The Attorney General of Texas 

March 24, 1981 

MARK WHITE 

Attorney General 

Honorable Mike Driscoll 

Harris County Attorney 

1001 Preston, Suite 634 

Houston, Texas 77002 

Opinion No. MW-314 

Re: Clarification of Attorney 

General Opinion MW-290 with 

respect to encumbrance for rental 

payments on Center Pavilion 

Hospital Project 

Dear Mr. Driscoll: 

You ask three questions seeking clarification of Attorney General 

Opinion MW-290 (1981). That opinion concluded that Harris County could 

spend bond proceeds and other county funds to improve the Center Pavilion 

Hospital building which the county had leased. We also answered several 

questions regarding the county auditor’s responsibility with respect to 

financial transactions arising from the lease, for example, payment of rent. 

You ask for clarification of the following sentences in Attorney General 

Opinion MW-290: 

Section 3 of the lease agreement provides that the 

leasehold estate shall commence as of the date of the 

execution of the lease. The encumbrance for any 

rent payment should be set up as of that date. (Your 

emphasis). 

You inform us that no rent was due in 1980, and that annual rentals in 

varying amounts are due, subject to the year-by-year budget appropriation 

by the commissioners court in 1981 and the following years. The total rent 

due over the life of the lease has been estimated to be $29,592,100. 

You first ask: 

L Is the opinion to be interpreted to mean that 

the rent payment encumbrance is to be (a) the 

amount of the yeal-by-year appropriation budgeted 

by [the1 commissioners court (estimated to be 

approximately $1,400,000); or (b) the entire rental for 

the lease life (approximately $29,592,100)? 

p. 1000 
Honorable Mike Driscoll - Page Two (MVr-314) 

The rent payment encumbrance is the amount of the year-by-year appropriation 

budgeted by the commissioners court. Clearly, with a year-to-year lease such as that 

executed by Harris County and the Harris County Hospital Authority, an encumbrance 

for the entire rental for the projected lease life is inappropriate. The commissioners 

court may withdraw from the lease at the end of any fiscal year by falling to 

appropriate. 

You next ask: 

2. For the year 1980, when no rent was payable, should the 

encumbrance, which will be carried forward, be zero or 

$29,592,100? 

For the year 1980, when no rent was payable, the encumbrance would be zero. 

You finally ask. 

3. For the year 1981, the first year of the rental payment 

liability, should the encumbrance be approximately $1,379,500 

(the first year’s estimated rental) or $29,592,100? If the first 

amount ($1,379,500), should a similar scheduled annual basic 

rental amount be freshly encumbered year-by-year, pursuant to 

appropriation of [the] commissioners court? If the latter 

amount, the unexpended portion would be carried forward 

annually as a new encumbrance. 

Again, following the reasoning in our answer to your first question, the 1981 

encumbrance should be for the first year’s estimated rental and the scheduled annual 

rental amount should be freshly encumbered year-by-year. Due to the nature of the 

leasehold estate herein involved there is no encumbrance lasting beyond a year. 

In Attorney General Opinion MW-290 we used the term “encumbrance” in the 

sense that the leasehold estate was encumbered by a need to meet a rental payment. 

The encumbrance, however, can only ba consistent with the terms of the lease. 

Therefore, a year-to-year lease clearly dictates a year-to-year encumbrance. 

SUMMARY 

The encumbrance for rental payments for the Harris County 

lease on the Center Pavilion Hospital is the amount of the year 

by-year appropriation budgeted by the commissioners court. 

For the year 1980, when no rent was payable, the encumbrance 

would be zero. For the year 1981, the first year of rental 

payment liability, the encumbrance should be for the first year’s 

estimated rentaL The scheduled annual rental amount should be 

freshly encumbered year-by-year. 

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Honorable Mike Driscoll - Page Three (Mw-314) 

MARK WHITE 

Attorney General of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

RICHARD E. GRAY III 

Executive Assistant Attorney General 

Prepared by Susan L. Garrison 

Assistant Attorney General 

APPROVED: 

OPINION COMMlTTEE 

Susan L. Garrison, Chairman 

Jon Bible 

Rick Gilpin 

Susan Voss 

p. 1002