Ruling poses city debt challenge

A Travis County court case could threaten the city of Brownsville’s ability to issue debt without voter approval, public records show after a review by The Brownsville Herald.

The issue is whether or not a state law supercedes Brownsville’s own charter in regards to issuing the certificates of obligation (COs) that fund city projects.

The Texas Certificate of Obligation Act says that a city can issue this debt without voter approval, unless voters petition for an election. But Brownsville is a home-rule city, which means it has adopted a charter and has the full power of local self-governance.

Brownsville’s City Charter specifically allows the city to borrow money and issue bonds and time warrants. Voter approval, however, is also specifically required for the latter two, except in an emergency.

While Deputy City Manager Pete Gonzalez, who also serves as finance director, said, "according to our bond counsel, the state law (Texas Certificate of Obligation Act) supersedes our city charter."

However, a recent Travis County ruling indicates that the local charter trumps state law. In the Travis County case, Judge Scott H. Jenkins, sitting in the 419th Judicial District Court, ruled against the city of Friendswood, which had argued that the Texas Certificate of Obligation Act superceded Friendswood’s charter.

Jenkins’ ruling possibly sets a precedent and could affect the ability of other home-rule cities, including Houston and Austin, to issue COs without voter approval.

The Brownsville City Commission approved the proposed issuance of $11.8 million in COs last week to fund several projects, including the expansion of the Brownsville Sports Park.

And while no one objected to the commission’s proposal, community activist Fernando Ruiz has consistently contended that the city cannot issue debt without voter approval.

Objections by concerned residents like Ruiz is what led to the Friendswood case.

The debate in the community located between Houston and Galveston began when a group of concerned taxpayers, known as the "Friendswood 5," challenged the city of Friendswood’s proposal to issue $11.8 million in COs without voter approval, according to court transcripts. Jenkins ruled for the taxpayers’ group on July 17, 2009.

City Attorney Mark E. Sossi said Friday he was not familiar with the Friendswood ruling and that he would be talking with Gonzalez.

Commissioner Anthony Troiani said, "I think that obviously, we would want our legal department to look at that issue."

The Friendswood 5, represented by attorney Jack McKinley with Ramey, Chandler, McKinley & Zito, P.C. of Houston, argued that their city charter controlled, according to court records. Friendswood’s charter requires voter approval for issuance of debt that could not be retired in the year of issuance with current revenues.

The Friendswood 5 consists of Janis Lowe, Deborah Winters, Mel Austin, Kathy Rogers and Leslie Roque, court records show.

The group contended that the Texas Certificate of Obligation Act did not control because as a home-rule city, Friendswood derives its powers from the Texas Constitution and its authority is subject to the limitations in its charter.

The Act does not require an election unless 5 percent of voters petition for an election.

Texas Attorney General Greg Abbott reviews and approves proposed issuances.

City of Friendswood attorney Pat W. Mizell, with Vinson & Elkins of Houston, told Jenkins that, "... It’s the Attorney General’s position and clearly stated in their answer that they have a longstanding tradition of approving COs absent an election, even when the charter says so to the contrary and that it is done regularly and often in the biggest home-rule cities."

Mizell said the legislature has the ability to preempt the charter provision. "And cities must have the ability to fund these projects without having to put them up for a vote ...," Mizell added.

Despite Jenkins’ ruling, Abbott’s position as of Monday continued to be that a home-rule city could use the Certificate of Obligation Act regardless of any provision in its charter to the contrary, as the Act states.

"They’re (city and AG’s Office) are trying to relegate us to the position of some little municipality that must yield to the legislature," McKinley argued before Jenkins.

During the proceedings, Jenkins told McKinley that, "I’m just surprised, like all of us, or maybe like you, that the issue hasn’t ever been joined before, given how long this has been going on."

After Jenkins ruled in favor of the Friendswood 5, neither the city nor the AG’s Office appealed.

Lowe, one of the Friendswood 5, told The Herald that, "the Friendswood 5 victory is a victory for all Texans. City charters are important and citizens do matter. They say you can not fight City Hall. Well, we did."