Pecos Housing Finance Corporation, Pleasanton Housing Finance Corporation, Maverick Housing Finance Corporation, and La Villa Housing Finance Corporation v. City of Arlington

Opinion

ACCEPTED 15-25-00111-CV CHASNOFF |STRIBLING FIFTEENTH COURT OF APPEALS AUSTIN, TEXAS BLAKEW.STRIBLING 7/2/2025PARTNER11:39 PM |

CHRISTOPHER A. PRINE BSTRIBLING@CHASNOFFSTRIBLING.COM DIRECT 210.469.3225 CLERK

DANIEL LECAVALIER FILED COUNSEL IN 15th COURT OF APPEALS DLECAVALIER@CHASNOFFSTRIBLING.COM AUSTIN, TEXAS DIRECT 726.777.6815 7/2/2025 11:39:12 PM July 2, 2025 CHRISTOPHER A. PRINE Clerk

Mr. Christopher A. Prine Clerk, Texas Fifteenth Court of Appeals P.O. Box 12852 Austin, Texas 78711

Re: Court of Appeals No. 15-25-00110-CV; Pleasanton Housing Finance Corporation, a Texas Nonprofit Corporation and Ismael Gallegos, Joey Macon, Mark Pinkston, Zachary Pawelek, Scott Ferguson, Lilian Cashmer, and Brandon Hicks, in Their Capacities as Board Members of Pleasanton Housing Finance Corporation v. City of Lake Worth, Texas

Court of Appeals No. 15-25-00111-CV; Pecos Housing Finance Corporation, Pleasanton Housing Finance Corporation, Maverick Housing Finance Corporation, and La Villa Housing Finance Corporation v. City of Arlington

Court of Appeals No. 15-25-00113-CV; Pleasanton Housing Finance Corporation and the Board Members of Pleasanton Housing Finance Corporation, In Their Official Capacities v. City of Missouri City, Texas & Sienna Parks & Levee Improvement District

Dear Mr. Prine:

Jointly, Appellants Pleasanton Housing Finance Corporation, Maverick Housing Finance Corporation, and La Villa Housing Finance Corporation (“Appellants”) provide the following response to this Court’s June 25 letter inquiring into its jurisdiction over these appeals.

A. Background

Appellants are housing finance corporations (“HFCs”) established to coordinate and facilitate affordable housing for Texas residents, pursuant to the Housing Finance Corporation Act, Tex. Loc. Gov’t Code § 394.001 et seq. (“the Act”). Appellants serve a “public purpose” and “perform[] an essential governmental function on behalf of and for the benefit of … this State.” Id. at § 394.002(c)(1)-(3). To fulfill this purpose, HFCs enter into public-private real estate partnerships to facilitate the development of low-income housing within the “local government,”

1020 N.E. LOOP 410, STE. 150 SAN ANTONIO,TX 78209

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and as a result, HFC-owned properties and the income derived therefrom are tax-exempt. Id. at § 394.903(a); 394.905. 1

The orders challenged in these appeals resulted from efforts by four municipalities—Fort Worth, Lake Worth, Arlington, and Missouri City—to prevent Appellants and other so-called “traveling HFCs” from operating within these cities, a practice certain of the local governments describe as “a widespread problem across the state.” 2 According to Appellees, the Act limits Appellants and other HFCs to operating only within the boundaries of the local governments that approve the incorporation of the HFC. Appellants assert that HFCs may operate outside the boundaries of their sponsoring governments under the unambiguous language of the Act. The trial court disagreed with Appellants, temporarily enjoining Appellants from purchasing or approving the purchase of real property within these cities’ boundaries, or requesting, approving, or obtaining tax exemptions for any real property located within these cities’ boundaries. These orders are before this Court.

Notably, these are just four among over a dozen similar lawsuits pending across the state, implicating the jurisdiction of numerous regional intermediate courts of appeal. See, e.g., City of Euless v. Cameron County Housing Finance Corp., Mark A. Yates, Gavino Sotelo, Eduardo Campirano, Louie Tijerina, and Cyndi Wyche, in their Official Capacities as Board Members of the Cameron County Housing Finance Corp., and Tarrant Appraisal District, Cause No. 348- 365230-25, pending in the 236th Judicial District of Tarrant County; Harris County Municipal Utility Dist. No. 390 v. Pleasonton Housing Finance Corp. and Roland Altinger, in his Official Capacity as Chief Appraiser of the Harris Central Appraisal District, Cause No. 2025-33133, pending in the 165th Judicial District of Harris County; City of San Marcos and Hays County, Texas v. Pecos Housing Finance Corp. and Pleasonton Housing Finance Corp., Cause No. 25- 1185-DCB, pending in the 207th Judicial District of Hays County; Williamson County, Siena Municipal Utility Dist. No. 1 and Siena Municipal Utility Dist. No. 2 v. Cameron County Housing Finance Corp., Cause No. 25-0488-C425, pending in the 425th Judicial District of Williamson County; City of Missouri City, Texas v. Maverick County Housing Finance Corp. and the Board Members of the Maverick County Housing Finance Corp. in their Official Capacities, Cause No.

1 On May 28, 2025, Gov. Greg Abbott signed HB 21 into law, amending the Act effective immediately. See Housing Finance Corporations; Authorizing a Fee, 2025 Tex. Sess. Law Serv. Ch. 208 (H.B. 21) (VERNON'S), attached hereto as Exhibit A. The properties at issue in these appeals were acquired prior to these amendments. 2 See Plaintiff City of Arlington’s Third Amended Petition and Application for TRO and Injunctive Relief, at 5 (Exhibit B); City of Fort Worth’s Third Amended Petition in Intervention and its Application for a Temporary Restraining Order and Injunctive Relief, at 7 (Exhibit C); [City of Lake Worth’s] First Amended Application for Temporary Injunction and Response to Defendant Tarrant County Appraisal District’s Plea to the Jurisdiction (Exhibit D) at 8 (excluding exhibits attached thereto); [City of Missouri City & Sienna Parks & Levee Improvement District’s] First Amended Petition Requesting Declaratory and Injunctive Relief (Exhibit E) at 9. July 2, 2025 Page 3 of 7 CHASNOFF STRIBLING

25-DCV-325392, pending in the 268th Judicial District of Fort Bend County; City of Lewisville v. Cameron County Housing Finance Corp., Pecos Housing Finance Corp., and Don Spencer, in his Official Capacity as Chief Appraiser of the Denton County Tax Appraisal Dist., Cause No. 25- 4665-367, pending in the 367th Judicial District of Denton County, Texas; Town of Little Elm v. Pleasonton HFC, Pecos HFC, Don Spencer in is Official Capacity as Chief Appraiser of Denton County Appraisal District, Cause No. 25-5634-367, pending in the 367th Judicial District of Denton County; City of Carrollton v. Pecos Housing Finance Corp., Shane Docherty, in his Official Capacity as Chief Appraiser of the Dallas Central Appraisal Dist., Cause No. DC-25- 07935, pending in the 101st Judicial District of Dallas County; City of Rowlett and Garland Indep. Sch. Dist. v. Pleasonton Housing Finance Corp., Cause No. DC-25-077781, pending in the 191st Judicial District of Dallas County; Montgomery County Municipal Utility Dist. No. 46 v. Maverick County Housing Finance Corp., Cause No. 25-06-09304, pending in the 284th Judicial District of Montgomery County.

B. These appeals are brought by or against the state or a board, commission, department, office, or other agency in the executive branch of the state government.

The Fifteenth Court of Appeals has exclusive intermediate appellate jurisdiction over civil matters “brought by or against the state or a board, commission, department, office, or other agency in the executive branch of the state government[.]” Tex. Gov’t Code § 22.220(d)(1).

The Texas Supreme Court recently addressed the scope of this provision in Baumgardner v. Brazos River Auth., 2025 WL 1779081 *1 (Tex. June 27, 2025). Finding the river authority to be a political subdivision 3 rather than a state agency, the Court determined the appeal did not fall within this Court’s exclusive jurisdiction. Id. at *3-5. Key to the Court’s holding was the limited geographic reach of the river authority. Id. at *3, 5. Citing Monsanto Co. v. Cornerstones Mun. Util. Dist., 865 S.W.2d 937, 940 (Tex. 1993), the Court observed “[a] political subdivision has jurisdiction over a portion of the State; a department, board or agency of the State exercises its jurisdiction throughout the State.” Baumgardner, 2025 WL 1779081 *5. Although HFCs are created by local government, Tex. Loc. Gov't Code § 394.002(d), at all times relevant to these appeals there was no limit to the geographic reach of their operations. See also Tex. Gov’t Code § 394.002(b)(1) (“the creation of a housing finance corporation is for the benefit of the people of the state, …”). Moreover, HFCs are empowered to delegate to the Texas Department of Housing and Community Affairs (indisputably a state agency) the authority to act on its behalf in the financing, refinancing, acquisition, leasing, ownership, improvement, and disposal of home mortgages or residential developments, making HFCs more akin to a state agency than a political subdivision. Id. at § 394.032(e).

3 Although considered political subdivisions, this Court has exercised jurisdiction over appeals brought by or against municipalities. See, e.g., City of Austin v. Mario Ponce et al., Case No. 15- 24-00076; City of Rio Vista v. Johnson County Special Utility District, Case No. 15-24-00065-CV. July 2, 2025 Page 4 of 7 CHASNOFF STRIBLING

C. This Court has jurisdiction to consider these appeals “as provided by law.”

This Court also has jurisdiction over any other matter as provided by law. Tex. Gov’t Code § 22.220(d)(2). As the Texas Supreme Court made clear in In re Dallas Cnty., 697 S.W.3d 142, 146 (Tex. 2024) and Kelley v. Homminga, 706 S.W.3d 829, 834 (Tex. 2025), this Court was created to adjudicate matters that implicate, or that the Legislature has defined as critical to, the State’s interests. The Legislature was clear on the importance of HFCs to achieving the goal of providing low-income housing to Texans: “the corporation, as a public instrumentality and nonprofit corporation, performs an essential government function on behalf of and for the benefit of the general public, the local government, and this state.” Tex. Loc. Gov’t Code § 394.002(c)(3) (emphasis added). There can be no question that Appellants’ alleged “misuse and abuse” of the Texas Housing Finance Corporation Act is a matter that is critical to the State’s interests within the common-law holding of Kelley. See Exhs. B-D.

Moreover, as noted supra, similar lawsuits are pending across the state. Those appeals should be heard by the same intermediate court of appeals as a matter of judicial economy. This, too, was a justification for the establishment of this Court: “[u]nder the current judicial system, appeals in cases of statewide significance are decided by one of Texas’s 14 intermediate appellate courts. These courts have varying levels of experience with the complex legal issues involved in cases of statewide significance, resulting in inconsistent results for litigants. … The justices on this new Fifteenth Court of Appeals are elected statewide, ensuring that all Texans have a voice in the selection of judges who decide cases of statewide importance.” See Senate Research Center, Bill Analysis, Tex. S.B. 1045, 88th Leg., R.S. (2023) (discussing background of the bill) (emphasis added).

D. These appeals are matters in which a party to the proceeding has challenged the constitutionality of a state statute.

Finally, this Court also has jurisdiction over matters in which a party to the proceeding files a petition, motion, or other pleading challenging the constitutionality or validity of a state statute or rule and the attorney general is a party to the case. Tex. Gov’t Code § 22.220(d)(2).

Appellee City of Fort Worth has alleged that, to the extent Appellants’ actions are authorized by the Act, the Act violates Article VIII Section 11 of the Texas Constitution. See Exhibit C at 9. It also seeks a declaratory judgment that Article VIII, Section 11 of the Texas Constitution “limits counties’ ad valorem taxation authority to ‘property within their respective boundaries’ and that Defendants' scheme violates Constitutional limits on the scope of Texas counties’ taxing authority.” Id. at 9-10. Likewise, Appellee City of Lake Worth seeks a declaration from the Court that “Pleasanton HFC’s actions violate the Texas Constitution’s rules against extra-jurisdictional taxation by seeking to impose a system of taxation on properties located outside the boundaries of Atascosa County, Texas where City of Pleasanton is located.” See Exhibit D at 12. July 2, 2025 Page 5 of 7 CHASNOFF STRIBLING

Appellants anticipate filing a notice with the Office of the Attorney General of these challenges under and pursuant to the Texas Constitution.

Thank you for your attention to this matter. July 2, 2025 Page 6 of 7 CHASNOFF STRIBLING

Respectfully Submitted:

/s/ Blake W. Stribling Blake W. Stribling Texas Bar No. 24070691 bstribling@chasnoffstribling.com Daniel J. Lecavalier Texas Bar No. 24129028 dlecavalier@chasnoffstribling.com CHASNOFF STRIBLING, LLP 1020 N.E. Loop 410, Suite 150 San Antonio, Texas 78209 Telephone: (210) 469-4155 ATTORNEYS FOR APPELLANTS PLEASANTON HOUSING FINANCE CORPORATION AND MAVERICK HOUSING FINANCE CORPORATION

/s/ Roel Gutierrez Roel Gutierrez Texas Bar No. 240693842 LAW OFFICE OF ROEL GUTIERREZ, PLLC 4415 N. McColl Rd. McCallen, TX 78504 Telephone: 956-278-3529 Fax: 956-278-3530 roelgutierrezlaw@gmail.com and Robert J. Salinas Texas Bar No. 17536000 2101 Wood Ave. Donna, Texas 78537 Telephone: 956-464-2460 ATTORNEYS FOR APPELLANT LA VILLA HOUSING FINANCE CORPORATION July 2, 2025 Page 7 of 7 CHASNOFF STRIBLING

Certificate of Service

I certify that a true and correct copy of the foregoing has been served in compliance with the Texas Rules of Civil Procedure on this 2nd day of July, 2025.

Blake W. Stribling EXHIBIT A HOUSING FINANCE CORPORATIONS; AUTHORIZING A FEE, 2025 Tex. Sess. Law...

