State of Texas, the Texas Facilities Commission, the Texas Health and Human Services Commission, Mike Novak, in His Official Capacity as Executive Director of the TFC, and Rolland Niles, in His Official Capacity as Deputy Executive Commissioner for the System Support Services Division of the Texas Health and Human Services Commission v. Broadmoor Austin Associates, a Texas Joint Venture

Opinion

ACCEPTED 15-25-00013-CV FIFTEENTH COURT OF APPEALS AUSTIN, TEXAS 5/7/2025 4:14 PM No. 15-25-00013 CHRISTOPHER A. PRINE CLERK

In the Fifteenth Court of Appeals FILED IN 15th COURT OF APPEALS AUSTIN, TEXAS

Austin, Texas 5/7/2025 4:14:15 PM CHRISTOPHER A. PRINE Clerk

State of Texas, the Texas Facilities Commission, the Texas Health and Human Services Commission, Mike Novak, in his Official Capacity as Executive Director of the TFC, and Roland Niles, in his Official Capacity as Deputy Executive Commissioner for the System Support Services Division of the Texas Health and Human Services Commission, Appellants, v.

Broadmoor Austin Associates, a Texas Joint Venture, Appellee.

On Appeal from the 455th Judicial District of Travis County, No. D-1-GN-23-007899

Brief of Appellee

Scott Douglass & McConnico LLP Jason R. LaFond State Bar No. 24103136 Casey Dobson Sara Clark 303 Colorado Street, Suite 2400 Austin, TX 78701 (512) 495-6300 jlafond@scottdoug.com Counsel for Appellee

Table of Contents

Page

Table of Authorities ................................................................................................ iv Introduction ............................................................................................................. 1 Statement of Facts ................................................................................................... 2 A. Legal background ......................................................................................... 2 1. State appropriations ............................................................................... 2 a. The budget process.......................................................................... 2 b. Legislative control ........................................................................... 4 2. Leasing private office space for state tenants ......................................... 6 B. Factual background ...................................................................................... 7 1. The Broadmoor Lease ........................................................................... 7 2. The breach ............................................................................................. 8 3. The pretext ............................................................................................ 8 C. Procedural history .......................................................................................16 Standard of Review ................................................................................................. 17 Summary of the Argument ..................................................................................... 18 Argument ................................................................................................................19 I. Chapter 114’s Waiver of Sovereign Immunity Encompasses Broadmoor’s Breach Claim. .................................................................................................. 19 A. A state agency entered into the Broadmoor Lease as authorized by law. ........................................................................................................ 20 1. The Commission entered into the Broadmoor Lease as authorized. ........................................................................................... 20 2. The Government misreads the law and the lease................................. 22 a. Government Code § 2167.055 confirms the Commission entered into the Broadmoor Lease. ................................................ 22 b. The “State” as lessee includes the Commission and HHSC. ........................................................................................... 25 i. Chapter 2167 shows the Commission and HHSC may and did enter into the lease relationship. ................................. 26 ii. Landlord-tenant law and the Broadmoor Lease’s terms show the same. ........................................................................ 28 c. In any event, the State as lessee is a “state agency” as defined. .......................................................................................... 30 B. The Broadmoor Lease is “a contract subject to this chapter.” .................. 33 C. Broadmoor alleges the breach of an express provision of the Broadmoor Lease. ...................................................................................... 35 1. Broadmoor doesn’t need to prove a breach to come within Chapter 114’s waiver of sovereign immunity. ...................................... 35 2. The State Entities breached in any event. ............................................ 37 a. The Government failed to plead any condition subsequent. .......... 37 b. Refusing to pay isn’t a lack of funding. .......................................... 38 D. None of Chapter 114’s terms and conditions take Broadmoor’s breach claim outside the waiver. ................................................................ 43 II. Broadmoor Adequately Pleaded Ultra Vires Claims. ....................................... 46 A. Broadmoor pleaded ultra vires acts by Novak and Niles. ........................... 47 1. Novak had no authority to terminate the Broadmoor Lease. ............... 49 a. Novak had no authority to terminate the Broadmoor Lease when money was available to pay rent. .......................................... 50 b. Novak had no authority to violate the Commission’s own regulations. .................................................................................... 56 2. Niles failed to perform his ministerial duty to certify that money was available for the Broadmoor Lease. ............................................... 58 B. Broadmoor seeks prospective relief bringing Novak’s and Niles’s conduct back in line with state law. .............................................................61 III. Broadmoor’s UDJA Claim Is Proper. .............................................................. 63 Conclusion and Prayer ........................................................................................... 63 Certificate of Compliance ...................................................................................... 65

ii

Appendix

Tab

1 Broadmoor Lease

2 Texas Government Code Chapter 2167

3 Texas Civil Practice & Remedies Code Chapter 114

4 Excerpts from Act of May 27, 2023, 88th Leg., R.S., ch. 1170 § 1

5 1 Texas Administrative Code Chapter 115 Subchapter B

6 2 HHSC Legislative Appropriation Request 4.A (2022)

iii

Table of Authorities

Page(s)

Cases Ballantyne v. Champion Builders, 144 S.W.3d 417 (Tex. 2004) ................................................................................ 48 Beaumont, Sour Lake & W. Ry. v. State, 173 S.W. 641 (Tex. App.—Galveston 1914, no writ) ........................................... 26 Bracey v. City of Killeen, 417 S.W.3d 94 (Tex. App.—Austin 2013, no pet.) .............................................. 62 Bradston Assocs. v. Cnty. Sheriff’s Dep’t, 892 N.E.2d 732 (Mass. 2008)............................................................................. 59 Bullock v. Tex. Skating Ass’n, 583 S.W.2d 888 (Tex. App.—Austin 1979, writ ref’d n.r.e.) ............................... 26 Byrdson Servs. v. S. E. Tex. Reg’l Plan. Comm’n, 516 S.W.3d 483 (Tex. 2016) ................................................................................ 34 Charles Scribner’s Sons v. Marrs, 262 S.W. 722 (Tex. 1924) .................................................................................... 49 City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) ............................................................................... 47 City of Hous. v. Hous. Mun. Emps. Pension Sys., 549 S.W.3d 566 (Tex. 2018) ........................................................................... 17, 46 City of Hous. v. Williams, 353 S.W.3d 128 (2011)......................................................................................... 21 City of Irving v. Seppy, 301 S.W.3d 435 (Tex. App.—Dallas 2009, no pet.) ............................................ 28 City of Lancaster v. White Rock Com., 2018 WL 6716932 (Tex. App.—Dallas 2018, pet. denied) ................................. 38 Cmty. Health Choice v. Hawkins, 328 S.W.3d 10 (Tex. App.—Austin 2010, pet. denied) ....................................... 52 Cmty. Health Sys. Prof’l Servs. v. Hansen, 525 S.W.3d 671 (Tex. 2017)................................................................................. 38

iv

Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909 (Tex. 2013) ................................................................................ 45 Ferguson v. Johnson, 57 S.W.2d 372 (Tex. App.—Austin 1933, writ dism’d) ....................................... 52 Flora Crane Serv. v. Ross, 390 P.2d 193 (Cal. 1964) ..................................................................................... 59 Fort Worth Cavalry Club v. Sheppard, 83 S.W.2d 660 (Tex. 1935) .................................................................................. 49 Fulmore v. Lane, 140 S.W. 405 (Tex. 1911)................................................................................. 5, 49 Hartzell v. S.O., 672 S.W.3d 304 (Tex. 2023).......................................................................... 49, 62 Herring v. Hous. Nat. Exch. Bank, 269 S.W. 1031 (Tex. 1925) ................................................................................... 25 Hoppenstein Props. v. McLennan Cnty. Appraisal Dist., 341 S.W.3d 16 (Tex. App.—Waco 2010, pet. denied) .................................... 33, 45 Hous. Belt & Terminal Ry. v. City of Hous., 487 S.W.3d 154 (Tex. 2016) ............................................................................ 48, 51 In re City of Galveston, 622 S.W.3d 851 (Tex. 2021) ................................................................................ 58 In re Dallas Cnty., 697 S.W.3d 142 (Tex. 2024) ................................................................................ 41 In re Durnin, 619 S.W.3d 250 (Tex. 2021) ................................................................................ 58 In re Panchakarla, 602 S.W.3d 536 (Tex. 2020) ............................................................................... 59 In re Phillips, 496 S.W.3d 769 (Tex. 2016) .......................................................................... 48, 60 In re Sanofi-Aventis U.S., 2025 WL 920111 (Tex. App.—15th Dist. 2025, no pet. h.)................................. 26 Indian Towing v. United States, 350 U.S. 61 (1955)............................................................................................... 19

v

Jessen Assocs. v. Bullock, 531 S.W.2d 593 (Tex. 1975) ....................................................................2, 5, 49, 62 Kirby Lake Dev. v. Clear Lake City Water Auth., 320 S.W.3d 829 (Tex. 2010) ............................................................................... 32 Lake v. Premier Transp., 246 S.W.3d 167 (Tex. App.—Tyler 2007, no pet.) .............................................. 24 Luther Transfer & Storage v. Walton, 296 S.W.2d 750 (Tex. 1956) ................................................................................ 37 Monsanto Co. v. Cornerstones Mun. Util. Dist., 865 S.W.2d 937 (Tex. 1993) ................................................................................ 25 Nat’l Biscuit Co. v. State, 135 S.W.2d 687 (Tex. 1940) .................................................................................. 4 NP Anderson Cotton Exch. v. Potter, 230 S.W.3d 457 (Tex. App.—Forth Worth 2007, no pet.) .................................. 30 Oncor Elec. Delivery v. Wilbarger Cnty. Appraisal Dist., 691 S.W.3d 890 (Tex. 2024)................................................................................ 36 Patel v. Tex. Dep’t of Licensing & Regul., 469 S.W.3d 69 (Tex. 2015) .................................................................................. 62 Pepper Lawson Horizon Int’l Grp. v. Tex. S. Univ., 669 S.W.3d 205 (Tex. 2023)............................................................... 19, 20, 36, 38 Port Arthur Cmty. Action Network v. Tex. Comm’n on Env’t Quality, 707 S.W.3d 102 (Tex. 2025) ................................................................................ 56 Pub. Util. Comm’n v. Luminant Energy, 691 S.W.3d 448 (Tex. 2024)................................................................................ 30 Rogers v. Bagley, 623 S.W.3d 343 (Tex. 2021) .................................................................................31 Schroeder v. Escalera Ranch Owners’ Ass’n, 646 S.W.3d 329 (Tex. 2022) ......................................................................... 48, 61 State v. City of San Marcos, 2025 WL 1142065 (Tex. App.—15th Dist. 2025, no pet. h.) ...............................17 Sw. Bell Tel. v. Emmett, 459 S.W.3d 578 (Tex. 2015) .......................................................................... 62, 63

vi

Tex. Dep’t of Transp. v. Sefzik, 355 S.W.3d 618 (Tex. 2011) ................................................................................. 62 Tex. Educ. Agency v. U.S. Dep’t of Educ., 908 F.3d 127 (5th Cir. 2018) ............................................................................... 52 Tex. Nat. Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849 (Tex. 2002) ................................................................................. 63 Texas v. White, 74 U.S. 700 (1868), overruled on other grounds by Morgan v. United States, 113 U.S. 476 (1885)....................................................... 32 TotalEnergies E&P USA v. MP Gulf of Mex., 667 S.W.3d 694 (Tex. 2023) ................................................................................ 58 Van Boven v. Freshour, 659 S.W.3d 396 (Tex. 2022) .......................................................................... 60, 61 Youngkin v. Hines, 546 S.W.3d 675 (Tex. 2018) ................................................................................ 25 Constitutional Provisions Tex. Const. art. I § 1 ....................................................................................................................... 32 § 2 ...................................................................................................................... 32 Tex. Const. art. II, § 1 ........................................................................................ 4, 32 Tex. Const. art. III § 49(a) .................................................................................................................. 4 §§ 1, 35(a) ............................................................................................................. 4 Tex. Const. art. IV, § 14............................................................................................ 5 Tex. Const. art. VIII § 3....................................................................................................................... 40 § 6 ........................................................................................................................ 4 Statutes Act of May 27, 2023, 88th Leg., R.S., ch. 1170 § 1, art. II sec. 1 .............................13 Tex. Civ. Prac. & Rem. Code § 101.001(3)(A) .................................................................................................. 25 § 101.025(a) ........................................................................................................ 36 § 114.001(3) ............................................................................................. 21, 31, 33

vii

§ 114.002 ................................................................................................ 43, 44, 45 § 114.003 ...................................................................................................... passim § 114.004 ............................................................................................................ 43 § 114.008 ............................................................................................................ 43 § 114.009 ............................................................................................................ 43 § 16.061(a) .......................................................................................................... 25 Tex. Gov’t Code § 2151.002(2) ..................................................................................................... 41 § 2151.004(c) ................................................................................................ 21, 28 § 2152.001 .......................................................................................................... 21 § 2152.103 .................................................................................................... 50, 56 § 2165.104(a) ........................................................................................................ 6 § 2165.105(a) ........................................................................................................ 6 § 2165.105(b) ........................................................................................................ 6 § 2167.002 ............................................................................................................ 6 §§ 2167.002, 2167.053, 2617.055(a)–(b) ................................................................ 7 § 2167.002(a) ................................................................................................ 27, 40 § 2167.0021 ........................................................................................................ 35 § 2167.0021(a) .................................................................................................... 56 § 2167.005(a) ...................................................................................................... 22 § 2167.006(a) ...................................................................................................... 22 § 2167.053........................................................................................................... 28 § 2167.054(a) ...................................................................................................... 22 § 2167.055(a) .......................................................................................... 22, 23, 26 § 2167.055(e) ................................................................................................... 7, 51 § 2167.055(f ) ................................................................................................. 27, 56 § 2167.101 ..................................................................................................... passim § 2167.102(a)–(b) ................................................................................................ 50 § 2167.104..................................................................................................... 22, 28 § 2167.104(f ) ...................................................................................................... 22 § 2167.105 ........................................................................................................ 7, 50 § 311.034 ............................................................................................................ 19 § 317.002(a) .......................................................................................................... 5 § 317.002(b) .......................................................................................................... 5 Legislative Materials Tex. H.B. 1, 88th Leg., R.S.

(as introduced Jan. 18, 2023) .............................................................................. 12

viii

(as passed in the House Apr. 6, 2023) ................................................................ 12 (as passed in the Senate Apr. 17, 2023) ................................................................13 Regulations 1 Tex. Admin. Code § 115.20 .............................................................................................................. 42 § 115.20(6)........................................................................................................... 11 § 115.21 .......................................................................................................... 54, 57 §§ 115.21–.22 ...................................................................................................... 57 § 115.21(a)...................................................................................................... 11, 57 § 115.21(b) .......................................................................................................... 54 § 115.22(a)–(b) .................................................................................................... 57 § 115.22(b) .................................................................................................... 54, 58 Texas Attorney General Opinions Tex. Att’y Gen. LA-2 (1974) .................................................................................. 61 Tex. Att’y Gen. Op. No. H-207 (1974)................................................................... 60 Tex. Att’y Gen. Op. No. JM-256 (1984) .................................................................. 4 Tex. Att’y Gen. Op. No. M-1171 (1972) ................................................................... 4 Tex. Att’y Gen. Op. No. M-1191 (1972) ................................................................. 60 Tex. Att’y Gen. Op. No. MW-52 (1979)................................................................. 26 Tex. Att’y Gen. Op. No. O-5545 (1943) ............................................................. 4, 61 Tex. Att’y Gen. Op. No. V-1147 (1957) .................................................................. 26 Agency Materials 2 HHSC Legislative Appropriation Request (2022) ............... 12, 21, 53 HHSC, Monthly Financial Report for Appropriation Year 2024 (Oct. 3, 2024), https://tinyurl.com/53j57bt2 ..............................................................................15 Legis. Budget Bd., ABEST Object of Expense Codes (Oct. 10, 2023), https://tinyurl.com/y8wytmsp ........................................................................... 11 Tex. Facilities Comm’n, Master Facilities Plan Report (2020), https://tinyurl.com/2n636aaw ........................................................................... 10 Tex. Facilities Comm’n, Self-Evaluation Report to Sunset Advisory Commission (Sept. 2011), https://tinyurl.com/33dr3sps .................................... 10

ix

Tex. Facilities Comm’n, State Lease Contract Template, https://tinyurl.com/yfyxsk94............................................................................... 7 Rules Tex. R. Civ. P. 54 .................................................................................................... 38 Other Authorities Black’s Law Dictionary (10th ed. 2014) ............................................... 31, 33 Garner’s Modern English Usage (4th ed. 2017) ................................... 32 Internet Archive Wayback Machine, Results of Search for “https://oig.hhs.texas.gov/,” https://tinyurl.com/mwmdme2s (last visited Apr. 8, 2025) .................................................................................... 11 Internet Archive Wayback Machine, Results of Search for “https://oig.hhs.texas.gov/,” https://tinyurl.com/mw3kev6j (last visited Apr. 8, 2025) .................................................................................... 11 15 McQuillin Mun. Corp. § 39:45 (3d ed.) .................................................. 58 O’Connor’s Texas Causes of Action Ch. 24-A § 3 (2025 ed.) ............. 28 O’Connor’s Texas Forms * Real Estate Ch. 2 § 4.8 (2025 ed.) ..................................................................................................................... 44 Restatement (Second) of Agency § 154 (1958) ..................................... 23 S. Rsrch. Ctr., Budget 101: A Guide to the Budget Process in Texas ( Jan. 2023), https://tinyurl.com/ared9bpy .... 2, 3, 4, 5, 12 49 Tex. Jur. 3d Landlord and Tenant § 237 .......................................... 29 Webster’s Third New International Dictionary (1993 ed.) ............................................................................................................51 Webster’s Third New International Dictionary (2002 ed.) .......................................................................................... 23, 39, 44, 56 5 Williston on Contracts § 9:1 (4th ed.) ...................................................31 12 Williston on Contracts § 35:39 (4th ed.) ............................................ 23

x

To the Honorable Fifteenth Court of Appeals:

Broadmoor constructed and leased substantial office space to the Texas gov-

ernment. The Broadmoor Lease’s term has not yet expired, yet rent has gone unpaid

for nearly two years. The cause—misconduct by state officials. The result—breach

of contract. The Court should affirm because sovereign immunity does not bar

Broadmoor’s claims addressing that cause and result.

By law, the Broadmoor Lease is contingent on ongoing rent appropriations to

the tenant state agency—HHSC. In 2023, for the upcoming biennium, the Legisla-

ture appropriated HHSC more rent money than HHSC planned on spending, and

plenty for the Broadmoor Lease. But at the same time, officials from the Texas Facil-

ities Commission and HHSC were facing down an embarrassing office-space blunder

and looking for a face-saving fix. So they contrived to escape the lease by implausibly

claiming inadequate funding. That conduct breached the lease; it was also beyond

the officials’ authority and contrary to their ministerial duties.

Sovereign immunity is no obstacle to Broadmoor’s claims against the lessee

(comprising the State; the Commission, who controlled the leased premises; and

HHSC, who occupied those premises (the “State Entities”)) and the responsible of-

ficials (collectively the “Government”). An express waiver plainly encompasses

Broadmoor’s breach of contract claim. And sovereign immunity doesn’t apply to

Broadmoor’s ultra vires claims, which merely seek prospective equitable and declar-

atory relief to bring the responsible officials back in line with state law.

Statement of Facts

Broadmoor begins with the legal background of state appropriations and the

lease of office space for state agencies before discussing the lease, its breach, and the

ultra vires conduct challenged here.

A. Legal background

1. State appropriations

An “appropriation” is “the setting aside or dedicating of funds for a specified

purpose.” 1 A multi-year budget process culminates in each biennial General Appro-

priations Act (GAA), by which the Legislature makes funding decisions that control

agency expenditures over the ensuing two years.

a. The budget process

The state government’s biennial budget is a four-year process: In year one,

agencies develop appropriation requests and the Comptroller develops revenue esti-

mates; in year two, the Legislature appropriates through the GAA; and in years three

and four, agencies expend the Legislature’s appropriations according to the GAA. 2

An agency’s appropriation request details the funding the agency’s adminis-

trators feel the agency needs to pursue the tasks assigned it by law. Based on these

requests, the Legislative Budget Board prepares the first draft of the GAA. 3 Two

1 Jessen Assocs. v. Bullock, 531 S.W.2d 593, 599 (Tex. 1975). 2 S. Rsrch. Ctr., Budget 101: A Guide to the Budget Process in Texas 3–4 ( Jan. 2023) (“Budget 101”), https://tinyurl.com/ared9bpy. 3 Id. at 4.

3

identical bills are introduced, one in each house of the Legislature; then each is

marked up and amended by the houses’ respective committees, and then passed and

sent to a conference committee, which reports a single bill for final passage. 4 When

passed, the Comptroller must certify whether enough revenue will exist to cover the

appropriations. 5 When certified, the bill goes to the Governor for his signature or

veto. 6 Any part of the bill not vetoed takes effect on September 1, the start of the

State’s fiscal year. 7 “Although the budget does not appear in Texas’ statutes or

codes, it is law and agencies are bound by it.” 8

The GAA directs spending by “line item,” which is “[a]n element of spending

authority granted to an agency or institution in an appropriations bill. Literally, a line

in the General Appropriations Act specifying an agency’s appropriations for a spe-

cific designated use.” 9 Line items appear in two forms, “strategy” and “object of

expense.” 10 A “strategy” is an output; it details “actions to be taken by the agency

to achieve” its various goals. 11 An “object of expense” (salary, rent, travel, etc.) is an

input necessary to fulfill the strategies; “[a]n expense category . . . covering

4 Id. at 4–5. 5 Id. at 5. 6 Id. 7 Id. 8 Id. 9 Id. at 69. 10 Id. at 18–19.

11 Id. at 18.

4

payments for a period of time or class of items.” 12 The sum of “strategy” appropri-

ations is equal to the sum of appropriations for each “object of expense.” 13

b. Legislative control

Appropriations are a precondition to spending because the Constitution says

(with exceptions not relevant here), “No debt shall be created by or on behalf of the

State,” 14 and “No money shall be drawn from the Treasury but in pursuance of spe-

cific appropriations made by law.” 15 And each new Legislature needs to adopt a new

appropriation law because (1) the Legislature makes the law, 16 and (2) no “appropri-

ation of money” may “be made for a longer term than two years.” 17

The Constitution’s assignment of control to the Legislature necessarily limits

the other branches’ role in appropriations. 18 For instance, other branches may not

determine their own appropriations or second-guess the Legislature’s choices about

what items to spend money on. 19 And just as other branches must respect the Legis-

lature’s role, the Legislature must not delegate its role away. 20

Two exceptions illuminate these limits.

12 Id. at 70. 13 Id. at 19. 14 Tex. Const. art. III, § 49(a). 15 Id. art. VIII, § 6. 16 See id. art. III, §§ 1, 35(a). 17 Id. art. VIII, § 6. 18 See id. art. II, § 1. 19 See, e.g., Tex. Att’y Gen. Op. No. JM-256 (1984); Tex. Att’y Op. No. O-5545 (1943). 20 See Nat’l Biscuit Co. v. State, 135 S.W.2d 687, 693–94 (Tex. 1940); Tex. Att’y Gen. Op. No. M- 1171 (1972).

5

First, before 1985, the Executive Branch’s only control over appropriations

was the Governor’s power to strike particular items of appropriations while allowing

others to become law. 21 “The veto power . . . is a legislative and not an executive func-

tion,” but the Constitution expressly endorses this crossover power. 22 That crosso-

ver, however, “exists only to the extent granted by the Constitution.” 23

Second, recognizing that the Executive Branch otherwise lacked the power to

redirect or impound appropriations made by law, the Legislature proposed and Tex-

ans ratified Article XVI, § 69, which says, “The legislature may require, by rider in

the General Appropriations Act or by separate statute, the prior approval of the ex-

penditure or the emergency transfer of any funds appropriated to the agencies of

state government.” Implementing this amendment, the Government Code provides

for “budget execution”: The Governor or Legislative Budget Board may propose and

the other may approve “that a state agency be prohibited from spending . . . part or

all of an appropriation” absent prior approval. 24 Either may also propose or approve

the other’s proposal that an appropriation be “used for a purpose different from or

additional to the purpose for which the appropriation was made,” or “transferred to

another state agency to be used for a specified purpose.” 25

21 See Tex. Const. art. IV, § 14. 22 Fulmore v. Lane, 140 S.W. 405, 411 (Tex. 1911). 23 Jessen Assocs., 531 S.W.2d at 598; accord Fulmore, 140 S.W. at 412. 24 Tex. Gov’t Code § 317.002(a). 25 Id. § 317.002(b); see also Budget 101 at 43 (“this is known as budget execution”).

6

2. Leasing private office space for state tenants

As the “objects of expense” in the GAA suggest, state government—like most

endeavors—entails overhead. The State’s arms require physical space from which to

pursue their governmental aims. Some office space is owned; some is leased, includ-

ing from private landlords like Broadmoor. Broadly, the Commission enters into a

lease on behalf of a state agency that needs space, and the agency occupies the leased

space and is responsible for paying rent due.

Government Code Chapters 2165 and 2167 govern this process. It’s the Com-

mission’s responsibility to “study the space requirements of state agencies that oc-

cupy space under the commission’s charge and control, including state-owned space

and space leased from other sources.” 26 And when a state agency desires more or

different space, it “send[s] to the commission a written request for space the agency

needs to perform its functions.” 27 The Commission then determines “whether a

need for the space exists” and, if so, the “specifications for needed space.” 28

If there’s no suitable space available in government-owned buildings, the

Commission looks for private office space to lease. 29 While the “State” is listed as

the nominal “lessee” in these leases, the law makes clear that the Commission is

26 Tex. Gov’t Code § 2165.104(a). 27 Id. § 2165.105(a). 28 Id. § 2165.105(b). 29 See id. § 2167.002.

7

entering into the lease, and is doing so on behalf the state agency tenant. 30 And the

Commission supervises the tenant agency’s compliance with the lease and the law. 31

To comply with the Constitution’s prohibition on debt, any “lease contract is

contingent on the availability of money appropriated by the legislature to pay for the

lease.” 32 And because the leasing agency is financially responsible for space leased

on its behalf, it must “certify to the commission, at least 60 days before the beginning

of each fiscal biennium during the lease term, that money is available to pay for the

lease until the end of the next fiscal biennium.” 33

B. Factual background

1. The Broadmoor Lease

In August 2014, the Commission entered into the Broadmoor Lease on behalf

of HHSC for 122,213 square feet of office space at 11501 Burnet Road in Austin, to

be occupied by HHSC’s Office of Inspector General. 34 The lease is on the Commis-

sion’s standard form. 35 The nominal “lessee” is the “State of Texas,” but, like the

associated statutes, the lease makes clear that the Commission and HHSC are parties

to the landlord-tenant relationship. 36

30 See, e.g., id. §§ 2167.002, 2167.053, 2617.055(a)–(b) (discussed more in Part I.A, infra). 31 See id. § 2167.105. 32 Id. § 2167.055(e). 33 Id. § 2167.101. 34 CR.282, 290. 35 See Tex. Facilities Comm’n, State Lease Contract Template, https://tinyurl.com/yfyxsk94. 36 See, e.g., CR.282–83; CR.312–14 (discussed more in Part I.A, infra).

