Untitled Texas Attorney General Opinion ( 2010 )

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
November 19,2010
The Honorable Mark Homer Opinion No. GA-0819
Chair, Committee on Culture, Recreation
and Tourism Re: Whether the Development Corporation Act of
Texas House of Representatives 1979 permits a 4A economic development corporation
Post Office Box 2910 to grant or use sales tax funds for certain purposes in
Austin, Texas 78768-2910 connection with a nonprofit corporation that provides
affordable housing assistance (RQ-0877-GA)
Dear Representative Homer:
You ask whether the Development Corporation Act of 1979 (the "Act") permits a 4A
economic development corporation to grant or use sales tax funds for certain purposes in connection
with a nonprofit corporation that provides affordable housing.l You relate that the Paris Economic
Development Corporation ("PEDC") was created in 1993 as a "4A" corporation under the Act.
Request Letter at 2. The PEDC has been approached for a grant of $10,000 of PEDC sales tax
revenue by Paris Living, mc. ("Paris Living"), a nonprofit corporation that provides affordable
housing assistance for persons with low or middle income. [d. at 1-2. The purpose of such a grant
from PEDC would be to hire a consultant to assist Paris Living to apply "to the United States
Department of Treasury for $100,000 in technical assistance funding in advance of applying for
certification as a first lien lender under the Community Development Financial mstitutions Fund
["CDFI"]." [d. at 1. Specifically, you ask:
(1) Whether the Paris Economic Development Corporation, a 4A
Economic Development Corporation created pursuant to the
[Act] may grant $10,000 in 4A sales tax funds to Paris Living,
Inc., a local non-profit corporation that provides affordable
housing assistance to qualifying persons of low-to-moderate
income in the Northeast Texas region?
(2) Does the [Act] allow for 4A Economic Development
Corporations (such as PEDC) to use 4A sales tax funds to
support an affordable housing program or project?
Request Letter at 1.
ISee Request Letter at 1 (available at http://www.texasattorneygeneral.gov).
The Honorable Mark Homer - Page 2 (GA-0819)
The Act is generally intended to promote and develop "new and expanded business
enterprises and ... job training." TEX. Loc. GOy'T CODE ANN. § 501.004(a) (West Supp. 2010).
To that end, the Act authorizes municipalities and other governmental units to create a corporation
as "a constituted authority for the purpose of financing one or more projects." [d. § 501.151; see
also id. § § 501.002(5), (17) (definitions of "Corporation" and "Unit"), 501.051 (authority of unit to
create a corporation). The Act has been codified as title 12, subtitle Cl of the Local Government
Code, effective April 1, 2009. Act of May 15, 2007, 80th Leg., R.S., ch. 885, §§ 3.01, 4.02,
2007 Tex. Gen. Laws 1905, 2082-2132, 2163 (codified at TEX. Loc. GOy'T CODE ANN.
§§ 501.001-505.355). Prior to codification, a corporation was referred to as a "4A corporation" or
a "4B corporation" in reference to the particular section of the Act that governed a corporation's
creation and authority 2 Now, the Act as codified in the Local Government Code refers
to a "Type A corporation" and a "Type B corporation." TEX. Loc. GOy'T CODE ANN.
§ 501.002(15), (16) (West Supp. 2010). For purposes of this opinion, we assume that the PEDC is
a Type A corporation under the Local Government Code.
A key concept under the Act is its provision for authorized "projects." See id. § 501.151
(stating that a development corporation is "a constituted authority for the purpose of financing one
or more projects" (emphasis added». The Act specifies and limits the kinds of projects that a
particular development corporation, depending on its authority, may facilitate. See id. § 50 1.002( 13)
(defining "project"); see, e.g., id. §§ 501.101-.107 (subchapter C, "Authorized Projects"). Thus,
while you have asked about a specific "grant" and "support," we understand your questions to more
broadly concern whether the provision of affordable housing or the financial, administrative, or
construction activity related to the provision of affordable housing may constitute an "authorized
project" with respect to a Type A corporation.
Chapter 501, subchapter C provides a general listing of authorized development corporation
projects. [d. § 501.002(13)3 Of particular importance, section 501.101 authorizes projects related
to the creation or retention of "primary jobs.'" !d. § 501.101(1). Section 501.101 provides:
'See Act of May 27, 1989, 71st Leg., RS., ch. 877, § 2, sec. 4A, 1989 Tex. Gen. Laws 3871, 3871-73
(providing for 4A corporations), and Act of Mar. 21, 1991, 72d Leg., RS., ch. II, § 2, sec. 4B, 1991 Tex. Gen. Laws
37,37-39 (providing for4B corporations), both repealed by Act of May IS, 2007, 80th Leg., RS., ch. 885. § 3.78, 2007
Tex. Gen. Laws 1905,2163.
'See TEx. Loc. GOV'TCODE ANN. §§ 501.101 (West Supp. 2010) (projects for the creation of primary jobs),
501.102 (projects related to certain job training), 501.103 (certain infrastructure improvement projects), 501.104
(projects related to certain military bases or missions), 501.1 05 (certain career center projects), 50 1.106 (airport facilities
or other projects concerning certain border municipalities), 501.107 (infrastructure projects concerning certain border
counties); see also id. § 501.162 (use of tax revenue for job training).
'As applicable here, a "primary job" is one that is "available at a company for which a majority of the products
or services of that company are ultimately exported to regional, statewide, national, or international markets infusing new
dollars into the local economy" and is included in specified job sectors in the North American Industry Classification
System. !d. § 501.002(l2)(A)(i)-Cii).
The Honorable Mark Homer - Page 3 (GA-OSI9)
[AJ "project" includes the land, buildings, equipment, facilities,
expenditures, targeted infrastructure, and improvements that are:
(1) for the creation or retention of primary jobs; and
(2) found by the board of directors to be required or
suitable for the development, retention, or expansion
of [certain categories of facilities J.
!d. § 501.101 (1 )-(2) (emphasis added). Also, chapter 504 authorizes projects specifically concerning
Type A corporations. See id. § 504.103(c) (projects concerning certain general aviation business
service airports, port-related facilities, or airport-related facilities). And chapter 505 authorizes a
Type A corporation to provide funding for a specific Type B corporation project or category of
projects by submitting the matter to the authorizing municipality's voters, preceded by notice and
a hearing. Id. §§ 504. 152(a), .153; see also id. § 505.153 (Type B corporation project concerning
affordable housing). However, whether a particular project or a specific expenditure is authorized
under the Act involves fact issues that may not be resolved in the opinion process and are matters
for the board of directors of the development corporation to determine in the first instance. See, e.g.,
Tex. Att'y Gen. Op. No. GA-00S6 (2003) at 2-3; Tex. Att'y Gen. LO-97-061, at 3 & n.6; Tex. Att'y
Gen. LO-94-037, at 3.
The Honorable Mark Homer - Page 4 (GA-0819)
SUMMARY
It is for the board of directors of a development corporation
to determine, in the first instance, whether a project or expenditure is
authorized under the Development Corporation Act.
DANIEL T. HODGE
First Assistant Attorney General
DAVID J. SCHENCK
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
William A. Hill
Assistant Attorney General, Opinion Committee