Houston Court Clears Way for Revenue Cap Lawsuit

Taxpayers are celebrating a win in Houston after the 14th Court of Appeals allowed a taxpayer lawsuit challenging the legality of certain city expenditures to move forward and it could mean an even bigger win down the road.

The lawsuit, brought by Carroll Robinson, Bruce Hotze, and the late Jeff Daily against the City of Houston, seeks to uphold Proposition 2, a revenue cap passed by Houston voters in 2004 that the city has sought to ignore.

Along with Proposition 2, voters that year also passed Proposition 1, a cap on how much property tax revenue the city can collect. Proposition 1 received more votes in the 2004 election, so the city argued only that cap should take effect. Houston taxpayers have long hoped to see Proposition 2 upheld as well, which would limit the amount of total revenue the city is able to collect from year to year.

The plaintiffs seek declaratory relief upholding the validity of Proposition 2 and an injunction against future tax collections and expenditures in violation of it.

However, the city has resisted the suit, arguing that the tax collection matter is a political issue and that Robinson and Hotze lack recourse to the courts to enforce the proposition.

Justice John Donovan, writing for the majority, ruled in favor of the plaintiffs, holding that taxpayers do have the right to challenge city tax collections and expenditures that are alleged to be in violation of the law.

The court cited “the famous ‘chicken salad’ case” from 1916, Terrell v. Middleton, “wherein private citizens were held to have standing to sue the State Comptroller to enjoin the expenditure of appropriated funds to pay for chicken salad and other items of ‘public’ entertainment at the mansion by Governor Oscar Colquitt.”

The ruling clears the way for arguments on the merits. If the plaintiffs win, then Proposition 2 would take full effect and all city taxes would be capped.

Justice Brett Busby joined the court’s opinion but also authored a separate concurrence emphasizing the importance of taxpayer standing in ensuring the rule of law.

“When the Mayor of Houston and the members of the City Council look down from their dais in the Council Chamber, they see the following words written above the doors: “The people are the city.” The people settled the political issue of how much revenue their government may collect from them: they initiated the Proposition 2 amendment to the City Charter and approved it at the ballot box,” Busby wrote. “The City is not above the law.”

Taxpayer lawsuits are an important tool to ensure that voters get the benefit of the policies they adopt to protect their pocketbooks. Robinson and Hotze should be commended for working to protect their fellow taxpayers, and the city should be condemned for wasting valuable city resources fighting against voter accountability.

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Tony McDonald

Tony McDonald serves as General Counsel for Empower Texans. A licensed and practicing attorney, Tony received his J.D. in 2012 from UT Law School. While in school, Tony served as Senior Vice Chairman for Young Conservatives of Texas and helped manage its legislative affairs. During the 83rd Texas Legislature he served as Chief of Staff for Rep. Jonathan Stickland. Tony resides in Austin and attends St. Paul Lutheran Church.

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