Court Opinion

ID: 4130561
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:05:47.845394+00
Date Added: 2024-06-11T14:31:40.107589
License: Public Domain

May 23, 1988

    Honorable Stephen C. Howard   Opinion No.   JN-908
    Orange County Attorney
    Orange County Courthouse      Re: Whether a county may enter
    Orange, Texas 77630           into a binding   agreement  for
                                  solid waste disposal  services,
                                  and related questions (RQ-1045)

    Dear Mr. Howard:

         you inform us that Orange County intends to establish a
    solid waste disposal   system in which solid waste would be
    burned and the energy produced would be sold. The county
    would buy solid waste from municipalities within the county
    and would sell its own solid waste, along with the munici-
    palities' solid waste, to a privately-owned      incinerator,
    which would burn the solid waste to produce         steam or
    electrical power.    The contracts between the municipal
    governments and the county would last as long as 20 years.
    You ask five questions   regarding the countyrs authority  to
    enter into such contracts:

            Question 1: Can [a] Commissioners Court enter
            into a solid waste disposal service agreement
            with an individual or corporation which will
            bind future Commissioners Courts?

            Question 2: Can the County enter into a solid
            waste disposal contract which would require
            the County to pay a penalty if a quantity  of
            solid waste is not provided by the County to
            an individual or corporation within a given
            period of time?

            Question 3: Can the County enforce a solid
            waste disposal contract against cities which
            would bind the cities for up to 20 years?
            Under what conditions   is such a contract
            valid where    a  home   rule city    charter
            restricts the duration of a city contract?
P

                                  p. 4495
Honorable Stephen C. Howard~- Page 2 W-908)

        Question  4: Is    a solid waste     disposal
        contract in which the County provides   solid
        waste disposal services to cities and charges
        the cities on a cost-plus a percentage  basis
        valid?

        Question 5: Can the County enter into a solid
        waste disposal contract with an individual or
        corporation without going out for bids?

Your questions    impliedly ask    whether the county     has
statutory authority to enter into any such contract in the
first place.   You also ask whether any such contract may be
binding. We note at the outset that we here do not construe
any specific contract; we limit this opinion to a general
discussion   of any    relevant statutes authorizing     such
contracts.   Nor do we address any issues regarding       the
payment for any services under any such long-term   contracts
and what constitutes the incurring of "debt" for'purposes of
article XI, section 7, of the Texas Constitution.     You do
not raise any constitutional     problems  related to these
issues, and accordingly, we do not consider them. We will
answer each of your questions in turn.

     You first ask whether     a commissioners court may enter
into a solid waste disposal        service agreement     with an
individual    or    corporation    that    will   bind     future
commissioners    courts.   The general     rules adopted by a
majority of jurisdictions that have addressed the issue of
the authority of a governing     body to enter into a contract
extending  beyond the body's terms are set forth in Annot.,
70 A.L.R. 794 (1931), 149 A.L.R. 336 (1944).    Boards or
governing bodies have two classes of powers -- governmental
(or legislative)    and proprietary (or business).        In the
exercise of its governmental or legislative powers, a board
or governing   body, in the absence of svecific         statutorv
provisions to the contra=        cannot enter into a contract
extending beyond its own te&n. But in an instance in which
the governing     body is exercising      its proprietary      (01
business) power, it may contract as an individual, unless it
is restrained by statutory provisions to the contrary.

     An exception  to the majority   rule occurs where the
contract for services  is not for services to be performed
during a particular   period, but for the rendering    of a
particular and specified act the performance   of which may
extend beyond the terms of the members of the governing body
making the contract.   Such a contract  is valid.  The rule
adopted in a minority  of jurisdictions that have addressed
the issue is that contracts, even those regarding    matters

                                p. 4496
Honorable Stephen C. Howard - Page 3   (JM-908)

governmental (or legislative), may extend beyond the terms
of the boards or governing  bodies that execute them. Texas
adopts the majority rule. See. e.o., Gulf Bitulithic Co. v.
Nueces Countv 11 S.W.2d 305 (Tex. Comm'n App. 1928, judgm't
adopted): J. N. McCammon. Inc. v. S e hens County, 127 Tex.
49, 89 S.W.Zd 984 (Tex. Comm'n App. 1936, opinion adopted);
Gillam v. Citv of Ft. Worth, 287 S.W.2d 494 (Tex. Civ. APP.
- Ft. Worth 1956, writ ref'd n.r.e.).l  Therefore, we first
must determine  whether the county has specific    statutory
authority to enter into the sort of contract about which you
inquire.

