ACCEPTED 15-25-00111-CV CHASNOFF |STRIBLING FIFTEENTH COURT OF APPEALS AUSTIN, TEXAS BLAKEW.STRIBLING 7/2/2025PARTNER11:39 PM |

CHRISTOPHER A. PRINE [email protected] DIRECT 210.469.3225 CLERK DANIEL LECAVALIER FILED COUNSEL IN 15th COURT OF APPEALS [email protected] AUSTIN, TEXAS DIRECT 726.777.6815 7/2/2025 11:39:12 PM July 2, 2025 CHRISTOPHER A. PRINE Clerk Mr. Christopher A. Prine Clerk, Texas Fifteenth Court of Appeals P.O. Box 12852 Austin, Texas 78711 Re: Court of Appeals No. 15-25-00110-CV; Pleasanton Housing Finance Corporation, a Texas Nonprofit Corporation and Ismael Gallegos, Joey Macon, Mark Pinkston, Zachary Pawelek, Scott Ferguson, Lilian Cashmer, and Brandon Hicks, in Their Capacities as Board Members of Pleasanton Housing Finance Corporation v. City of Lake Worth, Texas Court of Appeals No. 15-25-00111-CV; Pecos Housing Finance Corporation, Pleasanton Housing Finance Corporation, Maverick Housing Finance Corporation, and La Villa Housing Finance Corporation v. City of Arlington Court of Appeals No. 15-25-00113-CV; Pleasanton Housing Finance Corporation and the Board Members of Pleasanton Housing Finance Corporation, In Their Official Capacities v. City of Missouri City, Texas & Sienna Parks & Levee Improvement District Dear Mr. Prine: Jointly, Appellants Pleasanton Housing Finance Corporation, Maverick Housing Finance Corporation, and La Villa Housing Finance Corporation (“Appellants”) provide the following response to this Court’s June 25 letter inquiring into its jurisdiction over these appeals. A. Background Appellants are housing finance corporations (“HFCs”) established to coordinate and facilitate affordable housing for Texas residents, pursuant to the Housing Finance Corporation Act, Tex. Loc. Gov’t Code § 394.001 et seq. (“the Act”). Appellants serve a “public purpose” and “perform[] an essential governmental function on behalf of and for the benefit of … this State.” Id. at § 394.002(c)(1)-(3). To fulfill this purpose, HFCs enter into public-private real estate partnerships to facilitate the development of low-income housing within the “local government,” 1020 N.E. LOOP 410, STE. 150 SAN ANTONIO,TX 78209 WWW.CHASNOFFSTRIBLING.COM July 2, 2025 Page 2 of 7 CHASNOFF STRIBLING and as a result, HFC-owned properties and the income derived therefrom are tax-exempt. Id. at § 394.903(a); 394.905. 1 The orders challenged in these appeals resulted from efforts by four municipalities—Fort Worth, Lake Worth, Arlington, and Missouri City—to prevent Appellants and other so-called “traveling HFCs” from operating within these cities, a practice certain of the local governments describe as “a widespread problem across the state.” 2 According to Appellees, the Act limits Appellants and other HFCs to operating only within the boundaries of the local governments that approve the incorporation of the HFC. Appellants assert that HFCs may operate outside the boundaries of their sponsoring governments under the unambiguous language of the Act. The trial court disagreed with Appellants, temporarily enjoining Appellants from purchasing or approving the purchase of real property within these cities’ boundaries, or requesting, approving, or obtaining tax exemptions for any real property located within these cities’ boundaries. These orders are before this Court. Notably, these are just four among over a dozen similar lawsuits pending across the state, implicating the jurisdiction of numerous regional intermediate courts of appeal. See, e.g., City of Euless v. Cameron County Housing Finance Corp., Mark A. Yates, Gavino Sotelo, Eduardo Campirano, Louie Tijerina, and Cyndi Wyche, in their Official Capacities as Board Members of the Cameron County Housing Finance Corp., and Tarrant Appraisal District, Cause No. 348- 365230-25, pending in the 236th Judicial District of Tarrant County; Harris County Municipal Utility Dist. No. 390 v. Pleasonton Housing Finance Corp. and Roland Altinger, in his Official Capacity as Chief Appraiser of the Harris Central Appraisal District, Cause No. 2025-33133, pending in the 165th Judicial District of Harris County; City of San Marcos and Hays County, Texas v. Pecos Housing Finance Corp. and Pleasonton Housing Finance Corp., Cause No. 25- 1185-DCB, pending in the 207th Judicial District of Hays County; Williamson County, Siena Municipal Utility Dist. No. 1 and Siena Municipal Utility