Untitled Texas Attorney General Opinion ( 2002 )

OFFICEoftheATTORNEY GENERAL
GREG ABBOTT
December 23,2002
The Honorable Jane Nelson Opinion No. GA-0004
Chair, Nominations Committee
Texas State Senate Re: Whether the Euless Economic Development
P.O. Box 12068 Corporation is “a governmental entity that has the
Austin, Texas 78711 power of eminent domain” under section
272.001(b)(5) of the Local Government Code
(RQ-0568-JC)
Dear Senator Nelson:
Under section 271 .OOl(b)(5) of the Local Government Code, the public notice and bidding
requirements generally applicable to the sale or exchange of land owned by a political subdivision
do not apply to “a real property interest conveyed to a governmental entity that has the power of
eminent domain[.]” TEX. LOC. GOV’T CODE ANN. 5 272.001(b)(5) (Vernon Supp. 2002). You ask
about the transfer by the cities of Fort Worth and Dallas of jointly owned land to a private party in
exchange for another tract owned by that party under section 272.001(b)(5) using as an intermediary
the Euless Economic Development Corporation (“Euless EDC”).’ We first conclude that the Euless
EDC is not a “governmental entity” for the purposes of section 272.001(b)(5). We next conclude
that even if the Euless EDC were determined to be a “governmental entity,” section 272.001 (b)(5)
does not authorize a political subdivision to transfer land to a private party by using a “governmental
entity” as a pass-through.
We understand that your request is prompted by the desire of the cities of Dallas and Fort
Worth and the Dallas-Fort Worth Airport to exchange municipally owned, undeveloped airport land
for privately owned land that is more suitable for airport purposes. The cities own land that is a part
of the Dallas-Fort Worth Airport (the “DFW Tract”), but which is not suitable for development of
the airport. Request Letter, supra note 1, at 1. They wish to exchange the DFW Tract for another
tract of land near the airport owned by a private party, “Mr. Bennett,” that is more suitable for airport
development. See id. Mr. Bennett is willing to exchange his tract for the DFW Tract because it
would allow him to develop other property that he owns adjacent to the DFW Tract. See id. The
‘See Letter from the Honorable Jane Nelson, Chair, Nominations Committee, Texas State Senate, to the
Honorable John Cornyn, Texas Attorney General (June 26,2002) enclosing letter from Paul Tomme, Legal Counsel,
to Bob McFarland, Cribbs & McFarland, P.C. (May 1, 2002) (on file with Opinion Committee)[hereinafter Request
Letter]. We understand that the opinion request is on behalf of the Dallas-Fort Worth Airport. Telephone conversation
with Bob McFarland, Cribbs & McFarland, City Attorney for the City of Euless (September 17,2002).
An Equal Employment Opportunity Employer . Prrnted on Recycled Paper
The Honorable Jane Nelson - Page 2 (GA-0004)
cities, as political subdivisions, however, must generally convey land through a competitive bidding
procedure. See id.; see also TEX. LOC. GOV’T CODE ANN. 5 272.001 (Vernon Supp. 2002). “The
proposed exchange of property cannot be accomplished through competitive bidding, because the
bidders cannot be limited to Mr. Bennett, nor can the bids be limited to the particular consideration
the cities desire to receive.” Request Letter, supra note 1, at 1. The cities, therefore, propose to
accomplish the exchange under the section 272.001(b)(5) exception to the competitive bidding
procedures by using the Euless EDC as an intermediary:
[I]t is proposed that both parties convey their respective tracts to the
Euless [EDC] and in a simultaneous transaction the Euless [EDC]
would convey the tracts to the opposite parties, thus effecting the
exchange. No additional consideration either way is contemplated,
except that the Cities of Dallas and Fort Worth intend to retain an
aviation easement over the DFW Tract.2
Id. at 2 (footnote added). However, “the question is whether the Euless [EDC] is ‘a governmental
entity that has the power of eminent domain’, for purposes of Section 272.001(b)(5).” Id.