      Texas has enacted a series of statutes intended both to
enforce a state-wide comprehensive scheme of sanitation    and
health regulation    and to     facilitate state and     local
cooperation in dealing with matters    of public health.   See
                                                           _
V.T.C.S. articles 4477-7 -- 7f, et sea.      Article  4477-7a,
V.T.C.S., the Solid Waste Resource Recovery Financing     Act,
authorizes any. "issuer" to "acquire, construct, and improve
or cause to be acquired, constructed,      and improved solid
waste resource recovery systems," as defined by the act, as
well as to acquire real property.      V.T.C.S. art. 4477-7a,
§4 (a) - "Issuerw is defined as

        1.      We
               note that both the Annotation      and   Texas
JUriSDrUdenCe  construe the Texas cases as enunciating    the
rule adopted   in a minority of jurisdictions,     i.e. that
governing bodies are empowered to contract beyond the terms
their members. &&a 47 Tex. Jur. 2d Public Officers 5120 at
158 (1963); 40 Tex. Jur. 2d, MUniCiDal CorDorations 5434 at
200 (1976). We conclude that the above-cited cases do not
stand for the proposition   that governing bodies simply can
contract beyond their terms of office. We conclude that a
close reading of the Gulf Bitulithic cases, both in the
Court of Civil Appeals and the Commission of Appeals,     and
the McCammon case, will demonstrate that Texas in fact does
not adopt the minority     rule, but rather it adopts the
majority-adopted exceDtion to the majority rule. The Gulf
Bitulithic and McCammon cases set forth the rule that, where
a contract for services is not for services to be rendered
during a particular period, but rather for the doing of a
particular and specified act the performance    of which may
extend beyond the terms of the members of the governing body
making the contract, such contract is valid.

                             p. 4497
Honorable Stephen C. Howard - Page 4 (JM-908)

        any district     or authority   created   and
        existing under Article XVI, Section 59, or
        Article   III, Section   52, of the     Texas
        Constitution   which is   now or    hereafter
        authorized   [by any law] to own a waste
        disposal system and which includes within its
        boundaries at least one county.

V.T.C.S. art. 4477-7a, 53(3).

     Subsection 10 (a) of the act is the section upon which
you rely in support of your argument that the county may
enter into the sort of long-term contract about which you
inquire:

           All public agencies are authorized      to
        enter into contracts with any person for the
        supply of solid waste,   including contracts
        for the collection    and transportation   of
        solid waste, for disposal at any solid waste
        resource recovery system and may covenant and
        agree in such contracts to supply minimum
        quantities of solid waste and to pay minimum
        fees and charges for the right to have solid
        waste disposed   of   at such solid     waste
        resource recovery system during the term of
        such contracts. Any such contract may con-
        tinue in effect for such term of years as the
        governing body of the public agency shall
        determine is desirable.

V.T.C.S. art. 4477-7a,   .510(a).    The   act   defines   "public
agency* to mean:

        any district or authority heretofore         or
        hereafter created and existing under Article
        XVI, Section 59, as amended, or Article    III,
        Section 52, as amended, of the Constitution
        of Texas which includes within its boundaries
        all of at least one county, any incorporated
        city or town in the state, whether   operating
        under general   law or under    its hOme-Nle
        charter; or anv other nolitical    subdivision
        or aaencv of   the state havina the Dower to
        gwn and operate solid waste        collection,
        tranSDO?FtatiOn. or diSDOSa1    facilities   or
        svstems.   (Emphasis added.)

V.T.C.S. art. 4477-7a, 53(5). Article 4477-8, V.T.C.S., the
County Solid Waste Control Act, provides  at section 4 that

                                p. 4498
Honorable Stephen C. Howard - Page 5        KIM-908)

counties     themselves   may   operate    solid   waste   disposal
systems:

              A county may acquire, construct,   improve,
           enlarge, extend, repair, operate, or maintain
           all or any part of one or more solid waste
           disposal systems, and may make contracts with
           any person under which the county         will
           collect, transport, handle, store, or dispose
           of solid waste for any such person. A county
           may also enter into contracts with any person
           to purchase   or sell, by installments    over
           such term as may be deemed desirable,       or
           otherwise, all or any part of any solid waste
           disposal system. A county is also authorized
           to enter into operating agreements with any
           person,   for   such terms   and upon     such
           conditions as may be deemed desirable,     for
           the operation of all or any part of any solid
           waste disposal system by any person or by the
           county; and a county may lease to or from any
           person,   for   such  term and    upon    such
           conditions as may be deemed desirable, all or
           any part of any solid waste disposal system.

V.T.C.S. art. 4477-8, 54. Therefore, a county is a "public
agency" for purposes of article 4477-7a and is authorized to
enter into the sort of long-term contract for the sunnlv of
solid waste about which you ask. S       ,   a     Citv-of- Biq
Swrina v. Board of Control, 404 S.W.2?8lE'(T;x.     1966).    We
note that the sort of contract that you contemplate does not
appear to be one between a county and an llissuerllas defined
by the act. But section 10 of the act by its terms does not
limit contracts for the supply of solid waste to contracts
with "issuersw; rather, it permits any "public agency" to
enter into a solid waste supply contract with "any person."
Section 3(4) of the act defines person to mean              "any
individual, public agency as defined herein, public           or
private corporation, political  subdivision or governmental
agency of the United States of America          or the state,
copartnership, association,  firm, tNSt,       estate,  or any
other entity whatsoever."    V.T.C.S.    art. 4477-7a,    §3(4).
See also article 4477-7c, V.T.C.S.,        the    Comprehensive
Municipal  Solid Waste Management     Resource Recovery      and
Conservation Act, section 14. Accordingly, we conclude that
a county does have statutory authority to enter into the
sort of long-term contract that you describe.     &S Browninq-
Ferris, Inc. v. Citv of Leon Valley      590 S.W.2d 729    (Tex.
Civ. App. - San Antonio 1979, writ r;?f#d n.r.e.).

