Untitled Texas Attorney General Opinion ( 1988 )

May 23, 1988
Honorable Stephen C. Howard Opinion No. JN-908
Orange County Attorney
Orange County Courthouse Re: Whether a county may enter
Orange, Texas 77630 into a binding agreement for
solid waste disposal services,
and related questions (RQ-1045)
Dear Mr. Howard:
you inform us that Orange County intends to establish a
solid waste disposal system in which solid waste would be
burned and the energy produced would be sold. The county
would buy solid waste from municipalities within the county
and would sell its own solid waste, along with the munici-
palities' solid waste, to a privately-owned incinerator,
which would burn the solid waste to produce steam or
electrical power. The contracts between the municipal
governments and the county would last as long as 20 years.
You ask five questions regarding the countyrs authority to
enter into such contracts:
Question 1: Can [a] Commissioners Court enter
into a solid waste disposal service agreement
with an individual or corporation which will
bind future Commissioners Courts?
Question 2: Can the County enter into a solid
waste disposal contract which would require
the County to pay a penalty if a quantity of
solid waste is not provided by the County to
an individual or corporation within a given
period of time?
Question 3: Can the County enforce a solid
waste disposal contract against cities which
would bind the cities for up to 20 years?
Under what conditions is such a contract
valid where a home rule city charter
restricts the duration of a city contract?
P
p. 4495
Honorable Stephen C. Howard~- Page 2 W-908)
Question 4: Is a solid waste disposal
contract in which the County provides solid
waste disposal services to cities and charges
the cities on a cost-plus a percentage basis
valid?
Question 5: Can the County enter into a solid
waste disposal contract with an individual or
corporation without going out for bids?
Your questions impliedly ask whether the county has
statutory authority to enter into any such contract in the
first place. You also ask whether any such contract may be
binding. We note at the outset that we here do not construe
any specific contract; we limit this opinion to a general
discussion of any relevant statutes authorizing such
contracts. Nor do we address any issues regarding the
payment for any services under any such long-term contracts
and what constitutes the incurring of "debt" for'purposes of
article XI, section 7, of the Texas Constitution. You do
not raise any constitutional problems related to these
issues, and accordingly, we do not consider them. We will
answer each of your questions in turn.
You first ask whether a commissioners court may enter
into a solid waste disposal service agreement with an
individual or corporation that will bind future
commissioners courts. The general rules adopted by a
majority of jurisdictions that have addressed the issue of
the authority of a governing body to enter into a contract
extending beyond the body's terms are set forth in Annot.,
70 A.L.R. 794 (1931), 149 A.L.R. 336 (1944). Boards or
governing bodies have two classes of powers -- governmental
(or legislative) and proprietary (or business). In the
exercise of its governmental or legislative powers, a board
or governing body, in the absence of svecific statutorv
provisions to the contra= cannot enter into a contract
extending beyond its own te&n. But in an instance in which
the governing body is exercising its proprietary (01
business) power, it may contract as an individual, unless it
is restrained by statutory provisions to the contrary.
An exception to the majority rule occurs where the
contract for services is not for services to be performed
during a particular period, but for the rendering of a
particular and specified act the performance of which may
extend beyond the terms of the members of the governing body
making the contract. Such a contract is valid. The rule
adopted in a minority of jurisdictions that have addressed
the issue is that contracts, even those regarding matters
p. 4496
Honorable Stephen C. Howard - Page 3 (JM-908)
governmental (or legislative), may extend beyond the terms
of the boards or governing bodies that execute them. Texas
adopts the majority rule. See. e.o., Gulf Bitulithic Co. v.
Nueces Countv 11 S.W.2d 305 (Tex. Comm'n App. 1928, judgm't
adopted): J. N. McCammon. Inc. v. S e hens County, 127 Tex.
49, 89 S.W.Zd 984 (Tex. Comm'n App. 1936, opinion adopted);
Gillam v. Citv of Ft. Worth, 287 S.W.2d 494 (Tex. Civ. APP.
- Ft. Worth 1956, writ ref'd n.r.e.).l Therefore, we first
must determine whether the county has specific statutory
authority to enter into the sort of contract about which you
inquire.
