## ATTORNEY GENERAL OF TEXAS GREG ABBOTT

May 4,2005

Shirley .I.Neeley, Ed.D. Commissioner of Education Texas Education Agency 1701 North Congress Avenue Austin, Texas 78701-1494 Opinion No. GA-0321

Re: Whether an independent school district may enter into a 50-year lease with a private entity to
use and improve the entity’s land for school purposes in exchange for $1.OO per year and the agreement to lease excess school district land to the private entity for 50 years (RQ-0292-GA)

Dear Commissioner Neeley:

On behalf of the Port Neches-Groves Independent School District (“PNG” or “the school district”), you ask about the authority of an independent school district to enter into a 50-year lease with aprivate entity to use and improve the entity’s land for school purposes in exchange for $1.OO per year and the agreement to lease excess school district land to the private entity for 50 years.’

I. Factual Background

A letter from PNG enclosed with your request letter describes the following transaction:

The proposed transaction involves atract ofland owned by Huntsman Petrochemicals [“Huntsman”], who has agreed to lease the land to PNG for a term of 50 years, with an option to renew the lease for an additional 50 years, at the sole discretion ofPNG’s School Board, in exchange for the consideration of $1.OO per year and the use of atract of unused excess land owned by PNG. Essentially, the proposed transaction involves a long-term property exchange between the two parties.

‘See Letter from Shirley J.Neeley, Ed.D., Commissioner ofEducation, Texas Education Agency, to Honorable Greg Abbott, Texas Attorney General (Nov. 8, 2004) [hereinafter Request Letter]; Letter from Dr. Lani Randall, Superintendent, Port Neches-Groves Independent School District, to David A. Anderson, General Counsel, Texas Education Agency (Nov. 2,2004) (attached to Request Letter) [hereinafter PNG Letter] (both letters on tile with Opinion Committee, also available af http:ilwww.oag.state.tx.us).Shirley J. Neeley, Ed.D. - Page 2 (GA-0321)

The land owned by Huntsman is considered ideal for the possible construction of new schools and is almost twice the total acreage of land owned by PNG that would be involved in the proposed transaction. Huntsman wants the use ofPNG’s excess tract for the operation of the local community soccer league that would be displaced when it leases the larger tract to PNG.

PNG Letter, supra note 1, at 1. A brief submitted on PNG’s behalf further informs us that “Huntsman will be limited to [using the school district land for the community soccer league], thus assuring that if, at the expiration of the first 50 year lease term, PNG wishes not to exercise its renewal option, the land’s condition would be substantially similar to the state it would be in upon receipt by Huntsman.“z

II. Analvsis

PNG states “[tlhis unique proposal” requires it to resolve the following question:

Whether Port Neches-Groves Independent School District can construct buildings using public funds upon property that is owned by Huntsman Petrochemicals and that is leased rather than owned and as partial consideration for such lease, provide a tract of PNG’s excess and unused land to Huntsman Petrochemicals for the use as a community youth soccer program without bid or other public approval.
PNG Letter, supra note 1, at 1. No statute expressly authorizes a school district to enter into this kind oftwo-part transaction. Therefore, as PNG recognizes, we must consider separately the school district’s authority to enter into each lease. See id.at 1-2. Accordingly we address (i) the authority of an independent school district to construct buildings on leased land that is privately owned, and (ii) the authority of an independent school district to lease excess school district land to a private entity as partial consideration for the school district leasing land from the private entity.

A. School District’s Authority to Lease and Develop Privately Owned Land

We begin with an independent school district’s authority to lease land from aprivate entity and to develop the land for school district purposes. The Education Code authorizes aboard of trustees to lease real property on the school district’s behalf. The trustees of an independent school district “as a body corporate have the exclusive power and duty to govern and oversee the management of the public schools of the district.” TEX. EDUC. CODE ANN. 5 11.15 1(b) (Vernon

*Brief from Chris Booth, Mehaffy Weber, on behalf of Port Neches-Groves Independent School District, to Honorable Greg Abbott, Texas Attorney General, at l-2 (Dec. 16,2004) ( on file with Opinion Committee) [hereinafter PNG Brief].Shirley J. Neeley, Ed.D. - Page 3 (GA-0321)

Supp. 2004-05). Under section 11.15 l(a) of the Education Code, the trustees of an independent school district “in the name of the district may acquire and hold real and personal property.” 

