Houston city leaders are assessing their options after a federal judge invalidated the November referendum that turned off a red-light surveillance system and halted a stream of millions of dollars into strapped city coffers.

U.S. District Judge Lynn Hughes ruled Friday that the referendum was improperly placed on the ballot last year, and the city cannot be forced to turn off the cameras.

Hughes said Houston's city charterrequires that efforts to overturn ordinances by referendum must occur within 30 days of an ordinance's passage.

Opponents to the red-light ordinance, which passed in 2004, mounted the election challenge last year and got it on the ballot as a charter amendment, but Hughes said that was essentially the same as repealing it.

"Presented with this mislabeling, the council supinely ignored — over voices of some of its members — their responsibility and put the proposition to the voters as an amendment to the charter," Hughes wrote.

The city filed a federal suit against the camera vendor as a way of having a judge review the procedure for shutting off the system, winding down the contract and determining the amount owed the company.

City Attorney Dave Feldman said Friday's ruling will force the city to choose from canceling the contract with American Traffic Solutions — which might cost the city $16 million — or keeping the contract in force and turning the cameras back on. A third choice would be to hold another referendum and ask voters which of the two options to choose, he said.

"We lost on the issue of the validity of the charter amendment, so what the court is saying (is), 'OK city, now decide what you're going to do with the contract,' " Feldman said. "We need to decide how we're going to move forward and what position we're going to take with the contract in light of the fact he's declared the charter amendment invalid."

Charter cited in council

Mayor Annise Parker said Friday afternoon that although she supports the use of red-light cameras and has the authority to turn them back on, she will not do so before conferring with the City Council and possibly the voters.

"The cameras are going to stay off until council is fully briefed, and we have an opportunity to discuss all of our legal options and choose one of those legal options," the mayor said.

Complicating matters for Parker is that the city is still in a contract dispute with ATS over damages the company suffered when the city turned off the cameras.

The mayor said she and the City Council received sound legal advice last year from the city attorney, who advised that they were mandated to put the question on the November ballot.

Several council members argued last summer that putting the question on the ballot was illegal because of the city charter language cited by Hughes.

Paul Kubosh, a leading traffic ticket attorney who helped organize last year's referendum, said he was not surprised by Hughes' ruling and accused the city of mounting a feeble defense.

"We knew this was coming," Kubosh said. "The city's legal strategy was to file it in the federal court so they could get a more favorable venue to throw out the election. In state court, they would have had a harder time getting the election thrown out, I believe."

Opponent not giving up

The city wants to lose the case, Kubosh has contended, adding he doesn't think it will appeal the court's ruling.

Kubosh said he will not give up on the challenge to the red-light camera system, saying he won't abandon "the 181,000 voters who stood with us on this."

The Houston Police Department's budget took a $10 million hit in anticipated revenue from the time of the ordinance's passage in November through the end of the fiscal year this month.

That loss of income coincides with what Parker has described as the city's most challenging budget in decades. The City Council is expected to vote next week on a $1.8 billion general fund budget that includes 747 layoffs.

From the inception of the red-light camera program in September 2006 through its termination in November, the system collected nearly $44 million in fines.

Vendor sees precedent

American Traffic Solutions said it is reviewing and analyzing the implications of Hughes' ruling.

"We have always questioned whether the proper procedure was followed by the petitioners," said company president and CEO James Tuton, in a statement from corporate headquarters in Scottsdale, Ariz. "This ruling affirms our belief that the election was not proper and sets an important precedent."

james.pinkerton@chron.com

chris.moran@chron.com