Court Opinion

ID: 4129186
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:48:37.732716+00
Date Added: 2024-06-11T14:37:36.253849
License: Public Domain

OFFICE   OF THE ATTORNEY   GENERAL.   STATE OF TEXAS
   JOHN      CORNYN

                                                 April 23,2002

The Honorable Jim Solis                                    Opinion No. JC-0494
Chair, Economic Development Committee
Texas House of Representatives                             Re: Whether the Gun Barrel City Economic
P.O. Box 2910                                              Development Corporation may use Development
Austin, Texas 7876829 10                                   Corporation Act of 1979, section 4B sales and use
                                                           taxes to fund a project that does not promote
                                                           business development   (RQ-0462-JC)

Dear Representative      Solis:

         When the law requires that voters approve a tax, proceeds of the tax may only be used for
the purposes approved by the voters. Under section 4B of the Development Corporation Act of
1979, article 5 190.6 of the Revised Civil Statutes (the “Act”), an eligible city may collect sales and
use tax, if approved by the city’s voters, to be used by a city-created industrial development
corporation to fund authorized projects. On May 3,1997, the voters of Gun Barrel City (the “City”)
approved the adoption of a one-half percent sales and use tax “for the promotion and development
of new and expanded business enterprises.” On behalf of the Board of Directors of the Gun Barrel
City Economic Development Corporation (the “Corporation”), you ask about its authority under
section 4B(a)(2)(A) of the Act to use the sales tax proceeds to fund a project that does not promote
business development. * Consistent with the voter-approved election proposition, the sales taxes
collected in the City may be used only for the promotion and development of business enterprises.
The Board may not use the sales tax proceeds to fund a project that does not promote business
development.

         To provide a legal context for your request, we briefly review the Act’s provisions regarding
approval and use of the section 4B sales taxes. The Development Corporation Act of 1979
authorizes a city, county, or district to create an industrial development corporation to finance the
cost of authorized “projects” that generally promote economic development.           See TEX. REV. CIV.
STAT. ANN. art. 5 190.6 (Vernon 1987 & Supp. 2002).      In  particular, section 4B of the Act authorizes
an eligible city to create an industrial development corporation governed by that section, see id.
5 4B(b) (Vernon Supp. 2002), and authorizes the city to levy a sales and use tax for the benefit of
the corporation, but only if approved by a majority of the voters at an election called for that

           ‘See Letter from Honorable Jim Solis, Chair, Committee on Economic Development,        Texas House of
Representatives, to Honorable John Cornyn, Texas Attorney General (Nov. 7,200l) (on file with Opinion Committee)
[hereinafter Request Letter].
The Honorable Jim Solis - Page 2               (JC-0494)

purpose, see id. 8 4B(d). Other than the rate of the tax and descriptions ofparticular projects, section
4B does not generally specify the contents of the tax election proposition or ballot to be submitted to
the voters. See id.; see also id. $5 4B(a-3)(2) (re q uiring voter approval for specific venue projects
“clearly described on the ballot”); (a-5) (requiring ballot proposition at election to adopt tax to
clearly describe project if project involves water supply facilities or water conservation
programs); (p) (requiring ballot to provide for voting for or against use of sales tax for “cleanup of
contaminated property”).     Upon receipt of the sales tax proceeds, the city must deliver the tax
proceeds to the corporation, see id. 8 4B(g), to be used to finance costs of authorized “projects.” See
id. 8 4B(g)(l)-(2).  Th ose “projects” include “facilities and improvements” found by the board of
directors of the corporation to:

                (A) be required or suitable for use for professional and amateur
                (including children ‘s) sports, athletic, entertainment, tourist, conven-
                tion, and public park purposes and events, including stadiums, ball
                parks, auditoriums, amphitheaters, concert halls, learning centers,
                parks and park facilities, open space improvements,              municipal
                buildings, museums, exhibition facilities, and related store, restaurant,
                concession,     and automobile       parking     facilities, related area
                transportation facilities, and related roads, streets, and water and
                sewer facilities, and other related improvements that enhance any of
                those items;

                (B) promote or develop new or expanded business enterprises,
                including a project to provide public safety facilities, streets and
                roads, drainage and related improvements, demolition of existing
                structures, general municipally owned improvements, as well as any
                improvements or facilities that are related to any of those projects and
                any otherproject that the board in its discretion determinespromotes
                or develops new or expanded business enterprises.