### Id. 5 11.15 1(a). And aboard of trustees has express statutory authority to spend local school funds for purposes it determines necessary, including obtaining school sites and renting schools. See 

### id. 5 45.105(c) (authorizing the use of certain funds for, among other things, “buying school sites, buying, building, repairing, and renting school buildings, and for other purposes necessary in the conduct of the public schools determined by the board of trustees”).3 Moreover, a school district is also expressly authorized to construct school buildings, see, e.g., 

### id. $8 44.031-,041 (Vernon 1996 & Supp. 2004-05) (governing school districts’ authority to enter into construction contracts), 45.105(c) (Vernon Supp. 2004-05) (authorizing use of certain funds to “build[] school buildings”), and we are not aware of any statutory provision that would limit a school district to constructing school district buildings on land owned by the school district in fee simple.

In addition, PNG’s letter suggests that it is concerned about constitutional limitations on the authority of a school district to use public funds to construct school buildings on privately owned land. See PNG Letter, supra note 1, at 2. Article III, section 52(a) of the Texas Constitution limits the authority of apolitical subdivision, including a school district, to use public funds to aid aprivate entity. 

### See TEX. CONST. 

### art.III, 

### 5 52(a); 

### Lewis v.Zndep.Sch.Dist. ofAustin, 161 S.W.2d 450,452 (Tex. 1942) (“That the School District is a political corporation or subdivision of the State, as described in Section 52 of Article 3 of the Constitution, is well established.“). Section 52(a) prohibits “gratuitous payments to individuals, associations, or corporations,” but “[a] political subdivision’s paying public money is not ‘gratuitous’ if the political subdivision receives return consideration.” 

### Tex.Mm. League Zntergovernmental Risk Pool v. Tex. Workers ’Camp. Comm ‘n, 74 S.W.3d 377,383 (Tex. 2002). With the exception ofgratuitous transactions, which are absolutely prohibited, apolitical subdivision’s use of funds or “thing of value” that aids a private entity must
serve a “public purpose” to pass constitutional muster. As the Supreme Court ofTexas has recently held, in order to comport with article IU, section 52(a), the predominant purpose of a statute requiring apublic expenditure must be to accomplish apublic purpose, not to benefit private parties, and the statute must impose public control over the funds to ensure that the public purpose is accomplished and toprotect the public’s investment and ensure that the political subdivision receives
a return benefit. See 

### id. at 383-84. This office has identified similar principles for determining if
aparticular expenditure serves apublic purpose: “In making an expenditure of [public] funds that benefits aprivate person or entity,

. a [political subdivision’s governing body] will avoid violating article III, section 52 if it (i) determines in good faith that the expenditure serves a public purpose and (ii) places sufficient controls on the transaction, contractual or otherwise, to ensure that the public purpose is carried out.” Tex. Att’y Gen. Op. Nos. GA-01 88 (2004) at 4 (citing Young v. City 

### ofHouston, 756 S.W.2d 813, 814 (Tex. App.-Houston [lst Dist.] 1988, writ denied), 

### City of Coleman Y.

### Rhone, 222 S.W.2d 646, 649 (Tex. Civ. App.-Eastland 1949, writ ref d)); GA-0078 

### (2003) at 4-5.

‘See also Tex. Att’y Gen. Op. No. JM-1000 (1988) at 3, 5 (concluding that former Education Code section 23.26 authorized a school district to rent portable classroom).Shirley J. Neeley, Ed.D. - Page 4 (GA-0321)

With respect to constructing buildings with public funds on leased property, this office has stated: It is well established that the Texas Constitution does not

prohibit the state or a political subdivision from constructing improvements on leased property. [Under article III, section 52(a) and similar provisions,]

. [aIdequate consideration for the expenditure must flow to the public, and adequate controls, contractual or otherwise, must be in place to ensure that the public purpose will be carried out. The fact that improvements are to be constructed on leased property, and the terms ofthe lease, are relevant to the determination whether the state receives adequate consideration for, and retains adequate control over, the expenditure.

