Untitled Texas Attorney General Opinion ( 2008 )

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
January 25, 2008
Mr. Steve Pena, Presiding Officer Opinion No. GA-0599
Brazos River Authority
Post Office Box 7555 Re: Whether the Brazos River Authority may
VVaco, Texas 76714-7555 discount and freeze current lease rates for lessees
over 65 years of age (RQ-0611-GA)
Dear Mr. Pena:
You explain that "[t]he Brazos River Authority (the 'BRA') owns substantial property
surrounding Possum Kingdom Lake, and much of that property is subject to long-term residential
leases to private individuals."! You state that the leases have traditionally "reflected very low lease
rates" but that the BRA recently began "a process oftransitioning to lease rates that more accurately
reflect current market value." Request Letter, supra note 1, at 1. In order "to' minimize the adverse
impact" on certain lessees, you explain that the BRA proposes "to grant a ten percent (10%) discount
offofcurrent lease rates for lessees over 65 who would qualify for a homestead exemption, 2 and also
to freeze the discounted lease rate for such lessees on a going-forward basis. ,,3 Id. (footnotes added).
You ask whether the BRA "is authorized to give such a lease rate discount and lease rate freeze" and,
ISee Letter from Steve Pefia, Presiding Officer, Brazos River Authority, to Honorable Greg Abbott, Attorney
General of Texas (July 30, 2007) (on file with the Opinion Committee, also available at http://www.oag.state.tx.us)
[hereinafter Request Letter].
2We understand your reference to a person "who would qualify for a homestead exemption" to mean a person
who qualifies for such an exemption under article VIII, section I-b ofthe Texas Constitution, in relation to some taxing
unit and is listed as such on the appraisal rolls obtained by the BRA from the applicable appraisal district. See TEX.
CONST. art. VIII, § I-b; BRAZOS RIVER AUTHORITY, BOARD OF DIRECTORS, AUDIO MEETINGS MINUTES, Meetings on
Jan. 29,2007, Possum Kingdom Committee, Agenda Item 7: Senior Homestead Discount, available at http://www
.brazos.org/boardAudioMinutes.asp (last visited Jan. 22, 2008).
3you explain the reasons for offering the discount and freeze to this group of lessees as follows:
Rate increases have a disproportionate adverse impact on lessees over the age of sixty-five (65), who
are more likely to live on fixed incomes. In addition, many of the over-65 lessees have held their
leases for decades, resulting in the benefit of stable occupancy and use of the property and
administrative continuity for the [BRA] regarding those leases. The [BRA] is also concerned that if
the over-65 lessees are forced to leave due to higher lease rates, their departure will be a loss to the
Possum Kingdom community.
Request Letter, supra note 1, at 1.
Mr. Steve Pefia - Page 2 (GA-0599)
in particular, whether the discount or freeze violates article III, section 52 ofthe Texas Constitution. 4
ld.
In regard to your first question, no statutory or constitutional provision specifically authorizes
the BRA to lease its property under the terms you describe. We assume for the purposes of this
opinion that the leases will be executed under the BRA's general authority to lease its real property.
We begin then with an examination of such lease authority to determine whether it precludes the
proposed discount and freeze. s
The BRA is what is commonly referred to as a "special law district" governed not only by
its enabling legislation but also certain general laws applicable to water districts. See· TEXAS
COMMISSION ON ENVIRONMENTAL QUALITY, TEXAS WATER DISTRICTS: A GENERAL GUIDE, at 1-2
(Dec. 2004), available at http://www.tceq.state.tx.us/files/gi-043.pdf_4009260.pdf(last visited Jan.
22, 2008); 45 JEFF CIVINS ET AL., TEXAS PRACTICE: ENVIRONMENTAL LAW § 2.18 (2d ed. 2005).
There are two provisions in the BRA's enabling legislation that expressly authorize the BRA
to lease its property. See TEX. SPEC. DIST. CODE ANN. §§ 8502.012(f), .013(d) (Vernon 2007).
Section 8502.013(d) relates to the lease of "property used or to be used by [a] customer for the
transmission of or in connection with [hydroelectric] power purchased or to be purchased from the
authority" and does not appear to be applicable here. ld. § 8502.013(d).
