Texas Cases March 15, 2024: City of Dall. v. The Emps' Ret. Fund of City of Dall.

Case Description

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Argued October 4, 2023

On Petition for Review from the Court of Appeals for the Fifth District of Texas

OPINION

Evan A. Young, Justice

We must decide whether a city ordinance may bestow on a third party the perpetual right to "veto" categories of future lawmaking. We hold that such an alienation of lawmaking authority is impermissible. The court of appeals, by contrast, relied on principles of trust law to reach the opposite conclusion, holding that the City of Dallas cannot amend Chapter 40A of its own code of ordinances unless the board of trustees of the Employees' Retirement Fund agrees to the amendment. We reverse the court of appeals' judgment.

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I

In 1935, the legislature authorized larger Texas cities "to formulate and devise a pension plan for the benefit of all employees in the employment of such city." Tex. Rev. Civ. Stat. art. 6243d, § 1. A city's "governing body" would develop such a plan, which "shall be submitted in ordinance form by said governing body to the qualified electors of such city" and "be approved by said qualified electors at an election duly held." Id.

Eight years later, the Dallas City Council announced that "there is hereby established, subject to the approval of the electorate of the City at an election to be called for that purpose, 'The Employees' Retirement Fund of the City of Dallas.'" Dallas, Tex., Ordinance No. 3470 (Nov. 24, 1943). The voters so approved and the Fund came into existence. The ordinance creating and governing it is codified, as amended, as Chapter 40A of the Dallas City Code.

Chapter 40A describes the Fund as a "trust fund" and a "public entity" that is "established for the exclusive purpose of providing benefits to members and their beneficiaries." Dallas, Tex., Code of Ordinances § 40A-2(a)-(b). A seven-member board of trustees administers the Fund: three city-council appointees, three City employees "who are elected by members of the retirement fund and who are members of the retirement fund," and the city auditor. § 40A-2(c)(1). As of 2018, the Fund's assets exceeded $3.6 billion, benefiting more than 16,000 families.

The 1943 ordinance creating the Fund expressly provided that the

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city council could make unilateral amendments until 1945. See infra note 16 and accompanying text. The city council approved at least one amendment during that period. See Dallas, Tex., Ordinance No. 3577 (Oct. 26, 1944). Since 1945, the Fund says, Chapter 40A has mandated that any amendments to Chapter 40A be placed on the ballot. We assume that representation to be true. The record reflects, at least, that by 1977, Chapter 40A incorporated the following amendment procedure:

This chapter may not be amended except by ordinance adopted by the city council and approved by a majority of the voters voting at a general or special election.

Dallas, Tex., Ordinance No. 15414 (Feb. 7, 1977) (then codified as § 40A-34; recodified as amended as § 40A-35(a)).

In 1991, however, a city ordinance granted authority to the Fund's board that both parties here have described as a "veto" power. It did so by adding these underlined words:

This chapter may not be amended except by ordinance recommended by the board, adopted by the city council and approved by a majority of the voters voting at a general or special election.

Dallas, Tex., Ordinance No. 20960 (June 12, 1991) (then codified as § 40A-35; recodified as amended as § 40A-35(a)).

In 2004, another amendment (to which the board unsurprisingly

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consented) further strengthened the board's veto power. The following underlined language was added and the stricken language was deleted, modifying § 40A-35(a) from its immediately preceding form:

Except as provided in Subsection (b) of this section, this chapter may not be amended except by a proposal initiated by either the board or the city council that results in an ordinance approved recommended by the board, adopted by the city council, and approved by a majority of the voters voting at a general or special election.

Dallas, Tex., Ordinance No. 25695 (Aug. 11, 2004) (codified as amended as § 40A-35(a)). The Fund contends and the City does not dispute that, from 1991 onward, all amendments to Chapter 40A were adopted in accordance with § 40A-35(a)-that Chapter 40A was never amended without the board's consent.