Tex. Att’y Gen. LO-97-078, at 2 (citing Attorney General Opinions JM-1030 (1989) at 3 (expenditure of public funds to improve realty owned by private parties), MW-290 (1981) at 1,4 (county may improve building acquired by lease), H-41 6 (1974) at 3 (grant or loan of state funds for construction or improvement of municipal airport located on leased land), H-403 (1974) at 3 (state agency may spend public funds to build, repair, or maintain improvements on leased property), M-512 (1969) at 2 (state agency may refurbish leased building)).

Whether using public funds to construct buildings on leased land comports with these requirements involves questions of fact and cannot be resolved by this office. See 

### id.4 Based on the information you have provided, it appears that the PNG board of trustees could reasonably conclude that constructing school buildings on the leased land would serve aschool district purpose. See PNG Letter, supra note 1, at l-2 (stating that the Huntsman tract is ideal for school construction and that
a loo-year lease term would exceed the structures’ useful life). Your letter also suggests that the lease agreement would grant the school district an exclusive right to use the buildings for 50 to 100 years. Such a lease term could fulfill the PNG board of trustees’ obligation to place sufficient controls on the transaction to ensure that the public purpose is carried out.
B. School District’s Authority to Lease School Land to a Private Entity
Next, we address an independent school district’s authority to lease excess school district land to a private entity as partial consideration for the school district leasing land from the private entity, which is the more complicated issue.

1. 

### TheEducation Code andImplied Authority

A board of trustees holds school property in trust to be used for the benefit of school children in the district. See 

### Love v. City 

### ofDallas, 40 S.W.2d 20,26 (Tex. 193 1). Section

4SeegenerailyTex.Att’yGen. Op.Nos. GA-0128 (2003)at5 (aquestionrequiringresolutionofparticularfacts is “not one in which this offke ordinarily engages in the opinion process”); GA-0106 (2003) at 7 (“This office cannot find facts OIresolve fact questions in an attorney general opinion.“).Shirley J. Neeley, Ed.D. - Page 5 (GA-0321)

11.15 1(c) of the Education Code provides that “[a]11rights and titles to the school property of the district, whether real or personal, shall be vested in the trustees and their successors in office. The trustees may, in any appropriate manner, dispose of property that is no longer necessary for the operation of the school district.” TEX. EDUC. CODE ANN. § 11.151(c) (Vernon Supp. 2004-05). Section 11.154(a) further provides that a “board of trustees of an independent school district may, by resolution, authorize the sale of any property, other than minerals, held in trust for public school purposes.” 

### Id. 5 11.154(a) (Vernon 1996).
While sections 11.151(c) and 11.154 authorize aboardoftrustees to dispose ofreal property that is no longer necessary for the operation of the school district and to sell property, no provision expressly authorizes aboard of trustees to lease school real property to another entity. However, in 

### Royse Independent School District v.Reinhardt, 159 S.W. 1010 (Tex. Civ. App.-Dallas 1913, writ ref d), the court concluded that aboard of trustees’ statutory authority impliedly authorizes aboard to lease school real property to another entity. In that case, the court held that the board’s exclusive power to manage and control school property included the power to lease a school baseball field to the Royse Booster Club during summer months for a three-year term in exchange for the club’s agreement to make certain improvements to the property. The court observed that “[tlhe primary object in granting the privilege to the Royse Booster Club to 

### use its school grounds as aplace to play baseball is to subserve a public purpose, and not to promote some private end.” 

### Royse, 159 S.W. at 1011. Moreover, it concluded that the lease would not harm the property or interfere with school activities, given that it was limited to the summer months, and would “result in quite a financial advantage to the school district.” 

### Id.

Based on these facts, the court concluded that “such use [of the property] is not so inconsistent with the purposes to which the property has been dedicated or set apart as renders the contract illegal or unauthorized.” 

