Untitled Texas Attorney General Opinion ( 1992 )


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  •                         QBfficeof tfje ~2Utornep@eneral
    &ate of IBexae
    DAN MORALES                         December 7,1992
    ATTORNEY
    GENERAL
    Honorable Gonzalo Barrientos                 Gpinion No. DM-185
    Committee on Nominations                 Re: Whether a municipality may esta-
    Texas State Senate                       blisb a program for econoniic develop
    P.O.Box1206S                             ment pursuant to section 380.001 of the
    Austin,Texas 78711                       Local Government Code, and related
    questions (RO-464)
    Dear Senator Barrientos:
    You have asked several questions about the constitutionality and proper
    construction of section 380.001 of tbe Local Government Code. Specikally, you
    ask the following:
    1. I.5 the establishment of a proSram for economic
    development by a mmdcipality pursuant to Section 380.001 of
    the Imal Govermnent Code constitutional?
    2. Do each of the incentives outlined [in your letter], when
    used singdarly or in combination, constitute a “program.. . to
    promote state or local economic development” as that phrase is
    used in Section 380.001 of the Local Government Code?
    3. Can a municipality issue bonds to fund incentives which
    are included in a. program for economic development
    established under Section 380.001 of the Local Government
    code?
    4. Are there any constitutional or statutory prohiiitions or
    preemptions that would preclude inclusion of any of the
    incentives outlined [in your letter] in a program for economic
    development established under Section 380.001 of the Local
    Government Code?
    p.   969
    Honorable Gonzalo Barrientos - Page 2      KM-185)
    The legislature enacted section 380.001 of the Local Govermnent Code after
    1987, when voters approved adding article III, section 52-a to the Texas
    Constitutions Section 52-a provides as follows:
    Notwithstanding any other provision of this constitution, the
    legislature may provide for the creation of programs and the
    making of loans and grants of public money, other than money
    otherwise dedicated by this constitution to use for a different
    purpose, for the publk purposes of development and
    diversification of the economy of the state, the elimination of
    unemployment or underemployment in the state, the stimulation
    of agrkultural innovation. the fostering of the growth of
    enterprises based on agriculture, or the development or
    expansion of transportation or commerce in the state. Any
    bonds or other obligations of a county, municipality, or other
    political subdivision of the state that are issued for the purpose
    of making loans or grants in connection with a program
    authorized by the legislature under this section and that are
    payable from ad valorem tares must be approved by a.vote of
    the majority of the registered voters of the cotmty, municipality,
    or political subdivision voting on the issue. An enabling law
    enacted by the legislature in anticipation of the adoption of tbis
    amendment is not void because of its anticipatory character.
    One might argue that section 52-a authorizes the legislature to create state-
    wide economic development programs, but it does not authorize the legislature to
    delegate such responsibilities to counties, municipalities, or other political
    subdivisions. Admittedly, the first sentence is ambiguous on this point. Reading the
    section as a whole, however, section 52-a clearly envisions that a county,
    municipality, or other political subdivision may issue bonds to pay for its economic
    development program. Legislative history and this office’s prior interpretation of
    section 52-a supports this construction of the section.
    In hearings on the resolution proposing to place this constitutional
    amendment before the voters, a witness speaking before the House Committee on
    Science and Technology explained the proposed amendment as one that does not
    authorize, without further constitutional amendment, the state to issue general
    obligation bonds for the purpose of encouraging economic development in the state.
    Hearings on H.J.R. 5 Before the House Committee on Science and Technology,
    p.   970
    Honorable Gonxalo Barrientos - Page 3 (m-185)
    70th Leg. (Mar. 3, 1987) (statement of Jerry Turner) (copy on file with House
    Committee Coordinator). Rather, according to the witness, this amendment would
    authorize tbe legislature, if it chose to do so, to enact legislation that would
    empower local governments to issue bonds, provided that the people voting in the
    affected taxing jurisdiction approved the issuance of such bonds at an election. 
    Id. Signiticantly, according
    to another witness, this amendment to the constitution
    author&s a local government to provide any kind of assistance for the purposes
    listed in the amendment, but only if the legislature has enacted enabling legislation
    permitting the kind of program the local government seeks to establish, and, if the
    local government seeks to use any tax funds, a majority of the voters voting at a
    referendum on the issue have approved. 
    Id. (testimony by
    Robert Randolph,
    member of Speaker’s Economic Development Committee) (copy on tile with House
    Committee Coordinator).
    This office examined article IQ section 52-a in Attorney General opinion
    JM-1227 (1990) in reference to a project the City of Marlin proposed, in which the
