San Antonio Building & Construction Trades Council v. City of San Antonio

224 S.W.3d 738, 2007 Tex. App. LEXIS 1261, 2007 WL 521899
CourtCourt of Appeals of Texas
DecidedFebruary 21, 2007
Docket04-05-00675-CV
StatusPublished
Cited by5 cases

This text of 224 S.W.3d 738 (San Antonio Building & Construction Trades Council v. City of San Antonio) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
San Antonio Building & Construction Trades Council v. City of San Antonio, 224 S.W.3d 738, 2007 Tex. App. LEXIS 1261, 2007 WL 521899 (Tex. Ct. App. 2007).

Opinions

OPINION

Opinion by KAREN ANGELINI, Justice.

At issue in this appeal is whether chapter 2258 of the Texas Government Code requires construction workers working on the convention center hotel project in San Antonio, Texas to be paid prevailing wages. Because we hold that chapter 2258 does not apply to the project, we affirm the judgment of the trial court.

Background

The underlying action stems from the development of land owned by the City of San Antonio adjoining the Henry B. Gonzalez Convention Center. In February 2003, the City Council established the Convention Center Hotel Advisory Board (“Advisory Board”), which is composed of “seven local experts from the Fi-nanee/Banking, Real Estate/Corporate, and Hotel/Tourism business sectors as well as a community representative.” In May 2004, the Advisory Board and HVS International, an independent consulting firm, determined that a convention center hotel was important to maintain and expand San Antonio’s convention industry. In a written report, the Advisory Board recommended that the City’s land be developed by building such a hotel. In doing so, it recommended that a private developer construct, own, and operate the convention center hotel. However, the Advisory Board warned that a private developer would have difficulty obtaining “conventional hotel financing” for the project and that “some form of municipal or non-profit debt financing [would] be required to bridge the gap between financing provided by the developer and total construction costs to ensure development.”

Through an ordinance, the City approved the request and application of Hotel Investments, L.P. (“the Developer”) to design, construct, and operate the convention center hotel. See Ordinance No. 100686. As such, on June 8, 2005, the City and the Developer entered into the “Project Agreement,” which incorporated a “Ground Lease and License Agreement.” Under this Ground Lease, the Developer (the “tenant”) leased from the City (the “landlord”) the “Leased Premises” for an initial term of seventy-five years with an option to extend the term for an additional fifteen years. “Leased Premises” was defined by section 2.1 of the Ground Lease:

For good and valuable consideration, Landlord agrees to and does hereby [741]*741lease, let and demise to Tenant, and Tenant agrees to and does hereby receive and lease from Landlord, on and subject to the terms, conditions, and provisions of this Ground Lease, the Site and, subject to Tenant’s obligation to perform the Demolition Work in accordance with the Project Agreement, the Existing Improvements located on the Site (collectively, the “Leased Premises”) for the Lease Term.

Minimum standards for the convention center hotel were also incorporated into the Project Agreement through the incorporation of the Ground Lease. According to the Ground Lease, during the lease term, title to all “Project Improvements constructed on the Premises” shall remain in the tenant (the Developer); however, upon expiration of the lease, title to all “Project Improvements” will “automatically” “vest in Landlord [the City] without the payment of any compensation therefor....”

The Developer provided $77,331,200.00 of cash and capital contributions for construction of the convention center hotel and sought lower-cost/tax-free bonds to finance the remaining costs of $230,000,000.00. Pursuant to chapter 431 of the Texas Transportation Code,1 the City Council created the City of San Antonio, Texas Convention Center Hotel Finance Corporation (“the nonprofit corporation”),2 a Texas nonprofit local government corporation, “for the purpose of financing a portion of the costs required to construct, furnish and equip a privately-owned hotel to be located on land owned by the City that is adjacent to the City’s Convention Center in order to promote economic development and to stimulate business and commercial activity in the City, all at the request of the City Council of the City.” Ordinance No. 100685. Thus, the City Council created the nonprofit corporation so that it could issue Series 2005A Tax-Exempt Empowerment Zone Bonds totaling up to $130,000,000.00 and Series 2005B Taxable Revenue Bonds totaling up to $100,000,000.00.

The empowerment zone revenue bonds were issued pursuant to Internal Revenue Code Subtitle A, Chapter 1, Subchapter U, which permits municipalities in economically depressed and/or disadvantaged areas to issue tax-free bonds for the benefit of private enterprises. See 26 U.S.C. § 1391 et seq. The proceeds of the bonds were loaned to the Developer. Pursuant to the Loan Agreement between the nonprofit corporation and the Developer and the Indenture of Trust between the nonprofit corporation and Wells Fargo Bank, N.A., the Developer is responsible for repayment, interest, and financing costs of the revenue bonds. And, the Developer assigned an interest in its net operating revenue to the nonprofit corporation and Wells Fargo Bank to secure the Developer’s obligations. Further, the bonds expressly state that they are not a general debt or an obligation of the City, the State of Texas, or any political subdivision of the State.

The San Antonio Building and Construction Trades Council (“SABTC”), Tim McGrath (the representative officer of Sheet Metal Workers International Association Local No. 67, a labor union affiliated with SABTC), and Bob Salvatore (president of SABTC) (collectively “the SABTC [742]*742Plaintiffs”) filed suit for declaratory judgment against the City of San Antonio, alleging that chapter 2258 of the Texas Government Code requires construction workers working on the convention center hotel project to be paid prevailing wages.

On June 2, 2005, the case was tried to the bench. No witnesses testified. Instead, through agreement and stipulation by the parties, the documents at issue were admitted in evidence as exhibits. In its findings of fact and conclusions of law, the trial court found that the convention center hotel project was a “public work,” but that “no 'public funds’ [were] used in whole or in part to pay for the construction” of the hotel. Because public funds were not used, the trial court determined that the City was not required to pay the “prevailing wage rate” “to any employee, contractor, or employee of a contractor relating to the development, design, construction, management, or maintenance of a convention center hotel facility.” Thus, the trial court rendered judgment in favor of the City.

On appeal, the SABTC Plaintiffs bring two issues: (1) whether the convention center hotel project is a “public work” requiring application of chapter 2258 of the Government Code without regard to whether the project was financed in whole or in part by public funds; and (2) whether the funds raised from the bonds loaned to the Developer for the construction of the project are “public funds.” The City, in turn, raises two cross-issues on appeal: (1) whether the SABTC Plaintiffs have standing to assert their claims; and (2) whether the trial court erred in determining that the convention center hotel project was a “public work.”

Standing

The City of San Antonio argues that we do not have subject-matter jurisdiction because the SABTC Plaintiffs failed to plead or prove standing sufficient to confer subject-matter jurisdiction.

Standing is a component of subject-matter jurisdiction. Waco Indep. Sch. Dist. v.

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224 S.W.3d 738, 2007 Tex. App. LEXIS 1261, 2007 WL 521899, Counsel Stack Legal Research, https://law.counselstack.com/opinion/san-antonio-building-construction-trades-council-v-city-of-san-antonio-texapp-2007.