Section 8502.012(f) more broadly provides that the BRA may,
acting through the board, ... lease or sell, on terms and conditions,
including rentals or sales prices, on which the parties agree, all
works, improvements, facilities, plants, buildings, structures,
equipment, and appliances, and all real and personal property, or any
interest in real or personal property, related to the works,
improvements, facilities, plants, buildings, structures, equipment, and
appliances, that are incident to or necessary in carrying out or
performing any power or function of the authority under this section
[8502.012] .
ld. § 8502.012(f) (emphasis added); but see id § 8502.013(a)-(b) (generally prohibiting the BRA
from encumbering its real property and from allowing its property to come into the ownership or
control of other persons).
4We assume for the purposes ofthis opinion that the lease arrangements you ask about actually constitute leases.
See Tex. Att'y Gen. Opt No. GA-0252 (2004) at 8; Tex. Att'y Gen. LO-96-053, at 3 (explaining that, depending upon
the terms of the lease, a lease arrangement may actually constitute a permanent disposition of land).
SWe do not understand you to ask and we do not determine whether the BRA is authorized to lease its real
property to private persons for residential purposes. See TEX. CONST. art. XVI, § 59; Deason v. Orange County Water
Control & Improvement Dist., 244 S.W.2d 981,984 (Tex. 1952) ("The Legislature can only grant [a] district such
powers and rights as come within the contemplation or provisions of the articles of the Constitution" under which it is
organized).
Mr. Steve Pefia - Page 3 (GA-0599)
As to general laws that address the BRA's leasing authority, we look to chapter 49 of
the Water Code. See id § 8502.001(b) ("The authority is created under and is essential to
accomplish the purposes ofSection 59, Article XVI, Texas Constitution."); TEX. WATERCODE ANN.
§§ 49.001 (a)(1) (Vernon Supp.2007) (defining "district" to include an authority created under article
XVI, section 59 of the Texas Constitution), 49.002(a) (Vernon 2000) (establishing applicability of
chapter 49).6 Section 49.225 of the Water Code provides that a "district may lease any of its
property, real or personal, to any person" and the "lease may contain the terms and provisions
that the board determines to be advantageous to the district." TEX. WATER CODE ANN. § 49.225
(Vernon 2000) (emphasis added); see also ide § 49.002(a) (providing that chapter 49 applies to
special law districts, like the BRA, to the extent that its provisions do not directly conflict with the
district's enabling legislation); TEXAS NATURAL RESOURCE CONSERVATION COMMISSION, A
HANDBOOK FOR BOARD MEMBERS OF WATER DISTRICTS IN TEXAS, at 5 (4th ed. June 1996),
available at http://www.tceq.state.tx.us/files/rg-238.pdf_4006010.pdf (last visited Jan. 22, 2008)
("Subject to federal tax law restrictions, a district may lease any of its property to any person under
whatever terms the board considers advantageous.").
In sum, the general leasing authority contained in the BRA's enabling legislation and chapter
49 of the Water Code does not preclude the discount or freeze about which you ask. And we find
no other statutory provision that specifically prohibits these lease terms.
Next, we consider the potential constitutional limitation you raise. See Request Letter, supra
note 1. In your second question, you inquire about the propriety ofa lease discount and freeze under
article III, section 52 of the Texas Constitution, which provides in relevant part that:
Except as otherwise provided by this section, the Legislature shall
have no power to authorize any county, city, town or other political
corporation or subdivision of the State to lend its credit or to grant
public money or thing of value in aid of, or to any individual,
association or corporation whatsoever, ....
TEX. CONST. art. III, § 52(a); see also TEX. SPEC. DIST. CODE ANN. § 8502.001(a) (Vernon 2007)
("The authority is a river authority, a governmental agency, a municipality, and a body politic and
corporate.").
Article III, section 52(a) does not bar all transactions between a political subdivision and
private persons. An expenditure that directly accomplishes a legitimate purpose of a political
subdivision may still be valid even when it incidentally benefits a private interest. See Walker v. City
ofGeorgetown, 86 S.W.3d 249,260 (Tex. App.-Austin 2002, pet. denied) (considering challenge
to municipal real property lease under article III, section 52). Rather, the purpose of this provision
is to prevent the gratuitous grant of public funds for a private purpose. See Edgewood Indep. Sch.
6There are other general law provisions that may authorize the BRA to lease its property but none appear to be
applicable here. See, e.g., TEX. PARKS & WILDLIFE CODE ANN. § 25.005 (Vernon 2002) (relating to lease of water-
related park areas).