Id. 8 4B(a)(2)(A)-(B)   (emphasis added).

         With this background, we turn to your question. You inform us that there is “a desire in Gun
Barrel City to utilize Section 4B tax revenues to construct a youth league football field at the city
park.” Request Letter, supra note 1. Although the football field would benefit the community,
“there is no discernable economic advantage associated with the project.” See id. As we understand
it, the Corporation has determined that the project would not promote economic development much
less “business development,” arguably a more specific subset of economic development.          See id.;
Tex. Att’y Gen. Op. No. JC-0362 (2001) at 5 (determination of whether particular project will
promote economic development purposes of Act is generally a question of fact within discretion of
development corporation’s board of directors in the first instance). The Corporation’s Board of
Directors requests clarification of its project funding authority under section 4B(a)(2)(A) of the Act.
Specifically, the Board asks:
The Honorable       Jim Solis - Page 3                  (JC-0494)

                   Since Section 4B[(a)](2)(A) lacks reference to job creation, expan-
                   sion, retention, promotion of business and commerce, etc., and since
                   such references are evident in similar sections, e.g., in Section
                   2( 1 l)(A),* Section 33 and Section 4B[(a)](2)(B), may it be presumed
                   that projects may be undertaken under Section 4B[(a)](2)(A) without
                   consideration of some predictable positive economic impact?

Request Letter, supra note 1 (footnotes            added).

         Section 4B(a)(2)(A) by its terms does not require that the specific projects authorized in
that section promote economic development, notwithstanding that the overarching purpose of the
Act is the promotion of economic development.            See TEX. REV. CIV. STAT. ANN. art. 5 190.6,
9 4wa)ww         (V emon Supp. 2002); see, e.g., id. $5 3 (legislative findings regarding economic
development purpose and supporting measures authorized by Act); 21 (authorizing city, county,
or district to utilize industrial development corporation to finance projects to promote economic
development).       Given the numerous and rather selective changes to the Act since it was first
adopted in 1979, it is less than a coherent or consistent statute. See generally Tex. Att’y Gen. Op.
No. JC-0118 (1999) (reviewing sections 4A and 4B provisions); 1 OFFICE        OFTHETEXASA~ORNEY
GENERAL, HANDBOOK ON ECONOMIC DEVELOPMENT                  LAWS FOR TEXAS CITIES2-3, 5-6 (2002)
(discussing Act’s legislative evolution). However, because the Corporation’s authority to undertake
projects is limited by the particular sales tax election proposition submitted to and approved by the
City voters, we do not reach the Corporation’s question whether section 4B(a)(2)(A) generally
allows noneconomic development projects to resolve the question presented here.

        Use of section 4B sales tax is limited not only by the statutory provisions of the Act, but also
by the particular tax election authorizing the tax. Proceeds of the section 4B sales tax, of course,

         *Section 2( 1 l)(A) of the Act defines the term “[plroject,”   in part, as:

                   the land, buildings, equipment, [and] facilities . . . to promote new and expanded
                   business development or found by the board of directors to be required or suitable
                   for the promotion of development and expansion of manufacturing and industrial
                   facilities, job creation and retention, job training. . . .

                            Project also includes job training required or suitable for the promotion
                   of development    and expansion of business enterprises and other enterprises
                   described by this Act, as provided in Section 38 of this Act.

TEX. REV. CIV. STAT.ANN. art. 5 190.6, 9 2( 1 l)(A)   (Vernon   Supp. 2002).

