### July 1, 1968

sonorableFrank C. Erwin OpinionNO.&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 contractwith Central Energy Corporation for heating and air conditioning services for The University of Texas Medical,School,and related 3earMr. Erwin: question.

Your request for an opinion reads as follows:

"The Board of Regents of The University of Texas.Systemhas entered into a contract with Central Energy Corporation of Dallas, Texas, for heating .andair conditioning services for The Universityof Texas Medical School at San Antonio, Texas. The factual situation relating to the negotiation of this agreement has been discussed on several occasionswith members of your staff, but an official opinion is desired inconnection with the permanent financing of this project. Therefore,we would appreciatevery much your opinion as to the followingquestions:

"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 Universityof Texas System and the Central Energy Corporationvalid and binding obligations of the State of Texas, enforceable in accordancewith the terms of the said instruments?

"2. Is the Board of Regents of The University of Texas System the appropriate agency to contractwith Central Energy Corproation for heating and air conditiong services for The University of Texas Medical School at San Antonio as contemplatedby the customer agreement?

-1230-Eon. Frank 

### c. Erwin,page 2 04-253)

"Weappreciateyour cooperationin this connection. If additionaldata are needed, please let us know."

The contractualagreement referred to in your reguest is for the constructionof a centralplant and an underground distribution system to provide chilledwater and steam. to those buildings constitutingThe Universityof Texas Medical School at San Antonio. The agreement furtherprovides that the Board of Regents shallpay the Central EnergyCorporation rates prescribed in the contract for producingand circulatingchilled water and also agrees to pay Central EnergyCorporationrates called for in the contract for producing and circulatingsteam. The term of the contract is for a period of time ending August 31, 1993.

Section 26 provides:

"No IndebtednessCreated. This agreement shallnot beating an indebtedness against the State of Texas, and all obligationsof the Board hereunder are subject to the availability of appropriationsby the Legislatureof the State of Texas."

In view of the various provisionsof the contract referred to above,-

it is our opinion that theprinciple 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 constructionof this contract. In that case the Courtwas determining the validity of a contractbetween the city and the State,whereby the city agreed to furnishwater for use with the Big Spring State Hospital "as long as the State of Texas shall in good faith retain and operate saidhospital on said site."

In answer to the contention that the contractwas in violation of Section 49 of Article III of the ConstitutionOf Texas, prohibiting the creation of a debt, the Court stated:

"The contention that the purchase contract
was invalidbecause there then existedno legislative appropriation to pay for thewater to be furnished in the future is answeredby this Court's opinion in Charles Scribner's Sonsv. Warrs, 114 Tex. 11, 262 S.W. 722 (1924). In that case an attackwas made on an order of the StateTextbook Commissionpurchasing certain textbooks for the public schools of Texas from Scribner'sSons.

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

Among other objections it was urged that the contract to buy textbooks for a five-yearperiod
was invalidbecause itwas for longer than the two-year period of legislativeappropriations 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'sbooks 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 requisitionof 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 somany 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 iswholly within the control of the school authorities.

"'The contract is for uniform text-books for a period of fiveyears. No quantity is stipulated and no promise to pay, only an agreement to use the books in the schools. The statute and the contractprovide 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),inwhich a long-termwater purchase contractwas attacked: 'Themaking of a contract forwater 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 thereforeadvised that the contract in question is valid and constitutesa valid and binding obligation of the State of Texas enforceable in accordancewith the terms of the contract.

Since the Board of Regents of The Universityof Texas System is the governingboard for The Universityof Texas Medical School at San **Antonio,** you are advised in answer to your secondquestion that the Board is the appropriate agency to execute the contract in question.

SUMMARY

A contractbetween the Board of Regents of The Universityof Texas System and the Central Energy Corporationwhereby the Central Energy Corporationagrees to construct a central plant and an undergrounddistribution system to provide chilledwater and steam to those buildings constitutingThe Universityof Texas Medical School at sari Antonio and to provide chilled.waterand steam at rates specified in the contract for a term endingAugust 31, 1993, constitutes a valid and binding obligationof the State of Texas. City of Big Springv. Board of Control, 404 S.W.?d 810 (Tex.Sup.1966).

eneral of Texas
Prepared by John Reeves Assistant AttorneyGeneral

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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