    City of Marlin contractually would agree with the Texas Department of Commerce
    to take responsibility for the creation of jobs by a private entity. Attorney General
    opinion JM-1227 at 1. If the private entity failed or failed to provide the jobs it
    represented it would provide in its application for a loan from the Department of
    Commerce, the City of Marlin would reimburse the Department of Commerce apro
    mta portion of the department’s loan to the private entity. 
    Id. This office
    stated
    that the legislature and the voters intended section 52-a to create exceptions to pre-
    existing constitutional prohibitions on the lending of public credit.1 See id at 3 (and
    sources cited therein); see also Texas Const. art. III, $9 51.52. We advised, however,
    that article III, section 52-a does not by itself expand a municipality’s authority to
    lend credit, but it authorizes the legislature to enact laws that do so. Attorney
    General Gpinion JM-1227 at 3. Thus, the legislature must enact enabling legislation
    lIn Attorney General Gpiioo JhGl255 (lWl), this &cc stated that article III, section 52-a of
    the Texas Constitution expands tbe constitutional detkition of public purpose to include economic
    dewlopmeat and diwhfication, elimination of unemployment end underemployment, stimulation and
    poutb of agricelhue, and the expansion of state transportation and commerce. &omey General
    GpbdmJ?vf-Us5      at 8. H-r,      neither the hguage of section 52-a nor of any relcnnt commentary
    suggests that the voters and Iegishhue, by enacting section 52-a, %tended to change the require&nts
    that public resources and powers be used for ‘the direct accompli&meat of a public purpose’ end that
    traasactiors using such resources end powers a~ntain sufficient controls ‘to insure that the public
    purposebe carriedout.‘” Id et &9 (and sowccs cited t&rein).
    p.   971
    Honorable Gonzalo Barrientos - Page 4                 0X-185)
    to authorize the proposed transaction between the department of commerce and the
    City of Marlin. 
    Id. Section 380.001
    of the Local Government Code provides as follows:
    (a) The governing body of a municipality may establish and
    provide for the administration of one or more programs, includ-
    ing programs for making loans and grants of public money and
    providing personnel and services of the municipality, to promote
    state or local economic development and to stimulate business
    and commercial activity in the municipality.
    (b) The governing body may:
    (1) administer a program by the use of municipal
    personnel;
    (2) contract with the federal government, the state, a
    political subdivision of the state, a nonprofit organization, or any
    other entity for the administration of a program; and
    (3) accept conmbutio~ gifts. or other resources to
    develop and administer a program.
    The author of House Bill 3192, which proposed section 380.001 of the Local
    Government Code, stated before the House Committee on Urban Aftairs that this
    emxctment would be the enabling legislation for article III, section 52~a.2 Hearings
    %prem~h          hkCdough,    the author of House Bill 3192, testified before the House
    Chmdtt~oaUrban~that~on380.001oftheLoealG                           ovemment Chle, if enacted, would
    authorize a municipality to do the same thing that the legislature +d just authorized countim to do,
    i.e., to participate in economic development matters. Hearings on H.B. 3192 Before the House.
    committee on Urban Affaiq 71st Leg. (May l&1989) (testimony of Representative McCollough,
    author) (copy on 6le with House C?mmittee Coordinator). Representatin McCollough did not cite a
    particular act or code section; however, we believe he was referring to section 381.004 of the Local
    Govcrnmwt Code, which the legislature added to the Local Gmrnment code by Acts 1989,7lst Leg.,
    ch. 1060,$3, at 4307. Se&m 381JW(b) authorizes the fzommikoners court of a uxmty to stimulate
    business and commercial activity in the county by developing and administering a program for state or
    local euxmmic developmer& for small or disadvaatagcd business development; to stimulate,
    wco-,        and develop business location and commercial activity in the coutlty, or to improve the
    extent to wbicb women and minority busioe.ws are awarded county contrac& Subsection (c)(3), (4)
    explicitly authoriws a wlmty wmmissiowrs court to use county employees or funds for the program,
    p.   972
    Honorable Gonzalo Barrientos - Page 5              UN-185)
    on H.B. 3192 Before the House Committee on Urban Affaim, 71st Leg. (May 15,
    1989) (testimony of Representative McCoIIough, author) (copy on file with House
    fhumittee Coordinator). By enacting section 380.001, the legislature evidently
    intended to authorize municipalities to perform any of the functions that article III,
    section 52-a permitted the legislature to delegate. In our opinion, section 380.001 of
    the Locai Government Code properly implements article III, section 52-a; thus, in
    answer to your Srst question. we believe that section 380.001 of the Locai
    Government Code is cotWitutionaLs
    Your second question asks us to delineate the kind of incentives that a
    municipality properly may include in a “program.. . to promote state or local
    economic development.” The legishtture did not expressly instruct what such a
    program would be. In testimony before the Senate Committee on Intergovem-