But then came the City's desire to impose term limits on members of city boards. The city council could unilaterally impose limits on every board except (because of § 40A-35(a)) the Fund's. The City passed a general "board member" term-limit provision in 1994, when "member" was defined as "a duly appointed member of a board." See Dallas, Tex., Ordinance No. 22259 (Nov. 9, 1994) (codified as amended as § 8-1.5(a)). The Fund did not object to term limits for board members "appointed" by the city council. Its views were quite different as to the elected board members, who declined to observe the term-limit provision, thus creating an apparent "loophole."

In 2017, without securing board approval, the city council amended Chapter 8 of the City Code once more, this time expressly reaching the Fund's elected board members:

A person who has served on the board of the employees' retirement fund pursuant to Section 40A-3(a)(1) of this code,

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as amended, for three consecutive terms, of whatever length of time, will not again be eligible to serve on that same board until at least one term has elapsed, whether service was as a member, chair, or other position on the board.

Dallas, Tex., Ordinance No. 30555 (Aug. 9, 2017) (codified as amended as § 8-1.5(a-1)). Included with this amendment was a definitional change to the word "member," which now included "a duly appointed or elected member of a board." Id. (codified as amended as § 8-1(8)).

The City then informed the Fund that § 8-1.5(a-1) rendered all three elected board members ineligible for reelection. The City notified the two members whose terms were set to expire at the end of 2018 of their ineligibility and threatened to sue them if they sought another term.

The Fund disagreed with the City's position. Invoking its authority to interpret Chapter 40A, see § 40A-4(a)(18), (h), the Fund adopted Resolution No. 2018-1 regarding board term limits. The Fund resolved that: (1) Chapter 40A imposes no term limits on its elected board

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members and (2) imposing such limits "would constitute an amendment to Chapter 40A that would be required to comply with the procedure set forth under Chapter 40A-35(a)." The Fund therefore contended that § 8-1.5(a-1) was ineffective. Accordingly, the two purportedly ineligible elected board members ran for and won reelection to new terms.

The Fund sued the City and the City brought counterclaims. Both sides sought declaratory relief regarding § 8-1.5(a-1)'s validity and enforceability in light of § 40A-35(a). The parties cross-moved for summary judgment on that issue and the trial court rendered judgment for the City.

The court of appeals reversed and rendered judgment for the Fund. 636 S.W.3d 692 (Tex. App.-Dallas 2021). According to that court, Chapter 40A was a codified "Trust Document" that may not be amended except as that document provides. Id. at 694. Citing U.S. Term Limits, Inc. v. Thornton , 514 U.S. 779 (1995), and Burroughs v. Lyles , 181 S.W.2d 570 (Tex. 1944), the court reasoned that imposing term limits on the elected board members "added a substantive qualification for office" that improperly "effected a fundamental change to the Trust Document." Id. at 697. The "City's attempt to impose term limits on the elected members of the Fund's board by amending Chapter 8" was "invalid," it explained, so § 8-1.5(a-1) was "void and unenforceable." Id. at 698.

We granted the City's petition for review. The City defends § 8-1.5(a-1) as valid because that provision does not amend Chapter 40A. Under § 40A-35(a), the board may veto only amendments to Chapter 40A, not Chapter 8, so the City argues that the board had nothing to veto. But even if § 8-1.5(a-1) does amend Chapter 40A, the City claims that it did

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not need board consent because § 40A-35(a)'s veto power is unenforceable. Otherwise, the City contends, § 40A-35(a) would unconstitutionally delegate lawmaking authority to the Fund's board.

The Fund responds that § 8-1.5(a-1), despite its location in the Code, plainly amends Chapter 40A. The Fund also defends Chapter 40A as invulnerable to that or any other revision absent compliance with § 40A-35(a)'s procedure, which requires the board's consent. This result, the Fund says, is simply the natural consequence of Chapter 40A's status as a "trust document." The Texas Trust Code thus shields Chapter 40A from any unwelcome amendments, the Fund claims.

