The City of Magnolia altered its water rates in March of 2018 to charge nonprofit and tax-exempt organizations more than commercial businesses, leading the churches and the Magnolia Independent School District to protest the new rates before the city council.
According to the city’s court brief, the city then sought judgment from the 419th Judicial District Court in Travis County that the new system was valid without serving personal notice to the churches. Instead, the city published notices in The Austin American-Statesman and The Houston Chronicle.
The district court found the city’s new system valid — at first.
The churches filed a motion for a new trial, arguing that the city’s quiet tactics left them out of the legal proceedings. The same district court agreed in August of 2019 and granted the churches a second trial, directing the city to notify all interested parties directly. On Friday of last week, the Texas Third District Court of Appeals upheld this ruling in favor of the churches.
According to the EDJA, cities can seek judgments from courts that their bonds are valid. Rule 329 allows defendants in certain cases to seek a new trial up to two years after final judgments. No Texas court has previously addressed a clash between these two sections of code.
The churches argue that by allowing cities to slip notices into publications instead of serving them directly, the EDJA denies them due process. The city’s arguments are mostly procedural, claiming that missed deadlines and challenges of jurisdiction should prevent the churches from challenging the system in the first place.
More substantially, the city also argues that the new rates only hike the churches’ water bills slightly. Since one of the churches sits outside city limits, getting rid of the tax-exempt category in the water rate system wouldn’t make a difference because the church would then fall into the “Commercial Out-of-City” category with the same rates.
Before the churches sued the city, they first slung their stones at the legislative Goliath and convinced state Sen. Brandon Creighton (R-Conroe) to file Senate Bill 2322, which would have prohibited these discriminatory utility rates. At the bill’s hearing, Magnolia City Administrator Paul Mendes said the new rate system was meant to keep tax costs “more fairly apportioned among all customers.”
The bill died in the House. State Rep. Cecil Bell (R-Magnolia) also filed the identical House Bill 4114, which never made it to the Senate.
Texas Pastor Council President David Welch called Mendes’ description of a “fairly apportioned” system a way for the city to stretch and reach off-limits tax dollars.
“I’m pleased to see that Mr. Mendes has clarified that [City Council] did in fact pass these higher discriminatory rates specifically on churches, schools and nonprofits to offset the sales tax and property tax exemption,” Welch said.
“The city of Magnolia is growing [and] the churches are part of the community. We certainly support proper and good infrastructure growth in our water and sewer system, but the simple request we had to the city was to charge churches, schools and nonprofits the same that they do everybody else.”