2025 Tex. Sess. Law Serv. Ch. 208 (H.B. 21) (VERNON'S)

VERNON'S TEXAS SESSION LAW SERVICE 2025

Eighty-Ninth Legislature, 2025 Regular Session

Additions are indicated by Text; deletions by 'Fext . -Tcext. Vetoes are indicated by ;

stricken material by "Fext- .

CHAPTER 208 H.B. No. 21 HOUSING FINANCE CORPORATIONS; AUTHORIZING A FEE

AN ACT relating to housing finance corporations; authorizing a fee.

Be it enacted by the Legislature of the State of Texas:

SECTION 1. Section 394.004, Local Government Code, is amended to read as follows:

<< TX LOCAL GOVT § 394.004 >>

Sec. 394.004. APPLICATION OF CHAPTER TO CERTAIN RESIDENTIAL DEVELOPMENTS. This chapter applies only to a residential development at least 90 percent of which is for use by or is intended to be occupied by households [persons ] of low and moderate income whose adjusted gross income [;-tegether-with-the adjustedgross ineome-of-all persons-who-intend to-reside with those personsjroncdwelingeunit; ] did not for the preceding tax year exceed the maximum amount constituting moderate income as defined under the housing finance corporation's rules, resolutions relating to the issuance of bonds, or financing documents relating to the issuance of bonds.

SECTION 2. Subchapter A, Chapter 394, Local Government Code, is amended by adding Section 394.0045 to read as follows:

<< TX LOCAL GOVT § 394.0045 >>

Sec. 394.0045. APPLICABILITY OF OPEN MEETINGS AND OPEN RECORDS LAWS. (a) Chapter 551, Government Code, applies to actions and proceedings under this chapter.

(b) Chapter 552, Government Code, applies to all records of a housing finance corporation.

SECTION 3. The heading to Section 394.031, Local Government Code, is amended to read as follows:

<< TX LOCAL GOVT § 394.031 hd. >>

Sec. 394.031, EXERCISE OF POWERS; AREA OF OPERATION.

SECTION 4. Section 394.031, Local Government Code, is amended by adding Subsections (c), (d), and (e) to read as follows:

<< TX LOCAL GOVT § 394.031 >>

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(c) Subject to Subsection (d), the area in which a housing finance corporation may own real property for residential development or engage in residential development s limited to:

(1) for a housing finance corporation sponsored by a municipality under Section 394.011, the boundaries of the municipality that sponsored the corporation;

(2) for a housing finance corporation sponsored by a county under Section 394.011, the boundaries of the county that sponsored the corporation; or

(3) for a housing finance corporation sponsored by more than one local government under Scction 394.012:

(A) the boundaries of each municipal sponsor of the corporation; and

(B) the boundaries of each county sponsor of the corporation.

(d) A housing finance corporation may own real property for residential development or engage in residential development outside an area described by Subsection (c) only if a resolution or order, as applicable, approving that ownership or development in the outside area is adopted by the governing bodies of:

(1) cach municipality that contains any part of the outside area in which the corporation proposes to own real property for residential development or engage in residential development;

(2) for a residential development or home located in the unincorporated area of a county, each county that contains any part of the outside area in which the corporation proposes to own real property for residential development or engage in residential development; and

(3) any housing finance corporation sponsored by a municipality or county described by Subdivision (1) or (2), as applicable.

(e) This section does not prohibit or limit a housing finance corporation from owning real property outside an area described by Subsection (c) or (d) if the property is not owned for purposes of residential development.

SECTION 5. Section 394.032(e), Local Government Code, is amended to read as follows:

<< TX LOCAL GOVT § 394.032 >>

(e) A housing finance corporation may delegate to the Texas Department of Housing and Community Affairs the authority to act on its behalf in the financing, refinancing, acquisition, leasing, ownership, improvement, and disposal of home mortgages or residential developments, [within-and-o anee-corporation; ] including its authority to issue bonds for those purposes.

SECTION 6. Section 394.037, Local Government Code, is amended by adding Subsection (a-1) to read as follows:

<< TX LOCAL GOVT § 394.037 >>

(a-1) A housing finance corporation may issue bonds under this chapter for a purpose described by Subsection (a) only to finance or support a residential development or home that is located or will be constructed:

(1) within the boundaries of a local government in which a housing finance corporation is permitted to own real property for residential development or engage in residential development under Section 394.031(c); or

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(2) outside the boundaries of a local government described by Subdivision (1) if a resolution or order, as applicable, approving the issuance of bonds is adopted by the governing body of:

(A) each municipality that contains any part of the residential development or home; and

(B) for a residential development or home Jocated in the unincorporated area of a county, each county that contains any part of the residential development or home.

SECTION 7. Section 394.039, Local Government Code, is amended to read as follows:

<< TX LOCAL GOVT § 394.039 >>

Sec. 394.039. SPECIFIC POWERS RELATING TO FINANCIAL AND PROPERTY TRANSACTIONS. Subject to Sections 39.4.031(c), (d), and (e), a [A ] housing finance corporation may:

(1) lend money for its corporate purposes, invest and reinvest its funds, and take and hold real or personal property as security for the payment of the loaned or invested funds;

(2) mortgage, pledge, or grant security interests in any residential development, home mortgage, note, or other property in favor of the holders of bonds issued for those items;

(3) purchase, receive, lease, or otherwise acquire, own, hold, improve, use, or deal in and with real or personal property or interests in that property, [wherever-the property is located; ] as required by the purposes of the corporation or as donated to the corporation; and

(4) sell, convey, mortgage, pledge, lease, exchange, transfer, and otherwise dispose of all or part of its property and assets.

SECTION 8. Section 394.9025, Local Government Code, is amended to read as follows:

<< TX LOCAL GOVT § 394.9025 >>

Sec. 394.9025. MULTIFAMILY RESIDENTIAL DEVELOPMENT. (a) Following a public hearing by the governing body of the applicable local government, a housing finance corporation may, subject to the geographic limitations of Section 394.037(a-1), issue bonds to finance a multifamily residential development to be owned by the housing finance corporation if:

(1) at least 50 percent of the units in the multifamily residential development are reserved for occupancy by individuals and families earning less than 80 percent of the arca median family income; or

(2) the units in the multifamily residential development are reserved in the manner provided by Section 394.9026(c)(1).

(b) Following a public hearing by the governing body of the applicable local government, a housing finance corporation may, subject to the geographic limitations of Section 394.037(a-1), issue bonds to finance a multifamily residential development to be owned by the housing finance corporation in accordance with Scction 394.004 if the housing finance corporation receives approval of the goveming body of the local government.

SECTION 9. Subchapter Z, Chapter 394, Local Government Code, is amended by adding Sections 394.9026 and 394.9027 to read as follows:

<< TX LOCAL GOVT § 394.9026 >>

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Sec. 394.9026. ADDITIONAL CONDITIONS FOR BENEFICIAL AD VALOREM TAX TREATMENT RELATING TO CERTAIN MULTIFAMILY RESIDENTIAL DEVELOPMENTS. (a) In this section:

(1) "Housing choice voucher program" means the housing choice voucher program under Section 8, United States Housing Act of 1937 (42 U.S.C. Section 1437f).

(2) "Housing finance corporation user" means:

(A) a housing finance corporation; or

(B) for a multifamily residential development that is not owned directly by a housing finance corporation, a public-private partnership entity or a developer or other person or entity that has an ownership interest or a leasehold or other possessory interest in multifamily residential development financed or supported by a housing finance corporation.

(3) "Lower income housing unit" means a residential unit reserved for occupancy by an individual or family earning not more than 60 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development.

(4) "Maximum market rent" means, with respect to a particular income-restricted unit, the average annual rent charged fer all non-income-restricted units in the development having the same or substantially similar floor plan as the income-restricted unit.

(5) "Middle income housing unit" means a residential unit reserved for occupancy by an individual or family earning not more than 100 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development.

(6) "Moderate income housing unit" means a residential unit reserved for occupancy by an individual or family earning not more than 80 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development.

(7) "Multifamily residential development" means any residential development consisting of four or more residential units intended for occupancy as rentals, regardless of whether the units are attached or detached.

(8) "Rent" means any recurring fee or charge a tenant is required to pay as a condition of occupancy, including a fee or charge for the use of a common area or facility reasonably associated with residential rental property. The term does not include fees and charges for services or amenities that are optional for a tenant, such as pet fees and fees for storage or covered parking.

(9) "Rent reduction" means the projected difference between the rent charged for an income-restricted unit and the maximum market rent that could be charged for that same unit without the income restrictions.

(10) "Very low income housing unit" means a residential unit reserved for occupancy by an individual or family earning not more than 50 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Devclopment.

(b) This section does not apply to a multifamily residential development that is the recipient of a low income housing tax credit allocated under Subchapter DD, Chapter 2306, Government Code.

c) Subject to Subsection (g), an ad valorem tax exemption under Section 394.905 for a multifamily residential development owned by a housing finance corporation is available only if the other requirements of this chapter are satisfied and if:

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(1) at least:

(A) 10 percent of the units in the development are reserved for occupancy as lower income housing units and at least 40 percent of the units in the development are reserved for occupancy as moderate income housing units; or

(B) 10 percent of the units in the development are reserved for occupancy as very low income housing units and at least 40 percent of the units in the development are reserved for occupancy as middle income housing units;

(2) the rent reduction at the development in the preceding tax year was:

(A) not less than 50 percent of the amount of the estimated ad valorem taxes that would have been imposed on the applicable property in the same preceding tax year if the property did not receive an exemption from those taxes under Section 394.905, beginning with:

(i) for a multifamily residential development that is acquired by the corporation, the first tax year after the tax year that the corporation acquires the development; and

(ii) for a newly constructed multifamily residential development uot described by Subparagraph (i), the first tax year after the tax year in which construction first begins on the development; or

(B) less than 50 percent of the amount of the estimated ad valorem taxes described by Paragraph (A) beginning with the tax year specified by that paragraph, but the housing finance corporation user paid to each taxing unit authorized to impose ad valorem taxes on the applicable property for the applicable tax year an amount equal to that taxing unit's pro rata share of the rent reduction shortfall that exists based on the difference between the minimum rent reduction amount described by Paragraph (A) and the amount of actual rent reduction at the development in the preceding tax year;

(3) the income-restricted residential units in the development have the same unit finishes and equipment and access to community amenities and programs as residential units that are not income-restricted;

income- (4) the percentage of very low, lower, moderate, and middle income housing units reserved in cach category of restricted residential units in the development, based on the number of bedrooms per unit, is the same as the percentage of each category of income-restricted residential units reserved in the development as a whole;

(5) the monthly rent charged per unit does not exceed:

(A) for a very low income housing unit, 30 percent of 50 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development;

(B) for a lower income housing unit, 30 percent of 60 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development;

(C) for a moderate income housing unit, 30 percent of 80 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development; or

(D) for a middie income housing unit, 30 percent of 100 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development;

the housing finance corporation user and the development do not:

(A) refuse to rent a residential unit in the development to an individual or family because the individual or family participates in the housing choice voucher program; or

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(B) use a financial or minimum income standard that requires an individual or family participating in the housing choice voucher program to have a monthly income of more than 250 percent of the individual's or family's share of the total monthly rent payable for a unit;

(7) the housing finance corporation user causes to be published on the Internet website of the development information about the development's policies regarding tenant participation in the housing choice voucher program;

(8) the housing finance corporation user for the development:

(A) affirmatively markets available residential units directly to individuals and families participating in the housing choice voucher program; and

(B) notifies local housing authorities of the development's acceptance of tenants in the housing choice voucher program; and

(9) each lease agreement for an income-restricted residential unit in the development provides that:

(A) the landlord may not retaliate against the tenant or the tenant's guests by taking an action because the tenant established, attempted to establish, or participated in a tenant organizatian;

(B) the landlord may only choose to not renew the lease if the tenant:

(i) committed one or more substantial violations of the lease;

(ii) failed to provide required information on the income, composition, or eligibility of the tenant's household; or

(iii) committed repeated minor violations of the lease that disrupt the livability of the property, adversely affect the health and safety of any person or the right to quiet enjoyment of the leased premises and related development facilities, interfere with the management of the development, or have an adverse financial effect on the development, including the failure of the tenant to pay rent in a timely manner; and

(C) to not renew the lease, the landlord must serve a written notice of proposed nonrenewal on the tenant not later than the 30th day before the effective date of nonrenewal.

d) In calculating the income of an individual or family for a very low, lower, moderate, or middle income housing unit the housing finance corporation user must use the definition of annual income described in 24 C.E.R. Section 5.609, as implemented by the United States Department of Housing and Urban Development. If the income of a tenant exceeds an applicable limit at the time of the renewal of a lease agreement for a residential unit, the provisions of Section 42(g 2)(D), Internal Revenue Code of 1986, apply in determining whether the unit may still qualify as a very low, lower, moderate, or middle income housing unit.

e) A housing finance corporation user may require an individual or family participating in the housing choice voucher program to pay the difference between the monthly rent for the applicable unit and the amount of the monthly voucher if the amount of the voucher is less than the rent.

f) A tenant may not waive the protections provided by Subscction (c)(9). A housing finance corporation user may adopt tenant protections that are more protective of tenants than the tenant protections provided by Subsection (c)(9).

g) A multifamily residential development that is acquired by a housing finance corporation and is occupied on the date of the acquisition is eligible for an ad valorem exemption under Section 394.905 for the two tax years following the date of the acquisition, regardless of whether the development complies with the conditions prescribed by Subsections (c)(1),

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(3), (4), and (5), if the development comes into compliance with Subsections (c)(1), (3), (4), and (5) not Iater than the end of the second tax year after the date of the acquisition.