8

In addition to standard lease terms, the lease imposes on Broadmoor various

construction obligations. 37

As amended, the Broadmoor Lease’s term runs through October 31, 2026. 38

That term is subject to various conditions subsequent, including loss of funding. 39

But if the lessee fails to “pay rentals” without excuse, Broadmoor “will have the

remedies now or hereafter provided by law for recovery of rent . . . and damages oc-

casioned by Lessee’s default.” 40

2. The breach

HHSC abandoned the Broadmoor Lease in 2024 and Broadmoor hasn’t been

paid rent under the lease since August 2024. 41 Broadmoor has been unable to re-lease

the property and has suffered millions in damages in lost rent.

3. The pretext

The Government maintains there’s no breach because the Lease “is made

contingent upon the continuation of the availability of money appropriated by the

legislature to pay for the lease.” 42 To be sure, on May 31, 2023, an HHSC staffer

“directed the . . . Commission to terminate the . . . Lease due to the non-availability

of money, either appropriated by the legislature or funded by grants, to pay for the

37 E.g., CR.285; CR.307 (discussed more in Part I.D, infra). 38 CR.314. 39 CR.283. 40 CR.286. 41 CR.274; CR.448. 42 Br.31.

9

leased premises.” 43 And the next day, on June 1, the Commission’s Executive Direc-

tor purported to terminate the Lease because HHSC “has directed that rent will not

be certified for the biennium beginning September 1, 2023, as required by Section

2167.101, Texas Government Code.” 44

But HHSC’s supposed lack of appropriation has always been pretext—and pa-

tently false.

North Austin Complex

The events ending in the breach of the Broadmoor Lease are best understood

in the context of the “North Austin Complex.” HHSC’s instruction to the Commis-

sion to terminate the Broadmoor Lease reveals the true reason for the request—not

poverty, but a desire to move its staff to new digs at “NAC at 4601 W. Guadalupe” 45:

43 CR.317. 44 CR.320. 45 CR.317.

10

“NAC” is “North Austin Complex,” a project HHSC and the Commission have

been working together on for more than a decade, and which now includes a new

state office building at 4601 W. Guadalupe. 46

Years before entering the Broadmoor Lease on HHSC’s behalf, the Commis-

sion identified the “North Austin Complex”—a large swath of State-owned land that

has long included HHSC’s headquarters—as “underutilized” and a “significant re-

development opportunit[y].” 47 “The Commission, working on behalf of and in col-

laboration with HHSC, prepared a North Austin Complex Master Plan to consoli-

date [HHSC’s] leased office space into state-owned buildings.” 48 The Commission

and HHSC have long planned to “retire $7.4 million of annual lease expenses” by

“[c]onsolidating the leases into state-owned facilities” upon the completion of

“phase one” in 2021. 49

Impatient to relocate, HHSC began moving out of the Broadmoor Lease prop-

erty and moving its staff to the North Austin Complex in January 2023—just as that

cycle’s legislative appropriation process was starting. 50 In fact, by early March 2023,

HHSC’s Office of the Inspector General had already changed its address from the

46 See Tex. Facilities Comm’n, Master Facilities Plan Report 8 (2020), https://tinyurl .com/2n636aaw. 47 Tex. Facilities Comm’n, Self-Evaluation Report to Sunset Advisory Commission 12 (Sept. 2011), https://tinyurl.com/33dr3sps. 48 2020 Master Facilities Plan Report 8. 49 Id. 50 CR.317.

11

Broadmoor Lease location to the North Austin Complex. 51 These moves were all on

the Commission’s watch, as it controlled both properties.

Why did HHSC begin vacating the leased premises before it even knew its

funding? Because “[p]rior to requesting that the Commission cancel a lease due to

lack of funding, the governmental agency shall determine that it occupies idle facili-

ties.” 52 And “ʻ[i]dle facilities’ means completely unused facilities that are excess to the

governmental agency’s current needs.” 53 HHSC anticipated deficient funding would

allow it to terminate the Broadmoor Lease. But that deficiency never happened.

HHSC’s Biennial Appropriation

HHSC submitted its appropriation request for fiscal years 2024–25 at the be-

ginning of fiscal year 2023. 54 For that year, HHSC expected to spend $110 million for

the “Rent – Building” line-item—i.e., “Rental of Office Buildings or Office

Space.” 55 Yet HHSC’s baseline request for the two following fiscal years included

only $105 million in annual appropriations for that line-item. 56 HHSC included its

51 Compare Internet Archive Wayback Machine, Results of Search for “https://oig.hhs.texas.gov/,” https://tinyurl.com/mwmdme2s (last visited Apr. 8, 2025) (website as of Feb. 10, 2023 listing address for “Austin headquarters” as “11501 Burnet Road”), with id., https://tinyurl.com/mw3kev6j (last visited Apr. 8, 2025) (website as of Mar. 5, 2023 listing address for “Austin headquarters” as “North Austin Complex 4601 Guadalupe”). 52 1 Tex. Admin. Code § 115.21(a). 53 Id. § 115.20(6) (emphasis added). 54 CR.270. 55 Legis. Budget Bd., ABEST Object of Expense Codes 6 (Oct. 10, 2023), https://tinyurl .com/y8wytmsp; see also CR.434 (Government acknowledging that this item of appropriation is for HHSC’s lease payments). 56 CR.270.

12

remaining (and growing) lease obligations as a request for “exceptional items,” 57

which is like a wish list: “items that are not part of the agency’s baseline budget re-

quest, but are exceptional in nature and warrant further discussion.” 58 In justifying

its request for additional funding, HHSC explained that it cannot just walk away from

its lease obligations and thus “has limited flexibility to manage cost increases . . . for

leases.” 59

But as originally introduced in January 2023, the GAA devoted little to that

exceptional item, increasing the “Rent – Building” line-item less than $3 million

above HHSC’s baseline biennial request. 60

Around that same time, HHSC began vacating the Broadmoor Lease premises. The

GAA initially passed by the House maintained that initial lesser appropriation. 61

57 CR.270; 2 HHSC Legislative Appropriation Request 4.A at 57–58 (2022). 58 Budget 101 at 27. 59 2 HHSC Legislative Appropriation Request 4.A at 58. 60 See Tex. H.B. 1, 88th Leg., R.S., art. II, § 1 at II-43 (as introduced Jan. 18, 2023). 61 Id. art. II, § 1 at II-37 (as passed in the House Apr. 6, 2023).

13

But the next version of the GAA, reported by the Senate Finance Committee

and passed by the Senate, dramatically increased HHSC’s appropriation for the

“Rent – Building” line-item by more than $25 million across the biennium. 62

The GAA adopted by the Legislature on May 27 and signed by Governor Abbott in

mid-June maintained that level and also added another $1 billion to HHSC’s biennial

total. 63

According to HHSC’s Chief Financial Officer, HHSC had a “ʻvery successful

session from a funding perspective.’” 64

HHSC implausibly claims poverty and the Commission attempts to terminate

When it came to the Broadmoor Lease, however, the Legislature’s generosity

put HHSC and the Commission in a bind. Having jumped the gun and prematurely

62 Id. art. II, § 1 at II-37 (as passed in the Senate Apr. 17, 2023). 63 Id. art. II, § 1 at II-38 (as adopted May 27, 2023); Act of May 27, 2023, 88th Leg., R.S., ch. 1170 § 1, art. II sec. 1 at II-38. 64 CR.272–73 (citation omitted).

14

vacated the Broadmoor Lease premises, they faced the prospect of explaining to the

Legislature and the public why HHSC was paying rent for an empty building. The

solution: HHSC would claim lack of appropriation to get out of the Lease, which the

Commission—equally culpable for the fiasco given its supervisory role over leased

property—obliged, despite the obvious impossibility of HHSC’s claimed poverty.

On May 31, an HHSC staffer filled out an online space request form that “di-

rected the Texas Facilities Commission to terminate the [Broadmoor] Lease due to

the non-availability of money, either appropriated by the legislature or funded by

grants, to pay for the leased premises located at 11501 Burnet Road, Austin, Texas.” 65

But HHSC’s claimed “non-availability of money” was unbelievable on its face. The

space request represented that HHSC had money to pay the lease’s rent for the re-

maining three months of the then-current biennium. 66 And the May 31 request came

both before anyone knew the final form of the forthcoming biennium’s GAA (because

Governor Abbott had yet to sign the law) and after the Legislature adopted a GAA

that appropriated HHSC hundreds of millions for rent.

Even so, less than 24 hours later, Commission Executive Director Mike Novak

sent Broadmoor notice purporting to the terminate the Broadmoor Lease effective at

the end of the 2022–23 biennium. CR.320. In that notice, Novak repeated the space

request form’s direction “that rent will not be certified for the biennium beginning

65 CR.317.

66 CR.308.

15

September 1, 2023.” 67 Yet six days later, the Commission requested that HHSC

“certify[] that funds will be available for” the Broadmoor Lease during the next

(2024–25) biennium. 68

On July 27, 2023, HHSC’s Deputy Executive Commissioner Rolland Niles

responded. 69 Niles refused the Commission’s request to certify the availability of

funds for the Broadmoor Lease. 70 But Niles was careful not to falsely certify that

funding was unavailable. To avoid falsely certifying deficient funding, Niles instead

misleadingly created a list of leases that omitted the Broadmoor Lease, and certified

only that funds were available for that incomplete list. 71 Confirming that HHSC’s ear-

lier, premature assertion that it lacked funds was false, Niles acknowledged that

HHSC’s other annual lease obligations amounted to only $93,767,377.36—$20 mil-

lion less than what the GAA appropriated for “Rent – Building.” 72 That same day,

and despite Niles’s letter proving that HHSC never lacked funds, the Commission’s

general counsel papered an internal memo to Novak purporting to justify Novak’s

premature and unjustified attempt to terminate the Broadmoor Lease. 73

67 CR.320. 68 CR.323. 69 CR.330. 70 CR.330. 71 CR.330. 72 CR.330. Niles was almost spot on. By the end of fiscal year 2024, HHSC had spent $95 million on leases. HHSC, Monthly Financial Report for Appropriation Year 2024 at 16 (Oct. 3, 2024), https://tinyurl.com/53j57bt2. 73 CR.340.

16

C. Procedural history

Broadmoor sued the State Entities under breach of contract and the state offi-

cials under an ultra vires theory. 74 Broadmoor’s live petition pleads the details of the

Broadmoor Lease, including its design and construction requirements. 75 The petition

claims the State Entities breached the lease by attempting to terminate the lease out-

side the lease’s terms and by failing to pay rent due. 76 The petition further pleads that

all conditions precedent were satisfied. 77 The petition also pleads that the state offi-

cials’ acts and refusals to act were contrary the law. 78 The petition seeks damages

from the State Entities for the breach, prospective mandatory and prohibitive injunc-

tive relief against the officials, and declaratory judgment that the 88th Texas Legisla-

ture appropriated sufficient funds to pay rent under the Broadmoor Lease for the

2024-2025 biennium. 79

The Government answered, making a general denial, and raising jurisdictional

defenses. 80 It subsequently filed a plea to the jurisdiction challenging the sufficiency

of Broadmoor’s pleadings but offering no evidence to negate those pleadings. 81 The

74 CR.264–80. 75 CR.268–69. 76 CR.274–75. 77 CR.275. 78 CR.273–76. 79 CR.278. 80 CR.348–50. 81 CR.374–412.

17

district court granted the plea to the jurisdiction in part. 82 The Government ap-

pealed.

Standard of Review

This Court reviews a decision on a plea to the jurisdiction de novo. State v.

City of San Marcos, 2025 WL 1142065, at *4 (Tex. App.—15th Dist. 2025, no pet. h.).

A plea to the jurisdiction is decided on the pleadings unless the defendant presents

evidence looking to negate a plaintiff’s sufficient pleading. Id. To evaluate “whether

the facts alleged affirmatively demonstrate the court’s jurisdiction,” the court con-

strues pleadings “liberally” with an eye towards the “plaintiff’s intent.” City of Hous.

v. Hous. Mun. Emps. Pension Sys., 549 S.W.3d 566, 575 (Tex. 2018). If the pleadings

are deficient but don’t negate jurisdiction, the Court will remand for repleading. See

San Marcos, 2025 WL 1142065, at *11. And to negate sufficient pleadings with evi-

dence, the defendant must satisfy the same burdens as with a traditional motion for

summary judgment. Id. at *4.

82 CR.611. The district court dismissed as defendants the Commissioner of HHSC and the Comptroller . Id.

18

Summary of the Argument

Sovereign immunity is not an obstacle to Broadmoor’s breach of contract

claim. In Chapter 114, 83 the Legislature expressly waived sovereign immunity for

breach of contract claims arising from state contracts for construction and related

services. This suit meets all Chapter 114’s demands. A state agency (one or more of

the State Entities) entered into the Broadmoor Lease. The lease is a contract subject

to Chapter 114 because it includes essential terms for providing a host of services to

the State Entities. Broadmoor claims a breach of an express provision of the lease—

the lease’s obligation to pay rent. And among the services Broadmoor provided in

exchange for rent was construction of the leased premises.

Sovereign immunity is not an obstacle to Broadmoor’s other claims either.

Each comes down to math, which no official has discretion to botch. HHSC has al-

ways had money to pay the lease’s rent. That means Novak had no authority to at-

tempt to terminate the lease for lack of rent money and Niles shirked his ministerial

duty to certify that rent money was available. And the prospective injunctive and de-

claratory relief Broadmoor requests are the standard means to bring officials like No-

vak and Niles back into compliance with state law.

The Government’s attacks all miss their mark because each jumbles up statu-

tory text, ignores the lease’s terms and governing statutes, or conflates important

legal concepts. A faithful application of the law shows the district court got it right.

83 Throughout this brief, “Chapter 114” refers to Civil Practice & Remedies Code Chapter 114.

19

Argument

The Court should affirm because Broadmoor’s allegations show that sovereign

immunity is waived for its breach claim and does not apply to its ultra vires and de-

claratory judgment claims.

I. Chapter 114’s Waiver of Sovereign Immunity Encompasses Broadmoor’s Breach Claim.

Sovereign immunity waivers must be clear and express. Tex. Gov’t Code

§ 311.034. Chapter 114 fits that bill:

§ 114.003. Waiver of Immunity to Suit for Certain Claims A state agency that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this chapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of an express provision of the contract, subject to the terms and conditions of this chapter.

With the clear-statement rule satisfied, this Court discerns the waiver’s scope

like it would any other statute. See Pepper Lawson Horizon Int’l Grp. v. Tex. S. Univ.,

669 S.W.3d 205, 210–11 (Tex. 2023); contra Br.23 (“Any ambiguity in language

should be resolved in favor of retaining immunity for the State of Texas, as well as its

agencies and officials.”). Just as “this Court must not promote profligacy by careless

construction,” “[n]either should it as a self-constituted guardian of the Treasury im-

port [sovereign] immunity back into a statute designed to limit it.” Indian Towing v.

United States, 350 U.S. 61, 69 (1955).

20

Evaluating whether Broadmoor’s “breach-of-contract allegations . . . fall

within the scope of the express statutory waiver,” Pepper Lawson, 669 S.W.3d at 210–

11, requires answering four questions posed by Section 114.003’s text:

1. Did a state agency enter into the Broadmoor Lease as authorized by statute? 2. Is the Broadmoor Lease a contract subject to Chapter 114? 3. Does Broadmoor allege a breach of an express provision of the Broadmoor Lease? 4. Do any of Chapter 114’s terms and conditions take Broadmoor’s claim outside the waiver?

The answers are yes to each of the first three questions, and no to the fourth. Sover-

eign immunity is therefore no obstacle to Broadmoor’s breach claim.

A. A state agency entered into the Broadmoor Lease as authorized by law.

Chapter 114 defines “state agency.” The Commission is a “state agency” as

defined; the Commission was authorized to enter into the Broadmoor Lease; and the

Commission entered into the Broadmoor Lease. The Government’s contrary argu-

ment turns a blind eye to plain meaning and to the nature of relationship among the

State Entities and between the State Entities and Broadmoor. However conceived, a

“state agency” was authorized to and did enter into the Broadmoor Lease.

1. The Commission entered into the Broadmoor Lease as authorized.

The Commission is a “state agency” as defined in Chapter 114 because it’s a

“commission . . . that is in any branch of state government and . . . is created by . . . a

21

statute of this state.” Tex. Civ. Prac. & Rem. Code § 114.001(3); see Tex. Gov’t Code

§ 2152.001 (“The Texas Facilities Commission is an agency of the state.”).

The Government Code authorizes the Commission to enter into leases like the

Broadmoor Lease. The Commission’s “powers and duties” include the “lease

of . . . property.” Tex. Gov’t Code § 2151.004(c).

And the Commission entered into the Broadmoor Lease. As HHSC observed

in its appropriation request: “Lease contracts are entered into by [the] Texas Fa-

cilit[ies] Commission (TFC) with lessors on behalf of occupying agencies. . . . TFC

enters into lease contracts in good faith on behalf of state agencies.” 2 HHSC Leg-

islative Appropriation Request 4.A at 58 (2022). The Commission’s

Deputy Executive Director for Planning and Real Estate Management executed the

Broadmoor Lease. CR.289. 84 And the lease was expressly made “contingent upon

the majority approval by a quorum of the Commission members of the Texas Facili-

ties Commission.” CR.282–83.

Chapter 2167 85—which is inherently part of the lease, see, e.g., City of Hous. v.

Williams, 353 S.W.3d 128, 141 (2011)—repeatedly makes clear that it’s the Commis-

sion that enters leases (all emphases added):

84 Cf., e.g., DeLoach v. Lorillard Tobacco Co., 391 F.3d 551, 560 (4th Cir. 2004) (“ʻenters into’ equates with ʻexecutes’”); NLRB. v. Int’l Bhd. of Elec. Workers AFL-CIO, 405 F.2d 159, 164 (9th Cir. 1968) (“[T]he phrase ʻto enter into’ as used in the section included the reaffirmation of an existing agreement as well as its execution initially.”). 85 Throughout this brief, “Chapter 2167” refers to Texas Government Code Chapter 2167.

22

• “In leasing space under this chapter, the commission shall, whenever possible , enter into a lease contract that allows for subleasing space to a child care provider.” Tex. Gov’t Code § 2167.104(f ).

• “The commission may not enter a lease contract under this chapter unless it complies with the architectural barriers law . . . .” Id. § 2167.006(a).

• The commission may delegate to a state agency, including an institution of higher education, the authority to enter into lease contracts for space . . . .” Id. § 2167.005(a).

See also id. § 2167.055(a) (“In a contract by the commission for the lease of space un-

der this chapter . . . .” (emphasis added)); id. § 2167.054(a) (“The commission may

lease space using competitive sealed proposals.” (emphasis added)).

2. The Government misreads the law and the lease.

The Government doesn’t dispute that the Commission is a “state agency.” It

insists, however, that only the State was authorized to and did enter into the lease,

because the lease names the State as “Lessee.” Br.24–28. But the Government

misses the dispositive provisions quoted in the prior section. It also misinterprets the

statutory and lease provisions on which its arguments depend. And even looking only

to the State as lessee, Chapter 114’s first requirement is met.

a. Government Code § 2167.055 confirms the Commission entered into the Broadmoor Lease.

The Government isolates one subsection of Chapter 2167 that supposedly sup-

ports its argument that no state agency entered into the lease. The Government

points to § 2167.055, which sets forth necessary parameters for any lease of space.

Br.25–26. It seizes on one parameter: that the “state . . . is the lessee.” Tex. Gov’t

23

Code § 2167.055(a); Br.25–26. But the State’s status as lessee doesn’t mean—con-

trary to numerous provisions—that the Commission doesn’t enter into leases and

didn’t enter into the Broadmoor Lease.

Read in full, § 2167.055(a) removes any possible doubt that the Commission

entered into the lease. It reads, “In a contract by the commission for the lease of space

under this chapter, the state, acting through the commission, is the lessee” (emphasis

added). The Broadmoor Lease—“a contract . . . for lease of space”—was “by the

commission.” The word “by” means “through the direct agency of,” as in “a poem

written ∼ Keats.” By (prep., sense 4.b), Webster’s Third New Interna-

tional Dictionary 306–07 (2002 ed.) (“Webster’s Third”). The text

makes plain that the lease is the Commission’s contract.

Still more, the lessee isn’t simply the State, but the State “acting through the

commission.” Tex. Gov’t Code § 2167.055(a). “Through the commission” estab-

lishes that the Commission is the means of leasing. See Through (prep., sense 2.a(1)),

Webster’s Third 2385 (“by means of : by the help or agency of”). At a mini-

mum, then, § 2167.055(a) makes the Commission the State’s agent. And agents reg-

ularly “enter into” contracts for their principals. See, e.g., Restatement (Sec-

ond) of Agency § 154 cmt. b (1958) (“determining whether the principal or the

agent becomes a party to a contract entered into by the agent for his principal”) (em-

phasis added)); 12 Williston on Contracts § 35:39 (4th ed.) (discussing

“[t]he liability of an agent that enters into a contract” (emphasis added)); Lake v.

24

Premier Transp., 246 S.W.3d 167, 171 (Tex. App.—Tyler 2007, no pet.) (“In order for

an agent to avoid personal liability on a contract entered into by the agent on behalf of

the principal, the agent must disclose . . . .” (emphasis added)).

To be sure, an agent who enters into a contract on behalf of a disclosed princi-

pal usually isn’t liable for any breach. But nothing in Chapter 114 ties the waiver of

sovereign immunity to the liability or contracting status of the “state agency” that

“enters into a contract subject to the chapter.” Tex. Gov’t Code § 114.003.

The Government gets tripped up on this last point. It repeatedly misframes

Chapter 114’s waiver of sovereign immunity as tied to the defendant’s identity. The

Government proposes, for instance, “The chapter explicitly ʻwaives immunity’ for a

ʻstate agency that is authorized by statute or the constitution to enter into a contract,

and so “this Court must determine whether the specific state [Appellants]—the

State, TFC, and HHSC—are state agencies subject to the waiver.” Br.24, 26 (emphases

added); see also Br.28 (“Here, there is . . . a question of whether a clear and unambig-

uous immunity waiver exists against the State, HHSC, and TFC (it does not)”).

That’s not what Chapter 114 says.

Chapter 114’s waiver is for “adjudicating a claim”—“a claim for breach of an

express provision of the contract”—without respect to whom the claim is made

against. Tex. Civ. Prac. & Rem. Code § 114.003 (emphasis added). If Chapter 114’s

requirements are satisfied—including “a state agency . . . enter[ing] into a contract

subject to this chapter”—there’s no sovereign immunity for any government

25

defendant sued on that claim. Id. To hold otherwise would artificially and improperly

narrow Chapter 114’s express waiver. See Youngkin v. Hines, 546 S.W.3d 675, 681

(Tex. 2018) (rejecting “attempts to add a requirement to [a] statute that does not

exist in its text” because “injecting such a requirement into the [statute] would be

disloyal to its enacted text”).

At any rate, the Commission—and HHSC—entered into the Broadmoor

Lease as lessees.

b. The “State” as lessee includes the Commission and HHSC.

Even if “enters into” meant become a party, the Commission and HHSC are

state agencies that meet that requirement here.

“The State” is the lessee, but “all the several agencies of government . . . col-

lectively constitute the government of this state.” Tex. Civ. Prac. & Rem. Code

§ 101.001(3)(A).86 Thus, a legal instrument denoting “the State” may also include

constituent parts of state government. For example, in Monsanto Co. v. Cornerstones

Municipal Utility District, the Supreme Court found that an “ʻaction of this state’”

as used in a statute encompassed an action by any government “entity having

statewide jurisdiction.” 865 S.W.2d 937, 939–40 (Tex. 1993) (quoting Tex. Civ. Prac.

& Rem. Code § 16.061(a) (emphasis added)).

86 That’s why we’re here arguing about sovereign immunity at all. See, e.g., Herring v. Hous. Nat’l Exch. Bank, 269 S.W. 1031, 1033 (Tex. 1925) (“The board of prison commissioners . . . is purely an agency of government . . . . If it can be sued without legislative consent, it being purely a governmental agency or department then the government, the sovereignty, can be so sued. There is no difference.”).

26

Likewise, the law often requires some legal act be in the name of the State

while some other legal entity is also a party in interest. See, e.g., In re Sanofi-Aventis

U.S., 2025 WL 920111, at *2–3 (Tex. App.—15th Dist. 2025, no pet. h.) (discussing

qui tam suits); Bullock v. Tex. Skating Ass’n, 583 S.W.2d 888, 894 (Tex. App.—Austin

1979, writ ref’d n.r.e.) (“[T]the Comptroller and the Treasurer are jurisdictional par-

ties, although the State of Texas is the actual party in suit to recover taxes.”); Beau-

mont, Sour Lake & W. Ry. v. State, 173 S.W. 641, 642 (Tex. App.—Galveston 1914, no

writ) (where statute directed recovery to county coffers, State was a nominal party);

Tex. Att’y Gen. Op. No. MW-52 (1979) (“In prosecutions involving violations of or-

dinances only, the state is not the real party in interest, but is only a nominal party.”);

Tex. Att’y Gen. Op. No. V-1147 (1951) (similar).

Just like a qui tam relator is also party to a suit brought on behalf of the State,

see In re Sanofi-Aventis, 2025 WL 920111, at *2, so too may the State’s constituent

agencies be party to a contract for the State, depending on the governing statutes and

terms of the contract.

i. Chapter 2167 shows the Commission and HHSC may and did enter into the lease relationship.

Section 2167.055(a) contemplates that the Commission is included as lessee.