We look at section 272.001 of the Local Govemrnent Code. Subsection (a) of the statute
requires a political subdivision, before selling or exchanging any land, to give notice to the general
public of the offer to sell or exchange the land. See TEX. LOC. GOV’T CODE ANN. 8 272.001(a)
(Vernon Supp. 2002). The notice must include a description of the land “and the procedure by which
sealed bids to purchase the land or offers to exchange the land may be submitted.” Id. These
provisions are intended to protect “public property, to throw a safeguard around land owned by a
City in order that it might not be disposed of for less than true value and without prior
knowledge by the citizens of the community.” BowIing v. City of El Paso, 525 S.W.2d 539,541
(Tex. Civ. App.El Paso 1975, writ refd n.r.e.) (considering predecessor statute to section
272.001).
The general notice and the bidding requirements of section 272.001(a) do not apply to
specifically described conveyances: permanent school fund land conveyances authorized by the
legislature, see TEX. LOC. GOV’T CODE ANN. 5 272.001(e) (Vernon Supp. 2002); land transfers to
“an entity” for the development of low-income or moderate-income housing, see id. 5 272.001(g);
transfers of municipally owned, lake-side land to the individuals leasing the property, see id.
8 272.001 (h); conveyances of lands acquired with community development block grants to private
for-profit or nonprofit entities for carrying out purposes of the grant, see id. 5 272.001(i); transfers
of lands to an institution of higher education for educational purposes, see id. lj 272.001(j); or
conveyances of municipal utility lands, see id. 5 272.001(k). The requirements also do not apply
to the land and property interests described in subsection (b):
2We understand that the two tracts have been appraised and the value of the private tract exceeds the value of
the municipally owned tract. Telephone conversation with Bob McFarland, Cribbs & McFarland, City Attorney, City
of Euless (September 17, 2002).
The Honorable Jane Nelson - Page 3 (GA-0004)
(1) narrow strips of land, or land that because of its shape, lack of
access to public roads, or small area cannot be used independently
under its current zoning or under applicable subdivision or other
development control ordinances;
(2) streets or alleys, owned in fee or used by easement;
(3) land or a real property interest originally acquired for streets,
rights-of-way, or easements that the political subdivision chooses to
exchange for other land to be used for streets, rights-of-way,
easements, or other public purposes, including transactions partly for
cash;
(4) land that the political subdivision wants to have developed by
contract with an independent foundation;
(5) a real property interest conveyed to a governmental entity that
has the power of eminent domain; or
(6) a municipality’s land that is located in a reinvestment zone
designated as provided by law and that the municipality desires to
have developed under a project plan adopted by the municipality for
the zone.
Id. $272.001(b) (emphasis added).
Because the power of eminent domain informs our discussion of section 272.001 (b)(5) of the
Local Government Code, we also briefly review the delegation of that power. Article I, section 17
of the Texas Constitution provides that without consent, “no person’s property shall be
taken. . . for or applied to public use without adequate compensation being made.” TEX. CONST.
art. I, 8 17. Not only does this provision require that property may be taken only for public use; it
also prohibits taking property for private use. See Maher v. Lasater, 354 S.W.2d 923, 924 (Tex.
1962); Mercier v. MidTexas Pipeline Co., 28 S.W.3d 712, 716 (Tex. App.-Corpus Christi 2000,
pet. denied). The power of eminent domain delegated by the constitution resides in the legislature,
and the legislature may grant the authority to exercise that power to governmental and non-
governmental entities so long as the exercise is for a public use. See Mercier, 28 S.W.3d at 716;
Maberry v. Pedernales Elec. Coop., 493 S.W.2d 268,269 (Tex. Civ. App.-Austin 1973, writ ref d
n.r.e.). Under the “use by the public” approach adopted by Texas courts, “property can only be taken
when ‘there results to the public some definite right or use in the business or undertaking to which
the property is devoted.“’ City ofArlington v. Golddust Twins Realty Corp., 41 F.3d 960,965 (5th
Cir. 1994) (quoting Borden v. Trespalacios Rice & Irrigation Co., 86 S.W. 11,14 (Tex. 1905), afd
per curiam, 204 U.S. 667 (1907)).
