Untitled Texas Attorney General Opinion ( 1987 )

?rzm ATTOHZSEY GESERAL
OF TEXAS
October 5, 1987
Eonorable Kent Caperton opinion No. JM-805
Chairman
Jurisprudence Committee Re: Whether a home rule city may
Texas State Senate issue general obligation bonds to
P. 0. Box 12068 finance public housing for low
Austin, Texas 78711 income and moderate IllCO~e
families
Dear Senator Caperton:
You advise that .a home rule city is considering issuing general
obligation bonds. to provide a fund for financing various affordable
housing programs. Your first question is as follows:
Does the provision of housing for low and
moderate income families constitute a 'public
purpose' for which a home rule city may issue
general obligation bonds, and expend the proceeds
thereof, without express authorization under state
law and/or city charter?
Your question is essentially whether home rule cities hold the
authority to issue general obligation bonds for this purpose.
Home rule cities derive their powers directly from artiile XI,
section 5, of the Texas Constitution; Lower Colorado River Authority
V. City of San Marcos, 523 S.W.2d 641, 643 (Tex. 1975). A home rule
City may exercise, within its jurisdiction, any power the legislature
may- exercise. subject only to limits establishq in the Texas
Constitution and statutes and in the city's charter. Because a home
rule city's powers derive directly from the constitution, limits on
those powers must appear with "unmistakable clarity." 523 S.W.2d at
645; City of Sweetwater V. Geron, 380 S.W.Zd 550. 552 (Tex. 1964).
1. This opinion does not address the limits or absence of
limits in any home rule city's charter. It is the primary
responsibility of city attorneys to interpret the limits of their
cities' charters.
p. 3808
Honorable Kent Caperton - Page 2 (JET-805)
You ask about general obligation bonds to finance public housing for
low and moderate income families. General obligation bonds, unlike
revenue bonds, are not limited to the earnings of the project
financad. Generai obligation bonds are to be repaid from the general
revenue fund of a city. For this reason, limits on cities' taxing
powers must be considered.
Although article XI, section 5, contains no express limit on the
amount of bond debt that a home rule city may incur, it contains
limits on a home rule city's taxing power. There are additional
limits enforced through the requirement that the attorney general
determine whether the total tax and other resources of a city will
support the additional interest and retirement burden of the bonds.
See V.T.C.S. art. 1175. §lO. The ultimate practical limit is enforced
F the bond market. This opinion does not constitute implicit
approval of an additional bond burden for any particular home rule
city.
Article VIII. section 3, of the Texas Constitution provides:
"Taxes shall be levied and Collected by general laws and for public
purposes only." See also Tex. Coast. art. III, 552 (prohibiting
grants of public funds for private purposes). Although article XI,
section 5. creates an exceution with renard to the general law
requirement, the public purpose requirement remains. -In Housing
Authority of City of Dallas V. ,Higginbotham, 143 S.W.Zd 79, 89 (Tex.
1940), the court upheld a legislative determination that providing
housing for low-income families serVes a public purpose. See V.T.C.S.
art. 1269k, repealed and replaced, effective September 1,987, with
the Local Government Code. See Acts 1987, 70th Leg., ch. 149, 101,
49. at 1397, 2544. The legislature has also indicated, through the
enactment of several statutes, that providing moderate-income families
with affordable, sanitary housing serves a public purpose. See
V.T.C.S. arts. 12691-6, 94; 12691-7, 53. (Article 12691-7 E
repealed and replaced, effective September 1. 1987, with the Local
Government Code. See Acts 1987, 70th Leg., ch. 149, $51, 49, at 1397.
2544.) Although thequestion of whether a public purpose is actually
served by the application of a particular measure is a question for
the courts, the legislative determination of what constitutes a public
use will not be overturned absent a finding that the determination is
arbitrary or that it deprives a party of property without due process.
Davis V. City of Lubbock, 326 S.W.2d 699, 714 (Tex. 1959). Because a
home rule city has plenary powers, a city's determination that
providing affordable housing for low and moderate Income families
serves a public purpose is entitled to the same "legislative
presumption" of validity. Consequently, the issuance of general
obligation bonds to finance affordable housing for low and moderate
income families does not Per se violate the public purpose require-
ments of article VIII, section 3, and article III, section 52, of the
Texas Constitution.
p. 3809
Hororable Kent Caperton - Page 3 (JM-805)
Legislative limits must also be considered. As indicated, a home
rule city may not take actions that conflict with state legislation.