II

Under the Texas Constitution, cities may "adopt or amend their charters," provided that "no charter or any ordinance passed under said charter shall contain any provision inconsistent with the Constitution of the State, or of the general laws enacted by the Legislature of this State." Tex. Const. art. XI, § 5(a). Whatever power the City exercises is delegated by the State through our Constitution. As is typical, the City of Dallas exercises this delegated power through its city council. See Dallas City Charter, ch. III, § 1. The city council, in turn, adopted § 8-1.5(a-1), the ordinance that the Fund has challenged. We conclude that the consent of the Fund's board has no bearing on whether the ordinance is valid and enforceable.

A

The City regards the case as easy because § 40A-35(a) purports to give the board a veto only over amendments to Chapter 40A, and § 8-1.5(a-1) amends Chapter 8, not Chapter 40A. According to the City,

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we therefore can reverse and render judgment solely on this ground.

We reject this argument. Section 8-1.5(a-1) expressly references Chapter 40A and creates a term limit specifically applicable to the board of trustees under that chapter. The ordinance that imposes term limits on the board's members necessarily amends Chapter 40A's governance of the board's composition. Whether the City chooses to codify this amendment within Chapter 40A or Chapter 8 or anywhere else within its code of ordinances is immaterial.

Moreover, § 8-1.5(a-1)'s amendment of Chapter 40A goes beyond adopting previously absent term limits. It also amends Chapter 40A because it acts as a partial repeal by implication of § 40A-35(a). See Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 278 (2012) (repealability canon). This Court long ago explained that "the rule is well settled, that though the law does not favor repeals by implication, yet a subsequent statute, revising the subject matter of a former one, and intended as a substitute for it, although it contains no express words to that effect, will operate a repeal of the former, to the extent to which its provisions are supplied or repealed." Stirman v. State , 21 Tex. 734, 736 (1858); see also, e.g. , Gordon v. Lake , 356 S.W.2d 138, 139 (Tex. 1962); Cole v. State , 170 S.W. 1036, 1037 (Tex. 1914). "The law makes no distinction between express and implied repeals," so courts are not "authorized to give an effect to one different from that attached to the other." Stirman , 21 Tex. at 736. Once an implied repeal is established, in other words, its consequence is the same as if the statute had expressly provided for that result. These principles fully apply here because we "construe municipal ordinances the same way

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we construe statutes." Powell v. City of Houston , 628 S.W.3d 838, 842 (Tex. 2021).

Under § 40A-35(a), the City must follow the multi-step amendment procedure-which includes obtaining the board's consent-to modify even comparatively modest matters, like how many terms board members may serve. Unless it consents, the board is deemed to veto an amendment such that it could never become part of the City's law at all. Enacting § 8-1.5(a-1), in other words, implies rejecting § 40A-35(a)'s procedure and replacing it, at least for the term-limit purposes of § 8-1.5(a-1), with the traditional method of amending ordinances.

Courts do not readily find implied repeals. If we can reasonably harmonize two seemingly inconsistent enactments of the same level of authority-like two constitutional provisions, two statutes, or two ordinances-we will do so. But "as a matter of statutory construction, if statutes are irreconcilable, the statute latest in date of enactment prevails." Jackson v. State Off. of Admin. Hearings , 351 S.W.3d 290, 297 (Tex. 2011)

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(internal quotation marks omitted).

This principle is, in essence, a choice-of-law rule that requires courts to apply a later-enacted provision that clearly contradicts a prior one-which is another way to describe an implied repeal. See Scalia & Garner, supra , at 279, 327. Because § 8-1.5(a-1) is inherently incompatible and inconsistent with § 40A-35(a)'s procedure, § 8-1.5(a-1) necessarily repealed § 40A-35(a)'s board-veto provision. We therefore cannot avoid the parties' dispute about whether, unlike other ordinances, the board-veto provision was beyond the city council's authority to modify, supersede, or repeal.

B

To justify denying this legislative authority to the city council, the Fund and the court of appeals point to trust law and the Texas Trust Code (which is codified within the Texas Property Code, see §§ 111.001- 117.012). Even assuming for argument's sake that the Trust Code governs the Fund, we disagree that trust law affects the city council's authority to make city law.

