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CAUSE NO.

CITY OF DALLAS,
Plaintiff,

JUDICIAL DISTRICT

CARY "MAC" ABNEY, CONNIE WARE,


J.D. JACOBS, CONNIE WADE, CLIFF R.
TODD, DAVID KOONCE, EARL
WILLIAMS, STAN MATHEWS, AND
SHARON NEWCOMER a/k/a MARTHA
SHARON McMULLEN, all of whom are
sued solely in their capacities as members of
the board of directors of the Sabine River
Authority of Texas,
Defendants.

ORANGE COUNTY, TEXAS

CITY'S ORIGINAL PETITION FOR


DECLARATORY JUDGMENT
TO THE HONORABLE JUDGE OF SAID COURT:
Plaintiff, the City of Dallas (the "City" or "Dallas"), complains of Defendants, Cary
"Mac" Abney, Connie Ware, J.D. Jacobs, Jr., Connie Wade, Cliff R. Todd, David W. Koonce,
Earl Williams, Stanley N. "Stan" Mathews, and Sharon Newcomer, all of whom are sued solely
in their respective official capacities as members of the board of directors (the "Board") of the
Sabine River Authority of Texas ("SRA"), because they acted ultra vires (i.e., beyond their
power and authority) when they voted on October 9, 2014, to exorbitantly increase the rate
charged to The City for raw water from the Lake Fork Reservoir without the agreement of the
City. The City seeks a declaration that the SRA's board members acted without legal authority
and in violation of the SRA's enabling legislation when purporting to establish the unlawful new
rate, and that the this action was therefore void. In addition, if and when the evidence supports
the need for injunctive relief to prevent any or all SRA board members from violating the terms
of the Court's declaratory judgment at any time. retaliating against the City from bringing this

CITY'S ORIGINAL PETITION

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suit, or improperly discriminating against the City in the provision of water services or rates
during the pendency of the action, the City seeks ancillary relief in the nature of injunction
prohibiting the defendants and their respective successors and agents who receive notice of the
Court's order for injunctive relief from violating any declaratory judgment that the Court issues
in this cause, denying or curtailing water supply to the City, and from unilaterally imposing any
water rate changes on the City. In support, the City respectfully shows:
DISCOVERY CONTROL PLAN
1.

The City intends that discovery be conducted under Level 3 pursuant to Rule 190

of the Texas Rules of Civil Procedure.


PARTIES
2.

The City is a Texas home-rule municipal corporation situated in Dallas and other

counties in the State of Texas, with its principal offices located at City Hall, 1500 Marilla Street,
Dallas, Dallas County, Texas 75201.
3.

Cary "Mac" Abney is the President and a member of the Board of the SRA. He

can be served with process at 12777 N. Highway 87, Orange, Texas 77630; 215 E. Austin St.,
Marshall, Texas 75670; or wherever he may be found.
4.

Connie Ware is the Vice President and a member of the Board of the SRA. She

can be served with process at 12777 N. Highway 87, Orange, Texas 77630; 4585 FM 2625 E.,
Marshall, Texas 75672; or wherever she may be found.
5

J.D. Jacobs, Jr. is the Secretary/Treasurer and a member of the Board of the SRA.

He can be served with process at 12777 N. Highway 87, Orange, Texas 77630; 5961 Connie
Lane, Forney, Texas 75032-8151, or wherever he may be found.

CITY'S ORIGINAL PETITION

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6.

Connie Wade is the Secretary Pro-Tern and a member of the Board of the SRA.

She can be served with process at 12777 N. Highway 87, Orange, Texas 77630; 40 Oak Creek
Ridge Drive, Longview, Texas 75605-1630; or wherever she may be found.
7.

Cliff R. Todd is the past President and a member of the Board of the SRA. He

can be served with process at 12777 N. Highway 87, Orange, Texas 77630; 110 N. Pinewood
Drive, Carthage, Texas 75633-2213; or wherever he may be found.
8.