<< TX LOCAL GOVT § 394.9027 >>

Sec. 394.9027. AUDIT REQUIREMENTS FOR CERTAIN MULTIFAMILY RESIDENTIAL DEVELOPMENTS. (a) In this section: " (1) "Department means the Texas Department of Housing and Community Affairs.

(2) "Housing finance corporation user" has the meaning assigned by Section 394.9026.

(b) A housing finance corporation or housing finance corporation user that claims an ad valorem tax exemption for a multifamily residential development under Section 394.905 must annually submit to the department an audit report for a compliance audit, prepared at the expense of the housing finance corporation user and conducted by an independent auditor or compliance expert with an established history of providing similar audits on housing compliance matters, that:

(1) states whether the corporation is in compliance with the requirements imposed for the exemption by Section 394.9026; and

(2) identifies the difference in the rent charged for income-restricted residential units and the estimated maximum market rents that could be charged for those units without the income restrictions.

(c) Not later than the 60th day after the date of receipt of the audit conducted under Subsection (b), the department shall examine the audit report and publish a report summarizing the findings of the audit. The report must:

(i) be made available on the department's Internet website; (2) be issued to the housing finance corporation that owns or is associated with the development that is the subject of an audit, the housing finance corporation user of the development, the comptroller, and the governing body of the sponsoring local government or governments of the housing finance corporation; and

(3) describe in detail the nature of any failure to comply with the requirements of Section 394.9026.

(d) Ifan audit report submitted under Subsection (b) indicates noncompliance with Section 394.9026, a housing finance corporation user, the associated bousing finance corporation, and the chief appraiser of the appraisal district in which the development is located must be given written notice from the department that is provided not later than the 120th day after the date a report has been submitted under Subsection (b) and specifies the reasons for noncompliance. For a finding of noncompliance with any provision of Section 394.9026(c), a housing finance corporation user and the associated housing finance corporation must be given:

(1) additional written notice that:

(A) otherwise complies with the notice requirements of this section;

(B) contains at least one option for a corrective action to resolve the noncompliance; and

(C) informs the housing finance corporation user and associated housing finance corporation that failure to resolve the noncompliance within the period provided by Subdivision (2) will result in the loss of the ad valorem tax exemption under Section 394,905;

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(2) a period of 180 days after the date notice is received under Subdivision (1) to resolve the matter that is the subject of the notice; and

(3) if a matter that is the subject of a notice provided under this subdivision is not resolved to the satisfaction of the department during the period provided by Subdivision (2), a second notice that informs the housing finance corporation of the loss of the ad valorem tax exemption for the development due to noncompliance with Section 394.9026.

¢e) The initial audit report required by Subsection (b) is due not later than June 1 of the tax year following:

(1) the date of acquisition for an existing multifamily residential development that is acquired by a housing finance corporation; or

(2) the date a newly constructed multifamily residential development first becomes occupied by one or more tenants.

f) Subsequent audit reports following the issuance of the initial audit report under Subsection (e) are due not later than June 1 of each year.

¢g) The department may extend the deadline for submitting any audit required under this section for good cause shown as determined by the department.

¢h) An independent auditor or compliance expert may not prepare an audit under Subsection (b) for more than three consecutive tax years for the same housing finance corporation. After the third consecutive audit, the independent auditor or compliance expert may prepare an audit only after the second anniversary of the preparation of the third consecutive audit.

¢i) The department:

(1) shall adopt forms and reporting standards for the auditing process;

(2) may charge a fee for the submission of an audit report under this section in a reasonable amount necessary to cover the expenses of administering this section; and

(3) shall adopt rules necessary to implement this section and Section 394.9026.

(j) Rules adopted under Subsection (i)(3) must include administrative processes and a process by which a housing finance corporation user may appeal a finding of noncompliance made under this section or a loss of a tax exemption due to a finding of noncompliance with Section 394.9026 or any other provision of this chapter.

¢k) An audit conducted under Subsection (b) is subject to disclosure under Chapter 552, Government Code, except that information containing tenant names, unit numbers, or other tenant identifying information may be redacted.

¢) This section does not apply to a multifamily residential development during any period that the development is the recipient of a low income housing tax credit allocated under Subchapter DD, Chapter 2306, Government Code.

SECTION 10. Section 394.903, Local Government Code, is amended to read as follows:

<< TX LOCAL GOVT § 394.903 >>

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Sec. 394.903. TRANSFER [E@GAFION ] OF [RESIPENHAL-DEVELOPMENT; } RESIDENTIAL DEVELOPMENT SITES. Subject to Sections 394.031(c) and (d), a must be-located

[0>}Fhe ] local government may transfer any residential development site to a housing finance corporation by sale or lease. The governing body of the local government may authorize the transfer by resolution without submitting the issue to the voters and without regard to the requirements, restrictions, limitations, or other provisions contained in any other general, special, or local law, [Fhe-site-may be inside or outside the toeat government ]

SECTION 11. Section 394.905, Local Government Code, is amended to read as follows:

<< TX LOCAL GOVT § 394.905 >>

Sec. 394.905. EXEMPTION FROM TAXES AND FEES [TAXATION J. (a) Subject to compliance with the requirements of this chapter, a [Fhe ] housing finance corporation and[; ] all property owned by the corporation [it ], the income from that [the ] property, all bonds issued by the corporation [it }, the income from those [the ] bonds, and the transfer of those [the ] bonds are exempt, as public property used for public purposes, from license fees, recording fees, and all other taxes imposed by this state or any political subdivision of this state.

(b) A multifamily residential development owned by a housing finance corporation is eligible for an exemption from ad valorem taxes, and the materials used to improve the applicable property are eligible for an exemption from sales and use taxes, only if:

(1) the property is located in an area in which the housing finance corporation is authorized to own real property or engage in residential development under Section 394.031(c) or (d);

(2) the board of directors of the corporation has adopted a resolution approving the multifamily residential development;

(3) before approval of the board of directors under Subdivision (2), the housing finance corporation or a sponsoring local government of the corporation:

(A) conducts, or obtains from a professional entity that has experience underwriting affordable residential developments and does not have a financial interest in the corporation or the applicable development, developer, or investors, an underwriting assessment of the proposed development that is dated not earlier than 180 days before the date of the board resolution;

(B) based on the underwriting assessment, makes a good faith determination that the total amount of annual rent reduction applicable to the development, as defined by Section 394.9026(a), will be not less than 50 percent of the amount of estimated ad valorem taxes that would be imposed on the property in the same tax year if the applicable property did not receive an exemption from those taxes under this section:

(i) for a development that is acquired by the corporation, each of the third, fourth, and fifth tax years after the tax year that the corporation acquires the development; and

(ii) for a newly constructed development not described by Subparagraph (i), each of the first, second, and third tax years after the tax year in which the development first achieves an occupancy rate of 90 percent; and

(C) publishes on its Internet website a copy of the underwriting assessment required by this subsection; and

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(4) the housing finance corporation submits to the Texas Department of Housing and Community Affairs and to the chief appraiser for each appraisal district in which the exemption is sought a one-time exemption application on a form promulgated by the comptroller.

(c) Notwithstanding Subsections (a) and (b), and subject to Section 394.9027, a multifamily residential development owned by a housing finance corporation or a housing finance corporation user is not entitled to an ad valorem tax exemption for any given tax year in which:

(1) the corporation or the housing finance corporation user is not in compliance with any provisions of Section 394.9026(c) and:

(A) the notice requirements in Section 394.9027(d) have been fulfilled; and

(B) the noncompliance is not resolved to the satisfaction of the department within the period provided by Section 394,9027(d)(2); or

(2) the corporation or the housing finance corporation user has not timely submitted the audit report required by Section 394.9027.

(d) Subsection (a) does not apply to ad valorem taxes imposed on a multifamily residential development by:

(1) a conservation or reclamation district created under Section 52, Article III, or Section 59, Article XVI, Texas Constitution, that provides water, sewer, or drainage service to the development, unless the applicable corporation has entered into a written agreement with the district to make a payment to the district in lieu of taxation, n the amount specified in the agreement; or

(2) an emergency services district created under Chapter 775, Health and Safety Code, unless the applicable corporation has entered into a written agreement with the district to make a payment to the district in lieu of taxation, in the amount specified in the agreement.

(e) Subsections (b)(3), (b)(4), and (c) do not apply to a multifamily residential development that is:

(1) owned by a housing finance corporation; and

(2) the recipient of a low income housing tax credit allocated under Subchapter DD, Chapter 2306, Government Code.

(f) The corporation is exempt from the franchise tax imposed by Chapter 171, Tax Code, only if the corporation is exempted by that chapter.

<< Repealed: TX LOCAL GOVT § 394.005 >>

SECTION 12. Section 394.005, Local Government Code, is repealed.

<< Note: TX LOCAL GOVT §§ 394.031, 394.903, 394.037, 394.9025, 394.905 >>

<< Note: TX LOCAL GOVT §§ 394.9026, 394.9027 >>

SECTION 13. (a) Subject to Subsection (i) of this section, Sections 394.031(c) and (d), Local Government Code, as added by this Act, and Section 394.903, Local Government Code, as amended by this Act, apply only to the ownership of real property that is acquired by a housing finance corporation on or after the effective date of this Act. The ownership of real property acquired by a housing finance corporation before the effective date of this Act, and the authority of a housing finance corporation to own

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that property or to engage in residential development with respect to that real property in an area outside the areas authorized by Sections 394.031(c) and (d), Local Government Code, as added by this Act, are governed by the law in effect on the date the property was acquired by the housing finance corporation, and the former law is continued in effect for that purpose.

(b) Section 394.037(a-1), Local Government Code, as added by this Act, and Section 394.9025, Local Government Code, as amended by this Act, apply only to bonds issued on or after the effective date of this Act. Bonds issued before the effective date of this Act are governed by the law in effect on the date the bonds were issued, and the former law is continued in effect for that purpose.

(c) Section 394.9026, Local Government Code, as added by this Act, and Section 394.905, Local Government Code, as amended by this Act, apply only to a tax for a tax year that begins on or after the effective date of this Act.

(d) Subject to Subsections (e) and (f) of this section, Sections 394.9026 and 394.9027, Local Government Code, as added by this Act, apply to all multifamily residential developments claiming an exemption under Section 394.905, Local Government Code, regardless of when the developments were approved or acquired.

(c) A multifamily residential development that was acquired by a housing finance corporation before the effective date of this Actis not eligible for an exemption under Section 394.905, Local Government Code, as amended by this Act, unless the housing finance corporation that owns the development and any housing finance corporation user, as defined by Section 394.9026, Local Government Code, as added by this Act, associated with the development come into compliance:

(1) not later than January 1, 2026, with Sections 394.9026(c)(6), (7), (8), and (9), Local Government Code, as added by this Act; and

(2) with Sections 394.9026(c)(1), (2), (3), (4), and (5), Local Government Code, as added by this Act, not later than the earlier of:

(A) the end of the 10th tax year following the effective date of this Act; or

(B) the end of the first tax year following a tax year in which:

(i) existing mortgage indebtedness of the development is refinanced;

(ii) title to the development is conveyed; or

(iii) a sale, conveyance, transfer or assignment, or series of sales, conveyances, transfers or assignments, results in a change in a majority of the beneficial ownership interests of any housing finance corporation user associated with the development.

(f) Notwithstanding Section 394.9027(b) or (f), Local Government Code, as added by this Act, the initial audit report required to be submitted under Section 394.9027(b), Local Government Code, as added by this Act, for a multifamily residential development that was acquired by a housing finance corporation before the effective date of this Act must be submitted by the later of:

(1) the date established by Section 394.9027(e), Local Government Code, as added by this Act; or

(2) June 1, 2026.

(g) Subject to Subsections (e), (h), and (i) of this section, Section 394.905, Local Government Code, as amended by this

Act, applies to all multifamily residential developments owned by a housing finance corporation, regardless of when the developments were approved or acquired.

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(h) Sections 394.905(b)(1), (2), and (3) and (d), Local Government Code, as added by this Act, apply only to multifamily residential developments that are acquired by a housing finance corporation on or after the effective date of this Act.

(i) A residential development that is owned by a housing finance corporation on September 1, 2025, and is located outside an area in which the corporation is authorized to own real property or engage in residential development under Section 394.03 1(c), Local Government Code, as added by this Act, is not eligible for an ad valorem tax exemption under Section 394.905, Local Government Code, as amended by this Act, after January 1, 2027, unless the corporation obtains the appropriate resolutions or orders required under Section 394,031(d), Local Government Code, as added by this Act, before that date.

(j) Not later than January 1, 2026, the Texas Department of Housing and Community Affairs shall adopt rules necessary to implement Section 394.9027(i), Local Government Code, as added by this Act.

SECTION 14. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2025.

Passed by the House on May 10, 2025: Yeas 115, Nays 13, 3 present, not voting; passed by the Senate on May 14, 2025: Yeas 30, Nays 1.

Approved May 28, 2025. Effective May 28, 2025.

Eud of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works.