                                 p. 4499
Honorable Stephen C. Howard - Page 6    (JR-908)

     You next ask whether  a county may enter into a solid
waste disposal contract that would require the county to pay
a penalty  if a specified quantity   of solid waste is not
provided within a certain period of time by the county to
the person  or corporation   with whom  it has contracted.
Article 4477-7a, V.T.C.S., the Solid Waste Resource Recovery
Financing Act, provides at subsection 10 (a):

           All public agencies are authorized        to
        enter into contracts with any person for the
        supply of solid waste,    including  contracts
        for the collection     and transportation    of
        solid waste, for disposal at any solid waste
        resource recovery system and mav covenant and
        aaree in such contracts to suw~lv      minimum
        ouantities of solid waste and to pay minimum
        fees and charges for the right to have solid
        waste disposed   of    at such solid     waste
        resource recovery system during the term of
        such contracts.    Any    such contract     may
        continue in effect for such term of years as
       ,the governing body of the public agency shall
        determine is desirable.   (Emphasis added.)

V.T.C.S. art. 4477-7a, 510(a).

     The act clearly permits any contract that provides   for
the supply of solid waste to contain a clause specifying
that the supplier of solid waste supply a minimum     amount.
But the act does not by its terms permit the inclusion of a
penalty clause  for failure to supply the minimum      stated
amount. You assert that a county may not agree to indemnify
a person  or corporation  against risks, citing Galveston,
H. & S.A. Rv. Co. v. Uvalde Countv, ,167 S.W.2d 305   (Tex.
Civ. App. - San Antonio 1942, writ ref'd w.o.m.), but you
disagree that such a provision should be considered        an
indemnity clause. We do not here discuss the circumstances
under which a count may enter into a contract containing an
"indemnity clause." 3  We do agree with you, though, that on

       2. We do note, though, that the Texas Supreme    Court
has held that article XI, sections 5 and 7, of the Texas
Constitution, which we will discuss later in connection with
your fourth question, do not prevent a county from agreeing
to enter into a contract containing an indemnity       clause
providing that the county    "hold and save harmless"     the
United   States from damages that may result      from    the
construction of a bridge.   Brown v. Jefferson County,    406
S.W.2d 185 (Tex. 1966): see also Countv of Ector v. Citv of
Odessa, 492 S.W.2d 360  (Tex. Civ. App. - El Paso 1973, no
writ).

                              p. 4500
Honorable Stephen C. Howard - Page 7 (JM-908)

the basis of the information that you have furnished us, the
so* of clause that you describe       fairly could not be
denominated an "indemnity clause."

     A ncontract for indemnity"    is an undertaking by which
the promisor (indemnitor) agrees to make good any loss or
damage the promisee     (indemnitee) has incurred,     or    to
safeguard the indemnitee against liability.     See oenerally
Attorney General Opinion MW-475     (1982); 14 Tex. Jur. 3d
Contribution and Indemnification §§15 - 28 at 35 (1981):
Reynolds, Contracts of Indemnitv in Tex      43 Tex. B. J. 297
(1980) . The right of llindemnityl'restsa$on   the difference
between primary and secondary liability of two persons, each
of whom is made responsible by law to an injured party. The
right inures to the person compelled, because of some legal
obligation  other than     active fault,     to pay    damages
occasioned by another's initial negligence, for which      such
person is only secondarily liable. Muldownev v. Middleman,
107 A.2d 173 (Pa. 1954): Builders SUDD~Y Co. v. McCabe,      77
A.2d 368 (Pa. 1951). The Texas Supreme Court has defined
windemnity" to mean "the payment of all of plaintiff's
damage by one tortfeasor to another tortfeasor who has paid
it to the plaintiff."   General Motors Corn. v. Simmons,    558
S.W.2d 855, 859 (Tex. 1977), overruled on other arounds, 665
S.W.2d 427 (Tex. 1984): see also Hodges, Contribution       and
Indemnitv Amono Tortfeasors,     26 Tex. L. Rev. 150, 151
(1947). "Indemnity" results   in the shifting of the entire
burden   of   loss    from   one    tortfeasor   to   another.
International Harvester Co. v. Zavalq, 623 S.W.2d 699     (Tex.
Civ. App. - Houston [lst Dist.] 1981, writ ref'd n.r.e.)

