Untitled Texas Attorney General Opinion ( 2005 )

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
May 3,2005
The Honorable Todd Staples Opinion No. GA-0320
Chair, Committee on Transportation and
Homeland Security Re: Whether the Athens Economic Development
Texas State Senate Corporation may expend funds for highway
Post Office Box 12068 construction adjacent to an industrial park
Austin, Texas 7871 l-2068 (RQ-0289-GA)
Dear Senator Staples:
You ask whether the Athens Economic Development Corporation (“AEDC”) may expend
funds for highway construction adjacent to an industrial park.’
The Athens Economic Development Corporation is organized under section 4A of the
Development Corporation Act of 1979. See Request Letter, supra note 1, at 1; see also TEX. REV.
CIV. STAT. ANN. art. 5190.6 (Vernon 1987 & Supp. 2004-05) (“article 5190.6” or the “Act”). The
AEDC derives its revenue from City of Athens sales tax proceeds levied pursuant to section 4A of
the Act. See Request Letter, supra note 1, at 1. The AEDC acquired real property in the City of
Athens and established an industrial park, which includes facilities for manufacturing and industrial
firms, primary job training (currently used by Trinity Valley College), and a 400,000 square foot
warehouse. See id. at 1-2.
The park is located on FM Road 1616 near its intersection with Loop 317. Several fatal
traffic accidents have occurred at the intersection, and the Texas Department of Transportation
(“TxDOT”) has determined that in order to remedy what it deems an “unacceptably dangerous
condition,” one road must pass over the other. Id. at 1. You state that TxDOT has made plans for
FM Road 1616 to pass over Loop 317 in a project to be funded by both the federal and state
governments, except for $50,000. See id. As you explain, while the City of Athens could fund that
amount, the overpass would or could not be built to include entrance and exit ramps between the two
roads. See id. Currently, FM 1616 provides the sole access to the industrial park. Id. Without a
traffic interchange at that location, traffic from Loop 317 could not reach the park except by a
cumbersome, circuitous route through the city. See id. at 2. Such a configuration would render the
‘See Letter from Honorable Todd Staples, Chair, Committee on Infrastructure Development & Security (now
Chair, Committee on Transportation and Homeland Security), Texas State Senate, to Honorable Greg Abbott, Texas
Attorney General (Nov. 2, 2004) (on file with Opinion Committee, also available at http://www.oag.state.tx.us)
[hereinafter Request Letter].
The Honorable Todd Staples - Page 2 (GA-0320)
industrial park less attractive, ifnot unacceptable, to existing users as well as prospective enterprises.
In particular, without access to Loop 3 17, the park would not be suitable as a distribution center, one
of the park’s potential uses as originally conceived by the AEDC. See id.
TxDOT has presented an alternative plan, whereby Loop 317 would pass over FM 1616.
This alternative layout would allow entrance and exit ramps from one road to the other. See id.
While the alternative plan would enhance the industrial park’s accessibility, it would require
$700,000 from sources other than the federal and state governments. See id. You state it is unlikely
that the city could make that amount of money available, but the AEDC may be able to contribute
an amount sufficient to make the alternative construction plan feasible. See id. You ask whether
the Act authorizes such an expenditure.
The Act authorizes municipalities to create an industrial development corporation, which is
“a corporation created and existing under the provisions of this Act as a constituted authority for the
purposeoftinancingoneormoreprojects.” TEX.REV.CIV.STAT.ANN. art. 5190.6,s 2(10)(Vemon
Supp. 2004-05). Such corporations are commonly referred to as “economic development
corporations” (“ED&“), or more specifically as “4A corporations” or “4B corporations,” in
reference to the specific sections of the Act governing the creation and authority of EDCs. See id.
$5 4A, 4B. The AEDC, as a 4A corporation, is subject to section 4A’s provisions that may limit the
authority to undertake a particular project, as well as to other limitations in the Act.’ Your questions,
however, focus specifically on portions of section 2(11)(A) and section 4A(i), and we limit
our review accordingly. Section 2(1 l)(A) of the Act contains three definitions of a “project.” Id.
5 2(1 l)(A).” You suggest that an expenditure for construction of an interchange allowing access to
*For example, section 4A author&es a municipality to adopt sales and use taxes for an EDC’s benefit by
submitting a ballot proposition to the voters. See TEX.REV.CIV.STAT.ANN.art. 5 190.6,s 4A(d), (m)-(s) (Vernon Supp.
2004-05). Such a proposition may or may not contain terms limiting the use of such revenues to specific projects. See
id. 5 4A(r). Additionally, a 4A corporation’s use of funds may be limited by financial arrangements in the corporation’s
bonds. See, e.g., id. §$4A(f), 25(e). You do not ask about, nor do we address these potential limitations.
‘In full, the definition provides:
“Project” shall mean the land, buildings, equipment, facilities, expenditures,
targeted infrastructure, and improvements (one or more) that are for the creation or
retention ofprimary jobs and that are found by the board of directors to be required
or suitable for the development, retention, or expansion of manufacturing and
industrial facilities, research and development facilities, transportation facilities
(including but not limited to airports, ports, mass commuting facilities, and parking
facilities), sewage or solid waste disposal facilities, recycling facilities, air or water
pollution control facilities, facilities for the iimishing of water to the general
public, distribution centers, small warehouse facilities capable of serving as
decentralized storage and distribution centers, primaryjob training facilities for use
by institutions ofhigher education, and regional or national corporate headquarters
facilities.