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With this background, we return to the proposed DFW Tract exchange. Before addressing
your specific question, we note that in the transaction described to us, “no additional consideration
either way is contemplated.” See Request Letter, supra note 1, at 2. But see, supra note 2.
However, unlike the other excepted property interests in section 272.001, the land and interests
described in subsection (b)(5) may not be conveyed or exchanged for less than the fair market value
of the land or interest. See TEX. LOC. GOV’T CODE ANN. 8 272.001(b)(5) (Vernon Supp. 2002); see
also Tex. Att’y Gen. Op. No. DM-441 (1997) at 4 (concluding that section 272.001 (b)(5) requires
fixed, ascertainable consideration).
Turning to your specific question, we conclude that in section 272.001 (b)(5), “governmental
entity,’ refers to the state, a political subdivision of the state, or an irrigation or water district created
by law. The Code Construction Act directs that “[ w]ords and phrases shall be read in context and
construed according to the rules of grammar and common usage,” unless they have acquired a
technical meaning by legislation or otherwise. TEX.GOV’T CODE ANN. 6 3 11 .Ol 1 (Vernon 1998).
Section 272.001(b)(5) does not define “governmental entity.” See TEX.LOC.GOV’T CODE ANN.
tj 272.001 (V emon Supp. 2002). And we have found no judicial construction of that term as used
in section 272.001 (b)(5) or in another context with general application. Finally, there is no helpful
dictionary definition to which we may resort to for the “common usage” of the term. Accordingly,
we look to the meaning attributed to that term by the legislature in a closely related context, chapter
21 of the Property Code, governing all eminent domain proceedings. C$ Brookshire v. Houston
Indep. Sch. Dist., 508 S.W.2d 675, 677 (Tex. Civ. App.-Houston [14th Dist.] 1974, no writ)
(“When the Legislature defines a tern-r in one statute and uses the same term in relation to the same
subject matter in a later statute, it will be presumed that the latter use of the term is in the same sense
as previously defined.“). Chapter 2 1, the substance of which was adopted prior to the enactment of
section 272.001(b)(5),3 indicates
m that governmental entities with the power of eminent domain are
the state, a political subdivision of the state, or an irrigation, water, water improvement, or water
power control district “created by law.” See TEX. PROP. CODE ANN. $3 21.011 (governing
procedure), .012 (filing of condemnation petition), .021 (deposit of damages and cost and filing of
bond during litigation) (Vernon 1984). Chapter 2 1 provides for the filing of condemnation petition
by corporations; the United States; and the state, a political subdivision of the state, or an irrigation,
water, water improvement, or water power control district “created by law.” See id. 0 2 1.012.
However, only entities falling in the latter categories are excepted from the requirement that the
amount of damages or cost awarded to the property owner be paid or deposited with the court and
that a bond securing further costs be executed in order to take possession of the property pending
further litigation. See id. 5 21.02 1 (state, county, municipal corporation, or irrigation or water
district not required to make deposit or execute bond); see also id. 5 21 .Ol 11 (Vernon Supp. 2002)
(only governmental entities with power of eminent domain required to disclose appraisal records).
3The legislature enacted section 272.001(b)(5) ofthe Local Government Code in 1985. See Act May 24,1985,
69th Leg., R.S., ch. 367, $ 1, 1985 Tex. Gen. Laws 1440, 1440. The legislature adopted the substance of chapter 21 of
the Property Code, including sections 2 1 .Ol l-.01 2 and 2 1.02 1 on which we rely, prior to 1961. See TEX. PROP. CODE
ANN. $6 21.01 l-.012, .021 (Vernon 1984) (Historical Notes); Act of Feb. 21, 1934,43d Leg., 2d C.S., ch. 37, $0 l-2,
1934 Tex. Gen. Laws 89-90, repealed by, Act of May 26, 1983, 68th Leg., R.S., ch. 576, 0 6, 1983 Tex. Gen. Laws
3475,3729.