The specific statute that created the Fund, article 6243d, expressly

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and unambiguously insisted that every provision in Chapter 40A be first and foremost a codified city "ordinance"-not part of a city charter, not a distinct stand-alone "trust" (a word that does not even appear in the statute), or anything else. Instead, the "ordinance" adopting the plan "shall be so worded as to authorize the governing body of such city or town" to select one of two stated means to fund it (annual appropriations from "the general revenue" to "carry out" the plan or through "a general ad valorem tax sufficient to provide for" it). Rev. Civ. Stat. art. 6243d, § 1. Chapter 40A is part of the code of ordinances because the statute demanded that it be an ordinance.

Chapter 40A's status as an ordinance entails the consequence that § 8-1.5(a-1) is one ordinance amending another, not an ordinance purporting to amend something that exists apart from city law or something that has higher legal status than an ordinance. U.S. Term Limits , on which the court of appeals relied, involved a provision of the Arkansas Constitution that, the Supreme Court held, amounted to modifying the minimum electoral requirements that the U.S. Constitution prescribes for members of Congress. See 514 U.S. at 783. A state constitution, of course, may not amend the federal Constitution. Likewise, this Court observed in Burroughs that a Texas statute could not expand the Texas Constitution's eligibility requirements for election as a state senator. See 181 S.W.2d at 574. These principles do not govern a city council's ability to amend a city ordinance.

Article 6243d's statutory mandate to enact an "ordinance" implicates at least two relevant constitutional principles. The first "is traditionally known as the nonentrenchment doctrine," Scalia & Garner,

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supra , at 278, which is an ancient maxim that applies as fully here as to lawmaking bodies at any level of government: "[O]ne Legislature cannot bind the hands of a subsequent Legislature by the enactment of laws which may not be altered or repealed by a subsequent Legislature." Jefferson County v. Bd. of County & Dist. Rd. Indebtedness , 182 S.W.2d 908, 915 (Tex. 1944). In short, a "legislature cannot prevent future legislatures from amending or repealing a statute." Cent. Power & Light Co. v. Pub. Util. Comm'n of Tex. , 649 S.W.2d 287, 289 (Tex. 1983).

Like any legislative act, § 40A-35(a) was "alterable when the legislature shall please to alter it." Marbury v. Madison , 5 U.S. (1 Cranch) 137, 177 (1803). The city council that adopted the veto

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amendment in 1991, in other words, could not bind the city council in 2017 from further amending Chapter 40A to impose term limits on the elected board members. Granting the board the authority to veto future amendments to Chapter 40A is a self-evident impairment of a future city council's ability to amend city law. The veto, if it truly bound a future city council, would clearly violate the nonentrenchment doctrine.

A second principle is that, to whatever extent cities may legislate, they do so by drawing upon the State's authority that has been vested in them. See Tex. Const. art. XI, § 5(a). It is not within the power of a Texas city to alienate to some third party the governmental authority that the State allows the city alone to exercise. This basic principle applies in multiple contexts-governmental immunity, for example. As we stated in a case involving another city, "[e]ven if a governmental unit would be happy to waive 'its' immunity, it is not the governmental unit's immunity to waive." Rattray v. City of Brownsville , 662 S.W.3d 860, 867 (Tex. 2023).

Ordinances have the force of law-the ability to bind those resident in or who come into a city. The source of such power is not the city, but the State. After all, a city is not a sovereign entity-not even close. Cities are municipal corporations (which is why Article XI's title is simply "Municipal Corporations"). See City of Brenham v. Brenham Water Co. , 4 S.W. 143, 149 (Tex. 1887) ("It is now universally conceded that powers are conferred on municipal corporations for public purposes; and, as their powers cannot be delegated, so they cannot be bargained or bartered

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away." (internal quotation mark omitted)); Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth. , 320 S.W.3d 829, 843 (Tex. 2010).

