Untitled Texas Attorney General Opinion ( 1988 )

August 19, 1988
Honorable John Vance Opinion No. J'w942
Criminal District Attorney
Dallas County Re: Whether a county may
Services Building guarantee loans made to low
Dallas, Texas 75202 and moderate income families
for housing purposes and re-
lated questions (RQ-1337)
Dear Mr. Vance:
You inquire about the powers of a county to provide
financial assistance to low and moderate income families for
housing purposes. You first ask whether the provision of
financial assistance to low and moderate income families
for housing purposes constitutes a "public purpose" for a
county.
This question involves two issues: whether the county
has express or implied statutory authority to provide such
financial assistance to low and moderate income families,
and, if so, whether such statutory authority is consistent
with the Texas Constitutional provisions which require that
public funds be spent for public purposes. m Tex. Const.
art. III, Of 50, 51, 52; art. VIII, 5 3.
Attorney General Opinion JR-805 (1987) concluded that
the provision of housing assistance by a home rule city to
low and moderate income families would not necessarily
violate the public purpose requirements of the constitution.
The courts have accorded great weight to legislative
determinations of the public purpose to be served by the
provision of housing assistance. In Jiousina Authoritv 9
Citv of Dallas v. Hissinbotham, 143 S.W.Zd 79 (Tex. 19407,
the Texas Supreme Court upheld the Housing Authorities Law,
which authorized the construction of low rent housing
projects for persons of low income. Local Gov't Code ch.
392. The law defines "persons of low income" to mean
families or persons who lack the amount of
income that an authority considers necessary
to live, without financial assistance, in
p. 4736
Honorable John Vance - Page 2 (J&942)
,
decent, safe, and sanitary housing without
overcrowding.
Local Gov't Code 5 392.002(g). The Supreme Court determined
that the use to which the housing projects would be devoted
was a public use. 143 S.W.2d at 85 (Tex. 1940). The terms
"low income" and "moderate income" do not, in the abstract,
stand for precise amounts of income or a particular standard
of living. They are defined by evaluating income against
expenditures for necessities, taking into consideration
factors such as the costs of holding a job, family size, and
local cost of living. If an individual's earnings do not
increase in proportion to inflation, his income may decline
from l*moderatel'to "low" over a period of time without any
decrease in the amount of dollars earned. It is possible
that persons and families who have a moderate income by some
standards will meet the quoted test for 'low incomenq persons
and families because of local housing shortages or
inflation in housing.
We will not address the constitutionality of
housing assistance program available for low and rnod````
income persons in the state. These must be evaluated
individually, taking into consideration the legislature's
statement of purpose, the means of effectuating that
purpose, and the definitions of low and moderate income. We
simply wish to make it clear that attaching the label
"moderate income" to a person does not automatically remove
him from the class of persons who may receive housing
assistance consistently with consitutional provisions that
protect public funds from expenditure for private purposes.
&=G Attorney General Opinion O-2474 (1940) (A person need
not be reduced to pauperism in the starkest meaning of the
word before assistance may be extended to him under former
section 11 of article 2351, V.T.C.S.).
We next consider whether the county has statutory
authority to provide the kind of housing assistance you
inquire about. you ask whether a county may guarantee loans
made to low and moderate income families for housing
purposes, either by directly guaranteeing the loans or
indirectly, by guaranteeing the payment of debt service on
bonds issued by a housing finance corporation.
Housing projects for low income persons, slum
clearance, urban redevelopment, and similar programs are
within the general police power to provide for the public
health, safety, and welfare. 7 McQuillan, Municipal
Corporations ff 24.563, 24.563b (3d rev. ed. 1981). The
p. 4737
Honorable John Vance - Page 3 m-942)
legislative findings in the Housing Authorities Law state a
need for the exercise of the police power:
[Hlousing conditions are responsible for an
increase in and spread of disease and crime,
are a menace to the health, safety, morals,
and welfare of the residents of the state,
impair economic values, and necessitate
excessive and disproportionate expenditures
of public funds for Crimea prevention and
punishment, public health and safety, fire
and accident protection, and other public
services and facilities . . . .