© 2025 Thomson Reuters. No claim to original U.S.GGovernment Works. 1 EXHIBIT D FILED 348-364430-25 TARRANT COUNTY 5/28/2025 2:08 PM THOMAS A. WILDER DISTRICT CLERK

CAUSE NO. 348-364430-25

CITY OF LAKE WORTH, TEXAS § IN THE DISTRICT COURT Plaintiff, § § v. § § PLEASANTON HOUSING FINANCE § 348th JUDICIAL DISTRICT CORPORATION, a Texas nonprofit § corporation, THE TARRANT § APPRAISAL DISTRICT, and ISMAEL § GALLEGOS, JOEY MACON, MARK § PINKSTON, ZACHARY PAWELEK, § SCOTT FERGUSON, LILIAN § CASHMER, AND BRANDON HICKS, § in their official capacities as Board § Members of Pleasanton Housing § Finance Corporation, § TARRANT COUNTY, TEXAS Defendants. §

PLAINTIFF’S FIRST AMENDED APPLICATION FOR TEMPORARY INJUNCTION AND RESPONSE TO DEFENDANT TARRANT COUNTY APPRAISAL DISTRICT’S PLEA TO THE JURISDICTION

TO THE HONORABLE MEGAN FAHEY, JUDGE:

The City of Lake Worth, Texas, (“Lake Worth”) Plaintiff, files this its First Amended

Application for Temporary Injunction and Response to Defendant Tarrant Appraisal District

(“TAD”)’s Plea to the Jurisdiction and in support of which, respectfully shows the Court the

following:

I. BACKGROUND

This case involves an abuse of the Texas Housing Finance Corporation Act, Tex. Local

Gov’t Code §§ 394.001 et seq. (“The Act”). Pleasanton Housing Finance Corporation (“Pleasanton

HFC”) – a housing corporation located in and created by a small town that is 300 miles away from

the location of the property in question – seeks to obtain a full tax exemption on a large multi-

family development located in the City of Lake Worth, Texas. Pleasanton HFC receives a

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 1

Copy from re:SearchTX monetary kickback while causing the loss of millions of dollars in real property value from the

local tax base.

Pleasanton HFC’s scheme, which is in direct contravention of the Act, consists of the

following machinations: a private developer acquires land for a new multifamily development (or

acquires an already-existing multifamily development as in this case) in a city other than

Pleasanton, Texas; the private developer then conveys that property to Pleasanton HFC; Pleasanton

HFC, as the new owner, then applies for and receives a 100% tax exemption; and Pleasanton HFC

then leases that now-exempt property to a private landlord (oftentimes the same developer who

originally purchased the property), who then shares the profits with Pleasanton HFC. The upshot

of this unethical and unlawful scheme is that the developer and landlord get a massive tax

exemption, Pleasanton HFC gets to collect fees and a portion of the development’s profits, and the

other city (in this case, Lake Worth, Texas) bears 100% of the downside.

While the City supports the creation of affordable housing opportunities for its residents,

which is a worthy mission, Pleasanton HFC improperly seeks to deprive the elected officials of

Lake Worth, Texas – where these projects are located – from engaging in the critical cost-benefit

analysis necessary to determine whether the public benefits of these multifamily housing projects

are worth the elimination of tax revenues that are otherwise due to the local community. Further,

the City is also deprived of any oversight over the multifamily housing project to include whether

affordable housing is actually being provided to low-income tenants as required under the Act.

In short, a tiny housing finance corporation, located 300 miles away in a town with less than

13,000 residents, has singlehandedly reduced Lake Worth’s yearly tax revenue by well over a

quarter of a million dollars while it rakes in undeserved fees and profits from rental property located

in Lake Worth. Further, the City bears all costs for providing services to the property at issue

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 2

Copy from re:SearchTX while Pleasanton HFC obtains the financial windfall. The City of Pleasanton then unlawfully

diverts its ill-gotten gains to its general fund rather than use these funds for providing affordable

housing services for its own residents in violation of the Act. Accordingly, the City now brings

this lawsuit to enforce its statutory rights under Chapter 394 of the Texas Local Government Code.

The City also seeks injunctive relief to stop Pleasanton HFC’s and its Board members’ unlawful

behavior before they do any further irreversible damage to Lake Worth’s tax base, and to stop the

Tarrant Appraisal District (“TAD”) from granting tax exemptions requested by Pleasanton HFC

regarding properties located in Lake Worth, Texas.

II. FIRST AMENDED APPLICATION FOR TEMPORARY INJUNCTION

The City respectfully requests that this Court enter a temporary injunction order that

prohibits (1) the Pleasanton HFC Defendants from purchasing additional property in the City of

Lake Worth and (2) all Defendants from requesting, obtaining, granting, or receiving tax-

exemptions for property located in the City of Lake Worth. In support, the City shows the

following.

A. The Texas Housing Finance Corporations Act.

The Texas Housing Finance Corporations Act (“the Act”) found in Chapter 394 of the

Texas Local Government Code was passed in 1979 to help facilitate the development of low and

moderate income housing. Tex. Local Gov’t Code §§ 394.001 et seq.; see also Tex. Local Gov’t

Code § 394.002(a) (the Act’s purpose is to “provide a means to finance the cost of residential

ownership and development that will provide decent, safe, and sanitary housing at affordable

prices for residents of local governments”).

To help create more low and moderate income housing, the Act empowers local

governments to create Housing Finance Corporations (“HFCs”)—nonprofit organizations,

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 3

Copy from re:SearchTX comprised of local officials, that help coordinate and facilitate affordable housing projects. See

Tex. Local Gov’t Code §§ 394.002, 394.011(a), 394.032. And because HFCs are (at least in

theory) furthering a public purpose, the Act provides that HFC-owned properties and the income

derived from those properties are tax-exempt. Tex. Local Gov’t Code § 394.905 (“The housing

finance corporation, all property owned by it, the income from the property, all bonds issued by it,

the income from the bonds, and the transfer of the bonds are exempt, as public property used for

public purposes, from license fees, recording fees, and all other taxes imposed by this state or any

political subdivision of this state.”).

HFCs are commonly a part of public/private real estate partnerships, in which a private

developer acquires land for a new development or acquires an existing multifamily project and then

conveys it to an HFC, which then acquires tax-exempt status for the property and leases the

property to a private landlord who, in turn, pays fees to the HFC and shares the profits generated by

the property with the HFC. Because the Act allows for such an enormous tax benefit, it provides

two specific restrictions on what residential developments an HFC can tax-exempt: (1) a residential

development can receive tax exemption from an HFC only if at least 90% of the development “is

for use by or is intended to be occupied by persons of low and moderate income,” as defined by

the statute, Tex. Local Gov’t Code § 394.004; and (2) the residential development “must be

located within the local government.” Tex. Local Gov’t Code § 394.903 (emphasis added).

An HFC, in other words, can obtain tax-exempt status for a residential development only

if the development is located within the HFC’s local jurisdiction and is actually used to house low

or moderate income individuals. Tex. Local Gov’t Code §§ 394.004, 394.903. Here, Pleasanton

HFC has not complied with either mandatory requirement for tax-exemption.

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 4

Copy from re:SearchTX B. The Formation of Pleasanton HFC.

Pleasanton HFC is a governmental entity formed under the authority of the Act for the

purposes of financing and promoting affordable housing. According to Pleasanton HFC’s

Certificate of Formation filed with the Texas Secretary of State, a copy of which is attached as

Exhibit 1, Pleasanton HFC was incorporated by the City of Pleasanton, Texas in 2023. [Exhibit

1]. Pleasanton HFC is governed by a Board of Directors, in which all the powers of the HFC are

vested. Tex. Loc. Gov’t Code § 394.021. A majority of the directors constitutes a quorum. Id.

The directors may take action by a majority vote when a quorum is present. Id. Per the Restated

Certificate of Formation filed with the Texas Secretary of State, a copy of which is attached as

Exhibit 2, the Board of Pleasanton HFC is comprised of the members of the governing body of

the City of Pleasanton, Texas. [Exhibit 2, Art. VII, p. 3]. Accordingly, the current board members

are: Ismael Gallegos; Joey Macon; Mark Pinkston; Zachary Pawelek; Scott Ferguson; Lilian

Cashmer; and Brandon Hicks.

C. Pleasanton HFC is exempting properties in Lake Worth—300 miles outside its jurisdiction—without complying with the 90%-income-threshold under the Act.

As set forth in the affidavit of City Manager Stacey Almond, a copy of which is attached

as Exhibit 3, Pleasanton HFC recently acquired Neuhaus Lake Worth Apartments, located at 6201

Azle Ave., Lake Worth, Texas 76135 – an already-built, upscale apartment complex located in

Lake Worth. [Exhibit 3 at ¶ 2]. The legal description of this property follows:

Lot 1, Block 1, of FDG-POH LAKE WORTH JV ADDITION, LOT 1, BLOCK 1, a subdivision to the City of Lake Worth, Tarrant County, Texas, according to the Plat thereof recorded in cc# D225063225, Real Property Records, Tarrant County, Texas.

[Exhibit 3 at ¶ 2]. Upon information and belief, Pleasanton HFC has applied for a full tax-

exemption for this property, which is currently being processed by TAD. [Exhibit 3 at ¶ 2]. Upon

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 5

Copy from re:SearchTX information and belief, after receiving that exemption, Pleasanton HFC will lease the complex to

a private landlord and collect a share of that complex’s profits.

However, Neuhaus Lake Worth Apartments is not entitled to tax-exemption. Upon

information and belief, Neuhaus Lake Worth Apartments does not lease 90% of its available units

to persons of low and moderate income. With fees and rent, a three-bedroom apartment in this

complex costs over $2,000 per month, and a two-bedroom is only slightly less expensive. 1 Further,

Neuhaus Lake Worth Apartments provides no information on its website about affordable housing

or income requirements. Id. This complex also does not meet the 90%-income-housing threshold

needed to receive an exemption under the Act. See Tex. Local Gov’t Code § 394.004 (providing

that a residential development can receive tax exemption from an HFC only if at least 90% of the

development “is for use by or is intended to be occupied by persons of low and moderate income”).

Additionally, it appears that Pleasanton is utilizing the profits earned from this unethical and

unlawful scheme to offset utility rate increases and to supplement city operations via its General

Fund. However, Section 394.032(b) of the Act limits any net corporate earnings to provide housing

for low to moderate income individuals:

Sec. 394.023. DISPOSITION OF CORPORATE EARNINGS. (a) The housing finance corporation may not pay dividends. The net earnings of the corporation may not be distributed to or benefit the directors or officers of the corporation or any person except as reasonable compensation for services rendered to the corporation. (b) If the board of directors determines that sufficient provision has been made for full payment of the expenses, bonds, and other obligations of the corporation, any net corporate earnings accruing after the determination shall be paid to the local government. The local government shall use amounts received under this subsection only to provide for the housing needs of individuals and families of low and moderate incomes, including single- family units and mixed income multifamily projects found by the local government to serve the interests of low and moderate income individuals and families if the single-family and multifamily projects have as a major

1 https://www.neuhauslakeworth.com/models

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 6

Copy from re:SearchTX purpose the provision of safe, sanitary, and decent housing for individuals and families of low income. (c) This section does not prohibit the board of directors from transferring corporate property as provided by a contract made by the corporation.

Tex. Loc. Gov’t Code § 394.023 (emphasis supplied). Indeed, Pleasanton City Manager Johnny

Huizar has admitted to the Pleasanton Express that Pleasanton HFC’s revenue is transferred to the

City of Pleasanton’s general fund as needed. See Daniel Elizondo, Massive tax breaks, major

scrutiny: Pleasanton housing project under statewide spotlight, Pleasanton Express, April 2, 2025,

a copy of which is attached as Exhibit 5. According to Huizar, Pleasanton HFC’s funds were

recently used to support a five-year freeze on water rate hikes following a city council resolution.

[Exhibit 5, p. 8]. Defendant Hicks has previously stated that Pleasanton HFC reaps $300,000 from

each closed deal, some of which was spent on “back pay” for the Pleasanton City Manager and

City Secretary. [Exhibit 5, p. 7]. It seems that Pleasanton HFC’s revenue, which is generated by

decimating other municipalities’ tax rolls, is not being used to only provide for the housing needs of

individuals and families of low and moderate income as mandated by the Act.

Additionally, the City has been damaged as a result of Defendants’ actions. Specifically,

Pleasanton HFC’s illegal tax-exemption scheme has removed millions of dollars from Tarrant

County taxing units’ tax rolls. The 2025 appraised value for this property is $54,925,097, as set

forth in TAD records, attached hereto as Exhibit 4. [Exhibit 4, p. 2]. Consequently, the Property’s

tax-exempt status has resulted in tax revenue loss to the following taxing units: The City of Lake

Worth; Tarrant County; Tarrant County Hospital; Tarrant County College; and Lake Worth ISD.

[Exhibit 3 at ¶ 5]. These taxing units will lose a total of $1,220,931 in tax revenue in 2025. [Exhibit

3 at ¶ 5]. Lake Worth ISD alone will lose $689,420 in annual tax revenue as a result of Pleasanton

HFC’s improper claim of tax-exempt status on the Neuhaus Lake Worth apartment complex.

[Exhibit 3 at ¶ 5].

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 7

Copy from re:SearchTX In regards to the City, it will lose $266,618.00 in estimated tax revenue in 2025, based upon

the appraised value of the property and the City’s adopted tax rate of .485420/$100. [Exhibit 3 at

¶¶ 4, 6]. In other words, by improperly exempting just one apartment complex in Lake Worth,

Texas, Pleasanton HFC will cause Lake Worth to lose over a quarter of a million dollars annually,

in tax revenue, and there is no clear path for Lake Worth (or other affected local entities) to recoup

that loss. [Exhibit 3 at ¶ 4]. This equals an estimated 7.02% of Lake Worth’s annual ad valorem

tax revenue. [Exhibit 3 at ¶ 4]. Yet the City still incurs the cost of providing essential public

services to the property, including police, fire protection, code enforcement, street maintenance,

etc.; while Pleasanton HFC, an absent landlord, reaps all financial benefits.

This is a widespread problem across the state. The City of Euless, for example, has seen at

least a 2% drop in its overall annual revenue after a single apartment complex received tax-exempt

status from the Cameron County HFC. 2 Dallas, Fort Worth, McKinney, Irving, Lewisville, and

other north Texas cities have reported millions of dollars in total lost tax revenue. 3 Typically, these

out-of-jurisdiction HFCs are often bestowing tax-exempt status to already-built structures (not new

projects), and many of the exempted properties are not even affordable housing projects; they are

typical for-profit apartments and condos, usually located in upmarket neighborhoods, that do not

offer reduced rent, housing vouchers, or other benefits to low-income applicants. 4

2 Andrea Lucia, Euless Loses 2 Percent of Revenue to Controversial Tax Break Approved in Faraway County, CBS News (Feb. 21, 2024) available at https://www.cbsnews.com/texas/news/euless-loses-2-percent-of-revenue-to- controversial-tax-break-approved-in-faraway-county/.

