ATTORNEY GENERAL OF TEXAS GREG ABBOTT

January 30,2007

The Honorable Dennis Bonnen Chair, Committee on Environmental Regulation Texas House ofRepresentatives Austin, Texas 78768-2910 Opinion No. GA-0506

Re: Whether acity may operate acommercial compostimulch business that sells itsproducts outside the city’s limits (RQ-050%GA)

Dear Representative Bonnen:

You ask whether a city may operate a commercial compost/mulch business and sell its products outside ‘the city’s limits.’ You state that certain cities produce, market, and sell compostimulch products in direct competition with private businesses that produce and sell similar products. See Request Letter, supra note 1, at 1. You do not object to the cities producing compost/mulch and providing such products “to homeowners in their communities free of any charge, orusing compost/mulch intheir city parks and common areas.” Id. at2. In your view here,

“[t]he cities, however, should not be permitted to compete with private enterprises in the State of Texas nor in any way supply landscape contractors or sell bagged products to nurseries.” Id.
As we understand it, in connection with the management and processing ofmunicipal solid waste and wastewater, Texas cities such as Plano, Denton, Brenham, and Texarkana engage in “cornposting”’ ofthe solid waste and sludge’ and sell the resulting products such as compost, soil, and mulch to the public inside and outside their respective city limits4 Prior to these composting

‘SeeLetter fkom Honorable Dennis Bonnen, Chair, Committee on Environmental Regulation, Texas House of Representatives, to Honorable Greg Abbott, Attorney General of Texas, at 2 (July 12,2006) (on file with the Opinion Committee, also availableafhttp://w.oag.state.tx.us) [hereinafter Request Letter].

‘“Cornposting” is “the controlled biological decomposition of organic solid waste under aerobic conditions.” TEX. HEALTH& SAFETYCODEANN. 5 361.003(6) (Vernon 2001); see also id. 5 361.421(2) (similarly defming ,composting). “‘Compost is the disinfected and stabilized product ofthe decomposition process that isused or sdld for
use as a soil amendment, artificial top soil, growing medium amendment, or other similar uses.” Id. $ 361.421(l).

‘“‘Sludge’ means solid, semisolid, or liquid waste generated from a municipal, commercial, or industrial wastewater treatment plant, water supply treatment plant, or air pollution control facility, excluding the treated effluent from awastewater treatment plant.” Id. 5361.003(33).

%%eLetter from A. Vance Kemler, Director, Solid Waste Services, City ofDenton, to Nancy S. Fuller, Chair, Opinion Committee, Office ofthe Attorney General ofTexas, at 2 (Aug. 3I, 2006) [hereinafter Denton Briefl; see also (continued...)The Honorable Dennis Bonnen - Page 2 (GA-0506)

programs, the cities buried the solid waste and sludge in landfills. See Denton Brief, supra note 4, at 2;Austin Brief, 

### supra note 4, at 1. The revenues generated from these sales are used to fund the cost of the composting programs. See Denton Brief, 

### supra note 4, at 7; Plan0 Brief, supra note 4, at2;Brenham Brief, 

### supranote 4, at2. Based on your question and letter, we do not understand you to question the cities’ authority to engage incomposting orto distribute compost products to the city residents. See Request Letter, 

### supra note 1,at l-2. Rather you question only the cities’ authority to sell the compost products outside their city limits. See 

### id.at 2.
The cities you ask about arehome-rule cities that derive their powers from article XI, section 5 ofthe Texas Constitution.’ See TEX.CONST. art.XI, 5 5; Quickv. 

### City ofAustin, 7 S.W.?d 109, 122 (Tex. 1999); 

### Lower Cola.Riv.Auth. v.CityofSan Marcos, 523 S.W.2d 641,643 (Tex. 1975). Ahome-rule city has “all the powers ofthe state not inconsistent with the Constitution, the general laws, or 

### the city’s charter.‘? 

### Proctor v.Andrews, 972 S.W.2d 729, 733 (Tex. 1998) (citing TEX. CONST. art. XI, 5 5). “[I]t is necessary to look to the acts of the legislature not for grants ofpower to such cities but only for limitations on their powers.” 

### Lower Cola.Riv.Auth., 523 S.W.2d at 643. The Legislature may circumscribe a home-rule city’s broad power, but only if it does’ so with “unmistakable clarity.” 

### Id.at 645. Accordingly, to answer your specific question, we first consider whether the sale of compost products comports with state law and next consider whether the Legislature has, with unmistakable clarity, limited a home-rule city’s authority to sell compost products outside the city limits. We assume, for purposes ofthis analysis, that the sale is consistent with the cities’ respective charters. See, e.g., Tex. Att’y Gen. Op. Nos. JC-0142 (1999) at 4 (assuming for the purposes of such an analysis, that the city ordinance atissue was authorized bythe city charter); JM-846 (1988) at 1 (“As amatter ofpolicy, this off&does not interpret city charter provisions. .“).