Dist. No. 2 v. Cameron County Housing Finance Corp., Cause No. 25-0488-C425, pending in the 425th Judicial District of Williamson County; City of Missouri City, Texas v. Maverick County Housing Finance Corp. and the Board Members of the Maverick County Housing Finance Corp. in their Official Capacities, Cause No. 1 On May 28, 2025, Gov. Greg Abbott signed HB 21 into law, amending the Act effective immediately. See Housing Finance Corporations; Authorizing a Fee, 2025 Tex. Sess. Law Serv. Ch. 208 (H.B. ^[21]) (VERNON'S), attached hereto as Exhibit A. The properties at issue in these appeals were acquired prior to these amendments. ^[2] See Plaintiff City of Arlington’s Third Amended Petition and Application for TRO and Injunctive Relief, at 5 (Exhibit B); City of Fort Worth’s Third Amended Petition in Intervention and its Application for a Temporary Restraining Order and Injunctive Relief, at 7 (Exhibit C); [City of Lake Worth’s] First Amended Application for Temporary Injunction and Response to Defendant Tarrant County Appraisal District’s Plea to the Jurisdiction (Exhibit D) at 8 (excluding exhibits attached thereto); [City of Missouri City & Sienna Parks & Levee Improvement District’s] First Amended Petition Requesting Declaratory and Injunctive Relief (Exhibit E) at 9. July 2, 2025 Page 3 of 7 CHASNOFF STRIBLING 25-DCV-325392, pending in the 268th Judicial District of Fort Bend County; City of Lewisville v. Cameron County Housing Finance Corp., Pecos Housing Finance Corp., and Don Spencer, in his Official Capacity as Chief Appraiser of the Denton County Tax Appraisal Dist., Cause No. 25- 4665-367, pending in the 367th Judicial District of Denton County, Texas; Town of Little Elm v. Pleasonton HFC, Pecos HFC, Don Spencer in is Official Capacity as Chief Appraiser of Denton County Appraisal District, Cause No. 25-5634-367, pending in the 367th Judicial District of Denton County; City of Carrollton v. Pecos Housing Finance Corp., Shane Docherty, in his Official Capacity as Chief Appraiser of the Dallas Central Appraisal Dist., Cause No. DC-25- 07935, pending in the 101st Judicial District of Dallas County; City of Rowlett and Garland Indep. Sch. Dist. v. Pleasonton Housing Finance Corp., Cause No. DC-25-077781, pending in the 191st Judicial District of Dallas County; Montgomery County Municipal Utility Dist. No. 46 v. Maverick County Housing Finance Corp., Cause No. 25-06-09304, pending in the 284th Judicial District of Montgomery County. B. These appeals are brought by or against the state or a board, commission, department, office, or other agency in the executive branch of the state government. The Fifteenth Court of Appeals has exclusive intermediate appellate jurisdiction over civil matters “brought by or against the state or a board, commission, department, office, or other agency in the executive branch of the state government[.]” Tex. Gov’t Code § 22.220(d)(1). The Texas Supreme Court recently addressed the scope of this provision in Baumgardner v. Brazos River Auth., 2025 WL 1779081 *1 (Tex. June 27, 2025). Finding the river authority to be a political subdivision 3 rather than a state agency, the Court determined the appeal did not fall within this Court’s exclusive jurisdiction. Id. at *3-5. Key to the Court’s holding was the limited geographic reach of the river authority. Id. at *3, 5. Citing Monsanto Co. v. Cornerstones Mun. Util. Dist., 865 S.W.2d 937, 940 (Tex. 1993), the Court observed “[a] political subdivision has jurisdiction over a portion of the State; a department, board or agency of the State exercises its jurisdiction throughout the State.” Baumgardner, 2025 WL 1779081 *5. Although HFCs are created by local government, Tex. Loc. Gov't Code § 394.002(d), at all times relevant to these appeals there was no limit to the geographic reach of their operations. See also Tex. Gov’t Code § 394.002(b)(1) (“the creation of a housing finance corporation is for the benefit of the people of the state, …”). Moreover, HFCs are empowered to delegate to the Texas Department of Housing and Community Affairs (indisputably a state agency) the authority to act on its behalf in the financing, refinancing, acquisition, leasing, ownership, improvement, and disposal of home mortgages or residential developments, making HFCs more akin to a state agency than a political subdivision. Id. at § 394.032(e).