3 Andrea Lucia, Housing Group Made Millions Getting Tax Breaks for Developers, Costing Cities and Schools Even More, CBS News (Dec. 22, 2023) available at https://www.cbsnews.com/texas/news/housing-group-made- millions-getting-tax-breaks-for-developers-costing-cities-and-schools-even-more/.

4 Id. (documenting that an out-of-town HFC purchased an apartment complex in a “luxurious community” in Irving and that the tenants’ rents went up significantly under the HFC’s ownership).

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 8

Copy from re:SearchTX Because of the widespread nature of this practice, there has been a strong legislative push

to (even more) explicitly outlaw this sort of tax-exemption scheme. See H.B. No. 21. 5 Upon

information and belief, because the Legislature intends to take strong action to prevent these illegal

schemes, HFCs, such as Pleasanton HFC, are scrambling to acquire multiple out-of-jurisdiction

projects.

D. A Temporary Injunction is Necessary to Maintain the Status Quo, and to Prevent Continued Unlawful Action, because the City Has a Probable Right to Relief and Is Faced with Imminent Irreparable Harm.

To stop Pleasanton HFC from closing on the purchase of any more properties located in

Lake Worth, Texas, the City asks this Court for a temporary injunction that prohibits Pleasanton

HFC from (a) closing on the purchase of any properties located in the City of Lake Worth and (b)

requesting, approving and/or obtaining any tax exemptions on Lake Worth properties. The City

further requests a temporary injunction that prohibits Tarrant Appraisal District from granting tax

exemptions requested by Pleasanton HFC regarding any properties located in the City of Lake

Worth, Texas, to include the currently pending application for tax exemption for Neuhaus Lake

Worth Apartments. “To obtain a temporary injunction, [an] applicant must plead and prove three

specific elements: (1) a cause of action against the defendant; (2) a probable right to the relief

sought; and (3) probable, imminent, and irreparable injury in the interim.” Butnaru v. Ford

Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). “Whether to grant or deny a temporary injunction

is within the trial court’s sound discretion,” and an order granting injunctive relief will be reversed

on appeal only if “the trial court’s action was so arbitrary that it exceeded the bounds of reasonable

discretion.” Id. An applicant has a probable right to relief if it has a cause of action for which

relief may be granted. Universal Health Services, Inc. v. Thompson, 24 S.W.3d 570, 577-78 (Tex.

5 https://legiscan.com/TX/text/HB21/id/3053018.

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 9

Copy from re:SearchTX App.-Austin 2008, no pet.). Among other grounds, “[a] trial court may . . . grant injunctive relief

… when a dispute involves real property.” Shor v. Pelican Oil & Gas Mgmt., LLC, 405 S.W.3d

737, 750 (Tex. App.—Houston [1st Dist.] 2013, no pet.).

All these elements are present. The City has pled a cause of action against Defendants:

namely a declaratory action under the UDJA, an ultra vires claim against Pleasanton HFC board

members, and a violation of the Texas Constitution. The City has shown it will likely be successful

in this declaratory action, as the Act’s plain language prohibits Pleasanton HFC’s complained-of

conduct. And, in the absence of injunctive relief, Pleasanton HFC will continue to pursue its

application for tax exemption and TAD will grant Pleasanton HFC’s application for tax exemption

on the Neuhaus Lake Worth property and Pleasanton HFC is likely to close on the purchase of

additional Lake Worth properties and apply for tax exemptions on those properties as well. Such

actions would lead to an irreversible removal of those properties from the local tax rolls. Simply

put, this is precisely the sort of case in which equitable relief is warranted.

The City has a probable right to relief against the Pleasanton HFC Defendants.

As detailed in the City’s Original Petition, the City has well-supported causes of action

against Pleasanton HFC, and its board members, to establish and protect its rights in accordance

with the Act and the Texas Constitution. Specifically, the City has brought a declaratory judgment

action against the Pleasanton HFC Defendants pursuant to Civ. Prac. & Rem. Code § 37.003,

regarding their violation of Texas Local Gov’t Code Sections 394.903(a). (Original Petition, pp.

12-13). Specifically, Pleasanton HFC’s scheme to obtain properties outside the jurisdictional

limits of Pleasanton, Texas, runs afoul of the plain language of Section 394.903(a) of the Act,

which states “[a] residential development covered by this chapter must be located within the local

government,” Id. (emphasis supplied). Texas courts “interpret statutes by looking to their plain

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 10

Copy from re:SearchTX language and construing the text in light of the statute as a whole.” City of Austin v. Quinlan, 669

S.W.3rd 813, 821 (Tex. 2023). In order to give effect to the Legislature’s intent, Courts “enforce

the plain meaning of statutory text, informed by its context.” Hegar v Health Care Serv. Corp.,

652 S.W. 3rd 39, 43 (Tex. 2022).

In the context of Chapter 394 as a whole, “local government” in this case means the local

government sponsor of the HFC, i.e. the City of Pleasanton, Texas. For example, sections

394.055(c) and 394.055(d) of the Act both use the phrase “the state, the local government, or any

other municipality, county, or other municipal or political corporation or subdivision of the state.”

To replace the words “the local government” with “any municipality or county” in these clauses

renders the phrase redundant. Section 394.902 uses the phrase “the governing body of the local

government that authorizes, sponsors, or otherwise participates in the creation of the housing

finance corporation shall cooperate….” (emphasis added). The plain reading of the use of “local

government” throughout Chapter 394 further emphasizes the point that the Legislature meant the

local government sponsor of the HFC when it used the phrase “the local government.”

Accordingly, Chapter 394 is limited by its plain language to residential developments located

within the jurisdiction of the sponsoring local government. As such, Pleasanton HFC cannot

legally purchase, develop, and grant tax-exemptions for residential developments, such as Neuhaus

Lake Worth Apartments, which are outside its jurisdictional boundaries.

The case of Walker v. U.S. Dep’t of Housing & Urban Dev., 326 F.Supp. 2d 773, 777 (N.D.

Tex. 2004) is instructive. There, the United States District Court for the Northern District of Texas

held that:

§ 394.903(a), which applies to residential development by public facility corporations via § 394.004, restricts residential development to locations within the local government. “Local government” refers to any municipality or county, and in

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 11

Copy from re:SearchTX the context of a public facility corporation created by a housing authority, the housing authority's jurisdiction serves as an appropriate proxy for the limitation.

Id. at 477. Thus, the Court concluded that Section 394.903(a) restricts residential development to

locations within the housing authority’s jurisdiction. It would be absurd for the Act to allow an

HFC created by one municipality to own and lease property in another municipality. Such a

perverse scheme would allow a small town like Pleasanton, Texas to make decisions regarding

real property located in another municipality, which results in the other municipality (Lake Worth)

losing 100% of the ad valorem tax value from the property. Pleasanton HFC has no ability to

weigh that significant financial loss against the potential benefits of the project to the community,

which directly affects the residents of the City of Lake Worth in a detrimental way. Meanwhile,

the traveling, out-of-jurisdiction HFC reaps a purely monetary windfall without any incentive for

oversight by its sponsoring municipality, whose own tax revenues remain unaffected. Moreover,

the underlying public purpose of the Act to provide for the creation of affordable housing by local

housing authorities goes unserved within the jurisdiction of the local government that sponsored

the housing finance corporation.

In the alternative, to the extent Pleasanton HFC takes the position that, contrary to its plain

language, the Act does not prohibit it from acquiring and seeking tax exemptions for properties in

Tarrant County, and to the extent Pleasanton HFC prevails in such interpretation of the Act, the

City alternatively requests a declaration from the Court that Pleasanton HFC’s actions violate the

Texas Constitution's rules against extra-jurisdictional taxation by seeking to impose a system of

taxation on properties located outside of the boundaries of Atascosa County, Texas where the City

of Pleasanton is located. The Texas Constitution requires that all property shall be assessed for

taxation in the county where it is located. Tex. Const. Art. art. VIII, § 11. Specifically, a county’s

ad valorem taxation authority is limited to “property within their respective boundaries.” Tex.

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 12

Copy from re:SearchTX Const. Art. VIII,. § 1-a. If the Act could be read to empower Pleasanton HFC to take properties

outside of Atascosa County off of the tax rolls of other counties in Texas, this would violate the

Texas Constitution’s limits on the scope of Texas counties’ taxing authority. (Original Petition,

p. 15).

Accordingly, the City has meritorious claims against the HFC Pleasanton Defendants and

seeks temporary injunctive relief prohibiting the Pleasanton HFC Defendants from purchasing or

developing residential property in the City of Lake Worth and from requesting, obtaining, or

bestowing tax exemptions on real property located in Lake Worth, Texas.

The City has a probable right to relief against the Pleasanton HFC board members.

Additionally, the City has brought a meritorious ultra vires claim against Defendants

Ismael Gallegos, Joey Macon, Mark Pinkston, Zachary Pawelek, Scott Ferguson, Lilian Cashmer,

and Brandon Hicks, in their role as Pleasanton HFC board members, for their approval of the

illegal purchase and development of residential properties located in Lake Worth and the

application for tax-exempt status for same. (Original Petition, p. 15). “The ultra vires doctrine

applies when a government official’s conduct is without legal or statutory authority.” Klumb v.

Hous. Mun. Emps. Pension Sys., 458 S.W.3d 1, 9 (Tex. 2015). Parties may obtain prospective

declaratory and injunctive relief when an official: a) fails to perform a ministerial act; or b) acts

without legal authority. See City of El Paso v. Heinrich, 284 S.W.3d 366, 373 (Tex. 2009). Here,

the City requests prospective declaratory and injunctive relief to stop Pleasanton HFC from

engaging in residential development outside the geographic boundaries of the local government

that formed it, the City of Pleasanton, Texas. As discussed supra, residential development by

Pleasanton HFC is limited to the jurisdictional boundaries of the City of Pleasanton pursuant to

Section 394.903(a). Because Pleasanton HFC acts through its Board of Directors, Plaintiff

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 13

Copy from re:SearchTX requests relief to prevent the ultra vires acts of the Board of Directors in acting without authority

under Chapter 394 by applying it to the property at issue, to include declaratory and injunctive

relief set forth herein.

The City has a probable right to relief against TAD.

The City also has a meritorious cause of action against TAD. The Texas Tax Code allows

a taxing unit to sue an appraisal district that appraises property for the unit to compel the appraisal

district to comply with the provisions of [the Property Tax Code], rules of the comptroller, or other

applicable law. See Texas Tax Code § 43.01. The City is a taxing unit for the property at issue,

which was appraised by Tarrant Appraisal District. Accordingly, the City asks for a declaratory

judgment from this Court declaring the Act does not allow Pleasanton HFC to purchase, develop,

or to request, obtain, or bestow tax exemptions on real property located in Lake Worth, Texas.

Accordingly, TAD cannot grant a full tax exemption to Neuhaus Lake Worth Apartments, or any

other real property owned by Pleasanton HFC that is located in Lake Worth, Texas. (Original

Petition pp. 14-15). TAD’s claim that it is entitled to governmental immunity and that the City was

required to exhaust its administrative remedies, is addressed in Section III. below.

In the absence of a temporary injunction, the City will suffer irreparable injury.

In the absence of such relief, the City will suffer irreparable injury for which no remedy at

law exists without the protections of a temporary restraining order and injunctive relief.

Pleasanton HFC, like many traveling, out-of-jurisdiction HFCs, is rushing to acquire properties

outside its jurisdiction in a nefarious attempt to develop as many properties outside its

jurisdictional limits as possible before its misuse of the Act is stopped. As reported by the

Pleasanton Express, Pleasanton HFC’s financial attorney, Carey Troell, indicated that the

opportunity to finalize deals may soon close as legislation moves forward. [Exhibit 5, p. 6]. A

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 14

Copy from re:SearchTX temporary injunction will prevent this unlawful behavior from occurring, maintain the status quo,

and will not unduly prejudice Defendants in the short-term. Further, a temporary injunction is

necessary to prevent the Tarrant Appraisal District from granting tax exemptions requested by

Pleasanton HFC regarding any real property located in Lake Worth. Pleasanton HFC has applied

to TAD for tax exemption on the Neuhaus Lake Worth Apartments.

If its tactics are permitted with respect to the Neuhaus Lake Worth Apartments, the City,

along with Lake Worth ISD and other local governmental units, will face the dire consequence of

losing millions of dollars in ad valorem tax revenue. The removal of this property from the tax

rolls would immediately affect the City’s budgeting, thereby necessarily preventing the City from

allocating that lost revenue to be used for public services. The impact of this lost revenue on Lake

Worth ISD is over half a million dollars a year. Likewise, the City will lose over a quarter of a

million dollars in tax revenue each year, which totals an estimated 7.02% of its total annual tax

revenue. Indeed, as reported by the Pleasanton Express, when questioned about the ethics and

impact of Pleasanton HFC’s scheme, Defendant Brandon Hicks responded, “[w]hen it comes back

to taking revenue from other communities, I can see how people will see that as a bad thing. I

think there should be better safeguards in place for when an HFC purchases a unit that is already

existing and to make sure that those affordable guidelines are in place after the new developer

takes over to make sure they’re abiding by it.” [Exhibit 5, pp. 2-3]. Nonetheless, despite the

admitted impact on other municipalities, Pleasanton HFC has acquired 68 properties in

jurisdictions outside the city limits of the City of Pleasanton. [Exhibit 5, p. 5].

III. RESPONSE TO DEFENDANTS’ PLEA TO THE JURISDICTION

TAD has filed a Plea to the Jurisdiction that argues (1) TAD has governmental immunity

from suits brought pursuant to the Declaratory Judgments Act; and (2) that the City failed to

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 15

Copy from re:SearchTX exhaust administrative remedies pursuant to the Texas Tax Code regulatory scheme. It is

anticipated that the Pleasanton HFC Defendants will also raise the latter argument via a plea to

jurisdiction in the near future. However, both of TAD’s arguments should be rejected for the

following reasons.