### Id. Relying on 

### Royse, attorney general opinions have recognized boards of trustees’ implied authority to permit private groups to lease school property when the lease does not interfere with the property’s school purpose. See, e.g., Tex. Att’y Gen. Op. Nos. WW-1364 (1962) at 7 (concluding that a school district board of trustees was authorized to lease school property to a tire protection district so long as the lease “does not impede or interfere with the operation of the school”); O-5354 (1943) at 9 (concluding that a school district board of trustees was authorized to lease a school building to a religious sect for a summer religious school provided that the school district received reasonable consideration and the lease did not “interfere[] with the use of such property for school purposes”).

While judicial and attorney general opinions after 

### Royse have not questioned school district boards of trustees’ implied authority to lease school district land, subsequent opinions addressing long-term leases have concluded that boards of trustees lack authority to enter into a lease that interferes with the property’s use for school purposes or that relinquishes the board’s authority to control the property’s use. For example, in 1972 this office concluded that an independent school district lacked authority to lease an unused school facility and grounds for use as a neighborhood center for a 20-year term:

[A] minimum twenty-year lease bythepresent trustees oftheproperty in question, without any discretion being left in the trustees of theShirley J. Neeley, Ed.D. - Page 6 (GA-0321)

future for possible needed use for school purposes, would exceed the recognized discretionary leasing authority of the school The lease would not be deemed atemporary, casual, or incidental use and would amount to an impermissible diversion of governmental property from its intended use for school purposes.
Tex. Att’y Gen. Op. No. M-1047 (1972) at 3,

And even more significantly, in 1986, inthe lastjudicial opinion to consider a school district lease’s validity, the court declared the lease ultra vires and void. 

### SeeRiverRd. NeighborhoodAm ‘n v.S. Tex.Sports, 720 S.W.2d 551,559.60 (Tex. App.-San Antonio 1986, writ dism’d). In that case, the court considered a school district’s authority to lease a football stadium to aprivate entity, STS, according to terms described in part as follows:

The lease is for a primary term of 30 years and grants to lessee, STS, the right to extend the term for two additional IO-year periods. The lease is, thus, for aminimum period of 30 years, and if STS chooses to exercise its options, for an additional 20 years.
The lease gives STS the right to the “exclusive use” of the leased premises for “all lawful purposes,” without paying until at least February 1, 1986.


### Id. at 559. The plaintiffs did not question the district’s right to permit aprivate organization to use district property in a manner that would not interfere with the property’s use for school district purposes, but contended that the lease relinquished the board’s right to manage and control the property, including its right to allow other groups to use the property. 

### Id. The court agreed:

There can be no doubt that [the] District’s Board exceeded its powers when it, by the lease in question, effectively divested itself of the exclusive right to manage and control the property in question, including, for a period of perhaps 50 years, the exclusive right to determine when the District itself could use the school property for school purposes. The invalidity of such abdication of power and diversion ofproperty held for public purposes has been recognized in Texas at least since 1887.


### Zd.at 560.

In sum, a school district board of trustees has implied authority under the Education Code to lease district real property to a private entity, but that authority is limited. In leasing district property, a board of trustees may not (i) permit uses of the property that would interfere with the property’s use for district purposes, or (ii) divest itself of the exclusive right to manage and control the property in question. See Tex. Att’y Gen. Op. No. GA-0252 (2004) at 6.Shirley J. Neeley, Ed.D. - Page 7 (GA-0321)

With respect to the proposed lease, we disagree with the suggestion that the PNG board of trustees need not concern itself with these traditional limitations on its authority because the school district would lease its land to Huntsman as partial consideration for its lease ofHuntsman land. See PNG Letter, 

### supra note 1, at 1. Nor do we agree with PNG counsel’s suggestion that any loss of control over the school district land would be mitigated by the control the PNG would gain over the larger, more valuable Huntsman tract. See 

### generally Love, 40 S.W.2d at 26 (a board of trustees holds school property in trust td be used for the benefit of school children in the district).