That subsection does not say that the State qua State is the lessee. Contra Br. 25. Ra-

ther, it says, “the state, acting through the commission, is the lessee” (emphasis added);

see CR.282 (The State “acting by and through the Texas Facilities Commission”).

There’s no reason for that italicized language—the State always acts and can only

27

act through its constituent parts—unless the Legislature intended to make clear that

the Commission is equally a part of the State’s lease.

Section 2167.055(f ) confirms the Commission is a lessee as much as the

“State”: “The obligation . . . of the commission to accept the space is binding on the

execution of the lease contract” (emphases added). The lease contract thus binds the

Commission to accept the space, just like one would expect if the Commission were

lessee.

Other provisions show that the tenant agency is also in the lease relationship.

Sticking with § 2167.055, subsection (e) shows the importance of the agency tenant

to the lease relationship—it provides: “A lease contract is contingent on the availa-

bility of money appropriated by the legislature to pay for the lease.” And there’s no

dispute that when the legislature appropriates rent money, it does so through the

agency occupying the leased space—the tenant agency pays the “Rent – Building.”

See supra, pp.11–12.

Thus, when the Commission executes a lease, it “lease[s] space for a state

agency,” who must “verif[y] it has money available to pay for the lease.” Tex. Gov’t

Code § 2167.002(a) (emphasis added). 87 And because the leasing agency is financially

responsible for space leased on its behalf, it must “certify to the commission, at least

60 days before the beginning of each fiscal biennium during the lease term, that

“State agency” as used in Chapter 2167 includes only the State’s constituent entities. See Tex. 87

Gov’t Code § 2151.002.

28

money is available to pay for the lease until the end of the next fiscal biennium.” Id.

§ 2167.101.

And if the Commission bids out a lease, it “shall send to the leasing state

agency” the bids for “the leasing state agency’s recommendation.” Id. § 2167.053 (em-

phases added). Illustrating that the Commission and the tenant agency are in the

lease together as the “State,” they must both agree on the space, and if they can’t,

the Governor resolves the dispute. See id.

ii. Landlord-tenant law and the Broadmoor Lease’s terms show the same.

The Broadmoor Lease’s terms parallel Chapter 2167 and make plain that

HHSC and the Commission were included as “lessee.”

“[I]n a lease arrangement, the lessor transfers possession and control of the

leased premises to the tenant.” City of Irving v. Seppy, 301 S.W.3d 435, 446 (Tex.

App.—Dallas 2009, no pet.). Under the relevant statutes, the tenant agency has pos-

session of the premises in a state lease and the Commission has control. See Tex.

Gov’t Code § 2167.101 (referring to “[a] state agency occupying space leased under

this chapter”); id. § 2167.104 (referring to “the occupying agency” and the “occu-

pying state agency”); id. § 2151.004(c) (providing that the Commission has “charge

and control of state buildings, grounds, or property”). 88

88 Cf. O’Connor’s Texas Causes of Action Ch. 24-A § 3 (2025 ed.) (“If the agency that executed the contract was different from the one that benefited from and later breached the contract (e.g., the Texas [Facilities] Commission executes lease agreements for other agencies), the petition

29

The Broadmoor Lease’s terms are more the same. Showing HHSC’s posses-

sion, the lease provides the leased space will be “occupied by the Health and Human

Services Commission – OIG.” CR.282. And the lease term amendment was made

“on behalf of the occupying agency, the Health and Human Services Commission,”

not the “State.” CR.312–14. Showing the Commission’s control, the lease says the

“Commission” (not the “State”) “may . . . sublet” the premises “in whole or in

part.” CR.283. Of course, “ʻ[s]ubletting’ is a demise by a lessee of the whole or part

of the premises for a portion of the unexpired term.” 49 Tex. Jur. 3d Landlord

and Tenant § 237 (emphasis added).

Even more, many parts of the Commission’s form lease make no sense unless

the tenant agency and the Commission are under the “lessee” umbrella (all italicized

emphases added):

• “Lessee may bring on the leased Premises any and all furniture, fixtures and equipment reasonably necessary for the efficient exercise of Lessee’s governmental responsibilities . . . .” CR.284.

• “Any signs necessary to indicate Lessee’s name, location and governmental purpose shall be prepared and installed . . . .” CR.285; see also CR.296 (“[E]xterior sign. . . shall read, Office of Inspector General. . . . Interior signage will be more specific, i.e. Health and Human Services Commission, Department of Aging and Disability Services, or Department of Family and Protective Services and so on.”)

• “Lessee may terminate this lease without liability to the State of Texas and seek other leased space if . . . .” CR.286.

should also identify the breaching agency as the defendant and name its executive director or executive board as the agent for service.”).

30

• “This agreement . . . shall inure to the benefit of and be binding upon . . . the successor in office of Lessee.” CR.286.

• “Lessor acknowledges that . . . Lessee is an agency of the State of Texas . . . .”

CR.287.

• “Lessor further acknowledges that, as an agency of the State of Texas, Lessee has only such authority as is granted to Lessee by state law . . . .” CR.287.

The Government recognizes that its cramped take on the scope of the land-

lord-tenant relationship here is irreconcilable with the lease’s terms. In a footnote, it

asks the Court to ignore “inconsistent . . . usage” of “Lessee.” Br.25 n.3. But

“[i]nstead of treating” the lease’s terms “as conflicting,” we must “ask[] whether

they can be harmonized within the context and framework of the entire” lease, “giv-

ing effect to” all terms. Pub. Util. Comm’n v. Luminant Energy, 691 S.W.3d 448, 462

(Tex. 2024) (footnotes omitted)); see, e.g., NP Anderson Cotton Exch. v. Potter, 230

S.W.3d 457, 463 (Tex. App.—Forth Worth 2007, no pet.) (same, for lease). The

lease’s terms may be harmonized with each other and the relevant statutes by treat-

ing the “State” as lessee as including the Commission and the tenant agency.

c. In any event, the State as lessee is a “state agency” as defined.

The Government insists on a narrow conception of the “State” as lessee be-

cause it thinks the “State . . . is not a ʻstate agency’ under the definition of Section

114.001(3).” Br.25. It’s mistaken. Even accepting the Government’ unnatural inter-

pretation of the lease and Chapter 2167, Chapter 114’s first requirement is still satis-

fied.

31

The State “acting though the Commission” is a state agency. If it weren’t, then

no constituent agency would be, because each constituent agency is the means

through which the “State” acts. See, e.g., Br.20 (insisting that “any argument related

to [an HHSC spending] decision is Appellee’s improper attempt to control the

State”). The State, acting through the Commission, as lessee fits comfortably within

Chapter 114’s broad conception of “state agency.”

So too does the State alone. The Legislature defined “state agency” broadly

as including “an . . . entity that is in any branch of state government and that is cre-

ated by the constitution.” “In the absence of clear statutory language to the contrary,

we presume that when the Legislature chooses broad language, the Legislature in-

tended it to have equally broad applicability.” Rogers v. Bagley, 623 S.W.3d 343, 353

(Tex. 2021) (quotation marks omitted). The State as lessee is an “entity that is in any

branch of state government” and “is created by the constitution.” Tex. Civ. Prac. &

Rem. Code § 114.001(3).

The State alone as lessee is an entity. The Government concedes that the State

as lessee is an “entity legally capable of entering into a lease.” Br.25 (emphasis

added). If the State can enter into contracts, it’s a “legal entity”: “A body, other than

a natural person, that can function legally, sue or be sued, and make decisions through

agents.” Legal Entity, Black’s Law Dictionary (10th ed. 2014); see 5 Wil-

liston on Contracts § 9:1 (4th ed.) (“The formation of contracts requires the

existence of parties capable of contracting . . . .”).

32

The State alone as lessee “is in any branch of state government.” In the af-

firmative context, as here, “any” “means ʻevery’ or ʻall.’” Any, Garner’s Mod-

ern English Usage (4th ed. 2017); Kirby Lake Dev. v. Clear Lake City Water

Auth., 320 S.W.3d 829, 840 (Tex. 2010) (“Texas courts defining ʻany’ have generally

interpreted it to mean ʻevery.’”). The State as lessee is the state government, 89 which

is in every branch. See Tex. Const. art. II, § 1 (“The powers of the Government of

the State of Texas shall be divided into three distinct departments, . . . Legisla-

tive . . . , . . . Executive . . . , and . . . Judicial.”).

And the State alone as lessee is created by the Constitution. See id; see also id.

art. I, § 1 (“Texas is a free and independent State . . . and the maintenance of our free

institutions . . . depend upon the preservation of the right of local self-govern-

ment . . . .”), id. art. I, § 2 (“[T]he people of Texas . . . have at all times the inalienable

right to alter, reform or abolish their government in such manner as they may think

expedient.”).

★ ★ ★

However conceived, with the execution of the Broadmoor Lease, a “state

agency that is authorized by statute or the constitution to enter into a contract . . . en-

ter[d] into a contract.” Tex. Civ. Prac. & Rem. Code § 114.003.

89 “State” has several possible meanings depending on context, including “the government under which the people live.” Texas v. White, 74 U.S. 700, 720 (1868), overruled on other grounds by Morgan v. United States, 113 U.S. 476 (1885). In the context of state leases, provided for in the Government Code and for space occupied by governmental entities, the “State” is the state government.

33

B. The Broadmoor Lease is “a contract subject to this chapter.”

The contract the State Entities entered into is “a contract subject to this chap-

ter,” which “means a written contract stating the essential terms of the agreement

for providing goods or services to the state agency that is properly executed on behalf

of the state agency.” Tex. Civ. Prac. & Rem. Code § 114.001(3).

The lease is indisputably written, indisputably a contract, and indisputably

states the essential terms for providing services to each of the State Entities. Indeed,

it is a “full-service lease”—“in which the lessor agrees to pay all maintenance ex-

penses, insurance premiums, and property taxes.” Lease, Black’s Law Dic-

tionary (emphasis altered); see CR.284 (taxes); CR.287 (insurance); CR.293–94

(maintenance). The lease additionally obligates Broadmoor to provide design and

construction services. E.g., CR.288 (“Lessor shall design . . . and construct . . . .”);

see Hoppenstein Props. v. McLennan Cnty. Appraisal Dist., 341 S.W.3d 16, 20 (Tex.

App.—Waco 2010, pet. denied) (holding lease that included construction services

satisfied identical definition).

The Government offers two reasons why the services called for in the lease are

insufficient; neither reason has merit.

One, the Government argues that “[a]ny alleged ʻservices’ at issue here, such

as . . . maintaining the building so that it remains inhabitable, are indirect and atten-

uated, at best, and are not the type of ʻgoods and services’ contemplated by Chapter

114’s waiver of immunity.” Br.29. The Government never explains what it means by

34

“indirect and attenuated” services. No matter, because the “statute is . . . written

expansively to cover agreements providing services, so long as services are provided

ʻto’ the governmental entity.” Byrdson Servs. v. S. E. Tex. Reg’l Plan. Comm’n, 516

S.W.3d 483, 488 (Tex. 2016) (interpreting an identically worded definition). Nothing

in the lease suggests Broadmoor’s services weren’t provided to one or more of the

State Entities.

Two, the Government bizarrely claims that the lease doesn’t provide for pay-

ment of Broadmoor’s services under the lease. Br.29-30. Broadmoor isn’t a charity.

It performs the services under the lease for the same consideration sought by all les-

sors: Rent. Thus, Broadmoor had no right to rent until “120 days after . . . the lease-

hold improvements shown on the approved construction plans . . . are substantially

complete.” CR.285. If Broadmoor fails to “strict[ly] perform[] any of the . . . obliga-

tions imposed on Lessor by this lease,” the State Entities “may withhold payment of

rent from Lessor, until such time as the violations have been corrected or the Lessee

may correct all or any part of the violations and deduct the cost from rentals due the

Lessor.” CR.286 (emphasis added). And the State Entities agreed to extend the lease

term to October 31, 2026 expressly in consideration for Broadmoor’s additional

“leasehold improvements.” CR.314.

Moving on, the Government doesn’t dispute that the lease was properly exe-

cuted. The Commission’s Director of Planning and Real Estate Management exe-

cuted the lease on the Commission’s behalf, and the Government admits that official

35

was authorized to do so as “representative of the” Commission. CR.428. In turn, the

Commission executed the lease on behalf of the State, including HHSC. See, e.g.,

CR.282; CR.314 (“for and on behalf of the occupying agency, the Health and Human

Services Commission”); Tex. Gov’t Code § 2167.0021 (“The commission shall

lease space for the use of a state agency . . . .”); see also CR.320 (attempting to termi-

nate the lease “on behalf of the occupying agency, the Health and Human Services

Commission—Office of Inspector General”).

C. Broadmoor alleges the breach of an express provision of the Broadmoor Lease.

The Government itself identifies an express provision that Broadmoor claims

was breached: “ʻThe Lessee agrees to pay Lessor . . . Monthly Rent.’” Br.31 (quoting

CR.283); see CR.274 (alleging breach “by failing [to] pay rent when due under the

Broadmoor Lease.”). Yet it insists Broadmoor’s claim is insufficient “because the

Lease explicitly permits early termination of the lease.” Br.31. The Government’s

merits argument is premature and wrong.

1. Broadmoor doesn’t need to prove a breach to come within Chapter 114’s waiver of sovereign immunity.

The Government maintains that, because the lease provides “that the State of

Texas or the executive agency may cease funding the lease, there is no explicit provi-

sion that Appellee can point to that has been breached.” Br.32. The Government’s

argument has nothing to do with whether Broadmoor’s petition includes “a claim

for breach of an express provision of the” lease. Tex. Civ. Prac. & Rem. Code

36

§ 114.003. 90 That argument goes only to whether Broadmoor’s claim will succeed—

but asking the question concedes that Broadmoor’s claim exists, which is all the stat-

ute requires. The Government correctly admits elsewhere that “a plaintiff must

point to an express provision that was allegedly breached.” Br.31 n.6. Broadmoor has

done that.

The Government goes astray because it confuses a claim’s existence with its

ultimate merits. As the Supreme Court cautioned while applying the same statute,

“a plea to the jurisdiction does not authorize an inquiry so far into the substance of

the claims that plaintiffs would be required to put on their case to establish jurisdic-

tion.” Pepper Lawson, 669 S.W.3d at 211. Some waivers—like in the Tort Claims

Act—are limited “to the extent of liability.” Tex. Civ. Prac. & Rem. Code

§ 101.025(a). “In contrast, any waiver of sovereign immunity here is predicated not

on the viability of the litigant’s claim on the merits,” Oncor Elec. Delivery v. Wilbarger

Cnty. Appraisal Dist., 691 S.W.3d 890, 906 (Tex. 2024), but the nature of the claim

(breach of an express provision). After all, the waiver is for adjudicating a claim; that

is, deciding its merits. So the waiver logically cannot also turn on the claim’s merits.

90 Their argument that, “[b]ecause Appellee has no contractual relationship with HHSC or TFC for which to assert a breach of claim, Appellee cannot assert a claim under Chapter 114 against HHSC or TFC and there is no waiver of immunity,” Br.28, is misplaced for the same reason.

37

2. The State Entities breached in any event.

The Government’s argument fails on its own terms too—Broadmoor’s breach

claim is solid. The Government relies on the clause in the lease’s “Monthly Rental”

section providing that the lease is subject to ongoing appropriations:

MONTHLY RENTAL The Lessee agrees to pay Lessor a base Monthly Rent during the term of this lease . . . . This lease contract is made and entered into in accordance with and subject to the provisions of the Texas Constitution and the Texas Government Code, Title 10, Subtitle D, and is made contingent upon the continuation of the availability of money appropriated by the legislature to pay for the lease. In the event the Legislature or the Executive Branch of the State of Texas cease to fund the lease, or the agency ceases to exist . . . , then the Texas Facilities Commission . . . may terminate this lease.

CR.283; Br.31–32. That clause cannot defeat Broadmoor’s claim because the Gov-

ernment never pleaded—let alone proved—its application.

a. The Government failed to plead any condition subsequent.

The Government’s merits argument fails out of the gate because the subject-

to-appropriations clause is a condition subsequent that the Government must, but

did not, affirmatively plead.

A defendant must set out affirmative defenses in its answer, or else they aren’t

at issue. See Luther Transfer & Storage v. Walton, 296 S.W.2d 750, 754–55 (Tex. 1956).

The subject-to-appropriations clause is in the “Monthly Rental” section, and follows

the express agreement to pay rent. See Br.31. It thus sets forth a condition subsequent,

38

an event that excuses further performance. See Cmty. Health Sys. Prof’l Servs. v. Han-

sen, 525 S.W.3d 671, 682–83 (Tex. 2017). And “unlike a condition precedent,” a con-

dition subsequent “is an affirmative defense on which the defendant bears the burden

of proof.” City of Lancaster v. White Rock Com., 2018 WL 6716932, at *9 (Tex. App.—

Dallas 2018, pet. denied) (citing cases). 91

In an analogous situation, the Supreme Court held that—even if Chapter 114’s

waiver turned on a claim’s merits—it was error to rely on the supposed failure of a

condition precedent when the plaintiff pleaded that all conditions precedent have

been satisfied while the government defendant failed to specifically deny any condi-

tion precedent. Pepper Lawson, 669 S.W.3d at 212; see Tex. R. Civ. P. 54. So too here

it would be error to rely on the Government’s unpleaded affirmative defense.

b. Refusing to pay isn’t a lack of funding.

The Government also failed to prove the absence of continuing appropria-

tions. Indeed, the pleadings and evidence show the opposite. For fiscal year 2024, for

example, the Legislature appropriated HHSC $118 million for rent, yet HHSC spent

less than $100 million. See supra, p.15 & n.72. That 2024 delta alone is more than

enough to fund the Broadmoor Lease from fiscal year 2024 through expiration. And

HHSC isn’t planning to come close to the $119 million the Legislature appropriated

91 Even if appropriations were a condition precedent, Broadmoor pleaded that all conditions precedent were satisfied, and the Government’s answer didn’t specifically deny any condition precedent , so Broadmoor has no burden prove sufficient appropriations. See CR.275; CR.348–50; Tex. R. Civ. P. 54.

39

for rent in fiscal year 2025. See id. The Broadmoor Lease is fully funded, so the con-

dition subsequent hasn’t occurred.

Math isn’t on the Government’s side, so the Government insists HHSC could

trigger the subject-to-appropriations clause merely by refusing to pay:

The lease goes on to state that the Executive Branch of the State of Texas can cease to fund the lease at any time in its discretion . . . Because this provision is clear that the State of Texas or the executive agency may cease funding the lease, there is no explicit provision that Appellee can point to that has been breached.

Br.31-32 (emphasis added). That interpretation of the lease is implausible—conflict-

ing with text, context, and purpose.

The lease doesn’t anywhere “state that the Executive Branch of the State of

Texas can cease to fund the lease at any time in its discretion.” But even if it did, that

wouldn’t affect Broadmoor’s claim, because the Executive Branch hasn’t ceased

funding. HHSC’s refusal to pay rent is an expenditure decision, not a funding deci-

sion. See Fund (v., sense 1.b), Webster’s Third 921 (“to make provision for

meeting (a recurrent future liability) by accumulation of a fund”).

The better reading of the subject-to-appropriations clause is that (at a mini-

mum) if the GAA appropriates the agency responsible for rent sufficient funds under

the line item “Rent – Building” to cover all its lease expenses, the lease’s rent obli-

gation isn’t excused. The subject-to-appropriation clause distinguishes between

“pay[ing] for the lease” and “fund[ing] the lease”: Funding determines “the avail-

ability of money . . . to pay for the lease”; refusing to pay logically cannot affect the

40

availability of money to pay. CR.283; see also Tex. Gov’t Code § 2167.002(a)(2)

(“The commission may lease space for a state agency . . . if . . . the agency has veri-

fied it has money available to pay for the lease.”). And the clause distinguishes be-

tween the “Executive Branch” and the tenant “agency”—the Executive Branch

ceasing funding allows termination, but only an “agency ceas[ing] to exist” has that

effect. CR.283. The Government’s interpretation ignores these distinctions.

Its interpretation also ignores the clause’s structure, which highlights those

distinctions. The second main predicate segment in the clause’s first sentence sets

forth the contingency, making the lease “contingent upon the continuation of the

availability of money appropriated by the legislature to pay for the lease.” CR.283 (em-

phases added). The next sentence—the sentence the Government relies on—ex-

plains what happens when there’s no appropriated money available: “In the event

the Legislature or the Executive Branch of the State of Texas cease to fund the

lease . . . , then the Texas Facilities Commission . . . may terminate this lease.”

CR.283. The latter sentence cannot be divorced from the former. “Fund” is tied to

“availability of money appropriated by the legislature to pay for lease.” 92

That structure shows “the Executive Branch of the State of Texas ceas[ing] to

fund the lease” most plausibly refers to the Governor, not unelected bureaucrats.

The Governor is the only part of the Executive Branch that may affect the availability

92 If an “agency ceases to exist,” CR.283, there’s definitionally no appropriated money available for a lease to house that agency. Cf. Tex. Const. art. VIII, § 3 (“Taxes shall be levied and collected by general laws and for public purposes only.”).

41

of money appropriated by the legislature, through his line-item veto or budget execu-

tion authority. See supra, p.5. No other “executive agency,” Br.31–32, has discretion

to second-guess or obstruct the results of the legislative process. See supra, p.4; infra,

pp.60–61; see also GEO Grp. v. Hegar, 2025 WL 852414, at *3 (Tex. 2025) (adopting

interpretation “that best comports with the scope of the [agency]’s authority as part

of the executive branch”).

That more plausible interpretation has the added benefit of avoiding the anom-

aly that the Government’s implausible interpretation would create in the Commis-

sion’s form lease. The Government says the clause’s recognition that the Executive

Branch may cease funding means the tenant “executive agency may cease funding the

lease.” Br.32 (emphasis added). But the Commission’s form lease is for state agen-

cies outside the executive branch too: “the supreme court, the court of criminal ap-

peals, a court of appeals, or the Texas Judicial Council.” Tex. Gov’t Code

§ 2151.002(2) (defining “state agency”). There is no reasoned distinction between

executive and judicial agencies that would justify allowing the former discretion to

pay rent due but not the latter. The Government’s interpretation is nonsensical.

Purpose

“[I]f the language [of an instrument] is susceptible of two constructions, one

of which will carry out and the other defeat its manifest object, courts should apply

the former construction.” In re Dallas Cnty., 697 S.W.3d 142, 159 (Tex. 2024)

(cleaned up). Reading “In the event . . . Executive Branch of the State of Texas

42

cease[s] to fund” to allow the State Entities to terminate based on HHSC’s mere

refusal to pay would violate this principle.

The aim of subject-to-appropriations clauses is to “conform . . . contracts to

the requirements of Texas law” on appropriations and debt. City of Pflugerville v. Cap.

Metro. Transp. Auth., 123 S.W.3d 106, 110 (Tex. App.—Austin 2003, pet. denied).

They don’t give government entities “unbridled discretion to perform.” Id.; contra

Br.31–32. In fact, an agency has no power to simply refuse to pay for objects of ex-

pense for which the GAA appropriates money. See supra, p.4; infra, pp.60–61.

The clause’s text tracks that purpose. See 1 Tex. Admin. Code § 115.20 (ob-

serving that the clause tracks legal requirements). Its first sentence consists of two

main predicate segments both linked to the subject “This lease contract.” The sec-

ond is discussed above; the initial predicate introduces the contingency with crucial

context matching its constitutional purpose: “This lease contract is made and en-

tered into in accordance with and subject to the provisions of the Texas Constitution

and the Texas Government Code, Title 10, Subtitle D.” CR.283. 93 The attempted

lease termination too tracks that purpose. See CR.320 (“In accordance with Article

III, Section 49(a), of the Texas Constitution, Section 2167.055(e), Texas Government

Code . . . .”).

93 Texas Government Code, Title 10, Subtitle D likewise makes the lease contingent on appropriations for the same constitutional reasons.

43

The Government, however, cannot point to any “requirements of Texas law,”

Pflugerville, 123 S.W.3d at 110, that prevented HHSC from continuing to pay rent as

the lease required. Instead, the Government says, “at any time in its discretion . . .

the executive agency may cease funding the lease.” Br.31–32. That interpretation

would take the clause far beyond its evident purpose and allow an “unbridled discre-

tion to perform” at odds with the very purpose of contracting. Pflugerville, 123

S.W.3d at 110.

For these and other reasons to be set forth during the merits stage on remand,

HHSC’s refusal to pay rent as the lease expressly requires is a breach entitling Broad-

moor to damages.

D. None of Chapter 114’s terms and conditions take Broadmoor’s breach claim outside the waiver.

Finally, while Chapter 114 sets forth a handful of terms and conditions to

which its waiver is subject, none ousts Broadmoor’s claim. Broadmoor’s requested

relief doesn’t go outside Chapter 114’s limitations on adjudication awards. See Tex.

Civ. Prac. & Rem. Code § 114.004. Broadmoor hasn’t sued in federal court. See id.

§ 114.007. It hasn’t sued on a tort claim. See id. § 114.008. And Broadmoor isn’t an

agency employee. See id. § 114.009.

The only term or condition the Government invokes is § 114.002. See Br.31–

32.

44

§ 114.002. Applicability This chapter applies only to a claim for breach of a written contract for engineering , architectural, or construction services or for materials related to engineering , architectural, or construction services brought by a party to the written contract in which the amount in controversy is not less than $250,000, excluding penalties, costs, expenses, prejudgment interest, and attorney’s fees.

But Broadmoor’s claim is for breach of a written contract (the lease) to which Broad-

moor is party.

And the lease is “a written contract for engineering, architectural, or construc-

tion services.” A written contract for engineering, architectural, or construction ser-

vices is a written contract “to obtain” those services. For (prep., sense 2.g), Web-

ster’s Third 886. Through the lease, the State Entities obtained construction

services.

“A lease can include provisions addressing the parties’ respective responsibil-

ities for construction or renovation of the leased premises. These provisions are par-

ticularly common in commercial leases.” O’Connor’s Texas Forms * Real

Estate Ch. 2 § 4.8 (2025 ed.) (citation omitted). The lease obligates Broadmoor to

provide extensive construction services:

• “Lessor shall design, in consultation with Lessee and in accordance with the schedule for the Lease Requirements outlined in Exhibit B, and construct the additional 20,277 square feet commensurate with the room schedule, specifi- cations, and Exhibits outlined in this Lease”

• “SITE PLAN & CONCEPT FLOOR PLAN DRAWINGS (ʻSpace Plans’)

shall be provided by Lessor to Lessee upon the full execution of the lease.” CR.291;.