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The Euless EDC is a nonprofit industrial development corporation established under section
4B of the Development Corporation Act of 1979, TEX.REV.CIV.STAT.ANN. art. 5 190.6 (Vernon
1987 & Supp. 2002). An “industrial development corporation” is “a corporation created and existing
under the provisions of [article 5 190.61 as a constituted authority for the purpose of financing one
or more projects.” Id. 8 2( 10) (Vernon Supp. 2002). Article 5 190.6 authorizes the creation of an
industrial development corporation under the statute’s general provisions or under sections 4A and
4B of the statute. See id. art. 5 190.6 (Vernon 1987 & Supp. 2002). Section 4B of article 5 190.6
authorizes an eligible city to “create” and utilize a development corporation to finance authorized
“projects” on behalf of the city. See id. 8 4B(b) (Vernon Supp. 2002). The city’s governing body
appoints the section 4B development corporation’s board of directors. See id. 8 4B(c). The section
4B development corporation has the powers and is subject to the limitations of a corporation created
under other provisions of article 5 190.6, but to the extent of any conflict, section 4B prevails. See
id. 8 4B(b). The section 4B corporation, while “created” under the auspices of a city, is nonetheless,
pursuant to the general provisions of article 5 190.6, a nonprofit corporation incorporated by private
individuals pursuant to the Texas Non-Profit Corporation Act, TEX.REV.CIV.STAT.art. 1396- 1.Ol
to -70.01 (Vernon 1997 & Supp. 2002). See id. $5 4(a), 5-6 (Vernon 19X7), 23 (Vernon Supp.
2002).
A section 4B development corporation is not a political subdivision or a political corporation
notwithstanding its access to a dedicated tax and the authority to exercise eminent domain power.
Under section 4B, a city may levy and collect a sales and use tax “for the benefit of the corporation,”
id. 8 4B(d) (Vernon Supp. 2002)’ and the corporation “may exercise the power of eminent domain”
subject to the city’s approval and “in accordance with and subject to the laws applicable” to the city,
id. 8 4BCj) (Vernon Supp. 2002). Under the general provisions of article 5 190.6, however, a city that
creates a development corporation “shall never delegate to a corporation any of such [city’s]
attributes of sovereignty, including the power to tax, the power of eminent domain, and the police
power.” Id. 5 22 (Vernon Supp. 2002). Indeed, a development corporation’s exercise of powers is
subject “at all times to the control of the governing body of the [city] under whose auspices the
corporation was created.” Id. 5 23 (a)(12) (V emon Supp. 2002). And although the corporation is
“a constituted authority and an instrumentality [for the purposes of section 103 of the Internal
Revenue Code] and shall be authorized to act on behalf of’ the creating city, id. 8 22, the corporation
is “not intended to be and shall not be apolitical subdivision or apolitical corporation within the
meaning of the constitution and laws of the state[.]” Id. 5 22 (emphasis added).
Relying on section 22 of article 5 190.6-that a development corporation is not a political
subdivision or a political corporation-this office has concluded that a section 4B corporation is not
a political subdivision subject to the public notice and bidding requirements of section 272.001(a)
of the Local Government Code. See Tex. Att’y Gen. Op. No. JC-0109 (1999); see also Tex. Att’y
Gen. Op. No. JC-0032 (1999) ( concluding, on basis of section 22, that section 4A development
corporation is not itself a political subdivision subject to prevailing wage law, Government Code
chapter 2258). This office has also concluded, based on a review of section 4B and the general
provisions of article 5 190.6, that section 4B development corporation is not “any other ‘local
governmental entity”’ subject to the conflict of interest provision ofLocal Government Code chapter
171. See Tex. Att’y Gen. Op. No. JC-0338 (2001). Finally, relying on section 22, this office has
The Honorable Jane Nelson - Page 6 (GA-0004)
determined that because an industrial development corporation “bears none of the ‘attributes of
s0vereignty,“’ a member of the corporation’s board of directors is not a public officer for the
purposes of the common law doctrine of incompatibility. See Tex. Att’y Gen. Op. No. JC-0547
(2002) at 2.
