefighter or police officer following a decision rendered by the Fire Fighters' and Police Officers Civil Service Commission or an independent third party hearing examiner. Reported from the House Committee on Urban Affairs. H.B. 1314 (Creighton), relating to the unlawful seizure of a firearm by a governmental officer or employee. Reported from the House Select Committee on Federalism and Fiscal Responsibility. (Note: This bill would criminalize police action to seize a firearm when the seizure is authorized under federal law but there is not an equivalent state law requiring the seizure.) H.B. 1509 (Anchia), relating to the enforcement of water conservation and animal care and control ordinances of a municipality by civil action or quasi-judicial enforcement. Reported from the House Committee on Urban Affairs. 6

H.B. 2259 (Moody), relating to circumstances under which a vacancy on the governing body occurs in certain municipalities. Reported from the House Committee on Urban Affairs. H.J.R. 74 (Raymond), proposing a constitutional amendment prohibiting the taxation of the sale or use of certain food, drinks, and medicine. Reported from the House Committee on Ways and Means. S.B. 263 (Huffman), relating to the designation of certain synthetic cannabinoids as controlled substances and controlled substance analogues under the Texas Controlled Substances Act. Reported from the Senate Committee on Criminal Justice. S.B. 264 (Huffman), relating to the addition of a synthetic hallucinogenic substance to Penalty Group 2 of the Texas Controlled Substances Act. Reported from the Senate Committee on Criminal Justice. S.B. 459 (Rodriguez), relating to the sale, storage, transportation, and disposal of scrap or used tires. Reported from the Senate Committee on Transportation. S.B. 637 (Paxton), relating to notice and proposition language requirements for bond approval elections held by political subdivisions. Reported from the Senate Committee on Intergovernmental Relations. S.B. 904 (Van de Putte), relating to the adoption of certain voting procedures necessary to implement the federal Military and Overseas Voter Empowerment Act, including the modification of certain election deadlines. Reported from the Senate Committee on State Affairs. S.B. 1162 (Watson), relating to requirements for the purchase or acquisition of a water or sewer system. Reported from the Senate Committee on Natural Resources. S.B. 1247 (Carona), relating to certain extensions of consumer credit facilitated by credit access businesses. Reported from the Senate Committee on Business and Industry. CITY-RELATED BILLS FILED OTHER FINANCE/ADMINISTRATION BILLS S.J.R. 1 (Williams) State Infrastructure Fund: would: (1) establish a special revolving fund in the state treasury called the state water implementation fund to be used only to fund water infrastructure projects included in the State Water Plan; (2) provide that the legislature by general law may provide for the assets of the state water implementation fund for Texas to be invested separately from the investment of other treasury assets and funds; (3) provide that, on November 30, 2013, the amount of $2.5 billion is transferred from the economic stabilization fund (the state s rainy day fund ) to the credit of the state water implementation fund; (4) establish a state infrastructure fund to be administered by the Texas Transportation Commission 7

to provide: (a) loans to political subdivisions for projects related to economic development infrastructure; or (b) credit enhancement to political subdivisions and other governmental entities for projects related to economic development infrastructure; (5) provide that money or other assets in the fund shall be invested separately from the investment of other treasury assets and funds; (6) provide that the legislature by general law shall prescribe the manner in which the assets of the fund may be used, except that money in the fund may not be used for passenger rail projects; and (7) provide that, on November 30, 2013, the amount of $3.5 billion is transferred from the economic stabilization fund to the credit of the fund. City Officials Testify When the legislature is in session, nothing compares to the effectiveness of city officials testifying at the Capitol. City officials who take their time to travel to Austin to speak out on important city issues should be applauded by us all. Among the city officials who recently testified in front of legislative committees are the following: Stan Graham, Councilmember, West Lake Hills Marcus Norris, City Attorney, Amarillo Greg Guernsey, Director of Planning, Austin Bob Nicks, Fire Department, Austin Meghan Riley, Assistant City Attorney, Austin Abigail Smith, Chief Animal Services Officer, Austin Suzanne De Leon, Mayor, Balcones Heights Mike Lester, Director of Health, Baytown Jimmy Martinez, Mayor, Beeville Deborah Balli, City Manager, Beeville Ron Fletcher, Councilmember, Buda Matt Powell, Mayor, Cedar Park Daniel Biles, Director of Engineering Services, Corpus Christi Tom Tagliabue, Director of Intergovernmental Relations, Corpus Christi Sandy Greyson, Councilmember, Dallas Pete Kamp, Mayor Pro Tem, Denton John Cook, Mayor, El Paso Matthew McElroy, Director of City Development, El Paso Ted Gorski, Assistant City Attorney, Fort Worth Bob Harmon, Transportation Authority, Fort Worth Chris Mosley, Senior Assistant City Attorney, Fort Worth Jason Chessher, Director of Health, Garland Brian England, Senior Assistant City Attorney, Garland John Willis, Councilmember, Garland Charles England, Mayor, Grand Prairie Judith Ramsey, Senior Assistant City Attorney, Houston Jack Brockhouse, Mayor, Ivanhoe 8

Mike Castro, City Manager, Jersey Village Sam Fugate, Mayor, Kingsville Jerry Hendrix, Director of Communications and Community Development, Kyle Alex Perez, Councilmember, Laredo Ed Smith, Mayor, Marshall Lanny Armstrong, Fire Chief, Pasadena Bob Townsend, Mayor, Richardson Laura Maczka, Mayor Pro Tem, Richardson Dave Carter, Assistant Director of Development Services, Richardson Bryan Sylvester, Chief of Police, Richardson Kathy Davis, Director of Animal Care Services, San Antonio James Jones, Police Department, San Antonio Carlos Contreras, Assistant City Manager, San Antonio David Martinez, Fire Department, San Antonio Brad McMurray, Executive Director of Neighborhood Housing Services, San Antonio Melissa Ramirez, Planning Manager, San Antonio Christopher Steele, District Fire Chief, San Antonio Rod Sanchez, Director of Development Services, San Antonio Michael Sawaya, Sports Facilities Department, San Antonio Chris Shields, Sports Facilities Department, San Antonio Paul Wendland, Assistant City Attorney, San Antonio Ken Baker, Senior Director of Planning and Development, Southlake Jo Ann Evans, Mayor Pro Tem, South Padre Island Greg Morgan, Director of Utilities and Public Works, Tyler Mark Whatley, Mayor Pro Tem, Tyler Jerry James, Director of Intergovernmental Relations, Victoria Dave Claunch, Mayor, West Lake Hills TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League. 9