A. TAD Does Not Have Immunity as Section 43.01 of the Texas Tax Code Is an Express Waiver of Governmental Immunity.

TAD correctly argues that governmental immunity bars declaratory judgment actions

against the state and its political divisions absent a legislative waiver. See Tex. Tax Code § 6.01(c)

(“An appraisal district is a political subdivision of the state.”); Falls Cty. Appraisal Dist. v. Burns,

No. 10-21-00019-CV, 2022 Tex. App. LEXIS 1895 (Tex.App.—Waco, March 23, 2022, pet.

den’d). “UDJA claims requesting other types of declaratory relief are barred absent a legislative

waiver of immunity with respect to the underlying action.” Town of Shady Shores v. Swanson,

590 S.W.3d 544, 553 (Tex. 2019). In support, TAD also cites to the cases of City of El Paso v.

Heinrich, 284 S.W.3d 366, 373 (Tex. 2009) and Stiefer v. Moers, No. 14-14-00617-CV, 2015 WL

6950104, at *3 (Tex. App.—Houston [14th Dist. Nov. 10, 2015, no pet.) (mem. op.), which are

discussed in more detail below.

However, TAD ignores the plain language of Section 43.01 of the Texas Property Code, which

contains an express waiver of TAD’s governmental immunity. Section 43.01 states that “[a] taxing

unit may sue the appraisal district that appraises property for the unit to compel the appraisal

district to comply with the provisions of this title, rules of the comptroller, or other applicable

law.” Tex. Tax Code § 43.01 (emphasis added). The plain language of this section permits a

taxing unit to sue an appraisal district. See Ashland Inc. v. Harris Cnty Appraisal Dist., 437 S.W.3d

50, 52-53 (Tex.App.—Houston [14th Dist.] 2014, pet. den’d) (“If a statute is worded clearly, we

must honor its plain language, unless that interpretation would lead to absurd results.”); City of

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 16

Copy from re:SearchTX Dallas v. TCI W. End, Inc., 463 S.W.3d 53, 57 (Tex. 2015) (“As a general principle, we eschew

construction of a statute that render any statutory language meaningless or superfluous.”). Those

cases cited by TAD do not address the application of Section 43.01. City of El Paso v. Heinrich

involved a suit by a widow seeking to collect monies from the El Paso Fireman & Policemen’s

Pension Fund. See City of El Paso, 284 S.W.3d at 369. Stiefer v. Moers, an unpublished case, also

did not address whether Section 43.01 waived governmental immunity, and instead held that Section

41.45(f) did not waive a chief appraisal officer’s entitlement to governmental immunity. Stiefer, No.

14-14-00617-CV at *11-13 (holding that pursuant to the plain language of Section 41.45(f), while the

property owners are entitled to file a petition against the appraisal review board to compel a hearing,

this section does not permit suit against a chief appraisal officer). Courtesy copies of both opinions

are included in the attached appendix.

However, those courts that have analyzed Section 43.01 have found that it waives an

appraisal board’s governmental immunity. In Blue Cactus Post, L.C. v. Dallas County Appraisal

District, 229 B.R. 379 (N.D.Tex. Bank. 1999), the district bankruptcy court concluded that the

language of section 43.01 weighed against a finding of Eleventh Amendment (sovereign)

immunity:

5. The DCAD's capacity to sue and be sued

The DCAD may, and in some instances must, be sued in its own name. Further, as provided in the Property Tax Code, “a taxing unit may sue the appraisal district that appraises property for the unit to compel the appraisal district to comply with the provisions of [the Property Tax Code], rules of the State Property Tax Board, or other applicable law.” Therefore, this factor weighs against a finding of Eleventh Amendment immunity for the DCAD.

Id. at 385. It logically follows that the plain language of section 43.01 also weighs against any

finding of governmental immunity under Texas law. See City of Cleburne v. Cent. Appraisal Dist.

of Johnson County, No. 10-02-00154-CV, 2004 Tex. App. LEXIS 6088 (Tex.App.—Waco, July

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 17

Copy from re:SearchTX 7, 2004). In City of Cleburne, the Waco Court of Appeals reversed the granting of the Appraisal

District’s plea to the jurisdiction, holding that “Article 43.01 of the Tax Code authorizes the City

to sue the Appraisal District to compel it to comply with the Code.” Id. at *4.

The City has asserted a claim against the District to compel compliance with the Tax Code, a claim against the Board to prevent enforcement of an order claimed to be void, and a claim against Cobblestone as a party whose rights would be affected by the judgment. Without regard to whether the claims have merit, we believe that the district court had jurisdiction over them. We reverse the trial court's Order of Dismissal and remand the cause for further proceedings.

Id. Courtesy copies of these opinions are also included in the attached appendix.

Based upon the persuasive authority of the opinions in Blue Cactus and City of Cleburne

and the plain language of Section 43.10, the City respectfully submits that TAD does not have

governmental immunity pursuant to Section 43.01 of the Texas Tax Code, this Court has

jurisdiction over the instant action, and TAD’s plea to the jurisdiction should be denied.

B. The City is Not Required to Exhaust Administrative Remedies Pursuant to the Texas Tax Code.

TAD also claims that any claims brought pursuant to the Declaratory Judgments Act are

barred because the administrative provisions of the Texas Property Code are the exclusive means

for parties to solve disputes in connection with the Texas Property Code. In support of its

administrative exhaustion argument, TAD cites to Tex. Tax Code § 42.09, which states:

Sec. 42.09. REMEDIES EXCLUSIVE.

(a) Except as provided by Subsection (b) of this section, procedures prescribed by this title for adjudication of the grounds of protest authorized by this title are exclusive, and a property owner may not raise any of those grounds:

(1) In defense to a suit to enforce collection of delinquent taxes; or

(2) As a basis of a claim for relief in a suit by the property owner to arrest or prevent the tax collection process or to obtain a refund of taxes paid.

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 18

Copy from re:SearchTX (b) A person against whom a suit to collect a delinquent property tax is filed may plead as an affirmative defense:

(1) If the suit is to enforce personal liability for the tax, that the defendant did not own the property on which the tax was imposed on January 1 of the year for which the tax was imposed;

(2) If the suit is to foreclose a lien securing the payment of a tax on real property, that the property was not located within the boundaries of the taxing unit seeking to foreclose the lien on January 1 of the year for which the tax was imposed.

(c) For purposes of this section, “suit” includes a counterclaim, cross-claim, or other claim filed in the course of a lawsuit.

Tex. Tax Code § 42.09. The municipalities are not taxpayers protesting appraisals, and this

exclusive remedy statute does not apply. Taxing units such as municipalities are generally

excluded from the appraisal process, with the exception of the right to appeal “in limited

circumstances” pursuant to Section 41.03. Iraan-Sheffield Indep. Sch. Dist. v.. Kinder Morgan

Prod. Co., LLC, 657 S.W.3rd 525, 534 (Tex.App.—El Paso 2022, pet. den’d).

Indeed, Section 41.03 of the Texas Tax Code limits the right of appeal by a taxing unit to

the following:

Section 41.03 Challenge by Taxing Unit.

(a) A taxing unit is entitled to challenge before the appraisal board: (1) an exclusion of property from the appraisal records; (2) a grant in whole or part of a partial exemption, other than an exemption under Section 11.35; (3) a determination that land qualified for appraisal as provided by Subchapter C, D, E, or H, Chapter 23; or (4) a failure to identify the taxing unit as one in which a particular property is taxable.

Tex. Tax Code § 41.03(a) (emphasis supplied). None of which are applicable to a municipality’s

challenge to the granting of a full tax exemption in violation of the Texas Housing Finance

Corporations Act. Additionally, since Pleasanton HFC’s application for full tax exemption is

currently pending, there is nothing for the City to appeal to the appraisal board.

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 19

Copy from re:SearchTX In any event, those cases upon which TAD relies in its Plea to the Jurisdiction are

inapposite. See In re ExxonMobil Corp., 153 S.W.3d 605, 614 (Tex.App.—Amarillo 2004, orig.

proceeding); Vexler v. Spencer, No. 02-24-00305-CV, 2025 Tex. App. LEXIS 3060, at *8-9

(Tex.App.—Fort Worth, May 1, 2025, no pet. h.) (mem. op.); and Fort Worth v. Pastusek Indus.,

Inc., 48 S.W.3d 366, 370-371 (Tex.App.—Fort Worth 2001, no pet.). In re ExxonMobil Corp.

involved litigation filed by a taxing unit, arising from the “exclusion of property from appraisal

records” as set forth in Section 41.03 of the Tax Code. In re ExxonMobil Corp., 153 S.W.3d at

613-614 (concluding that fraud claim against oil companies regarding fraudulent undervaluing of

mineral interest in property constituted property omitted from the appraisal roll). Both Vexler and

Pastusek arose from a property owner’s suit to recover excessive taxes collected and the exclusive

remedy for “protests initiated by property owners” as set forth in Tex. Tax Code §§ 41.01(a)(1),

41.44(a), and 41.41. Vexler, 2025 Tex. App. LEXIS 3060 at *8; Pastusek Indus., 48 S.W.3d at

369.

In contrast, litigation challenging the traveling HFC scheme and subsequent full tax

exemptions does not implicate the grounds for appeal under Section 41.03, nor does it arise in

connection with the Texas Property Code. Instead, this litigation focuses upon the interpretation

and application of the Housing Finance Corporations Act, Chapter 394 of the Texas Local

Government Code. A district court’s jurisdiction “consists of exclusive, appellate, and original

jurisdiction of all actions, proceedings, and remedies, except in cases where exclusive, appellate,

or original jurisdiction may be conferred by this Constitution or other law on some other court,

tribunal, or administrative body.” Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71, 75 (Tex. 2000)

(citing Tex. Const. art. V, § 8). A district court “may hear and determine any cause that is

cognizable by courts of law or equity and may grant any relief that could be granted by either

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 20

Copy from re:SearchTX courts of law or equity.” Tex. Gov’t Code Ann. § 24.008. For “courts of general jurisdiction . . .

the presumption is that they have subject matter jurisdiction unless a showing can be made to the

contrary.” Dubai Petroleum, 12 S.W.3d at 75.

Pursuant to the plain language of Section 41.03 of the Tax Code, the appraisal review board

does not have exclusive jurisdiction over a claim that the Housing Finance Corporations Act

precludes granting a full tax exemption to a property obtained by a traveling HFC. In re

ExxonMobil Corp., 153 S.W.3d at 615 (“. . . in an analysis of a claim of exclusive administrative

agency jurisdiction, the administrative body is limited to the powers clearly and expressly given it

and courts will not imply additional agency authority.”); accord Jim Wells County v. El Paso Prod.

Oil & Gas, 189 S.W.3d 861, 870 (Tex.App.—Houston [1st Dist] 2006, pet. den’d) (Pursuant to the

Tax Code, a “pervasive regulatory scheme” vests the Board with exclusive original jurisdiction

over tax appraisal protests.”)(emphasis added). Moreover, Section 43.01 of the Texas Tax Code

expressly provides that “[a] taxing unit may sue an appraisal district that appraised property for

the taxing unit to compel compliance with . . . other applicable law.” Tex. Tax Code § 43.01.

IV. PRAYER FOR RELIEF

For these reasons, the City respectfully requests that this Court deny Defendant Tarrant

Appraisal District’s Plea to the Jurisdiction and grant Plaintiff’s application for temporary

injunction that:

1. Prohibits Pleasanton Housing Finance Corporation and Defendant Board Members Ismael Gallegos, Joey Macon, Mark Pinkston, Zachary Pawelek, Scott Ferguson, Lilian Cashmer, and Brandon Hicks from purchasing or approving the purchase of real property located in the City of Lake Worth, Texas;

2. Prohibits Pleasanton Housing Finance Corporation and Defendant Board Members Ismael Gallegos, Joey Macon, Mark Pinkston, Zachary Pawelek, Scott Ferguson, Lilian Cashmer, and Brandon Hicks from requesting, approving, or obtaining tax exemptions for any real property located in the City of Lake Worth, Texas; and

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 21

Copy from re:SearchTX 3 . Prohibits the Tarrant Appraisal District from granting tax exemptions requested by Pleasanton HFC regarding any real property located in the City of Lake Worth, Texas.

Respectfully submitted,

/s/ Tammy Ardolf Wayne K. Olson Texas Bar No. 15276900 Email: wolson@toase.com

Tammy Ardolf Texas Bar No. 90001536 Email: tardolf@toase.com

Marc A. Cavazos Texas Bar No. 24128683 Email: mcavazos@toase.com

Members of the Firm of: TAYLOR, OLSON, ADKINS, SRALLA, & ELAM, L.L.P. 6000 Western Place, Suite 200 Fort Worth, Texas 76107-3654 Telephone: 817.332.2580 Facsimile: 817.332.4740

ATTORNEYS FOR PLAINTIFF CITY OF LAKE WORTH, TEXAS

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the above and foregoing instrument has been served on all parties, in accordance with the Texas Rules of Civil Procedure, on this 22nd day of May, 2025.