Texas has enacted a series of statutes intended both to
enforce a state-wide comprehensive scheme of sanitation and
health regulation and to facilitate state and local
cooperation in dealing with matters of public health. See
_
V.T.C.S. articles 4477-7 -- 7f, et sea. Article 4477-7a,
V.T.C.S., the Solid Waste Resource Recovery Financing Act,
authorizes any. "issuer" to "acquire, construct, and improve
or cause to be acquired, constructed, and improved solid
waste resource recovery systems," as defined by the act, as
well as to acquire real property. V.T.C.S. art. 4477-7a,
§4 (a) - "Issuerw is defined as
1. We
note that both the Annotation and Texas
JUriSDrUdenCe construe the Texas cases as enunciating the
rule adopted in a minority of jurisdictions, i.e. that
governing bodies are empowered to contract beyond the terms
their members. &&a 47 Tex. Jur. 2d Public Officers 5120 at
158 (1963); 40 Tex. Jur. 2d, MUniCiDal CorDorations 5434 at
200 (1976). We conclude that the above-cited cases do not
stand for the proposition that governing bodies simply can
contract beyond their terms of office. We conclude that a
close reading of the Gulf Bitulithic cases, both in the
Court of Civil Appeals and the Commission of Appeals, and
the McCammon case, will demonstrate that Texas in fact does
not adopt the minority rule, but rather it adopts the
majority-adopted exceDtion to the majority rule. The Gulf
Bitulithic and McCammon cases set forth the rule that, where
a contract for services is not for services to be rendered
during a particular period, but rather for the doing of a
particular and specified act the performance of which may
extend beyond the terms of the members of the governing body
making the contract, such contract is valid.
p. 4497
Honorable Stephen C. Howard - Page 4 (JM-908)
any district or authority created and
existing under Article XVI, Section 59, or
Article III, Section 52, of the Texas
Constitution which is now or hereafter
authorized [by any law] to own a waste
disposal system and which includes within its
boundaries at least one county.
V.T.C.S. art. 4477-7a, 53(3).
Subsection 10 (a) of the act is the section upon which
you rely in support of your argument that the county may
enter into the sort of long-term contract about which you
inquire:
All public agencies are authorized to
enter into contracts with any person for the
supply of solid waste, including contracts
for the collection and transportation of
solid waste, for disposal at any solid waste
resource recovery system and may covenant and
agree in such contracts to supply minimum
quantities of solid waste and to pay minimum
fees and charges for the right to have solid
waste disposed of at such solid waste
resource recovery system during the term of
such contracts. Any such contract may con-
tinue in effect for such term of years as the
governing body of the public agency shall
determine is desirable.
V.T.C.S. art. 4477-7a, .510(a). The act defines "public
agency* to mean:
any district or authority heretofore or
hereafter created and existing under Article
XVI, Section 59, as amended, or Article III,
Section 52, as amended, of the Constitution
of Texas which includes within its boundaries
all of at least one county, any incorporated
city or town in the state, whether operating
under general law or under its hOme-Nle
charter; or anv other nolitical subdivision
or aaencv of the state havina the Dower to
gwn and operate solid waste collection,
tranSDO?FtatiOn. or diSDOSa1 facilities or
svstems. (Emphasis added.)
V.T.C.S. art. 4477-7a, 53(5). Article 4477-8, V.T.C.S., the
County Solid Waste Control Act, provides at section 4 that
p. 4498
Honorable Stephen C. Howard - Page 5 KIM-908)
counties themselves may operate solid waste disposal
systems:
A county may acquire, construct, improve,
enlarge, extend, repair, operate, or maintain
all or any part of one or more solid waste
disposal systems, and may make contracts with
any person under which the county will
collect, transport, handle, store, or dispose
of solid waste for any such person. A county
may also enter into contracts with any person
to purchase or sell, by installments over
such term as may be deemed desirable, or
otherwise, all or any part of any solid waste
disposal system. A county is also authorized
to enter into operating agreements with any
person, for such terms and upon such
conditions as may be deemed desirable, for
the operation of all or any part of any solid
waste disposal system by any person or by the
county; and a county may lease to or from any
person, for such term and upon such
conditions as may be deemed desirable, all or
any part of any solid waste disposal system.
V.T.C.S. art. 4477-8, 54. Therefore, a county is a "public
agency" for purposes of article 4477-7a and is authorized to
enter into the sort of long-term contract for the sunnlv of
solid waste about which you ask. S , a Citv-of- Biq
Swrina v. Board of Control, 404 S.W.2?8lE'(T;x. 1966). We
note that the sort of contract that you contemplate does not
appear to be one between a county and an llissuerllas defined
by the act. But section 10 of the act by its terms does not
limit contracts for the supply of solid waste to contracts
with "issuersw; rather, it permits any "public agency" to
enter into a solid waste supply contract with "any person."
Section 3(4) of the act defines person to mean "any
individual, public agency as defined herein, public or
private corporation, political subdivision or governmental
agency of the United States of America or the state,
copartnership, association, firm, tNSt, estate, or any
other entity whatsoever." V.T.C.S. art. 4477-7a, §3(4).
