Untitled Texas Attorney General Opinion ( 1990 )

October 4, 1990
Honorable James L. Anderson, Jr. Opinion No. JM-1229
County Attorney
Aransas County, Texas Re: Whether county or
301 N. Live Oak state may provide goods
Rockport, Texas 78382 to patron prior to
receipt of payment; re-
Ms. Kay Schlueter, Director consideration of Attorney
State Law Library General Opinion MW-461
Supreme Court Building (1982) (RQ-1922)
P-0. Box 12367
Austin, Texas 78711-2367
Dear Mr. Anderson and Ms. Schlueter:
Mr. Anderson asks whether Aransas County may sell gas
and fuel products at the county airport to individuals,
corporations, or the parks and Wildlife Department on a
thirty day account whereby charges during the month are
billed at the end of the month. Ms. Schlueter informs us
that the State Law Library receives many requests from
patrons for next day delivery or telefacsimile transmission
of photocopied materials available in the library. She asks
whether Attorney General Opinion MW-461 (1982) requires the
library to receive payment before the copies are sent
instead of enclosing a bill with the copies.
This office issued Attorney General Opinion MW-461 in
answer to an inquiry by the State purchasing and General
Services Commission about its billing for copies of bid
tabulations after they are sent out pursuant to open records
requirements. The commission wished to accumulate charges
during each month and send out bills at the end of the
month. The legal question addressed by the opinion was
whether the proposed system of billing would violate article
III, section 50, of the Texas Constitution, which provides
as follows:
me Leaislature shall have no aower to
aive or to lend, or to auth rize the aivinq
s-of in aid
of, or to any person, association or
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Honorable James L. Anderson, Jr. - Page 2 (JM-1229)
Ms. Kay Schlueter
corporation, whether municipal or other, or
to pledge the credit of the State in any
manner whatsoever, for the payment of the
liabilities, present or prospective, of any
individual, association of individuals,
municipal or other corporation whatsoever.
Tex. Const. art. III, S 50 (emphasis added).
The opinion cited Letter Opinion R-2358 (1951), which
stated of article III, section 50, that '@[o]ur laws
contemplate, it seems, that State offices or enterprises,
the management of which requires the collection of public
funds or charges, should be operated on a cash basis.111
Attorney General Letter Opinion R-2358 at 4. "To defer the
payments of charges for copies of public records by means of
a monthly billing of the accumulated charges," Attorney
General Opinion MN-461 determined, was "just such an
extension of the state's credit which is constitutionally
proscribed.*@2 Attorney General Opinion MN-461, at 2.
1. Letter Opinion R-2358 (1951) is a letter written by
assistant attorney general with the hand-written
Zignation 1'R-23581'in the upper right-hand corner. The
attorney general's name appears in the closing, followed by
a signature block for the attorney who wrote the letter.
Formal attorney general opinions issued in 1951 had a typed
opinion number, a heading describing the subject matter, a
summary, and a list of the attorneys who approved the
opinion. None of these indicia of a formal attorney general
opinion appear in Letter Opinion R-2358. See Attorney
General Opinion H-1063 (1977) at 3 (citat= form of
R-1404).
2. A resolution proposing a constitutional amendment
to allow the legislature to authorize state agencies to
defer fees for services was introduced in the 71st
Legislature. H.J.R. 94, 71st Leg. (1989). The resolution,
inspired by the issuance of Attorney General Opinion MN-461,
was not passed by the legislature.
The legislature's failure to adopt H.J.R. 94 does not
establish that Attorney General Opinion MN-461 was correct,
or that a constitutional amendment is necessary to change
its holding. See Texas TUrnDike Auth v. rmer
iFootn% Con%nuziy
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Ms. Kay Schlueter
Accordingly, the Purchasing Commission could not institute
its proposed method of billing, unless it required a deposit
to cover the costs of copying records pursuant to section 11
of article 6525-17a, V.T.C.S.
This office addressed a similar question in Attorney
General Opinion JM-533 (1986), which concluded that a county
officer would lend the county's credit in violation of
article III, section 52, and article XI, section 3, of the
constitution if he delivered services to individuals
associations, or corporations for deferred payment.5
Article III, section 52, prohibits the legislature from
authorizing political subdivisions to lend their credit,
while article XI, section 3, directly prohibits counties and
other municipal corporations from lending credit, and the
opinion determined that these provisions required county
officers to provide services on a "cash only" basis.
Attorney General Opinions MW-461 and JM-533 overlooked
authorities holding that the state or a political
subdivision may lend credit to accomplish a public purpose.
