OPP,CE OFTHEATTORNEV GENERAL. STATEOFTEXAS JOHN CORNYN

April 12,200O

The Honorable Michael P. Fleming Harris County Attorney 1019 Congress, 15th Floor Houston, Texas 77002-1700 Opinion No. JC-0206

Re: Whether the County Purchasing Act, TEX.Lot. Gov’TCODEANN. @j262.021-,035 (Vernon 1999 & Supp. 2000), applies to the purchases of a local government corporation created by a county under subchapter D, chapter 431 of the Transportation Code (RQ-0139-JC)

Dear Mr. Fleming:

You ask whether the County Purchasing Act, TEX.Lot. GOV’TCODE ANN.$9262.021-,035 (Vernon 1999 & Supp. 2000), applies tothe purchases ofalocal government corporation created by Harris County (the “County”) under subchapter D, chapter 431 of the Transportation Code. We conclude that because 1999 amendments to subchapter Dexempt the contracts ofalocal government corporation from competitive bidding requirements applicable to the local government that created it, the County Purchasing Act does not apply to the contracts of a local government corporation created by acounty.

Your question pertains to the Harris County Sports and Convention Corporation (the “Corporation”), alocal government corporation created by the County under subchapter D, chapter 431 of the Transportation Code. You state that the Corporation is organized to aid and act on behalf of the County in managing, operating, and developing the Astrodomain Complex, which consists of the Astrodome, Astrohall, Astroarena, and related infrastructure. See Letter from Michael P. Fleming, Harris County Attorney, to Honorable John Comyn, Texas Attorney General at 1,4 (Nov. 12, 1999) (on file with Opinion Committee) [hereinafter “Request Letter”]. Harris County has leased the Astrodomain Complex to the Corporation for $1.00 a year. See Second Amended and Restated Lease Agreement between Harris County, Texas and Harris County Sports & Convention Corporation (Apr. 7, 1999), art. 2, para. 2.01 [hereinafter “Contract”]. The Corporation will operate and manage the facilities for the County. See Contract, art. 4,para. 4.01, at 7 (Purpose). Under the lease, “Harris County reserves the right to approve the Corporation’s annual budget and agrees to fund any operating deficit and the cost of capital repairs and replacements.” Request Letter, supra, at4.

The County will expend aconsiderable sum to improve the facilities: “The County plans to fund orbudget over $200,000,000 for improvements to the Astrodomain Complex within the next two to three years. Funding will be provided from the general fund, commercial paper, certificates ofobligation, tax anticipation notes orother debt.” Id. We understand that these improvements willThe Honorable Michael P. Fleming - Page 2 (X-0206)

be made by the Corporation and that the County will not be party to the contracts. Telephone Conversation with John R. Barnhill, Assistant County Attorney, Harris County, Texas (Mar. 3,200O). The lease agreement between the County and the Corporation dated April 7,1999 provides that allpurchases made bythe Corporation with funds provided by the County will bemade in accordance with the County Purchasing Act. See Contract, art. 6,para. 6.10, at 13-14 (County Purchasing Act). You ask whether the County Purchasing Act applies to expenditures of funds by the Corporation “irrespective of any requirement in the Lease to comply with such Act.” Request Letter, supua, at 1. An attorney in your office explains that when the parties entered into the lease, there was some question regarding whether the County Purchasing Act would apply to the Corporation. Telephone Conversation with John R. Barnhill, Assistant County Attorney, Harris County, Texas (Mar. 3, 2000). The Corporation believes that this question has been resolved by 1999 legislation and would like to ask the County to amend the lease if the Corporation is not required by law to comply with the Act. Id.

We note that the legal memorandum submitted with your request raises issues other than whether the Corporation is subject to the County Purchasing Act. For example, the memorandum observes that subchapter Dof chapter 43 1ofthe Transportation Code does not expressly authorize the local government that creates a local government corporation to fund the operation of the corporation and suggests that this authority may be implied. See Request Letter, supra, at 4-5. However, you have not asked us to address this issue or any other issue regarding the County’s authority to contract with alocal government corporation orto lease property to alocal government corporation. See, e.g., TEX.LOC. GOV’TCODEANN.$5263.001, ,007 (Vernon 1999 & Supp. 2000) (competitive procedures for leasing county property). Accordingly, we limit our analysis to the question asked, which you state asfollows: “Our specific question iswhether the County Purchasing Act, irrespective of any requirement in the Lease to comply with such Act, applies to expenditures of funds by the Corporation.” Request Letter, supra, at 1.