City of Brookside Village V. Cornea",633 S.W.2d 790, 796 (Tex.1, cert.
denied, 459 U.S. 1087 (1982). City action is preempted if legislation
expressly prohibits the action, if the legislature intended state law
to occupy the field covered by the action, or if the city's action is
in direct conflict with state law even when the state law does not
occupy the field. See Attorney General Opinions JM-619 (1987); tiw-226
(1984); H-1071 (1977).
Section 10 of articie 1175, V.T.C.S., provides that home rule
cities hold the following power:
The power to control and-manage the finances of
any such city; to prescribe Its fiscal year and
fiscal arrangements; the power to issue bonds upon
the credit of the city for the purpose of making
permanent public Improvements or for other public
purposes in the amount and to the extent provided
by such charter, and consistent with the Constitu-
tion of this State; provided, that said bonds
shall have first been authorized by a majority
vote by the duly qualified property tax-paying
voters voting at an election held for -that
purpose. Thereafter all such bonds shall be
submitted to the Attorney General for his
approval, and the Comptroller for registration, as
provided by law. . . .
Section 10 does not prohibit the issuance of the type of bonds at
issue here; it simply places certain conditions on the issuance of
general obligation bonds. The "public purpose" requirement in section
10 echoes the constitutional requirement discussed above. As
indicated previously, the requirement of approval by the attorney
general places limits on the maximum amount of- a city's bonded
indebt$dness. Additionally, section 10 requires voter approval of the
bonds. Thus, section 10 of article 1175 does not create insurmount-
able limits on the issuance of general obligation bonds for affordable
housing for low and moderate income families.
2. This opinion does not address validity of the reference in
article 1175, section 10, to only "property tax-paying voters." See
generally City of Phoenix V. Kolodziejski, 399 U.S. 204 (1970); cf.
Salyer Land Co. V. Tulare Lake Basin Water Storage District, 410 U.S.
719 (1973).
p. 3810
Honorable Rent Caperton - Page 4 (3%805)
Nor do any other statutes expressly limit the authority of home
rule cities with regard 30 providing affordable housing for low and
moderate income families. As indicated, however, city action is also
preempted if the city's action conflicts with state legislation or if
the legislature intended state law to occupy the field at issue.
The legislature enacted a series of statutes authorizing the
provision of affordable housing for low and/or moderate income
residents. See V.T.C.S. arts. 1269k, 12691-3, 12691-4. 12691-7,
repealed andreplaced, effective September 1, 1987, with the L%al
Government Code. In light of these enactments, parallel actions by a
city to achieve the same purpose cannot be said to be in "conflict"
with these statutes. Local actions, ancillary to and in harmony with
the general scone and nurdose
. . of state enactments. are accentable.
See City of Brookside Village V. Comeau, 633 S.ti.2d at 796. The
state's entry into a field of regulation does not in and of itself
evidence the legislative intent to preempt that field from municipal
action. See & Implied limits on a home rule city's powers must
appear withunmistakable clarity." Lower Colorado River Authority V.
City of San Marcos, 523 S.W.2d at 645. There Is no Indication in the
general laws regarding urban renewal and affordable housing that the
general laws are intended to occupy the field of affordable housing.
The fact that Higginbotham, supra, and Davis, supra, affirmed the
authority of local governing entitles to address conditions of
substandard housing through legislative enactments does not mean that
home rule cities are limited to those neneral laws in carryinn out
these authorized public purposes. For-example. in City of College
Station Y. Turtle Rock Corporation, 680 S.W.2d 802, 807-08 (Tex,
1984). the Texas Supreme Court upheld a home rule city's, parkland
dedication ordinance despite the fact that several statutes authorized
municipalities to acquire parkland by other methods. The court
indicated that enabling statutes may serve as specific grants of power
to entities other than home rule cities. ,& The simple fact of the
existence of these enabling statutes does not "unmistakably" limit the
powers of a home rule city with regard to the actions authorized by
the statutes. -Id.
Moreover, statutes that authorize governmental bodies to engage
in certain public activities are qualitatively different than statutes
that authorize governmental bodies to regulate private activities.
3. This opinion does not address state and federal antitrust
limits that could be relevant, denendinn upon how the affordable
housing program is administered. ‘See generally Attorney General
Opinion JM-560 (1986).
p. 3811
Honorable Kent Caperton - Page 5 (JM-805)
Courts ordinarily find “clearly implied” limits when municipalities
attempt to regulate in a field regulated by state statutes. See
Attorney General Opinion JM-619 (1987) (and cases discussed thereix
Conflict is more likely when both the state and a political sub-
division attempt to regulate one activity than when two types of
political subdivisions offer similar public services.
