City of Westworth Vill. v. City of White Settlement

558 S.W.3d 232

CITY OF WESTWORTH VILLAGE, Texas, Appellant

v.CITY OF WHITE SETTLEMENT, Texas, Appellee

NO. 02-17-00211-CV

Court of Appeals of Texas, Fort Worth.

DELIVERED: August 9, 2018

ATTORNEYS FOR APPELLANT: L. KELLY JONES & MICHAEL HASSETT, JONES HASSETT, PC, ARLINGTON, TEXAS.

ATTORNEYS FOR APPELLEE: ROBERT F. MARIS & ALISE N. ABEL, MARIS & LANIER, P.C., DALLAS, TEXAS.

PANEL: SUDDERTH, C.J.; GABRIEL and KERR, JJ.

BONNIE SUDDERTH, CHIEF JUSTICE

I. Introduction

Appellant the City of Westworth Village and its neighbor, Appellee the City of White Settlement, negotiated an economic development plan to locate a Wal-Mart and a Sam’s Club on undeveloped property, 66% of which was located in Westworth Village, where the stores would be built, and 34% of which was located in White Settlement, where the parking lot would be built. This plan led to a contract between the two cities and a property developer that bore fruit when Wal-Mart and Sam’s Club selected the proposed site, resulting in an increase in Westworth Village’s retail sales tax revenue, some of which, under the parties' agreement, was payable to White Settlement.

Twelve years later, when Westworth Village suffered buyer’s remorse based on the "inordinate amount of its police and EMS resources" that it had to devote to the Wal-Mart and Sam’s Club without assistance from White Settlement, Westworth Village notified White Settlement of its decision to terminate the agreement.

White Settlement sued Westworth Village for breach of contract. Arguing immunity from suit, Westworth Village filed a plea to the jurisdiction, which the trial court denied. In a single issue in this interlocutory appeal, Westworth Village appeals that denial. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(8) (West Supp. 2017). We affirm.

II. Background

A. Economic Development in General

Based on our review of the state constitution, statutes, and case law, we understand "economic development" to generally consist of a goal sought or a process used to improve an area’s tax base and keep it economically productive by attracting and retaining businesses and jobs through various financial and other incentives. See generally Tex. Const. art. III, § 52-a (focusing on state economy’s development and diversification to eliminate un- and under-employment and permitting the legislature to enact legislation for economic development); Tex. Loc. Gov't Code Ann. §§ 373.002(a), 374.002(b) (West 2005) (focusing on community development and urban renewal), § 501.004 (West 2015) (focusing on promotion and development of new and expanded business enterprises and job training); Tex. Tax Code Ann. § 311.003 (West 2015) (tax increment financing), § 312.002 (West 2015) (tax abatement agreements); In re City of Dallas , 501 S.W.3d 71, 74 (Tex. 2016) (orig. proceeding) (describing conflict between two governmental entities in which one claimed that the other’s economic development recruitment effort had caused it to lose approximately 200 jobs, affecting the entity’s taxing authorities and businesses); EP Hotel Partners, LP v. City of El Paso , 527 S.W.3d 646, 658 n.11 (Tex. App.—El Paso 2017, no pet.) ("[C]ommentators have recognized that it is a common practice for governmental entities to offer ‘economic incentives’ as a means of attracting corporations to develop projects within their purview in the hope of stimulating local growth and ensuring prosperity."); Jamro Ltd. v. City of San Antonio , No. 04-16-00307-CV, 2017 WL 993473, at *1 (Tex. App.—San Antonio Mar. 15, 2017, no pet.) (mem. op.) (describing tax increment financing as a development tool used by municipalities to finance public improvements and infrastructure by leveraging private investment for certain types of development activities); Mantos v. City of Mansfield , No. 02-09-00315-CV, 2011 WL 476776, at *1 (Tex. App.—Fort Worth Feb. 10, 2011, no pet.) (mem. op.) ("The City eventually entered into an economic development agreement affecting the property that included $63,000,000 in tax incentives."); Tex. Bay Cherry Hill, L.P. v. City of Fort Worth , 257 S.W.3d 379, 386 (Tex. App.—Fort Worth 2008, no pet.) (reciting that city council, to promote a project through economic development incentives, authorized negotiation of a public-private partnership, tax abatement, and tax increment financing); see also Martin E. Gold, Economic Development Projects: A Perspective , 19 Urb. Law. 193, 193 (1987) (observing that economic development projects are characterized by state, city, and local governments' provision of "various concessions to induce private industry into locating, staying, or expanding within their borders by providing assistance and subsidies for such private development," such as tax exemptions or abatements, for "long-term benefits for the municipality"); Patricia J. Askew, Comment, Take It or Leave It: Eminent Domain for Economic Development—Statutes, Ordinances & Politics, Oh My! , 12 Tex. Wesleyan L. Rev. 523, 527 (2006) (defining "economic development" as the "process of site selection and community marketing used to attract and retain businesses and jobs, and ideally prevent, but at least impede, the cycle of economic decline and urban decay" through influencing "the location decisions of private corporations for the benefit of some particular geographic area, ... local, regional, state, or national" (footnotes omitted) ).

