Untitled Texas Attorney General Opinion ( 2003 )

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
May 12,2003
The Honorable Kent Grusendorf Opinion No. GA-0069
Chair, Committee on Public Education
Texas House of Representatives Re: Whether a municipality that has been granted
P.O. Box 2910 a charter for an open-enrollment charter school
Austin, Texas 78768-2910 may issue certificates of obligation to construct
facilities for the school (RQ-0029-GA)
Dear Representative Grusendorf:
You ask whether a municipality that has been granted a charter for an open-enrollment
charter school may issue certificates of obligation to construct facilities for the school.*
In 1995, the legislature amended the Education Code to provide for open-enrollment charter
schools, adopting subchapter D of chapter 12 of the Education Code. See Act of May 27,1995,74th
Leg., RX, ch. 260,$1,1995 Tex. Gen. Laws 2207,2244-2247. As enacted in 1995, chapter 12 also
provided for home-rule school district and campus charter schools in subchapters B and C. See id.
at 2236 (enacting Education Code, section 12.002 establishing classes of charters), 2236-2244
(enacting Education Code, chapters B-C). In 200 1, the legislature added subchapter E providing for
public college or university open-enrollment charter schools. See Act of May 28,2001,77th Leg.,
R.S., ch. 1504, 0 19, 2001 Tex. Gen. Laws 5344, 5355 (enacting Education Code, chapter 12,
subchapter E). A 1995 bill analysis describes charter schools as “independent public schools
formed by individuals or organizations that operate according to a charter.” HOUSE RESEARCH
ORGANIZATION, BILL CONFERENCE REPORTSUMMARY, Tex. S.B. 1,74th Leg., R.S. (1995).
Under subchapter D, an open-enrollment charter school is “part of the public school system
of this state.” TEX. EDUC. CODE ANN. 8 12.105 (Vernon Supp. 2003). An open-enrollment charter
school may not charge tuition. See id. 8 12.108. Rather, a charter holder “is entitled to receive for
the. . . school funding . . . as if the school were a school district.” Id. 5 12.106.* These funds “are
‘See Letter from Honorable Kent Grusendorf, Chair, Committee on Public Education, Texas House of
Representatives, to Honorable Greg Abbott, Texas Attorney General, at 1 (Mar. 12, 2003) (on file with Opinion
Committee) [hereinafter Request Letter].
2SeeTEX. EDUC. CODE ANN. 8 12.106(a) (Vernon Supp. 2003) (“A charter holder is entitled to receive for the
open-enrollment charter school funding under Chapter 42 as if the school were a school district without a tier one local
(continued...)
The Honorable Kent Grusendorf - Page 2 (GA-0069)
considered to be public funds” and “are held in trust by the charter holder for the benefit of the
students of the open-enrollment charter school.” Id. tj 12.107.
Under subchapter D, the State Board of Education (the “Board”) may grant a charter on the
application of “an eligible entity” that meets various financial, governing, and operational standards.
See id. 5 12.101 (a)-(b). Significantly, as it has since 1995,3 section 12.101 (a) of the EducationCode
specifically defines the term “eligible entity” to include “a governmental entity.” Id. tj 12.10 1(a)(4).
Although subchapter D does not define the term “governmental entity,” the legislature has broadly
defined the term in other statutes to expressly include municipalities. See, e.g., TEX. GOV’T CODE
ANN. $8 2051.041(1)(B) (V emon 2000) (notice publication by governmental entities), 225 1 .001(3),
(6) (Vernon Supp. 2003) (payment ofvendors by governmental entities), 2254.002( 1) (Vernon Supp.
2003) (Professional Services Procurement Act); TEX. HEALTH & SAFETYCODEANN. 8 773.003( 17)
(Vernon Supp. 2003) (Emergency Medical Services Act); see also TEX.EDUC. CODEANN. 8 26.007
(Vernon Supp. 2003) (defining the term “governmental entity” by reference to section 205 1.041 of
the Government Code); TEX. GOV’T CODEANN. 9 3 11 ,011 (b) (Vernon 1998) (“Words and phrases
that have acquired a technical or particular meaning, whether by legislative definition or otherwise,
shall be construed accordingly.“). We see no reason not to apply an inclusive definition here. Thus,
the legislature has authorized the Board to grant charters for open-enrollment charter schools to
municipalities.
