ATTORNEY GENERAL OF TEXAS GREG ABBOTT
February 16, 2011

The Honorable Allan B. Ritter Chair, House Committee on Natural Resources Texas House ofRepresentatives Post Office Box 2910 Austin, Texas 78768-2910

Dear Representative Ritter: Opinion No. GA-0843 Re: Authority of the Sandy Land Underground Water Conservation District to transfer certain assets to an individual or other entity (RQ-0904-GA)

You ask aboutthe authority oftheSandyLandUndergroundWaterConservationDistrict (the "District") to transfer certain assets to an individual or other entity.' Under chapter 36 of the Water Code, an underground water conservation district is directed to "develop a comprehensive management plan which addresses [particular] management goals," including, 

### inter alia, "conservation, recharge enhancement, rainwater harvesting, 

### precipitation enhancement, or brush control, where appropriate and cost-effective." TEX. WATER CODE ANN. § 36.1071(a)(7) (West 2008) (emphasis added). You tell us that the District developed a comprehensive management plan that included among its goals that of cloud seeding for the intended purpose of "precipitation enhancement.,,2 Request Letter at 1-2; 

### see SANDY LAND UNDERGROUNDWATERCONSERVATIONDIST., MANAGEMENTPLAN (2009-2014) at 14 (Goal #4). 3 Because state funds are no longer available for cloud seeding operations, the District proposes to transfer certain assets of its cloud seeding program to "an individual or other entity that will essentiallycarryontheprogram's work so thattheDistrictcancontinueto benefitfrom programdata gathering, research, and cloud seeding functions." Request Letter at 2. You ask whether, both in statutory and constitutional terms, the District may do so. ld. at 6. With regard to statutory authority, section 36.158 ofthe Water Code provides: A district may make or accept grants, gratuities, advances, or loans in any form to or from any source approved by the board,
lRequest Letter at 1-2 (available at http://www.texasattorneygeneral.gov). 2Wepresumethatthe executive management plan was submitted to and approved bytheexecutiveadministrator ofthe Texas Water Development Board, in accordance with the statutory directive ofsections 36.1071 and 36.1072 of the Water Code. See TEx. WATER CODE ANN. §§ 36.1071-.1072 (West 2008). 'Available at http://www.sandylandwater.comldocuments.html(last visited Feb. 14,2011).The Honorable Allan B. Ritter

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including any governmental entity, and may enter into contracts, agreements, and covenants in connection with grants, gratuities, advances, or loans that the board considers appropriate. TEX. WATER CODE ANN. § 36.158 (West 2008). Thus, in strictly statutory terms, the District is empoweredto transferthe assets ofits cloud seedingprogram to any entity "thattheboardconsiders appropriate." As you note in your request, however, we must also consider constitutional issues,. specifically section 52(a) ofarticleIIIoftheTexas Constitution, whichprohibitstheLegislaturefrom authorizing any subdivision ofthe state "to lend its credit or to grantpublic money orthing ofvalue in aid of, or to any individual, association orcorporation whatsoever." 

### TEx. CONST. art. Ill, § 52(a). We do not understand your request to question the facial constitutionality ofsection 36.158 oftheWater Code in so far as it generally authorizes the District to "make

... grants." Rather, we construe your request to assume the constitutionality of the statute by reading it to require any particular grant to conform to the relevant constitutional constraints. The Texas Supreme Court has frequently declared that the prohibition ofarticle Ill, section 52(a) means that the Legislature may not "requiregratuitous payments to individuals, associations, or corporations." Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Compo Comm'n, 74 S.W.3d 377, 383 (Tex. 2002); see also EdgewoodIndep. Sch. Dist. v. Meno, 917 S.W.2d 717, 740 (Tex. 1995); Davis V. City of Lubbock, 326 S.w.2d699, 709 (Tex. 1959). A political subdivision's transfer ofpublic assets is not "gratuitous" ifthepolitical subdivision receives return consideration. Tex. Mun. League Intergov 'tl RiskPool, 74 S.W.3d at 383. Such transfers are permissible so long as the statute authorizing them "serves a legitimate public purpose" and "affords a clear public benefit received in return." Id: The Texas Supreme Court has articulated a three-part test to determine whether a statute accomplishes a public purpose under section 52(a). The entity contemplating the grant must (1) ensure that its purpose is to "accomplish a public purpose, not to benefit private parties"; (2) retain public control over the public assets and/or rights associated with the transaction in order to ensure that a publicpurpose is accomplished andtoprotectthe public's investment; and (3) "ensurethatthe political subdivision receives a return benefit." Id. at 384. In a prior opinion, we said that the determination of whether a particular contract or agreement accomplishes a public purpose and satisfies the three-part test articulated by the court is in the first instance a matter to be determined by the board ofdirectors ofthe District, subject tojudicial review. Tex. Att'y Gen. Op. No. GA0553 (2007) at 4; see also Tex. Att'y Gen. Op. No. JC-0080 (1999) at 5. Whether article Ill, section 52(a) authorizes thetransfer contemplated here will dependupon the facts ofany particular transaction, including, interalia, whetherthe transfer will accomplish the

