July 1, 1968 

sonorable Frank C. Erwin Opinion NO.&253 

Zhairman, The University of 

Texas Board of Regents Re: Authority of the University 

'Jniversity of Texas of Texas Board of Regents to 

hstin, Texas contract with Central Energy 

Corporation for heating and 

air conditioning services 

for The University of Texas 

Medical,School, and related 

3ear Mr. Erwin: question. 

Your request for an opinion reads as follows: 

"The Board of Regents of The University 

of Texas.System has entered into a contract 

with Central Energy Corporation of Dallas, 

Texas, for heating .and air conditioning services for The University of Texas Medical School 

at San Antonio, Texas. The factual situation 

relating to the negotiation of this agreement 

has been discussed on several occasions with 

members of your staff, but an official opinion 

is desired inconnection with the permanent 

financing of this project. Therefore, we 

would appreciate very much your opinion as 

to the following questions: 

"1. Are the customer and lease agreements, 

which are attached to this opinion request, 

dated October 6, 1967, by and between the 

Board of Regents of The University of Texas 

System and the Central Energy Corporation valid 

and binding obligations of the State of Texas, 

enforceable in accordance with the terms of the 

said instruments? 

"2. Is the Board of Regents of The 

University of Texas System the appropriate 

agency to contract with Central Energy Corproation for heating and air conditiong services for The University of Texas Medical 

School at San Antonio as contemplated by the 

customer agreement? 

-1230- 
Eon. Frank c. Erwin, page 2 04-253) 

"We appreciate your cooperation in this 

connection. If additional data are needed, 

please let us know." 

The contractual agreement referred to in your reguest is for the construction of a central plant and an underground distribution system to provide chilled water and steam. 

to those buildings constituting The University of Texas Medical 

School at San Antonio. The agreement further provides that the 

Board of Regents shall pay the Central Energy Corporation rates 

prescribed in the contract for producing and circulating chilled 

water and also agrees to pay Central Energy Corporation rates 

called for in the contract for producing and circulating steam. 

The term of the contract is for a period of time ending August 

31, 1993. 

Section 26 provides: 

"No Indebtedness Created. This agreement 

shall not beating an indebtedness 

against the State of Texas, and all obligations of 

the Board hereunder are subject to the availability 

of appropriations by the Legislature of the State 

of Texas." 

In view of the various provisions of the contract referred to above,- it is our opinion that the principle of law announced by the Supreme Court of Texas in City of Big Spring'v. 

Board of Control, 404 S.W.Zd 810 (Tex.Sup. 1966), governs the 

construction of this contract. In that case the Court was determining the validity of a contract between the city and the 

State, whereby the city agreed to furnish water for use with 

the Big Spring State Hospital "as long as the State of Texas 

shall in good faith retain and operate said hospital on said 

site." 

In answer to the contention that the contract was in 

violation of Section 49 of Article III of the Constitution Of 

Texas, prohibiting the creation of a debt, the Court stated: 

"The contention that the purchase contract 

was invalid because there then existed no legislative appropriation to pay for the water to be 

furnished in the future is answered by this Court's 

opinion in Charles Scribner's Sons v. Warrs, 114 

Tex. 11, 262 S.W. 722 (1924). In that case an 

attack was made on an order of the State Textbook 

Commission purchasing certain textbooks for the 

public schools of Texas from Scribner's Sons. 

- 1231- 
Hon. Frank C. Erwin, page 3 @l-253) 

Among other objections it was urged that the 

contract to buy textbooks for a five-year period 

was invalid because it was for longer than the 

two-year period of legislative appropriations 

and created a debt which could not be paid for 

out of the reserves for the biennium in which 

created. This Court said: 

"'This contract obligates the state to 

introduce into and use relator's books in the 

public free schools for a period of five years. 

It obligates relator to furnish, offer, and sell 

these books to the state each year for five years, 

upon the requisition of the school authorities 

each.year for such books as may be needed. Payment for them is to be made out of the current 

fund each year as they are purchased. The obligation of the contract is not to buy a fixed 

number or amount of books, but only so many as 

are.needed by the schools of the state. Liability 

is fixed only for such amounts as are requisitioned 

by the trustees of the schools. The number of 

books purchased for any year and the amount of 

money applied thereto is wholly within the control of the school authorities. 

"'The contract is for uniform text-books 

for a period of five years. No quantity is 

stipulated and no promise to pay, only an agreement to use the books in the schools. The statute 

and the contract provide that no debt is created. 

The obligation to pay arises only upon the purchase and delivery of books for the year when 

needed, and according to the purchase. The books 

so furnished and so purchased during any year do 

not make a charge on the future resources of the 

state, but are paid for each year as the purchases 

are made.’ 

"This Court quoted from the Fase of City 

of Tyler v. L. L. Jester & Co., 97 Tex. 344, 

78 S.W. 1058 (1904), in which a long-term water 

purchase contract was attacked: 'The making 

of a contract for water for a number of years, to 

be delivered in the future did not create a debt 

against the city, but the liability of the city 

arose upon the use by it of the water during each 

year. ' " 

-1232- 
Hon. Frank C. Erwin, page 4 (M-253) 

You are therefore advised that the contract in 

question is valid and constitutes a valid and binding obligation of the State of Texas enforceable in accordance with 

the terms of the contract. 

Since the Board of Regents of The University of 

Texas System is the governing board for The University of 

Texas Medical School at San Antonio, you are advised in answer 

to your second question that the Board is the appropriate 

agency to execute the contract in question. 

SUMMARY 

A contract between the Board of Regents of 

The University of Texas System and the Central 

Energy Corporation whereby the Central Energy 

Corporation agrees to construct a central plant 

and an underground distribution system to provide 

chilled water and steam to those buildings constituting The University of Texas Medical School 

at sari Antonio and to provide chilled.water and 

steam at rates specified in the contract for a 

term ending August 31, 1993, constitutes a valid 

and binding obligation of the State of Texas. 

City of Big Spring v. Board of Control, 404 

S.W.?d 810 (Tex.Sup. 1966). 

eneral of Texas 

Prepared by John Reeves 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Hawthorne Phillips, Chairman 

Kerns Taylor, Co-Chairman 

James McCoy 

James Broadhurst 

Scott Garrison 

Dan Jones 

A. J. CARUBBI, JR. 

Executive Assistant 

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