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Plaintiffs Hamilton Atmos LP and CitySquare Housing files this Original Petition against
Defendant City of Dallas and would respectfully show the Court as follows:
I.
DISCOVERY CONTROL PLAN
1. Plaintiffs intend to conduct discovery in this case under Level 3 of Texas Rules of
Civil Procedure because the issues in dispute are complex and the claims will be better resolved
in accordance with a discovery plan specifically tailored by the Court for the disposition of this
case.
II.
PARTIES
principal place of business at 311 S. Harwood St., Dallas, Dallas County, Texas 75201.
place of business at 511 N. Akard Street, Suite 301, Dallas, Dallas County, Texas 75201.
and principal place of business is located at 1500 Marilla St, Dallas, Dallas County, Texas 75201.
It may be served with process by serving its registered agent City Secretary Bilierae Johnson at
the City Secretary’s Office, 1500 Marilla St., Room 5 D South, Dallas, Texas 75201.
III.
JURISDICTION AND VENUE
5. This Court has jurisdiction over this case because the damages sought are within
the jurisdictional limits of the Court and the City of Dallas has unambiguously waived immunity
to suit for breach of contract claims. TEX. LOC. GOV'T CODE ANN. § 271.152; Dallas County Hosp.
Dist. v. Hospira Worldwide, Inc., 400 S.W.3d 182, 185 (Tex. App.—Dallas 2013, no pet.). Plaintiff
6. Venue is proper in this Court because Dallas County is the county in which all or a
substantial part of the events or omissions giving rise to Plaintiffs’ claims occurred, because Dallas
County is the county of City of Dallas’s principal office in Texas, and because Defendant City of
Dallas resides in Dallas County, Texas. See CIV. PRAC. & REM. CODE §§ 15.002(a)(1-3).
IV.
FACTS
7. The City of Dallas is in an existential crisis. Despite robust economic growth, the
city’s prosperity is unavailable to the majority of its residents. Its median wages are the lowest of
any city of more than a million residents in the United States. Large swaths of the city are losing
population. The city’s Racially and Ethnically Concentrated Areas of Poverty (“RECAP”) have
more than doubled since 1990. See Matt Goodman, Dallas Isn’t Helping its Poorest Residents
Escape Poverty, and Neither Are Its Neighbors, D MAGAZINE (Nov. 6, 2018),
Dallas to be literally the least inclusive city in the nation at 274th out of 274.
8. One of the central causes for this crisis is the lack of affordable housing in areas of
high opportunity. Dallas spent lots of money over the years on affordable housing, but its attitude
toward keeping those in need of opportunity in certain areas of town resulted in the radical re-
segregation of the city over the last twenty years concentrating poverty in areas of town where we
(“ICP”) of the city’s inability to lift its poorest residents out of poverty have pointed to
desegregation and building affordable housing in high opportunity areas as key interventions to
prevent the growth of poverty in Dallas. See Housing Policy Recommendations, OPPORTUNITY
2019).
10. The city’s recalcitrance to building mixed income neighborhoods ultimately led to
the Federal Department of Housing and Urban Development (“HUD”) threatening to force Dallas
to repay misspent federal funds and to cut off all future housing dollars. The city is still under the
terms of a 2015 Voluntary Compliance Agreement strictly controlling its federal housing spending.
See DEP’T OF HOUSING AND URBAN DEV., VOLUNTARY COMPLIANCE AGREEMENT BETWEEN THE
http://dallascityhall.com/departments/fairhousing/DCH%20Documents/pdfs/dallas-hud-
Housing Department and of millions of dollars stolen, misspent, or missing. See Jim Schutze, HUD
City Hall Probe to End with Findings of Wrongdoing and Fakery, DALLAS OBSERVER,
https://www.dallasobserver.com/news/hud-probe-of-dallas-city-hall-will-wind-up-soon-with-
11. As it turns out, putting all of the subsidized, affordable housing in the same parts
of the city is exactly the same thing as concentrating poverty, and because Dallas’s impoverished
residents are disproportionately people of color, it’s also exactly the same thing as re-segregating
the city. Dallas’s uses of federal and state housing subsidies to concentrate poverty is so notorious
that it forms the basis of both the United States Supreme Court’s most recent opinion on disparate
12. The news about Dallas’s treatment of affordable housing is not uniformly bad,
though. As Dallas’s downtown lost its leadership as an employment center after Texas’s oil,
banking, and real estate crashes of the 1980s, the silver lining that emerged was large buildings
13. These former office towers could no longer attract the employer tenants that had
spurred their development, but putting residents in them held the promise of renewed life for the
vacant structures, housing near employment opportunities for those in need, and most importantly
for this case, massive increases in tax base for the city.