See also article 4477-7c, V.T.C.S., the Comprehensive
Municipal Solid Waste Management Resource Recovery and
Conservation Act, section 14. Accordingly, we conclude that
a county does have statutory authority to enter into the
sort of long-term contract that you describe. &S Browninq-
Ferris, Inc. v. Citv of Leon Valley 590 S.W.2d 729 (Tex.
Civ. App. - San Antonio 1979, writ r;?f#d n.r.e.).
p. 4499
Honorable Stephen C. Howard - Page 6 (JR-908)
You next ask whether a county may enter into a solid
waste disposal contract that would require the county to pay
a penalty if a specified quantity of solid waste is not
provided within a certain period of time by the county to
the person or corporation with whom it has contracted.
Article 4477-7a, V.T.C.S., the Solid Waste Resource Recovery
Financing Act, provides at subsection 10 (a):
All public agencies are authorized to
enter into contracts with any person for the
supply of solid waste, including contracts
for the collection and transportation of
solid waste, for disposal at any solid waste
resource recovery system and mav covenant and
aaree in such contracts to suw~lv minimum
ouantities of solid waste and to pay minimum
fees and charges for the right to have solid
waste disposed of at such solid waste
resource recovery system during the term of
such contracts. Any such contract may
continue in effect for such term of years as
,the governing body of the public agency shall
determine is desirable. (Emphasis added.)
V.T.C.S. art. 4477-7a, 510(a).
The act clearly permits any contract that provides for
the supply of solid waste to contain a clause specifying
that the supplier of solid waste supply a minimum amount.
But the act does not by its terms permit the inclusion of a
penalty clause for failure to supply the minimum stated
amount. You assert that a county may not agree to indemnify
a person or corporation against risks, citing Galveston,
H. & S.A. Rv. Co. v. Uvalde Countv, ,167 S.W.2d 305 (Tex.
Civ. App. - San Antonio 1942, writ ref'd w.o.m.), but you
disagree that such a provision should be considered an
indemnity clause. We do not here discuss the circumstances
under which a count may enter into a contract containing an
"indemnity clause." 3 We do agree with you, though, that on
2. We do note, though, that the Texas Supreme Court
has held that article XI, sections 5 and 7, of the Texas
Constitution, which we will discuss later in connection with
your fourth question, do not prevent a county from agreeing
to enter into a contract containing an indemnity clause
providing that the county "hold and save harmless" the
United States from damages that may result from the
construction of a bridge. Brown v. Jefferson County, 406
S.W.2d 185 (Tex. 1966): see also Countv of Ector v. Citv of
Odessa, 492 S.W.2d 360 (Tex. Civ. App. - El Paso 1973, no
writ).
p. 4500
Honorable Stephen C. Howard - Page 7 (JM-908)
the basis of the information that you have furnished us, the
so* of clause that you describe fairly could not be
denominated an "indemnity clause."
A ncontract for indemnity" is an undertaking by which
the promisor (indemnitor) agrees to make good any loss or
damage the promisee (indemnitee) has incurred, or to
safeguard the indemnitee against liability. See oenerally
Attorney General Opinion MW-475 (1982); 14 Tex. Jur. 3d
Contribution and Indemnification §§15 - 28 at 35 (1981):
Reynolds, Contracts of Indemnitv in Tex 43 Tex. B. J. 297
(1980) . The right of llindemnityl'restsa$on the difference
between primary and secondary liability of two persons, each
of whom is made responsible by law to an injured party. The
right inures to the person compelled, because of some legal
obligation other than active fault, to pay damages
occasioned by another's initial negligence, for which such
person is only secondarily liable. Muldownev v. Middleman,
107 A.2d 173 (Pa. 1954): Builders SUDD~Y Co. v. McCabe, 77
A.2d 368 (Pa. 1951). The Texas Supreme Court has defined
windemnity" to mean "the payment of all of plaintiff's
damage by one tortfeasor to another tortfeasor who has paid
it to the plaintiff." General Motors Corn. v. Simmons, 558
S.W.2d 855, 859 (Tex. 1977), overruled on other arounds, 665
S.W.2d 427 (Tex. 1984): see also Hodges, Contribution and
Indemnitv Amono Tortfeasors, 26 Tex. L. Rev. 150, 151
(1947). "Indemnity" results in the shifting of the entire
burden of loss from one tortfeasor to another.
International Harvester Co. v. Zavalq, 623 S.W.2d 699 (Tex.
Civ. App. - Houston [lst Dist.] 1981, writ ref'd n.r.e.)