/s/ Tammy Ardolf Tammy Ardolf

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 22

Copy from re:SearchTX Copy from re:SearchTX EXHIBIT E Filed 5/27/2025 11:05 AM Beverley McGrew Walker District Clerk Fort Bend County, Texas Norma Sosa

CAUSE NO. 25-DCV-328899

CITY OF MISSOURI CITY, § IN THE DISTRICT COURT OF TEXAS & SIENNA PARKS & § LEVEE IMPROVEMENT § DISTRICT, § § Plaintiffs, § § vs. § FORT BEND COUNTY, TEXAS § PLEASANTON HOUSING § FINANCE CORPORATION AND § THE BOARD MEMBERS OF § THE PLEASANTON HOUSING § FINANCE CORPORATION, IN § THEIR OFFICIAL CAPACITIES, § § Defendants. § 240TH JUDICIAL DISTRICT

CITY OF MISSOURI CITY & SIENNA PARKS & LEVEE IMPROVEMENT DISTRICT’S FIRST AMENDED PETITION REQUESTING DECLARATORY AND INJUNCTIVE RELIEF

1. Plaintiffs, the City of Missouri City, Texas and Sienna Parks &

Levee Improvement District, file this First Amended Petition Requesting

Declaratory and Injunctive Relief against the Pleasanton Housing Finance

Corporation (“Pleasanton HFC”) and the members of its Board of Directors,

each in their official capacity as board members of the Pleasanton HFC.

I. INTRODUCTION

2. This case arises from the actions of the Pleasanton HFC in

unlawfully seeking to remove property from the public tax rolls in Fort Bend

County. Pleasanton HFC was created by the City of Pleasanton, a city of

ROUTED TO COURT 5/27/2025 NS RT'D TO D. CLERK approximately 11,000, located in Atascosa County, about 35 miles south of San

Antonio, and more than 220 miles from Fort Bend County and the property at

issue in this case.

3. Under Chapter 394 of the Texas Local Government Code, the City

of Pleasanton is authorized to create a local housing finance corporation to

promote the availability of affordable housing within its corporate limits.

Instead, the City of Pleasanton created the Pleasanton HFC for the sole

purpose of generating windfall revenue for the City at the expense of other

cities, counties, school districts, and special districts located outside the City

of Pleasanton and sometimes hundreds of miles from the City.

4. In furtherance of its quest for windfall revenue, the Pleasanton

HFC has now purported to acquire, or is in the process of acquiring, title to the

Royal Sienna, a large existing apartment complex in Fort Bend County, under

the apparent theory that it can acquire property anywhere in the State of

Texas and thereby render that property exempt from taxation. The Pleasanton

HFC’s actions, if allowed to stand, will deprive Fort Bend County taxing

jurisdictions of more than $1.2 million a year in tax revenues for as long as the

property is owned by Pleasanton HFC. For its actions, the Pleasanton HFC

has received, or will receive, a one-time payment of $300,000 and will

ultimately transfer a substantial amount of that payment to the City of

Pleasanton to use as it pleases.

2 5. As Plaintiffs will establish, the Pleasanton HFC’s actions are

unlawful and contrary to the express terms of the relevant statute, which

limits a housing finance corporation’s authority to acquire property to only

those “residential development[s]” that are located within the boundaries of

the local government that created the corporation.

II. DISCOVERY CONTROL PLAN

6. Pursuant to Rule 190 of the Texas Rules of Civil Procedure,

Plaintiffs state their intention to conduct discovery under level 3.

III. PARTIES AND SERVICE

7. Plaintiff City of Missouri City, Texas, (“Missouri City”) is a home-

rule municipal corporation situated in Fort Bend County and Harris County,

Texas, and incorporated and operating under its City Charter and the laws of

the State of Texas.

8. Plaintiff Sienna Parks & Levee Improvement District (“SPLID”) is

a political subdivision of the State of Texas created by the Commissioners

Court of Fort Bend County, Texas under authority of article XVI, section 59 of

the Texas Constitution and chapter 57 of the Texas Water Code. SPLID’s

boundaries encompass approximately 9,832 acres.

9. Defendant, Pleasanton Housing Finance Corporation, is a Texas

housing finance corporation created by the City of Pleasanton, Texas, and can

be served through the Corporation’s registered agent, Johnny Huizar, at 102

3 Second Street, Pleasanton, Texas 78064, or at any other location where he may

be found.

10. Defendant, J.R. Gallegos, is president of the Board of Directors of

the Corporation and Mayor of the City of Pleasanton. He is sued in his official

capacity as a member of the Board of Directors of the Corporation. He can be

served through the Corporation’s registered agent, at 102 Second Street,

Pleasanton, Texas 78064, or at any other location where he may be found.

11. Defendant, Joey Macon is vice-president of the Board of Directors

of the Corporation and a member of the Pleasanton City Council. He is sued

in his official capacity as a member of the Board of Directors of the Corporation.

He can be served through the Corporation’s registered agent, at 102 Second

Street, Pleasanton, Texas 78064, or at any other location where he may be

found.

12. Defendant, Harmony Ratterree is the secretary of the Board of

Directors of the Corporation and a member of the Pleasanton City Council. She

is sued in her official capacity as a member of the Board of Directors of the

Corporation. She can be served through the Corporation’s registered agent, at

102 Second Street, Pleasanton, Texas 78064, or at any other location where

she may be found.

13. Defendant, Zachery Pawelek is the treasurer of the Board of

Directors of the Corporation and a member of the Pleasanton City Council. He

4 is sued in his official capacity as a member of the Board of Directors of the

Corporation. He can be served through the Corporation’s registered agent, at

102 Second Street, Pleasanton, Texas 78064, or at any other location where he

may be found.

14. Defendant, Robert Leonhardt is a member of the Board of

Directors of the Corporation and a member of the Pleasanton City Council. He

is sued in his official capacity as a member of the Board of Directors of the

Corporation. He can be served through the Corporation’s registered agent, at

102 Second Street, Pleasanton, Texas 78064, or at any other location where he

may be found.

15. Defendant, Lillian Cashmer is a member of the Board of Directors

of the Corporation and a member of the Pleasanton City Council. She is sued

in her official capacity as a member of the Board of Directors of the

Corporation. She can be served through the Corporation’s registered agent, at

102 Second Street, Pleasanton, Texas 78064, or at any other location where

she may be found.

16. Defendant, Brandon Hicks is a member of the Board of Directors

of the Corporation and a member of the Pleasanton City Council. He is sued

in his official capacity as a member of the Board of Directors of the Corporation.

He can be served through the Corporation’s registered agent, at 102 Second

5 Street, Pleasanton, Texas 78064, or at any other location where he may be

found.

IV. JURISDICTION AND VENUE

17. Plaintiffs bring this lawsuit to stop Defendants from acting ultra

vires and unlawfully exercising jurisdiction over property that is outside of,

and 220 miles away from, the City of Pleasanton, and within Fort Bend

County, the extra-territorial jurisdiction (“ETJ”) of the City of Missouri City,

Texas, and the boundaries of SPLID.

18. Venue is proper in Fort Bend County because Missouri City,

SPLID, and the subject property are in Fort Bend County and because Fort

Bend County is the county in which all or a substantial part of the events or

omissions giving rise to the claims occurred.

V. TEXAS RULE OF CIVIL PROCEDURE 47(c)

19. For purposes of Rule 47(c) of the Texas Rules of Civil Procedure,

Missouri City and SPLID states that they seek only non-monetary relief and

attorneys’ fees and costs.

VI. WAIVER OF BOND

20. Under section 6.002 of the Texas Civil Practice & Remedies Code

and in article XI, section 11.02 of Missouri City’s Charter, neither the City nor

SPLID is required to post an injunction bond.

6 VII. LEGAL AND FACTUAL BACKGROUND

A. The property in question is within the jurisdiction of Missouri City.

21. Missouri City is a home-rule municipality located principally in

Fort Bend County and with a population of 76,773 as of the latest census data.

Under Texas law, Missouri City has been granted extra-territorial jurisdiction

of areas that are within 3 ½ miles of its boundaries and not within the ETJ of

another city. The Royal Sienna Apartment Complex (“Royal Sienna”) is located

at 5222 Avalon Point, within Missouri City’s ETJ. Royal Sienna is also located

within SPLID’s boundaries.

22. Under section 43.014 of the Texas Local Government Code,

Missouri City has regulatory authority over developments within its ETJ as

well as the exclusive authority to annex property that is located therein. In

1996 and 1998, the original owners of the real property, on which Royal Sienna

is now located, entered into contracts with Missouri City that gave the City the

right to annex the property in the future.

23. Missouri City has grown over the years by annexing such property

into the City, extending services to the annexed areas, and assessing and

collecting property taxes to fund those services. For those reasons, Missouri

City has a strong interest in protecting its ability to assess and collect property

7 taxes on property in its ETJ so that it can fund the extension of services to that

property when the City exercises its contractual right to annex the property.

24. SPLID has constructed and continues to maintain and operate the

flood control infrastructure and other public facilities that benefit Royal

Sienna. For those reasons, SPLID has a strong interest in protecting its ability

to collect property taxes on property within its boundaries to fund its

maintenance and operation costs.

B. Chapter 394 authorizes Texas cities and counties to create housing finance corporations to promote affordable housing within their boundaries.

25. Chapter 394 of the Texas Local Government Code authorizes

municipalities and counties to create housing finance corporations (“HFCs”).

The purpose of the chapter is “to provide a means to finance the cost of

residential ownership and development that will provide decent, safe, and

sanitary housing at affordable prices for residents of local governments.” Tex.

Loc. Gov’t Code § 394.002(a).

26. The statute gives HFCs the authority to provide home mortgages

for low or moderate income purchasers and to acquire and operate apartment

complexes and similar facilities for occupancy of persons of low or moderate

income. Id. at § 394.039. Once an HFC acquires an apartment property, the

property is exempt from taxation for as long as it is owned by the HFC. Id. at

§ 394.095.

8 27. The subject property, Royal Sienna, is a “residential development”

within the definition contained in Chapter 394.

A “residential development” is defined to include “… the acquisition of … any of the following items for the purpose of providing … housing that are an integral part of … any affordable housing project …: (A) land, an interest in land, a building or other structure, facility, system, fixture, improvement, addition, appurtenance, or machinery or other equipment … .”

Id. at § 394.003(13). Under section 394.903(a), a “residential development

covered by this chapter must be located in the local government.” Id. at

§ 394.903(a) (emphasis added).

28. Royal Sienna is located in Fort Bend County, in Missouri City’s

ETJ, and within the boundaries of SPLID. It is not located in the City of

Pleasanton. Thus, the Pleasanton HFC is not authorized to acquire Royal

Sienna, or any other property outside of Pleasanton, nor is the property eligible

for the tax exemption that would otherwise apply to residential developments

in Pleasanton.

C. The City of Pleasanton created the Pleasanton HFC as a means of generating windfall revenue for the City at the expense of other communities across the state.

29. On March 14, 2023, the City of Pleasanton created the Pleasanton

HFC. The City of Pleasanton’s purpose in creating the HFC was not to promote

affordable housing within Pleasanton but to generate revenue by selling its

9 sponsorship of affordable housing projects to real estate developers in other

jurisdictions near and far for a fee of up to $300,000 each.

30. As recently as February 13, 2025, the Pleasanton HFC purported

to authorize the acquisition of nine new residential developments; all of which

are located outside of Pleasanton. The Pleasanton City Manager, Johnny

Huizar, has admitted that the Pleasanton HFC transfers its revenue to the

City which uses it for general municipal purposes, not for the provision of

affordable housing.

D. The Pleasanton HFC purports to make major policy decisions for other local governments without any input from them.

31. The members of the City of Pleasanton City Council also serve as

the Pleasanton HFC board of directors. Were the Pleasanton HFC to consider

the purchase of an existing residential development within the City of

Pleasanton, as contemplated by Chapter 394, the board/city council would be

expected to take into consideration the impact to the City of Pleasanton,

Atascosa County, the local school district, and other local taxing jurisdictions.

However, the board/city council has no incentive to consider the impact on local

taxing jurisdictions when considering projects in other locations in the state.

Under Defendants’ apparent reading of Chapter 394, Pleasanton HFC has the

right to make major decisions impacting other local governments, without any

input from those governments or their citizens.

10 E. The Pleasanton HFC is prohibited by law from purchasing the Royal Sienna in Fort Bend County.

32. On March 20, 2025, Pleasanton HFC entered into a Purchase

Option and Right of First Refusal Agreement (the “Option Agreement”) with

Royal Sienna SPE, LLC, and PHFC Royal Sienna MM, LLC, (a subsidiary of

Pleasanton HFC) that contemplates the Pleasanton HFC’s purchase of Royal

Sienna. See Exhibit 1. The proposed purchase of the property as described in

the Option Agreement would violate section 394.903(a) for the reasons stated

above.

33. It would also cause irreparable harm to Missouri City by

exempting the subject property from taxation for an indefinite period. If the

property is rendered tax exempt, it will negatively affect the City’s right to

annex the property. More specifically, if it is rendered tax exempt, Missouri

City will be required to provide full public services to a large apartment

complex and its hundreds of tenants without the tax revenue necessary to

offset any portion of the cost of providing services.

34. It will also cause irreparable harm to SPLID due to the resulting

loss of tax revenue. As a levee improvement district, SPLID relies heavily on

property taxes to fund its operations, including the construction, maintenance,

and operation of flood control infrastructure. SPLID constructed public

facilities that benefit Royal Sienna. SPLID will demonstrate that Defendants’

11 acquisition of the subject property and its subsequent removal from the tax

rolls will materially diminish SPLID’s revenue base and unfairly shift the tax

burden onto remaining taxpayers within the district.

35. In tax year 2024, Royal Sienna paid $190,575 in property taxes to

SPLID based on a certified value of $46,200,000 and a tax rate of $0.4125. See

Exhibit 2. As of April 23, 2025, Royal Sienna is ranked #4 in the Sienna

Management District’s Top 25 Taxpayers Report. Id. While certified property

values for tax year 2025 will be issued in August 2025, Royal Sienna’s

preliminary value is $62,000,000. Based on a similar tax rate, this would

result in $255,750 in property taxes for 2025. Consequently, if this acquisition

proceeds, SPLID stands to lose $255,750 in tax revenue from Royal Sienna,

while the complex continues to benefit from SPLID’s public facilities. To offset

this lost tax revenue and cover operating expenses, SPLID will need to collect

the shortfall from other taxpayers.