14. Older buildings challenge developers. No two projects work the same way, which
prevents developers from exploiting common materials, design, and construction techniques.
These are advantages developers operating in the suburbs hold over urban competitors. Interior
amenities such as swimming pools are critical to attract residential tenants. Dallas’s downtown
15. Dallas’s downtown additionally had suffered reputational damage as the city
neglected its development and redevelopment in the ‘80s and ‘90s. The result was that private
capital was reluctant to enter downtown preferring Uptown and the suburbs, and while those places
have many enviable aspects, affordable housing isn’t one of them. Dallas needed risk tolerant,
creative developers to invest in downtown, and those developers were going to need specialized
16. Most of the redeveloped buildings that have brought so much vibrance to
downtown today utilized the National Parks Service’s historic tax credit program, and the later
ones use the state’s similar tax credits. Recently, Texas’s Property Assessed Clean Energy program
has provided affordable financing to modernize building mechanicals. But by far the most
important public component of downtown developers’ capital stacks has been the Tax Increment
Financing (“TIF”) program. See Tax Increment Financing, DALLAS ECONOMIC DEVELOPMENT,
2019). Though administered by the city’s Office of Economic Development, the TIF that has most
elevated development in downtown is the Downtown Connection TIF that was initiated and
evaluates the increase to the city’s tax base that is the result of new development within a defined
area and then makes those incremental gains in tax revenue available as incentives within that area.
The theory is that the increased tax revenue results from the private development and so can be
used to stimulate private development. Without these important gap-closing dollars, it is safe to
say that Dallas’s downtown would have continued vacancies, a fraction of its residents, and
18. Because TIF diverts tax dollars from the city’s general fund, powerful, transparent,
and exacting controls must be put in place to ensure that the funding is used to accomplish the
city’s goals as first priority. City Council has strictly complied with state law in approving TIF
districts and has laid down strong policy guidelines requiring, among other things, affordable,
mixed-income housing in exchange for TIF dollars. City staff has erected a labyrinthine
superstructure of regulations governing applications for TIF dollars, awarding of the funds, and
the timing and priority of distribution. And for added oversight, Council empowers an appointed
board for each TIF to evaluate and manage the districts on a granular level. The members of the
Downtown Connection TIF board who made the grant at issue here are some of the most
sophisticated housing advocates, architects, developers, and investors ever gathered to administer
a TIF.
19. In other words, a developer qualifying for TIF funding in the Downtown
Connection TIF will have endured an extraordinarily exacting process and will have committed to
a development specifically designed to meet the city’s needs. The financing structures that are
usually do, comprise complex stacking of funding sources. These can include private capital, debt,
The failure of any one of these sources to come through on an individual project, or even a delay
in capital availability, can spell ruin for the developer and extended vacancy for the city.
20. While the city fought HUD and squandered federal funds, some Dallas developers
have for years sought to do the right thing, follow the rules, and provide desperately needed
affordable housing in areas where its residents will have easy access to jobs, education, and
transportation.
developments. By the late ‘00s, Hamilton Properties had delivered the Davis Building, Dallas
Power & Light, Mosaic, and Lone Star Gas Lofts, all successful uses of TIF awards, and was
22. Atmos Energy vacated its complex between St. Paul and Harwood sometime
around 2005. The buildings in this complex were built over the course of several decades as Atmos
and its predecessor entities changed and grew. The vacant grouping of buildings—known
physical development problems presented by one historic building are only multiplied when a
developer seeks to repurpose multiple structures from different historical periods. Plaintiffs and
23. Hamilton signed the first of the development agreements for the project on March
31, 2009. Underlining the challenge of the project, Hamilton acquired the property from a rival
Defendant.
24. The affordable housing standard typically required by the city in the Downtown
Connection TIF district prior to this project was that 10% of the units in a multifamily building
would be set aside for moderate-income affordable housing. Moderate-income, as that term has
been used by the city’s Housing and Economic Development Departments, means the least
affordable threshold at which HUD will still recognize the units as affordable for purposes of
meeting the city’s duty to affirmatively further fair housing. The tenants are not desperately poor;
in fact they make 80% of the Area Median Income or about $43,000.00 last year.