We note, again, that we here do not construe any
specific contract provision: any penalty provision must be
viewed in the context of the contract taken as a whole. Our
opinion, then, is limited to a more general discussion of a
county's authority in this area. On the basis of the
information that you have furnished us, we agree with your
construction of the penalty provision; we do not think that
such a clause fairly can be denominated as an indemnity
clause. If the clause more properly could be denominated as
a liquidated damages clause, providing for specified damages
in the event that the county breaches its agreement, it
would be permissible. &,9 Rellv v. Galveston Countv, 520
S.W.Zd 507 (Tex. Civ. App. - Houston [14th Dist.] 1975, no
writ) (inclusion of what appears to be liquidated damages
clause in contract of employment is not contrary to public
p. 4501
Honorable Stephen C. Howard - Page 8 (JM-908)
policy).3 We conclude that the county may enter into a
contract containing the sort of clause that you describe,
but only if the penalty imposed is a measure of any damages
actually incurred by the contracting party: if the penalty
bears no relationship to the actual damages sustained or if
it is not part of a ouid nro QUO for which the county
legitimately may bargain, we conclude that it will
constitute a gratuity, the grant of which violates article
III, section 52, of the Texas Constitution.
You next ask whether the county may enforce a solid
waste disposal contract against cities when the contract
would bind the cities for up to 20 years and whether such a
contract would be valid in an instance in which a home rule
city charter restricts the duration of any city contract.
With the first part of your question, you are really asking
whether a city may enter into the sort of long-term contract
that the county contemplates entering.
Article 4477-7~ V.T.C.S., the Comprehensive Municipal
Solid Waste Management, Resource Recovery, and Conservation
Act, provides at section 14:
(a) A public agency may enter into
contracts to enable it to furnish or receive
solid waste management services. Each
contract may be for the time and under the
3. "Liquidated damages" constitute the measure of
damages agreed to in advance by the parties as just
compensation for a breach of contract, typically in an
instance in which the harm caused by the breach is incapable
or very difficult of an accurate estimation. Sisk v.
Parker, 469 S.W.2d 727 (Tex: Civ. App. - Amarillo 1971, writ
ref'd n.r.e.); Citv of Amarillo v. Hume, 70 S.W.2d 651 (Tex.
Civ. App. - Amarillo 1934), aff'd 128 Tex . 596, 99 S.W.2d
887 (Tex. Comm'n App. 1937). Parties to a contract have the
legal right to stipulate the amount of damages that may be
recoverable in actions for breach of the contract: on a
showing that the stipulated sum fairly was estimated by the
parties and that it was their intention that that sum be in
lieu of all other damages, the agreement is binding on the
parties and furnishes the measure of damages. A.J. Rife
Construction Co. v. Brans, 298 S.W.2d 254 (Tex. Civ. App. -
Dallas 1956, writ ref'd n.r.e.); aliott v. Henck, 223
S.W.2d 292 (Tex. Civ. App. - Galveston 1949, writ ref'd
n.r.e.).
p. 4502
Honorable Stephen C. Howard - Page 9 W-908)
terms considered appropriate by the governing
body of the public agency. A home-Nle
citv's charter wrovision re trictina the
duration of a CitV contract do& not annlv to
a citv contract that relates to solid waste
manaaement services.
(b) Under a solid waste management service
contract, a public agency may:
. . . .
(6) contract with another public agency or
other persons for solid waste management
services, including contracts for the
collection and transportation of solid waste
and for processing or disposal at any per-
mitted solid waste management facility,
including a resource recovery facility,
provided the contract may specify the minimum
quantity and quality of solid waste to be
provided by the public agency and the minimum
fees and charges to be paid by the public
agency for the right to have solid waste
processed or disposed of at the solid waste
management facility:
(7) contract with any person or other
public agency to supply materials, fue,l, or
energy resulting from the operation of a
resource recovery facility: and
(8) contract with any person or other
public agency._ to receive
__ or purchase solid
waste, materials, fuel, or energy recovered
from resource recovery facilities. (Emphasis
added.)
V.T.C.S. art. 4477-7c, 514. The act at section 6(18)
defines "public agency" to mean
a city, county, or a district or authority
created and operating under either Article
III, Section 52(b)(l) or (2) or Article XVI,
Section 59, of the Texas Constitution, or a
combination or two or more of these govern-
mental entities acting under an interlocal
agreement and having the authority under this
Act or other laws to own and operate a solid
waste management system.
p. 4503
Honorable Stephen C. Howard - Page 10 (JM-908)
V.T.C.S. art. 4477-7c, §6(18). The act defines at section
6(24) "solid waste management" as:
the systematic control of any or all of the
following activities:
generation;
source separation:
collection:
handling;
storage:
transportation;
processing:
treatment:
resource recovery: or
disposal of solid waste.