https://www.neuhauslakeworth.com/models

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 6

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purpose the provision of safe, sanitary, and decent housing for individuals and families of low income. (c) This section does not prohibit the board of directors from transferring corporate property as provided by a contract made by the corporation.

Tex. Loc. Gov’t Code § 394.023 (emphasis supplied). Indeed, Pleasanton City Manager Johnny

Huizar has admitted to the Pleasanton Express that Pleasanton HFC’s revenue is transferred to the City of Pleasanton’s general fund as needed. See Daniel Elizondo, Massive tax breaks, major scrutiny: Pleasanton housing project under statewide spotlight, Pleasanton Express, April 2, 2025, a copy of which is attached as Exhibit 5. According to Huizar, Pleasanton HFC’s funds were recently used to support a five-year freeze on water rate hikes following a city council resolution.

[Exhibit 5, p. 8]. Defendant Hicks has previously stated that Pleasanton HFC reaps $300,000 from

each closed deal, some of which was spent on “back pay” for the Pleasanton City Manager and City Secretary. [Exhibit 5, p. 7]. It seems that Pleasanton HFC’s revenue, which is generated by

decimating other municipalities’ tax rolls, is not being used to only provide for the housing needs of individuals and families of low and moderate income as mandated by the Act.

Additionally, the City has been damaged as a result of Defendants’ actions. Specifically, Pleasanton HFC’s illegal tax-exemption scheme has removed millions of dollars from Tarrant

County taxing units’ tax rolls. The 2025 appraised value for this property is $54,925,097, as set forth in TAD records, attached hereto as Exhibit 4. [Exhibit 4, p. 2]. Consequently, the Property’s tax-exempt status has resulted in tax revenue loss to the following taxing units: The City of Lake

Worth; Tarrant County; Tarrant County Hospital; Tarrant County College; and Lake Worth ISD.

[Exhibit 3 at ¶ 5]. These taxing units will lose a total of $1,220,931 in tax revenue in 2025. [Exhibit

3 at ¶ 5]. Lake Worth ISD alone will lose $689,420 in annual tax revenue as a result of Pleasanton

HFC’s improper claim of tax-exempt status on the Neuhaus Lake Worth apartment complex.

[Exhibit 3 at ¶ 5].

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 7

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In regards to the City, it will lose $266,618.00 in estimated tax revenue in 2025, based upon the appraised value of the property and the City’s adopted tax rate of .485420/$100. [Exhibit 3 at

¶¶ 4, 6]. In other words, by improperly exempting just one apartment complex in Lake Worth, Texas, Pleasanton HFC will cause Lake Worth to lose over a quarter of a million dollars annually, in tax revenue, and there is no clear path for Lake Worth (or other affected local entities) to recoup that loss. [Exhibit 3 at ¶ 4]. This equals an estimated 7.02% of Lake Worth’s annual ad valorem tax revenue. [Exhibit 3 at ¶ 4]. Yet the City still incurs the cost of providing essential public

services to the property, including police, fire protection, code enforcement, street maintenance, etc.; while Pleasanton HFC, an absent landlord, reaps all financial benefits.

This is a widespread problem across the state. The City of Euless, for example, has seen at least a 2% drop in its overall annual revenue after a single apartment complex received tax-exempt

status from the Cameron County HFC. ^[2] Dallas, Fort Worth, McKinney, Irving, Lewisville, and other north Texas cities have reported millions of dollars in total lost tax revenue. ^[3] Typically, these out-of-jurisdiction HFCs are often bestowing tax-exempt status to already-built structures (not new projects), and many of the exempted properties are not even affordable housing projects; they are typical for-profit apartments and condos, usually located in upmarket neighborhoods, that do not offer reduced rent, housing vouchers, or other benefits to low-income applicants. ^[4] Andrea Lucia, Euless Loses 2 Percent of Revenue to Controversial Tax Break Approved in Faraway County, CBS News (Feb. ^[21], 2024) available at https://www.cbsnews.com/texas/news/euless-loses-2-percent-of-revenue-to- controversial-tax-break-approved-in-faraway-county/.

Andrea Lucia, Housing Group Made Millions Getting Tax Breaks for Developers, Costing Cities and Schools Even More, CBS News (Dec. ^[22], 2023) available at https://www.cbsnews.com/texas/news/housing-group-made- millions-getting-tax-breaks-for-developers-costing-cities-and-schools-even-more/.

Id. (documenting that an out-of-town HFC purchased an apartment complex in a “luxurious community” in Irving and that the tenants’ rents went up significantly under the HFC’s ownership).

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 8

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Because of the widespread nature of this practice, there has been a strong legislative push to (even more) explicitly outlaw this sort of tax-exemption scheme. See H.B. No. 21. 5 Upon information and belief, because the Legislature intends to take strong action to prevent these illegal schemes, HFCs, such as Pleasanton HFC, are scrambling to acquire multiple out-of-jurisdiction projects.

D. A Temporary Injunction is Necessary to Maintain the Status Quo, and to Prevent Continued Unlawful Action, because the City Has a Probable Right to Relief and Is Faced with Imminent Irreparable Harm.