Local government code chapter 380, "Miscellaneous Provisions Relating to Municipal Planning and Development," covers economic development programs and grants by certain municipalities. See Tex. Loc. Gov't Code Ann. §§ 380.001, .003 (West 2005), § 380.002 (West Supp. 2017). Section 380.001 allows a city to set up a program for loans and grants of public money "to promote state or local economic development and to stimulate business and commercial activity in the municipality." Id. § 380.001(a).

B. The Contract

Pursuant to local government code chapter 380, on December 15, 2004, Westworth Village, White Settlement, and Allegiance Commercial Development LP entered a contract entitled, "Economic Development Program Grant Agreement Between and Among The City of Westworth Village, the City of White Settlement, and Allegiance Commercial Development, LP." In the contract, Allegiance was listed as the grantee, Westworth Village was listed as "the City," and White Settlement was listed as the assignee. One of the contract’s stated purposes was "to promote local economic development and to stimulate business and commercial activity" in Westworth Village.

In the first section of the contract, "Authorization and Purpose," Westworth Village specifically found and acknowledged that participation by Allegiance and White Settlement was essential to the success of the economic development program:

that the economic benefit to be derived from the business operations on the Property, as defined below, could not have been achieved and will not continue without the cooperation, assistance, performance, and involvement of [Allegiance] and of [White Settlement]. The purpose of this Agreement is to document the terms and conditions under which [Allegiance] will provide land and cause Wal-Mart and Sam’s Club retail stores (the "Project") to be developed and located in [Westworth Village,] which will generate more than the amount of financial incentives which [Westworth Village] has herein granted to make such development possible.

White Settlement also specifically acknowledged that the economic benefit to be derived by it from the business operations on the property "could not have been achieved and will not continue without the cooperation, assistance, performance and involvement of Westworth Village."

The essence of the contract is found beginning with the fourth section of the agreement, wherein Westworth Village agreed to make certain periodic payments to White Settlement, first through Allegiance by assignment and later directly. In that section, Westworth Village obligated itself to make monthly program grant payments to White Settlement within fifteen days after receiving its monthly tax payments from the State of Texas. Section five of the agreement covered how the program grant payments would be computed: For the first twelve years of the agreement, the program grant payment would be equal to 50% of Westworth Village’s tax collections—defined as the 2% share of all gross sales taxes collected from sales made on the property. This amount would drop to 34% after the first twelve years.

Under the agreement, Allegiance assigned to White Settlement 34% of its 50% share of the applicable retail sales tax collection made by Westworth Village, payable directly to White Settlement. After the first twelve years of the agreement, when Allegiance’s 50% share would drop to 34%, Allegiance’s shares would be irrevocably assigned from Allegiance to White Settlement for the remainder of the agreement, with Allegiance having no further obligation to either party.

The contract listed the program term as "a period of thirty years and thereafter for so long as there exists on the Property an entity paying city sales tax." By its terms, the agreement would otherwise terminate only upon mutual written agreement of all of the parties to the agreement, except that Allegiance’s written agreement would not be required after the first twelve years. The agreement itself was contingent upon approval by both Westworth Village and White Settlement of all plats and the issuance of all permits necessary to build the stores on the property and upon the stores' opening within two years of the agreement’s effective date.

Both cities also agreed that if the portion of the property within White Settlement’s boundary was ever further developed or redeveloped in such a way as to result in sales taxes being produced from it, they would revise the agreement to provide that White Settlement would receive 34% of all sales tax revenues payable to the two cities from the sales occurring...