In his analysis of article III, section 50, of the Texas
Constitution, Braden described the "lending of credit"
language of this provision as saying that the state may not
aid anybody by providing him land, goods, or services on
credit. Braden, The Constitutionof of Texas: An
Annotated and Comnarative Analvsis 225 (1977). He concluded
that if the current interpretation of article III, section
51, is correct, "it follows that today Section 50 is
applicable only if the credit is for a private purpose."
m Section 51 provides that the legislature "shall have no
power to make any grant or authorize the making of any grant
of public moneys" to any individual, association of
individuals, or corporation. The current interpretation of
this provision, as given in Braden's analysis thereof,
prohibits grants for private purposes, but not those to
(Footnote Continued)
S.W.2d 302, 305 (Tex. 1955); Friedman . American Suretv Co.
f New York 151 S.W.2d 570, 580 (Gex 1941): see also
ittorney Gen&al Opinion JM-1102 (1989) at 8.
3. Attorney General Opinion JM-533 (1986) found an
exception to the "lending of credit" provisions where some
other constitutional provision, such as article I, section
13, required a county officer to provide services without
requiring immediate payment.
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MS. Kay Schlueter
accomplish public purposes, if sufficient controls are
placed on the transaction to ensure that the public purpose
is carried out. Braden, m at 232-35 (and authorities
cited); ~88 Barrinaton v. Cokinos, 338 S.W.Zd 133, 140 (Tex.
1960); se also State v. c of Austu 331 S.W.2d 737
(Tex. 196:): Davis . Citv of Lubbock 326'S.W.2d 699 (Tex.
1959); Attorney Genzral Opinion JM-62; (1987).
In State v. CitY Of Au tb 331 S.W.2d 737 (Tex. 1960),
the supreme court addressid ' number of constitutional
issues pertaining to articlea 6674w-4, V.T.C.S., which
provides for the relocation of utility facilities at state
expense whenever the relocations is necessitated "by the
improvement of any highway in this State which has
been . . . established . . . as a part of the National
System of Interstate and Defense Highways . . . provided
that such relocation is eligible for Federal participation."
The terms of federal reimbursement to the state are set
forth in title 23, section 123, of the United States Code.
& State v. City Of Dallas, 319 S.W.2d 767, 772 (Tex. Civ.
APP. - Austin 1958), aff'd 331 S.W.2d 737 (Tex. 1960).
oenerally Attorney General Opinion JM-105 (1983) (caE
television as a utility within article 6674w-4, V.T.C.S.).
In addressing the state#s argument that payment of the
relocation costs would constitute a gift or loan of the
credit of the state in violation of article III, section 50,
the supreme court opinion in State v. Citv of Austin stated
as follows:
Article 6674w-4 obviouslv does not involve
a aift or loan of the credit of the state
unless it can be said that payment of
relocation costs amounts.to a grant of public
money in violation of Article III, Section
51. The purpose of this section and of
Article XVI, Section 6, of the Constitution
is to prevent the application of public funds
to private purposes.
331 S.W.2d at 742 (emphasis added). The supreme court, like
Braden, applies the same "public purpose" test to determine
the validity of a transaction under article 111, section 50,
and article III, section 51, of the constitution.
In Brazoriaq 537 S.W.2d 89 (Tex. Civ.
APP. - Houston [lst Dist.] 1976,'no writ), the county sued a
former deputy sheriff under a promissory note whereby the
deputy agreed to repay county funds spent on training him if
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Ms. Kay Schlueter
he did not serve for two years after completing training.
The central issue was whether there was a lending of credit
by the county in violation of article III, section 52, of
the constitution. The court found no violation, stating as
follows:
The clear purpose of this constitutional
provision is to prevent the gratuitous
application of funds to private use. The
Constitution does not, however, invalidate an
expenditure which incidentally benefits a
private interest if it is made for the direct
accomplishment of a legitimate public
purpose.
537 S.W.2d at 90-91 (citations omitted); see also Attorney
General Opinion H-1010 (1977). Thus, a "loan of credit"
does not violate the constitution if it is made to
accomplish a public purpose.
Opinions of this office issued since Attorney General
Opinion MW-461 have treated extensions of credit
constitutional if they met the "public purpose" tes?
P Attorney General Opinion JM-274 (1984) stated that article
III, section 52(a), prohibits the use by a political
subdivision of its public funds or credit for private
purposes and concluded as follows:
Any lending of credit must be intended to
accomplish an authorized county purpose and
must be accompanied by conditions to ensure
the use of county credit for a public
purpose.
Attorney General Opinion JM-274 at 2-3.
Attorney General Opinion JM-1030 (1989) considered
whether the Texas Department of Mental Health and Mental
Retardation could make advance payment of start-up costs to
private entities that had contracted to provide services to
clients of the department. Start-up costs could be used to
purchase and renovate space in which to provide services,
purchase furniture, and pay other costs associated with the
preparation to provide services. Thus, the department would
be transferring funds to the contractor well in advance of
its provision of services to the department's clients.
The reguestor asked whether advance payment of start-up
costs to a private entity might contravene the prohibition
r
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against the grant of public credit in section 50 of article
III or the prohibition against the grant of public monies in
section 51. The opinion took note of several opinions that
approved the advance payment of public funds to private
parties for the achievement of a public purpose.
