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DAN MORALES ATTORNEY GENERAL Sbtate of 

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March IO, 1995 HonorableDavidH. Cain Texas State Senate P.O. Box 12068 Austin, Texas 78711 Gpiion No. DM-331 Re: Whether a city’ s expenditures of community development block grant funds are subject to state competitive bidding hvs (RQ-644) Dear senator Cain:
In your capacity as chahman of the House &m&tee on Transportation you asked whether the state’ s competitive bidding laws apply to community development block grant (“CDBG”) 8mds “received and distributed” by a city to (a) “nonprofit contractors” and @) “for-profit entities.” You say that federal law, at least, “does not. require that CDBG funded projects be competitively bid if cities award a grant to a nonprofit corporation.” Also, you note that, while the municipal competitive bidding provisions in section 252.021 of the Local Government Code apply to “[a] contract..

. [that requires M expenditure].

. . from one or more municipl fun&” section 373.005(c) of the Local Government Code makes a distinction, in the context of municipal community development projects, between “fbderal money” and “municipal funds.” In our opinion, a city’ s expenditures of CDBG Smds are subject to competitive bidding under state law when spent on %mtmcts” exceeding the threshold amounts set out in those laws and not fallingwithin any of the exceptionsto the bidding requirements set out there or elsewherein state law. Chapter 373 of the Local GovernmentCode generally authorizes a municipalityto finance community developmentprojects using federal funds received by the municipality as well as other 8mds of the municipality. Section 373.005(c),referenced in your request, reads in pertinent part:

A municipalitymay implement programsto provide Snancingfor the acquisition, wnstruction, improvement or rehabiitation of privately owned buildings and other improvements or to assist private, for-profit entities ifthe assistanceis necessary or appropriate to carry out an economic development project, through the use of loans and grants from federal money remitted to the WCipslity.

. . . A municipality may not provide municipal property or municipaljunrl for private purposes. The programs and financing must be in keeping with an approved wmmunity development plan that the municipality has determined to be a public purpose. AHonorableDavid H. Cain- Page 2 PM-33 1)

program established for financing the acquisition, wnstruction, improvement,or rehabilitationof buildingsand improvements,or for financingeconomicdevelopmentprojects, through the use offerlea funds may prescribe procedures under which the owners of the buildings,improvements,or economicdevelopmentprojects agree to partially or fully reimbursethe municipality. emphasis added.] The federal law providing for the granting of CDBG fbnds is found in 42 U.S.C. chapter 69. See also 24 C.F.R. pt. 570. We sre aware of nothing in current federal law. however, that specit?caUyaddresses the applicabiMy of state wmpetitive bidding requirementsto the use of CDBGfundsby recipientmunicipalities. Severalprior opinionsof this officeconcludedthat federal ?evenue sharing”funds received by local govemments under chapter 67 of title 3 1 of the United States Code, the Revenue Sharing Act, now repealed. were subject to state laws generally applicable to those entities’ public 8mds.r See Attorney General Gpiions IM-716 (1987); MW-329 (1981); H-1189 (1978); H-1010; (1977), and H-127 (1973). In support of their wnclusions, those opinions, irrrer alia, cited federal provisions specifically nuking recipient entities’expendituresof any federalrevemresharingfbnds received subjectto the same laws and procedures applicable to other timds of those entities. See 31 U.S.C 5 6794(a) (repealed 1986). in wntrast, the federal law pertaining to CDBGs provides merely that grantees must “comply with the other provisions of [42 U.S.C. ch. 691 cmd wirh other apphd$e lows..” 42 U.S.C. 0 5304(b)(6) (emphasisadded).
In our opinion, however, federal timds discretionarily obtained and expended by Texas municipalitiestake on the character of municipalfunds and are generally subject to the state laws per&ing to such funds absent specificexceptions made under state law. We believe this to be the case even in the absence of specific federal provisions acknowledgingthe applicabiity of state law, such as those in the now-repealed Revenue SharingAct, and indeed even ifthe pertinent federal law specifically imposed requirements wntrary to state law.2
Further, as to the applicable state law here, while we think it IUlMCCSSaryittthiS context to determineprecisely what, if any, distinctionthe legislature intended to make in section 373.005(c) of the Local Government Code vis~%visthe uses to which &deral

‘The Revenue !&ring Act wns tcpealai in 1986. Pub. Law No. 99372, TiL XIV, 0 14001(a)(l), Apr. 7,1986,100 Stat. 327.