But this does not mean that we believe that these limitations on the board’s authority preclude it from leasing the school land to Huntsman, or that the school district’s lease of the Huntsman tract may not be taken into account as a relevant factor in considering the school district’s authority to lease its land to Huntsman. In contrast to the actively used school district facilities at issue in

### Royse and 

### River Road, PNG describes the property it would lease to Huntsman as “unused excess land.” PNG Letter, 

### supra note 1, at 1. The fact that the land is not used by the school district is relevant to whether the proposed lease would permit uses of the property that would interfere with the property’s use for district purposes. See, e.g., Tex. Att’y Gen. Op. No. JM-531 (1986) at 3 (addressing a school district’s authority to lease for a 50-year term undeveloped land that it did not plan to use for instructional purposes and distinguishing 

### RiverRoad on the basis that the facility in that case was actively used by school district sports teams). But the board of trustees must also consider whether PNG may need the land for school district purposes over the term of the lease and, if so, whether the lease would permit the school district to use the land. See, e.g., Tex. Att’y Gen. Op. Nos. GA-0252 (2004) at 7 (concluding that ajunior college district may not divest itself of the right to control campus facilities constructed under a lease); M-1047 (1972) at 3 (concluding that school district lacked authority to lease an unused elementary school for a20-year term with no right to terminate). The PNG letter indicates that Huntsman will not agree to a lease that gives PNG the right to terminate. See PNG Letter, 

### supra note 1,at 2. A lease divesting PNG of any right to manage and control the property for aterm of 50 to 100 years isproblematic under relevant precedent, unless the board of trustees can expressly find that the property is no longer necessary for the operation of the school district. Cj: TEX. EDUC.CODEANN. 5 11.15 l(c) (Vernon Supp. 2004-05) (authorizing
aschool district board oftrustees to dispose ofproperty “that isno longer necessary for the operation of the school district”). In making such a finding, the board of trustees could take into account the fact that the Huntsman tract would be available for school purposes.
In the end, the final determination whether a lease comports with these limitations involves questions of fact and contract interpretation and is thus beyond the purview of an attorney general opinion. See Tex. Att’y Gen. Op. No. GA-0252 (2004) at 6 (junior college district’s authority to lease campus land to private foundation involves questions of fact and contract interpretation); see also Tex. Att’y Gen. Op. No. JM-531 (1986) at 2 (whether a school district’s agreement to lease school district land for a 50-year term interfered with the property’s school district use and the board’s authority “is essentially a question of fact”).’ We suggest that the PNG board of trustees consider and make express findings regarding these issues.

‘Seegenera& Tex.Att’yGen.Op.Nos.GA-0176(2004)at2(attorneygeneralopinionsmay “address apublic entity’s authority to agree to a particular contract term, if the question can be answered as a matter of law,” but they do not construe contracts); GA-0078 (2003) at 2 (same).Shirley J. Neeley, Ed.D. - Page 8 (GA-0321)



### 2. OtherLimitations onAuthority toLease School District Land

The Local Government Code and the Texas Constitution also impose limitations on the authority of a school district to lease real property to aprivate entity that the board of trustees must address.
First, PNG describes the transaction at issue as a “long-term property exchange.” PNG Letter, 

### supra note 1, at 1. The Local Government Code requires political subdivisions, including school districts, to sell or exchange land using competitive procedures, and, in some instances, a long-term lease (or “long-tennproperty exchange”) by apolitical subdivisionmaybe subject to these requirements.
Section 272.001 of the Local Government Code governs the authority of political subdivisions to sell or exchange land, generally requiring apolitical subdivision to provide notice and to obtain bids. See TEX.Lot. GOV’T CODE ANN. 5 272.001 (Vernon Supp. 2004-05). Courts construe the term “political subdivision” to embrace school districts. See 

### City ofE1Paso Y.ElPaso Cmty. Junior Coil. Dist., 729 S.W.2d 296, 299 (Tex. 1987).6 Section 272.001 “protect[s] public property in order that it might not be disposed of for less than true value. The notice and bidding requirements stimulate competition, prevent favoritism, and secure the best price for the property.” 

