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Click here for the full text of this decision FACTS:The underlying action stemmed from the development of land owned by the city of San Antonio adjoining the Henry B. Gonzalez Convention Center. In February 2003, the city council established the Convention Center Hotel Advisory Board (advisory board), which is composed of experts from local business sectors as well as a community representative. In May 2004, the advisory board and HVS International, an independent consulting firm, determined that a convention center hotel was important to maintain and expand San Antonio’s convention industry. In a written report, the advisory board recommended that the city’s land be developed by building such a hotel. In doing so, it recommended that a private developer construct, own and operate the convention center hotel. The advisory board, however, warned that a private developer would have difficulty obtaining conventional financing for the project and that some form of municipal or nonprofit debt financing would be required to bridge the gap between financing provided by the developer and total construction costs to ensure development. Through an ordinance, the city approved the request and application of Hotel Investments LP (the developer) to design, construct and operate the convention center hotel. On June 8, 2005, the city and the developer entered into the project agreement, which incorporated a ground lease and license agreement. Under this ground lease, the developer leased from the city the leased premises for an initial term of 75 years with an option to extend the term for an additional 15 years. The developer provided $77,331,200 of cash and capital contributions for construction of the convention center hotel and sought lower-cost, tax-free bonds to finance the remaining costs of $230,000,000. Pursuant to Chapter 431 of the Texas Transportation Code, the city council created a nonprofit corporation to finance a portion of the costs required to construct, furnish and equip the hotel. Thus, the city council created the nonprofit corporation so that it could issue Series 2005A Tax-Exempt Empowerment Zone Bonds totaling up to $130,000,000 and Series 2005B Taxable Revenue Bonds totaling up to $100,000,000. The empowerment zone revenue bonds were issued pursuant to Internal Revenue Code Subtitle A, Chapter 1, Subchapter U, which permits municipalities in economically depressed and/or disadvantaged areas to issue tax-free bonds for the benefit of private enterprises. The city loaned the bond proceeds to the developer. Under the agreement, the developer was responsible for repayment, interest and financing costs of the revenue bonds. The bonds expressly state that they are not a general debt or an obligation of the city, the state of Texas or any political subdivision of the state. A number of plaintiffs sought a declaratory judgment against the city of San Antoni the San Antonio Building and Construction Trades Council (SABTC); Tim McGrath, the representative officer of Sheet Metal Workers International Association Local No. 67, a labor union affiliated with SABTC; and Bob Salvatore, president of SABTC (collectively the SABTC plaintiffs). They alleged that Chapter 2258 of the Texas Government Code requires construction workers working on the convention center hotel project to be paid prevailing wages. On June 2, 2005, the parties tried the case in a bench trial. In its findings of fact and conclusions of law, the trial court found that the convention center hotel project was a public work, but that “no”public funds’ [were] used in whole or in part to pay for the construction” of the hotel. Because public funds were not used, the trial court determined that the city was not required to pay the prevailing wage rate to any employee, contractor or employee of a contractor relating to the development, design, construction, management or maintenance of a convention center hotel facility. Thus, the trial court rendered judgment in favor of the city. HOLDING:Affirmed. In their petition, SABTC stated that it brought suit “in its own name on behalf of itself and on behalf of the numerous construction workers comprising the membership of its affiliated local unions.” In reviewing the record, the court was satisfied that the SABTC plaintiffs represented members with standing to sue in their own right and that SABTC did not manufacture the suit. As such, the court held that the SABTC plaintiffs had standing. Section 2258.021 of the Texas Government Code, titled Right to Be Paid Prevailing Wage Rates, requires a worker employed on a public work to be paid the prevailing wage rate. But under �2258.002, �2258.021 is not applicable unless the construction of a public work was “paid for in whole or in part from public funds.” The court noted the trial court’s finding that the construction of the convention center hotel project was not paid for in whole or in part from public funds. Thus, the court found that the trial court did not err in determining that the prevailing wage rate did not apply unless public funds were used for the construction of the project. The SABTC plaintiffs then argued that the trial court’s finding that the construction of the project was not paid for in whole or in part from public funds was not supported by legally and factually sufficient evidence. Chapter 2258, the court noted, does not define “public funds.” The court noted that the Texas Attorney General stated in a 1998 advisory opinion that public funds include “only funds that the state or a political subdivision collects in accordance with a general law and that will be used to benefit the public generally.” First, the SABTC plaintiffs argued that public funds were used, because the nonprofit corporation created by the city was an alter ego of the city. But the court found that whether the nonprofit corporation was an alter ego of the city is relevant to the issue of whether the project was a public work but not relevant to the issue of whether public funds were used in its construction. The SABTC plaintiffs next argued that the bonds issued by the nonprofit corporation are public funds, because the funds loaned to the developer are to be used for a public purpose. But the court disagreed, because the city, Bexar County, the state of Texas or any other political subdivision of the state would never be liable for the bonds. It therefore held that the issuance of the bonds was not public funds as understood in chapter 2258. In considering the plain meaning of the phrase “construction of a public work . . . paid for in whole or in part from public funds,” the court construed it to mean public funds actually used to construct the public work here, the convention center hotel. Hotel occupancy taxes at issue, however, are not funds that are being used for the construction of the convention center hotel; instead, the taxes are being used as security in the event that the developer is not able to pay the bond holders. The possibility of the taxes being paid as security does not make them public funds used in the construction of the convention center hotel, the court stated. In conclusion, the court held that the trial court did not err in determining the public funds were not used in the construction of the hotel. OPINION:Angelini, J.; Angelini and Simmons, J.J. DISSENT:Stone, J. “Because I believe that the term”public funds’ should be construed to support the broad purpose of the prevailing wage rate law, the text of section 2259.002 of the Government Code should be read to incorporate within the”public funds’ definition construction projects of public works financed through tax breaks and bond statutes that might necessitate the use of public funds. By rejecting the majority’s argument and adopting this more expansive reading of”public funds,’ I believe that the purpose of the law is best served.”

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