VIII. CAUSES OF ACTION

A. Declaratory Relief against Defendants.

36. The Texas Uniform Declaratory Judgments Act (“UDJA”) provides

that a party “whose rights, status, or other legal relations are affected by a

statute … may have determined any question of construction or validity arising

under the … statute … and obtain a declaration of rights, status, or other legal

relations thereunder.” Tex. Civ. Prac. & Rem. Code § 37.004(a). Here,

12 Defendants are acting under the incorrect legal theory that Chapter 394

authorizes Pleasanton HFC to acquire and own residential developments

outside the boundaries of the City of Pleasanton.

37. In fact, section 394.903(a) limits an HFC’s authority—to acquire

and own property and thereby render it tax exempt—to properties that are

located in the local government that created the HFC. Defendants’ actions, if

left standing, will have serious legal consequences to Missouri City, Fort Bend

County, SPLID, and other local taxing jurisdictions by eliminating any tax

revenues from Royal Sienna while leaving in place their obligation to provide

full public services to the apartment complex and its hundreds of tenants.

38. Plaintiffs request that the Court issue a judgment declaring that:

a) Pleasanton HFC is prohibited by state law from acquiring or owning the property located at 5222 Avalon Point in Fort Bend County and known as the Royal Sienna apartments;

b) The property located at 5222 Avalon Point in Fort Bend County and known as the Royal Sienna apartments is not eligible for a tax exemption under Chapter 394 of the Texas Local Government Code;

c) Pleasanton HFC is prohibited by state law from acquiring or owning any property that is located in the City of Missouri City, its ETJ, or SPLID;

d) Pleasanton HFC is prohibited by state law from seeking or obtaining tax exemptions on any property located in the City of Missouri City, its ETJ, or SPLID.

13 B. Injunctive Relief.

39. As explained above, Defendants have acquired, or are in the

process of acquiring, the Royal Sienna apartment complex in Fort Bend County

with the intention of making the property exempt from taxation by Missouri

City, SPLID, and other taxing jurisdictions in Fort Bend County. Such action

is in violation of section 394.903(a) of the Texas Local Government Code.

40. Unless Defendants are enjoined from going forward with the

acquisition of the Royal Sienna and seeking to render the property tax exempt,

Missouri City and SPLID will suffer irreparable harm. Plaintiffs’ right to

annex the property will be burdened by the obligation to provide full public

services to a large apartment complex but unable to offset any of the costs of

those services through the collection of property taxes. More specifically, and

based on current tax rates, Plaintiffs will collectively lose approximately

$600,000 a year in tax revenue. For these reasons, Missouri City requests that

the Court enter a temporary restraining order, temporary injunction, and,

upon final trial, a permanent injunction enjoining Defendants from:

a) taking any further action toward the acquisition of the property located at 5222 Avalon Point in Fort Bend County and known as the Royal Sienna apartments or any other property located in Missouri City, its ETJ, or SPLID; and

b) taking any action to seek a tax exemption for the property located at 5222 Avalon Point in Fort Bend County and known as the Royal Sienna apartments or any other property located in Missouri City, its ETJ, or SPLID.

14 C. Attorneys’ Fees and Other Relief.

41. Plaintiffs request that the Court award Plaintiffs a judgment

against the public official defendants, in their official capacities, and to award

the City its reasonable and necessary attorneys’ fees under the authority of the

Uniform Declaratory Judgment Act. Plaintiffs also request an order awarding

it costs of court and such other relief to which it may show itself entitled.

Respectfully submitted,

OLSON & OLSON, L.L.P.

By: /s/ Jordan Marget Allison S. Killian State Bar No. 24099785 akillian@olsonllp.com Jordan Marget State Bar No. 24130447 jmarget@olsonllp.com 2727 Allen Parkway, Suite 600 Houston, Texas 77019 Telephone: (713) 533-3800 Facsimile: (713) 533-3888

COUNSEL FOR PLAINTIFFS, CITY OF MISSOURI CITY, TEXAS & SIENNA PARKS & LEVEE IMPROVEMENT DISTRICT

15 CERTIFICATE OF SERVICE

I hereby certify that on May 27, 2025, a true and correct copy of the

foregoing was sent as indicated to all counsel of record in accordance with Tex.

R. Civ. P. 21 and 21a, as follows:

Blake W. Stribling Via electronic service Daniel J. Lecavalier CHASNOFF | STRIBLING, LLP 1020 N.E. Loop 410, Suite 150 San Antonio, Texas 78209 bstribling@chasnoffstribling.com dlecavalier@chasnoffstribling.com

/s/ Jordan Marget Jordan Marget

16 EXHIBIT 1 EXHIBIT 2 Jurisdiction: SM105 SIENNA MANAGEMENT DISTRICT Page 1 Top 25 Taxpayers Report 4/23/2025 Tax Year: 2024 As of 4/23/2025 1:12 PM Certified Values Only This Year Last Year % Rank Name Accounts Net Taxable Accounts Net Taxable Juri 1 OHT SIENNA LLC 2 59,616,220 1 16,009,900 12.812% Improvement Non HS,Land Non HS,Personal Property

2 ORION RAVELLA PROPERTY DE LLC 1 55,249,680 1 37,100,000 11.873% Improvement Non HS,Land Non HS

3 RANCH@SIENNA EQUITY PARTNERS PROPERTY LLC 1 49,285,869 1 43,536,324 10.592% Improvement Non HS,Land Non HS

4 ROYAL SIENNA SPE LLC 2 46,200,000 2 46,200,000 9.929% Improvement Non HS,Land Non HS,Personal Property

5 ELYSIAN AT SIENNA PLANTATION LP 1 36,083,813 1 30,000,000 7.755% Improvement Non HS,Land Non HS

6 VILLAS OF ELYSIAN AT SIENNA PLANTATION LP 1 27,283,945 1 24,255,000 5.863% Improvement Non HS,Land Non HS

7 HEB GROCERY COMPANY LP 2 18,138,819 2 14,886,915 3.898% Improvement Non HS,Land Non HS

8 EIGHTY SEVEN TWENTY SIENNA LTD 5 17,327,780 5 16,500,000 3.724% CBL Adjustment,Improvement Non HS,Land Non HS

9 SIENNA CYPRESS LLC 2 9,244,291 2 7,849,238 1.987% CBL Adjustment,Improvement Non HS,Land Non HS

10 BHATIA FAMILY PARTNERSHIP LTD ETAL 1 8,578,950 1 8,432,908 1.844% Improvement Non HS,Land Non HS

11 SIENNA RETAIL DEVELOPMENT LLC 4 8,451,126 4 7,452,338 1.816% CBL Adjustment,Improvement Non HS,Land Non HS

12 H-E-B LP 1 7,309,657 1 6,591,269 1.571% Personal Property

13 PROVIDENT TRUST GROUP LLC 1 5,001,277 1 4,320,459 1.075% Improvement Non HS,Land Non HS

14 WE 71 SIENNA CROSSING LLC 2 4,938,404 2 4,938,404 1.061% Land Non HS

15 UNIUS PROPERTY LP 1 4,660,000 1 4,524,830 1.001% Improvement Non HS,Land Non HS

16 BEGUM JAAN LLC 3 4,326,297 3 3,918,063 0.930% CBL Adjustment,Improvement Non HS,Land Non HS

17 SIENNA/JOHNSON NORTH LP 15 4,310,791 15 4,079,481 0.926% CBL Adjustment,Land Non HS

18 SIENNA LAKES LLC 1 4,209,656 1 3,751,160 0.905% Improvement Non HS,Land Non HS

19 TEXAS DOW EMPLOYEES CREDIT UNION 2 3,955,240 2 3,735,364 0.850% Improvement Non HS,Land Non HS,Personal Property

20 CENTRE AT SIENNA CREEK LLC 1 3,902,176 1 4,235,860 0.839% CBL Adjustment,Improvement Non HS,Land Non HS

21 AEI ACCREDITED INVESTOR FUND VI LP 1 3,893,685 1 3,388,747 0.837% CBL Adjustment,Improvement Non HS,Land Non HS

22 ALDI TEXAS LLC 2 3,636,751 2 3,328,199 0.782% Improvement Non HS,Land Non HS

23 TEXAS PETROLEUM GROUP LLC 2 3,593,087 2 3,173,282 0.772% CBL Adjustment,Improvement Non HS,Land Non HS,Personal Property

24 MALABAR HILL SIENNA LP 1 3,230,150 1 571,630 0.694% Improvement Non HS,Land Non HS

Report Prepared by Tax Tech, Inc. www.taxtech.net 281-499-1223 Jurisdiction: SM105 SIENNA MANAGEMENT DISTRICT Page 2 Top 25 Taxpayers Report 4/23/2025 Tax Year: 2024 As of 4/23/2025 1:12 PM Certified Values Only This Year Last Year % Rank Name Accounts Net Taxable Accounts Net Taxable Juri 25 PARI PROPERTIES LLC 1 3,221,404 1 3,150,000 0.692% CBL Adjustment,Improvement Non HS,Land Non HS

Totals 56 395,649,068 55 305,929,371

Report Prepared by Tax Tech, Inc. www.taxtech.net 281-499-1223 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules.

Kaela Olson on behalf of Jordan Marget Bar No. 24130447 kolson@olsonllp.com Envelope ID: 101267238 Filing Code Description: Amended Filing Filing Description: City of Missouri City and Sienna Parks & Levee Improvement District's First Amended Petition Requesting Declaratory and Injunctive Relief Status as of 5/27/2025 11:49 AM CST

Associated Case Party: City of Missouri City, Texas

Name BarNumber Email TimestampSubmitted Status

John Hightower 9614200 jhightower@olsonllp.com 5/27/2025 11:05:40 AM SENT

Allison Killian 24099785 akillian@olsonllp.com 5/27/2025 11:05:40 AM SENT

E. Joyce Iyamu ejiyamu@missouricitytx.gov 5/27/2025 11:05:40 AM SENT

Jordan Marget 24130447 jmarget@olsonllp.com 5/27/2025 11:05:40 AM SENT

Associated Case Party: Pleasanton Housing Finance Corporation

Name BarNumber Email TimestampSubmitted Status

Daniel Lecavalier 24129028 dlecavalier@chasnoffstribling.com 5/27/2025 11:05:40 AM SENT

Blake W.Stribling bstribling@chasnoffstribling.com 5/27/2025 11:05:40 AM SENT

Associated Case Party: Sienna Parks & Levee Improvement District

Name BarNumber Email TimestampSubmitted Status

Joel Cleveland Joel@mullerlawgroup.com 5/27/2025 11:05:40 AM SENT Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules.

Rachel Feltner on behalf of Blake Stribling Bar No. 24070691 rfeltner@chasnoffstribling.com Envelope ID: 102729296 Filing Code Description: Letter Filing Description: Jurisdictional Response Status as of 7/3/2025 7:05 AM CST

Associated Case Party: Pecos Housing Finance Corporation

Name BarNumber Email TimestampSubmitted Status

Jeffrey MTillotson jtillotson@tillotsonlaw.com 7/2/2025 11:39:12 PM SENT

Kassi Yukevich kyukevich@tillotsonlaw.com 7/2/2025 11:39:12 PM SENT

Amanda Reichek areichek@tillotsonlaw.com 7/2/2025 11:39:12 PM SENT

Daniel J.Lecavalier dlecavalier@chasnoffstribling.com 7/2/2025 11:39:12 PM SENT

Blake W.Stribling bstribling@chasnoffstribling.com 7/2/2025 11:39:12 PM SENT

Case Contacts

Name BarNumber Email TimestampSubmitted Status

TJP Service tillotsonjohnsonpatton@gmail.com 7/2/2025 11:39:12 PM SENT

Sean Wallace swallace@tillotsonlaw.com 7/2/2025 11:39:12 PM SENT

Christopher Schluter cschluter@chasnoffstribling.com 7/2/2025 11:39:12 PM SENT

Julie Whitson jwhitson@chasnoffstribling.com 7/2/2025 11:39:12 PM SENT

Kim Decker kdecker@chasnoffstribling.com 7/2/2025 11:39:12 PM SENT

Rachel Feltner rfeltner@chasnoffstribling.com 7/2/2025 11:39:12 PM SENT

Devlin Browne dbrowne@tillotsonlaw.com 7/2/2025 11:39:12 PM SENT

Associated Case Party: City of Arlington, Texas

Name BarNumber Email TimestampSubmitted Status

Nena Chima-Tetteh nena.chima-tetteh@arlingtontx.gov 7/2/2025 11:39:12 PM SENT

Joseph N.Nguyen joseph.nguyen@arlingtontx.gov 7/2/2025 11:39:12 PM SENT

Jonathan Moss jonathan.moss@arlingtontx.gov 7/2/2025 11:39:12 PM SENT Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules.

Rachel Feltner on behalf of Blake Stribling Bar No. 24070691 rfeltner@chasnoffstribling.com Envelope ID: 102729296 Filing Code Description: Letter Filing Description: Jurisdictional Response Status as of 7/3/2025 7:05 AM CST

Associated Case Party: City of Arlington, Texas

Jonathan Moss jonathan.moss@arlingtontx.gov 7/2/2025 11:39:12 PM SENT

Alexander J.Lindvall alexander.lindvall@arlingtontx.gov 7/2/2025 11:39:12 PM SENT

Galen Gatten galen.gatten@arlingtontx.gov 7/2/2025 11:39:12 PM SENT

Associated Case Party: City of Fort Worth, Texas

Name BarNumber Email TimestampSubmitted Status

Stephen Cumbie stephen.cumbie@fortworthtexas.gov 7/2/2025 11:39:12 PM SENT

Christopher Mosley chris.mosley@fortworthtexas.gov 7/2/2025 11:39:12 PM SENT

Olyn Poole olyn.poole@fortworthtexas.gov 7/2/2025 11:39:12 PM SENT