Local Gov't Code 9 392.003(2). &9 &&DD v. Citv of Dallas,
235 S.W. 513 (Tex. 1921) (providing that police power
authorizes government to protect the health, safety,
comfort, and welfare of the public). The Texas Housing
Finance Corporations Act also includes a finding that it
will promote the public health, safety, morals, and welfare.
Local Gov*t Code 9 394.002(b)(l).
The commissioners courts may exercise only~such powers
as the constitution or the statutes have conferred upon
them. mles v. Lauchlin 214 S.W.Zd 451, 453 (Tex. 1948).
Although the commissioners'courts have broad discretion in
exercising powers expressly conferred on them, the legal
basis for any action by a commissioners court must be found
in the constitution or the statutes. Q& Unlike home rule
cities, counties have no general police power. Commis-
si ners Court of Harris Countv v. Kaiser, 23 S.W.Zd 840
(kx. Civ. APP. - Galveston 1929, writ ref'd); Attorney
General Opinion JM-863 (1988); M Local Gov*t Code 9 54.004
(general police power of home-rule cities).
An examination of the relevant statutes persuades us
that a commissioners court lacks authority to guarantee
loans for housing purposes either directly or indirectly
through guaranteeing the payment of debt service on bonds
issued by a housing finance corporation.
The Texas Housing Finance Corporations Act provides a
means of using tax-exempt financing to generate mortgage
funds. Etter & Fraser, Housing Finanace Corporations: The
Texas Experience (A & M Real Estate Research Center,
September 1986); g.9~ Local Gov*t Code S 394.002(a). It
authorizes the governing body of any city or county to
approve the incorporation of public, nonprofit corporations
which may issue bonds to defray costs of residential
p. 4738
Honorable John Vance - Page 4 m-942)
development or the costs of purchasing or funding home
mortgages for persons of low or moderate income. Local
Gov't Code 55 394.003(8)(11); 394.011; 394.037(a). The
corporation may pledge all or a part of its revenues,
receipts, or resources, including revenues or receipts
received from residential development or home mortgages, to
the payment of principle and interest on its bonds. Local
Gov*t Code § 394.037(b). Section 394.055 of the Local
Government Code provides that bonds issued by a housing
finance corporation are limited obligations of the
corporation, payable solely from the revenue, receipts, and
other resources pledged to their payment. The local govern-
ment and the state are "not liable in any way regarding
bonds issued by the housing finance corporation." Local
Gov't Code &? 394.055(b). Section 394.055 of the Local
Government Code further states that:
The bonds do not constitute, within the
meaning of a statutory or constitutional
provision, an indebtedness, an obligation, or
a loan of credit of the state, the local
government, or any other municipality,
county, or other municipal or political
corporation or subdivision of the state. The ^
bonds do not create a moral obligation on
the part of any of those governmental
entities with respect to the payment of the
bonds. nose covernmental entities mav not
1.
(Em;haEis adied:)
Local Gov't Code 8 394.055(c). The underlined sentence
prohibits cities and counties from paying debt service on
bonds issued by a housing finance corporation. Accordingly,
a county lacks authority to guarantee the payment of debt
service on such bonds.
Nor does a county have statutory authority to guarantee
mortgage loans made by a housing finance corporation to a
low or moderate income person or family. The Texas Housing
Finance Corporations Act defines "home mortgage" in part as
an interest-bearing loan to a mortgagor, or a
participation in such a loan, that is:
. . . .
(D) except as provided by Section 394.906,
guaranteed or insured by the United States, an
p. 4739
Honorable John Vance - Page 5 (JM-942)
instrumentality of the United States, or a
private mortgage insurance or surety company
to the extent the loan amount exceeds 80
percent of the lesser of the appraised value
of the home at the time the loan is made or
the sale price of the home.
Local Gov't Code § 394.003(7). Under section 394.906 of the
Local Government Code, a federal guarantee or home mortgage
insurance is not required if the the housing finance
corporation's bonds are guaranteed or insured by an agency,
department, or instrumentality of the United States or by an
insurance or surety company authorized to issue municipal
bond insurance.