     We note, again, that we here do not construe         any
specific contract provision: any penalty provision must be
viewed in the context of the contract taken as a whole.   Our
opinion, then, is limited to a more general discussion of a
county's authority   in this area. On the basis of the
information that you have furnished us, we agree with your
construction of the penalty provision; we do not think that
such a clause fairly can be denominated as an indemnity
clause.  If the clause more properly could be denominated as
a liquidated damages clause, providing for specified damages
in the event that the county breaches its agreement,       it
would be permissible.   &,9 Rellv v. Galveston Countv,    520
S.W.Zd 507 (Tex. Civ. App. - Houston [14th Dist.] 1975, no
writ) (inclusion of what appears to be liquidated     damages
clause in contract of employment  is not contrary to public

                              p. 4501
Honorable Stephen C. Howard - Page 8 (JM-908)

policy).3  We conclude that the county may enter into a
contract containing the sort of clause that you describe,
but only if the penalty imposed is a measure of any damages
actually incurred by the contracting party: if the penalty
bears no relationship to the actual damages sustained or if
it is not part of a ouid nro QUO for which the county
legitimately  may bargain,    we conclude    that it    will
constitute a gratuity, the grant of which violates   article
III, section 52, of the Texas Constitution.

     You next ask whether the county may enforce a solid
waste disposal  contract against cities when the contract
would bind the cities for up to 20 years and whether such a
contract would be valid in an instance in which a home rule
city charter restricts  the duration of any city   contract.
With the first part of your question, you are really asking
whether a city may enter into the sort of long-term contract
that the county contemplates entering.

     Article 4477-7~ V.T.C.S.,  the Comprehensive Municipal
Solid Waste Management, Resource Recovery, and Conservation
Act, provides at section 14:

           (a) A public      agency may enter    into
        contracts to enable it to furnish or receive
        solid waste     management   services.   Each
        contract may be    for the time and under the

      3. "Liquidated damages"    constitute  the measure    of
damages agreed to in advance by the parties           as just
compensation for a breach of contract,      typically   in an
instance in which the harm caused by the breach is incapable
or very difficult    of an accurate estimation.       Sisk v.
Parker, 469 S.W.2d 727 (Tex: Civ. App. - Amarillo 1971, writ
ref'd n.r.e.); Citv of Amarillo v. Hume, 70 S.W.2d 651 (Tex.
Civ. App. - Amarillo   1934), aff'd 128 Tex . 596, 99 S.W.2d
887 (Tex. Comm'n App. 1937). Parties to a contract have the
legal right to stipulate the amount of damages that may be
recoverable in actions for breach of the contract:       on a
showing that the stipulated sum fairly was estimated by the
parties and that it was their intention that that sum be in
lieu of all other damages, the agreement is binding on the
parties and furnishes the measure of damages. A.J. Rife
Construction Co. v. Brans, 298 S.W.2d 254 (Tex. Civ. App.    -
Dallas 1956, writ ref'd n.r.e.); aliott       v. Henck,    223
S.W.2d 292   (Tex. Civ. App. - Galveston 1949, writ ref'd
n.r.e.).

                              p. 4502
Honorable Stephen C. Howard - Page 9 W-908)

       terms considered appropriate by the governing
       body of the public agency.       A home-Nle
       citv's charter wrovision    re trictina     the
       duration of a CitV contract do& not annlv to
       a citv contract that relates to solid waste
       manaaement services.

           (b) Under a solid waste management service
        contract, a public agency may:

           .   .   .   .

           (6) contract with another public agency or
       other persons    for solid waste management
       services,    including   contracts   for   the
       collection and transportation of solid   waste
       and for processing   or disposal at any per-
       mitted   solid   waste management    facility,
       including a     resource  recovery   facility,
       provided the contract may specify the minimum
       quantity and quality of solid waste to be
       provided by the public agency and the minimum
       fees and charges to be paid     by the public
       agency for the right to have solid waste
       processed or disposed of at the solid waste
       management facility:

            (7) contract with any person   or other
        public agency to supply materials, fue,l, or
        energy resulting  from the operation   of a
        resource recovery facility: and

            (8) contract with any person or other
        public agency._ to receive
                           __         or purchase   solid
        waste, materials, fuel,    or  energy  recovered
        from resource recovery facilities.      (Emphasis
        added.)

V.T.C.S. art. 4477-7c,   514.   The      act   at   section   6(18)
defines "public agency" to mean

        a city, county, or a district or authority
        created and operating under either Article
        III, Section 52(b)(l) or (2) or Article  XVI,
        Section 59, of the Texas Constitution, or a
        combination or two or more of these govern-
        mental entities acting under an interlocal
        agreement and having the authority under this
        Act or other laws to own and operate a solid
        waste management system.

                               p. 4503
Honorable Stephen C. Howard - Page 10 (JM-908)

V.T.C.S. art. 4477-7c, §6(18).   The act defines at          section
6(24) "solid waste management" as:
        the systematic control of    any or all of     the
        following activities:

               generation;
               source separation:
               collection:
               handling;
               storage:
               transportation;
               processing:
               treatment:
               resource recovery: or
               disposal of solid waste.