25. The city’s duty to affirmatively further fair housing is complex and involves many
other aspects that the city has historically failed to fulfill, but for purposes of this issue, it is the
number of affordable units and the income level of the residents that matters. By allowing the
previous owner to proceed with the project using TIF funds and only provide 10% of the building
for affordable housing is exactly the kind of lenience on the part of the city that ultimately resulted
in the protracted conflict with HUD and the city’s forced agreement to a Voluntary Compliance
26. As the development proceeded in the teeth of the Great Recession, Hamilton
conceived of an idea to ensure the success of the Atmos project while providing even greater
affordable housing benefits to the city. Hamilton proposed to increase its own investment in the
project if the city would approve a small increase in the TIF award and a HUD-funded grant. In
27. Of greater benefit for low-income Dallas residents, Hamilton proposed to offer 107
of these units at low-income rents. Low-income, as that term has been used by the city’s Housing
median income. These are people and families who would be mathematically unable to pay for
necessities such as health care or even adequate family nutrition without affordable housing with
rents at a deep discount to the market. Far from shying away from Dallasites in these
circumstances, Hamilton sought a way forward to provide a beneficial development for downtown
28. In May of 2011, the city agreed to Hamilton’s enhanced affordable housing
proposal, and Hamilton proceeded to develop and deliver the most radically mixed-income
residential project in Dallas to that date. Hamilton then brought in CitySquare Housing’s
experience with Low Income Housing Tax Credits on which the newly conceived project would
partially rely.
29. Phase 1 of the project was substantially complete in August of 2012, and Phase 2
was delivered in September, 2014. Since that time, Hamilton has provided the desperately needed
affordable housing it promised in coordination with the city’s departments of Fair Housing,
Housing, and Economic Development and in compliance with all the terms of the development
agreement with the city. The Economic Development Department conducted an audit of the project
90 days after completion and certified, as required by the development agreement, that all
conditions precedent to Hamilton’s right to collect its TIF award had been met. All of the data
confirming the continual provision of affordable housing since the complex was first leased up
Plaintiffs are providing more affordable housing than the other TIF recipients combined while
31. Providing affordable housing is not inexpensive for apartment operators and
developers. Each dollar discount in market rent is an impact to the bottom line every single month
over the entirety of the affordability period, the shortest of which is 15 years. In the current market
downtown, offering one affordable unit at the least affordable 80% AMI threshold could easily
32. Even if we could conjure the most magnanimous developer, charity alone will not
produce affordable units. Investors set their return expectations on market rents, and lenders
actually require borrowers to promise to charge what the market will bear. In short, there is no
33. TIF spurs affordable housing while causing the city the least amount of pain. The
taxes incentivizing the development come from the investments in the TIF district themselves; so
against misspending the public’s resources, the city makes TIF applicants run a gantlet of onerous
financing documentation and underwriting requirements, and as is clear from the development
agreements at issue here, the city demanded serious, material benefit to the public before any TIF
34. The priority and timing of the payment of TIF awards demonstrates the difficulty
of becoming a successful TIF awardee. Because the city is prohibited from leveraging TIF dollars
by paying awards before the tax base has verifiably increased, TIF awards are often not due for
issue in this case set forth a complex system for determining when TIF funds would be paid. The
complexity was necessary to accomplish two goals: 1) ensure the increase in tax base could pay
35. TIF districts are not risk-free propositions for the applicants and awardees. If a
district’s tax base doesn’t rise or if it doesn’t rise as much as projected, the last TIF awards in the
queue will not be paid. If a board sets an inequitable payment priority or if city staff pays the
awards out of order, a deserving awardee may be stiffed or short paid. Tax increment, the increase
in taxable value, is never calculated based on how much developers spend but only on the fair
market value of the district as a whole. If developers fail to convince the market that values have
risen or if one land owner devalues the district through inappropriate use of a property, the new
investment might not produce as much tax base growth as anticipated. These risks are spelled out
in the development agreements Dallas requires of TIF applicants and are just more risks Plaintiffs
braved.
36. In the case of the Downtown Connection TIF, and to all our good fortune, the
redevelopment of downtown has been successful, especially when measured by increase in tax
base. The TIF board’s payment priority policy was made an effective amendment to Hamilton’s
development agreement with the city and lists all the projects ahead of Atmos in the queue and the
conditions under which city staff can be assured that the TIF district has produced enough
increment for Hamilton’s TIF award to be paid. Again happily, all those other awardees have been
paid, and the TIF is currently more than adequately funded to pay Hamilton’s award some seven
years after Hamilton started providing one of the largest sources of affordable housing in the city.
37. Because the queue for payment and the balance of available funds are public record,
Plaintiffs began inquiring with the city about payment when it became obvious that the award was
owed in the summer of 2018. After multiple inquiries from Plaintiffs, the city finally responded
with three separate letters on the same day alleging a variety of bogus defaults it claimed prevented
the payment of the TIF award. All of the ostensible defaults alleged by the city were drawn from
data continuously provided to the city by Hamilton for years, and none of the ostensible defaults
are actual, contractual conditions precedent to the city’s duty to pay the TIF award.