V.T.C.S. art. 4477-7c, §6(24). Because a city is a "public
agency" for purposes of the act and because the collection,
handling, storage, etc., of solid waste falls within the
definition of "solid waste management,l' a city is authorized
by the terms of the act to enter such a contract as you
describe. And the language of subsection 14(a) of the act,
underscored above, provides that any home rule city charter
provision restricting the duration of a city contract does
not apply to a city contract that relates to solid waste
management services. See Tex. Const. art. XI, g5.
However, in the brief accompanying your request
letter, you express concern about the effect of article
4477-7d, V.T.C.S., which states:
A home-Nle city's charter provision
restricting the duration of a city contract
does not apply to a city contract:
(1) that relates to solid waste
management: and
(2) that must be for a longer term than
the charter permits in order for the city to
qualify for the receipt of federal funds
designated for solid waste management
purposes.
This provision appears to conflict with article
4477-7c, V.T.C.S., and to limit the instances in which a
contract may be for a longer term than that permitted by a
home rule city charter provision to those in which the
contract must be for a longer term in order to qualify for
p. 4504
Honorable Stephen C. Howard - Page 11 (JB-908)
h
the receipt of federal funds. YOU suggest that, because
article 4477-7d fails to define %olid waste management,"
article 4477-7~ controls all contracts relating to solid
waste management as defined in that act. In all other
instances, article 4477-7d controls. Because each of the
statutes in the article 4477-7 series defines llsolid waste
management" or llmanagement'l in substantially identical
terms, we disagree with your argument. Instead, we conclude
that the provisions of subsection 14(a) of article 4477-7c,
V.T.C.S., prevail over article 4477-7d, V.T.C.S. in all
instances: consequently, article 4477-7c, V.T.C.S., prevails
over any home rule city charter provision that limits the
duration of any contract that the home rule city may enter
regarding solid waste management.
In an instance in which conflicting statutes are
enacted by the same session of the legislature, the latest
expression of legislative intent prevails. Ex narte de
Jesus de la 0 227 S.W.2d 212 (Tex. Crim. App. 1950):
Attorney Generai Opinions WW-139 (1980); H-1115 (1978).
Sutherland on Statutorv Construction offers the following
rules:
P
In the absence of an irreconcilable
conflict between two acts of the same
session, each will be construed to operate
within the limits of its own terms in a
manner not to conflict with the other.
However, when two acts of the same session
cannot be harmonized or reconciled, that
statute which is the latest enactment will
operate to repeal a prior statute of the same
session to the extent of any conflict in
their terms.
Because the latest expression of the
legislative will prevails, the statute last
passed will prevail over a statute passed
prior to it, irrespective of the time of
taking effect. Where the two acts of the
same session take effect at the same time,
the latest passed will prevail. (Footnotes
omitted.)
P Singer, Sutherland on Statutory Construction, 523.17 (4th
ed.)
In this instance, both provisions were enacted during
the 68th legislature, and both deal with the same subject
matter. The two provisions are in irreconcilable conflict.
V.T.C.S. article 4477-7c, section 14(a), permits a home rule
p. 4505
Honorable Stephen C. Howard - Page 12 (JR-908)
city to enter into any contract regarding solid waste
management whose duration is longer than that permitted in
the home city's charter: article 4477-7d, V.T.C.S., on the
other hand, permits a home rule city to enter such a long
term contract regarding solid waste management, but only in
an instance in which the city must do so in order to qualify
for the receipt of federal funds. Article 4477-7d,
V.T.C.S., passed the House of Representatives on April 14,
1983 and passed the Senate on May 23, 1983. Article
4477-7c, V.T.C.S., passed the House of Representatives on
May 13, 1983. The house then concurred in the Senate
amendments to the bill on May 30, 1983; the Senate passed
the amended bill on May 30, 1983. Article 4477-7d,
V.T.C.S., became law without the Governor's signature on
June 19, 1983: article 4477-7c, V.T.C.S., was signed by the
Governor the same day. Article 4477-7d, V.T.C.S., became
effective on August 29, 1983; article 4477-7c, V.T.C.S., on
September 1, 1983.