45

• “COMPLETED CONSTRUCTION PLANS (ʻConstruction Plans’) shall be provided by Lessor to Lessee 60 days from execution of the lease or earlier .” CR.291.

• “Lessor shall design, in consultation with Lessee, and construct the Premises based upon all of the specifications outlined in this Lease and Exhibits as well as the following criteria.” CR.307

Broadmoor spent millions complying with its obligations. CR.448 And in exchange

for an extension of the lease term, Broadmoor agreed to construct an additional

$560,000 in leasehold improvements described in multiple change orders. CR.314.

The Government ignores the plain meaning of the statute and the lease. It of-

fers a false dichotomy, contending “the contract is for a rental agreement for 122,123

square feet of office space, not engineering, architectural, construction services.”

Br.30. But “a contractual relationship can include both the granting of a property

interest and an agreement to provide goods or services.” Coinmach Corp. v. As-

penwood Apartment Corp., 417 S.W.3d 909, 925 (Tex. 2013). Commercial leases like

this often do, including construction services. See Hoppenstein Props., 341 S.W.3d at

20. And nothing in § 114.002 requires the written contract to be for only the listed

services.

Continuing to ignore the statute’s and the lease’s text, the Government com-

plains that Broadmoor “has not identified an express provision that was breached

that would fall within the limited categories (engineering, architectural, construction

services) and be in excess of $250,000.” Br.30–31. Broadmoor doesn’t need to: Noth-

ing in Chapter 114 limits the waiver to claims for breach of express “engineering,

46

architectural, construction services” provisions, which the Legislature could easily

have done if it wanted. Satisfying § 114.003’s conditions “waives sovereign immun-

ity to suit for the purpose of adjudicating a claim for breach of an express provision

of the contract,” without limitation. And “the contract” in § 114.003 is a “contract

subject to this chapter.” Tex. Civ. Prac. & Rem. Code § 114.003. And the definition

of “contract subject to this chapter” doesn’t even mention construction, etc. ser-

vices. See id. § 114.001(2).

At any rate, as already shown, Broadmoor sues on the lease’s express rent ob-

ligation, which was expressly contingent on Broadmoor performing design and con-

struction services. See supra, p.34. And Broadmoor claims the State Entities breached

both by trying to terminate the lease and refusing to pay rent. Even on the Govern-

ment’s reading, Chapter 114 waives sovereign immunity to adjudicate that claim.

★★★★★

Every requirement of Chapter 114 is satisfied. The district court may adjudi-

cate Broadmoor’s breach claim against the State Entities.

II. Broadmoor Adequately Pleaded Ultra Vires Claims.

Just because a governmental entity “chooses not to honor its agreements, its

obligations under the statute do not simply disappear.” City of Hous., 549 S.W.3d at

580. The actions that ultimately resulted in the State Entities’ breach were per-

formed by state officials acting without authority and in abdication of their ministerial

duties. And if the district court prospectively requires those officials to act only

47

within their authority and perform their ministerial duties, much of the damage

caused by the State Entities’ breach hopefully will be undone. That is, if the officials

act according to law, they will remove the illegal obstacles to expending the Legisla-

ture’s appropriation for the purpose the Legislature directed—payment of HHSC’s

rental obligations.

For those reasons, Broadmoor’s claims for injunctive relief against state offi-

cials Mike Novak—the Commission’s Executive Director—and Rolland Niles—

HHSC’s Deputy Executive Commissioner for System Support Services—to pro-

spectively comply with the law fall within the ultra vires exception to sovereign im-

munity. The Government’s attacks on Broadmoor’s ultra vires claims falter in the

face of statutory plain meaning, binding Supreme Court precedent, and constitu-

tional limits on agency power.

A. Broadmoor pleaded ultra vires acts by Novak and Niles.

The “basis for the ultra vires rule is that a government official is not following

the law, so that immunity is not implicated.” City of El Paso v. Heinrich, 284 S.W.3d

366, 374 (Tex. 2009). The Government says this suit attempts to control the State,

Br.48, but “ʻultra vires suits do not attempt to exert control over the state—they at-

tempt to reassert the control of the state’ over . . . its officials.” Phillips v. McNeill,

635 S.W.3d 620, 628 (Tex. 2021) (citation omitted).

So, to “fall within this ultra vires exception, a suit . . . must allege, and ulti-

mately prove, that the officer acted without legal authority or failed to perform a

48

purely ministerial act.” Schroeder v. Escalera Ranch Owners’ Ass’n, 646 S.W.3d 329,

332 (Tex. 2022) (quotation marks omitted). In turn, acting “without legal authority”

includes acting with no authority as well as “an officer’s exercise of judgment or lim-

ited discretion without reference to or in conflict with the constraints of the law au-

thorizing the official to act.” Hous. Belt & Terminal Ry. v. City of Hous., 487 S.W.3d

154, 163 (Tex. 2016). And “[m]inisterial acts are those for which the law prescribes

and defines the duty to be performed with such precision and certainty as to leave

nothing to the exercise of discretion or judgment.” Ballantyne v. Champion Builders,

144 S.W.3d 417, 425 (Tex. 2004) (quotation marks omitted).

Broadmoor adequately pleaded that Novak’s and Niles’s conduct was ultra

vires. “An official has no discretion or authority to misinterpret the law or the rules

of arithmetic.” In re Phillips, 496 S.W.3d 769, 775 (Tex. 2016) (quotation marks omit-

ted). Novak and Niles misinterpreted both. Broadmoor alleges that rent money for

the Broadmoor Lease was always available. CR.270–73 ¶¶ 19–25. Broadmoor alleges

that Novak’s attempted termination exceeded his authority, which is limited to ter-

minating a lease when the Legislature has failed to appropriate money for rent, and,

even then, only in conformity with the Commission’s rules. CR.276–77 ¶¶ 43, 45.

And Broadmoor alleges that Niles shirked his nondiscretionary duty to certify to the

Commission that rent money was in fact available for the Broadmoor Lease. CR.276

¶ 42.

49

1. Novak had no authority to terminate the Broadmoor Lease.

There are no inherent executive powers; government agencies and officials

may exercise only those powers expressly granted by the Constitution or statute “and

those implied powers that are reasonably necessary to carry out [their] statutory du-

ties.” Hartzell v. S.O., 672 S.W.3d 304, 311-12 (Tex. 2023); see also, e.g., Fulmore v.

Lane, 140 S.W. 405, 411–12 (1911). Acts done without or exceeding authority are ultra

vires and “have no effect.” Jessen Assocs. v. Bullock, 531 S.W.2d 593, 598 (Tex. 1975);

Fort Worth Cavalry Club v. Sheppard, 83 S.W.2d 660, 665 (Tex. 1935).

Likewise, state officials lack inherent discretion to interfere with or obstruct

performance of a contract executed by the State’s authorized agent. See Charles Scrib-

ner’s Sons v. Marrs, 262 S.W. 722, 727–28 (Tex. 1924). In Marrs, the State Board of

Education entered a contract with Charles Scribner’s Sons for textbooks, but

Marrs—the State Superintendent of Public Instruction, and subordinate to the Board

of Education—unilaterally determined that the contract was invalid and therefore he

couldn’t comply. Id. at 723. The Court found that this subordinate official “was with-

out authority to contest [the contract’s] validity.” Id. at 727. The Court warned that

if any officer could “question such contracts, on their face regular and valid, chaos

in government would soon reign. . . . Under such condition no contract could be en-

forced, and no one would dare contract with the state.” Id. at 728. “Fixedness of

responsibility is a necessity in government.” Id.

50

Like Marrs, Novak attempted without authority to terminate a contract exe-

cuted by his superiors. Indeed, even after Novak’s attempted termination, the Com-

mission was still treating the Broadmoor Lease as continuing through the next bien-

nium. See CR.323 (Commission requesting that HHSC “certify[] that funds will be

available for” the Broadmoor Lease during the next biennium). Instead of respecting

that superior decision, Novak took marching orders from a low-level HHSC staffer’s

request that the Commission terminate the Broadmoor Lease. See CR.316–20. But

nothing in any statute or regulation empowers Novak to terminate Chapter 2167

leases at the mere request of tenant agency employees, especially requests that fly in

the face of other law and the Commission’s rules. Novak’s attempted termination

was ultra vires.

a. Novak had no authority to terminate the Broadmoor Lease when money was available to pay rent.

Novak has no more authority than the Commission. See Tex. Gov’t Code

§ 2152.103. Chapter 2167 Subchapter C sets forth “Commission and State Agency

Powers and Duties Related to Leased Space.” The Commission is tasked with super-

vising performance under Chapter 2167 leases, both lessor and tenant agency. Sec-

tion 2167.102 provides for “remedial action” by the Commission against the lessor

based on “lessor’s performance under the contract,” and with help from the “attor-

ney general,” if necessary. Tex. Gov’t Code § 2167.102(a)–(b). And § 2167.105 di-

rects the Commission to “report . . . noncompliance” by agency tenants “with the

commission’s rules or with other state law related to leasing requirements . . . to the

51

members of the state agency’s governing body and to the governor, lieutenant gover-

nor, and speaker of the house of representatives.”

Nothing in Subchapter C, however, expressly empowers the Commission to

terminate a Chapter 2167 lease for a tenant agency’s lack of money to pay rent. But,

as the Government suggests, see Br.40–42, that power may be implied from

§ 2167.055(e): “A lease contract is contingent on the availability of money appropri-

ated by the legislature to pay for the lease.” (emphasis added).

But “a public officer has no discretion or authority to misinterpret the law.”

Hous. Belt, 487 S.W.3d at 163, so the Commission’s authority is necessarily limited to

§ 2167.055(e)’s terms. The Commission may terminate leases when no appropriated

money for rent is available. “Availability” is a familiar concept in all sorts of statutes,

but it’s especially common in law related to appropriations. And “the ordinary mean-

ing of the word ʻavailable’ is ʻcapable of use for the accomplishment of a purpose,’

and that which ʻis accessible or may be obtained.’” Ross v. Blake, 578 U.S. 632, 642

(2016) (quoting Webster’s Third 150 (1993 ed.) and citing various other dic-

tionaries).

Availability of money for government expenditures turns on the amount ap-

propriated to the agency for the purpose of the expense: “ʻFunds available,’ as mark-

ing the bounds of the commission’s contractual liability creating authority . . . can,

we think, mean but one thing, namely, funds made available for that purpose by the

Legislature through appropriation.” Ferguson v. Johnson, 57 S.W.2d 372, 375 (Tex.

52

App.—Austin 1933, writ dism’d); accord, e.g., Cmty. Health Choice v. Hawkins, 328

S.W.3d 10, 19 (Tex. App.—Austin 2010, pet. denied) (“[H]ere an appropriation for

the payment of contract claims has been made and the necessary funding is availa-

ble.”); Tex. Educ. Agency v. U.S. Dep’t of Educ., 908 F.3d 127, 133 (5th Cir. 2018)

(“[A] state must appropriate funds to make them available. Without a suitable appro-

priation, funding is not capable of immediate use.”).

Novak’s attempted termination of the Broadmoor Lease on June 1 exceeded

the Commission’s implied authority under § 2167.055(e) because he couldn’t con-

clude “money appropriated by the legislature to pay for the lease” was unavailable.

The timeline tells the story:

May–August 2023

Legislature adopts GAA appropriating HHSC $118 million+ May 27 annually for “Rent – Building.”

HHSC staffer requests termination of Broadmoor lease for May 31 unavailability of appropriation.

June 1 Novak transmits notice of termination of Broadmoor Lease.

Commission requests HHSC certify availability of funds for the June 7 Broadmoor Lease for next biennium.

June 16 Governor Abbott signs GAA.

Niles certifies $93 million in annual lease obligations for the next July 27 biennium; leaves out Broadmoor Lease.

August 31 Last rent payment to Broadmoor.

53

Novak had no discretion to get the math or the law wrong. In re Phillips, 496

S.W.3d at 775. On June 1, the adopted GAA was not yet law, awaiting Governor Ab-

bot’s signature and any line-item veto. See supra, p.13. At best, then, the controlling

math result was akin to dividing by zero: undefined. Novak (and HHSC) couldn’t

possibly conclude that money was unavailable until the GAA became law. Even more,

Novak knew the cost of HHSC’s leases. See Tex. Gov’t Code 2167.103 (“the com-

mission shall maintain records of the amount and cost of space under lease”). And

so he knew that the GAA awaiting the Governor’s signature appropriated sufficient

funds

Indeed, the Government doesn’t even argue that Novak ever did the math and

concluded money for the lease wasn’t available. See Br.42 (“Appellee makes no alle-

gation that Executive Director Novak was involved in the decision that funds were

not appropriated for this Lease.”). Instead, they argue “Novak simply carried out

the actions within his authority to complete [HHSC’s] action—terminating the

Lease—after HHSC made the determination.” Br.42; accord Br.45.

That argument will surprise the Legislature, to whom HHSC told a different

story to get more money for rent. In asking for a higher appropriation, HHSC repre-

sented that it “has limited flexibility to manage cost increases . . . for leases,” includ-

ing because the Commission’s “input is required before lease payments are with-

held.” 2 HHSC Legislative Appropriation Request 4.A at 58 (emphasis

added).

54

HHSC correctly represented the Commission’s role to the Legislature; the

Government misstates that role here. See 1 Tex. Admin. Code § 115.21(b) (“[A] lease

may be considered for cancellation by the Commission upon request by a governmen-

tal agency.” (emphasis added)); id. § 115.22(b) (similar). Novak couldn’t abdicate

the Commission’s duty to determine whether funds were available before terminat-

ing the lease.

The Government says Novak was just relying on HHSC’s certification. Br.41-

42. But the law too forecloses that excuse. Section 2167.055(e) says, “A lease contract

is contingent on the availability of money appropriated by the legislature to pay for

the lease,” Tex. Gov’t Code § 2167.055(e), not on the tenant agency fulfilling its duty

to “certify to the commission . . . that money is available” under § 2167.101. Consid-

ering the provisions’ proximity, the Commission’s duty to know lease costs, and the

Commission’s watch-dog role over tenant agencies, the legislative choice to omit def-

erence to the tenant agency’s math could not have been an accident.

The timeline of events also forecloses the Government’s just-following-orders

argument. The HHSC action the Government says Novak relied was Deputy Com-

missioner Niles’s supposed “certif[ification] that the funds were not available” for

the lease. Br.41–42; see Tex. Gov’t Code § 2167.101. But Niles’s “certification” was

made on July 27, 2023, CR.330, while Novak attempted to terminate the lease weeks

earlier on June 1, 2023. CR.320. Novak did not rely on any certification.

55

Novak’s notice of termination instead relied on a low-level HHSC staffer’s

prediction that HHSC would not certify that funds are available for the Broadmoor

Lease no matter how much was appropriated. See CR.316–18. Novak’s Notice said:

“You are advised that [HHSC] has directed that rent will not be certified for the bien-

nium beginning September 1, 2023, as required by Section 2167.101, Texas Govern-

ment Code.” CR.320 (emphases added). That sentence is extraordinary—Novak

openly acknowledges that HHSC will refuse to comply with the law, yet goes right

along with it. Rather than indulge HHSC’s illegality, Novak and the Commission had

a duty to “report the noncompliance . . . to the governor, lieutenant governor, and

speaker of the house of representatives.” Tex. Gov’t Code § 2167.105.

In fact, no one from HHSC has ever “certif[ied] that the funds were not avail-

able.” Contra Br.42. The only certification came from HHSC’s Niles, but Niles cer-

tified only that funding was available for a list of leases that excluded that Broad-

moor’s. CR.330–337. 94 Niles expressly refused to certify whether funds were availa-

ble for the Broadmoor Lease, despite the Commission requesting that HHSC do so.

CR.330. But his certification—$93 million in annual lease expenses for the biennium,

CR.330—left no question that sufficient funds remained available for the Broadmoor

Lease from the Legislature’s “Rent – Building” appropriation of $118 million and

$119 million in fiscal years 2024 and 2025, respectively:

94 As the Government recognizes, § 2167.101’s directive that the tenant agency “shall certify to the commission . . . that money is available,” allows for a certification that money is not available. Regardless , money was available here.

56

$118+ million > $93 million

Easy math.

In a last-ditch effort to conjure some discretion, the Government argues Novak

maintained “the discretion—required by the Legislature—through section

2167.0021, to make leasing decisions on the basis of obtaining best value for the

state.” Br.42. That argument fails because to “lease space,” Tex. Gov’t Code

§ 2167.0021(a) (emphasis added), is “to take a lease of,” Webster’s Third 1286.

Section 2167.0021 does not give the Commission carte blanche to terminate leases—

discretion that would conflict with the Commission’s “binding” “obligation to ac-

cept the space . . . on the execution of the lease contract.” Tex. Gov’t Code

§ 2167.055(f ) .

b. Novak had no authority to violate the Commission’s own regulations.

Even if some statute authorized Novak’s bad math, his conduct was still ultra

vires, because he acted wholly outside the Commission’s regulations governing lease

terminations. As Executive Director, Novak “shall manage the commission’s affairs

under the commission’s direction.” Tex. Gov’t Code § 2152.103. The Commission

set forth that direction as to lease terminations in regulations. And “[w]hen a state

agency adopts an administrative rule, it commits itself to follow the plain meaning of

the promulgated text.” Port Arthur Cmty. Action Network v. Tex. Comm’n on Env’t

Quality, 707 S.W.3d 102, 104 (Tex. 2025).

57

At the outset, the regulations confirm that Novak may not defer to the tenant

agency’s funding determination. They provide that when an agency requests “to

cancel a lease due to lack of funding,” that request is “considered for action by the

Commission,” not rubber-stamped. 1 Tex. Admin. Code § 115.22(a)–(b). When the

Commission leaves a determination to the tenant agency, the Commission says so

expressly. See id. § 115.21(a) (“the governmental agency shall determine that it occu-

pies idle facilities or has idle capacity”). The Commission doesn’t defer to the agency

on funding.

The regulations also set forth two unsatisfied prerequisites before the Com-

mission could “consider[]” HHSC’s request to terminate the Broadmoor Lease. See

id. §§ 115.21–.22. The Commission couldn’t even consider HHSC’s request, so No-

vak couldn’t grant it.

First, before the Commission can consider an agency’s request to terminate,

“the governmental agency shall determine that it occupies idle facilities or has idle

capacity due to one of” a handful of factors, and then “furnish[] a written determi-

nation that the governmental agency occupies idle facilities or has idle capacity the

following factors.” Id. § 115.21. No such determination was ever furnished to the

Commission. See CR.316–18; CR.330.

Second, when an agency, like HHSC, that’s “under the authority of an indi-

vidual commissioner . . . , appointed by or directly accountable to the Governor,” re-

quests “to cancel a lease due to lack of funding,” that request “must provide

58

evidence of notification to the Office of the Governor.” 1 Tex. Admin. § 115.22(b)

(emphasis added). HHSC never provided evidence that it notified the Governor that

it was out of money despite the vast sums the GAA appropriated to it. For obvious

reasons.

Novak’s attempted termination wasn’t just outside the Commission’s statu-

tory authority, it also conflicted with the Commission’s rules that bound his conduct.

2. Niles failed to perform his ministerial duty to certify that money was available for the Broadmoor Lease.

Even after Novak’s ultra vires attempt to terminate the Broadmoor Lease, the

Commission treated the lease as not terminated. It later requested “certification of

available funding for the next biennium (2024–2025)” for the Broadmoor Lease.

CR.323, 327. HHSC, acting through Deputy Commissioner Niles, defied that re-

quest. See CR.330. That defiance was ultra vires.

Government Code § 2167.101 says, “A state agency occupying space leased

under this chapter shall certify to the commission . . . that money is available to pay

for the lease until the end of the next fiscal biennium.” “The use of the word ʻshall’

in a statute evidences the mandatory nature of the duty imposed.” TotalEnergies E&P

USA v. MP Gulf of Mex., 667 S.W.3d 694, 709 (Tex. 2023) (quotation marks omitted).

It “leav[es] no room for discretion.” In re Durnin, 619 S.W.3d 250, 257 n.3 (Tex.

2021). “Shall” therefore introduces a ministerial duty. See In re City of Galveston, 622

S.W.3d 851, 857 (Tex. 2021); see also 15 McQuillin Mun. Corp. § 39:45 (3d ed.)

(“The duty to certify [that funds are available], being expressly imposed by law, is

59

ministerial and may be compelled by mandamus.”); Flora Crane Serv. v. Ross, 390

P.2d 193, 204 (Cal. 1964) (similar); Bradston Assocs. v. Cnty. Sheriff’s Dep’t, 892

N.E.2d 732, 738 (Mass. 2008) (similar).

The Government responds with a couple of faulty arguments. The Govern-

ment first goes back to the “just following orders” well: “[O]nce HHSC determined

that funds were unavailable to pay rent under the Lease, . . . Niles was obligated to

certify that the funds were not available.” Br.41–42 (citing Tex. Gov’t Code

§ 2167.101). Three problems. One, Niles never certified that fund weren’t available

for the lease. See supra, p.55. Two, the Government has no evidence that “HHSC

determined that funds were unavailable.” It introduced no evidence at all in support

of the plea to the jurisdiction, and arguments in a brief aren’t evidence. 95 Three, even

if HHSC made that untenable and unlawful determination, an ultra vires claim

against Niles would be an appropriate vehicle to contest it. The Government con-

cedes that Niles’s conduct is the manifestation of any availability determination by

HHSC; so Niles is not just some “nominal, apex representative who has nothing to

do with the allegedly ultra vires actions.” Hall v. McRaven, 508 S.W.3d 232, 240 (Tex.

2017).

95 Should some higher official’s bad math be disclosed in discovery, Broadmoor will add that official as a defendant. Cf. In re Panchakarla, 602 S.W.3d 536, 539–40 (Tex. 2020) (a trial court “retains continuing control over interlocutory orders and has the power to set those orders aside any time before a final judgment.” (quotation marks omitted)).

60

The Government next asserts (over and over) that HHSC has “discretion” to

“determine whether the Legislature appropriated funds to pay the particular Lease.”

Br.41–47. Not so. Nothing in § 2167.101 grants a tenant agency such interpretive lat-

itude. See Van Boven v. Freshour, 659 S.W.3d 396, 402 (Tex. 2022) (allowing ultra vires

claim where no law “grants the Board unrestrained authority to interpret” applicable

legal requirements). “Available” has an established meaning, which permitted

HHSC to—at most—compare its biennial appropriation for “Rent – Building” to its

biennial rent obligations. See supra, pp.51–52. HHSC is devoting tens of millions less

than the GAA appropriates for that item. See supra, pp.55–56. The law’s clear and

the math’s easy, and no one at HHSC has discretion to get either wrong. In re Phillips,

496 S.W.3d at 775.

HHSC’s claim to discretion isn’t just wrong; it discloses a troubling miscon-

ception of agencies’ role in carrying out legislative appropriations. When an agency

official “cancels an item of . . . direct spending” or redirects it, “he is rejecting the

policy judgment made by [the Legislature] and relying on his own policy judgment.”

Clinton v. City of New York, 524 U.S. 417, 444 (1998). The Constitution forbids that

result and confirms that Niles (and Novak) acted ultra vires. See supra, pp.4–5. Ap-

propriations are not slush funds left to bureaucratic whim. No law may give “a blank

check to the Executive Department to make an appropriation or reappropriation.”

Tex. Att’y Gen. Op. No. M-1191 (1972). And outside the limited budget-execution

authority granted the Governor, appropriations may not turn “upon any exercise of

61

[executive] discretion.” Tex. Att’y Gen. Op. No. H-207 (1974). Rather, “[o]nce the

Legislature has appropriated funds for a particular purpose or use, it is the duty of

the responsible executive authority to accomplish (not frustrate) that purpose by us-

ing such funds as necessary.” Tex. Att’y Gen. LA-2 (1974); accord, e.g., Tex. Att’y

Gen. Op. No. O-5545 (1943) (“[A]n appropriation of public money for a specific pur-

pose may not be used—drawn from the treasury—for any purpose other than that

specified.”). Availability is a function of math, not discretion.

B. Broadmoor seeks prospective relief bringing Novak’s and Niles’s conduct back in line with state law.

Ultra vires claims are limited to prospective relief, which is all Broadmoor asks

for. Broadmoor’s petition requests

• “an injunction mandating that . . . Novak retract the wrongful termination of the Broadmoor Lease, and comply with his non-discretionary statutory obligations” going forward, including “tak[ing] all steps necessary to ensure that his organization complies with . . . lease termination requirements ,” if necessary; and • “an injunction mandating that . . . Niles comply with [his] non-discretionary statutory obligations to certify the availability of funds to pay rent under the Broadmoor Lease for the 2024–2025 fiscal years.”

CR.276. That relief is forward-looking.

The Government fails to recast Broadmoor’s relief as retrospective. It sug-

gests that because Broadmoor challenges Novak’s and Niles’s “prior actions” as ul-

tra vires, any relief “is by its very nature retrospective relief.” Br.50. Wrong. In nearly

every ultra vires claim there’s an eye toward the past: “the officer acted without legal

authority or failed to perform a purely ministerial act.” Schroeder, 646 S.W.3d at 332

62

(emphases added). Thus, a court may order corrective relief prospectively. See, e.g.,

Van Boven, 659 S.W.3d at 401 (approving injunctive relief “directing [officials] to file

a Void Report . . . , which would remove the Initial Report and the Revision-to-Action

Report from disclosure”); Hartzell, 672 S.W.3d at 319 (approving “restoration of

[plaintiff’s] degree on a forward-looking basis”); Bracey v. City of Killeen, 417 S.W.3d

94, 114 (Tex. App.—Austin 2013, no pet.) (Field, J., sitting) (observing that sovereign

“immunity would not bar [a] claim for prospective reinstatement”). 96

Broadmoor’s claims don’t “require the Court to ʻundue’ [sic] past decisions,

such as the termination of the Lease and certification of funds.” Br.50. Novak issued

his notice of termination without authority and therefore his attempted termination

had no effect. See, e.g., Jessen Assocs., 531 S.W.2d at 598; see also Patel v. Tex. Dep’t of

Licensing & Regul., 469 S.W.3d 69, 76 (Tex. 2015) (“[U]nlawful acts of officials are

not acts of the State.”). And he may be enjoined to follow the law and refrain from

treating the lease as terminated going forward. See, e.g., Hartzell, 672 S.W.3d at 319.