38. More troubling is that the city’s alleged defaults would result in awful outcomes
for the affordable housing tenants if Plaintiffs were to comply with the city’s requests. For instance,
one of Plaintiffs’ affordable housing tenants qualified for an affordable unit but later got a raise.
The city claims, in contradiction of federal housing regulations, that this poor tenant’s hard work
to improve his income required Plaintiffs to immediately evict him. This is not how federal housing
regulations work.
39. Plaintiffs had many informal communications with city staff attempting to work
through what Plaintiffs assumed must be a kind of misunderstanding. Ultimately, calm discussion
failed, and Hamilton was forced to send the city a notice of default in compliance with the default
provisions of the development agreement on June 7, 2019, and making written demand for its TIF
award.
TIF award endangers the city and its residents in a number of ways.
41. First, the city is in violation of its duty to affirmatively further fair housing under
federal housing law and regulations as well as the 2014 Voluntary Compliance Agreement with
HUD. The duty to affirmatively further fair housing, again, is a complex duty encompassing many
obligations, but for cities like Dallas with an acute shortage of affordable housing, diligent pursuit
42. The VCA was a compromise reached between the city and HUD after HUD’s OIG
had concluded after an extensive investigation that the city had systematically discriminated
against minority residents by concentrating them in poverty-stricken areas and explicitly refusing
43. The regulatory danger the city has placed itself in is that a motivated HUD could
easily pursue the city for breaches of its duties and breaches of the VCA. The federal government’s
remedies in cases like these include repayment of federal housing funds and reducing or ceasing
future funding.
44. The bigger danger, though, is the message the city is sending to developers and
builders who might otherwise be tempted to propose housing projects that can begin to heal the
historical divisions in our city. Even apart from TIF funding, if Plaintiffs can be treated this way
after providing so much affordable housing, who will ever rely on the city’s promises to help
45. More pressing is the issue of what will happen to Hamilton’s TIF award if it is not
paid in order and in compliance with the board’s explicit prioritization policy. As discussed above,
inappropriately sidelined and scheduled for a payment in the future, the wasting fund of the
increment becomes subject to the claims of lower priority awardees in the queue. By the time the
city can be convinced to pay Plaintiffs what it owes, there is a real risk that the Downtown
Connection TIF could be underfunded to fulfill the award or may even have been shuttered.
46. To guard against this risk of irreparable harm, Plaintiffs require the Court’s help in
the form of a Temporary and Permanent Injunction prohibiting the city from making any further
transfers out of the TIF until Plaintiffs’ award is paid and from further violating the board’s
prioritization policy. Further details are pleaded below in Plaintiffs’ Petition for a Temporary and
Permanent Injunction.
47. Plaintiffs are now faced with the sad prospect of being forced to petition this Court
for assistance in collecting a presently due and owing debt by compulsion from a city that by
federal mandate, by state policy, and by city council policy should be an eager partner in providing
V.
COUNT 1 – BREACH OF CONTRACT
48. In May of 2011, Hamilton and Dallas executed a valid and enforceable written
contract in the form of the First Amendment to the Development Agreement. Hamilton attaches a
49. On February 15, 2013, the city and the Plaintiffs executed a valid and enforceable
contract in the form of a Partial Assignment to Development Agreement and the city’s Consent
50. These contracts provided that Plaintiffs would provide the improvements described
therein along with the affordable housing discussed above in exchange for certain incentives
51. Defendant materially breached the contract when it withheld Hamilton’s TIF
53. Plaintiffs additionally made a valid demand for payment and declaration of default
in accordance with the default terms of the contracts. Those provisions specify a default rate of
interest on the amount of Plaintiffs’ principal damages at a rate of Prime plus four percent. This
default interest accrues to Plaintiffs damages for breach of contract and is also due and owing.
54. Plaintiffs are entitled to recover reasonable and necessary attorney fees under Texas
Local Government Code section 271.153(a)(3) because this suit is for breach of contract against a
local-government entity.
VI.
TEMPORARY AND PERMANENT INJUNCTIVE RELIEF
55. Plaintiffs require injunctive relief to prevent the City from transferring any more
money out of the TIF fund until Plaintiffs’ TIF award is paid and to prevent the City from further
56. As detailed above, Plaintiffs have a right to money from the Dallas Downtown
Connection TIF. A TIF creates a particularized pool of funding that pursuant to state law can only
57. The board of this TIF has created strong and clear guidelines setting forth the
priority of payments from the revenues of the TIF. Such clear rules were and are necessary to give
district.