V.T.C.S. art. 4477-7c, §6(24). Because a city is a "public
agency" for purposes of the act and because the collection,
handling, storage, etc., of solid waste     falls within  the
definition of "solid waste management,l' a city is authorized
by the terms of the act to enter such a contract as you
describe.  And the language of subsection 14(a) of the act,
underscored above, provides that any home rule city charter
provision restricting the duration of a city contract    does
not apply to a city contract that relates to solid waste
management services. See Tex. Const. art. XI, g5.

      However,   in the brief accompanying your              request
letter, you express concern about the effect of              article
4477-7d, V.T.C.S., which states:

           A home-Nle     city's charter    provision
        restricting the duration  of a city contract
        does not apply to a city contract:

            (1)   that  relates     to    solid      waste
        management: and

            (2) that must be for a longer term than
        the charter permits in order for the city to
        qualify for the receipt of federal funds
        designated    for  solid   waste   management
        purposes.

     This provision   appears  to conflict with     article
4477-7c, V.T.C.S., and to limit the instances   in which   a
contract may be for a longer term than that permitted by a
home rule city charter provision   to those in which the
contract must be for a longer term in order to qualify   for

                              p. 4504
        Honorable Stephen C. Howard - Page 11 (JB-908)

h

        the receipt of federal funds. YOU suggest that, because
        article 4477-7d fails to define   %olid waste management,"
        article 4477-7~ controls all contracts relating    to solid
        waste management  as defined in that act. In all other
        instances, article 4477-7d controls.   Because each of the
        statutes in the article 4477-7 series defines llsolid waste
        management"  or llmanagement'l in substantially    identical
        terms, we disagree with your argument.  Instead, we conclude
        that the provisions of subsection 14(a) of article  4477-7c,
        V.T.C.S., prevail over article 4477-7d, V.T.C.S.     in all
        instances: consequently, article 4477-7c, V.T.C.S., prevails
        over any home rule city charter provision that limits the
        duration of any contract that the home rule city may enter
        regarding solid waste management.

             In an instance    in which conflicting    statutes   are
        enacted by the same session of the legislature, the latest
        expression of legislative   intent prevails.   Ex narte de
        Jesus de la 0     227 S.W.2d 212   (Tex. Crim. App.    1950):
        Attorney Generai Opinions WW-139    (1980); H-1115    (1978).
        Sutherland on Statutorv Construction   offers the following
        rules:

P
                   In the absence      of an   irreconcilable
                conflict between   two    acts of the     same
                session, each will be construed to operate
                within the limits of its own terms in a
                manner not to conflict with the         other.
                However, when two acts of the same session
                cannot be harmonized     or reconciled,   that
                statute which  is the latest enactment    will
                operate to repeal a prior statute of the same
                session to the extent of any conflict       in
                their terms.

                   Because the latest expression    of   the
                legislative will prevails, the statute last
                passed will prevail over a statute passed
                prior to it, irrespective of the time of
                taking effect.   Where the two acts of the
                same session take effect at the same time,
                the latest passed will prevail.   (Footnotes
                omitted.)

    P   Singer, Sutherland   on Statutory   Construction,   523.17   (4th
        ed.)

             In this instance, both provisions were enacted during
        the 68th legislature,  and both deal with the same subject
        matter. The two provisions are in irreconcilable   conflict.
        V.T.C.S. article 4477-7c, section 14(a), permits a home rule

                                      p. 4505
Honorable Stephen C. Howard - Page 12   (JR-908)

city to enter into any contract       regarding   solid waste
management whose duration is longer than that permitted     in
the home city's charter:   article 4477-7d, V.T.C.S., on the
other hand, permits a home rule city to enter such a long
term contract regarding solid waste management, but only in
an instance in which the city must do so in order to qualify
for the receipt of       federal funds.    Article    4477-7d,
V.T.C.S., passed the House of Representatives on April     14,
1983 and passed the Senate on May 23, 1983.            Article
4477-7c, V.T.C.S., passed the House of Representatives      on
May 13, 1983.    The house then concurred     in the Senate
amendments to the bill on May 30, 1983; the Senate passed
the amended bill on May 30, 1983.          Article    4477-7d,
V.T.C.S., became   law without the Governor's   signature   on
June 19, 1983: article 4477-7c, V.T.C.S., was signed by the
Governor the same day. Article     4477-7d, V.T.C.S.,   became
effective on August 29, 1983; article 4477-7c, V.T.C.S.,    on
September 1, 1983.

     Article 4477-7c, V.T.C.S., the Comprehensive  Municipal
Solid Waste Management, Resource Recovery, and Conservation
Act, was the last enacted statute, and therefore  represents
the most recent expression   of legislative intent on the
subject. Accordingly, the provisions of subsection 14(a) of
article 4477-7c, V.T.C.S., which permits a home rule city to
enter into any contract regarding solid waste management for
the time and under the conditions       that it    considers
appropriate, prevail over a home rule city charter provision
that limits the duration  of a contract that the home rule
city may enter.