Niles has never made any certification about the availability of funds for the lease.

And he may be prospectively enjoined to accurately certify the fact that money has

always been available. See, e.g., Tex. Dep’t of Transp. v. Sefzik, 355 S.W.3d 618, 622 n.2

(Tex. 2011) (“[C]ompel[ing] a government official . . . to perform some act . . . falls

within the ultra vires rationale.”).

96 That payment to Broadmoor may eventually result doesn’t change the nature of the relief. See, e.g., Sw. Bell Tel. v. Emmett, 459 S.W.3d 578, 588–89 (Tex. 2015).

63

III. Broadmoor’s UDJA Claim Is Proper.

Finally, sovereign immunity doesn’t bar Broadmoor’s claim seeking “a decla-

ration that the 88th Texas Legislature did in fact appropriate sufficient funds to pay

for the Broadmoor Lease for the 2024-2025 biennium.” CR.278. As the Govern-

ment’s attempts to pass the buck (Novak to Niles, Niles to unnamed HHSC officials)

show, this relief is necessary to correct the bad math at the heart of this case, what-

ever its origin. And it’s well established that “[p]rivate parties may seek declaratory

relief against state officials who allegedly act without legal or statutory authority.”

Tex. Nat. Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002); ac-

cord, e.g., Sw. Bell Tel. v. Emmett, 459 S.W.3d 578, 589 (Tex. 2015) (“AT&T is entitled

to declaratory relief that payment of its relocation expenses by the District is required

by § 49.223.”); contra Br.36, 38.

Conclusion and Prayer

The Court should affirm the district court’s order denying the Government’s

plea to the jurisdiction. Alternatively, if the Court finds that Broadmoor’s allegations

are insufficient, it should remand for repleading.

64

Respectfully submitted,

Scott Douglass & McConnico LLP

Jason R. LaFond State Bar No. 24103136 jlafond@scottdoug.com Casey Dobson State Bar No. 05927600 cdobson@scottdoug.com Sara Clark sclark@scottdoug.com State Bar No. 00794847 303 Colorado Street, Suite 2400 Austin, Texas 78701 (512) 495-6300

Counsel for Appellee Broadmoor Austin Associates, a Texas Joint Venture

65

Certificate of Compliance

Microsoft Word 2019 reports that this brief contains 14,648 words,

excluding the portions of the brief exempt from the word count under Texas Rule of

Appellate Procedure 9.4(i)(1).

Jason R. LaFond

No. 15-25-00013

In the Fifteenth Court of Appeals Austin, Texas State of Texas, et al.,

Appellants, v.

Broadmoor Austin Associates, a Texas Joint Venture,

Appellee.

On Appeal from the 455th Judicial District of Travis County, No. D-1-GN-23-007899

Appellee’s Appendix

Tab

1 Broadmoor Lease

2 Texas Government Code Chapter 2167

3 Texas Civil Practice & Remedies Code Chapter 114

4 Excerpts from Act of May 27, 2023, 88th Leg., R.S., ch. 1170 § 1

5 1 Texas Administrative Code Chapter 115 Subchapter B

6 2 HHSC Legislative Appropriation Request 4.A (2022)

Tab 1

282

co :

STATE LEASE 20392 Austin

THE STATE OF TEXAS § COUNTY OF TRAVIS § 1, PARTIES

This Agreement is made and entered into on this7Z iRe dayof , 2014, by and between LESSOR, BROADMOOR AUSTIN ASSOCIATES, A TEXAS JOINT VENTURE and LESSEE, STATE OF TEXAS, acting by and through the Texas Facilities Commission (TFC).

2. PROPERTY LEASED 122,123. Total Square Feet (usable), occupied by the

Health and Human Services Commission -

OIG located in the

Broadmoor 902 at

11501 Burnet Road in

Austin, 78758 in

Travis County, Texas

Lessor promises, in return for the consideration described herein to be paid by the Lessee and the covenants set out herein to be kept by Lessee, to hereby lease, unto the Lessee, the Property and Premises described herein.

Lessor also promises to furnish any and all requirements related to such Property and Premises as set out in this lease, all of which are incorporated herein by reference and made a part hereof for all purposes.

3. TERMS OF LEASE

The term shall be for a period of 120 months commencing on the later of the day of August, 2015 or the Rent Commencement Date (as defined hereinafter in Section 7i), and ending on the 31% day of July, 2025 (the Termination Date), unless sconer terminated as hereinafter provided; provided, however, if Substantial Completion (as defined in Section 7(i) below) does not occur by April 3, 2015, then the Termination Date shall be the last day of the 120" month after the Rent Commencement Date. Subject to the next sentence, this lease is contingent upon the majority approval by a quorum of the

283

Lease # 20392 Austin Commission members of the Texas Facilities Commission. If the Commission does not approve this Lease at its meeting on August 20, 2014, this Lease shall be null and void for ail purposes without further action by either party.

4. MONTHLY RENTAL

The Lessee agrees to pay Lessor a base Monthly Rent during the term of this lease in accordance with the Rent Schedule as detailed in Exhibit A. The rental payments provided for herein shall be due and payable by Lessee in advance on the first day of the month for which said rentals are due.

This lease contract is made and entered into in accordance with and subject to the provisions of the Texas Constitution and the Texas Government Code, Title 10, Subtitle D, and is made contingent upon the continuation of the availability of money appropriated by the legislature to pay for the lease. In the event the Legislature or the Executive Branch of the State of Texas cease to fund the lease, or the agency ceases to exist as a result of the Legislative sunset review process, then the Texas Facilities Commission, hereinafter referred to as Commission, may assign another state agency with comparable use (General Office/Administrative and Professional Services which do not involve on-site customer/client services) to the space, or a part thereof, covered by this lease. Should the Commission be unable to find another State agency or agencies to fill, or partiaily fill the space, the Commission, upon written notice to the Lessor, either may terminate this lease, or sublet in whole or in part to a private third party.

5 RENEWAL OPTION

By mutual agreement between Lessee and Lessor, this lease may be renewed two (2) times for a period up to 120 months, under the same terms and conditions except the rental rate, which will be at the then current market rate for comparable space, and that no leasehold improvements other than refurbishment as mutually agreed to shall be provided by Lessor except to the extent reflected in the market rate and Lessee shall have no further renewal options. Lessee shall give Lessor written notice of intention to exercise this option at least 180 days prior to expiration of this lease.

6. CPI ESCALATION CLAUSE

(a) On each anniversary date of the lease commencement, the total monthly rent of the lease shail be adjusted by changes in the Consumer Price Index (CP!) reflecting percentage increases.

(6) To receive the CPi adjustment, the Lessor must submit a request in writing by certified mail, return receipt requested, and received by the Texas Facilities Commission (TFC) no later than forty-five (45) days after the anniversary date for that year. In determining whether to grant Lessors request for a CP} increase, in whole or in part, TFC may review and consider Lessor's performance under this lease and whether any material or substantive issues with the leased premises of which Lessee has provided prior timely notice to Lessor remain unresolved, as provided in Section 7(k) below.

(c) The percent escalation allowable will be based on the percent change in the CPI for Urban Wage Earners and Clerical Workers, Current Series (CPI-W, U.S. City Average, All items) published by the United States Department of Labor, Bureau of Labor Statistics. The index may be obtained from the U.S. Bureau of Labor Statistics web site at www.bis.qov.

The index month three (3) months prior the anniversary month for the current year and the previous year shall be used to determine the percent increase.

(d) A Base Factor of 50% of the monthly rent will be used in the calculation for the escalation in accordance with the following schedule:

Base Factor Percent Paying Utilities Paying Janitorial

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Lease # 20392 Austin 50% Lessor Lessor

(e) EXAMPLE (Caiculation formula with a 50% Base Factor):

Part 1. CP) Current Year CPt Previous Year Difference Divided by Previous Year % Change {Mar 04) 182.9 -

(MarQ3)1803 = 26 180.3 = 14

Part 2. Current Monthly Rent % Base Factor % Change Rent Increase $2,500.00 x 50% = $1,250.00 x 1.4 = $17.50

Part 3. Current Monthly Rent CPIIncrease New Monthly Rent $2,500.00 + $1750 = $2,517.50

(f) The first eligible CPI rent adjustment for this lease will be August 1, 2016, based upon the percent change in the CPI from May 2015 and May 201 using a Base Factor of 50%. Each succeeding year, the same procedure as outlined in paragraph (e) above will be used.

7 GENERAL TERMS AND CONDITIONS

(a) Lessor covenants and agrees to pay all taxes of whatever nature, levied and assessed and to be levied or assessed, on or against the leased Property and improvements during the term of the lease: and to keep the leased Premises, Property and buildings in good repair and condition during the continuance of the term of this lease, said maintenance is to include, but is not limited to, the following services: repair and patch wall, ceiling and floor surfaces; painting as needed: replacement of broken window glass; repair of window shades, blinds and/or drapes, fasteners and sash cord or chains; roof and ceiling leaks; building exterior, interior; plumbing, heating, air conditioning and ventilating equipment and filters; fire protection equipment; miscellaneous valves; woodwork, locks, floor surfaces and coverings: lighting fixtures, and the replacement of all defective or burned-out light bulbs, fluorescent tubes, ballasts and starters. lf the occupying agency, or its agents, cause damage to said Property that goes beyond "normal wear and tear', the occupying agency is responsibie to pay for those repairs.

(b) Lessor hereby covenants and agrees that hereafter and during the term of this lease, it will not rent, lease or otherwise furnish space in this or any adjacent buildings under its control to any enterprise which, in the usual exercise of its business, could be expected to create noise or odors injurious or disruptive to the occupying agency's normal governmental activity. Lessor covenants and agrees it will not lease space that would locate or collocate any regulated parties which have an interest in the occupying agency/ies or whose occupation of these Premises would cause the occupying agency to be in violation of State statute.

(c) Lessor warrants that the demised Premises is not in violation of any city, state or local ordinance or statute or any restriction imposed against the demised Premises and that said Lessor will indemnify said Lessee for any direct or indirect loss sustained by Lessee as a result of the existence of such restriction, ordinance or statute.

(d) Lessor hereby covenants and agrees that the Lessee may bring on the leased Premises any and all furniture, fixtures and equipment reasonably necessary for the efficient exercise of Lessee's governmental responsibilities and the parties agree that all such Property shall remain the Property of the Lessee.

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Lease ¥ 20392 Austin (e) Any signs necessary to indicate Lessee's name, location and governmental purpose shall be prepared and installed consistent with signage for other lessees in the Property and in keeping with building decor. Any special requirements of Lessee contrary to the above must be stated in writing and made a part of this lease. Any cost of compliance with this paragraph in excess of the amount that would be required for Lessor's standard signage shall be borne by Lessee.

(f) On termination of this lease, by lapse of time or otherwise, Lessee may, within thirty (30) days thereafter, at its option and expense, remove from said Premises any and all improvements, equipment, appliances or other Property placed or owned by it thereon. Lessee shall deliver the Premises and Property to Lessor in good order and condition, provided however, the reasonable use and ordinary wear and tear are expected.

(g) if during the term of this lease, said Premises, or any portion thereof, shall be condemned for any public purpose, Lessee hereto shalt have the option of terminating and canceling this ease upon thirty (30) days' notice to the Lessor of its election to do so.

(h) It is mutually agreed between the Lessor and the Lessee that if said building and Premises shall, during the term of this lease, be damaged by flood, fire or (any other cause or causes), the same shall be promptly repaired by the Lessor. During the time of such repair, if the space cannot be fully utilized by Lessee, lease payments due hereunder shall be either reduced or withheld in accord with the degree of non-use. But, if said building and Premises be so damaged as to render said Premises unfit for occupancy, then, and from the date of such damage, this lease shall cease and be void; and rent and other obligations hereunder shall be due and payable only to the date of such damage. The determination as to whether the building and Premises are damaged so as to render them unfit for occupancy shall be made by Lessee. if the Lessor has available under his control space which will meet Lessee's needs and offers same to Lessee, the Lessee may at its option, occupy that space under the same terms and conditions as this lease. Lessor will be responsible for any relocation costs that may be incurred, included but not limited to, cost of the space, moving, communications equipment and computer expenses.

(i) Lessee is not obligated to pay rent and other sums under this lease until 120 days after Substantial Completion ("Rent Commencement Date") provided, however, to the extent Substantial Completion is delayed due to Lessee Delays, the Rent Commencement Date shall be the date that is 120 days after the date Substantial Completion would have occurred but for Lessee Delays.. "Substantial Completion" shall occur, and Lessor shail "Substantially Complete" the premises, when the premises are available to Lessee for full occupancy and the leasehold improvements shown on the approved construction plans (as described in Exhibit B) are substantially complete (specifically excluding Lessee's furniture and other personal property), subject to punchlist items. If Lessor is unable to deliver the premises to Lessee Substantially Complete on April 3, 2015 other than for the reasons set forth in the second paragraph of this Section 7(i), Lessor shall give Lessee immediate written notice of the cause for the delay and the date the premises will be Substantially Complete.

Except as provided in Paragraphs 3 and 4, Lessee may not terminate the lease if the delay of occupancy is caused by Lessee (a "Lessee Delay"), or by conditions beyond Lessor's control (a "Justifiable Delay"), such as strikes, fire, unavoidable casualties or other unusual circumstances beyond Lessor's control that constitutes a justifiable delay.

In the event Substantial Completion has not occurred by April 3, 2015 (provided such date shall be pushed back on a day-for-day basis for each day of Justifiable Delay or Lessee Delay), this lease shall remain in full force and effect for a period following of no less than 180 days. During this time, or for as long as Substantial Completion does

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Lease # 20392 Austin not occur, the rent shall not be paid. During this period, but not to exceed 6 consecutive months, Lessor will be liable to Lessee in damages for any rent payable by Lessee in excess of its current rent paid to its current landlord for its existing location in the building commonly referred to as Braker located at 11101 Metric Boulevard, Building , Austin, | |

TX 78758. Lessee shall have the right to offset such excess rent against the first Monthly Rent payment(s) due from and after the Rent Commencement Date until offset in full.

Lessee may terminate this lease without liability to the State of Texas and seek other leased space if Substantial Completion does not occur by October1,2015, provided such date shall be pushed back on a day-for-day basis for each day of Lessee Delay and Justifiable Delay.

(i) Lessee reserves the right to assign any agency of State government to occupy all or any part of the space described herein or to assign or sublet all or any part of the leased Premises to any private entities (persons or corporations) so long as the use is General Office/Administrative and Professional services which do not involve on-site customer/client services.

(k) In the event Lessor shall breach or be in default in the strict performance of any of the covenants or obligations imposed upon Lessor by this lease, and shall remain in default for a period of thirty (30) days after written notice of such default, Lessee shall have the right and privilege of terminating this lease and declaring the same at an end, and shall have the remedies now or hereafter provided by law for recovery of damages occasioned by such default. In lieu of a formal declaration of default and resutting termination as provided above, Lessee may withhold payment of rent from Lessor, until such time as the violations have been corrected or the Lessee may correct all or any part of the violations and deduct the cost from rentals due the Lessor.

(I) If Lessee fails to pay rentals or other charges hereunder or otherwise fails to perform its obligations hereunder and this failure is not cured within 30 days after written notice from Lessor to Lessee of such failure, then Lessee is in default, and Lessor may terminate this Lease and may enter and take possession of premises, and will have the remedies now or hereafter provided by law for recovery of rent, repossession of premises and damages occasioned by Lessee's default. No provision, covenant or agreement contained in this Lease shall be deemed a waiver of sovereign immunity of the State of Texas from tort or other liability.

(m) The failure of the Lessee or Lessor to insist in any one or more instances on a strict performance of any of the covenants of this lease shall not be construed as a waiver or relinquishment of such covenants in future instances, but the same shall continue and remain in full force and effect.

(n) This agreement and each and all of its covenants, obligations and conditions hereof shall inure to the benefit of and be binding upon the heirs, personal representatives, successors and assigns of Lessor, and the successor in office of Lessee.

(0) This agreement shall be governed by Texas law.

(p) Lessor understands that acceptance of funds under this contract acts as acceptance of the authority of the State Auditors Office, or any successor agency, to conduct an audit or investigation in connection with those funds. Lessor further agrees to cooperate fully with the State Auditor's Office or its successor in the conduct of the audit or investigation, including providing all records requested. Lessor will ensure that this clause concerning the authority to audit funds received indirectly by subcontractors through Lessor and the requirement to cooperate is included in any subcontract it awards.

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Lease # 20392 Austin (q) Lessor warrants and represents that any use, storage, treatment, or transportation of Hazardous Substances that has occurred in or on the Premises prior to the execution of this Lease has been in compliance with all applicable federai, state, and local laws, regulations, and ordinances. Lessor additionally warrants and represents that no release, leak, discharge, spill, disposal, or emission of Hazardous Substances in viclation of environmental laws has occurred in, on, or under the Premises, and that the Premises are free of Hazardous Substances as of the execution of this Lease.

Lessor shall indemnify Lessee from any and all claims, damages, fines, judgments, penalties, costs, liabilities, or losses (including, without limitation, any and all sums paid for settlement of claims and for fees of attorneys, consultants, and experts) arising during or after the lease term from or in connection with the presence of Hazardous Substances in or on the Premises, in violation of applicable environmental laws, unless the Hazardous Substances are present as a result of Lessee or Lessee's agents, employees, contractors, or invitees. Without limitation of the foregoing, this indemnification of the site or any cleanup, removal, or restoration mandated by a federal, state, or local agency or political subdivision, unless the Hazardous Substances are present as a result of the acts of Lessee, Lessee's agents, employees, contractors, or invitees. Except for Hazardous Substances on the premises caused by Lessee, its agents, employees, licensees, contractors, or invitees, this indemnification shall specifically include any and all costs due to Hazardous Substances in violation of environmental laws that flow, diffuse, migrate, or percolate into, onto, or under the Premises after the lease term commences.

As used herein, "Hazardous Substance" means any substance that is toxic, ignitable, reactive, or corrosive and that is regulated by any local government with jurisdiction over the Premises, the State of Texas, or the United States Government. "Hazardous Substance" includes any and all material or substances that are defined as "hazardous waste," extremely hazardous waste," or a "hazardous substance" pursuant to any applicable state, federal, or local governmental law. "Hazardous Substance" includes but is not restricted to asbestos, polychlorobiphenyls ("PCBs"), solvents, pesticides, and petroleum.

(r) At all times during the lease term, Lessor must maintain a policy of all-risk property insurance, issued by and bonded upon an insurance company licensed in the State of Texas, covering the Leased Premises and leasehold improvements (exclusive of contents), in an amount equal to not less than 80% percent of the replacement cost thereof. Lessee shail have no interest in the policy or policy proceeds and Lessor shali not be obligated to insure any furnishings, equipment, trade fixtures, or other personal property that Lessee may place or cause to be placed upon the Leased Premises. Lessor must also maintain a policy or policies of comprehensive general liability insurance insuring Lessor against loss of fife, bodily injury and/or property damage with respect ta Common Areas, operation of the Building, parking lots and other improvements associated with the land upon which the Leased Premises are located, and any other losses caused by or related to the duties and obligations of Lessor under this Lease.

Lessor acknowledges that, because Lessee is an agency of the State of Texas, liability for the tortious conduct of the agents and employees of Lessee (other than medical liability of medical staff physicians) or for injuries caused by conditions of tangible state property is provided for solely by the provisions of the Texas Tort Claims Act (Texas Civil Practice and Remedies Code, Chapters 1010 and 104), and that Workers' Compensation Insurance coverage for employees of Lessee is provided by Lessee as mandated by the provisions of Texas Labor Code, Chapter 503. Lessor further acknowledges that, as an agency of the State of Texas, Lessee has only such authority as is granted to Lessee by state law or as may be reasonably implied from such law, and that Lessee shall have the right, at its option, to (a) obtain liability insurance protecting Lessee and its employees and property insurance protecting Lessee's buildings and the contents, to the extent authorized by Section 51.966 of the Texas Education Code or other law; or (b) self-insure against any risk that may be incurred by Lessee as a result of its operations under this lease. Any obligation by Lessee under this Lease to obtain insurance is expressly made subject to the

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Lease # 20392 Austin Lessee's authority under state law to obtain such insurance. No insurance carrier of either party shail have a right of subrogation against the other party to this lease.

8. LEASE REQUIREMENTS

Lessor and Lessee shall comply with all provisions of Exhibit B entitled Lease Requirements which is incorporated herein for all purposes.

9. OTHER TERMS AND CONDITIONS

(a) This lease shall be effective as of the date that all parties execute this lease contract. All proposals, negotiations, notices, and representations with reference to matters covered by this lease are merged in this instrument and no amendment or modification thereof shall be valid unless evidenced in writing and signed by ail parties as identified below.

(b) Any statement or representation of Lessee in any Estoppel Certificate delivered pursuant to this lease which would modify the rights, privileges or duties of Lessor or Lessee hereunder shall be of no force and effect and may not be relied on by any person unless otherwise agreed to in writing.

(c) Should Lessor require Lessee to provide an Estoppel Certificate at any time during the term of this lease, Lessor will give Lessee thirty (30) days prior written notice whereupon TFC will deliver to Lessor a completed signed original of same utilizing its standard Estoppel Certificate form.

10. SPECIAL PROVISIONS:

1) Lessor shall design, in consuttation with Lessee and in accordance with the schedule for the Lease Requirements outlined in Exhibit B, and construct the additional 20,277 square feet commensurate with the room schedule, specifications, and Exhibits outlined in this Lease, and the cost per square foot to complete the construction of the additional 20,277 square feet shall not exceed on a cost per square foot basis the cost to complete the work defined in Exhibit B. 2) The Lessor shall provide and maintain a key card system for after-hours access to the Building for the Lessee. Lessee shall be responsible for maintaining and programing the system. 3) Normal building hours and HVAC are from 7:00 am to 7:00 pm, Monday through Friday, and from 7:00 am to 12:00 pm on Saturdays, exclusive of official State holidays as identified by the State of Texas Comptroller's calendar. After hours HVAC will be charged at the prevailing rate for the building which is currently estimated to be $25.00 per hour per zone. Notwithstanding the foregoing, the Lessor shall provide 24 hour 365 days per year HVAC to the Lessee's Tele/data room at no charge to the Lessee.

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Lease # 20392 Austin LESSOR: LESSEE: Broadmoor Austin Associates STATE OF TEXAS, c/o Brandywine Realty Trust Acting by and through the 1501 South MoPac Expressway, Suite 310 TEXAS FACILITIES COMMISSION Austin, TX 78746 P. ©. Box 13047 Tel. : (512) 306-1994 Austin, TX 78711 Email : Tel.: (512) 463-3160 Fax: (512) 236-6187 Email: jon.conant@tfc.state.tx.us

By: By: ESTE Mines Signature Peter Maass, Deputy Executive Director of Planning and Real Estate yy Management Division Printed Name

Cc: Tim Horn, Health and Human Services Commission Ginna Harris, Texas Department of Licensing and Regulation Regina Roberson, Texas Department of insurance Fire Safety Inspections, State Fire -

Marshal's Office

EXHIBIT A RENT SCHEDULE EXHIBIT B LEASE REQUIREMENTS EXHIBIT B1 AGENCY SPECIFIC REQUIREMENTS & ROOM SCHEDULE EXHIBIT C GENERAL CONSTRUCTION NOTES EXHIBIT C1 NEW CONSTRUCTION NOTES

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Lease # 20392 Austin

EXHIBIT A

RENT SCHEDULE

OCCUPYING SQ. FT. ANNUAL BASE ANNUAL BASE MONTHLY BASE AGENCY OCCUPIED RATE / SF RENT RENT HHSC 122,123 $32.39 $3,955,043.04 $329,586.92

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Lease # 20392 Austin

EXHIBIT B

LEASE REQUIREMENTS

(a) In signing this tease contract, the Lessor certifies that the leased Premises to be occupied shall comply with all applicable federal, state and local laws, statutes, ordinances, codes, rules and regulations, which include compliance with all applicable handicapped accessibility requirements. Acceptance of the space does not exonerate the Lessor from meeting all the requirements. No requirement may be waived by the Lessee or the occupying agency.

(b) Lessor specifically covenants and warrants that the space will comply with the Texas Accessibility Standards (TAS) requirements during the term of the lease for persons with disabilities administered by the Texas Department of Licensing and Regulations, however any TAS requirements for any work requested by, or performed for, the Lessee in addition to work on the approved plans and specifications as set out in Exhibit B1 shall be paid for by the Lessee.

(c) Lessor attests that it has sufficient and appropriate title to said Premises and attests that it has the financial capability to fully execute obligations in this lease contract. Lessor further covenants that it has the power and authority to execute this lease and to place Lessee in possession of the Premises in full satisfaction of and compliance with the terms and conditions herein.

(d) Subject to Lessors current loan, Lessor also agrees that it will not attempt to impose upon Lessee any requirements of other legal instruments related to these Premises not referred to herein or made a part hereof. Lessor warrants to Lessee the leasehold interest created hereunder and agrees to defend Lessee against the claims of all persons to the leasehold interests of the Lessee. Any person or entity executing this lease as agent for the Lessor shall attach to this lease sufficient evidence of authority to act in the capacity shown.

(e) SITE PLAN & CONCEPT FLOOR PLAN DRAWINGS ("Space Plans") shall be provided by Lessor to Lessee upon the full execution of the lease; lessor shall provide lessee dimensioned Auto Cad drawing files of the floor plans of the leased premises. Site plan shall show the building footprint and parking lot(s). Lessee shall have five (5) business days to approve Space Plans. Any delays beyond such five (5) day period shall be deemed a Lessee Delay.

(f) COMPLETED CONSTRUCTION PLANS ("Construction Plans") shall be provided by Lessor to Lessee 60 days from execution of the lease or earlier, for Lessee approval prior ta commencement of construction. Lessor shal! also provide Lessee a construction schedule showing all critical dates of construction or substantial renovation 60 days from execution of the lease and prior to the commencement of construction of the Premises covered by this lease. Lessee shall have five (5) business days to approve Construction Plans. Any delays beyond such five (5) day period shall be deemed a Lessee Delay.

(g) SUBJECT TO LESSEE DELAYS AND JUSTIFIABLE DELAYS, ALL CONSTRUCTION, REPAIRS AND ALTERATIONS shall be substantially completed by Lessor 120 days prior to the Rent Commencement Date. Lessee shall have access to the premises beginning 180 days prior to the Rent Commencement Date to begin cabling and fit up, at no charge to Lessee, in order to prepare the Premises for occupancy, provided such access does not interfere with Lessor's construction. Any delays caused by Lessee's access to such space shall be deemed a Lessee Delay. All non-economic terms and conditions of the Lease shall be in force upon full execution of the lease. Lessee may do whatever is necessary during said period to ensure it is able to commence normal business operations upon occupancy and commencement.