David W. Koonce is a member of the Board of the SRA. He can be served with

process at 12777 N. Highway 87, Orange, Texas 77630; 717 County Road 1140, Center, Texas
75935-6036; or wherever he may be found.
9.

Earl Williams is a member of the Board of the SRA. He can be served with

process at 12777 N. Highway 87, Orange, Texas 77630; 6912 Hudnall Road, Orange, Texas
77632-3534; or wherever he may be found.
10.

Stanley N. "Stan" Mathews is a member of the Board of the SRA. He can be

served with process at 12777 N. Highway 87, Orange, Texas 77630; 16 Waterford Drive,
Orange, Texas 77630-2072; or wherever he may be found.
11.

Sharon Newcomer a/k/a Martha Sharon McMullen is a member of the Board of

the SRA. She can be served with process at 12777 N. Highway 87, Orange, Texas 77630; 3144
FM 2802 62, Orange, Texas 77632-8213; or wherever she may be found.
JURISDICTION AND VENUE
12.

This Court has subject-matter jurisdiction of this action because the amount in

controversy exceeds the minimal jurisdiction limits of this Court and the subject matter is
authorized by Chapter 37 of the Texas Civil Practice & Remedies Code, Sections 24.007, 24.008
and 24.011 of the Texas Government Code, and Article V, Section 8 of the Texas Constitution.

CITY'S ORIGINAL PETITION

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13.

Venue is proper in this Court under: (1) Section 15.002(a)(3) of the Texas Civil

Practice and Remedies Code because SRA's principal office is located in this county; (2) Section
15.0151 of the Texas Civil Practice & Remedies Code because SRA is a political subdivision
that is located in this county, which has a population of 100,000 or less; and (3) case law, which
provides that venue lies in the county where a governmental entity could be sued when the
members of the governmental entity's governing body are being sued solely in their official
capacities as officers of the governmental entity..
FACTS
14.

The SRA is a political subdivision of the State. Specifically, the SRA is a

conservation and reclamation district and a water control and improvement district created by the
legislature. See Act of April 27, 1949, 1 & 23, 51st Leg., R.S., ch. 110, 1949 Tex. Gen. Laws
193, as amended (the "SRA State Enabling Act"). The SRA Board is the governing body of the
SRA. To the extent that the SRA is empowered to set water rates, such power can be exercised
only by and through the Board. The SRA is not a party to this lawsuit.
15.

In 1981, the City, the SRA, Dallas Power & Light Company, Texas Electric

Service Company, and Texas Power & Light Company (the last three of which are not parties
and are collectively the "Corporations") acting through non-party Texas Utilities Generating
Company ("TUGCO") entered into an agreement related to the assignment and conveyance of
water from the Lake Fork Reservoir for use by the City for municipal and resale purposes. See
Water Supply Contract and Conveyance ("Agreement"), a copy of which is attached to this
petition as Exhibit "A" and incorporated herein for all purposes. Lake Fork Reservoir is within
the watershed jurisdiction of the SRA. Under the terms of the Agreement, the Corporations,
TUGCO and the SRA conveyed water rights to the City up to 74% of the dependable yield of the

CITY'S ORIGINAL PETITION

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Lake Fork Reservoir for the City's use as a water supply agency and the right to sell and convey
the water as permitted by law. In exchange, the City agreed to: (1) pay 100% of the construction
cost for the Lake Fork Reservoir by retiring all bonds issued for the financing of the Lake Fork
Dam and Reservoir Project and by reimbursing the bond principal and trustee's fees paid by the
Corporations prior to the execution of the Agreement, and (2) pay a "service charge" equal to
74% of the reasonable and necessary costs and expenses directly associated with the operation
and maintenance of the Lake Fork facilities. See Exhibit A at 2.04 & 2.05. Dallas has fully
performed its obligations under the Agreement, as amended.
16.

The Agreement provides that the term would be automatically renewed for a 40-

year term starting on November 1, 2014, unless the City gave written notice of termination at
least one year before November 1, 2014. See Exhibit A at 6.01. The City did not give notice of
termination, and, in fact, notified the SRA before November 1, 2013, of the City's intent to
renew the Agreement.
17.