The Euless EDC, as a section 4B industrial development corporation, is not a “governmental
entity” for the purposes of section 272.001(d)(5) of the Local Government Code. As we have
previously concluded, “governmental entity,’ under section 272.001(d)(5) refers to the state, a
political subdivision of the state, or an irrigation or water district created by law. The Euless EDC
is clearly not the state or an agency of the state. See Guar. Petroleum Corp. v. Armstrong, 609
S.W.2d 529,529 (Tex. 1980) (departments or agencies of state exercise jurisdiction throughout state;
governing bodies are elected in statewide elections or are appointed by statewide officials). It is not
an irrigation or water district. See generally TEX. REV. CIV. STAT.ANN. art. 5 190.6 (Vernon 1987
& Supp. 2002). Nor is it a political subdivision of the state or a local governmental entity. See id.
8 22 (Vernon Supp. 2002); Tex. Att’y Gen. Op. No. JC-0109 (1999); Tex. Att’y Gen. Op. No.
JC-0338 (2001).
Furthermore, even if a court were to determine that a section 4B development corporation
is a governmental entity for the purposes of section 272.001(b)(5), we do not believe that section
272.001 (b)(5) authorizes the type of transfer contemplated here. In the transaction described, the
Euless EDC is merely a pass-through for the transfer of the property to the private party for his
private use. Thus, the essential question presented here is whether section 272.001 (b)(5) authorizes
a political subdivision to transfer its land to a private party using another governmental entity as a
pass-through.
In our opinion, section 272.001 (b)(5) does not authorize transfer of municipally owned land
to a private party for that party’s private use utilizing a governmental entity as a pass-through. In
construing a statute, the primary objective is to effect the legislature’s intent, which like a court, we
must endeavor to discover from the actual language the legislature used. See Mitchell Energy Corp.
v. Ashworth, 943 S.W.2d 436,438 (Tex. 1997). When specific exceptions to a statute are made by
the legislature, it is usually clear that no other exceptions are intended. See Unigard Sec. Ins. v.
Schaefer, 572 S.W.2d 303, 307 (Tex. 1978). Moreover, because section 272.001 is intended to
“ensure that public lands be disposed of in a manner that will fully protect the citizenry,” exceptions
to the statute must be read narrowly. City of Dallas v. McKasson, 726 S.W.2d 173, 176-77 (Tex.
App.-Dallas 1987, writ ref d n.r.e.); Tex. Att’y Gen. Op. No. DM-441 (1997) at 3. The exceptions
to the statute “must not be permitted to consume the rule lest the act fail its objectives.” City of
Dallas, 726 S.W.2d at 177. These principles of statutory construction require us to read the section
272.001 (b)(5) exception to apply only to real property transfers to an entity expressly mentioned
therein, a governmental entity and, by logical extension, for the governmental entity’s public
purposes for which the governmental entity may condemn the real property. See Mercier, 28 S.W.3d
at 716 (property may be taken only for public use); see also City of Arlington, 41 F.3d at 965
(property can only be taken when there results to public some definite right or use in business or
undertaking to which the property is devoted). Section 272.001 (b)(5) does not exempt a transfer to
a private party for a private use.
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Our narrow construction of section 272.001(b)(5) is consistent with legislative history. This
section was not intended to allow transfers of public property to private parties or for private use.
The section 272.00 1(b)( 5) exception for transfer of real property interest to a governmental entity
is intended to codify Attorney General Opinion M-788’s determination that the exchange of real
property between two political subdivisions for their public purposes, pursuant to which publicly
owned land is changed fi-om one public use to another, is not subject to the public notice and bidding
requirements of the predecessor statute to section 272.001. See Hearing on Tex. H.B. 917 Before
the Senate Comm. on State Affairs, 69th Leg., R.S. (May 15, 1985) (tape available at Lorenzo De
Zavala State Archives and Library); Tex. Att’y Gen. Op. No. M-788 (1971). Senator Truan, the
author of House Bill 917, which amended the statute, explained the bill as follows:
The City of Corpus Christi requested this legislation. They wish to
convey land between the city which is home-ruled and the Corpus
Christi Independent School District. Present law requires the city to
bid and post public notice requirements but the Attorney General in
opinion M-788 has indicated that such bid and posting requirements
are not necessary between a home-rule city and an independent school
district. This bill codifies that opinion into law. . . . And that’s all the
bill does.