SUBJECT TO LESSEE DELAYS AND JUSTIFIABLE DELAYS, A CERTIFICATE OF Page 10 of 29 Rev. 711/12

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Lease # 20392 Austin OCCUPANCY (CO), issued by the appropriate local authority, shall be provided by Lessor to Lessee 120 days prior to the Rent Commencement Date. Notwithstanding the above and subject to Lessee Delays and Justifiable Delays, Lessor shall allow Lessee and its contractors access to begin setting up furniture, inclusive of Lessee's modular furniture, and cabling, at Lessee's sole cost and expense, on two (2) mutually agreed upon floors (other than the first floor) 150 days prior to the Rent Commencement Date and provide a Temporary Certificate of Occupancy on such floors no later than March 27, 2015. Any delay arising out of Lessee's or Lessee's contractor's installation of the modular furniture shall be deemed a Lessee delay.

(h) Lessee reserves the right of inspection and may reject space based on the Premises not being constructed substantially in accordance with the Construction Plans. In addition, any adverse building conditions, including but not limited to general cleanliness, appearance of carpet or tile, grounds, finished interiors or exteriors, odors, pests, insects, or other problems relating to improper extermination or any other condition that would create unsanitary, unattractive or unsafe conditions, will be addressed as part of the punch list.

(i) As a condition of occupancy, Lessor certifies that the leased space contains the minimum usable square footage specified in the lease contract.

()) Lessee shall have the right to survey and inspect Property during the construction pracess to ensure the leased space complies with all requirements as set forth in this lease agreement.

(k) Prior to occupancy, Lessor shall thoroughly clean the leased Premises. Cleaning operations shall include, but not be limited to, the following:

1. Removal of non-permanent protection and labels. 2, Polish glass of all windows and doors. 3 Clean exposed finishes. 4. Clean all mirrors. 5 Remove al! waste and debris. 6 Clean light fixtures and replace dimmed or burned out light bulbs. 7 Sweep and wash paved areas as needed.

Clean yards and grounds.

9. Vacuum all carpeted areas. 1 0. Wax and polish all hard surface flooring. 11. Clean blinds.

() The Lessee may, upon written notice to the Lessor at least 90 days prior to termination of this lease or any extension, remain in possession of the leased Premises for a period specified in the notice, not to exceed 180 days. The Lessee shail pay the Lessor for each month or part of a month, a pro-rata sum equal to the Monthly Rent in effect at the termination of this lease for the space occupied by the agency during this period.

(m) Lessor shall provide, at Lessor's expense, access to all utilities services, meters, and connections necessary for the proper and intended use of the space. These utilities include telecommunications facilities, continuous hot and cold water, wastewater, electricity and natural gas, if required for heating and or cooling.

(n) UTILITIES shall be paid by LESSOR.

Utility bills for telephone, data transmission, and telecommunications will be paid by the Occupying Agencies. The Occupying Agencies' normal weekly hours of operation shall be 7:00 a.m. to 7:00 p.m., Monday through Friday, and 7:00 a.m. to 12:00 noon on Saturday. At Lessee's reasonable request, Lessor shall also make available all utilities at other times necessary at an hourly reimbursement rate based on Building Owners and Managers Association International Page 11 of29 Rev. 11/12

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Lease # 20392 Austin (BOMA) standards, to be provided by the Lessor to the Occupying Agencies prior to award of the Lease. (Currently estimated to be $25.00/hr for OT HVAC)

(0) JANITORIAL SERVICES AND SUPPLIES shall be paid by LESSOR.

LESSOR shall provide JANITORIAL SERVICES AND SUPPLIES, services shall include:

A. Ona Daily Basis (Monday through Friday: no earlier than 5: 00p.m. and must be completed by 7: 00a.m. the next work day): 1. Vacuum, sweep and/or dust mop all floors and vestibules. 2. Detergent mop, rinse, and dry all non-carpeted floors; vacuum carpets and floor rugs;

and spot clean carpet and floor rugs as necessary.

3. Spot clean around light switches and door levers. 4. Ciean and disinfect ail restrooms, urinals, toilets, wash basins and drinking fountains. 5. Empty and clean all restroom receptacles. 6. Clean and refill all restroom dispensers. 7. Empty and clean waste baskets and place refuse in proper container. Replace trash can and waste basket liners.

8. Thoroughly clean break room(s), with cleaning to include, but not limited to, wiping table(s), counter(s), and sink(s).

9. Remove all refuse from building and place in proper container(s). 1 0. Set security alarm and lock the building after last janitorial employee is out of building,

if applicable.

B. Ona Weekly Basis:

1. Clean all baseboards and door frames. 2. Clean and wash all entrance doors. 3. Perform dusting on desks, files, etc.

C. Ona Monthly Basis:

1. Perform dusting on all partitions, doors and window ledges. 2. Brush down ail walls, ceiling vents and light fixtures. 3. Clean and wax all desks, if requested by the occupying agency/ies.

D. On a Semi-Annual Basis:

1. Steam clean all carpet and floor rugs. 2. Non-carpeted floors to be waxed or buffed. 3. Clean fluorescent light lenses and diffusers when needed and/or as requested by Lessee.

4. Wash all windows, blinds, glass doors, glass partitions, etc.

E. Should the Lessee exercise its right to assume janitorial services, the Lessor will continue to provide and pay for the following services: 1. Exterior of windows washed twice yearly. 2. Daily sanitization of restrooms with germicidal detergent, and restocking of soap and paper products for restrooms that are not within the occupying agency/ies space and for their exclusive use.

(p) Lessor shall provide and install labels for all individual electrical circuits in all electrical breaker/fuse boxes.

(q) Lessor shall be responsible for furnishing appropriate outside trash and refuse receptacles and for the removal of trash and refuse from the Premises.

(r) Lessor shall maintain the exterior of the building and adjacent grounds in an appropriate manner.

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Lease # 20392 Austin Lessor agrees to make diligent efforts to landscape with Texas flora. All grass, trees, shrubbery and other landscaping must be maintained on a regular basis. Water used by Lessor for landscaping and/or decorative purposes shall be paid for by Lessor.

(s) The Lessor shall provide monthly interior and quarterly exterior pest extermination services. Any extermination service must be performed after normal business hours.

(t) Lessor shall have building maintenance personnel available to respond to routine calls within twenty-four (24) hours and emergency calls within four (4) hours. "Emergency" repair or maintenance shall include, but not be limited to, situations involving the air conditioning, electrical, plumbing, roof leaks, disruption of water-delivery to or drainage from any portion of the plumbing system, access into and out of the leased space, and environmental control. Lessor shall, at a minimum, acknowledge emergency calls within two (2) hours.

(u) Space to be occupied under this lease shall be designated a "non-smoking area".

(v) Lessor shall provide off-street parking for §48 vehicles of which 181 shall be in the parking garage.

Parking must be under the direct control of the Lessor and must be located within a reasonable distance of the entry to the lease space. See agency specific requirements for parking.

(w) Lessor shall furnish and maintain exterior lighting for the building, connecting walkways and parking area(s) as necessary for appropriate security. The light fixtures shall be equipped with a light level-sensing device that will operate the units automatically. Lessor shall provide a minimum level of illumination to comply with normal business standards. Lessor shall pay all utility costs associated with exterior lighting.

(x) Cost of furnishing and installing light fixtures at inception of lease and replacement light bulbs shall be at Lessor's expense.

(y) Exit lights, shall be provided to the outside of the building in accordance with applicable codes.

Electric and/or luminous directiona! arrows shall be strategically placed to identify the way leading to the outside.

(z) Lessor shall provide an emergency lighting system for one and one-half (1-1/2) hours of illumination in the event of failure of normal lighting.

(aa) Each room and area shall have a fight switch.

(bb) All lighting and electrical accessories shal! comply with all Municipal, County, State and Federal ordinances, rules and regulations for any new construction. All electrical work shall conform to the standards and requirements of the latest editions and applicable sections of the National Electrical Code (NEC) Handbook. All tighting fixtures shall have light diffusing panels or elements. Fluorescent lighting fixtures shall have energy efficient ballasts.

(cc) Lessor shal! provide all life safety equipment, including but not limited to fire extinguishers and smoke alarms, in accordance with the requirements of all applicable municipal building codes. In the absence of a local municipal code, Lessor agrees to comply with minimum requirements as set forth by the International Building Code and the Life Safety Code, as published by the National Fire Protection Administration.

(dd) Lessor shall provide access to telecommunication and automation service providers under contract ta the occupying agencies at appropriate times during construction.

(ee) Lessor shall not unreasonably withhold the right of the Lessee to install a security system in the lease space, as requested by the Lessee. The security system shall remain the Property of the Page 13 of 29 Rev. 11/12

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Lease # 20392 Austin Lessee or occupying agency/ies and may be removed at the end of the lease term.

(ff) All exterior doors shall be keyed with non-duplicating keys. Lessor shall furnish keys, individually numbered, as requested by Lessee. All exterior exit doors shall be solid core doors (where applicable) and equipped, unless otherwise required by code, with deadbolt locks with a minimum one-inch throw bolt. All door hardware and automatic door closers shail be of sufficiently sturdy construction to ensure security.

(99) All offices and work areas shall have finished ceiling surfaces, unless otherwise approved by Lessee. Broken or stained acoustical tiles shall be replaced by Lessor in a timely manner. Ceiling tiles must be of sufficient quality and weight to not become dislodged due to the opening and closing of doors.

(hh) All demising walls between Lessee space and other tenant space shail be extended from wall to the deck above the finished ceiling at Lessor's expense.

(i) The location of the HVAC unit(s) shall not unduly inconvenience the occupying agency, either due to maintenance requirements or noise levels. Lessor shail furnish a cost efficient central heat and cooling system. The heating and cooling temperatures shail be maintained in accordance to meet the goals of the Energy Management Plan Guide as set forth by the State Energy Conservation Office or TEC. The building must have a mechanical system that provides an indoor environment that is healthful, comfortable and free of objectionable odors. The heating, air conditioning and ventilation system shall comply with the requirements of the latest American Society of Heating, Refrigeration, and Air Conditioning (ASHRAE) Standards for Ventilation for Acceptable Indoor Air Quality (currently ASHRAE 62-1989) and the latest ASHRAE Standards for Thermal Environmental Conditions for Human Occupancy (currently ASHRAE 55-1992). Forced air cooling and heating shall be ducted and vented throughout the space to provide the most efficient manner of operation and occupant comfort. Conditioned air shall be vented into each room and area with the exception of closets. Thermostats shall be provided as necessary to control conditions throughout the leased space. Numbers and locations of thermostats and associated zones or equipment shall accommodate all internal and external loads to provide uniform temperatures throughout the space. HVAC controls/thermostats shall have locking covers and one master key or taol shal! be provided te the Occupying Agency. Lessor is responsible for balancing the HVAC system.

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296

Lease # 20392 Austin EXHIBIT B1

AGENCY SPECIFIC REQUIREMENTS & ROOM SCHEDULE Agency Names(s): HHSC Current Lease # and/or Location: 20085 and 10292 revised 02/20/14

1. Public bus transportation, if such service is provided within the city, is preferred to be within 450 feet of the entrance to the facility site and there must be an accessible route from the property line to the accessible entrance to the building as prescribed in TAS. Any such accessible routes shail be covered with a hard surface material such as concrete, asphalt paving, or comparable surface material.

2. Exterior Signage: Lessor shail be responsible for the exterior sign. For collocated offices, it shail read, Office of Inspector General. The Lessor will coordinate exterior signage appearance and placement on the Building eyebrow

interior Signage: For multi-tenant buildings Lessor shall provide a central directory indicating the location of each occupying agency and shall update the signage within a reasonable time of request from the occupying agency. Interior signage will be more specific, i.e. Health and Human Services Commission, Department of Aging and Disability Services, or Department of Family and Protective Services and so on. Lessor shall be responsible for numbering each room or area within the leased space with TAS compliant signage as specified by the agency.

3. Parking: Lessor shall provide off-street parking spaces. Parking must be under the direct control of the Lessor and must be located within a reasonable distance of the employee entry to the lease Space, as determined by Lessee. All parking spaces shail be in close proximity to the proposed building. Accessible parking spaces shall be located as prescribed in TAS. The size of nonhandicapped parking spaces shall be in accordance with city code requirements or in the absence of a city code at least 50% of the spaces shalt accommodate a full size car. The parking area shall be covered with a hard surface material that is in new or like-new condition and shall drain as to prevent water accumulation if not required by city codes. The lessor shall provide and maintain all parking lot striping. The Lessor shall provide and maintain the parking area in good condition and state of repair and parking area shall be kept clean at atl times. Lessor shall furnish exterior lighting for the building and parking area necessary for security and shall keep lighting in good operating condition. The light fixtures shall be equipped with a light level sensitive device that will operate the units automatically. Lessor shall provide a minimum of five foot-candles of illumination. Lessor shall provide 12 reserved parking spaces within the north garage.

4, Agency prefers contiquous space within a single building. Other space arrangements subject to approval by TFC to ensure occupying agency needs are met.

5. Multi-story building shatl be equipped with 2 automatic elevators, with automatic leveling. 6. Lessor shall provide adequate access for freight loading and receiving. 7. interior Doors:

All doors shali have door stops. Interior door(s) from the client waiting room shall have automatic door closers. All restroom doors will have automatic door closers.

8. Keyed Locks: The following rooms/doors shall have separately keyed locks provided by the fessor.

e Exterior doors to the leased premises e Supervisor/Manager office(s) as identified on the room schedule e Storage rooms as identified on the room schedule 0 Janitorial Closet(s)

2 keys shall be furnished for each separately keyed lock. Keyed system will require a Master Lock systern(s) with Grand Master lock system.

1

$. Client Waiting Area / Reception Area:

Lessor shall furnish chilled water drinking fountains. Drinking water fountains must be located In the Client Waiting Room or be accessible to the Client Waiting Room from a public corridor.

10. Client Waiting Area / Reception Area:

Interior door(s) leading from the client waiting area into the office areas shall have a keyless release button(s) mounted where directed by the agency.

11. Client Waiting Area / Reception Area:

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Each door leading from the waiting area to internal haltways within the office area must have a safety ¢glass view as designated by the agency.

12. Reception Area:

A panic alarm shall be installed with 1 contro! switch/button(s) located at the reception area. The control switch/button shail be positioned out of sight beneath the work surface of the workstation/desk(s). A sufficient number of horns/buzzers shall be installed so that when the panic alarm is activated there will be a sound level of not less than 15 dB or more than 25 dB throughout the employee work areas. The control switch/button must have the capability to send a single short alarm or a constant alarm.

13 Client Waiting Area Customer Service Counters:

A locking sliding laminated safety glass window shall be installed in the opening at the customer service counter. The window shall be 30° wide by 48" high. All openings shall have non-corrosive trim.

14. Electrical:

The agency will designate the locations of equipment and electrical outlets. Lessor shail provide:

e Electrical service to accommodate vending machines as specified in these agency specifics.

s Structural support and electrical service for the following agency-provided equipment: 3 TVs), and 3 other audio visual equipment units as specified by the agency at locations to be determined by the agency. Installation of TVs and other audio/video equipment, including hangers, is the responsibility of the agency.

15. Modular Electrical:

Lessor shall provide electrical service for the agency's modular furniture. Unless expressly permitted by the agency, connection to the modular furniture shail be made above the ceiling, through power poles that are part of the modular furniture system. (Note: Agency's modular furniture vendor shail be responsible for installation of said power poles. Lessor shall be responsible for ceiling tile cuts for agency-provided power poles.) Electrical service shall include standard 120-volt service for small office equipment and task lighting, as well as dedicated 120-volt service for computer equipment. Generaily, each modular cubicle shall have two (2) standard 120- volt duplex outlets and one (1) computer-dedicated 120-volt duplex outlet. (The outlets are part of the modular furniture system.) For planning purposes, Lessor shall assume that a power pole shall service no more than four (4) modular cubicles. Locations and distribution of modular cubicles may require that a power pole service less than four (4) cubicles. In any event, Lessor will be responsible for providing and connecting electrical service to all agency-provided power poles and/or whips. Lessor shall distribute electrical service so there will be no more than six (6) standard duplex outlets per circuit and no more than six (6) computerdedicated outlets per dedicated circuit. (See Attachment A for modular furniture dimensions and electrical requirements.)

16. Conference and/or Training Room(s)

Lighting: Each entrance shall have light switch to activate the main fluorescent lighting. In addition

a

to the main lighting, Lessor shall provide sufficient recessed lighting controlied by a dimmer switch to provide evenly distributed lighting levels up to 50 foot-candles when the primary fluorescent lights are off. All special feature lighting, etc. switches shalt be located together at the front of the room and there shall be one recessed light fixture at the front center connected to a switch for control of this fixture, independent from the primary fluorescent lighting. HVAC: Room(s) will have a separate HVAC thermostat control and will require cooling for the planned occupant load of 20 trainees and trainers.

17. Conference and/or Training Room(s):

A folding partition shal! be provided to divide the room(s) into two sections. Partitions shall be of such type as to achieve a minimum 40 STC rating.

18. Automation Training Room(s): Automation training room lighting will be provided as follows.

Each entrance shall have a light switch to activate the main fluorescent lighting. in addition to the main lighting, Lessor shall provide sufficient recessed lighting controlled by a dimmer switch to provide evenly distributed lighting levels up to 50 foot-candies when the primary fluorescent lights are off. All special feature lighting, etc. switches shall be located together at the front of the room and there shail be one recessed light fixture at the front center connected to a switch for cantral of this fixture, independent from the primary fluarescent lighting.

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HVAC system shail be separately zoned with its own thermostat and designed for an occupant load of 20 people, 20 computers, 0 printer(s), and 0 multi purpose device (device includes copying, printing, scanning and faxing).

19. Telephone/Data Closet:

A The room location should be towards the interior of the facility and as near the "core" of the building as possible with no windows. The room must be free from static, magnetic disturbances, and electrical emanations from transformers, electrical switchgear, and fluorescent lights. If IDF rooms are also required, these will be placed one per floor or as designated by the occupying agency.

Lessor shall maintain an ambient room temperature between 65 and 75 degrees Fahrenheit, with relative humidity between 40% and 50%. Lessor shall provide and maintain an air conditioner that is independent of the building HVAC system. This will provide A/C for 24 hours per day, 7 days week. (See Attachment 83 for a list of agency

a

equipment.)

C The room(s) must not be located under or near water or steam pipes. If local codes require sprinklers in the room(s), heads must be high temp and cages are recommended to prevent accidental discharge. Drip pans may be advisable. HVAC units of any kind should not be mounted directly above the room(s) or on wails that also contain/share proximity to HHSC/vendor network and/or phone equipment.

O All Telephone/Data electrical cutlets must be a dedicated circuit and include isolated grounds for the data demarcations, local area network equipment, and telephone equipment.

E Lessor shall provide evenly spaced electrical outlets in the LAN/Telephone room with the following specifications:

a Two "quad" §-15/20R T-slot receptacte and two 120-v NEMA L5-30R 2P 3W receptacles (for specialized UPS Systems) on wall marked for telephone and/or LAN demarcation.

a Two "quad" 5-15/20R T-slot receptacle outlets on wall marked for LAN network equipment.

s One 2-slot 5-15/20R T-slot receptacle outlet for each identified secondary IDF room. s Other (please specify):

F Lessor shall provide two conduits: a 3"diameter conduit for telephone service and a 1"diameter conduit for the data circuit both from the access point on building exterior to the facility telephone company room and on to the occupying agency(s) telephone/data closet ending at the D-marc termination noted for the agency(s) plywood designated for the extended D-marcs. Sufficiently sized conduit (each) for voice and data drops will be installed from the telephone/data closet to the occupying agency(s) telephone/data extended D-mares.

G Also required are two #6 solid ground wires attached to a building ground; one is to be installed at the data demarcation point and the other at the telephone demarcation point These must be located close to the occupying agency's voice and data equipment.

H Lessor shall provide and mount 2 sheet(s) of 4 ft. X 8 ft. %" fire retardant grade plywood in the Telephone/Data Closet and IDF room(s) if needed, at a location to be determined by the occupying agency.

20. Break Room:

Each Break room will be equipped with the following equipment to be provided by the agency:

3 Refrigerators 3 Vending Machines 3 Microwaves 1 Coffee Pots

Counters: Break Room countertops should have cabinet space above and below for storage. A standard double sink with a lever handie faucet, hot and cold water and grbage disposal will be Page 17 of 29 Rav. 14/12

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Lease # 20392 Austin

installed in the counter sink. Countertops should include space 24° high, 18" wide and 19" deep for each coffee pot indicated above.

Cabinets: Bottom cabinets shall be 34" high, 24" wide, have drawers at the top with cabinet space underneath with two shelves (including bottom of cabinet). Knee space shall be provided below the sink for handicapped accessibility as prescribed in TAS. There shall be enclosed wall cabinets above the lower cabinets with three shelves {including bottom of cabinet and two adjustable shelves). Upper cabinet shall be located 20" above lower cabinet. Shelving shall be provided far the number of microwaves indicated above.

Lessor shail install 1" x 8" hardwood chair rail around the perimeter of the room. Chair rail should be at a height designated by the agency.

21. Lactation Room: (for offices with 75 or more staff)

A. Room shall have a plastic laminate countertop with a small utillty-type sink deep enough fo wash bottles and pump parts, and a gooseneck faucet with hot and cold water. A 30-inch wide clear knee space shail be provided beneath the counter along with a bottom cabinet for storage of cleaning supplies and paper towels. Counter shall be a minimum of 20 inches deep and wide enough to provide an adequate work surface for a pump and bottles.

B. 120-valt duplex outlets shall be provided on twa walls and above the counter.

22. Rest Rooms:

Staff Rest Rooms shail be located within the office space. All restrooms shall have a wall mounted baby changing station. Rest room shall have lever handle faucets with hot and cold water and paper towel dispensers. Rest room fixtures will be commercialgrade.

23, Janitor Closet(s) must have a commercial grade floor mounted mop sink with a minimum 24" X 24"

X 10" (depth) and commercial grade mop sink faucet with hot and cold water.

24. Flooring:

Non-slip VCT flooring shall be provided in the following rooms/areas: Restrooms, break rooms, janitor closet Lessor shall provide commercial grade carpet tile (24" x 24°) in open areas where modular stations will be installed. If fessor does not provide carpet tiles per this requirement then lessor accepts responsibility for the costs of moving furniture and equipment during carpet replacement.

All other rooms/areas may have roll carpet.

25, Normal working hours for the occupying agency(s) are 7am to 7pm, Monday thru Friday and 7am to 12 noon on Saturday. This office is anticipated to work additional hours outside of this schedule. For full service leases the lessor will provide TFC an hourly rate for keeping the building open for business.