     You next ask whether any contract entered into by the
county with a city that provides that the county provide
solid waste disposal  services to the city may charge the
city on a so-called llcost-plus'lbasis. Subsection 14(a) of
article 4477-7c, V.T.C.S., provides that a public agency as
defined by the act may enter into contracts to enable it to
furnish or receive solid waste management services.  It also
provides:  "Each contract may be for the time and under the
terms considered appropriate  by the governing  body of the
public agency." V.T.C.S. art. 4477-7c, 514(a). YOU assert
that this sentence from subsection 14(a) authorizes a county
and a city to enter into such "cost-plus" contracts.

     A "cost-plus" contract or a "cost-plus-fixed-fee"   con-
tract is one in which the contractor is to be reimbursed for
costs of materials and labor by the owner and is to receive
a stated percentage of such costs as his profit.   Burditt v.
si    710 S.W.2d 114  (Tex. App. - 'Corpus Christi 1986, no
     ; Gav v. Stratton, 559 S.W.2d 131 (Tex. Clv.     App. -

                              p. 4506
Honorable Stephen C. Howard - Page 13 (JR-908)

Texarkana 1977, writ ref8d n.r.e.). The consideration    due
under a Vast-plus"   contract cannot be ascertained    other
than by relation to costs expended or necessary       to be
expended.  Fair v. Uhr, 310 S.W.Zd 125 (Tex. Civ. App. - Ft.
Worth 1958, writ ref'd n.r.e.).

     It has been suggested that such a contract might vio-
late article XI, sections 5 and 7, of the Texas Constitu-
tion, which forbid both cities and counties from incurring
debt for any purpose in any manner unless provision is made,
at the time such debt is incurred, for levying and collect-
ing a sufficient tax to pay the interest thereon and provide
at least two per cent as a sinking fund. These constitu-
tional provisions   have been COnStNed by the courts to
include any pecuniary obligation imposed by contract, except
such as was, at the time of the agreement, within the lawful
and reasonable contemplation of the parties, to be satisfied
out of current revenues for the year or out of some fund
then within the immediate control of the city.or county.
See Brown v. Jefferson Countv 406 S.W.Zd 185      (Tex. 1966);
T. & N.O. R.R. Co. v. Galveiton County, 141 Tex. 34, 169
S.W.2d 713 (Tex. Comm'n. App. 1943, opinion adopted):     City
of Houston v. West, 563 S.W.2d 680 (Tex. Civ. App. - Waco
1978, writ ref'd n.r.e.).     It has been suggested    that a
llcost-plusV1or a lVcost-plus-fixed-feeV*contract would impose
upon the contracting   city a l'debtllfor purposes of these
constitutional provisions   that could be unlimited,    or at
least unascertainable,   and would not permit a city to
provide for the levying and collecting of a sufficient     tax
to discharge the debt.

     We have found no Texas case specifically       on point.
However, a similar argument was made challenging a contract
that contained an indemnity clause, providing that Jefferson
County would lqhold and save harmlesstl the United States from
damages that might result from the construction of a bridge;
the Texas Supreme Court upheld the validity of the contract.
Brown v. Jefferson    Countv, 406 S.W.2d 185 (Tex. 1966)
[hereinafter Brown]. The contract    in Brown was challenged
on the ground that the obligation    incurred was unlimited,
while the taxing power of the county was limited by article
VIII, section 9, of the Texas         Constitution.    It was
suggested that the      county could not      then meet    the
constitutional requirements of article XI, section 7.       In
other words,  it was argued that, because there was a
possibility that an obligation   due the United States might
arise in the future under the indemnity clause of the
contract that might be beyond the ability of the county to
pay because of the constitutional restrictions of its taxing
power, the contract was invalid. The court disagreed:

                              p. 4507
Honorable Stephen C. Howard - Page 14    (JM-908)

       The 'hold and save' agreement herein involved
       will not necessarily result in the assertion
       of a claim against the County.      If a claim be
       asserted, it may be one that could be settled
       from the current revenues of a particular
       year, or it may be one which may be funded
       and paid off without violating any constitu-
       tional debt limit or taxing restrictions
       applicable to counties.      If such obligation
       may be so discharged, the County has bound
       itself to do so. It has, if necessary, bound
       itself to levy a 'sufficient tax.'           There
       remains only the possibility that an obliga-
       tion may arise under the indemnity        contract
       which the County could not fund and discharge
       because of the taxing restrictions      contained
       in Article [VIII], [section 91 of the Consti-
       tution [placing a ceiling on the tax rates
       that a county may impose]. Necessarily,         the
       agreement to levy a 'sufficient tax'           from
       year to year is subject to constitutionally
       imposed restrictions    upon the taxing power
       and when the levy .of a 'sufficient tax* for
       any particular    year would exceed the tax
       limit, no county could be forced to levy a
       tax in excess of the constitutional         limit.
       The outside possibility       that this latter
       situation might 'arise will not operate to
       invalidate the 'hold and save' agreement.
       There   is always the possibility         that    a
       municipal   taxing organization      will    incur
       obligations that may exceed its permissible
       taxing power in future years.          [Citations
       omitted.]-    However,      legitimate      county
       contracts should not be declared void upon
       possibilities.    When the order or resolution
       creating the obligation      complies with the
       provisions of article [XI], [section] 7 of
       the Constitution, it should be stricken down
       only when   it is made to appear that the
       limited tax resources of the municipality are
       insufficient at such time to discharge          the
       obligation.      (Citations     and     Footnotes
       omitted.)