To stop Pleasanton HFC from closing on the purchase of any more properties located in Lake Worth, Texas, the City asks this Court for a temporary injunction that prohibits Pleasanton

HFC from (a) closing on the purchase of any properties located in the City of Lake Worth and (b) requesting, approving and/or obtaining any tax exemptions on Lake Worth properties. The City further requests a temporary injunction that prohibits Tarrant Appraisal District from granting tax exemptions requested by Pleasanton HFC regarding any properties located in the City of Lake

Worth, Texas, to include the currently pending application for tax exemption for Neuhaus Lake

Worth Apartments. “To obtain a temporary injunction, [an] applicant must plead and prove three specific elements: (1) a cause of action against the defendant; (2) a probable right to the relief sought; and (3) probable, imminent, and irreparable injury in the interim.” Butnaru v. Ford

Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). “Whether to grant or deny a temporary injunction is within the trial court’s sound discretion,” and an order granting injunctive relief will be reversed on appeal only if “the trial court’s action was so arbitrary that it exceeded the bounds of reasonable discretion.” Id. An applicant has a probable right to relief if it has a cause of action for which relief may be granted. Universal Health Services, Inc. v. Thompson, 24 S.W.3d 570, 577-78 (Tex.

https://legiscan.com/TX/text/HB21/id/3053018.

Plaintiff’s First Amended Application for Temporary Injunction and Response to Defendant TAD’s Plea to the Jurisdiction PAGE 9

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App.-Austin 2008, no pet.). Among other grounds, “[a] trial court may . . . grant injunctive relief

… when a dispute involves real property.” Shor v. Pelican Oil & Gas Mgmt., LLC, 405 S.W.3d

737, 750 (Tex. App.—Houston [1st Dist.] 2013, no pet.).

All these elements are present. The City has pled a cause of action against Defendants: namely a declaratory action under the UDJA, an ultra vires claim against Pleasanton HFC board members, and a violation of the Texas Constitution. The City has shown it will likely be successful

in this declaratory action, as the Act’s plain language prohibits Pleasanton HFC’s complained-of conduct. And, in the absence of injunctive relief, Pleasanton HFC will continue to pursue its application for tax exemption and TAD will grant Pleasanton HFC’s application for tax exemption

on the Neuhaus Lake Worth property and Pleasanton HFC is likely to close on the purchase of additional Lake Worth properties and apply for tax exemptions on those properties as well. Such actions would lead to an irreversible removal of those properties from the local tax rolls. Simply put, this is precisely the sort of case in which equitable relief is warranted.

The City has a probable right to relief against the Pleasanton HFC Defendants.

As detailed in the City’s Original Petition, the City has well-supported causes of action against Pleasanton HFC, and its board members, to establish and protect its rights in accordance with the Act and the Texas Constitution. Specifically, the City has brought a declaratory judgment

action against the Pleasanton HFC Defendants pursuant to Civ. Prac. & Rem. Code § 37.003, regarding their violation of Texas Local Gov’t Code Sections 394.903(a). (Original Petition, pp.

12-13). Specifically, Pleasanton HFC’s scheme to obtain properties outside the jurisdictional

limits of Pleasanton, Texas, runs afoul of the plain language of Section 394.903(a) of the Act, which states “[a] residential development covered by this chapter must be located within the local government,” Id. (emphasis supplied). Texas courts “interpret statutes by looking to their plain

Second Street, Pleasanton, Texas 78064, or at any other location where he may be found.

is sued in his official capacity as a member of the Board of Directors of the Corporation. He can be served through the Corporation’s registered agent, at

102 Second Street, Pleasanton, Texas 78064, or at any other location where he may be found.

Street, Pleasanton, Texas 78064, or at any other location where he may be found.

IV. JURISDICTION AND VENUE

VII. LEGAL AND FACTUAL BACKGROUND

A. The property in question is within the jurisdiction of Missouri City.

taxes on property in its ETJ so that it can fund the extension of services to that property when the City exercises its contractual right to annex the property.

sponsorship of affordable housing projects to real estate developers in other jurisdictions near and far for a fee of up to $300,000 each.

E. The Pleasanton HFC is prohibited by law from purchasing the Royal Sienna in Fort Bend County.

acquisition of the subject property and its subsequent removal from the tax rolls will materially diminish SPLID’s revenue base and unfairly shift the tax burden onto remaining taxpayers within the district.

Defendants are acting under the incorrect legal theory that Chapter 394 authorizes Pleasanton HFC to acquire and own residential developments outside the boundaries of the City of Pleasanton.

B. Injunctive Relief.

C. Attorneys’ Fees and Other Relief.

CERTIFICATE OF SERVICE

I hereby certify that on May 27, 2025, a true and correct copy of the foregoing was sent as indicated to all counsel of record in accordance with Tex.

R. Civ. P. 21 and 21a, as follows:

Blake W. Stribling Via electronic service Daniel J. Lecavalier CHASNOFF | STRIBLING, LLP 1020 N.E. Loop 410, Suite 150 San Antonio, Texas 78209 [email protected] [email protected]

/s/ Jordan Marget Jordan Marget

EXHIBIT 1