The County Purchasing Act generally applies to county purchases. Section 262.023 ofthe Local Government Code provides that “[blefore acounty may purchase one ormore items under a contract that will require an expenditure exceeding $25,000, the commissioners court ofthe county must comply with the competitive bidding orcompetitive sealed proposal procedures prescribed by this subchapter.” TEX. Lot. GOV’T CODEANN. 5 262.023(a) (Vernon Supp. 2000). These requirements apply “only to contracts for which payment will be made from current funds orbond funds or through time warrants.” Id. 3262.023(b); see also id. 4262.022(l) (“‘Bond funds’ means money inthe county treasury received Tom the sale ofbonds, and proceeds ofbonds that have been voted but that have not been issued and delivered.“), (3) (“‘Current funds’ means funds inthe county treasury that are available in the current tax year, revenue that may be anticipated with reasonable certainty to come into the county treasury during the current tax year, and emergency funds.“), (9) (“‘Time warrant’ means any warrant issued by acounty that isnot payable out of current funds.“). As the Texas Supreme Court has recognized, however, the requirements ofthe County Purchasing Act may also extend to the purchases ofentities separate from but under the supervision ofacounty:

Public policy strongly favors protecting taxpayers with strict oversight of governmental financial transactions.

. It would beThe Honorable Michael P. Fleming - Page 3 (X-0206)

entirely contrary to public policy to allow these boards [that handle millions of dollars in public funds] to operate with total autonomy and to avoid the public posting, bidding, purchasing and auditing procedures imposed on counties unless explicitly excluded.

Lohec v. Galveston County Comm’rs Court, 841 S.W.2d 361, 365 (Tex. 1992) (concluding that purchases ofcounty beach park board were subject tocounty control). We gather you are concerned that the County Purchasing Act may apply to the Corporation because itoperates onbehalf ofHarris County for acounty purpose and isfunded with county funds. We conclude, however, that the 1999 amendments to section 431.101 ofthe Transportation Code exempt the Corporation from the County Purchasing Act.

While most ofchapter 431provides fortransportation corporations authorized by the Texas Transportation Commission and created to promote and develop public transportation facilities, subchapter D authorizes the creation of local government corporations. The term “local government”meansamunicipalityoracounty. S~~TEX.TRANSP.CODEANN. §431.003(3)(Vemon 1999). Section 431.101 provides that alocal government corporation “may be created to aid and act
on behalf ofone ormore local governments to accomplish any governmental purpose ofthose local governments.” Id. 5 431.101(a) (Vemon Supp. 2000). A local government corporation has the powers of a transportation corporation authorized for creation by the Texas Transportation Commission under chapter 43 1,which include the powers of anonprofit corporation incorporated under the Texas Non-Profit Corporation Act. See id. $5 431.062 (Vernon 1999), .101(b), (c) (Vernon Supp. 2000).

In 1999, the legislature amended subchapter D to provide in section 431.101(e) that

Section 394.904(a), Local Government Code, applies to property and improvements owned by a local government corporation. Section 394.904(b) 

### ofthatcode applies toeachcontract awarded by the local government corporation.

Id. 543 1.101(e) (Vernon Supp. 2000) (emphasis added) (as added by Act of May 29, 1999,76th Leg., R.S., ch. 983,s 12, 1999 Tex. Gen. Laws 3763,376s).

The statute towhich this amendment refers, section 394.904 ofthe Local Government Code, pertains to ahousing finance corporation created under the auspices of a “local government,” 

### i.e.,

amunicipality or county, to finance residential ownership and development. See TEX.LoC. GOV’T CODE ANN. $3 394.002 (purpose); 394.003(10) (defining “local government”); 394.011 (incorporation) (Vernon 1999 & Supp. 2000). Section 394.904 provides as follows:

(a) Theacquisition, construction, or rehabilitation 

### ofaprivate residential development or a home is not subject to requirements relating to public buildings, structures, grounds, works, orThe Honorable Michael P. Fleming - Page 4 (X-0206)

improvements imposed by the laws of this state, or to any other similar requirements.
(b) Any competitive bidding requirement or restriction imposed
on the procedure regarding the award 

### of contracts 

### for that acquisition, construction, or rehabilitation or regarding the lease, sale, or other disposition ofproperty of the local government is not applicable to any action taken under this chapter.