We understand that in January 2002, the Texas Education Agency (“TEA”) granted a charter
for an open-enrollment charter school to the City of Westlake, a Type A general-law municipality.4
Because the city would like to issue certificates of obligation to finance the construction of facilities
for the school, you ask, “May a municipality that has been granted a charter from the TEA to operate
an open-enrollment charter school issue its Certificates of Obligation to construct facilities in which
to house the charter school?” Request Letter, supra note 1, at 1.
Subchapter C of chapter 271 of the Local Government Code, the Certificate of Obligation
Act (the “Act”), authorizes the governing body of an issuer, which it defines as either a municipality
*(. ..continued)
share for purposes of Section 42.253 and without any local revenue . . . for purposes of Section 42.302. In determining
funding for an open-enrollment charter school, adjustments under Sections 42.102,42.103,42.104, and 42.105 and the
district enrichment tax rate . . . under Section42.302 are based on the average adjustment and average district enrichment
tax rate for the state.“); see aZsoid. $0 42.253,42.302.
3See Act of May 27, 1995,74th Leg., R.S., ch. 260,§ 1,1995 Tex. Gen. Laws 2207,2244 (enacting Education
Code, section 12.101(a)).
4See Letter to Don Willett, Deputy Attorney General and General Counsel, from Jody Richardson, Akin Gump
Strauss & Feld, L.L.P. (Mar. 12,2003), attaching Letter to Representative Victoria Truitt from Scott Bradley, Mayor,
Westlake, Texas [hereinafter City of Westlake Letter], (on file with Opinion Committee); City of Westlake Letter at 1,
4, 6.
The Honorable Kent Grusendorf - Page 3 (GA-0069)
or county, TEX. Lot. GOV’T CODE ANN. 0 271.043(7) (V emon 1999),5 to authorize certificates to
pay for certain contractual obligations. Because the Act authorizes municipalities and counties to
create debt, it has been strictly construed to authorize a city or county to issue certificates only for
those purposes expressly authorized. See Lopez v. Ramirez, 558 S.W.2d 954, 957 (Tex. Civ.
App.-San Antonio 1977, no writ) (“We assume that if the legislature, in passing the Act of 1971,
intended that the county could issue the certificates of obligation for any purpose, it would have said
so, and by expressing its intention in Sec. 3(a) it intended to limit the purposes for which certificates
of obligation could be issued.“). This construction is consistent with the long-standing rule that
“[sltatutes respecting the power of local governments to create a debt must be strictly and narrowly
construed.” Id. (citing San Antonio Union Junior Coil. Dist. v. Daniel, 206 S.W.2d 995 (Tex. 1947),
and Robertson v. Breedlove, 4 SW. 209 (Tex. 1884)).
Some of the Act’s provisions authorize municipalities or counties to issue certificates for
specific kinds of projects. See, e.g., TEX. LOC. GOV’T CODE ANN. $5 271.045(c) (Vernon Supp.
2003) (authorizing certificates to pay “a municipality’s obligations incurred by contract for interests
in and rights to water or sewer treatment capacity in connection with a water supply and transmission
project or sewer treatment or collection project”), 271.046(a) (Vernon 1999) (authorizing certificates
to pay contractual obligations incurred by counties in “constructing or equipping a jail,”
“constructing, renovating, or otherwise improving a county-owned building,” or “constructing a
bridge that is part of or connected to a county road or an approach to such a bridge”), 271.0461
(Vernon 1999) (authorizing certificates to pay a municipality’s contractual obligations “incurred in
demolishing dangerous structures or restoring historic structures”). Importantly, however, the Act
as a general matter does not authorize issuers to undertake specific kinds of projects but merely
authorizes issuers to create debt to finance them.