Article 4477-7c, V.T.C.S., the Comprehensive Municipal
Solid Waste Management, Resource Recovery, and Conservation
Act, was the last enacted statute, and therefore represents
the most recent expression of legislative intent on the
subject. Accordingly, the provisions of subsection 14(a) of
article 4477-7c, V.T.C.S., which permits a home rule city to
enter into any contract regarding solid waste management for
the time and under the conditions that it considers
appropriate, prevail over a home rule city charter provision
that limits the duration of a contract that the home rule
city may enter.
You next ask whether any contract entered into by the
county with a city that provides that the county provide
solid waste disposal services to the city may charge the
city on a so-called llcost-plus'lbasis. Subsection 14(a) of
article 4477-7c, V.T.C.S., provides that a public agency as
defined by the act may enter into contracts to enable it to
furnish or receive solid waste management services. It also
provides: "Each contract may be for the time and under the
terms considered appropriate by the governing body of the
public agency." V.T.C.S. art. 4477-7c, 514(a). YOU assert
that this sentence from subsection 14(a) authorizes a county
and a city to enter into such "cost-plus" contracts.
A "cost-plus" contract or a "cost-plus-fixed-fee" con-
tract is one in which the contractor is to be reimbursed for
costs of materials and labor by the owner and is to receive
a stated percentage of such costs as his profit. Burditt v.
si 710 S.W.2d 114 (Tex. App. - 'Corpus Christi 1986, no
; Gav v. Stratton, 559 S.W.2d 131 (Tex. Clv. App. -
p. 4506
Honorable Stephen C. Howard - Page 13 (JR-908)
Texarkana 1977, writ ref8d n.r.e.). The consideration due
under a Vast-plus" contract cannot be ascertained other
than by relation to costs expended or necessary to be
expended. Fair v. Uhr, 310 S.W.Zd 125 (Tex. Civ. App. - Ft.
Worth 1958, writ ref'd n.r.e.).
It has been suggested that such a contract might vio-
late article XI, sections 5 and 7, of the Texas Constitu-
tion, which forbid both cities and counties from incurring
debt for any purpose in any manner unless provision is made,
at the time such debt is incurred, for levying and collect-
ing a sufficient tax to pay the interest thereon and provide
at least two per cent as a sinking fund. These constitu-
tional provisions have been COnStNed by the courts to
include any pecuniary obligation imposed by contract, except
such as was, at the time of the agreement, within the lawful
and reasonable contemplation of the parties, to be satisfied
out of current revenues for the year or out of some fund
then within the immediate control of the city.or county.
See Brown v. Jefferson Countv 406 S.W.Zd 185 (Tex. 1966);
T. & N.O. R.R. Co. v. Galveiton County, 141 Tex. 34, 169
S.W.2d 713 (Tex. Comm'n. App. 1943, opinion adopted): City
of Houston v. West, 563 S.W.2d 680 (Tex. Civ. App. - Waco
1978, writ ref'd n.r.e.). It has been suggested that a
llcost-plusV1or a lVcost-plus-fixed-feeV*contract would impose
upon the contracting city a l'debtllfor purposes of these
constitutional provisions that could be unlimited, or at
least unascertainable, and would not permit a city to
provide for the levying and collecting of a sufficient tax
to discharge the debt.
We have found no Texas case specifically on point.
However, a similar argument was made challenging a contract
that contained an indemnity clause, providing that Jefferson
County would lqhold and save harmlesstl the United States from
damages that might result from the construction of a bridge;
the Texas Supreme Court upheld the validity of the contract.
Brown v. Jefferson Countv, 406 S.W.2d 185 (Tex. 1966)
[hereinafter Brown]. The contract in Brown was challenged
on the ground that the obligation incurred was unlimited,
while the taxing power of the county was limited by article
VIII, section 9, of the Texas Constitution. It was
suggested that the county could not then meet the
constitutional requirements of article XI, section 7. In
other words, it was argued that, because there was a
possibility that an obligation due the United States might
arise in the future under the indemnity clause of the
contract that might be beyond the ability of the county to
pay because of the constitutional restrictions of its taxing
power, the contract was invalid. The court disagreed:
p. 4507
Honorable Stephen C. Howard - Page 14 (JM-908)
The 'hold and save' agreement herein involved
will not necessarily result in the assertion
of a claim against the County. If a claim be
asserted, it may be one that could be settled
from the current revenues of a particular
year, or it may be one which may be funded
and paid off without violating any constitu-
tional debt limit or taxing restrictions
applicable to counties. If such obligation
may be so discharged, the County has bound
itself to do so. It has, if necessary, bound
itself to levy a 'sufficient tax.' There
remains only the possibility that an obliga-
tion may arise under the indemnity contract
which the County could not fund and discharge
because of the taxing restrictions contained
in Article [VIII], [section 91 of the Consti-
tution [placing a ceiling on the tax rates
that a county may impose]. Necessarily, the
agreement to levy a 'sufficient tax' from
year to year is subject to constitutionally
imposed restrictions upon the taxing power
and when the levy .of a 'sufficient tax* for
any particular year would exceed the tax
limit, no county could be forced to levy a
tax in excess of the constitutional limit.