Hearing on Tex. H.B. 917 Before the Senate Comm. on State Affairs, 69th Leg., R.S. (May 15,1985)
(tape available at Lorenzo De Zavala State Archives and Library); see also Tex. Att’y Gen. Op. No.
M-788 (1971).
Attorney General Opinion M-788 relied on the judicially recognized proposition that political
subdivisions that can condemn each others’ lands for a “paramount” public use or need should be
able to agree on such use or need without instituting condemnation proceedings. See Tex. Att’y Gen.
Op. No. M-788 (1971). El Paso County v. City of El Paso, 357 S.W.2d 783 (Tex. Civ. App.-El
Paso 1962, no writ), on which Attorney General Opinion M-788 relied, dealt with the transfer of
county park land to the city for the construction of a city firemen training facility and a water tower.
The El Paso County court determined that a statute requiring a county to sell its land at a public
auction and a statute relating to abandonment of county parks applied whenever a political
subdivision subject to those statutes disposed of any public land to a private party, “but not where
such [a] political subdivision with the power of eminent domain. . . chooses to deal with its opposite
number and reach an agreement as to the change of public use, rather than resort to” long and
expensive litigation in the courts. El Paso County, 357 S.W.2d at 787. In Kingsville Independent
SchoolDistrict v. Crenshaw, 164 S.W.2d49 (Tex. Civ. App.-San Antonio 1942, writ ref dw.o.m.),
on which the El Paso County court and Attorney General Opinion M-788 relied, the court held that
a city could transfer land used as a city park to a school district without resorting to condemnation
proceedings where the city and the school district agreed that the land was necessary for school
purposes. See Kingsville Indep. Sch. Dist., 164 S.W.2d at 50-5 1. Significantly, both cases involved
the transfer of land for the public purpose of the transferee political subdivision for which the
political subdivision could condemn the land through eminent domain proceedings.
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In the circumstances before us, the land sought to be transferred would not be used for a
public purpose of the “governmental” transferee. Here, the ultimate intended user of the DFW Tract
is the private party who would use the land for his private purposes. Even assuming that the Euless
EDC were a “governmental entity” under section 272.001 (b)(5) of the Local Government Code, the
transfer of the DFW Tract would not be for public use or for a public purpose of the Euless EDC.
It would not be for a purpose for which the Euless EDC could condemn the land under its enabling
legislation, article 5 190.6 of the Revised Civil Statutes. See City of Arlington, 41 F.3d at 965 (one
of tests for public use is whether property taken is reasonably essential to successful completion of
public project); see also Maberry, 493 S.W.2d at 270 (exercise by a corporation of power of eminent
domain conferred by state is special in character, and there must be showing of strict compliance
with law authorizing taking).
In sum, in response to your specific question-whether the Euless EDC is a “governmental
entity” for purposes of section 272.001 (b)(5)- we conclude that it is not. Furthermore, even if the
Euless EDC were determined to be a “governmental entity,” section 272.001 (b)(5) does not
authorize a political subdivision to transfer its land to a private party using a governmental entity
merely as an intemediary to “effect” or “accomplish” the transfer.
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SUMMARY
Section 272.001(b)(5) of the Local Government Code
exempts “a real property interest conveyed to a governmental entity
that has the power of eminent domain” from the public notice and
bidding requirements generally applicable to the sale or exchange
of land owned by a political subdivision. The Euless Economic
Development Corporation, a nonprofit industrial development
corporation created under the Development Corporation Act of 1979,
article 5 190.6 of the Revised Civil Statutes, is not a “governmental
entity” for the purposes of section 272.001(b)(5) of the Local
Government Code. Furthermore, section 272.001(b)(5) does not
authorize a political subdivision to transfer land to a private party by
using a “governmental entity” as a pass-through.
Very truly yours,
Attom@neral of Texas
BARRY R. MCBEE
First Assistant Attorney General
NANCY FULLER
Deputy Attorney General - General Counsel
SUSAN DENMON GUSKY
Chair, Opinion Committee
Sheela Rai
Assistant Attorney General, Opinion Committee