The City of Westlake would like to issue certificates to construct a facility for its charter
school pursuant to section 271.045(a) of the Certificate of Obligation Act,6 which provides
that an issuer may authorize certificates “to pay a contractual obligation to be incurred for,”
. among other things, the “construction of any public work” or “purchase of materials, supplies,
equipment, machinery, buildings, land, and rights-of-way for authorized needs and purposes.” Id.
5 27 1.045(a)(1)-(2) (V emon Supp. 2003). Unlike the Act’s provisions that authorize certificates for
particular kinds of projects, see id. $8 271.045(c), 271.046,271.0461, supra, section 271.045(a) is
general in scope. In order to determine whether section 271.045(a) authorizes a county or
municipality to issue certificates to pay for a contractual obligation incurred for a project or purchase,
we must first look outside the Act to ascertain whether the issuer is authorized to undertake the
particular public work or purchase. See, e.g., Navarro Auto-Park, Inc. v. City of San Antonio, 574
S.W.2d 582, 584 (Tex. Civ. App.-San Antonio 1978, writ refused n.r.e) (relying on case law to
5We assume that the City of Westlake is eligible to proceed under the Certificate of Obligation Act. See TEX.
LOC. GOV’T CODE ANN. 9 27 1.044(a) (Vernon 1999) (providing that a municipality may use the Certificate of Obligation
Act only if it “( 1) is incorporated under the home-rule amendment to the constitution (Article XI, Section 5, of the Texas
Constitution); or (2) is incorporated under a general or special law and the municipality has the authority to levy an ad
valorem tax of not less than $1.50 on each $100 valuation of taxable property in the municipality.“).
6See City of Westlake Letter, supra note 4, at 1.
The Honorable Kent Grusendorf - Page 4 (GA-0069)
conclude that a city-owned off-street parking garage was a “public work” for which a city was
authorized to issue certificates under the Certificate of Obligation Act) (citing Amstater v. Andreas,
273 S.W.2d 95 (Tex. Civ. App.-El Paso 1954, writ ref d n.r.e.)).
No provision outside the open-enrollment charter school provisions in the Education Code
authorizes a city to operate a schooly7 and no provision authorizes a city to construct a school
building. Nor does any Texas judicial or attorney general opinion indicate that operating or
constructing a school is within a city’s authority. Traditionally, Texas cities and school districts have
exercised separate powers, and the authority to operate and support schools with public funds has
been reserved to school districts. See City of Rockdale v. Cureton, 229 S.W. 852,853 (Tex. 1921)
(city that had taken over local school district pursuant to constitutional and statutory authority
“acquired [a] dual character. It has its powers as strictly a municipality, to be exercised for strictly
municipal purposes; and it had its powers as a duly constituted independent school district. The two
are not to be confused.“). For that reason, a Type A general-law municipality has no inherent
authority to operate or construct a school, and that authority may not be implied from the
municipality’s general authority to manage and control its property. See, e.g., TEX. LOC. GOV’T
CODE ANN. $5 5 1.012 (Vernon 1999) (Type A general-law municipality “may adopt an ordinance,
act, law, or regulation, not inconsistent with state law, that is necessary for the government, interest,
welfare, or good order of the municipality as a body politic”), 5 1.O15 (authority of a Type A general-
law municipality to manage and control its property).
Significantly, the legislature has now expressly provided in section 12.101(a) of the
Education Code that a municipality is eligible to obtain a charter for and to operate an open-
enrollment charter school. See TEX. EDUC. CODE ANN. 5 12.101(a) (Vernon Supp. 2003). In light
of this statutory authority, it would seem to follow that a municipality is authorized to construct a
facility for its open-enrollment charter school and to issue certificates of obligation to finance the
construction.