### Bell Y.Katy Indep. Sch. Dist., 994 S.W.2d 862,866 (Tex. App.-Houston [lst. Dist.] 1999, no pet.) (citing 

### CityofDallas v.McKasson, 726 S.W.2d 173,176 (Tex. App.-Dallas 1987, writ ref dn.r.e.); 

### WestOrange-Cove Consol. Indep. Sch. Dist. v.Smith, 928 S.W.2d 773,776 (Tex. App.-Beaumont 1996, no writ)). Specifically, section 272.001(a) requires that “before land owned by a political subdivision of the state may be sold or exchanged for other land, notice to the general public of the offer of the land for sale or exchangemust be published in anewspaper of general circulation,” with information about sealed bidding procedures. See TEX. Lot. GOV’T CODE ANN. 5 272.001(a) (Vernon Supp. 2004-05). Section 272.001(b) excepts certain types of land and interests from the section 272.001(a) notice and bidding requirements, including, for example, “land that the political subdivision wants to have developed by contract with an independent foundation.” 

### Id. $272.001 (b)(4).’ However, the land and interests described by section 272.001(b), including section 272.001(b)(4), “may not be conveyed, sold, or exchanged for less than the fair market value of the land or interest unless the

%e EducationCodealsoindicatesthatsection272.001generallyappliestoschooldistrictlandsales.Chapter 45,subchapterDoftheEducationCodeauthorizesaboardoftrusteesto sellrealproperty andtoissuerevenuebonds payablefrom the proceeds of the sale, see TEX.EDUC.CODEANN. $5 45.08 l-.086 (Vernon 1996 & Supp. 2004-05), and expressly providesthat Local Govemment Code section 272.001 does not apply to a real property sale conducted under thesubchapter,see id. 545.083 (Vernon 1996); see also Bell v. Kaiy Indep. Sch. Dist., 994 S.W.Zd 862, 865-66 (Tex. App.-Houston [lst Dist.] 1999, no pet.) (holding that subchapter D applies only when a school district issues revmoe bonds from the land sale proceeds and suggesting that section 272.001 otherwise applies).

‘See also Tex. Att’y Gen. LO-97.076, at 3 (“[A]ny contract of sale under the tern of Local Govemment Code section 272.001 (b)(4) between apolitical subdivision and aprivate foundation for the development of aparcel ofpublic land owned by the political subdivision must include an undertaking that the foundation will develop the land as the political subdivision determines.“).Shirley .I.Neeley, Ed.D. - Page 9 (GA-0321)

conveyance, sale, or exchange iswith one or more abutting property owners who own the underlying fee simple.” 

### Id. 5 272.001(b).
Whether alease arrangement is asale or exchange ofland subject to section 272.001 depends upon the lease’s terms, such as the lease’s duration, the political subdivision’s right to control the land during the lease term, andthe political subdivision’s right to improvements at termination. See Tex. Att’y Gen. LO-96-053, at 3 (noting that a court could “conclude that a transaction in which a county transfers equitable title to county real property to another entity with an irrevocable option to purchase constitutes a sale of land for purposes of section 272.001”). A court of appeals recently concluded that section 272.001 does not apply when apolitical subdivision temporarily leases land to aprivate entity. See 

### Walker-v.City of

### Georgetown, 86 S.W.3d 249,259 (Tex. App.-Austin 2002, pet. denied). In that case, the court found that “there was no permanent disposition of land. The City of Georgetown entered into a ten-year lease, with a ten-year renewal option, during which the City retains significant control over the use of the property. Upon termination of the lease, if renewed, the City will acquire the batting cages [built on city property by the private lessee].” 

### Id. at 258.
Neither the PNG letter nor its counsel’s brief addresses section 272.001. See PNG Letter, supra note 1; PNG Brief, supra note 2. This office cannot ultimately determine whether the proposed lease at issue here would constitute a permanent disposition of land subject to section 272.001. See, e.g., Tex. Att’y Gen. Op. No. GA-0252 (2004) at 8; Tex. Att’y Gen. LO-96-053, at 3 (“the determination whether aparticular lease-purchase agreement constitutes a sale [subject to section 272.001] would involve questions offact and contract interpretation and is therefore beyond the scope of an attorney general opinion”). However, the proposed lease term, 50 to 100 years with
no right to terminate, suggests that the lease could rise to a sale or exchange under section 272.001. We urge PNG to consider section 272.001’s requirements and exceptions before proceeding with the transaction.8