The Agreement provides that "[t]he amount of compensation that [SRA] shall be

entitled to receive during any renewal term (exclusive of the City's pro rata share of the Service
Charge) shall be determined by mutual agreement between the City and [SRA], taking into
account such price as is prevailing in the general area at the time for like contract sales of water
of similar quality, quantity, and contract period." See Exhibit A at 6.02 (emphases added).
The Agreement further provides that, if the City and the SRA are unable to agree on the amount
of compensation prior to the expiration of the term, the Texas Water Commission may establish
interim compensation, until the amount of compensation is finally determined. Id.
18.

For more than six years prior to November 1, 2014, the City attempted to

negotiate with the SRA for the rate for the renewal term. However, the SRA and the City could

CITY'S ORIGINAL PETITION

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not agree on the rate. The City continued attempting to reach agreement, until the SRA Board's
unilateral imposition of rates made it clear that those efforts were in vain.
19.

Rather than requesting the Public Utility Commission of Texas (*TUC," the

successor agency to the Texas Water Commission with respect to water rates) to establish
interim compensation as contemplated by the Agreement, the Executive Vice President and
General Manager of the SRA sent a letter to the Director of Dallas Water Utilities announcing
the decision of the SRA's Board to increase the rate to be paid by the City. The letter informed
the City, and the City therefore believes and alleges, that on October 9, 2014, the Board of the
SRA purported to adopt a rate of $0.5613 per 1000 gallons, payable on a "take or pay" basis for
131,860 acre-feet of water per year, with a price escalator based on the Consumer Price Index.
See letter from David Montagne to Jody Puckett dated October 13, 2014, which is attached to
this petition as Exhibit "B" and incorporated herein. The City did not and has not agreed to that
rate.
20.

By thus purporting to set the City's water rates without going through the PUC

the SRA Board materially violated the Agreement.


21.

The SRA State Enabling Act sets the limits the SRA Board must follow in

imposing fees and charges for the use of water:


The Board of Directors of the [SRA] shall prescribe fees and charges to be
collected for the use of water, water connections, hydro-electric service, or other
service, which fees and charges shall be reasonable and equitable and fully
sufficient to produce revenues adequate to pay, and said Board of Directors shall
cause to be paid therefrom:

I In 1991, the Legislature combined the Texas Water Commission and two other state agencies into the Texas
C.S., ch. 3, art. 1,
Natural Resources Conservation Commission (TNRCC). See Act of July 30, 2991, 72nd Leg.,
1991 Tex. Gen. Laws 4. In 2002, the Legislature changed the name of the TNRCC to the Texas Commission on
Environmental Quality (TCEQ). See Act of June 15, 2001, 77th Leg., R.S., ch. 965, 18.01, 2001 Tex. Gen. Laws
1985. In 2013, the Legislature transferred the water rate functions of the TCEQ to the PUC. See Act of May 13,
2013, 83rd Leg., ch. 170, 2.07, 2013 Tex. Gen. Laws 725; Act of May 13, 2013, 83"I Leg., ch. 171, 7, 2013 Tex.
Gen. Laws 772.

CITY'S ORIGINAL PETITION

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(1) all expenses necessary to the operation and maintenance of the


improvements and facilities of said district. Such operating and maintenance
expenses shall include the cost of the acquisition of properties and materials
necessary to maintain said improvements and facilities in good condition and to
operate them efficiently, necessary wages and salaries of the district, and such
other expenses as may be reasonably necessary to the efficient operation of said
improvements and facilities;
(2) the annual or semi-annual interest as it becomes due upon any bonds
issued hereunder payable out of the revenues of said improvements and facilities;
(3) the amount required to be paid annually into the sinking fund for the
payment of any bonds issued hereunder, payable out of the revenues of said
improvements and facilities, and to be paid into the reserve and other funds under
the resolution authorizing the issuance of the bonds.
Act of April 27, 1949, 14(o), 51st Leg., R.S., ch. 110, 1949 Tex. Gen. Laws 193, as amended
(emphases added).
22.