Id. at 189-90. Article XI, section 5, of the Texas Consti-
tution contains the same sort of constitutional   limitation
on the taxing power of home rule cities that is contained in
article VIII, section 9, which limits the taxing power of
counties:

                              p. 4508
    Honorable Stephen C. Howard - Page 15 (JM-908)

            [S]aid cities may levy, assess and collect
            such taxes as may be authorized by law or by
0           their charters; but no tax for any purpose
            shall ever be lawful for any year, which
            shall exceed two and one-half per cent of the
            taxable property of such city. . . .

    Tex . Const. art. XI, 55.    Accordingly, we conclude that if
    the formal action taken by the city creating the obligation
    complies with the provisions of article XI, section 7, the
    contract should be struck   down only in an instance in which
    the limited tax resources of the city are insufficient       at
    that time to discharge the obligation.      We conclude that a
    "cost-plus"     or     l'cost-plus-fixed-feell   contract    is
    permissible.

         With your last question, you ask whether the county may
    enter into a solid waste disposal services contract with an
    individual or corporation without  awarding the contract  on
    the basis of competitive bidding. We conclude that competi-
    tive bidding is not required in such an instance, if enter-
    ing into the contract is necessary to preserve or protect
    the public health of the citizens of the county.     Whether
P   such is the case in Orange County is a factual matter,   the
    finding of which does not fall within the ambit of the
    opinion process.

         Subchapter C of chapter 262 of the Local Government
    Code previously   codified as article 2368a.5, V.T.C.S.,
    governs competitive bidding. Section 262.023 of the Local
    Government Code provides:

                (a) Before a county may purchase one or
            more items under a contract that will require
            an    expenditure  exceeding   $5,600,    the
            commissioners court of the county must comply
            with the competitive  bidding or competitive
            proposal procedures    prescribed   by   this
            subchapter.   All bids or proposals must be
            sealed.

                (b) The competitive  bidding and competi-
            tive proposal    requirements  established  by
            Subsection (a) apply only to contracts     for
            which payment will be made from current funds
            or bond funds or through time warrants.
            However, contracts for which payments will be
            made through certificates   of obligation  are
            governed by The Certificate of Obligation Act
            of 1971 (Subchapter C, Chapter 271).

                                  p. 4509
Honorable Stephen C. Howard - Page 16 (JM-908)

            (c) In applying the competitive      bidding
        and    competitive     proposal     requirements
        established by Subsection (a), all separate,            -,
        sequential, or component    purchases of items
        ordered or purchased, with the intent of
        avoiding    the    competitive   bidding     and
        competitive   proposal   requirements   of this
        subchapter, from the same supplier by the
        same county officer, department, or institu-
        tion are treated as if they are part of         a
        single purchase and of a single contract.

Section 262.024 of the Local Government  Code sets out the
exemptions  to the    reach of    the competitive   bidding
requirements and provides the following:

           (a) A contract for the purchase of any of
        the following    items is exempt   from   the
        requirement established by Section 262.023 if
        the commissioners court by order grants the
        exemption:

           .   .   .

              (2) an item necessary to preserve or'
           protect the public health or safety of
           the residents of the county;

           . . .

              (4) a personal or professional
           service:

           . . .

     YOU do not specify in your request letter just exactly
for what the county  intends to contract. Under subsection
14(b) of article 4477-7c, V.T:C.S., a llsolid waste manage-
ment services contract" may include both    "items," in the
common understanding  of "physical objects,"    as well as
services. Nor have you indicated whether the commissioners
court has voted pursuant    to subsection    (a) of section
262.024 to grant the exemptions set forth in subsection   (b)
of that section. Nor have you indicated the amount of money
to be expended on the contract.      YOU suggest that the
contract falls within exemption (2) of subsection (b), and,
on the basis of Brownina-Ferris. Inc. v. Citv of Leon
Vallev, 590 S.W.2d 729 (Tex. Civ. App. - San Antonio    1979,
writ ref'd n.r.e.), no competitive bidding is required.

