## KEN PAXTON ATTORNEY GENERAL OF TEXAS

The Honorable Robert L. Nichols Chair, Committee on Transportation Texas State Senate Post Office Box 12068 Austin, Texas 78711-2068

Dear SenatorNichols: December 14, 2015

OpinionNo. KP-0046 Re: Authority of the Metropolitan Transit Authority of Harris County to participate in the Uptown Houston Transit Project otherwise known as the Post Oak Boulevard Dedicated Bus Lanes Project (RQ-0028-KP)

You seek our opinion on the authority ofthe Metropolitan Transit Authority of Harris County (METRO) to participate in the Uptown Houston Transit Project, otherwise known as the Post Oak Boulevard Dedicated Bus Lanes Project ("Project"). 1
In 2003, Harris County voters approved a referendum on METRO's transit authority system, includingthe METRO Solutions Transit SystemPlan ("TransitPlan"). 

### See Scarbrough v. Metro. TransitAuth. of Harris Cty., 326 S.W.3d 324, 327-29 (Tex. App.-Houston [1st Dist.] 2010, pet. denied) (discussing the referendum election, referencing METRO's Resolution No. 2003-93 andResolutionNo. 2003-77, and acknowledgingthe voter's approval ofthe TransitPlan). The Transit Plan included a METRORail component that contained, among other segments, an Uptown/West Loop segment involving approximately 4.4 miles ofcommuter light rail along Post. OakBoulevard. 

### See Notice ofSpecial Election, METRO, at 1 (ResolutionNo. 2003-77 &Exhibits A, A-4).2 You tell us that "[i]nstead ofconstructing light rail on Post Oak, the current project, which is ajoint**ventur~** between the City ofHouston, METRO and Uptown, intends to utilize the same approved light rail route along Post Oak but with a different technology; known as a Bus Rapid Transit." Request Letter at I. Yo.u also tell us that the Project will "allegedly not be built or funded by METRO, but METRO will nevertheless fully participate in the Project by operating and maintaining the dedicated Project bus lanes and dedicated Project buses." 

### Id And you state that METRO will develop "bus specifications, operatingplans, fare collectionpolicy and systems, bus schedules and ·other system characteristics necessary to operate the dedicated bus service.

1See Letter from Honorable RobertL. Nichols, Chair, Senate Comm. on Transp., to Honorable Ken Paxton, Tex. Att'y Gen. at 1-2 (June 15, 2015), https://www.texasattomeygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter"). Your question is the same question that was before a court in Cosmopolitan Condominium Owners Ass 'n v. Metropolitan Transit Authority of Harris County, No. 2015-34192 (270th Dist. Ct., Harris Cty., Tex. June 15, 2015). This cause has been dismissed by the court and the question is no longer in litigation. See Order ofDismissal (10/29/2015) (on file with the Op. Comm.).

2 Available at https://ridemetro.org/METROPDFs/AboutMETRO/Referendum/Referendum2003-web.pdf.The Honorable Robert L. Nichols

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METRO will also procure the dedicated buses." 

### Id You therefore question whether METRO's involvement in the Project is illegal "in that it would violate the contract METRO entered into with the voters via the 2003 referendum," given that the voters approved light rail on Post Oak. 

### Id at 2.The "contract with the voters" doctrine stems from article I, section 16 of the Texas Constitution, whichprohibits laws that impairthe obligation ofcontracts. TEX. CONST. art. I,§ 16 notes ofdecisions; see San Saba Cty. v. McCraw, 108 S.W.2d 200, 202-04 (Tex. 1937) (orig. proceeding). This doctrine is "grounded in

... election orders and propositions." Tex. Att'y Gen. Op. No. JC-0400 (2001) at 5. Essentially, the election order calling for a bond election and establishing the purposes for which bonds will be issued becomes a contract with the voters once the voters approve the bonds. See id. Thus, proceeds ofbonds approved by voters "may only be expendedforthepurpose for whichthey were approved." Tex. Att'yGen. L0-98-060, at2. "They may not be expended for an additional or different project." Id. When an election order states only a general purpose for which bonds will be issued and does not specify particular projects for whichthe proceeds will be used, the governing body is free to exercise its discretion in expending the funds within the scope ofthe general purpose. Id. at 2-3. Where the election order specifies