Here, the SRA is already being reimbursed by the City for 74% of the expenses

necessary for the operation and maintenance of the SRA's improvements and facilities at Lake
Fork in exchange for providing the City with 74% of the dependable yield of water from that
lake. The City's reimbursement includes the SRA's expenses for capital improvements and
capital additions to the Lake Fork reservoir, so the SRA has no unreimbursed capital costs for the
lake. In addition, the City's reimbursement includes an allocated amount for the SRA's
administrative and general expenses. Moreover, the SRA has sold its 26% share of Lake Fork
water to other customers at rates that allow it to recover the remaining 26% of its expenses
necessary to operate and maintain its improvements and facilities at the lake.
23.

Here, the SRA does not owe any interest on any bonds for the Lake Fork

improvements and facilities because the City has already paid 100% of the cost of retiring all
bonds issued by the SRA for the financing of the Lake Fork project. There are no outstanding
bonds for the Lake Fork Project.

CITY'S ORIGINAL PETITION

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24.

Here, the SRA is not required to make a payment into a sinking fund for the

payment of the bonds issued for the Lake Fork improvements and facilities because the City has
already paid 100% of the cost of retiring all bonds issued by the SRA for the financing of the
Lake Fork project.
25.

Thus, the service charge itself is fully sufficient to produce revenues adequate for

the SRA to pay: (1) all of its expenses necessary to operate and maintain the Lake Fork
improvements and facilities, (2) any interest on any bonds for those improvements and facilities,
and (3) the amount required to be paid into a sinking fund for the payment of any bonds issued
for those improvements and facilities.
26.

Notwithstanding the facts described above, the new rate for the City purportedly

set by the SRA's Board increases the amount the City will pay for its water from Lake Fork by
approximately nine times or $24.1 million more annually than the City has been paying: from
approximately $3,022,023.00 to $27,139,238.93.
27.

Here, the new rate adopted by the SRA's Board exceeds the rates charged by the

SRA for sales to other customers for raw water supplied from Lake Fork or Lake Tawakoni, and
in fact is two times the amount charged by SRA for sales of raw water to other customers for use
outside the Basin.
28.

Because the SRA's Board set the City's rate at a time when the Agreement

contemplates rates agreed upon by the parties or rates set by the PUC, the Board members'
action in setting rates unilaterally was ultra vires and void.
29.

Because SRA's Board purported to set the City's rate at a time when only the

PUC had authority to determine the rate in the absence of an agreement between the parties, the
Board members' action in setting the rate unilaterally was ultra vires and void.

CITY'S ORIGINAL PETITION

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30.

Because the SRA's Board purported to set a rate for the City that was not

reasonable or equitable, the Board members' action was ultra vires and void.
31.

Section 37.004(a) of the Texas Civil Practice and Remedies Code provides: "A

person . . . whose rights, status, or other legal relations are affected by a statute, [or] contract, . . .
may have determined any question of construction or validity arising under the . . . statute [or]
contract . . . and obtain a declaration of rights, status, or other legal relations thereunder."
32.

Section 37.011 of the Texas Civil Practice and Remedies Code authorizes the

Court to grant supplemental relief in the nature of injunctive relief if "necessary or proper,"
particularly if it appears that a defendant will not comply with the declaratory judgment.
33.

A governmental official has no immunity from a suit in the official's official

capacity seeking a declaration that the official has acted outside of his or her constitutional or
statutory authority. See City of El Paso v. Heinrich, 284 S.W.3d 366, 372 (Tex. 2009).
34.

The City incorporates by reference the allegations in Paragraphs 1-33 of this

pleading in each of the claims asserted below.


FIRST CLAIM: DECLARATORY JUDGMENT
35.

This claim arises under Chapter 37 of the Texas Civil Practice and Remedies

Code, particularly section 37.004(a), and the common law of this state.
36.