Id. 5 394.904 (Vernon 1999) (emphasis added). Subsection (b) of section 394.904, the relevant provision for our purposes, exempts from competitive bidding a housing finance corporation’s contracts for “that acquisition, construction, or rehabilitation,” referencing contracts relating to a private residential development orhome in subsection (a), and contracts for “the lease, sale, orother disposition ofproperty.” Id. This exemption appears to distinguish between contracts relating to private and public projects.

Given the differences between housing finance corporations and local government corporations, particularly the great difference intheir breadth ofpurpose, and the distinction section 394.904(b) appears tomake between private andpublic projects, the reference to section 394.904(b) in section 43 1.101(e) ofthe Transportation Code isperplexing. We conclude, however, that section 431.101(e) exempts all contracts of a local government corporation from competitive bidding requirements applicable to the contracts of the local government that created it. In citing section 394.904(b) ofthe Local Government Code, the legislature referenced an exemption to competitive bidding that exempts certain contracts from municipal and county competitive bidding requirements that might otherwise apply. Furthermore, the legislature provided that this exemption “applies to each contract awarded by the local government corporation,” TEX.TRANSP.CODE ANN.943I. 101(e) (Vernon Supp. 2000) (emphasis added), and thus clearly intended this exemption to apply to all contracts awarded by a local government corporation. Therefore, although it might have been preferable for the legislature to have provided this competitive bidding exemption in a straightforward fashion, we have no choice but to conclude that the purpose of section 431.101(e) isto exempt all contracts ofalocal government corporation from competitive bidding requirements applicable to the contracts ofthe local government that created it.

Given that section 431.101(e) exempts the contracts ofalocal government corporation from competitive bidding requirements applicable to the contracts ofthe local government that created it, the contracts of a local government corporation created by a county are not subject to the competitive bidding requirements of the County Purchasing Act. We note, however, that any contracts the county enters into for alocal government corporation payable from current funds, bond funds, orthrough time warrants will be subject tothe County Purchasing Act. See TEX.LOC.GOV’T CODEANN. §262.023(a), (b) (Vernon Supp. 2000).
Accordingly, we conclude that by virtue of section 431.101(e) ofthe Transportation Code the Harris County Sports and Convention Corporation’s contracts arenot subject to the competitive bidding requirements ofthe County Purchasing Act. Therefore, the Harris County CommissionersThe Honorable Michael P. Fleming - Page 5 (X-0206)

Court may decide whether torenegotiate its lease with the Corporation to amend the term requiring the Corporation tocomply with the County Purchasing Act, keeping inmind the beneficial purposes ofcompetitive bidding and the best interests ofthe County. Seegenerally TexasHighway Comm ‘n
v.TexasAss ‘nofSteeZZmporters,Znc., 372 S.W.2d 525 (Tex. 1963) (“‘[The] purpose [ofcompetitive bidding] is to stimulate competition, prevent favoritism and secure the best work and materials at the lowest practicable price, for the best interests and benefit of the taxpayers and property owners.“‘) (citing Sterrett v.Bell, 240 S.W.2d 516,520 (Tex. Civ. App.-Dallas 1951, no writ)); see also Lohec, 841 S.W.2d at 365; TEX.TRANSP.CODEANN. 543 1.104(b) (Vernon 1999) (“A local government that assumes the powers and duties ofalocal government corporation assumes the assets and liabilities of the corporation.“) (emphasis added). Of course, any contracts for improvements to the Astrodomain to which the County is aparty will be subject to the County Purchasing Act.The Honorable Michael P. Fleming - Page 6 (~~-0206)

SUMMARY

Because section 431.101 of the Transportation Code as amended by the Seventy-sixth Legislature exempts the contracts of
a local government corporation from competitive bidding requirements applicable to the contracts ofthe local government that created it, the contracts ofalocal government corporation created by
acounty are not subject to the competitive bidding requirements of the County Purchasing Act. See TEX. TRANSP. CODE ANN. §43l.lOl(e)(VemonSupp. 2000)(as addcdbyActofMay29,1999, 76th Leg., R.S., ch. 983, 5 12, 1999 Tex. Gen. Laws 3763,376s).

Y rsve truly. 

# 4J4ii

JOHN CORNYN Attorney General ofTexas

ANDY TAYLOR First Assistant Attorney General

CLARK RENT ERVJN Deputy Attorney General - General Counsel

ELIZABETH ROBINSON Chair, Opinion Committee
Mary R. Crouter Assistant Attorney General - Opinion Committee