When Magnolia, Texas, decided in 2018 to raise its water rates, everyone in the small town felt the pinch. But the increase squeezed churches even more because the city levied additional fees on nonprofit groups, schools, and places of worship.
To cover its bigger water bills, First Baptist Church in Magnolia cut funding to its free Christian counseling ministry by about $13,200. Church officials say the extra water fee significantly burdens their free exercise of religion. On top of that, city officials carried out a series of legal maneuvers to undercut the church’s ability to defend its rights in court.
With the help of lawyers from First Liberty, First Baptist and two other congregations, Magnolia Bible Church and Believers Fellowship, convinced a judge to reinstate their rights and let them sue the city for hitting them with extra taxes when they are supposed to be tax-exempt. A Texas appellate court is now weighing whether the city can get away with the double assault on the churches’ freedom of religion and right to due process.
Magnolia used to be a sleepy sawmill town in Montgomery County in East Texas. But as the urban sprawl of Houston crept closer and closer, the county became one of the fastest-growing in the country.
The city of Magnolia struggled to keep up with the cost of providing water service to new developments. In late 2017, officials began planning the first major increase to water rates in more than a decade. The proposal included a higher base rate and increased usage rates per 1,000 gallons for what the city considered institutional/nonprofit/tax-exempt customers. The new rates for the churches were up to 57 percent higher than those of normal commercial entities.
The city claims that the water rate hikes had a minimal effect on the churches’ ability to carry out their ministry. Magnolia also argues that because churches use more water than other homes or businesses in town, it is justified in charging them a higher rate.
The churches say the city is unfairly and illegally punishing them for not paying property taxes, from which they are exempt, according to state law.
“For as long as there have been tax exemptions, governmental bodies have sought to evade those exemptions by simply relabeling a tax as something else,” the churches say in their lawsuit.
After adopting the new water rates, the Magnolia City Council went to Austin, the state capital, and asked a judge there to approve it. The judge issued an order that effectively preempted the churches from challenging the rates in court. None of the churches knew what the city was doing in Austin, so they did not have an opportunity to contest it.
“The churches attended multiple public hearings, sent letters, sought a legislative fix, and even provided written notice that they were going to sue,” said Jeremy Dys, special counsel for First Liberty. “And, still, city leaders denied these churches a fair opportunity to challenge the water fee scheme by seeking approval from a court several hours away.”
A judge later reversed the decision and said the churches have a right to sue. The city has asked an appeals court to uphold the legal blockade it tried to erect. Both sides gave oral arguments in front of the Texas 3rd District Court of Appeals on Wednesday.
“The city’s approach would mean that these weighty constitutional challenges would never be considered by any court,” lawyers said in the churches’ appellate brief. “And it would create a roadmap for other cities to enact unlawful rates without judicial consideration.”