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Lease # 20392 Austin

HHS Modular Furniture Dimensions & Bectical Requirements

6x8 workstation 8x8 workstation 108 workstation 48 sq. ft. 64 sq. ft. 80 sq. ft.

a6? Nig Pore:

FETS ae

Attachment A

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Attachment B Telephone/Data Closet Equipment List

Power Consumption Heat BTu/Hr Watts per Total total watts x Equipment unit Watts 3.41 Dell PowerEdge R510 Servers (Dual Power Supplies) 1,500 10,500 35,805 Dell PowerEdge 830 Server 420 420 1,432 Dell PowerEdge 2900 Servers (Dual Power Supplies) 930 2,790 9,514 Dell PowerEdge -1320 Servers (Dual Power Supplies) 1,500 4,500 15,345 Dell PowerEdge 2800 Servers (Dual Power Supplies) 930 1,860 6.343 Dell PowerEdge R310 Server (Dual Power Supplies) 400 400 1,364 Dell OptiPlex GX790 Workstations 250 750 2,598 HP LJ1320 Printer 340 340 1,159 Deil PowerEdge 1855 Blade Server Controller 2,100 2,100 7,161 Dell 2161DS KVMs 13 25 85 Dell PowerEdge 6400 Server (Dual Power Supplies) 640 640 2,182 Cisco ASA 5520 Security Appliances 190 570 1,944 Cisco 3750 Gigabit Switches 84 168 573 D-Link 24 port Gigabit Switch 19 19 65 APC Symmetra LX 11,200 11,200 38,192 Buffalo TS-QVH8.0TLIR6 86 86 293 Buffalo TSHO.OTGL/RS NAS 86 86 293 LG NAS N2B1DD2 44 44 150

totals 36,498 124,458

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HHSCOIG Austin Space Program Full Time Employees 431 Date 1/20/14 ~ Sie"

Heatth and Human Services Commission (HHSC) Office of Inspector General (OK) Inspector General 1 Director (Wilson) 1 180 180 Office 2 Exec Assistant 1 120 120 office; adj. to director 3 Dentist 2 120 offic 4 Physician 1 120 120 office 5 Research &bk Statistic Techs 11 80 880 system fumiture

Enforcement (ENF)

6 Director (Stick) j 140 140 office; 7 Speciaists-ChiefofStaff 1 120 120 office Admin Assist 1 80 system furmitura Data Analytics & Fraud Detection Unit (DAFDU)

9 Director (Stansbury) 1 140 140 offices; Data Analytics & Fraud Datection Unit 10 j Research Specialists 3 80 240 system fumiturera 11 Specialists -2 160 system fumiture General Investigation (GI)

12 Director (Vacant) 1 140 140 fice 13 Managers (Vacant / Vacant/ Compton/Vacant 4 120 480 offices ~

14 Managers (Neal /Olguin/ Boozer) 3 120 360 offices 15 Investigator (lead) 2 80 160 system fumiture; 16 Investigators 19 80 1,520 system funiture 17 Specialists 7 80 560 system fumiture 18 Staff Service Officer 80 80 system furniture;

«Admin. Asit. $ 64 182 system fumiture Medicaid Provider Integrity (MPi} 20 Director (vacant) 1 140 140 office 21 Investigator (lead) 1 80 80 system furniture; 22 Managers (Stevens) 1 120 420 offices 23 Nurses 12 80 960 system furniture 24 Investigators (lead) 15 80 1,200 system furniture 25 Investigators 45 80 3,600 system fumiture; 26 Admin. Assist. 2 64 128 system furniture, 27 Manager 4 120 480 office 28 Attorney 1 120 120 office

Operations (OPS)

29 Director (Henry) 1 140 140 office 30 1 w 84 system firrature;

Managed Care Organizations (MCO)

31 Manager (Dufiot) 1 120 120 Specialists 5: 80 80 system furniture Business Operations (Bus OPS) Director (Ble) 1 140 140 office [33 Page 21 of 29 Rev. 11/12

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Lease # 20392 Austin

34 Managers (Porter / Pietrzyk) 2 120 240 offices 35 Xerox Representative 1 120 120 office 36 Actuary (lead) 80 80 system furniture; 37 Actuaries 4 80 320 system fumiture; 38 Accountant 1 &0 System fumiture; 39 Financiai Analyst 1 80 80 system furniture; 40 Budget Analyst 1 80 80 system furniture; 41 Speciatists 480 system fumiture; 42 Property Manager 1 80 80 system fumiture; 43 Admin. Assist. (Receptionist) 0 8&8 system furiture; jocate staff in Waiting Room Center for Policy and Outreach (CPO)

44 Director (Santos) i 140 140 office 45 Specialist 1 80 80 system furniture; 46 Goverment Relations Specialist 1 80 80 system furniture, 47 Manager (Akhtar) 1 120 120 office 48 Nurse 1 80 80 system fumiture; 49 Training Specialist 1 80 80 system fumiture; 50 Specialists 4 80 320 sysiem furniture; 51 Manager (Nelson-Wernli) 1 120 120 office __ 52 Admin Assist. 1 64 64 system furniture;

CPO Hotline Nelson-Wemii's Group -

53 Customer Service Rep. (Lead) 4 Q 1 8'x 10° sys.fum; ocaie in hotline room 54 Customer Servica Reps 0 8-8 x & system fumiture; locate staff in hotline CPO Provider integrity Research (PIR) Nelson-Wemii's -

Group 55 Investigator 1 80 80 system furniture; 56 Specialist 1 80 80 system furniture; 57 Research Specialists 7 80 560 system fumiture;

Technology Analysis Development and Support (TADS)

58 Director (Dekneef} 4 140 140 office __

58 Manager (Clayton / Boardhurst) 2 120 240 office 60 Specialists 7 80 560 system fumiture; 61 Research Specialist 1 80 system furniture;

4

62 Specialist Dovers Group -

1 80° system em fumiture 63 Research Specialists Dover's Group -

8 80 640 system tem Business Anatysis and Support Services (BASS) Clayton's Group 64 System Analysts (Lead) 2 80 160 system fumiture: 65 System Analysts 9 80 720° system furniture Project Manager 1 120 120 office Research Analysis and Detaction (RAD)

67 Manager (Dover) 1 120 120 office Nurses 720 system furniture:

69 Research Specialists 1 80 system furniture;

Compliance (COMP)

70 Director (McDade) 140 140 office 71 Admin. Assist. 1 64 64 system furniture;

Audit (AUD)

72 Director (Vercolen) 1 140 140 office 73 Admin. Assist. 1 64 64 system furniture: 74 Auditors (Lead) 2 80 160 system furniture; 75 Auditors 4 80 320 system furniture;

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76 ' Managers (Gauntt: Lane; Rhett) 3 120 360 offices 77 Admin. Assist. (Rhett's Group) 1 64 64 system fumiture; 78 Auditor (Lead) 1 80 80 system furnifure; 79 Auditors 12 80 960 system furniture; 80 Specialists 2 160 system furniture;

Madicaid / CHIP Audit (MEDUCHIP) Lane's group 81 Auditor (Lead) 1 80 system furniture; 82 Auditors 720 system furniture;

Medical Review Audit (MED REV) Gauntt's group Auditors 480 system furniture; Admin. Assist. 1 80 system furniture; Nurses :

6 480 system furniture;

Hospital Audit (HOSP)

86 Managers (Evbayiro; Ofiva) 2 120 240 offices 87 Auditors (Lead) 2 80 160 system furnture; 88 Auditors 22 BO 1,760 system furniture; &9 Admin. Assist. 1 54 64 system fumiture;

TWIG Vendor Monitoring (WIC VEN)

80 Director (Hoftman-Knobloch) 140 140 office 81 Auditors 80 640 system furniture; 82 Manager 1 120 120 office Quality JRev - UtiiRev%UR)

83 Manager (Carlaon/Vacant} 2 120 240 office Nurses, 8 640 system fumiture;

95 Specialists 6 80 480 sysiem furniture;

tT Auditor 80 system furniture;

97 Nurses Hoffman-Knoblich group 3 80 240 system furniture;

Lock-In Program (LP)

98 Nurses 2 80 1 60 system fumiture; 95 Speciaiist 1 80 80 system furniture;

Internal Affaire (1A)

100 Director 1 140 140 office 101 Admin.Assist. 1 64 64 system fumiture; 102 Managers 120 720 offices 103 Investigators (lead) 5 80 400 system fumiture; 104 investigators 16 80 1,280 system furniture; 105 Investigators (Forensic Lab) 3 0 (1-8x 10) &(4-8x8) system furniture; locate staff in fora lab 106 Specialists 1 80 80 system furniture; 107 Admin. Assist. 2 64 128 system furniture; 108 Research Specialists 4 80 320 Sysfam furniture:

Chief Counsel (CC)

09 Director (Sparks) 1 140 140 fo #2, #3 110 Attorney 1 120 120 office; adj. to director 111 Specialist t 80 80 system fumiture;

Sanctions (SANC)

112 Director (Pettigrew) 1 140 140 office; adj. to 113 Attomeys 10 120 1,200 offices; adj. te 114 Specialists 6 80 480 system fumiture;

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115 Accountant (Lead) 1

7

80 80 system furniture 116 Accountant 1 80 80 system furniture; 117 Investigators 6 80 480 system fumiture: 118 Admin Assist. 1 64 64 system fumiture; 119 Legal Assistants 52 80 160 system fumitura

HHSC IT 120 Contractors 3 80 160 system fumiture

Support Areas 2 Waiting Room 1 750 750 at entrance; includes; (4 -8%8' cubicies) for 3 1recaptic 1 guard and room for mail processing 122 Open File Area 1 80 60 adjacent fo COMP- (LP) Staff 123 Open File Area 1 100 100 adjacent to COMP- (UR) Staf 124 Open Fife Area 1 70 70 adjacent to COMP- (WIC-VEN) Staff 125 Office Machine Areas 16 45 720 distribute equally to all staff 126 CPO Hottins Room 4 1,000 1,000 inciudes staf and workspace in hotline staff: adj. to € CPO §taff 127 IA Forensic Lab 1 850 850 location of Forensic staff adj. to {A staff "

128 lA Law Enforcement Storage Room 1 500 500 adjacent near iA 129 DAFDU Room 1 1,000 1,000 adjacent to DAFDU staff 130 Interview Rooms 5 120 600 edjacont to (2 at GI & MPI staff, 2 at IA staff. 1 near f, lobb 131 Supply / Storage Room 1 200 200 Central to ail staff 132 IT Storage Room 120 120 adjacent to IT staff 133 MPI Law Enforcement Storage Room 500 500 adjacent to MPI staff 134 Enclosed Fila Room 1 600 600 adjacent to CC (SANC) staff -

135 Enclosed File Room A 700 700 adjacent to OPS (Bus OPS) staff -

138 Enclosed File Room 1 120 120 Securéd: adjacent 1to OPS - (Bus OPS) staff 137 Enclosed Fite Room 1 390 380 adjacent to OPS- (RAD) staff 138 Enclosed File Room a 390 390 Secured; adjacent to OPS- (CPO-PIR) staff 139 Enclosed File Room 1 850 850 Secured; adjacent to ENF-(GI) staff ~

140 Enclosed Fite Room 1 384 384 Secured: adjacent to COMP staff 141 Enclosed File Room 230 230 Secured; adjacentto COMP- (UR) staff 142 Enclosed File Room 1 480 480 Secured; adjacent to IA staff 143 Records Storage Room 1 100 100 Secured; adjacent fo ENF- (MPI) staff 144 DPS/TLETS Room i 90 90 Secured: adjacent to [A staff 145 Tete/Data Room 1 880 880 central 146 Audit Training /Lab Rooms 2 150 300 Compilance Staff 147 Audit Training Lab 1 150 150 adjacent to Compiiance Staff 148 Wellness Room 1 4 224 224 149 Hearing Rooms 432 2,160 near Sanctions/Chiaf Counse! 150 Conference Room (Smal) 2 256 512 Central to alf staff _

151 Conference Room (Small) 2 160 320 Central to all staff 152 Conference Room (medium) 1 432 432 Central to aff staff 153 Conference Room (extra large) 1 2,000 2,000 Cantral to all staff 15 Training Storage 1 $0 90 adjacent to conference and training reom 155 Automation Training/Conference Room 1 520 520 Central to all staff 156 Conference Room (large) 2 520 1.040 Central to all staff .

157 Conference Room (medium) 2 400 800 Central to aif staff 158 Conference Room (small) 2 200 400 Central to all staff 159 Lactation Room 1 80 80 near employee restrooms

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160 Break Room 600 2,400 distribule equally to all staff 161 Janitors Closet 60 120 162 Vestibule 4] 60 exterior, unconditioned; al entrance {No circulation included)

163 Loading Dack 100 100 exterior, unconditioned; at rear (No circulation includ 164 Evidence Storage Room 10,000 10,000 Secure; conditioned; adjacent fo #163 (No circulation included)

185 General Investigation (Gl) Case Files Storage Room 9,000 9,000 Secure; conditioned; adjacent to Gi staff (No circu {

included)

166 Employees Restroom O per building code Sub- 78,412 total Open Plan Circulation 50% 14,235 Built-out Circulation 30% 9,199 Tota! Circulation 23,434 O1G 101,846 SF HHSC 20,277 SF Total 122,123 SF REST ROOMS TO BE PROVIDED BY LESSOR IN ACCORDANCE WITH LOCAL BUILDING CODE AND ARE NOT INCLUDED IN THE USABLE SQUARE FOOTAGE OF THIS LEASE.

Parking requirements: Standard Parking Spaces §25 Reserved 12 ADA/TAS 41 548

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EXHIBIT C

GENERAL CONSTRUCTION NOTES

Lessor shall design, in consultation with Lessee, and construct the Premises based upon all of the specifications outlined in this Lease and Exhibits as well as the following criteria at no additional cost to Lessee. Lessor understands that Lessee has no provision for payment of additional construction costs. Any unforeseen costs associated with compliance herein shall be at Lessor's sole cost.

Lessee, not the Occupying Agency of the lease space, has sole authority for the initiation of any changes or modifications (Change Order) to the scope of work contained in this lease.

Should any Occupying Agency cause or request changes by the Lessor to exceed the scope of work described below, Lessor shall first obtain written and signed authorization from the Texas Facilities Commission prior to being obligated to proceed with the work.

1. The space to be occupied must comply with ali applicable federal, state, and local laws, statutes, ordinances, codes, rules and regulations. (n lieu of applicable local building codes, the International Building Code will apply. Acceptance of the space does not exonerate the Lessor from meeting all the requirements. No requirement may be waived by the Commission or the Occupying Agency.

2 . The Leased space shall meet all zoning and building code requirements of the Local Government(s) in which the space is located. Lessor shall comply with all Local Government(s) rules and regulations regarding land development including, but not limited te, subdivision requirements, zoning ordinances, site reviews, plan reviews, development and building permits, inspections, and certificates of occupancy. \f Lessor seeks or acquires an exemption from such rules and regulations regarding land development without TFC approval, such action shall be grounds for termination of the lease by the Texas Facilities Commission in accordance with paragraph 7(k) of the State Lease contract.

3 . The Texas Accessibility Standards (TAS) requirements for persons with disabilities are administered by the Texas Department of Licensing and Regulation (TDLR), Architectural Barriers Division, P. ©. Box 12157, Austin, TX 78711, Telephone: 512-463-3211; web site http://www.license.state.tx.us.

4 . Lessee reserves the right to survey or inspect construction/renovation to ensure space complies with all requirements at any time.

5 . Any new construction for the Premises shall be constructed by Lessor to conform to New Construction Notes in Exhibit C1 and Lease Requirements outlined in Exhibit B and B1.

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EXHIBIT C1

NEW CONSTRUCTION NOTES

Initial New Construction: If requested by Lessee, Lessor agrees to construct, in accordance with the New Construction specifications outlined in this Exhibit.

1. WALLS (a) All new interior walls to be taped, bedded, textured and painted. Existing walls to be repainted or cleaned to a like new condition. Color to be selected by tenant.

(b) Provide ceramic tiles in Restrooms and Shower Room if applicable. (c) New demising walls shalt be full height to structural deck with insulation and fire caulking at all penetrations.

2. FLOORS (a) Provide new anti-static VCT, locations to be determined by Lessee. (0) Provide new building standard commercial grade carpet throughout, subject to Lessee approval unless noted otherwise, color to be approved by Lessee.

(c) Provide new 4" rubber cover base throughout, color to be selected by Lessee.

3. CEILING Ceiling grid to be minimum 9'-0" Above Finished Floor (A.F.F.) with new matching 2' x 4' or 2' x 2' ceiling tiles.

4. DOORS & HARDWARE (a) Use building standard doors, frames, and lever hardware throughout. (b) Re-paint or re-finish exterior doors and touch-up to like new condition. (c) All entrance, exit and interior doors to meet ADA/TAS required code.

ELECTRICAL (a) Lessor shail provide 120 voit electrical duplex wall outlets as follows: Walls in excess of twenty feet in length will require one every ten feet. A minimum of one in each hallway; hallways in excess of 50 feet in length will require one every 25 feet.

(b) Lessor shall provide ring and string for telecommunication and automation station wiring in walls, ceiling or power poles, as applicable. The Lessee anticipates the need for cable drops at every workstation, office and other areas per the room schedule as will be identified during the Construction Documentation preparation phase.

(c) Lessee will connect the furniture to the power and data drops. (d) Lessee shall provide cable. Lessor shall provide all necessary raceway, conduit or pathways per code and pull strings as necessary, to accommodate all work stations, offices etc. per Roam Schedule.

(e) Lessor shall provide conduit from access point on building exterior to the data/telecom IDF closet for telephone lines and data circuits.

(f) All branch circuit ground wires must be tied to a common ground at the distribution panel, to a service ground, or suitable building ground. The conduit must net be the sole means of grounding. The system neutral must be electrically isolated from the ground conductor except at the building ground

Page 27 of 29 Rev. 11/12

309

Lease # 20392 Austin

station. All branch circuits shall be on the same primary transformer. All dedicated circuits shall be identifiable by use of orange colored plates on the outlets.

(g) Provide adequate electrical for an 8-wire cube for all work stations. Provide j-

boxes in the ceiling to feed into power-poles when furniture is not adjacent to a wall or column.

(h) Lessor to provide 120-volt electrical duplex outlets: (these are approx. numbers for preliminary bidding) 1. (3) in each Office. 2. (4) in each Storage/Break Room 3. (1) in each hallway every 25" 4. (2) in Wait Room 5.. (4) in Reception area 6.. (1) at each ceiling mounted. J-box at each exterior door for tenant provided security system.

(i) Provide sufficient dedicated quad. outlets @ LAN room te meet Lessee's requirements.

(j) Relocate to provide normal office lighting coverage. (k) J All electrical panels are to be labeled with circuits identified to all boxes to be used for power to furniture, equipment, etc.

(I) To the extent not covered above Lessor shall provide required electrical service to the furniture and equipment identified by the Lessee during the Construction Documentation phase.

(m) Wiring covered by molding carried across open floor will not be permitted. (n) Building to have standard lighting throughout. (2x4 florescent acrylic lenses or Parabolic desired).

6. MECHANICAL (a) Ail units will be cleaned to eliminate any debris in ail ducts. (b) Thermostats to be added or relocated shall be approved as to location by Lessee.

(c) Landlord Mechanical Contractor to balance HVAC system if new or redesign, reconfigure and re-balance the existing HVAC system as required and will provide a final report to Lessee.

7. PLUMBING (a) Provide hot and cold water in Break Room(s). (b) Provide grab bars as per ADA/TAS requirements, paper towel dispensers, soap dispensers, trash receptacles, sanitary napkin dispensers and toilet paper dispensers in all restrooms.

8. WINDOW TREATMENT (a) Provide new building standard window treatment if not existing. Provide blinds if there are no building standard window treatments.

(b) If existing, clean and or replace damaged blinds and window coverings to like new condition.

Page 28 of 29 Rav. 11/12

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Lease # 20392 Austin

MILLWORK (a) Provide upper and lower plastic laminate clad cabinets in break rooms. (b) Uppers to have (2) adjustable shelves and lowers to have (1) adjustable shelf.

10. ADA/ITAS (a) Provide opening below sinks to meet ADA/TAS. (b) Building must meet all ADA/TAS standards and regulations. (c) See required specs, if applicable, indicated on lease.

11. SECURITY Lessor shall provide conduit/wire pull to boxes located by Lessee for Lessee security system.

NOTE: Above items are subject to change if noted otherwise on TFC approved Construction Documents.

Page 29 of 29 Rev. 41/12

Chair Cf Executive Director Betty Reinbeck Harvey Hilderbran Commissioners Mailing address:

William D. Darby P. O. Box 13047 Virginia Hermosa Brant C. Ince f Austin, TX 78711-3047 Mike Novak Jack W. Perry (512)463-3446 Alvin Shaw www.tfic.state.tx.us

LEASE TERM AMENDMENT Lease: 20392 Austin

This Lease Term Amendment is made and entered into on this date, by and between the LESSOR, Broadmoor Austin Associates, and LESSEE, STATE OF TEXAS, acting by 4 -(7-{ -

and through the Texas Facilities Commission, for and on behalf of the occupying agency, the Health and Human Services Commission. Lessor and Lessee are parties to State Lease 20392 Austin dated August 22, 2014 (the "Lease") and hereby amend the Lease upon the terms and conditions set forth below.

The following dates in the Lease are amended as follows:

(1) In Section 3: "1*' day of August, 2015" is deleted and replaced with November 1, 2015".

"

(2) In Section 3: "315 day of July, 2025" is deleted and replaced with "October 31, 2025". (3) In Sections 3 and 7(i): "April 3, 2015" is deleted and replaced with "June 12, 2015". (4) In Section 6(f): "August 1, 2016" is deleted and replaced with "November 1, 2016". (5) In Section 6(f): "May" is deleted and replaced with "August". (6) In Section 7(i): "October 1, 2015" is deleted and replaced with "January 1, 2016". (7) In Exhibit B, paragraph (g): "March 27, 2015" is deleted and replaced with "May 27, 2015".

The Lease is hereby ratified and confirmed by the parties hereto, and every provision, covenant, condition, obligation, right, term, and power contained in and under the Lease shall continue in full force and effect, affected by this Amendment only to the extent of the amendments and modifications set forth herein. In the event of any conflict between the terms and conditions of this Amendment and those of the existing Lease, the terms and conditions of this Amendment shall control.

TEXAS FACILITIES Approved By: COMMISSION APPROVED: BROADMOOR AUST N ASSOCIATES

Veen Maes Peter Maass, Deputy Executive William D. Redd Director of Planning and Real Estate By: Fxecutive Vice President Management Division Printed Name and Senior Managing Director

cc: Tim Horn, Health and Human Services Commission Ginna Harris, Texas Department of Licensing and Regulation Regina Roberson, Texas Department of Insurance Fire Safety Inspections, State Fire -

Marshal's Office je

Texas Facilities Commission 312 Physical address: 1711 San Jacinto Bivd, Austin, Texas 78701 Planning and administering facilities in service to the State of Texas +

314

Chair Executive Director Betty Reinbeck Harvey Hilderbran Commissioners William D. Darby Mailing address:

P. O. Box 13047 Virginia Hermosa Brant C. Ince Austin, TX 78711-3047 Mike Novak Jack W. Perry xA (512) 463-3446 Alvin Shaw www.tfc.state.tx.us

LEASE EXTENSION AMENDMENT Lease: 20392 Austin

This Lease Extension Amendment is made and entered into on this date, 7-2 , by and between the LESSOR, BROADMOOR AUSTIN ASSOCIATES, and LESSEE, STATE OF TEXAS acting by and through the Texas Facilities Commission, for and on behalf of the occupying agency, the Health and Human Services Commission (HHSC-OIG). Lessor and Lessee are parties to State Lease 20392 Austin dated August 22, 2014, as amended by a Lease Term Amendment dated April 17, 2015 (as amended, the "Lease"), The Lessee hereby elects to exercise its option pursuant to the Lease, and the parties hereby extend the Lease upon the terms and conditions set forth below by mutual agreement.

The term of the Lease is extended for 12 months, from November 1, 2025 through October31,2026, for the leased premises comprised of 122,123 usable square feet of space at the same annual rate per square foot pursuant to the terms and conditions of the Lease, including the CPI adjustment. Substantial Completion occurred on June 22, 2015, and the Rent Commencement Date is November 1, 2015.

The leasehold improvements shall include the work shown in change orders requested by Lessee and approved in writing by Lessor ("Approved Change Orders"). The leasehold improvements shall also include any Additional Work to the premises requested by the Lessee by October 3t, 2016, and approved in writing by the Lessor at Lessor's sole discretion. Lessor shall pay for up to $560,000.00 of Approved Change Orders and Approved Additional Work. All costs of Approved Change Orders and Approved Additional Work in excess of $560,000.00 shall be paid for by Lessee.

All other terms and conditions of the Lease remain the same and continue in full force and effect. This Lease Extension Amendment is by mutual agreement between Lessee and Lessor. The Lease is hereby ratified and confirmed by the parties hereto, and every provision, covenant, condition, obligation, right, term, and power contained in and under the Lease shall continue in full force and effect, affected by this Amendment only to the extent of the amendments and modifications set forth herein. In the event of any conflict between the terms and conditions of this Amendment and those of the existing Lease, the terms and conditions of this Amendment shall control.

TEXAS FACILITIES APPROVED BY: COMMISSION APPROVED:

Peter Maass, Deputy Executive Broadmoor Austin Associates Director of Planning and Real Estate Management Division By:

Printed Name

cc: Tim Horn, Health and Human Services Commission Ginna Harris, Texas Department of Licensing and Regulation Regina Roberson, Texas Department of Insurance Fire Safety Inspections, State Fire Marshal's -

Office je

Texas Facilities Commission Physical address: 1711 San Jacinto Blvd, Austin, Texas 78701 Planning and administeringfacilities in service to the State of Texas+

Tab 2

GOVERNMENT CODE

TITLE 10. GENERAL GOVERNMENT

SUBTITLE D. STATE PURCHASING AND GENERAL SERVICES

CHAPTER 2167. LEASE OF SPACE FOR STATE AGENCIES

SUBCHAPTER A. GENERAL PROVISIONS

§ 2167.001. APPLICABILITY.

(a) This chapter applies to:

(1) office space;

(2) warehouse space;

(3) laboratory space;

(4) storage space exceeding 1,000 gross square feet;

(5) boat storage space;

(6) aircraft hangar space other than hangar space and adjacent space leased by the Texas Department of Transportation at Austin-Bergstrom International Airport and operated for the purpose of providing air transportation services for the State of Texas;

(7) vehicle parking space; and

(8) a combination of those kinds of space.

(b) This chapter does not apply to:

(1) radio antenna space;

(2) residential space for a Department of State Health Services or Health and Human Services Commission program;

(3) residential space for a Texas Juvenile Justice Department program;

(4) space to be used for less than one month for meetings, conferences, conventions, seminars, displays, examinations, auctions, or similar purposes;

(5) district office space for members of the legislature;

(6) space used by the Texas Workforce Commission;

(7) residential property acquired by the Texas Department of Housing and Community Affairs or the Texas State Affordable Housing Corporation that is

offered for sale or rental to individuals and families of low or very low income or families of moderate income;

(8) except as provided by Section 2167.007, space for a university system or institution of higher education;

(9) space leased by the Texas Veterans Commission to administer the veterans employment services program; or

(10) space for the Texas Department of Motor Vehicles.

§ 2167.0011. DEFINITION.

In this chapter, "commission" means the Texas Facilities Commission.

§ 2167.002. PREREQUISITES FOR LEASING SPACE.

(a) The commission may lease space for a state agency in accordance with this chapter and the agency's specifications if:

(1) state-owned space is not otherwise available to the agency; and

(2) the agency has verified it has money available to pay for the lease.

(b) In making a determination under this section that state-owned space is not available to a state agency, the commission must consider all reasonably available state-owned space in this state, regardless of whether utilizing state-owned space would require the agency to move all or part of the agency's operations to a different geographic location in this state.

§ 2167.0021. BEST VALUE STANDARD FOR LEASE OF SPACE.

(a) The commission shall lease space for the use of a state agency on the basis of obtaining the best value for the state.

(b) The commission shall adopt rules establishing guidelines for the determination of best value in a lease contract. In determining the best value, the commission may consider:

(1) the cost of the lease contract;

(2) the condition and location of lease space;

(3) utility costs;

(4) access to public transportation;

(5) parking availability;

(6) security;

(7) telephone service availability;

(8) indicators of probable lessor performance under the contract, such as the lessor's financial resources and the lessor's experience;

(9) compliance with the architectural barriers law, Article 9102, Revised Statutes; and

(10) other relevant factors.

(c) This section does not prohibit the commission from leasing space from the offeror that offers the space at the lowest cost if the commission determines that doing so obtains the best value for the state.

§ 2167.003. FIRST CONSIDERATION TO HISTORIC STRUCTURE.

(a) In leasing space for the use of a state agency, the commission or the private brokerage or real estate firm assisting the commission shall give first consideration to a building that is designated as a historic structure under Section 442.001 or to a building that has been designated a landmark by a local governing authority, if:

(1) the building meets requirements and specifications; and

(2) the cost is not substantially higher than the cost for other available buildings that meet requirements and specifications.

(b) When it considers leasing space for a state agency, the commission or the private brokerage or real estate firm assisting the commission shall notify each individual and organization that is:

(1) on a list furnished to the commission by the Texas Historical Commission under Section 442.005; and

(2) in the county in which the commission is considering leasing space.

(c) Repealed by Acts 2003, 78th Leg., ch. 309, Sec. 4.07(1).

§ 2167.004. LEASING SPACE FOR HEALTH AND HUMAN SERVICES AGENCIES.

(a) Notwithstanding any other provision of this chapter or of Subchapter C, Chapter 2165, the commission may not lease office space to serve the needs of any health and human services agency unless the Health and Human Services Commission has approved the office space for the agency.