Importantly, however, section 12.10 1(a) of the Education Code does more than authorize the
State Board of Education to grant charters to “eligible entities” and define that term. See id. As it
has since 1995,8 section 12.101(a) also governs where an eligible entity may operate its charter
school, expressly providing that the Board “may grant a charter on the application of an eligible
entity for an open-enrollment charter school to operate in a facility of a commercial or nonprofit
entity or a school district, including a home-rule school district.” Id. (emphasis added). Section
12.10 1(a) is similar to provisions in subchapters C and E of chapter 12 that govern where other types
71n 1995, the legislature repealed former chapter 24 of the Education Code, which had provided for municipal
school districts, but allowed a school district operating under former law to continue to do so. See Act of May 27, 1995,
74th Leg., R.S., ch. 260, $9 1 ( enacting Education Code, section 11.301 continuing former law), 5S(a)( 1) (repealing
former chapter 24), 1995 Tex. Gen. Laws 2207,2234,2498. Moreover, under that former law a city and its municipal
school district exercised authority as distinct legal entities. See City of Rockdale v. Cureton, 229 S.W. 852, 853 (Tex.
1921).
‘See Act of May 27,1995,74th Leg., R.S., ch. 260,§ 1,1995 Tex. Gen. Laws 2207,2244 (enacting Education
Code, section 12.101(a)).
The Honorable Kent Grusendorf - Page 5 (GA-0069)
of charter schools will be operated. See id. $5 12.052(a) (Vernon 1996) (“the board of trustees of
a school district or the governing body of a home-rule school district may grant a charter to parents
and teachers for a campus or a program on a campus”) (emphasis added), 12.152(a) (Vernon Supp.
2003) (“the State Board of Education may grant a charter on the application of a public senior
college or university for an open-enrollment charter school to operate on the campus of the public
senior college or university or in the same county in which the campus of the public senior college
or university is located”) (emphasis added).
Section 12.10 1(a) does not contemplate that an eligible entity will operate a charter school
in a municipal facility. Reading section 12.101 (a) according to its plain language, the phrase “a
facility of a commercial or nonprofit entity” means the facility of a private entity. Section 12.101 (a)
separately lists the facility of “a school district.” If a public entity were included within the term
“nonprofit entity,” the reference to a school district would be redundant. See Chevron Corp. v.
Redmon, 745 S.W.2d 314,3 16 (Tex. 1987) (Texas Supreme Court “will give effect to all the words
of a statute and not treat any statutory language as surplusage if possible”) (citing Perkins v. State,
367 S.W.2d 140,146 (Tex. ````));TEx.Gov’TCODEANN. 5 311.021(2) (Vernon 1998) (inenacting
a statute, it is presumed that “the entire statute is intended to be effective”) (Code Construction Act).
Moreover, section 12.101 (a) uses the term “nonprofit entity” whereas section 12.10 1(a)(4) uses the
term “governmental entity,” which includes a municipality. See discussion supra page 2. The fact
that the legislature used both terms in the statute suggests that the legislature intended them to have
different meanings, as is the case with other statutes where the legislature has used both terms,
clearly differentiating between “governmental entities” and private “nonprofit entities.“’ The phrase
“a facility of a commercial or nonprofit entity” does not include the facility of a governmental entity
such as a municipality.