Mr. Steve Pefia - Page 4 (GA-0599)
Dist. v. Meno, 917 S.W.2d 717, 739-40 (Tex. 1995). The Texas Supreme Court has held that "[a]
political subdivision's paying public money is not 'gratuitous' if the political subdivision receives
return consideration." Tex. Mun. League Intergovernmental Risk Pool v. Tex. Worker's Compo
Comm 'n, 74 S.W.3d 377, 383 (Tex. 2002); see also San Antonio River Auth. v. Shepperd, 299
S.W.2d 920, 928 (Tex. 1957) (involving a contractual transfer oftax money from a county to a river
authority in return for the authority's construction of flood control facilities for the benefit of the
county and holding that the contract did not violate article III, section 52(a)).
Additionally, the court has established a three-part test to determine when a statute
accomplishes a public purpose as required by article III, section 52(a): (1) the predominant purpose
of a statute requiring a public expenditure must be to accomplish a public purpose, not to benefit
private parties; (2) the statute must impose public control over the funds to ensure that the public
purpose is accomplished and to protect the public's investment; and, (3) the statute m~st ensure that
the political subdivision receives a return benefit. See Tex. Mun. League Intergovernmental Risk
Pool, 74 S.W.3d at 384. Similar principles are used to analyze whether the grant of a public thing
of value-such as a lease-by a political subdivision serves a public purpose. See, e.g., Tex. Att'y
Gen. Op. No. GA-0252 (2004) at 7.
With this understanding of article III, section 52(a)'s prohibition, we turn to your
question-whether the proposed "discount or freeze would violate the provisions of article III,
section 52 of the Texas Constitution." Request Letter, supra note 1, at 1. We cannot definitively
answer your question because whether the proposed lease discount and freeze are gratuitous is a fact
question for the governing body in the first instance, and ultimately for the court. See Tex. Att'y
Gen. Op. No. GA-0252 (2004) at 6-7 (explaining that an attorney general opinion cannot resolve
questions of fact). It is also for the governing body to initially determine whether the proposed lease
terms accomplish a predominantly public purpose of the BRA, furnish sufficient control over the
transaction, and provide the public with a return benefit. See Youngv. City ofHouston, 756 S.W.2d
813, 814 (Tex. App.-Houston [1st Dist.] 1988, writ denied) ("Determining a public purpose is
primarily a function of the legislature, whose decision should not be reversed, unless manifestly
arbitrary and incorrect."); Dodson v. Marshall, 118 S.W.2d 621,624 (Tex. Civ. App.-Waco 1938,
writ dism'd) (explaining that if the commissioners court exercised reasonable discretion in leasing
space in the courthouse, the district court has no authority to intervene); Bland v. City of Taylor,
37 S.W.2d 291,293 (Tex. Civ. App.-Austin 1931), aff'd sub nom., Davis v. City of Taylor, 67
S.W.2d 1033, 1034 (Tex. 1934) (determining a public purpose is primarily alegislative function).7
Thus, article III, section 52(a) of the Texas Constitution does not prohibit the BRA from offering a
lease discount and freeze·to certain lessees ifthe BRA's governing body reasonably determines that
such lease terms satisfy the public purpose test.
7you explain that your "outside counsel has advised that such a discount or freeze would violate article III,
section 52 of the Texas Constitution, as there is no specific amendment allowing such a discount or freeze." Request
Letter, supra note 1, at 1. We have not been provided any details regarding this analysis and thus, do not address that
analysis.
Mr. Steve Pefia - Page 5 (GA-0599)
SUMMARY
We find no statutory provision in either the Brazos River
Authority's enabling legislation or applicable general laws that
specifically prohibits a discounted lease rate and freeze for certain
lessees.
As to article III, section 52(a) of the Texas Constitution, it
does not preclude offering discounted lease rates and rate freezes to
certain lessees if the lease terms do not constitute the gratuitous
application ofpublic funds for a private purpose and ifthe governing
body reasonably determines, in the first instance, that: (1) the lease
terms have as their predominant purpose the. accomplishment of a
public, rather than a private, purpose C?fthe BRA; (2) the BRA retains
sufficient control to ensure accomplishment ofthe public purpose and
to protect the public's investment; and (3) the public receives a return
benefit.
GREG B OTT
Attorney General of Texas
KENT C. SULLIVAN
First Assistant Attorney General
ANDREW WEBER
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
Christy Drake-Adams
Assistant Attorney General, Opinion Committee