The City seeks and is entitled to declarations that the fees and charges prescribed

by the SRA's Board members on October 9, 2014, to the City for the use of water from Lake
Fork are ultra vires and void because: (a) at the time only the PUC, and not the SRA's Board
members, had authority to set water rates for the City's water from the Lake Fork Reservoir; and
(b) the SRA's Board members lacked (and continue to lack) the power to set rates other than
rates that are reasonable and equitable.

CITY'S ORIGINAL PETITION

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SECOND CLAIM: CONDITIONAL CLAIM FOR SUPPLEMENTAL RELIEF


IN THE NATURE OF INJUNCTIVE RELIEF
37.

The City conditionally seeks injunctive relief against any Defendant and any of

their respective successors or agents who receives knowledge of the injunction, against any
attempt or act to impose unilateral water rates on the City, to refuse to provide water to the City
in accordance with the Agreement, or to retaliate against the City in connection with this
litigation if and when the City adduces evidence demonstrating that such injunction is necessary
or proper.

THIRD CLAIM: ATTORNEYS' FEES


38.

Pursuant to Sections 37.009 of the Texas Civil Practice & Remedies Code, the

City requests that it be awarded recovery of its costs and reasonable and necessary attorneys'
fees as appropriate for preparation and trial of this matter and all appeals against all Defendants.
JURY DEMAND
39.

The City requests a trial by jury on all issues so triable.


MISCELLANEOUS

40.

The City reserves the right to amend or supplement this pleading.

41.

Pursuant to Rule 47 of the Texas Rules of Civil Procedure, the City seeks

monetary relief over $100,000 but not more than $200,000 in the form of costs, expenses,
attorney fees, and non-monetary relief.
REQUEST FOR DISCLOSURE
42.

The City requests each Defendant to disclose in writing all the information

described in Rule 194.2 of the Texas Rules of Civil Procedure to the City within 50 days of
service of this Petition.

CITY'S ORIGINAL PETITION

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PRAYER
WHEREFORE, PREMISES CONSIDERED, the City prays that the Court:
(1)

cite Defendants to appear and answer this lawsuit;

(2)

declare and decree that the SRA's Board members acted without legal authority

on October 9, 2014, when they purported to approve fees and charges (rates) to the City for the
use of water from Lake Fork, and that these fees and charges are therefore void.
(3)

find that the SRA Board members' unilateral action to set rates was in material

violation of the Agreement and order the SRA Board Members to perform their obligation under
the Agreement to approve only rates either set by the PUC or agreed to between the SRA and the
City;
(4)

render judgment awarding the City its reasonable attorneys' fees and costs of suit

against all Defendants;


(5)

grant the City supplemental relief in the nature of injunction when and if the

evidence demonstrates that such relief is necessary or proper; and


(6)

grant the City such other and further relief, at law or in equity, to which it is justly

entitled.

CITY'S ORIGINAL PETITION

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Respectfully submitted,
Ileana N. Fernandez
Executive Assistant City Attorney
State Bar No. 06933980
Christopher D. Bowers
First Assistant City Attorney
State Bar No. 02731300
Office of the City Attorney
City of Dallas
1500 MariIla Street, 7BN
Dallas, Texas, 75201
214-670-3519
214-670-0622 (fax)
Chris.Bowers@dallascityhall.com
Ileana.Fernandez@dallascityhall.com

Gwendolyn Hill Webb


State Bar No. 21026300
Webb & Webb, Attorneys At Law
211 East Seventh Street, Suite 712
Austin, Texas 78701
512-472-9990
512-472-3183 (fax)
g.hill.webb@webbwebblaw.com
Norman J. Gordon
State Bar No. 08203700
Merwan N. Bhatti
State Bar No. 24064896
Mounce, Green, Myers, Safi, Paxson &
Galatzan, A Professional Corporation
100 N. Stanton, Suite 1000
El Paso, Texas 79901
915-532-2000
915-541-1548 (fax)
Gordon@mgmsg.com
Bhatti@mgmsg.com

By:
No

an J. Gordon

Attorneys for City of Dallas

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