Because section 12.101 (a) states where an eligible entity may operate a charter school and
does not provide for operation of a charter school by an eligible entity in a municipal facility, it
appears that the legislature has withheld the authority to operate a charter school in a municipal
‘See, e.g., TEX. OCC. CODE ANN. 0 952.102(a) (Vernon 2003) (“An applicant for a certificate or the renewal
of a certificate issued under this chapter must: (1) be operated by: (A) a governmental entity; or (B) a nonprofit entity
exempt from the payment of federal income taxes under Section 501(a) of the Internal Revenue Code of 1986 and its
subsequent amendments by being listed as an exempt entity under Section 501(c)(3), 501(c)(4), or 501(c)(6) pf that
code.“) (emphasis added); TEX. PAW&WILD. CODEANN. 0 11.103(a) (Vernon 2002) (“The department shall inventory
all land and water associated with historical, natural, recreational, and wildlife resources in this state that are owned by:
(1) governmental entities; or (2) nonprofit entities that offer access to the land or water to the public.“) (emphasis added);
see also TEX. TRANSP. CODE ANN. $0 456.001(2) (V emon 1999) (“‘Designated recipient’ means an entity that receives
money from the United States or this state for public transportation through the department or the Federal Transit
Administration or the administration’s successor and is a transit authority, a municipaZity not included in a transit
authority, a local governmental body, another political subdivision of this state, or a nonprofit entity providing rural
public transportation service.“) (emphasis added), 458.00 1 (2) (“‘Rural public transportation provider’ means: (A) a
nonprofit entity, ZocaZgovernmentaZ body created under Chapter 791, Government Code, orpoZiticaZsubdivision of this
state, which on August 3 1, 1995, provided rural public transportation services and received state or federal public
transportation money through the department, the Federal Transit Administration, or the administration’s successor.“)
(emphasis added); TEX. WATERCODEANN. 5 15.602(7) (V emon Supp. 2003) (“‘Nonprofit noncommunity water system’
means a public water system that is not operated for profit and that: (A) is owned by apoZiticaZ subdivision or nonprofit
entity; and (B) is not a community water system.“) (emphasis added).
The Honorable Kent Grusendorf - Page 6 (GA-0069)
facility. From this omission, we must conclude that operation of a charter school in a municipal
facility is not authorized. See In re Bell, 91 S.W.3d 784,790 (Tex. 2002) (“It is a rule of statutory
construction that every. word of a statute must be presumed to have been used for a purpose.
Likewise, . . . every word excluded from a statute must also be presumed to have been excluded for
a purpose. This rule complements another general statutory construction principle that courts should
not insert words in a statute except to give effect to clear legislative intent.“) (citing Quick v. Austin,
7 S.W.3d 109, I23 (Tex. 1998), Laidlaw Waste Sys., Inc. v. City of Wilmer, 904 S.W.2d 656, 659
(Tex. 1995), and Cameron v. Terrell& Garrett, Inc., 618 S.W.2d 535, 540 (Tex. 1981))”
In sum, a municipality’s authority to operate a school depends entirely upon the open-
enrollment charter school provisions in the Education Code. Because section 12.101 (a) of the
Education Code precludes a municipality from operating its charter school in a municipal facility,
a municipality lacks authority to construct a charter school facility and may not pay for obligations
incurred in constructing such a facility with certificates of obligation. See TEX. LOC. GOV’T CODE
Am. 8 271.045(a)(1)-(2) (V emon Supp. 2003); Lopez v. Ramirez, 558 S.W.2d 954,957 (Tex. Civ.
App.-San Antonio 1977, no writ) (strictly construing Certificate of Obligation Act to authorize a city
or county to issue certificates only for those purposes expressly authorized).
Your query also raises a constitutional issue. In particular, in 1990 this office considered
whether article III, section 52 of the Texas Constitution, which prohibits a municipality from using
its funds except “‘for the direct accomplishment of a legitimate public purpose,“’ precludes a
municipality from issuing bonds to buy land and construct a school building to lease to the local
school district. See Tex. Att’y Gen. Op. No. JM-1255 (1990) at 3 (citing Brazoria County v. Perry,
537 S.W.2d 89,91 (Tex. Civ. App.-Houston [ 1st Dist.] 1976, no writ)); see also TEX. CONSK art.
III, 5 52(a) (“Except as otherwise provided by this section, the Legislature shall have no power to
authorize any county, city, town or other political corporation or subdivision of the State to lend its
credit or to grant public money or thing of value in aid of, or to any individual, association or
corporation whatsoever . . . .“). After reviewing several judicial opinions holding that cities are
prohibited from using municipal funds to provide financial support for school districts, see San
Antonio Indep. Sch. Dist. v. Bd. of Trs. of the San Antonio Elec. & Gas Sys., 204 S.W.2d 22,25 (Tex.
