Untitled Texas Attorney General Opinion ( 1988 )

February 5, 1988
Honorable Hugh Parmer Opinion NO. (JM-852)
Chairman
Committee on Inter- Re: Applicability of former
governmental Relations article 988b, V.T.C.S., to
Texas State Senate transactions between a city
P. 0. Box 12068 council and a state univer-
Austin, Texas 78711 sity or school district which
employs city council members
(RQ-1197)
Dear Senator Parmer:
You request advice on the application of article
988b, V.T.C.S., to local public officials who are also
employed by a state university. You inform us that
Southwest Texas State University requested that the city
of San Marcos approve an abandonment of certain streets
and alleys bounded on all sides by the university. The
request for abandonment was formally reviewed by the city
planning commission, which recommended to the city
council that the request be granted. The city council
approved the abandonment. The university acquired owner-
ship of the abandoned city easements, paying fair market
value for them. &g Local Gov't Code 9272.001 (former
article 5421c-12, V.T.C.S.; provides for the sale or lease
of real property by a political subdivision).
You inform us that the San Marcos city council
consists of six members. At present, four city council
members either work for Southwest Texas State University
or are married to university employees. Each of these
university employees receives funds from the university in
excess of 10% of his gross income for the previous year.
You ask the following question:
r Would a city council member who worked
for Southwest Texas State University or
whose spouse worked for Southwest Texas
State University be prohibited by article
r 988b, V.T.C.S., from voting to grant or deny
the abandonment request?
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Honorable Hugh Parmer - Page 2 (JM-852)
Article 988b, V.T.C.S., was amended by three bills
adopted by the 70th session of the legislature. See Acts
1987, 70th Leg., chs. 323, 362, 659. It was also repealed
and recodified as chapter 171 of the Local Government
Code. Acts 1987, 70th Leg., ch. 149, 549(l). The repeal
of article 988b, V.T.C.S., by the Local Government Code
does not affect its amendment by the same legislature that
enacted the code. Gov't Code 5311.031(c). The amendments
are given effect as part of the code provision that
reenacted article 98833, V.T.C.S. &
The abandonment of streets and alleys was approved by
the city council before the three amendments to article
988b, V.T.C.S., became effective. See aenerally S.B. No.
1131, Acts 1987, 70th Leg., ch. 323 (amendments to article
988b, V.T.C.S., effective Sept. 1, 1987); H.B. No. 1948,
Acts 1987, 70th Leg., ch. 362 (amendments to article 98833,
V.T.C.S., effective Sept. 1, 1987); Acts 1987, 70th Leg.,
ch. 659 (amendment stating when board members of higher
education authority are subject to article 98813, V.T.C.S.,
effective June 18, 1987). Since you indicate that you are
concerned about future transactions between the city and
the university, we Will apply article 98813, V.T.C.S., as
amended and recodified to the situation you raise. If a -.
different result would be reached under former article
988b, V.T.C.S., we will make note of it.
Section 171.004 of the Local Government Code, as
amended by House Bill No. 1948 of the 70th Session of the
Legislature, provides that a local public official commits
an offense if he violates the following provision:
(a) If a local public official or a
person related to that official in the first
degree by either affinity or consanguinity
has a substantial interest in a business
entity or in real property, the local public
official, before a vote or decision on any
matter involving the business entity or the
real property, shall file an affidavit
stating the nature and extent of the interest
and shall abstain from further participation
in the matter if:
(1) in the case of a substantial interest
in a business entity the action on the matter
will have a special economic effect on the
business entity that is distinguishable from
the effect on the public; or
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Honorable Hugh Parmer - Page 3 (JR-852)
(2) in the case of a-substantial interest
in real property, it is reasonably forseeable
that an action on the matter will have a
special economic effect on the value of the
property, distinguishable from its effect on
the public. (Emphasis added.)
Local Gov't Code §171.004(a).
Members of the San Marcos City Council are local
public officials within this provision. Local Gov't Code
§171.001(1). The spouse of a public official is a person
related to that official within the first degree of
affinity. Attorney General Opinion V-785 (1949) .
However, section 171.004 of the Local Government Code
applies only when a member of a local governmental body or
his relative has a substantial interest in a "business
entity" which will be affected by a decision of the
governmental body. Thus, section 171.004 of the Local
Government Code will not apply to this transaction unless
Southwest Texas State is a "business entity."
Section 171.001 of the Local Government Code includes
the following definition:
(2) 'Business ,entity' means a sole
proprietorship, partnership, firm, corpora-
tion, holding company, joint-stock company,
receivership, trust, or anv ther entitv
recoanized bv laW. (Emphasis aided.)
Local Gov't Code §171.001(2).