“Project” also includes job training required or suitable for the promotion of
development and expansion ofbusiness enterprises and other enterprises described
by this Act, as provided by Section 38 of this Act.
(continued...)
The Honorable Todd Staples - Page 3 (GA-0320)
the park from Loop 3 17 meets two ofthe three definitions of a “project” in section 2( 1 l)(A), the first
and the third. See Request Letter, supra note 1, at 2. As we are able to answer your question based
on the third definition in the section, we need not consider the first definition.
The third definition of a “project” in section 2(1 l)(A) specifically includes “streets and
roads” among the kinds of infrastructure that may the subject of a project under the Act:
“Project” also includes expenditures found by the board of directors
[of the EDC] to be required or suitable for infrastructure necessary to
promote or develop new or expanded business enterprises limited to
streets and roads, rail spurs, water and electric utilities, gas utilities,
drainage and related improvements, and telecommunications and
Internet improvements.
TEX. REV. CIV. STAT. ANN. art. 5190.6, 5 2(1 l)(A) (V emon Supp. 2004-05). According to the
language of the statute, such a project is to be based on findings by the EDC’s board of directors.
See id. Under this definition of project, the board must find that (1) an expenditure is required or
suitable for the proposed infrastructure and (2) the infrastructure is “necessary” to promote or
develop new or expanded business enterprises. See id.
The exchange construction you describe seems almost certainly to be encompassed by the
phrase “streets and roads.” Request Letter, supra note 1, at 1-2. You inform us that the AEDC seeks
to sell a facility in the industrial park to a new owner who would use it for distribution. See id.
at 2. You suggest that attracting such a new enterprise may hinge on the proposed interchange
construction. See id. Consequently, the board could determine that the construction is “necessary
to promote or develop new or expanded business enterprises” and that the expenditure is “required
or suitable” for the construction. TEX. REV. CIV. STAT. ANN. art. 5 190.6, § 2(1 l)(A) (Vernon Supp.
2004-05).
While the interchange construction project may meet one or more of the general definitions
of a “project” in section 2(1 l)(A), section 4A contains other provisions specifically applicable to
projects undertakenby corporations formed under that section. You are specifically concerned about
section 4A(i), which prohibits a 4A corporation from providing certain “transportation facilities,”
even though they may meet one of the general definitions of a “project”:
Except as provided by this subsection, the corporation may not
undertake a project the primary purpose of which is to provide
‘(...continued)
“Project” also includes expenditures found by the board of directors to be required
or suitable for infrastmcture necessary to promote or develop new or expanded
business enterprises limited to streets and roads, rail spurs, water and electric
utilities, gas utilities, drainage and related improvements, and telecommunicatioo.s
and Internet improvements.
TEX. REV.CIV. STAT.ANN. art. 5190.6, $2(1 l)(A) (Vernon Supp. 2004-05)
The Honorable Todd Staples - Page 4 (GA-0320)
transportation facilities, solid waste disposal facilities, sewage
facilities, facilities for furnishing water to the general public, or air or
water pollution control facilities. However, the corporation may
provide those facilities to benefit property acquired for a project
having another primary purpose.
TEX. REV. CIV. STAT. ANN. art. 5190.6, § 4A(i) (Vernon Supp. 2004-05); see also Request Letter,
supra note 1, at 2-3. Assuming that the primary purpose of the proposed interchange construction
is to provide “transportation facilities,” then section 4A(i) would preclude the AEDC from
undertaking the construction as a project unto itself. But that prohibition does not apply to an
expenditure that benefits projects having a different primary purpose, such as the industrial park.
As you describe the industrial park, its principal purpose is to establish facilities expressly included
within section 2(1 l)(A)‘s first definition: manufacturing and industrial facilities, primary job
training facilities, and warehouse and distribution facilities. See Request Letter, supra note 1, at 1-2.
Assuming these facilities are for the retention or creation of primary jobs, we conclude that section
4A(i) does not prohibit the AEDC from making an expenditure for the proposed construction.
The Honorable Todd Staples - Page 5 (GA-0320)
SUMMARY
An expenditure for road construction may qualify as a
“project” under section 2(1 l)(A) of the Development Corporation
Act of 1979, provided the board of directors of an industrial
development corporation finds that the expenditure is “required or
suitable for infrastructure necessary to promote or develop new or
expanded business enterprises.” TEX. REV. CIV. STAT. ANN. art.
5190.6, 5 2(1 l)(A) (Vernon Supp. 2004-05). Section 4(A)(i) of
the Act does not preclude a 4A corporation from providing a
transportation facility that benefits property acquired for another
authorized project.
Ve~truly yours,
BARRY R. MCBEE
First Assistant Attorney General
DON R. WILLETT
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
William A. Hill
Assistant Attorney General, Opinion Committee