Published: July 26, 2007 10:23 pm      

City responds to ESD 3 petition for judgment on debt

By Erik Onstott

The Orange Leader



The city of Orange on Wednesday filed a response to the petition filed earlier this month by Orange County Emergency Services District No. 3.

ESD 3 filed the petition seeking a declaratory judgment to compel the city to submit to arbitration regarding the amount of money the city owed the district after it annexed part of the district in February. State law specifies that when a city annexes a part of an emergency services district, it must assume a percentage of the district’s debt equal to the percentage of the district which was annexed. In the case of ESD 3, the city must assume 26.5 percent of the district’s debt.

The point of contention between the city and the district is the point at which the city must assume the portion of the district’s debt; the city contends the law says it must assume the portion of the debt the district had when the city announced its intent to annex, while ESD 3 maintains the city must assume the portion of the debt the district had when the city annexed the portion of the district.

ESD 3 had no debt in February 2004, when the city of Orange announced its annexation plans; in February 2007, when the city finally annexed the property, the district had approximately $521,000 in debts, of which the city would assume approximately $138,000.

The city, in its response to the petition, cites Section 776.052 of the Texas Health and Safety Code, which states in part, “(T)otal indebtedness...does not include a loan or lease-purchase agreement after the district receives notice about the municipality’s intent to remove district property.”

The debt ESD 3 had as of February 2007 was incurred by the purchase of a new fire truck in October 2004. The original amount of the loan, according to the city’s response to the petition, was $620,000; as of January 23, the loan payoff amount was $521,290.60.

The city contends its dispute with ESD 3 is not how much is owed to the district, but whether the percentage of the district’s debt incurred by the purchase of the fire truck should be included or excluded; in short, the city says the question is one of how the law is interpreted, which precludes arbitration.

“There is no place for compromise in this regard because of the accountability regarding the proper handling of public funds,” city attorney John Cash Smith said in a letter to ESD 3 attorney Tommy Gunn.

Also, the city says, the arbitration sought by the district is for a factual dispute — the amount of compensation owed to ESD 3. According to the city’s response to the petition, it owes either $138,230.68 — 26.5 percent of the district’s debt as of February 2007 — or no money, since the district had no debt in February 2004. Thus, the city contends, the amount of money owed to the district is not technically in dispute and thus not subject to arbitration.

Gunn said his office had just received the petition and would withhold comment for the time being.

“At some point we’ll have a chance to analyze it and respond to it, but that may take several days,” he said.

Smith could not be reached for comment.



Reach this reporter at 409-883-3571, Ext. 2616 or eonstott@orangeleader.com