    mental Relations, the author of Senate BiIi 1820, a companion bill to House Bili
    3192, stated that the bill would authorize cities to establish loan programs and to use
    municipal personnel for the purpose of attracting new businesses to the area and
    assisting existing businesses to expand. Hearings on S.B. 1820 Before the Senate
    Committee on Intergovermnentai ReIations, 71st Leg. (May 18,1989) (testimony of
    Senator Carriker, author) (copy on file with Senate Staff Setices); see &o 
    id. (testimony of
    Bob Hart, City Manager for City of Georgetown) (indicating
    Georgetown’s interest in establishing direct lending program). It is outside the
    scope of the opinion process, however, to determine specificaily which incentives,
    when offered singuhuiy or in combination, constitute a “program.. . to promote
    state. or Iocai economic development.”
    You next ask whether a municipality may issue bonds to fund incentives that
    it desires to include in a “program . . . to promote state or local economic
    development” that the municipality has established under section 380.001 of the
    (fochotc continued)
    and to accept contriiutions, gifts, or 0th rcsourccs to &v&p and administer the program. We
    found no cases or attomcy gcmral opinions iaterprethg s&ion 381.004.
    Jwe bclicvc, however, that a municipality that imtitutcs a program to promote state or local
    eumomic dtmdopmeot pursuant to s&ion 3&X001 of the Local Gommm cot Code must comply with
    other wm6tutid      requirements. See supm note 1. Specihdy, the municipality must determine that
    itis~publicfundsandrcsourctsforthcdircdaccomplishmentofapublicpurposcandthat
    tramxtiom using the. public hods and resources contain sufticimt controls to ensurc that the public
    purpose is carried out.
    p.   973
    Honorable Gonzalo Barrientos - Page 6         (aSl85)
    Local Govermnent Code. Significantly, section 380.001 does not explicitly provide
    that a municipality may finance such a program through bond revenues. However,
    the municipality about which you specifically inquire is a home-rule municipality. A
    home-rule municipality has “[t]be power to issue bonds upon the credit of the city
    for . . . public purposes in the amount and to the extent provided by such charter,
    and consistent with the Constitution of this State; provided, that said bonds shall
    have first been authorized by a majority vote by the duly qualified property tax-
    paying voters voting at an election held for that purpose.” V.T.C.S. art. 1175.
    Therefore, if the proposed bond issuance is in accordance with the ‘home-rule
    mmdcipality’s charter, and if a majority of the duly qualhied property tar-paying
    voters voting at an election held to consider the bond issue have approved the
    issuance, the municipality may issue bonds to fund an economic development
    program established under section 380.001. But see supm note 3.
    Finally, you ask whether any constitutional or statutory prohibitions or
    preemptions would preclude inclusion of any particular incentive in a program for
    economic development that a municipality establishes pursuant to section 380.001 of
    the Local Government Code. ‘Ihe legislature intended article III, section 52-a of
    the Texas Constitution and section 380.001 of the Local Government Code to
    authoriae municipalities to implement a range of programs designed to promote
    economic development. Again, it is outside the scope of the opinion process to
    determine whether any set of incentives, offered singularly or in combination, can
    constitute an economic development program under section 380.001. However, we
    are unaware ot and you have not specifically mentioned, any provisions that would
    forbid a municipality from establishing a program to promote state or local
    economic development and to stimulate business and commercial activity in the
    municipality.
    SUMMARY
    Section 380.001 of the Local Government Code, which the
    legislature enacted pursuant to article III, section 52-a of the
    Texas Constitution, is constitutional. The legislature intended
    section 380.001 to authorize municipalities to offer a range of
    incentives desigued to promote state or local economic
    development. It is outside the scope of the opinion process to
    determine, however, whether a particular incentive or
    combination of incentives constitutes a “program.. . to promote
    p.   974
    Honorable Gonzalo Barrientos - Page 7         (1x-185)
    state or local economic development” for purposes of section
    380.001 of the Local Government Code.
    A home-rule municipaLity may issue bonds to fund an
    economic development program that the municipality has
    established in accordance witb section 380.001, but only if two
    conditions are met. First, the bonds the munici@lity desires to
    issue must be in an amount and to the extent provided by the
    municipality’s charter. Second, a majority of the duly qualified
    property tax-paying voters voting at an election held to consider
    the bond issue must have approved the issuance.
    DAN      MORALES
    Attorney General of Texas
    WILL PRYOR
    First Assistant Attorney General
    MARYKELLER
    Deputy Assistant Attorney General
    RENEAHxcKs
    Special Assistant Attorney General
    MADELEINE B. JOHNSON
    Chair, Opinion Committee
    Prepared by Kymberly K. Oltrogge
    Assistant Attorney General
    p.   975
    

Document Info

Docket Number: DM-185

Judges: Dan Morales

Filed Date: 7/2/1992

Precedential Status: Precedential

Modified Date: 2/18/2017