          3Section 3(a) sets out legislative fmdings and determinations generally to the effect that the welfare of the state
requires as a public purpose the “promotion and development of new and expanded business enterprises and the
promotion and development ofjob training[;] . . . that the existence, development, and expansion ofbusiness, commerce,
industry,” higher education, and job training are essential to the state’s economic growth; and that the measures
authorized by the Act promote the economic welfare of the state “by the securing and retaining of business enterprises
and the resulting maintenance of a higher level of employment, economic activity, and stability[.]” Icl. 5 3(a)(1)-(4).
The Honorable      Jim Solis - Page 4                 (JC-0494)

may be used only for the purposes authorized by the statute. See Tri-City Fresh Water Supply Dist.
v. Mann, 142 S.W.2d 945, 948 (Tex. 1940) (taxing power may be exercised only for purposes
distinctly included in constitutional or legislative authorization); see also Tex. Att’y Gen. Op. No.
JC-0118 (1999) (section 4B sales tax proceeds may only be used for projects authorized by statute).
Additionally, they may be used only for the purposes expressly represented to and approved by the
voters, i.e., the contract with the voters, which may be more limited than the purposes allowed by
the statute. See Tex. Att’y Gen. Op. No. JC-0400 (2001) at 4-5 (and cases cited therein); see also
Tex. Att’y Gen. Op. No. JC-0488 (2002) at 4. “The contract with the voters clearly includes the
purposes stated in an election ordinance or order formally adopted by a governing body and the
election proposition submitted to the voters.” See Tex. Att’y Gen. Op. No. JC-0488 (2002) at 4. It
may also include representations       made by the governing body outside the formal election
proceedings, for example, such as statements made before the election to the public regarding
specific purposes for which the proceeds will or will not be used. See id. at 4. We assume for the
purposes of this opinion that neither the governing body of the City nor of the Corporation made any
representations    limiting the use of the sales and use tax proceeds beyond that in the election
proposition approved by the City’s voters.

        The election proposition presented to the City voters limited the use of the section 4B sales
tax to business development purposes. On March 11, 1997, the City Council of Gun Barrel City
adopted an ordinance calling a special election to be held on May 3, 1997, to allow City residents
to vote on the “question of the adoption of an additional sales and use tax for the purpose of the
promotion and development of new and expanded business enterprises.” GUN BARRELCITY, TEX.,
ORDINANCE     No. 1997-005 (1997). The ordinance directed the submission to the voters of the
following proposition: “The adoption of an additional [one-half] of one percent sales and use tax
for the promotion and development of new and expanded business enterprises.” Id.4 Compare id.
with Tex. Att’y Gen. Op. No. JC-0400 (2001) at 4 (City of Sonora proposition submitted to voters:
“The adoption of an additional one-half of one percent sales and use tax within the City pursuant to
the provisions of Article 5 190.6 . . . , with the proceeds thereof to be used and applied in the manner
and to the purposes authorized by Section 4B of the Act, including but not limited to . . . .“). We
understand that the sales tax revenues at issue here are collected pursuant to the May 3,1997 election
because no other sales and use tax election in the City has been called and held pursuant to the Act.

         In sum, because the City’s voter-approved sales tax election proposition limits their use “for
the promotion and development of new and expanded business enterprises,” see GUNBARRELCITY,
TEX., ORDINANCE    NO. 1997-005 (1997) at 1, the Corporation’s Board of Directors may use the sales
tax proceeds to fund only projects that promote business development. Accordingly, we conclude
that the Corporations’s Board of Directors may not use the section 4B tax revenues to fund a project
that does not promote business development.

         4See also GUN BARREL    CITY, TEX., ORDINANCE   No. 1997-007 (1997) ( canvassing special election returns and
finding that the “proposition for the adoption of a Section 4B sales and use tax at the rate of one-half of one percent”
submitted at the election on May 3, 1997, was passed by voters).
The Honorable   Jim Solis - Page 5            (JC-0494)

                                        SUMMARY

                         Consistent with the particular 1997 voter-approved election
                proposition, the sales taxes collected in Gun Barrel City under section
                4B of the Development        Corporation Act of 1979 may be used
                only for projects that promote business development. The Board of
                Directors of the Gun Barrel City Economic Development Corporation
                may not use the sales tax proceeds to fund a project that does not
                promote business development.

                                               Attorney General of Texas

HOWARD G. BALDWIN, JR.
First Assistant Attorney General

NANCY FULLER
Deputy Attorney General - General Counsel

SUSAN DENMON GUSKY
Chair, Opinion Committee

Sheela Rai
Assistant Attorney General, Opinion Committee