Pecos Housing Finance Corporation, Pleasanton Housing Finance Corporation, Maverick Housing Finance Corporation, and La Villa Housing Finance Corporation v. City of Arlington
15-25-00111-CV
Tex. App.Jul 2, 2025Background
- Housing Finance Corporations (HFCs) are nonprofit entities created under Tex. Loc. Gov’t Code ch. 394 to promote affordable housing; property owned by an HFC is eligible for tax-exemption under the statute.
- Several Texas cities (Fort Worth, Lake Worth, Arlington, Missouri City, Fort Bend plaintiffs, etc.) sued Pleasanton HFC and other traveling HFCs, alleging out‑of‑jurisdiction acquisitions and tax‑exemption claims that strip local tax bases; multiple similar suits are pending statewide.
- Trial courts issued temporary injunctions in at least some cases enjoining the HFCs from purchasing property or obtaining tax exemptions in those cities (status: interlocutory; appeals filed/anticipated).
- Appellants (Pleasanton, Maverick, La Villa HFCs) argue the pre‑amendment text of Chapter 394 permits HFCs to operate outside their sponsor’s boundaries and that the Fifteenth Court of Appeals has exclusive intermediate jurisdiction over these appeals (statewide importance / possible state‑agency analogy).
- Municipalities and appraisal districts assert statutory and constitutional limits: (1) Chapter 394 limits HFC residential development to the sponsoring local government’s area; (2) allowing extra‑jurisdictional exemptions would violate Tex. Const. art. VIII and local taxing authority; (3) appraisal districts are subject to suit under Tex. Tax Code § 43.01 and plaintiffs need not exhaust appraisal‑board administrative remedies for these UDJA/ultra vires claims.
- The Legislature enacted H.B. 21 (effective May 28, 2025) amending ch. 394 to add express geographic limits and new compliance/audit conditions; the statute contains transitional provisions and applies prospectively in many respects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chapter 394 limits an HFC to acquiring/owning residential developments only within the sponsoring local government's boundaries | Chapter 394’s language and context ("local government," §394.903) restrict HFC residential development to the sponsor’s jurisdiction; Pleasanton’s out‑of‑jurisdiction acquisitions are unlawful | Appellants contend the Act (as written prior to HB21) did not impose a geographic limitation and authorized broader activity; HFCs may operate outside sponsor boundaries | Trial courts granted temporary injunctions blocking purchases/exemptions; merits remain pending and will be resolved at trial/appeal |
| Whether the Fifteenth Court of Appeals has exclusive intermediate appellate jurisdiction over these appeals | Cities treat HFCs as political‑subdivision disputes; jurisdiction may lie with regional courts | Appellants argue HFCs perform an essential state/public function, can act statewide (and can delegate functions to TDHCA), and therefore appeals fall within Tex. Gov’t Code §22.220(d) and statewide‑importance precedents | Appellants filed a jurisdictional response asking the Fifteenth Court to assert jurisdiction; jurisdictional determination was contested and remains pending |
| Whether a taxing unit (city) may sue an appraisal district (TAD) despite governmental immunity and whether administrative exhaustion is required | Cities: Tex. Tax Code §43.01 authorizes a taxing unit to sue an appraisal district (waiver of immunity); challenges to statutory authority (Chapter 394) are not exclusively within appraisal‑board administrative remedies | TAD: contends governmental immunity and/or exclusive administrative remedies bar the UDJA suit | Plaintiffs argue §43.01 waives immunity and §41.03 administrative appeals are inapplicable; the plea to the jurisdiction was opposed; court rulings on pleas vary by case and remain contested |
| Whether the HFC actions give rise to ultra vires claims and equitable relief (temporary injunction) | Cities assert ultra vires acts by HFC boards (acting outside statutory authority) and irreparable harm (loss of tax revenue) warrant injunctive relief | HFCs assert statutory authority for their conduct and challenge the basis for ultra vires relief | Trial courts have granted temporary injunctions in multiple matters to preserve the status quo; final relief on ultra vires and damages unresolved |
| Whether allowing out‑of‑jurisdiction exemptions violates the Texas Constitution (art. VIII limits on taxation) | Cities: if Chapter 394 permits extra‑jurisdictional tax exemptions, it would contravene constitutional limits on county/taxing‑unit authority to tax property only within their boundaries | Appellants: contend statutory scheme is valid or that HB21 and other constraints address constitutional concerns; constitutional challenge is contested | Plaintiffs plead constitutional claims and expect Attorney General notice; courts have yet to resolve the constitutional question on the merits |
Key Cases Cited
- Monsanto Co. v. Cornerstones Mun. Util. Dist., 865 S.W.2d 937 (Tex. 1993) (distinguishing political subdivisions from state agencies by geographic reach of authority).
- In re Dallas Cnty., 697 S.W.3d 142 (Tex. 2024) (describing the role of appellate courts in adjudicating matters implicating statewide interests).
- Kelley v. Homminga, 706 S.W.3d 829 (Tex. 2025) (articulating the common‑law/state‑interest test for assigning statewide‑significance matters).
- Butnaru v. Ford Motor Co., 84 S.W.3d 198 (Tex. 2002) (standards for temporary injunctions: cause of action, probable right, probable imminent harm).
- City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) (ultra vires relief and prospective declaratory/injunctive remedies against officials acting without legal authority).
- Klumb v. Housing Mun. Emps. Pension Sys., 458 S.W.3d 1 (Tex. 2015) (application of ultra vires doctrine to public officials).
- Ashland Inc. v. Harris Cnty. Appraisal Dist., 437 S.W.3d 50 (Tex. App.—Houston [14th Dist.] 2014) (statutory interpretation regarding taxing‑unit suits against appraisal districts).
- Walker v. U.S. Dep't of Housing & Urban Dev., 326 F. Supp. 2d 773 (N.D. Tex. 2004) (federal district court interpreting §394.903 to limit residential development to the housing authority's jurisdiction).