The outside possibility that this latter
situation might 'arise will not operate to
invalidate the 'hold and save' agreement.
There is always the possibility that a
municipal taxing organization will incur
obligations that may exceed its permissible
taxing power in future years. [Citations
omitted.]- However, legitimate county
contracts should not be declared void upon
possibilities. When the order or resolution
creating the obligation complies with the
provisions of article [XI], [section] 7 of
the Constitution, it should be stricken down
only when it is made to appear that the
limited tax resources of the municipality are
insufficient at such time to discharge the
obligation. (Citations and Footnotes
omitted.)
Id. at 189-90. Article XI, section 5, of the Texas Consti-
tution contains the same sort of constitutional limitation
on the taxing power of home rule cities that is contained in
article VIII, section 9, which limits the taxing power of
counties:
p. 4508
Honorable Stephen C. Howard - Page 15 (JM-908)
[S]aid cities may levy, assess and collect
such taxes as may be authorized by law or by
0 their charters; but no tax for any purpose
shall ever be lawful for any year, which
shall exceed two and one-half per cent of the
taxable property of such city. . . .
Tex . Const. art. XI, 55. Accordingly, we conclude that if
the formal action taken by the city creating the obligation
complies with the provisions of article XI, section 7, the
contract should be struck down only in an instance in which
the limited tax resources of the city are insufficient at
that time to discharge the obligation. We conclude that a
"cost-plus" or l'cost-plus-fixed-feell contract is
permissible.
With your last question, you ask whether the county may
enter into a solid waste disposal services contract with an
individual or corporation without awarding the contract on
the basis of competitive bidding. We conclude that competi-
tive bidding is not required in such an instance, if enter-
ing into the contract is necessary to preserve or protect
the public health of the citizens of the county. Whether
P such is the case in Orange County is a factual matter, the
finding of which does not fall within the ambit of the
opinion process.
Subchapter C of chapter 262 of the Local Government
Code previously codified as article 2368a.5, V.T.C.S.,
governs competitive bidding. Section 262.023 of the Local
Government Code provides:
(a) Before a county may purchase one or
more items under a contract that will require
an expenditure exceeding $5,600, the
commissioners court of the county must comply
with the competitive bidding or competitive
proposal procedures prescribed by this
subchapter. All bids or proposals must be
sealed.
(b) The competitive bidding and competi-
tive proposal requirements established by
Subsection (a) apply only to contracts for
which payment will be made from current funds
or bond funds or through time warrants.
However, contracts for which payments will be
made through certificates of obligation are
governed by The Certificate of Obligation Act
of 1971 (Subchapter C, Chapter 271).
p. 4509
Honorable Stephen C. Howard - Page 16 (JM-908)
(c) In applying the competitive bidding
and competitive proposal requirements
established by Subsection (a), all separate, -,
sequential, or component purchases of items
ordered or purchased, with the intent of
avoiding the competitive bidding and
competitive proposal requirements of this
subchapter, from the same supplier by the
same county officer, department, or institu-
tion are treated as if they are part of a
single purchase and of a single contract.
Section 262.024 of the Local Government Code sets out the
exemptions to the reach of the competitive bidding
requirements and provides the following:
(a) A contract for the purchase of any of
the following items is exempt from the
requirement established by Section 262.023 if
the commissioners court by order grants the
exemption:
. . .
(2) an item necessary to preserve or'
protect the public health or safety of
the residents of the county;
. . .
(4) a personal or professional
service:
. . .
YOU do not specify in your request letter just exactly
for what the county intends to contract. Under subsection
14(b) of article 4477-7c, V.T:C.S., a llsolid waste manage-
ment services contract" may include both "items," in the
common understanding of "physical objects," as well as
services. Nor have you indicated whether the commissioners
court has voted pursuant to subsection (a) of section
262.024 to grant the exemptions set forth in subsection (b)
of that section. Nor have you indicated the amount of money
to be expended on the contract. YOU suggest that the
contract falls within exemption (2) of subsection (b), and,
on the basis of Brownina-Ferris. Inc. v. Citv of Leon
Vallev, 590 S.W.2d 729 (Tex. Civ. App. - San Antonio 1979,
writ ref'd n.r.e.), no competitive bidding is required.