(b) Repealed by Acts 2003, 78th Leg., ch. 309, Sec. 4.07(2).

(c) In this section, "health and human services agency" has the meaning assigned by Section 521.0001.

§ 2167.005. DELEGATION OF AUTHORITY TO STATE AGENCIES.

(a) The commission may delegate to a state agency, including an institution of higher education, the authority to enter into lease contracts for space if the commission determines that state-owned space is not available as provided by Section 2167.002.

(b) Any reports on the lease contracts made under this delegated authority shall be required annually.

(c) If information to be included in the report is also included in another report to be made by the institution of higher education to another state agency, the commission, the agency receiving the other report, and the institution of higher education shall enter into a memorandum of understanding concerning the information to be reported in order to enable the institution of higher education to provide the required information in the most cost-effective manner taking into account the costs to each affected agency.

(d) The commission may revoke a delegation of authority made under this section.

§ 2167.0051. CLASSROOM AND INSTRUCTIONAL SPACE.

(a) An institution of higher education may not lease classroom and instructional space unless the portion of the building to be used by the institution complies with the applicable standards and specifications under the architectural barriers law, Article 9102, Revised Statutes.

(b) An institution of higher education may lease classroom and instructional space through competitive bidding in accordance with Section 2167.053 or through competitive sealed proposals in accordance with Section 2167.054 or may negotiate for that space on making a determination that competition is not available and shall include provisions to obtain a lease contract for classroom and instructional space in accordance with Section 2167.055.

§ 2167.006. ELIMINATION OF BARRIERS TO PERSONS WITH DISABILITIES IN LEASED BUILDINGS.

(a) The commission may not enter a lease contract under this chapter unless it complies with the architectural barriers law, Article 9102, Revised Statutes.

(b) A state agency, including an institution of higher education, may not enter a lease contract under Section 2167.005 unless the agency complies with the architectural barriers law, Article 9102, Revised Statutes.

§ 2167.007. LEASING SERVICES TO STATE AGENCIES.

(a) This chapter does not prohibit the commission from providing leasing services to a state agency otherwise excluded from its requirements.

(b) Services performed under Subsection (a) are not subject to the interagency cooperation law, Chapter 771.

(c) The commission may establish a system of charges and billings to assure the recovery of the cost of providing services under Subsection (a) and may submit, after the close of each month, a purchase voucher or journal voucher to an agency for which services were provided.

§ 2167.008. RULES.

The commission shall adopt rules necessary to administer this chapter.

§ 2167.009. CONSIDERATION TO MILITARY INSTALLATION.

In leasing space for the use of a state agency, the commission or the private brokerage or real estate firm assisting the commission shall give consideration to a federally owned or operated military installation or facility.

GOVERNMENT CODE

TITLE 10. GENERAL GOVERNMENT

SUBTITLE D. STATE PURCHASING AND GENERAL SERVICES

CHAPTER 2167. LEASE OF SPACE FOR STATE AGENCIES

SUBCHAPTER B. PROCEDURES FOR LEASING SPACE; LEASE CONTRACT § 2167.051. LEASING SPACE FROM ANOTHER GOVERNMENTAL ENTITY.

Space may be leased:

(1) through an interagency contract from another state agency; or

(2) through a negotiated contract from:

(A) the federal government;

(B) a political subdivision, including a county, municipality, school district, water or irrigation district, hospital district, council of governments, or regional planning commission;

(C) a statewide Texas public retirement system in a commercial building that is completely owned, directly or indirectly, by the retirement system; or

(D) a children’s advocacy center established under Subchapter E, Chapter 264, Family Code.

§ 2167.052. LEASING SPACE FROM PRIVATE SOURCE.

(a) Space may be leased from a private source through:

(1) competitive bidding;

(2) competitive sealed proposals under Section 2167.054; or

(3) direct negotiation.

(b) The commission may negotiate for space on making a written determination that competition is not available.

(c) The commission shall use the method for leasing space that provides the best value for the state.

§ 2167.053. LEASING SPACE THROUGH COMPETITIVE BIDDING.

(a) When space is leased through competitive bidding, the commission shall determine the bid that provides the best value for the state after considering moving costs, the cost of time lost in moving, the cost of telecommunications services, and other relevant factors.

(b) The commission shall send to the leasing state agency:

(1) a copy of all bids received; and

(2) the commission's recommended award.

(c) If, after review of the bids and evaluation of all relevant factors, the leasing state agency's opinion is that the bid selected by the commission is not the bid that provides the best value for the state, it may file with the commission a written recommendation that the award be made to a bidder other than the commission's recommended bidder. The leasing state agency's recommendation must contain the agency's justification for its recommendation and a complete explanation of all factors it considered.

(d) The commission shall fully consider the leasing state agency's recommendation and, if it does not agree, shall notify the agency of its disagreement in writing. The leasing state agency and the commission shall attempt to agree on the award.

(e) If the commission and the leasing state agency do not agree within 30 days, all bids and pertinent documents shall be sent to the governor. The governor shall designate the bidder to which the award shall be made.

§ 2167.054. LEASING SPACE THROUGH COMPETITIVE SEALED PROPOSALS.

(a) The commission may lease space using competitive sealed proposals.

(b) The commission shall solicit proposals by publishing a notice of request for proposals in:

(1) the Texas Register; and

(2) a newspaper of general circulation in the county in which the space is to be leased.

(c) The commission shall open each proposal in a manner that does not disclose the contents of the proposal during the process of negotiating with competing offerors.

(d) As provided in a request for proposals and under rules adopted by the commission, the commission may discuss acceptable or potentially acceptable proposals with offerors to assess an offeror's ability to meet the solicitation requirements and to obtain the most advantageous lease contract for the state. The commission may invite a leasing state agency to participate in discussions and negotiations conducted under this section. After receiving a proposal but before making an award, the commission may permit the offeror to revise the proposal to obtain the best final proposal.

(e) The commission may not disclose information derived from proposals submitted from competing offerors in conducting discussions under Subsection (d).

(f) The commission shall provide each offeror whose proposal meets the minimum requirements in the request for proposals a reasonable opportunity to discuss and revise its proposal.

(g) The commission shall make a written award of a lease to the offeror whose proposal provides the best value for the state, considering price and the evaluation factors in the request for proposals. The commission shall state in writing in the contract file the reasons for which an award is made.

(h) The commission shall refuse all proposals if it determines that none of the proposals is acceptable.

(i) If the competitive sealed proposal procedure for leasing space is used by a state agency that has been delegated leasing authority under Section 2167.005, the agency shall follow the procedures outlined by this section and any rules adopted by the commission.

§ 2167.0541. USE OF PRIVATE FIRMS TO OBTAIN SPACE.

(a) The commission may contract with one or more private brokerage or real estate firms to assist the commission in obtaining lease space for state agencies on behalf of the commission under this chapter.

(b) A private brokerage or real estate firm with which the commission contracts under Subsection (a) may assist the commission in leasing facilities under this chapter.

(c) The commission may establish a system of charges and billings to recover the costs of contracting with a private brokerage or real estate firm under Subsection (a).

§ 2167.055. CONTRACT FOR LEASE OF SPACE.

(a) In a contract by the commission for the lease of space under this chapter, the state, acting through the commission, is the lessee.

(b) A lease contract entered into under Section 2167.053 or 2167.054 must reflect the provisions contained in the invitation for bids or request for proposals, the successful bid or proposal, and the award of the contract.

(c) A lease contract may:

(1) provide for an original term that does not exceed 10 years; and

(2) include options to renew for as many terms that do not exceed 10 years each as the commission considers to be in the state's best interest.

(d) A lease contract that does not contain an option to renew may, on agreement of the parties, be renewed under terms to which all parties to the contract agree.

(e) A lease contract is contingent on the availability of money appropriated by the legislature to pay for the lease.

(f) The obligation of the lessor to provide lease space and of the commission to accept the space is binding on the execution of the lease contract.

§ 2167.056. OPTION TO PURCHASE.

(a) If the commission considers it advisable, the commission may lease space for a state agency under a contract that contains an option for the commission to purchase the space subject to the legislature’s appropriation of money for the purchase.

(b) A lease contract containing the option must indicate:

(1) the amount that will accumulate and be credited toward the purchase at various times during the lease term; and

(2) the purchase price of the property at the beginning of each fiscal biennium during the lease term.

Added by Acts 1995, 74th Leg., ch. 41, Sec. 1, eff. Sept. 1, 1995.

GOVERNMENT CODE

TITLE 10. GENERAL GOVERNMENT

SUBTITLE D. STATE PURCHASING AND GENERAL SERVICES

CHAPTER 2167. LEASE OF SPACE FOR STATE AGENCIES

SUBCHAPTER C. COMMISSION AND STATE AGENCY POWERS AND DUTIES RELATED TO LEASED SPACE

§ 2167.101. CERTIFICATION OF AVAILABLE MONEY.

A state agency occupying space leased under this chapter shall certify to the commission, at least 60 days before the beginning of each fiscal biennium during the lease term, that money is available to pay for the lease until the end of the next fiscal biennium.

§ 2167.102. REMEDIAL ACTION AGAINST LESSOR.

(a) When a state agency occupying leased space is aware of circumstances that require remedial action against the lessor, the agency shall notify the commission.

(b) The commission may investigate the circumstances and the lessor's performance under the contract.

(c) The attorney general on the commission's request shall assist the commission in protecting the state's interest under a lease contract.

§ 2167.103. RECORDS.

To efficiently maintain a space management system, the commission shall maintain records of the amount and cost of space under lease by the commission and may collect other information that it considers necessary. A state agency shall cooperate with the commission in securing this information.

§ 2167.104. SUBLEASE TO CHILD CARE PROVIDER.

(a) Subject to restrictions imposed by a lease or other enforceable contract, the commission, at the request of the occupying agency, shall sublease part of a space leased under this chapter to a child care provider for the operation of a child care facility.

(b) Chapter 663 applies to the establishment and operation of the child care facility, except as provided by this section.

(c) This section does not affect the duties of the commission regarding child care facilities in state-owned buildings and potential child care facility sites in state-owned buildings under Chapter 663, 2165, or 2166.

(d) The occupying agency and the commission may agree to:

(1) procedures relating to the selection of the child care provider;

(2) granting some preference in enrollment to children of officers and employees of the occupying state agency; and

(3) any other matter regarding the operation of the child care facility.

(e) The commission shall sublease space under this section to a child care provider approved by the commission under Chapter 663 at a rate set by the commission.

(f) In leasing space under this chapter, the commission shall, whenever possible, enter into a lease contract that allows for subleasing space to a child care provider.

§ 2167.105. REPORT ON NONCOMPLIANCE.

If the commission determines that a state agency has not complied with the commission's rules or with other state law related to leasing requirements, the commission shall report the noncompliance to the members of the state agency's governing body and to the governor, lieutenant governor, and speaker of the house of representatives. The commission shall include in its report an estimate of the fiscal impact resulting from the noncompliance.

Tab 3

CIVIL PRACTICE AND REMEDIES CODE

TITLE 5. GOVERNMENTAL LIABILITY

CHAPTER 114. ADJUDICATION OF CLAIMS ARISING UNDER WRITTEN

CONTRACTS WITH STATE AGENCIES

§ 114.001. DEFINITIONS.

In this chapter:

(1) "Adjudication" of a claim means the bringing of a civil suit and prosecution to final judgment in county or state court.

(2) "Contract subject to this chapter" means a written contract stating the essential terms of the agreement for providing goods or services to the state agency that is properly executed on behalf of the state agency. The term does not include a contract that is subject to Section 201.112, Transportation Code.

(3) "State agency" means an agency, department, commission, bureau, board, office, council, court, or other entity that is in any branch of state government and that is created by the constitution or a statute of this state, including a university system or a system of higher education. The term does not include a county, municipality, court of a county or municipality, special purpose district, or other political subdivision of this state.

§ 114.002. APPLICABILITY.

This chapter applies only to a claim for breach of a written contract for engineering, architectural, or construction services or for materials related to engineering, architectural, or construction services brought by a party to the written contract, in which the amount in controversy is not less than $250,000, excluding penalties, costs, expenses, prejudgment interest, and attorney's fees.

§ 114.003. WAIVER OF IMMUNITY TO SUIT FOR CERTAIN CLAIMS.

A state agency that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this chapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of an express provision of the contract, subject to the terms and conditions of this chapter.

§ 114.004. LIMITATIONS ON ADJUDICATION AWARDS.

(a) The total amount of money awarded in an adjudication brought against a state agency for breach of an express provision of a contract subject to this chapter is limited to the following:

(1) the balance due and owed by the state agency under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration if the contract expressly provides for that compensation;

(2) the amount owed for written change orders;

(3) reasonable and necessary attorney's fees based on an hourly rate that are equitable and just if the contract expressly provides that recovery of attorney's fees is available to all parties to the contract; and

(4) interest at the rate specified by the contract or, if a rate is not specified, the rate for postjudgment interest under Section 304.003(c), Finance Code, but not to exceed 10 percent.

(b) Damages awarded in an adjudication brought against a state agency arising under a contract subject to this chapter may not include:

(1) consequential damages;

(2) exemplary damages; or

(3) damages for unabsorbed home office overhead.

§ 114.005. CONTRACTUAL ADJUDICATION PROCEDURES ENFORCEABLE.

Adjudication procedures, including requirements for serving notices or engaging in alternative dispute resolution proceedings before bringing a suit or an arbitration proceeding, that are stated in the contract subject to this chapter or that are established by the state agency and expressly incorporated into the contract are enforceable, except to the extent those procedures conflict with the terms of this chapter.

§ 114.006. NO WAIVER OF OTHER DEFENSES.

This chapter does not waive a defense or a limitation on damages available to a party to a contract, other than a bar against suit based on sovereign immunity.

§ 114.007. NO WAIVER OF IMMUNITY TO SUIT IN FEDERAL COURT.

This chapter does not waive sovereign immunity to suit in federal court.

§ 114.008. NO WAIVER OF IMMUNITY TO SUIT FOR TORT LIABILITY.

This chapter does not waive sovereign immunity to a claim arising from a cause of action for negligence, fraud, tortious interference with a contract, or any other tort.

§ 114.009. EMPLOYMENT CONTRACTS EXEMPT.

This chapter does not apply to an employment contract between a state agency and an employee of that agency.

§ 114.010. VENUE.

A suit under this chapter may be brought in a district court in:

(1) a county in which the events or omissions giving rise to the claim occurred; or

(2) a county in which the principal office of the state agency is located.

§ 114.011. LIMITATION ON REMEDIES.

Satisfaction and payment of any judgment under this chapter may not be paid from funds appropriated to the state agency from general revenue unless the funds are specifically appropriated for that purpose. Property of the state or any agency, department, or office of the state is not subject to seizure, attachment, garnishment, or any other creditors' remedy to satisfy a judgment taken under this chapter.

§ 114.012. EXCLUSIVE REMEDY.

A claim to which this chapter applies may not be brought under Chapter 2260, Government Code, against the state or a unit of state government as defined by Section 2260.001, Government Code.

§ 114.013. REPORT.

Before January 1 of each even-numbered year, each state agency shall report to the governor, the comptroller, and each house of the legislature the cost of defense to the state agency and the office of the attorney general in an adjudication brought against the agency under a contract subject to this chapter. Included in the report shall be the amount claimed in any adjudication pending on the date of the report.

Tab 4

Tab 5

TEXAS ADMINISTRATIVE CODE

TITLE 1. ADMINISTRATION

PART 5. TEXAS FACILITIES COMMISSION

CHAPTER 115. FACILITIES LEASING PROGRAM

SUBCHAPTER B. CANCELLATION OF LEASE DUE TO LACK OF FUNDING

§ 115.20. DEFINITIONS.

The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) “Cost of idle facilities or idle capacity” means costs such as maintenance, repair, housing, rent, and other related costs, e.g., insurance, interest, property taxes and depreciation or use allowances.

(2) “Facilities” means land and buildings or any portion thereof, equipment individually or collectively, or any other tangible capital asset, wherever located, and whether owned or leased by the governmental agency.

(3) “Funding Out Clause” means the constitutional prohibitions on spending as set out in Sections 49 and 49a, Article III, Texas Constitution and codified in Texas Government Code §2167.055(e) (West 2008) which are incorporated into the state lease, as amended.

(4) “Governmental agency” means a board, commission, department, office, or other agency in the executive branch of state government, including an institution of higher education as defined by Section 61.003, Education Code.

(5) “Idle capacity” means the unused capacity of partially used facilities. It is the difference between: (a) that which a facility could achieve under 100 percent operating time on a one-shift basis less operating interruptions resulting from time lost for repairs, setups, unsatisfactory materials, and other normal delays; and (b) the extent to which the facility was actually used to meet demands during the accounting period. A multi-shift basis should be used if it can be shown that this amount of usage would normally be expected for the type of facility involved.

(6) “Idle facilities” means completely unused facilities that are excess to the governmental agency’s current needs.

§ 115.21. DETERMINATION OF IDLE CAPACITY OR IDLE FACILITIES.

(a) Prior to requesting that the Commission cancel a lease due to lack of funding, the governmental agency shall determine that it occupies idle facilities or has idle capacity due to one of the following factors:

(1) changes in program requirements;

(2) the implementation of changes that result in a reduction in staff;

(3) consolidation of office or building space to achieve cost efficiencies;

(4) a change in client demographics resulting in the need to relocate staff to other locations; or

(5) efforts to achieve more economical operations, reorganization, termination, or other causes which could not have been reasonably foreseen.

(b) Upon furnishing a written determination that the governmental agency occupies idle facilities or has idle capacity based upon the factors set out in subsection (a) above to the Commission, a lease may be considered for cancellation by the Commission upon request by a governmental agency.

§ 115.22. CANCELLATION OF LEASE UPON REQUEST BY A GOVERNMENTAL AGENCY DUE TO LACK OF FUNDING.

(a) Unless a governmental agency has been abolished by the Legislature, a governmental agency that elects to invoke the Funding Out Clause to cancel a lease due to lack of funding shall request the Commission to either cancel the lease or make the leased premises available to another governmental agency.

(b) A request by a governmental agency to cancel a lease due to lack of funding must have the approval of the governing body of the governmental agency making the request. Any agency under the authority of an individual commissioner or executive director, appointed by or directly accountable to the Governor, must provide evidence of notification to the Office of the Governor in order for such a request to be considered for action by the Commission.

(c) Unless the term of the lease is amended by written agreement between a lessor and the Commission, the Commission will serve written notice to the lessor of intent to cancel the lease effective on a date certain at least 180 days prior to the date of the lease cancellation. Notice to the lessor is effective upon receipt if served by electronic mail directed to the lessor’s designated contact on the Commission’s database. Rent shall continue to be paid through the date that the lessee vacates the facilities or through the end of the biennium, whichever is earlier, for which funds had been certified pursuant to Texas Government Code § 2167.101.

Tab 6

Legislative Appropriations Request for Fiscal Year 2024 and 2025 Volume II

Submitted to the Office of the Governor, Budget and Policy Division, and the Legislative Budget Board by Health and Human Services Commission September 9, 2022 4.A. Exceptional Item Request Schedule DATE: 9/9/2022 88th Regular Session, Agency Submission, Version 1 TIME: 11:56:06AM Automated Budget and Evaluation System of Texas (ABEST)

Agency code: 529 Agency name: Health and Human Services Commission

CODE DESCRIPTION Excp 2024 Excp 2025 Item Name: Maintain Public Facing Offices and Client Supports Item Priority: 18 IT Component: No Anticipated Out-year Costs: Yes Involve Contracts > $50,000: No Includes Funding for the Following Strategy or Strategies: 12-02-02 Regional Program Support

OBJECTS OF EXPENSE:

2001 PROFESSIONAL FEES AND SERVICES 1 1 2006 RENT - BUILDING 29,601,496 41,826,148 TOTAL, OBJECT OF EXPENSE $29,601,497 $41,826,149

METHOD OF FINANCING:

1 General Revenue Fund 18,613,126 26,299,865 555 Federal Funds 10.557.001 SPECIAL SUPPL FOOD WIC 2,960 4,183 10.561.000 State Admin Match SNAP 1,353,084 1,911,873 93.767.000 CHIP 183,825 259,740 93.778.000 XIX FMAP 28,417 40,153 93.778.003 XIX 50% 3,950,024 5,581,281 758 GR Match For Medicaid 4,045,637 5,716,380 8010 GR Match For Title XXI 56,539 79,888 8014 GR Match for Food Stamp Admin 1,353,084 1,911,873 8032 GR Certified As Match For Medicaid 14,801 20,913

TOTAL, METHOD OF FINANCING $29,601,497 $41,826,149

DESCRIPTION / JUSTIFICATION: This EI includes funding for cost increases and inflation impacts for critical agency functions including leases and major non-client services contracts for which there is little or no flexibility to alter the pricing structure or services provided under the contract. The first component is for leases. HHS has experienced a steady increase in lease costs from FY 2017 and costs increased significantly from $93.9 million in FY 2021 to an estimated $102.2 million in FY 2022. The increase in lease costs has required HHSC to reduce support costs including onsite security and monitoring, custodial services, building maintenance, pest control, HVAC and plumbing services. HHSC does not have the ability to absorb further cost increases without closing public facing offices . This item includes an assumed 9.9% year-over-year increase in the Consumer Price Index for the 2024-25 biennium.

4.A. Page 57 of 107

4.A. Exceptional Item Request Schedule DATE: 9/9/2022 88th Regular Session, Agency Submission, Version 1 TIME: 11:56:06AM Automated Budget and Evaluation System of Texas (ABEST)

Agency code: 529 Agency name: Health and Human Services Commission

CODE DESCRIPTION Excp 2024 Excp 2025 Although new leases result in a smaller footprint in terms of space, new leases replace older space with lower costs. As Texas continues to experience population growth, new facility costs will be higher per square foot. The remainder of the EI request serves as a placeholder for inflation impacts on program and indirect administration costs at HHSC, including for major non-client services contracts. HHSC anticipates that additional data on inflation will be available during the legislative session, and that the 2024-25 Biennial Revenue Estimate will reflect additional revenue due to inflationary impacts on certain revenue sources. HHSC anticipates that inflation will most significantly impact the fixed costs of major non-client service contracts for which there is little or no flexibility to alter the pricing structure or services provided under the contract. As additional information becomes available, the agency will be able to more accurately assess its needs. EXTERNAL/INTERNAL FACTORS: The Health and Human Services Commission (HHSC) is experiencing significant impacts from inflation and other cost increases on several critical agency functions and support costs, including on client service programs, state-owned facility operations and construction, staffing, leases, and major contracts. The Comptroller publishes Key Economic Indicators, including measures of inflation based on year-to-year change in the Consumer Price Index (CPI) based on information provided by the US Bureau of Labor Statistics. As of August 2022?, CPI in Texas increased by 9.9% from the previous year. Historically, HHSC has absorbed inflation within existing resources, but with budget reductions to administration in the 2022-23 biennium and years of absorbing inflation within existing resources, HHSC will be unable to manage this level of inflation without disruptions to service delivery and related administration if current appropriation levels are not adjusted. HHSC has limited flexibility to manage cost increases for major contracts and for leases. Lease contracts are entered into by Texas Facility Commission (TFC) with lessors on behalf of occupying agencies. Each lease has a Consumer Price Index (CPI) escalation clause that allows the lessor to request an increase yearly. TFC enters into lease contracts in good faith on behalf of state agencies. Their input is required before lease payments are withheld or an agency seeks to end a lease prematurely for any reason. HHSC major non-client service contracts primarily consist of 1) contracts that impact the capacity to complete the eligibility determinations for client service programs; and 2) contracts that impact the operations and oversight of the Medicaid program. HHSC has little or no flexibility to alter the pricing structure or the services provided under the contracts. PCLS TRACKING KEY:

DESCRIPTION OF ANTICIPATED OUT-YEAR COSTS : Each Lease permits a Consumer Price Index (CPI) esculation clause that will allow the lessor to request an increase yearly. Texas continues to experience population growth and a competitive realestate market. Annual regional lease costs in FY2017 was $70,032,535 and has risen to $82,474,757 in FY2022. The probability of additional facility replacements occurring in the future is high as some locations are more than 20 years old and agencies' business processes change as time goes on. The rise in lease costs has also been accompanied with the rise in services required to support the leases.

4.A. Page 58 of 107

4.A. Exceptional Item Request Schedule DATE: 9/9/2022 88th Regular Session, Agency Submission, Version 1 TIME: 11:56:06AM Automated Budget and Evaluation System of Texas (ABEST)

Agency code: 529 Agency name: Health and Human Services Commission

CODE DESCRIPTION Excp 2024 Excp 2025

ESTIMATED ANTICIPATED OUT-YEAR COSTS FOR ITEM:

2026 2027 2028 $41,826,149 $41,826,149 $41,826,149

4.A. Page 59 of 107

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.

Jason LaFond on behalf of Jason LaFond Bar No. 24103136 jlafond@scottdoug.com Envelope ID: 100566689 Filing Code Description: Brief Not Requesting Oral Argument Filing Description: Brief Not Requesting Oral Argument Status as of 5/7/2025 4:40 PM CST

Case Contacts

Name BarNumber Email TimestampSubmitted Status

Michaelle Peters mpeters@scottdoug.com 5/7/2025 4:14:15 PM SENT

Angela Goldberg agoldberg@scottdoug.com 5/7/2025 4:14:15 PM SENT

Susie Smith ssmith@scottdoug.com 5/7/2025 4:14:15 PM SENT

Jason R.LaFond jlafond@scottdoug.com 5/7/2025 4:14:15 PM SENT

Kemp Kasling kkasling@kaslinglaw.com 5/7/2025 4:14:15 PM SENT

Angie Espinoza aespinoza@scottdoug.com 5/7/2025 4:14:15 PM SENT

Associated Case Party: State of Texas

Name BarNumber Email TimestampSubmitted Status

Victoria Gomez victoria.gomez@oag.texas.gov 5/7/2025 4:14:15 PM SENT

Alyssa Bixby-Lawson alyssa.bixby-lawson@oag.texas.gov 5/7/2025 4:14:15 PM SENT

Associated Case Party: Broadmoor Austin Associates, a Texas Joint Venture

Name BarNumber Email TimestampSubmitted Status

Sara W.Clark sclark@scottdoug.com 5/7/2025 4:14:15 PM SENT

Casey Dobson cdobson@scottdoug.com 5/7/2025 4:14:15 PM SENT