In addition, a school district’s agreement to permit aprivate entity to use its land constitutes
a “thing of value” for purposes of article III, section 52(a). See 

### Walker, 86 S.W.3d at 260 (addressing whether city’s lease ofpark land to private company violated article III, section 52(a)); Tex. Att’y Gen. Op. Nos. GA-0252 (2004) at 8-9 (addressing whetherjunior college district’s lease of campus land to private foundation violated article III, section 52(a)), GA-0084 (2003) at 9 (addressing whether a city lease agreement with avolunteer firefighters association violated article III, section 52(a)), JC-0582 (2002) at 5-6 (addressing whether a county lease agreement with a museum violated article III, section 52(a)). Thus, a school district lease to a private entity must

*For example,itmaybepossiblefortheschooldistricttoenterintoanagreementwithHuntsmanafterproviding noticeandaccepting bids foranexchangeofproperty. SeeTEX. Lot. GOV’T CODEANN. $272.001(a), (d) (Vernon Supp.2004-05)(“Thissectiondoesnotrequirethegovemingbodyofapoliticalsubdivisionto acceptanybidoroffer ortocompleteanysaleorexchange.“).Alternatively,itmaybepossibleforPNGtoleasethe schooldistrictlandfor anindependentfoundationtodevelopathleticfieldsundersection272.001(b)(4) withoutnoticeandbids. Seealsonote 7supra. PNGsuggeststhatthevalueofthe Huntsmantractequalsorexceedsthefairmarketvalueoftheschooldistrict land. See PNG Letter, sup-a note 1, at 2; TEX.Lot. GOV’TCODEANN. 5272.001(b) (Vernon Supp.2004-05)(generally requiringthatlandoraninterestundersubsection(b)maynotbeconveyed,sold,orexchangedforlessthanfairmarket Willie).Shirley .I.Neeley, Ed.D. - Page 10 (GA-0321)

satisfy the public purpose test. See, e.g., Tex. Att’y Gen. Op. Nos. GA-0084 (2003) at 8 (applying the public purpose test to a city lease agreement with avolunteer firefighters association), JC-0582 (2002) at 4 (applying the public purpose test to a county lease agreement with a museum).
Here, PNG asserts that in exchange for leasing its property to Huntsman, it would “obtain
an interest in avaluable piece ofland, without any significant cost and certainly farbelow fair market value.” PNG Letter, supra note 1, at 1. It also states that the Huntsman land “is considered ideal for the possible construction of new schools and is almost twice the total acreage” of the land PNG would lease to Huntsman. 

### Id. These statements indicate that the lease would serve a school district purpose, school construction, and would be supported by valuable consideration. Under these circumstances, assuming the lease includes sufficient controls to ensure the public purpose is carried out, we believe acourt could conclude that the lease of school land to Huntsman would comply with article III, section 52(a). See 

### Walker, 86 S.W.3d at260 (“[Tlhe lease entered into here was supported by valuable consideration. As such, it was not a gratuitous donation of public funds or a thing of value.“).Shirley J. Neeley, Ed.D. - Page 11 (GA-0321)

SUMMARY

An independent school district is authorized to lease land from a private entity and to develop the land for school district purposes. An independent school district has implied authority to lease school land to aprivate entity, but in leasing school property the board of trustees may not (i) permit uses of the property that would interfere with the property’s use for district purposes, or (ii) divest itself of the exclusive right to manage and control the property. A long-term exchange of school land for private land may be subject to section 272.001 of the Local Government Code, in which case the school district may be required to provide notice and accept bids.

Article III, section 52(a) of the Texas Constitution does not prohibit a school district from using public funds to construct buildings on leased property or from leasing school land to aprivate entity if the board of trustees determines that the expenditure or use of the thing of value serves a public purpose and places sufficient controls on the transaction to ensure that the public purpose is carried out.

BARRY R. MCBEE First Assistant Attorney General

DON R. WLLLETT Deputy Attorney General for Legal Counsel

NANCY S. FULLER Chair, Opinion Committee Mary R. Crouter Assistant Attorney General, Opinion Committee