'The Texas Supreme Court's decision was concerned with the facial constitutionality ofthe statute at issue in the RiskPool case. As we have noted, we are concerned in the present instance only with the question ofwhether the statute under consideration here, section 36.158 oftheWater Code, may beconstitutionally applied by the District. See Tex. Mun. League Intergov'tl Risk Pool, 74 S.W.3d at 383-84.The Honorable Allan B. Ritter

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statntory goals ofthe District, e.g., precipitation enhancement. Because you have not provided us with sufficient information about the details ofthe transaction, we cannot determine whether the transfer in question satisfies the constitutional test. You also ask a series ofquestions about the circumstances and conditions under which the District may generally transfer assets from the cloud seeding program, including, potentially, a transfer oftitle to one ormore aircraft. RequestLetter at 6-7
. You suggest, interalia, thattheBoard maywish to transfer assets to one or more members ofthe Board, orto its officers and/oremployees. [d. To the extent these questions implicate the constitutional authority ofthe Districtto accomplish the referenced transfer of assets, we will address them together. However, we lack the necessary information to make that determination because such an inquiry would necessarily involve mixed questions oflaw and fact, and is thereforebeyondthe scope ofan attorney general opinion. Like the determination abouttheconstitutionalityofthe transfer oftheDistrict's assets, these matters belong, in the first instance, to the sound discretion ofthe District's board of directors, subject to judicial review. We can here, however, briefly advise you of certain statutory provisions that must be addressed when considering a transfer to any current director, officer, or employee ofthe District. Chapter 176 ofthe Local Government Code applies to a member ofthe governing board of the District, as well as to any officer and certain employees and vendors ofthe District. TEX. Loc. GOV'TCODEANN. §§ 176.001-.003, .005 (West200S). A personto whom chapter 176 is applicable is required, under certain circumstances, to file a "conflicts disclosure statement" under section 176.003, thecontents ofwhich are describedby section 176.004. See generally Tex. Att'yGen. Op. No. GA-0446 (2006). Likewise, chapter 171 of the Local Government Code is applicable to every "local public official," definedto include a memberoftheboard ofdirectors ofthe District. See TEX. LOc. GOV'T CODE ANN. § 171.001(1) (West 200S). Ifa current District director "has a substantial interest in a business entity," and a transaction between the District board and that business entity will have a "special economic effect on the business entitythat is distinguishable from the effect on the public," then the director is required to "file, before a vote or decision on any matter involving the business entity

... an affidavit stating the nature and extent of the interest," and to "abstain from further participation in the matter." [d. § 171.004(a). Violation of section 171.004 constitutes a class A misdemeanor. [d. § 171.003(b). Before the board of directors of the District enters into any transaction to dispose of the assets described in your request, we urge the board to consult with its attorney.The Honorable Allan B. Ritter

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### SUMMARY Theboardofdirectors ofthe SandyLandUndergroundWater Conservation District has broad statutory authority to transfer certain assets to any individual or entity. Whether it may do so under article ill, section 52(a) of the Texas Constitution depends upon whether such transfer comports with the public purpose analysis promulgatedbythe Texas SupremeCourtin 

### Texas MunicipalLeague Intergovernmental Risk Pool 

### v. Texas Workers' Compensation Commission, 74 S.W.3d 377 (Tex. 2002), and its progeny.

DANIEL T. HODGE First Assistant Attorney General DAVID J. SCHENCK Deputy Attorney General for Legal Counsel NANCY S. FULLER Chair, Opinion Committee Rick Gilpin Assistant Attorney General, Opinion Committee