The definition specifically names several types of
private business entities which may engage in activities
such as providing goods, services or financing, which are
directed at making money for the owners or beneficiaries
of the entity. Southwest Texas State University is an
institution of higher education under the management and
control of the Board of Regents, Texas State University
system. Educ. Code 596.41. It is not any of the business
entities specifically named in section 171.001(2).
The definition of business entity also includes the
generalized phrase "or any other entity recognized by
law.* This phrase, if taken out of context, appears to be
broad enough to include a state university, since the
university is an VVentity8V recognized by Education Code
provisions. However, the definition of "business entity"
in section 171.001(2) should be construed according to the
rule of ejusdem generis. Where general words follow
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Honorable Hugh Parmer - Page 4 (JM-852)
7
specific words in a statutory enumeration, the general
words are construed to include only items similar in
nature to those items enumerated by the prevailing -
specific words. Farmers' 8 Mechanics' National Bank v.
Hanks, 137 S.W. 1120 (Tex. 1911); Bx carte Muckenfuss, 107
S.W. 1131, 1132 (Tex. Crim. App. 1908); Bmnlovers' Casu-
altv Co. v. Stewart Abstract Co., 17 S.W.2d 781 (Tex.
Comm'n App. 1929, judgmt adopted): Sutherland, Statutorv
Construction 947.17 (4th Ed.). Thus, we believe that "any
other entity recognized by law" should be read to refer to
private entities organized in a form authorized or recog-
nized by the legislature to carry out purposes similar to
the purposes of the entities listed in section 171.001(2)
of the Local Government Code.
Southwest Texas State University, in contrast to the
business entities identified in section 171.001(2) of the
Local Government Code, is a public institution established
by legislative action and governed by public officers
exercising delegated legislative authority. See, e.a
Educ. Code 5595.01, 95.21, 95.27-95.36, 96.41. Th;?
university's financing consists primarily of constitution-
ally appropriated funds, funds appropriated by the
legislature, and fees collected from students pursuant to
legislative authorization. Tex. Const. art. VII, 517:
Educ. Code §§95~.26, 95.28. Its primary purpose is to
provide higher education to persons who qualify for
admission. Educ. Code §§61.003, 96.41. Southwest Texas
State University does not carry out the commercial
purposes of the entities specifically identified in
section 171.001(2). The university is publicly funded and
its use of its funding is strictly controlled by statute.
The general language of section 171.001(2) of the Local
Government Code should not be construed to include a
public institution of education like Southwest Texas
State University. Accordingly, the university is not a
"business entity" under that provision.
We note that Attorney General Opinion JM-424 (1986)
concluded that a nonprofit corporation was a business
entity within article 98833, V.T.C.S. This opinion relied
on the general language of the definition, on the specific
inclusion of "corporationt' in the definition, and the
absence of language limiting "business entities" to
profit-making entities, in contrast to the limit included
in the definition of "business entity" in the statute on
financial disclosure requirements for public officers.
V.T.C.S. art. 6252-933, §2(11). The opinion did not
consider the maxim "ejusdem generis," but it would have
reached the same result had it done so. A nonprofit
corporation is a private entity, which operates in a
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Honorable Hugh Parmer - Page 5 (JM-852)
statutorily authorized form of organization. See Texas
Non-Profit Corporation Act, V.T.C.S. art. 1396-1.01 &
seer. Although a nonprofit corporation may not distribute
income to its members, directors, or officers, it may pay
compensation for services rendered. Id. Thus, the
employees of a nonprofit corporation may stand to gain
from the corporation's transactions. Unlike a state
supported educational institution, a nonprofit corporation
is a private entity which may carry out purposes similar
to the purposes of some of the business entities named in
section 171.001(2) of the Local Government Code.
In answer to your question, we conclude that a San
Marcos city council member who worked for Southwest Texas
State University or whose spouse worked for the university
would not be prohibited by former article 988b, V.T.C.S.,
as recodified, from voting to grant or deny the request
for abandonment. The university is not a business entity
within the statute. There are, however, other statutes
relevant to potential conflicts of interest involving
public officers and public employees, and these may apply
in a particular case. See. e.a Penal Code 039.01
'(official misconduct): V.T.C.S. art:‘6252-9b, §8(c) (state
employee should not accept other employment which would
interfere with independence of judgment in performing his
official duties).
SUMMARY
Former article 988b, V.T.C.S., recodified
as chapter 171 of the Local Government Code,
does not apply to a vote on a matter involving
Southwest Texas State University by a member
of the San Marcos city council who is employed
by the university or 'who has a substantial
interest in the university through his
spouse's employment there. Southwest Texas
State University is not a ltbusiness entity" as
defined in chapter 171.001(2) of the Local
Government Code.
J h
Very truly yo ,
A
JIM MATTOX
Attorney General of Texas
MARY WLLHR
First Assistant Attorney General
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Honorable Hugh Parmer - Page 6 UM-852)
LOU MCCRRARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrison
Assistant Attorney General
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