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.

timds and finds from other sources could be put by a city on wmmunity development projects, we do not believe that the use of the distinct terms “federal money” and “municipsJfunds” in section 373.005(c) was itself intended to exempt expenditures of federal 8mds in the hands of a municipalitytkm the operation of state law generally applicable

to municipal

funds. CDBG receipts would presumably be subject to the municipalbudget processsection 102.003 of the Local Govemment Code rewires funds received and available

“from all sources” to be included in the budget, Likewise, we wuld not imagine that CDBGreceipts would not have to be deposited in the municipaldepository under chapter 105 of the Local GovernmentCode, even though those provisions wnsistently speak only to the deposit of “municipalfunds.” See id. 58 105.014- .015, .031. Had the legislature intended to exempt the expenditure of CDBG grant money 8om the state wmpetitive bidding laws, we think it would have specitMly done so. See. e.g., Local Gov’t Code 8Q212.071 (excepting certain municipal public improvement wntracts from bidding requirements), 374.904 (exemptingcertain municipalsales wmlected Withurban renewal projects from state law biddingrequirements), 392.0565 (added in response to Attorney General OpinionJTvl-573

(1986) specilicaUy

exemptingmunicipalhousing authoritiesfrom state law to extent newssary to participate in Consolidated Supply Program of Department of Housing and Urban Development); Attorney General Gpiion JM-573 (1986) (municipalhousing authority may not participate in Consolidated Supply Program of Department of Housing and Urban Development Without also complying with state competitivebiddinglaws). Moreover, we think it clear that the fact, in itself, that an expenditure of CDBG funds is made to a nonprofit as opposed to a for-profit entity does not take the expenditure out of the competitive bidding requirements. The municipal wmpetitive bidding requirements in chapter 252 make no general distinction betvveennonprofit and for-profit wntractees. Section 252.022(7)(P) does make a specific bidding requirement exception for ‘management services provided by.

. . nonprofit wrporations” to certain museums, parks, zoos, or “other facilit[ies].” This specitic exception suggests that wntracts over the threshold amounts Withnonprofit entities are generally subject to the bidding requirements, absent specific exceptions. See also Attorney General Gpiion I’M-385(finding that a wunty contract with a nonprofit entity Was exempted from the competitive bidding requirements only because a state statute specificahy applicableto wntracts of the non-profit entities at issue there expressly excepted them from the requirements). Gf wurse, whether a particular expenditureof CDBG fimds wnstitutes one under a “wntract”s in a suEcient amount as to bring it Within the wmpethive biddingprovisions

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Of course, whether a particular expenditure of CDBG funds constitutes one under a ‘contract”3 in a suf&cient amount as to bring it within the competitive bidding provisions of chapter 252, or whether a particular contract would fall within the exceptions to the bidding requirements in that chapter or elsewhere in state law would depend on the facts of the particular case. See, e.g., Local Gov’t Code 5 252.022(a)(4) (“personal or professional services*’ exception to bidding requirements), (a)(1 1) ,(exception

for certainpublic improvementwntracts under chapter 212).

SUMMARl Expenditures by a city of Federal Community Development Block Grant Funds on “‘ wntracts”exceeding the threshold amounts set out in the state’ s municipal wmpetitive bidding laws and not falling within any of the exceptions to the bidding requirements set out there or elsewhere in state law are subject to competitive bidding.

DAN MORALES Attorney Genera)of Texas JORGE VEGA First Assistant Attorney General SAFL4I-l J. SHIRLEY Chair, Opinion Committee Pmpared by William Walker Assistant Attorney Genera)

3We note that your tquti spealu in part of cities’ expeaditurr of CDBG funds in the form of “grants.” llte provisions of chapter 373 s@ficdlly authorize cider to make “gran0” to cutain entities, includiq c&ain kiads of nonprofit or&zations. We do not speculatehere as to whetherparticubu grants must inevitably be “contracts” within the ambit of tbe bidding provisions af chapter 252. See, rg., Aaomey General Opinion C-246 (1964) (county may anange without a witten umbact for the cdrc of indigents). Bat see Atlomy Gwcral Opinion JM-274 (1985)(statc wwdtotion rcqairas public entity’s gram or knding of credit to be accompanied by sufficient control to ensure that a public purpwc of tbc emityi%SCWCd).

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