Lone Star Law Review examined the unusually strong record governmental defendants have compiled before the Sixth Court of Appeals when they ask the court to end lawsuits on jurisdictional grounds.
One of those cases was TexAmericas Center v. Hooks Independent School District.
At first glance, it looked like an obscure government-versus-government contract dispute.
It is much more interesting than that.
TexAmericas is now helping develop Project Big Pine, a proposed 500-acre campus aimed at data centers, artificial-intelligence infrastructure and other power-intensive users. The project has been described as representing approximately $3.5 billion in potential investment. Railway Age
Data centers are controversial for obvious reasons. They consume enormous amounts of electricity, can require substantial water and infrastructure, and often receive substantial tax incentives. The debate has become heated enough that Gov. Greg Abbott recently halted new state-issued data-center permits while Texas audits their effects on the electric grid, water and tax incentives. Reuters
The standard argument on the other side is equally familiar: whatever their costs, massive data centers can create an enormous local tax base.
Fort Worth, for example, says data centers generated more than $83 million in city property taxes over five years. A proposed $10 billion data center near Waco has been promoted as potentially producing approximately $50 million per year in local tax revenue. Fort Worth Texas
That is the bargain communities are normally asked to consider.
Northeast Texas may get something very different.
Start with two sentences in Texas law
The special law governing TexAmericas contains an unusually clear limitation:
“The authority may not impose a tax.”
But the Legislature also enacted a special TexAmericas provision exempting qualifying private leasehold and possessory interests from ordinary property taxation.
That provision came from Senate Bill 579, authored in the Senate by Sen. Bryan Hughes.
Rather than merely recognizing that the underlying government land is tax-exempt, SB 579 specifically addresses the private interest held by a TexAmericas tenant. It declares that interest held for a public purpose, exempts it under Tax Code §11.11, and expressly says the ordinary rule in Tax Code §25.07(a) does not apply. Justia Law
So TexAmericas cannot levy a property tax.
Its qualifying private tenant does not pay the ordinary property tax on that leasehold. Typically under the Texas Constitution, a private taxable tenant leasing from an exempt government entity would pay local property taxes.
But TexAmericas can require the tenant to make a contractual Payment in Lieu of Taxes, or PILOT, calculated from the taxes the tenant otherwise would have paid.
The legal distinction is real.
The economic resemblance is hard to miss.
Suppose a tenant would ordinarily owe $100 in local taxes.
Under the standard TexAmericas PILOT formula, the tenant pays roughly 90 percent of that amount.
So the tenant pays $90 instead of $100.
That sounds like a fairly ordinary economic-development incentive: give the company a 10-percent break and send the other $90 to the school district, county, community college and other jurisdictions that would normally receive the property taxes.
And according to Hooks ISD, that was the arrangement it understood TexAmericas to be proposing.
Chief Justice Scott Stevens’s eventual opinion recounts Hooks’s allegation that a TexAmericas representative told the school board that tenants would make the payment to TexAmericas and TexAmericas would then “cut a check to the school district in that amount.” Hooks ISD subsequently adopted a resolution supporting the legislation. Justia Law
The legislation passed.
Then the arrangement changed.
For newer leases, TexAmericas’s adopted PILOT policy provides that only 10 percent of the PILOT payment goes to the taxing jurisdictions. TexAmericas retains the other 90 percent of the PILOT.
Return to our hypothetical $100 tax bill:
Ordinary property tax: $100
Tenant’s standard PILOT: $90
Local taxing jurisdictions collectively receive: about $9
TexAmericas retains: about $81
That is a very different bargain.
And it exists alongside the statutory command:
“NO TAXING POWER.”
This land was outside the ordinary tax base for generations
There is another reason the arrangement matters locally.
TexAmericas controls thousands of acres of former military property. Much of that land traces back to the World War II-era military installations that became Red River Army Depot and the Lone Star Army Ammunition Plant.
For generations, enormous tracts of that property were outside the ordinary local property-tax system. They were taken by the Federal government from private property owners.
Civilian redevelopment should therefore present an obvious opportunity: put valuable private industry on formerly federal property and finally expand the tax base available to local schools, Bowie County, Texarkana College and other jurisdictions.
Instead, the Legislature enacted a special law keeping qualifying private TexAmericas leaseholds outside the ordinary system.
That might have been easier for the local taxing entities to accept if the substitute PILOT revenue simply replaced the lost tax revenue.
Hooks says that is why it supported the legislation.
Hooks went to court
Hooks eventually alleged that TexAmericas had not honored the bargain.
It sued for breach of contract and related theories.
TexAmericas responded with governmental immunity.
The trial judge initially wanted to give Hooks 60 days of discovery before deciding TexAmericas’s renewed plea to the jurisdiction.
TexAmericas went to the Sixth Court of Appeals seeking mandamus.
Justice Charles van Cleef wrote the opinion granting relief. Because TexAmericas’s jurisdictional attack was directed at Hooks’s pleadings, the Sixth Court concluded that TexAmericas was entitled to have that issue decided without first going through the discovery authorized by the trial judge. Justia Law
The case eventually returned to the Sixth Court after the trial judge denied TexAmericas’s plea.
This time Chief Justice Stevens wrote the opinion.
The court reversed and dismissed Hooks’s claims.
Stevens concluded that Hooks had not established the kind of written contract required for the statutory waiver of governmental immunity. In doing so, the court examined whether the resolutions and other writings established an agreement, whether the payment obligation was sufficiently definite, and whether the writings reflected the agreement Hooks alleged. Justia Law
Texas immunity law allows jurisdictional questions to overlap with issues that look very much like the merits.