Like other corporations, municipal corporations depend on the State for their existence. Before the 1912 adoption of the "home-rule amendment" in Article XI, § 5, cities came into existence when the legislature granted an individual charter-a tedious exercise that exhausted considerable legislative time. See City of San Antonio v. City of Boerne , 111 S.W.3d 22, 26 n.5 (Tex. 2003). What we call the home-rule amendment streamlined the method of incorporating cities. But it certainly did not purport to recognize authority in cities that in any sense was independent of the State itself. To the contrary, Article XI, § 5 states with marked clarity that "no charter or any ordinance passed under said charter shall contain any provision inconsistent with the Constitution of the State, or of the general laws enacted by the Legislature of this State." Tex. Const. art. XI, § 5(a).

A city's authority over the law is not within a city's power to give away any more than the legislature could hand away its own power. Even assuming that trust law or the Trust Code otherwise apply, that does not change how ordinances are drafted and by whom , which is a matter of constitutional import. State law may preempt the substantive reach of city law, see, e.g. , City of Laredo v. Laredo Merchs. Ass'n , 550 S.W.3d 586, 592-93 (Tex. 2018), just as federal law may preempt state law. But

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trust law no more stops a city from amending city law than it stops the legislature from amending state law. Neither trust law generally nor the Trust Code specifically purports to allow-much less require -cities to grant authority to other entities over the content of city law. The board never received that authority from the City because it was not the City's to give. Said differently, state law does not compel the City to retain the arrangement that the Fund defends because state law never allowed the City to bind itself to that arrangement in the first place. Until now, the city council was willing to accommodate the board by not amending Chapter 40A without the board's consent. But that practice in no way implies that the city council was legally bound to do so, even though it may well have been prudent then-and in the future-for the city council to closely involve the board before amending Chapter 40A.

The Fund is to be commended for its candor in arguing that trust law entails the legal consequences that we reject. At oral argument, it agreed that under its theory any number of unconstitutional alienations of authority could be achieved simply by the artifice of creating a trust with some rather tenuous link to the subject matter. It confirmed, for example, that even our legislative process could be converted from a bicameral into a tricameral system for broad swaths of our law. How? Suppose that the legislature decided that future legislatures would likely be benighted about higher-education policy. Imagine that it put the property of state universities into a "trust" and, within a relevant "trust document," included the requirement that amendments to the law governing those universities could not be presented to the governor for his signature without the concurrence of the two houses of the legislature

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and the University of Texas faculty senate. The Fund readily agreed that such a result would be permissible and not even particularly troubling.

The contrary is true. Embracing the Fund's approach would represent an earthquake in our constitutional order. It would amount to an escape hatch both from the principle that one legislature cannot bind its successors and the principle that core lawmaking authority vested by the State cannot be given away. The Fund's candor and consistency are helpful because they illustrate the underlying infirmity of the Fund's position. If trust law could provide so simple a way to "crack the code" of the basic constitutional principles of self-government, it surely would have been discovered long ago.

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C

At the same time, we pause to note that our decision today does not imperil the interests that seemingly animate the Fund's arguments. The Fund invokes trust principles to vaguely, but grimly, warn that allowing amendments to Chapter 40A without board approval would destabilize the rights of employee participants in the Fund. World history confirms that the threatened image of craven politicians freely raiding the Fund is less far-fetched than one might wish. That possibility is why our law takes those concerns seriously. Important as they are, however, those concerns have nothing to do with the question before us, which is only whether the City may lawfully give the board veto power over city law .

For purposes of this case, we can readily accept the Fund's underlying principle: that the city council cannot abridge the vested rights of the Fund's participants. But that is true regardless of the board's consent. Said differently, individual rights are not subject to violation even if the board agrees . Various sources of Texas law protect those rights-maybe the Texas Constitution's contracts clause, probably Texas contract law, perhaps trust law, presumably the provisions of our Constitution that address public-employee retirement, and possibly more still. Article 6243d required, from the moment of the Fund's creation, that it be "for the benefit of all employees in the employment of [the] city." Rev. Civ. Stat. art. 6243d, § 1 (emphasis added). Whatever else that

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provision might mean, it does not authorize the City to raid the Fund at will (and the City certainly does not claim otherwise).

