Untitled Texas Attorney General Opinion ( 1984 )

The Attome,)/ General of Texas
Dlzcember 27. 1984
JIM MAllOX
Attorney General
Ronorable Jay T. Kfmbrough Opinion No. JM-274
Supreme Court BuildIn
P. 0. Box 12545 Bee County Attorney
Austin. TX. 78711. 2549 Room #204, Courthov se Re: Whether the Bee County
51214752501 Beeville, Texas 78102 Community Action Agency may
Telex 91OlS74-1357 receive Interest free loans
TeIecoDier 51214750288
from a bank which is a depos-
itory for Bee County
714 Jackson. Suite 700
Dsllar. TX. 752024506 Dear Mr. Kimbrough:
2141742-0944
You ask whether the Bee County Comnity Action Agency
4824 Alberta Ave., Suit4 1.50 [hereinafter Agency] may receive an interest-free loan from a bank
El Paso, TX. 799052793 which is a depository for Bee County. Apparently. the bank in
91515~3dS4 question gives the Agency interest-free loans based on the county’s
credit with the b,%nk. You refer to the Agency as a not-for-profit
agency but indicate that it is organized by the Bee County
Jo1 Texas, Suite 700
Houston. TX. 77002-3111 Commissioners Court and funded through various government programs.
713l2255888 Regardless of whether the county is even authorized to organize this
Agency. we conclude that such an Agency cannot receive interest-free
loans in the instances described herein.
806 Broadway. Suite 312
Lubbock, TX. 79401-3479
8061747.5239 The basis for this conclusion differs according to whether the
Agency is an indepmsndent entity or whether it is an “extension” of the
county. Because 1,t is unclear which type of entity is presently in
4309 N. Tenth. Suite B question, each deserves analysis.
McAllen. TX. 78x)l.lSSS
5121682.4547
If the Agent:? in question is an “extension” of the county, it
cannot receive inl:erest-free loans because the county itself cannot
2&l Main Plaza. Salt0 400 receive such loant;. An agency or arm of a local governmental entity
San Antonio. TX. 782052797
has no greater pov’er than the local governmental entity which creates
51212254191
the agency. Attorney General Opinion JM-220 (1984). Counties possess
only the powers expressly or by necessary implication authorized by
An Equal OPPOftUnitYl the Texas Constitut:ion or statutes. _Canales v. Laughlin, 214 S.W.?d
Aftirmstive Action Employer 451 (Tex. 1948). Counties lack authority eo borrow money except
through the issuance of bonds, certificates of. obligation, or other
forms of indebtedness which are specifically authorized by law. See
Tex. Const. art. XI, 57; Brown v. Jefferson County, 406 S.W.Zd 185
(Tex. 1966) ; -mm
see also Tex. Const. art. III. 552-b; art. VIII, 59
(because counties ere limited in property taxes they may levy, their
power to incur debt is limited); see generally V.T.C.S. arts. 701 g
-, 2368a.l; cf.
-- V.T.C.S. arts. 1644~. 1644c-1. Accordingly, the
honorable Jay T. Kimbrough - Page 2 (JPI-274)
Agency cannot receive interest-free loans from Bee County’s depository
bank.
If, on the other t la.nd, the Agency is an independent
not-for-profit legal entity with which the county merely contracts,
a, for the delivery of certain authorized social services on an
independent contract basis, then the Texas Constitution may prohibit
the loans in question. If the Agency is a private, not-for-profit
entity, and thus not connected to the county, it would be free to seek
loans from any bank, subject to legal limitations applicable to
not-for-profit corporations and associations which are not in issue
here. Apparently, the bank in, question gives the Agency interest-free
loans based on the county’s c,redit with the bank. If the county acts,
in this manner, as a guaran:or or surety for these loans, the Texas
Constitution prevents counties from lending their credit to any
individual, association, or cclrporation. Art. III, §52(a).
Article III. section 52(e) provides that
Pxcept as otherwis~z provided by this section, the
Legislature shall have no power to authorize any
county, city, town or other political corporation
or subdivision of t!ae State to lend its credit or
to grant public money or thing of value in aid of,
or to any individr``l. association or corporation
whatsoever, or to become a stockholder in such
corporation, assoc:i.ation or company. (Emphasis
added).
See also Tex. Const. art. XI, 513.7.
The Texas Constituticn prohibits the use by a political
subdivision of its public funds or credit for private purposes. State
v. City of Austin, 331 S.‘rJ.2d 737 (Tex. 1960). I!Io fixed rule
delineates exactly what con:;t:itutes a public purpose. Nevertheless,
the prohibition of article III. section 52, extends to private,
not-for-profit organizationa. -See Attorney General Opinions MW-329
(1981); V-173 (1947).
Consequently, although the county may occasionally contract with
a private entity to deliver certain services which the county is
specifically authorized to provide, a county may not make an
unconditional grant of its #::redit to a private entity. See Attorney
General Opinion H-1189 (1978). An incidental benefit tz private
person or entity is not prohibited. Attorney General Opinions JM-220
(1084); MW-423 (1982); see
- Barrington
-- v. Cokinos, 338 S.W.2d 133 (Tex.
1960). Virtual donations z.re prohibited. Attorney General Opinion
JM-65 (1983). Any lending of credit must be intended to accomplish an
authorized county purpose ::r:d must be accompanied by conditions to
P. 1220
Honorable Jay T. Kimbrough - Page 3 (JM--274)
ensure the uae of county credit for a public purpose. See Attorney
General Opinions m-220 (19184); JM-103 (1983); MW-423 (1982); MU-60
(1979).
If the Bee County Cormsunity Action Agency in an
"extension" of Bee County, it cannot receive
intereat-free loa!>:, from a bank which is a
depository for Bee County. If, on the other hand,
the Agency is an independent, private. legal
entity, any lending of county credit as a
guarantor or surety on loans to the Agency on an
independent Contl'sct basis must be for an
authorized county purpose and must have conditions
attached to ensure the accomplishment of that
county purpose.
Attorney General of Texas
TOM GREEN
First Assistant Attorney Ger:e,ral
DAVID R. RICHARDS
Executive Assistant Attorney, General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Jennifer Riggs
Assistant Attorney General
APPROVBD:
OPINION COMMITTEE
Rick Gilpin. Chairman
Colin Carl
Susan Garrison
Tony Guillory
Jim Moellinger
Jennifer Riggs