The Texas Housing Finance Corporations Act does not
authorize a county to guarantee mortgage loans financed by a
corporation established under that act. The legislature
intended that such guarantees be provided by federal or
private entities, and not by the city or county that
established the housing finance corporation.
It is suggested that section 394.036 of the Local
P.
Government Code authorizes counties to guarantee mortgage
loans made by housing finance corporations, but this
provision merely authorizes such corporations to accept
financial assistance from any source:
A housina finance corporation may amle
f r a d ac it its own behalf or on
bihal: of z:other'ierson, advances, loans,
grants, contributions, guarantees, rent
supplements, mortgage assistance, and other
forms of financial assistance from the
federal government, the state, a county, a
municipality, or any other public or guasi-
public body, corporation, or foundation, or
from any other public or private source, for
any of the purposes of this chapter.
(Emphasis added.)
Local Gov*t Code 5 394.036(a). This provision gives such
corporations broad authority to accept financial assistance,
but it does not authorize the enumerated public and private
entities to grant financial assistance.
In Attorney General Opinion JM-604 (1986), we held
that a city could not designate a credit union as its
P. depository, even though credit unions had express authority
p. 4740
Honorable John Vance - Page 6 m-942)
to serve as depositories of the United States, its agencies
or instrumentalities, any state, or any city, county, school
district, municipal corporation, political subdivision, or
other taxing authority of Texas or any other state. The
statutes authorizing the city to place funds in a depository
governed the kind of financial institution which the city
could use. m w Attorney General Opinions JW-832
(1987); MW-534 (1982); MW-224 (1980); H-723 (1975).
State agencies must have legislative authorization to
receive gifts and grants, since the conditions attached to
gifts may be inconsistent with the powers and duties given
that agency. Attorney General Opinions H-1180 (1978);
O-4681 (1942). Section 394.036 of the Local Government Code
makes it clear that a housing finance corporation may accept
gifts from any source and may include 'reasonable and
appropriate terms, not inconsistent with the purposes of
this chapter" in a contract for financial assistance. Local
Gov't Code 5 394.036(b).
We conclude that a county does not have express or
implied authority under chapter 394 of the Local Government
Code to guarantee mortgage loans made to low and moderate
income people and families.
Nor may the county, in our opinion, guarantee mortgage
loans under its authority to "[plrovide for the support of
paupers." V.T.C.S. art. 2351(6). The program authorized by
chapter 394 represents an exercise of the state's police
power far broader than the authority delegated to counties
by paragraph 6 of article 2351, V.T.C.S. The legislature
has provided in chapter 394 of the Local Government Code a
means whereby a county may increase the availability of
mortgage loan funds to low and moderate income persons in
the county, subject to strict controls protecting its tax
revenues. The county may not use the purpose clause in
chapter 394 as authority for a different method of providing
mortgage funds which ignores the controls imposed by that
chapter. Cf. Letter Advisory No. 119 (1977) (Texas
Opportunity Plan Fund established by article III, section
50(b), may not be used as ~a reserve fund for insuring
student loans).
Since we conclude that a county does not have statutory
authority to guarantee bonds issued by a housing finance
corporation or mortgage loans made to low or moderate income
people, we need not consider whether the provision of such
guarantees would be a loan of the county's credit in viola-
tion of article III, section 52, of the Texas Constitution.
p. 4741
Honorable John Vance - Page 7 m-942)
But see Attorney General Opinion H-120 (1973); Letters
Advisory Nos. 119 (1977); 9 (1973) (providing that article
III, section 52 does not bar lending of credit for a public
purpose).
SUMMARY
A county lacks authority to guarantee the
payment of bonds issued by a housing finance
corporation under chapter 394 of the Local
Government Code or to guarantee loans
provided to low and moderate income persons
for housing purposes.
JIM MATTOX
Attorney General of Texas
MARYEELLER
h
First Assistant Attorney General
Lou MCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAELEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrison
Assistant Attorney General
p. 4742