You do not reference and we have not found a state or federal constitutional provision that
on its face is contravened by a city’s sale of compost products outside the city limits or by a city acting as a “market participant.” See Request Letter, 

### supra note 1,at 2. The Commerce Clause to the United States Constitution, article I, section 8, clause 3, does not restrain a city from acting as a market participant. See, 

### e.g., Whitev.Muss. Council ofConstr.Employers, 460 U.S. 204,208 (1983) (“[Wlhen astate or local government enters the market asaparticipant itisnot subject to the

‘(...continued) Letter from Thomas H. Muehlenbeck, City Manager, City of Plano, to Nancy S. Fuller, Chair, Opinion Committee, Office of the Attorney General of Texas, at 1(Aug. 4,2006) [hereinafter Plano Brief]; Letter 6om David Allan Smith, City Attorney, City ofAustin, to Honorable Greg Abbott, Attorney General of Texas, at 1(Aug. 31,2006) [hereinafter Austin Brief]; Letter from Gary L. Bovey, City Attorney, City of Bra&am, to Nancy S. Fuller, Chair, Opinion Committee, Office of the Attorney General of Texas, at 2 (Aug. 31, 2006) [hereinafter Brenham Brief]; Letter from Wiley Stem, III, Assistant City Manager, City of Waco, to Nancy S. Fuller, Chair, Opinion Committee, Office of the Attorney General of Texas, at 1-2 (Sept. 5, 2006) [hereinafter Waco Briefl; Letter from Adam S. Block, Texas Municipal League, to Nancy S.Fuller, Chair, Opinion Committee, Oftice of the Attorney General ofTexas, at 1(Aug. 25, 2006) (all briefs on tile with the Opinion Committee).

‘See http://www.municode.com/resources/online%2OLibra~.asp (city charters for Plano, Denton and Texarkana); http://www.ci.brenham.tx.us/CHOOO-~-PART~I~SPECIAL~CHARTER.pdf (Brenham) (websites last visited Jan. 12,2007).The Honorable Dennis Bonnen - Page 3 (GA-0506)

restraints of the Commerce Clause.“); 

### Reeves, Inc. v. Stake, 447 U.S. 429, 437 (1980) (“[T]he Commerce Clause responds principally to state taxes and regulatory measures impeding free private trade in the national.marketplace. There is no indication of aconstitutional plan to limit the ability ofthe States themselves to operate freely in the free market.“) (citations omitted); U.S. CONST. art. I, !$8, cl. 3.
Nor have we found any state statutes contravened, as a matter of law, by a city’s sale of compost products outside its city limits. Maximizing the sale ofcompost, in fact, would appear to be consistent with state laws generally encouraging reduction “to the maximum extent that is technologically and economically feasible” of municipal solid waste through “reuse or r&cycling” and ofmunicipal sludge through “marketing and distribution of sludge and sludge products,” TEX. HEALTH&SAFETY CODEANN. 5 361.022(a), (b)(2), (c)(3) (Vemon2001)(PublicPolicyConcerning Municipal Solid Waste and Sludge); see 

### also id. § 363.002 (stating that it is the state’s policy to encourage reduction in solid waste and the proper management of solid waste, including its disposal andprocessing to extract usable materials); 30TEX. ADMIN. CODE 5 332.2( 16) (2006) (Tex. Comm’n on Environmental Quality, Cornposting) (“Distribute--To sell, offer for sale, expose for sale

. .“). And such activity would appear to be consistent with state law spetiifically encouraging cornposting and reuse of cornposting products. See TEX. HEALTH & SAFETY CODE ANN. 5 361.428(am) Vernon Supp. 2006); see 

### also Schulman v. City of

### Houston, 406 S.W.2d 219, 222 (Tex. Civ. App.-Tyler 1966, writ ref dn.r.el) (stating that ahome-rule city’s garbage compost plant is “forthe public purpose of disposing of garbage and for the welfare of the community” and is “a lawful

‘business andan operation not subject to abatement”). Texas Health and Safety Code section 361.428 directs the Texas Commission on Environmental Quality (the “Commission”) toprovide incentives for cornposting programs capable ofreducing municipal solid waste streams that would be disposed in landfills and to adopt rules for permitting compost facilities. See TEX. HEALTH & SAFETY CODE ANN. 5 361.428(a)-(b) (Vernon Supp. 2006). Pursuant to this authority, the Commission has adopted rules governing the operation ofcornposting facilities, including facilities operated bycities. See 30 TEX. ADMIN.COOS 5 332.3 (2006) (applicability); 