                               P. 4510
Honorable Stephen C. Howard - Page 17 (JM-908)

      In Brownins-Ferrig    a city granted, by ordinance,. an
exclusive franchise to a' garbage collection agency to pro-
vide all garbage collection    within the city. The contract
was awarded without the city going through the competitive
bidding process. Quoting the lqpublic health" provisions      of
the predecessor statute to chapter 262 of the Local Govern-
ment Code, the court concluded that the award was necessary
to preserve and protect the public health and that competi-
tive bidding was not required.       The court relied on an
earlier case that ConstNed       the predecessor    statute to
article   2368a. 5, V.T.C.S.,   Hoffman    v. citv of     Mount
Pleasant, 126 Tex. 632, 89 S.W.2d 193 (Tex.        Comm'n  App.
1936), and concluded that a county properly could expend
funds to protect the public health without the necessity     of
requiring   competitive   bids   otherwise   required by    the
competitive bidding provisions    and that the public health
exception   to    the competitive    bidding provisions     was
operative at all times whether or not there was a "case of
public calamity."    The public health exception contained    in
the predecessor     statute to article 2368a.5,       V.T.C.S.,
substantially tracks the exception now found in chapter 262.

      The Hoffman court declared at 89 S.W.2d 194':

           The matter   is one purely of statutory
        constNction.    After careful consideration of
        the whole act as well as the          peculiar
        language of the exception, in light of the
        rules usually     applicable   when   statutes
        concerning public health are involved, ‘we
        have reached the conclusion   that the use of
        the word     'when' clearly    indicated    the
        introduction of a new condition and exception
        not dependent upon a 'public calamity,'     and
        that the requirement of competitive bids with
        publication of notice of letting the contract
        is dispensed with when such exception exists.
        In other words, we are of the opinion that
        'when it is necessary to preserve or protect
        the public health of the citizens of a county
        or city,' a condition    requiring prompt and
        unrestrained action in order to remedy such a
        situation exists, regardless of whether    such
        condition has been brought about by a public
        calamity or in some other way.      The words
        'preserve* and 'protect,' as applied         to
        public health, carry the idea of timely,
        efficient, and effective   action which keeps
        intact and unimpaired the good health of the
        citizens in advance of its impairment.

                               p. 4511
Honorable Stephen C. Howard - Page 18      0-908)

     Accordingly, we conclude that competitive.bidding    is
not required in an instance in which the county enters  into
a solid waste disposal services contract with an individual
or a corporation, if it is necessary to preserve or protect
the public health of the citizens of the county.     Whether
such is the case in Orange County is a factual matter,   the
finding of which does not fall within     the ambit of the
opinion process.

                       SUMMARY

           1. A commissioners court specifically  is
        authorized by article 4477-7c, V.T.C.S.,  to
        enter into a long-term solid waste disposal
        services contract with an individual      or
        corporation    that   will    bind    future
        commissioners courts.

          2. The county may enter into a solid
       waste disposal contract with an individual or
       a corporation that would require the county
       to pay a penalty    if it fails .to provide
       within a certain period of time a specified
       quantity of solid waste to the individual  or
       corporation, but only if the penalty  imposed
       is a measure of any damages actually incurred
       by the contracting party or if it is part of
       a ouid wro     au0 for    which the    county
       legitimately may bargain.

          3. Subsection 14(a) of article        4477-7c,
       V.T.C.S., the Comprehensive Municipal       Solid
       Waste Management,     Resource Recovery,       and
       Conservation Act, prevails over the provi-
       sions of article    4477-7d, V.T.C.S.,    because
       it is the latest expression of the legisla-
       ture's intent regarding the authority of a
       home rule city to enter into a solid waste
       management services contract.        Accordingly,
       subsection    14(a)    of    article     4477-7c,
       V.T.C.S., which permits a home rule city to
       enter into any contract regarding solid waste
       management   for the      time and under       the
       conditions   that it considers       appropriate,
       prevails   over a home rule city          charter
       provision   that limits the duration        of a
       contract that the home rule city may enter.

                                 p. 4512
    Honorable Stephen C. Howard - Page 19 KM-908)

P
               4. Article   4477-7c, V.T.C.S.,    permits
            political subdivisions  to enter into solid
            waste disposal service contracts under terms
            that they consider appropriate;     a "cost-
            plus" or Wcost-plus-fixed-feeW   contract  is
            permissible.

               5. A county may enter into a solid waste
            disposal services contract with an individual
            or corporation without awarding such contract
            on the basis of the competitive       bidding
            provisions  of chapter 262 of the       Local
            Government  Code, if it is necessary       to
            preserve or protect the public health of the
            citizens of the county. Whether such is the
            case in Orange County is a factual matter,
            the finding of which does not fall within the
            ambit of the opinion process.

                                       d-
                                         Very truly
                                               .

                                         JIM     MATTO     X
                                         Attorney General of Texas
                                                       .
    MARY KELLER
    First Assistant Attorney General

    LOU MCCREARY
    Executive Assistant Attorney General

    JUDGE ZOLLIE STEAXLRY
    Special Assistant Attorney General

    RICK GILPIN
    Chairman, opinion Committee

    Prepared by Jim Moellinger
    Assistant Attorney General

P

                                  p. 4513