58. If the Defendant is allowed to deny Plaintiffs payment of the due and owning TIF
award or of the Defendant is permitted to vary the board’s priority of payment, Plaintiffs may not
have an adequate remedy at law because the TIF could run out of revenue due to drawing down of
the funds through payments to other, due to loss of value in an economic downturn, or due to loss
of confidence of existing or future investors limiting the new increment to be created in the future.
59. Any of these factors would tend to limit the effectiveness of a judgment in
Plaintiffs’ favor if Defendant is allowed to continue dispersing TIF funds while this case is still
pending.
60. Plaintiffs can easily demonstrate a probable right to recovery on their breach of
61. For these reasons, Plaintiffs request a Temporary Injunction until trial and a
Permanent Injunction on final trial. Plaintiffs seek the Court’s order only to preserve the status quo
during the pendency of this action. Plaintiffs seek an order immediately restraining Defendant from
making any further payments out of the Downtown Connection Tax Increment Finance District
funds or from making further awards or from taking any other action that could reduce the
VII.
CONDITIONS PRECEDENT
62. All conditions precedent to Plaintiffs’ right to recover their TIF award are listed in
the Agreement is hereby expressly made subject to all of the following contingencies which must
(a) Hamilton Atmos shall complete the Phase I Improvements and the Phase II
Improvements as described in Sections 1.01A and B and shall meet all deadlines for
obtaining building permits and for completing of the Atmos Complex Improvements by
(b) Hamilton Atmos shall provide Affordable Housing in the Phase I Improvements
throughout the Phase I Affordability Period and shall provide Affordable Housing the
Section 1.11 and all applicable state and local laws, codes and regulations; and
(c) Hamilton Atmos shall market such residential units as Affordable Housing pursuant
(d) Hamilton Atmos shall privately bid the construction and abide by the City's
Business Inclusion and Development Fair Share policies and Downtown Connection TIF
District Fair Share Agreement adopted by the Downtown Connection TIF District Board
of Directors on August 10, 2006, with a goal of twenty-five percent (25%) participation in
(e) Hamilton Atmos shall obtain Downtown Connection TIF District Design Review
conformance to the design and the materials shown in elevations and site plans approved
by the Downtown Connection TIF District Board and the Design Review Committee
(g) Hamilton Atmos shall submit quarterly status reports in form and substance
satisfactory to the City on the progress of the construction of the Atmos Complex
Improvements from inception to the issuance of a final ce1iificate of occupancy and a final
(h) Hamilton Atmos shall execute and deliver an operating and maintenance agreement
for the public infrastructure improvements associated with the Atmos Complex
Improvements in fom1 and substance satisfactory to the City by the Phase I-CO and Phase
(i) Hamilton Atmos shall complete construction in substantial accordance with the
Plans and the Construction Budget and receive a final ce1iificate of occupancy and a final
certificate of acceptance issued by the Department of Public Works and Transportation for
the Phase I Improvements by the Phase I-CO date and for the Phase II Improvements by
(j) the Office of Economic Development shall conduct and complete a post construction
audit within 90 days after the final certificate of completion is issued for the Atmos
Complex to verify the Hamilton Atmos' compliance with the conditions to TIF Subsidy.
Failure of the City to complete such audit within 90 days shall not delay any payments of
that all conditions precedent have been met or has waived its right to do so pursuant to subsection
(j).
VIII.
JURY DEMAND
64. Plaintiff Hamilton Properties demands a trial by Jury and tenders the appropriate
IV.
REQUEST FOR DISCLOSURE
65. Pursuant to Rule 194, Defendants are requested to disclose, within 50 days of
service, all information or material described in Texas Rule of Civil Procedure 194.2.
X.
PRAYER
66. For these reasons, Plaintiff respectfully asks that the Court issue citation for
Defendants City of Dallas to appear and answer. Plaintiff prays that it be awarded a judgment
against Defendants City of Dallas for the principal damages and interest listed above, and any such
other and further relief, both at law and in equity, general and specific, to which Plaintiff proves it
is justly entitled.
James M. Stanton
State Bar No. 24037542
jms@stantonllp.com
Jennifer Salim Richards
State Bar No. 24079262
jrichards@stantonllp.com
Philip T. Kingston
State Bar No. 24010159
pkingston@stantonllp.com
STANTON LLP
1717 Main Street
Suite 3800
Dallas, Texas 75201
Telephone: (972) 233-2300
Facsimile: (972) 692-6812
ATTORNEYS FOR
PLAINTIFFS