### id. 5 332.2(38) (defining operator of facility), (42) (defining permit), (43) (defining person).6 Neither the state law provisions nor the Commission rules limit the sale ordistribution ofcompost products toparticular geographical areas. Finally, you do not reference and we have not found any statutory provisions whereby the Legislature has with unmistakable clarity limited a home-rule City’s authority to sell compost products. Aletter submitted tothis office suggests that chapter 756, subchapter G,Health and Safety Code limits a city’s authority to sell compost products outside its city limits.7 Section 756.101 authorizes a city to “provide landscaping services, including tree-trimming, tree disposal, and

‘See also Waco Brief, supra note 4, at 1(“[Waco] is in the process of obtaining the necessary authorization from the [Commission] to produce compost

.“); ,Letter from Thomas H. Muehlenbeck, City Manager, City of Piano, to Ms. Nancy Fuller, Chair, Opinion Committee, Office of the Attorney General of Texas, at 2 (Sept. 5,2006) (on file with the Opinion Committee) (“All compost facilities must comply with state regulations. The City ofPIano is listed with [the Commission] as a Notifications Operation.“).

‘See Letter from Honorable Vicki Truitt, Texas House ofRepresentatives, to Nancy S.Fuller, Chair, Opinion Committee, Oftice ofthe Attorney General ofTexas, at I (July 25,2006) (on file with the Opinion Committee).The Honorable Dennis Bonnen - Page 4 (GA-0506)

recycling services” to persons inside and outside the corporate limits of the city “only if the governing body of the municipality makes written findings asrequired by Section 756.102.” TEX. HEALTH& SAFETYCODEANN. §756.101 (Vernon Supp. 2006). Section 756.102 requires the city to (1) identify the problem raising the need for providing the landscaping services; (2) identify the public health, safety, orwelfare concern; (3) describe previous actions taken to address the problem; and (4) specify adefinite time period necessary to address the problem. 

### Id. 5756.102. Subchapter G, by its terms, addresses landscaping services rather than cornposting of municipal waste and the sale of compost products. See 

### id. $5 756.101-,102; see also SENATECOMM.ONNATCJRAL RESOURCES,BILLANALYSIS,T~~.S.B. 585,78thLeg., R.S. (2003) (enrolledversion) (“Thisbillalso authorizes certain landscaping services under certain conditions.“). It does not evidence with unmistakable clarity the Legislature’s intent to prohibit or limit ahome-rule city’s authority to sell compost products outside the city limits.

Your letter suggests that because the production and sale of compost products may be a proprietary rather than a governmental function, the cities may not sell the products to persons outside the city limits. See Request Letter, 

### supva note 1, at l-2. The proprietary-governmental distinction has generally been used to determine a city’s immunity from suit for tortious conduct. 

### Tooke v. City ofMexia, 197 S.W.3d 325, 343 (Tex. 2006); see 

### also TEX. CONST.

### art.XI, 5 13 (authorizing the Legislature to define and reclassify for all purposes municipal functions that are to be consider&d governmental and those that are proprietary); TEX.CIV.PRAC.&REM. CODEANN. 5s 101.OOl-,109 (Vernon 2005 & Supp. 2006) (Texas Tort Claims Act). The distinction may also be relevant to a city’s contractual liability. See Tex. Att’y Gen. Op. No. JC-0154 (1999) at 2-3 (discussing estoppel against a city acting in its proprietary capacity as distinguished from its governmental capacity). In addition, it may be relevant under federal law with respect to the application of economic regulation under the Commerce Clause. 

### See Jefferson County Pharm. Ass’n, Inc. v.Abbott Labs., 460 U.S. 150, 154 n.6 (1983) (“It is too late in the day to suggest that Congress cannot regulate States under its Commerce Clause powers when they are engaged in proprietary activities.“). But whether the cotipost activity isaproprietary orgovernmental function would appear to be irrelevant to acity’s authority to sell compost products outside the city limits and is not a distinction that makes a difference here. Lastly, your letter generally suggests that cities are not permitted to compete with private enterprises. See Request Letter, 

### supranote 1,at 1-2. But you do not cite and wehave not found any authority that as amatter of law prohibits cities from competing with private enterprises.

Because ahome-rule city’s sale ofcompost products to persons outside the city limits does not generally appear to contravene constitutional or statutory law, and because the Legislature has not with unmistakable clarity forbidden a home-rule city to sell compost products outside its city limits, we conclude that ahome-rule city may sell compost products outside its city limits.The Honorable Dennis Bonnen - Page 5 (GA-0506)

SUMMARY

Because a home-rule city’s sale of compost products to persons outside the city limits does not generally appear to contravene constitutional or statutory law, and because the Legislature has not with unmistakable clarity forbidden ahome-rule city to sell compost products outside its city limits, a home-rule city may sell compost products outside its city limits.

KENT C. SULLIVAN First Assistant Attorney General

ELLEN L. WITT Deputy Attorney General for Legal Counsel
NANCY S. FULLER Chair, Opinion Committee
Sheela Rai Assistant Attorney General, Opinion Committee