Still, the practical result is striking.
The Sixth Court first prevented the discovery the trial judge wanted to permit.
It then examined the written evidence closely enough to conclude that Hooks could not sue on the alleged bargain.
The underlying question—did TexAmericas actually promise what Hooks says it promised and then fail to deliver?—never received a trial.
That sequence is particularly notable in light of the broader Sixth Court immunity record examined in this site’s previous article. Our earlier review found that government defendants obtained complete victories in most of the current court’s plea-to-the-jurisdiction cases; TexAmericas was one of the cases in which a trial judge rejected the government’s jurisdictional plea only to be reversed by the Sixth Court.
The question Hooks ISD never asked
Hooks may also have fought the smaller battle.
Its lawsuit was about enforcing the alleged PILOT bargain.
But there is a much larger legal question:
Was the special tax exemption itself constitutional?
The Texas Constitution puts limits on the Legislature’s ability to create exemptions from property taxation.
Article III, §56 specifically says the Legislature may not, except where otherwise authorized by the Constitution, enact a local or special law “exempting property from taxation.” Texas Statutes
That language is difficult to ignore here because SB 579 is not simply a generally applicable provision of the Tax Code.
The TexAmericas exemption sits in the Special District Local Laws Code and applies specifically to TexAmericas.
There is also unusually relevant Texas precedent.
In Tarrant Appraisal District v. Tarrant Regional Water District, the Fort Worth Court of Appeals considered a special statute purporting to exempt one water district’s property from ad valorem taxation.
The court held that the special exemption violated Article III, §56.
The property in that particular case still qualified for exemption under a separate generally applicable law, but the court rejected the district-specific exemption itself. Justia Law
Then, in Odyssey 2020 Academy v. Galveston Central Appraisal District, the Texas Supreme Court confronted legislation saying certain property associated with a charter school should be considered public property.
The Court held that the Legislature could not simply recharacterize a property interest that was not actually publicly owned in order to obtain a constitutional tax exemption. Justia Law
Neither case automatically decides the TexAmericas question.
But both make the question serious.
The Sixth Court has already explained what normally happens
There is an additional irony.
In an unrelated 2024 case, Hunt County Appraisal District v. Lake Tawakoni Wind Point Park Corp., the Sixth Court itself explained how Tax Code §25.07 normally works.
When the government owns the tax-exempt fee estate but leases the property to a private party, the court explained that §25.07 can make the private leasehold the taxable estate. Justia Law
SB 579 specifically removes TexAmericas leaseholds from that ordinary rule.
So the Legislature did not merely declare the government land exempt.
It specifically insulated the private leasehold interest that Texas law otherwise contemplates taxing.
Whether the Constitution allows that TexAmericas-specific exception has apparently never been adjudicated.
The alternative may be 100 percent taxation
That matters because the alternative to TexAmericas’s PILOT structure may not simply be a different division of the 90-percent payment.
If the special exemption were successfully challenged and no other general exemption applied to a particular private leasehold, §25.07 could potentially put that leasehold back into the ordinary property-tax system.
Instead of debating whether the local jurisdictions should receive $9 or $90 from our hypothetical $100 tax bill, the question could become whether the tenant should simply owe the full $100 under the ordinary tax laws.
Texas law gives taxing units a mechanism for challenging property excluded from appraisal records, followed by judicial review. That creates at least a potential route for Hooks ISD and other affected taxing jurisdictions to bring the constitutional question into court through an actual excluded leasehold rather than trying again to enforce the old PILOT promise.
No court has ruled that SB 579 is unconstitutional.
But no court appears to have ruled that it is constitutional either.
The Sixth Court case never reached that issue.
Big Pine makes the question harder to ignore
The dispute no longer involves merely an old contract fight over roughly a million dollars.
TexAmericas is promoting development measured in billions.
And data centers are currently being defended across Texas partly on the ground that their enormous capital investment can generate enormous local property-tax revenue. The Texas Tribune
Northeast Texas deserves to know whether that familiar benefit applies here and whether the Texas Constitution applies here.
If the public is asked to accept the electrical, water and infrastructure demands associated with massive data-center development, then the tax structure should be understood plainly.
A special law authored by Bryan Hughes exempts qualifying private TexAmericas leaseholds from the ordinary property-tax system.
TexAmericas substitutes a PILOT based on what those taxes otherwise would have been.
For newer leases, TexAmericas’s policy allows it to retain most of that payment.
Hooks ISD says it supported the legislation based on a very different agreement of where the money would go.
When Hooks tried to enforce that alleged bargain, the Sixth Court first stopped the discovery the trial court had allowed and later dismissed the district’s claims based on governmental immunity.
The first Hooks lawsuit is finished.
The much larger constitutional and tax question is not.
[1] TexAmericas board members had documented political ties to Stevens’s campaign. Stevens’s 2018 campaign website listed “Martha and Fred Norton” and “Alison and Stephen Mayo” among his supporters. Texas Ethics Commission reports also show a $500 contribution from Norton & Wood, LLP on December 6, 2017, and a $100 contribution from TexAmericas director Don Morriss on September 15, 2021. No evidence identified here establishes that those relationships affected the court’s decision.
[2] Lone Star Law Review contacted Sen. Bryan Hughes’s office before publication and requested comment on whether the result affecting Hooks ISD was an intended consequence of SB 579 and whether Hughes had considered supporting Hooks ISD in addressing the resulting revenue dispute. No response had been received as of publication.