Attorney General Opinions IN-423 (1982) (grant to privE
museum honoring firefighters, subject to condition that
museum remain open long enough for public to receive benefit
of grant): H-1010 (1977) (payment of medical tuition as
partial compensation for promise that student will practice
medicine in county); H-74 (1973) (prepayment of state
employees* authorized travel expenses): see also State ex
Tel. Grimes County Tamavers Ass'n v. Texas MUniCiDal Power
Aaence, 565 S.W.2d 258 (Tex. Civ. App. - Houston [lst Dist.]
1978, writ dismjd w.o.j.) (test for validity of transactions
between governmental entities in which one renders agreed
services to the other in exchange for money paid at a
different time); V.T.C.S. art. 601b, 0 3.24 (state agencies
may pay in advance for goods purchased from federal and
state agencies where advance payment will expedite
delivery): Attorney General Opinion H-1033 (1977) (sale of
accounts receivable from patients by county hospital).
The opinion concluded that the department could pay
"start-up costs" to private entities, provided that the
public receive adequate consideration and the governmental
body retained enough control over the expenditure of the
funds to assure that the public purpose of providing mental
health/mental retardation services was actually met. A
requirement that advances be repaid was discussed as a
possible, although not necessarily exclusive, method of
control. If repayment were required, the transfer would
take the form of a loan rather than a grant.
Based on the authorities cited, we conclude that a
lending of credit will not violate the constitution if it
accomplishes a public purpose and is accompanied by
conditions to ensure the use of governmental credit for a
public purpose. Accordingly, a state or local entity may
provide services to a private person or entity in advance of
receiving payment if a public purpose will thereby be
accomplished and if it places sufficient controls on the
transaction to insure that the public purpose will be
carried out. Attorney General Opinions WW-461 and JW-533
are overruled to the extent that they hold the contrary.
The determination that a particular extension of credit
meets the constitutional requirements is in the first
instance within the sound discretion of the governing body,
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c Ms. Kay Schlueter
subject to judicial review. See. e.a D dson v Marshall
118 S.W.2d 621 (Tex. App. - Waco "19:8, writ dism'd);
Attorney General Opinions JW-1030 (1989); JM-551 (1986);
WW-423 (1982); H-1260 (1978). Mr. Anderson informs us that
Aransas County has installed a new gas dispensing and
payment system which would allow a person to buy airplane
fuel twenty-four hours a day and use an approved credit card
for payment. Several entities, including the Texas Parks
and Wildlife Department, wish to be issued a special card
for the fuel dispensing facilities and be billed on a
monthly basis. You do not indicate what public purpose
would be served by this arrangement. The commissioners
court should determine in the first instance whether such an
extension of credit would meet constitutional requirements.
With respect to the inquiry of the State Law Library,
however, its request letter and the remarks of the State
Purchasing and General Services Commission noted in Attorney
General Opinion WW-461 provide some information as to the
public purpose that might be served by providing copies of
documents to individuals in advance of payment. The State
Law Library "may be used by the members and staff of the
supreme court, court of criminal appeals, the office of the
attorney general, and other state entities and by citizens
of the state." Gov't Code 5 91.002(b). The letter from the
library states that its patrons request next day delivery or
telefacsimile transmission of photocopies because they are
in a hurry for the information. When they do not have the
time to send the money first, the library is forced to
either send the information without charge or not send it at
all. &&R V.T.C.S. art. 6252-17a, § 9 (charges for copies of
documents under the Open Records Act): General
Appropriations Act, Acts 1989, 7lst Leg., ch. 1263, at 5705
(fee schedule for duplication services at State Law
Library). Attorney General Opinion WW-461 noted that the
State Purchasing and General Services Commission might
benefit from reduced administrative costs if it billed for
documents on a monthly basis.
The library might be able to operate more efficiently
and reduce administrative costs by billing on a delayed
basis. In determining whether a public purpose will
actually be served by permitting delayed payment, the
library can balance its savings in administrative costs and
in fees collected that would otherwise be waived against
possible losses through default of payment. The library has
an effective means of control over such transactions in that
it can require a deposit or advance payment by a patron who
has defaulted on payment in the past. We conclude that the
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Honorable James L. Anderson, Jr. - Page 8 (JM-1229)
Ms. Kay Schlueter
library may constitutionally bill patrons for copies of
documents sent in advance of payment. The details of such a
plan, including the controls necessary to carry out its
public purpose, are for the library administrators.
SUMMARY
A lending of credit that accomplishes a
public purpose and is accompanied by controls
that ensure the use of public credit for a
public purpose does not violate article 111,
sections 50 and 52, or article XI, section 3,
of the Texas Constitution. The determination
that a particular extension of credit meets
the constitutional requirements is in the
first instance within the sound discretion of
the governing body, subject to judicial
review. Attorney General Opinions MN-461
(1982) and JM-533 (1986) are overruled to the
extent they hold the contrary.
-
JIM MATTOX
Attorney General of Texas
MARYKELLER
First Assistant Attorney General
mu MCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RENEA HICKS
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan Garrison
Assistant Attorney General
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