You also ask several questions about various methods of providing
affordable housing to low and moderate income families:
2. May a home rule city purchase or construct
multi-family housing and directly or indirectly
sell or lease units in such housing to low income
residents at below market prices or rents?
3. May a home rule city directly contract with
private nonprofit entities to provide rental or
sale housing for low and moderate income residents
with funds provided by the city from the proceeds
of the sale of its general obligation bonds?
4. May a home rule city enter into a coopera-
tion agreement with a local public housing author-
ity, providing for the purchase of land and the
installation of infrastructure by the city, using
the proceeds of general obligation bonds issued by
it. with the housing to be constructed by the
housing authority through the [issuance] of its.
own revenue bonds?
5. May a home rule city purchase Individual
lots nor tracts of land, to be conveyed to public
or private development entities, at cost, to
provide housing for low and moderate income
residents? May the city also purchase such real
property to hold for future use as the sites for
housing for low and moderate income families?
Because your second and fifth questions refer, respectively, to
conveyances of real property “at below market prices” and “at cost.”
article 5421c-12, V.T.C.S. (repealed and replaced, effective September
1, 1987, with the Local Government Code, see Acts 1987. 70th Leg., ch.
149, IPl. 49, at 1397. 2546). must be addressed. Article 5421c-12
requires public notice and competitive bidding for the sale of public
land by a political subdivision. Subsection (5) of section 2 of
article 5421c-12 contains an exception for the competitive bidding
procedures when a political subdivision’s land Is to be “developed by
contract with an independent foundation.” This subsection authorizes
cities to convey public land at fair market value for the construction
p. 3812
Uonorable Kent Caperton - Page 6 (JM-805)
of housing for low-income citizens by a private, not-for-profit
corporation that qualifies as an independent foundation under state
law. Attorney General Opinion MW-46 (1979). The foundation must
agree to develop the land as required by the city. Id. Additionally,
the statute expressly prohibits conveyances. even th= made under the
exemptions set forth in section 2, at less than fair market value.
Art. 5421c-12, 54. Of course, if the foundation paid fair market
value, the statute does not prevent the foundation from then selling
the land at below market prices.
Additionally, a home rule city could enter Into a cooperation
agreement with e local housing authority pursuant to article 12691,
V.T.C.S., the Texas Housing Co-operation Law, repealed and replaced,
effective September 1, 1987, with the Local Government Code/see Acts
1987, 70th Leg.. ch. 149, §§I, 49, at 1397, 2544. Articl~12691
authorizes cities to convey real property to local housing authorities
and authorizes local housing authorities to sell or lease property to
persons of low income. The act does not require compliance with the
competitive bidding provisions or require that the conveyance be at a
fair market price.
Your questions also raise issues under the constitutional
provisions requiring a “public purpose” for the expenditure of public
funds. See Tex. Const. art. III, $52. The fact that a home rule
city’s determination that providing affordable housing to low and
moderate income families serves a public purpose is entitled to a
presumption of validity does not end the inquiry. Article III,
section 52, of the Texas Constitution prohibits grants of public funds
for private purposes. This prohibition extends to not-for-profit
organizations, see Attorney General Opinions JM-2i4 (1984); MW-329
(1981)s and toother political subdivisions. Harris County Flood
Control District~Mann, 140 S.W.2d 1098 (Tex. 1940); Attorney
General Opinions JM-768 (1987); JM-220 (1984). A merely~incidental
benefit to another entity is not prohibited. Attorney General Opinion
JM-274; see Barrington V. Cokinos, 338 S.W.Zd 133 (Tex. 1960). In
light ofarticle III, section 52, any contract with a private entity
and any cooperative agreement with a local housing authority under
article 12691 must contain provisions to assure that a valid public
purpose will be accomplished and to assure that the city will receive
quid p quo for its expenditure. -See Attorney General Opinion
k-768 (1;:7,.
SUMMARY
A home rule city”s issuance of general
obligation bonds to finance affordable housing for
low and moderate income families does not Per se
violate the public purpose requirements of article
VIII, section 3, and article III, section 52, of
p. 3813
Honorabie Kent Caperton - Page 7 (JM-805)
the Texas Constitution. Although some statutes
limit the manner of issuing general obligation
bonds and the manner in which an affordable
housing program may be carried out, no statutes
prohibit the issuance of general obligation bonds
by a home rule city to finance affordable housing
for low and moderate income families.
MARY KELLER
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Jennifer Riggs
Assistant Attorney General
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