· the projects for whichbondproceeds will be used; the proceeds can onlybe used for thoseprojects

and cannotbe applied to otherprojects. See id. at 3; see generally Fletcher v. Ely, 53 S.W.2d 817, 818 (Tex. Civ. App.-Amarillo 1932, writ refd) (distinguishing discretion ofgovernmental body to expend bond proceeds when bond proposal does not identify the specific road to be paved but indicates only that route must be between two points against its discretion when a proposal identifies the particular route and road to be paved). Courts considering the question look to the relevant documents comprising the "contract with the voters" to ascertainthe governmental body's intent with regard to the proceeds.**S~e** City of San Antonio v. Headwaters Coal., Inc., 381 S.W.3d 543, 551 (Tex. App.-San Antonio 2012, pet. denied). Here, we consider METRO's resolutions calling for the 2003 special election. 3 See id. The resolution calling for the special election stated thatthe propositionto be submitted to the voters was

a proposition to authorize METRO to issue bonds, notes, and other obligations payable, in whole or in part, from seventy-five percent (75%) ofMETRO's sales and use tax revenues for the acquisition, construction, repair, equipping, improvement or extension of METRO'stransit authority system, includingthe METRO Solutions Transit SystemPlan, as describedherein, whichincludesbus service expansions and construction ofextensions ofMETRO'srail system known as "METRORail," to approve suchplan andconstruction of the METRORail and commuter line components thereof, and to dedicate twenty-five percent (25%) ofMETRO's sales and use tax

3Initially approved on August 18, 2003, METRO Resolution No. 2003-77 called for a special election. See Notice ofSpecial Election, METRO, at 1(ResolutionNo. 2003-93 & Attachment 1, Resolution No. 2003-77), supra note 2. METRO ResolutionNo. 2003-93, approved on August 28, 2003, approved, adopted, ratified, and confirmed the August 18, 2003 resolution. See id.The Honorable Robert L. Nichols

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revenues through September 30, 2014, for street improvements and mobility projects, as authorized by law and with no increases in the currentrate ofMETRO's sales and use tax
.... Notice of Special Election, METRO, at 1 (Resolution No. 2003-93 & Attachment 1, Resolution No. 2003-77) (emphasis added). The ballot language sought voter approval of [a]uthorization of METRO to issue bonds, notes and other obligations payable, in whole or in part, from 75% ofmetro's sales anduse taxrevenues in an aggregate principal amount not to exceed $640,000,000 for METRO's transit authority system, including the metro solutions transit system plan

..., which includes bus service expansions

... and construction ofextensions and new segments of metro'srail systemknown as "metrorail,"approvalof suchplanand construction ofall segments ofthe metrorail and commuter line components
... , and dedication of25% ofmetro's sales and use tax revenues through September 30, 2014, to street improvements and related projects, as authorized by law, and with no increase in the

.currentrate ofmetro's sales and use tax. Id. at 2 (Exhibit D) (emphasis added). Both the resolution language and the ballot language explicitly reference METRORail "commuter line components." As noted earlier, the commuter line component has different rail segments, one of which is the Uptown/West Loop segment described as "[a]pproximately 4.4 miles north from Westpark along Post Oak Blvd. and the West Loop 610 to the Northwest Transit Center. Serves the Galleria and Uptown businesses on Post Oak Boulevard. This segment or line will have approximately 7 stations." Id. at 1 (Exhibit A-4). The plain language ofthe election order and the ballot language clearly indicate that METRO intended some portion ofthe bondproceeds to be spent on commuter line components. Similarly, the exhibits incorporated into the resolution calling for the special election clearly identify which ofthe particular rail components were to benefit from the bond proceeds. See id. (Exhibits A & A-4). Thus, a court would likely determine that METRO's contract with the voters included the expenditure ofa portion ofthe bond proceeds on the Uptown/West Loop 4.4 mile rail segment. See Fletcher, 53 S.W.2d at 818 (stating that when the voters approve a specific project, "the proceeds ofthe bond issue are 'earmarked' with the character ofa trust fund which may not be diverted to another purpose orproject.·