Civ. App.-San Antonio 1947, writ ref’d n.r.e.) (a city may not donate funds to an independent
municipal corporation such as a school district); City of El Paso v. Carroll, 108 S.W.2d 251,257
(Tex. Civ. App.-El Paso 1937, writ ref d) (a city could not lend or donate public funds to school
district, which was a separate municipal corporation); see also City of Rockdale, 229 SW. at 853
(holding that city debt limitations did not apply to a bond issue for city acting as independent school
district because city taxed separately for each purpose), the opinion concluded that “municipal
powers and purposes do not include those reserved to school districts for the provision and
maintenance of schools, including the power to finance and construct school buildings or facilities.”
Tex. Att’y Gen. Op. No. JM-1255 (1990) at 7.
“By contrast, in 2001 the legislature amended the Education Code to authorize public senior colleges and
universities to operate open-enrollment charter schools in their facilities. See Act of May 28,2001,77th Leg., R.S., ch.
1504, $ 19, 2001 Tex. Gen. Laws 5344, 5355 (enacting Education Code, section 12.152(a)); TEX. EDUC. CODE ANN.
6 12.152(a) (V emon Supp. 2003) (“the State Board of Education may grant a charter on the application of a public senior
college or university for an open-enrollment charter school to operate on the campus of the public senior college or
university or in the same county in which the campus of the public senior college or university is located’) (emphasis
added).
The Honorable Kent Grusendorf - Page 7 (GA-0069)
The Seventy-eighth Legislature is currently considering legislation that would permit an
eligible entity to operate a charter school in its own facility and would expressly authorize a
municipality that is granted a charter to borrow funds, issue obligations, and spend its funds
to construct buildings for the charter school. See Tex. H.B. 1564, 78th Leg., R.S. (2003). If
municipalities are granted statutory authority to operate charter schools in municipal facilities and
to construct facilities for their charter schools, using municipal funds to construct such a facility
would accomplish a legitimate public purpose of a municipality under article III, section 52 of the
Texas Constitution. See Tex. Mun. League Intergovernmental Risk Pool v. Tex. Workers’ Comp.
Comm ‘n, 74 S.W.3d 377,383 (Tex. 2002) (article III, section 52(a) “does not prohibit payments to
individuals, corporations, or associations so long as the statute requiring such payments: (1) serves
a legitimate public purpose; and (2) affords a clear public benefit received in return”) (emphasis
added). Moreover, such an expenditure would not benefit a private corporation or association but
rather an open-enrollment charter school, which is “part of the public school system of this state,”
TEX. EDUC. CODE ANN. 5 12.105 (Vernon Supp. 2003). See Tex. Mun. League Intergovernmental
Risk Pool, 74 S.W.3d at 384 (while article III, section 52(a) “prohibits granting public money to
private individuals or commercial enterprises, it does not prohibit transfers to a state agency”).
Furthermore, because an open-enrollment charter school is separate from any school district, this
arrangement would not constitute a transfer of municipal funds to a school district.
The Honorable Kent Grusendorf - Page 8 (GA-0069)
SUMMARY
Because section 12.101 (a) of the Education Code does not
authorize a municipality to operate an open-enrollment charter school
in a municipal facility, a municipality is not authorized to issue
certificates of obligation to finance such a facility’s construction.
The Seventy-eighth Legislature is currently considering
legislation that would permit an eligible entity to operate an open-
enrollment charter school in its own facility and would expressly
authorize a municipality that is granted a charter to borrow funds,
issue obligations, and spend its funds to construct buildings for the
charter school. See Tex. H.B. 1564, 78th Leg., R.S. (2003). This
legislation would authorize a municipality to issue certificates of
obligation to finance construction of a facility for its open-enrollment
charter school. If municipalities are granted statutory authority to
operate charter schools in municipal facilities and to construct
facilities for their charter schools, using municipal funds to construct
such a facility would accomplish a legitimate public purpose of a
municipality under article III, section 52 of the Texas Constitution.
Very truly yours,
BARRY R. MCBEE
First Assistant Attorney General
DON R. WILLETT
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
Mary R. Crouter
Assistant Attorney General, Opinion Committee