Such protection should alleviate any concerns about the ordinance "just" being an ordinance-part of Dallas law that can be amended in the normal course without a bespoke "veto" over legislative enactments. The Fund's assets are protected, and its participants' own rights are protected in many other ways. In myriad contexts, the Constitution and our laws protect all sorts of rights-but they have never been understood to prevent a legislative body from legislating in the first place or to authorize some third party to veto legislation based on that party's special concern with a given right. A unique calcification of the legislative process in Dallas is not necessary to protect the Fund's legitimate interests and would contravene the constitutional principle forbidding the city council from giving away its authority to legislate.

We hold that the board's veto in § 40A-35(a) is unenforceable and cannot prevent an otherwise-valid ordinance from taking effect.

III

We decline, however, to resolve whether the City must hold an election that submits § 8-1.5(a-1) to the voters before it may enforce that

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provision. At least two possible grounds may require such an election, one of which is foreclosed while the other remains open. Specifically, to the extent that the Fund argues that any amendment to Chapter 40A requires an election because of § 40A-35(a) , our decision today necessarily rejects that contention. Our holding concerning the board's veto relies on the principle that the city council that adopted § 40A-35(a) could not bar a subsequent city council from amending Chapter 40A, including by impliedly repealing § 40A-35(a)'s procedural requirements. The adoption of § 8-1.5(a-1) without board approval or popular election means that § 40A-35(a)'s election requirement has been repealed just like the board-veto requirement, without any impediment from trust-law doctrines.

But law other than Texas trust law may compel a different result, such as requiring an election here. The specific issue that we leave unresolved today does not implicate § 40A-35(a) at all: whether article 6243d would obligate the City to seek voter approval of amendments to Chapter 40A even if § 40A-35(a) had never required such elections.

As we have noted, article 6243d requires voter approval before a city may enact a pension plan like Chapter 40A. Rev. Civ. Stat. art. 6243d, § 1. The voters of Dallas so approved in 1943. The city council had unilateral authority to amend what is now Chapter 40A until 1945, and it approved at least one amendment during that period. The Fund

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asserts that, after 1945, every ordinance amending Chapter 40A has been put to the voters for their approval. Whether § 8-1.5(a-1) must be submitted to a popular election turns on whether the practice was commanded by the statute (and if so, whether the city council's initial authority to amend it without elections was unlawful or was excused for some other reason).

We decline to address this question in the first instance. "As a court of last resort, it is not our ordinary practice to be the first forum to resolve novel questions, particularly ones of widespread import." In re Troy S. Poe Tr. , 646 S.W.3d 771, 780 (Tex. 2022). The court of appeals did not address whether the voters must approve this or other amendments to Chapter 40A, in part because that court's holding regarding the board's role made it unnecessary to further consider whether an election was also required (much less whether article 6243d would be the source of such a requirement). That court likely also declined to reach that question because the briefing addressing it was

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insubstantial compared to the arguments surrounding the board's authority, which has always been the case's central focus. The parties' briefing in this Court gave even less attention to whether the voters must approve amendments to Chapter 40A. The State as amicus briefly addressed the question and the Fund briefly responded, but no party has provided sufficient briefing for us to resolve the question in the first instance. A decision by this Court that determines whether the statute requires continuing voter approval would have "widespread import," id. , because it would provide a rule that would also bind every other city plan created under article 6243d. If we must address such a question, we will not do so until it is fully presented.

We instead have resolved the issues that were briefed and argued to us, which are sufficient to reverse the judgment below and to remand the case to the court of appeals. We leave it in the first instance for that court to determine if the parties have adequately preserved any question regarding the statutory basis for any continuing need for elections to validate amendments to Chapter 40A. If the court concludes that the issue was properly before it, that court should resolve the issue. If the court concludes otherwise, then it should render judgment for the City of Dallas and reinstate the trial court's judgment.

The judgment of the court of appeals is accordingly reversed and the case is remanded to that court.