...''.) (citing Blackv. Strength, 246 S.W. 79 (Tex. 1922)). In briefing submitted to this office, METRO argues that its contract with the voters comprises only section 14 ofthe Notice ofSpecial Election, entitled METRO's Agreement with the Voters, which section does not contain a requirement for rail only on Post Oak Boulevard.4 Yet, section 14 refers to and incorporates by reference Exhibit A-4, which describes 4.4 miles of light rail along Post Oak Boulevard. See Notice of Special Election, METRO, at 1 (Resolution No. 2003-93 & Attachment 1, Resolution No. 2003-77) (Exhibit A-4). A court would likely

4 See Brieffrom Alva I. Trevino, Gen. Counsel, METRO at 5-6 (Nov. 10, 2015) (hereinafter "METRO Brief') (on file with the Op. Comm.).The Honorable Robert L. Nichols

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consider the entirety ofthe order and notice ofthe election to determine the nature ofthe contract madebythevoters. See generally City of SanAntonio v. Headwaters Coal., Inc., 381 S.W.3d 543, 552 (Tex. App.-SanAntonio 2012, pet. denied) (determining that the plain language ofthe bond ordinance constitutes the contract with the voters). In addition, METRO argues that "[v]oter approval ofthe planning and construction ofadditional light rail lines and bus service expansions was needed" only to satisfy Houston City Charter requirements. METRO Brief at 4. METRO asserts it "did not need voter approval to construct light rails, but it was required to**g~t** City of Houstonapprovalto utilizerail onHouston'scity streets." Id. TheTransportationCode authorizes metropolitanrapid transit authorities to "call an electionto determine the voters' will on any issue that the board is authorized to decide under this chapter or on the exercise ofany discretionary power of the board under this chapter." TEX. TRANSP. CODE § 451.072(b). Importantly, this provision allows the board to "specify whether the results of the election are binding on the authority." Id. In submitting the question oflightrail to the voters inthe 2003 election, METRO submittedthe proposition as a binding one. These arguments are unavailing. WhetherMETRO'sparticipationintheProjectviolatesthatcontractitmadewiththe voters is a separate question. The voters mustreceive "substantially the benefits expectedbythem when they cast their votes." Thayer v. Greer, 229 S.W.2d 833, 836 (Tex. Civ. App.-Amarillo 1950, writrefd n.r.e.). Indeterminingwhether a governmentalbodyviolates its contractwiththevoters, "[t]he law does notrequire a literal performance, butthere mustbe left to the parties substantially the benefits expected." Fletcher, 53 S.W.2d at 821. Ifthere is a change inthe use ofthe proceeds as approved by the voters but "the changes have not materially detracted from these benefits," courts will generally find that there has been substantial compliance with the "contract." Id. The question whether METRO's participation in the Project ultimately violates its contract with the voters will requiretheresolution ofseveral fact questions, including questions regarding the actual expenditure ofthe bond proceeds and whether the Project will prevent the development ofthe promised rail segment,5 and is beyondthe purview ofan attorney general opinion. See Tex. Att'y Gen. Op. No. GA-0876 (2011) at 1 (noting thatthis office does notresolve disputed fact questions in attorney general opinions).

5In connection with a previous request for an attorney general opinion, RQ-1217-GA (2014), which was subsequently withdrawn, METRO acknowledged that it "cannot**~gree** to build a bus line to the exclusion ofthe METRORail that the voters specifically approved." See Letter and brieffrom Honorable Vince Ryan, Harris Cty. Att'y, to Honorable Greg Abbott, Tex. Att'y Gen. at 4 (Aug. 28, 2014) (on file with the Op. Comm.).The Honorable Robert L. Nichols

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### SUMMARY
A courtwould likely determinethatthe MetropolitanTransit Authority's contract with the voters included the expenditure of a portionofthebondproceeds ontheUptown/WestLoop 4.4 mile rail segment. Whether METRO's participation in the Uptown Houston Transit Project violates that contract with the voters requires the resolution offact issues that are beyond the purview ofan attorney general opinion.

CHARLES E. ROY FirstAssistant Attorney General BRANTLEY STARR Deputy Attorney General for Legal Counsel VIRGINIA K. HOELSCHER Chair, Opinion Committee CHARLOTTE M. HARPER Very truly yours,

KEN PAXTON Attorney General ofTexas

Assistant Attorney General, Opinion Committee