P. 4510
Honorable Stephen C. Howard - Page 17 (JM-908)
In Brownins-Ferrig a city granted, by ordinance,. an
exclusive franchise to a' garbage collection agency to pro-
vide all garbage collection within the city. The contract
was awarded without the city going through the competitive
bidding process. Quoting the lqpublic health" provisions of
the predecessor statute to chapter 262 of the Local Govern-
ment Code, the court concluded that the award was necessary
to preserve and protect the public health and that competi-
tive bidding was not required. The court relied on an
earlier case that ConstNed the predecessor statute to
article 2368a. 5, V.T.C.S., Hoffman v. citv of Mount
Pleasant, 126 Tex. 632, 89 S.W.2d 193 (Tex. Comm'n App.
1936), and concluded that a county properly could expend
funds to protect the public health without the necessity of
requiring competitive bids otherwise required by the
competitive bidding provisions and that the public health
exception to the competitive bidding provisions was
operative at all times whether or not there was a "case of
public calamity." The public health exception contained in
the predecessor statute to article 2368a.5, V.T.C.S.,
substantially tracks the exception now found in chapter 262.
The Hoffman court declared at 89 S.W.2d 194':
The matter is one purely of statutory
constNction. After careful consideration of
the whole act as well as the peculiar
language of the exception, in light of the
rules usually applicable when statutes
concerning public health are involved, ‘we
have reached the conclusion that the use of
the word 'when' clearly indicated the
introduction of a new condition and exception
not dependent upon a 'public calamity,' and
that the requirement of competitive bids with
publication of notice of letting the contract
is dispensed with when such exception exists.
In other words, we are of the opinion that
'when it is necessary to preserve or protect
the public health of the citizens of a county
or city,' a condition requiring prompt and
unrestrained action in order to remedy such a
situation exists, regardless of whether such
condition has been brought about by a public
calamity or in some other way. The words
'preserve* and 'protect,' as applied to
public health, carry the idea of timely,
efficient, and effective action which keeps
intact and unimpaired the good health of the
citizens in advance of its impairment.
p. 4511
Honorable Stephen C. Howard - Page 18 0-908)
Accordingly, we conclude that competitive.bidding is
not required in an instance in which the county enters into
a solid waste disposal services contract with an individual
or a corporation, if it is necessary to preserve or protect
the public health of the citizens of the county. Whether
such is the case in Orange County is a factual matter, the
finding of which does not fall within the ambit of the
opinion process.
SUMMARY
1. A commissioners court specifically is
authorized by article 4477-7c, V.T.C.S., to
enter into a long-term solid waste disposal
services contract with an individual or
corporation that will bind future
commissioners courts.
2. The county may enter into a solid
waste disposal contract with an individual or
a corporation that would require the county
to pay a penalty if it fails .to provide
within a certain period of time a specified
quantity of solid waste to the individual or
corporation, but only if the penalty imposed
is a measure of any damages actually incurred
by the contracting party or if it is part of
a ouid wro au0 for which the county
legitimately may bargain.
3. Subsection 14(a) of article 4477-7c,
V.T.C.S., the Comprehensive Municipal Solid
Waste Management, Resource Recovery, and
Conservation Act, prevails over the provi-
sions of article 4477-7d, V.T.C.S., because
it is the latest expression of the legisla-
ture's intent regarding the authority of a
home rule city to enter into a solid waste
management services contract. Accordingly,
subsection 14(a) of article 4477-7c,
V.T.C.S., which permits a home rule city to
enter into any contract regarding solid waste
management for the time and under the
conditions that it considers appropriate,
prevails over a home rule city charter
provision that limits the duration of a
contract that the home rule city may enter.
p. 4512
Honorable Stephen C. Howard - Page 19 KM-908)
P
4. Article 4477-7c, V.T.C.S., permits
political subdivisions to enter into solid
waste disposal service contracts under terms
that they consider appropriate; a "cost-
plus" or Wcost-plus-fixed-feeW contract is
permissible.
5. A county may enter into a solid waste
disposal services contract with an individual
or corporation without awarding such contract
on the basis of the competitive bidding
provisions of chapter 262 of the Local
Government Code, if it is necessary to
preserve or protect the public health of the
citizens of the county. Whether such is the
case in Orange County is a factual matter,
the finding of which does not fall within the
ambit of the opinion process.
d-
Very truly
.
JIM MATTO X
Attorney General of Texas
.
MARY KELLER
First Assistant Attorney General
LOU MCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAXLRY
Special Assistant Attorney General
RICK GILPIN
Chairman, opinion Committee
Prepared by Jim Moellinger
Assistant Attorney General
P
p. 4513