Court Opinion

ID: 4129850
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:57:12.701594+00
Date Added: 2024-06-11T14:31:26.660627
License: Public Domain

@ffice of tiy JZWmwp @eneral
                                      Sbtate of llCexa$
DAN MORALES
 ATTORNEY GENERAL                              March IO, 1995

        Honorable David H. Cain                         Gpiion No. DM-331
        Texas State Senate
        P.O. Box 12068                                  Re: Whether a city’s expenditures of
        Austin, Texas 78711                             community development block grant funds
                                                        are subject to state competitive bidding
                                                        hvs (RQ-644)

        Dear senator Cain:

                In your capacity as chahman of the House &m&tee on Transportation you
        asked whether the state’s competitive bidding laws apply to community development
        block grant (“CDBG”) 8mds “received and distributed” by a city to (a) “nonprofit
        contractors” and @) “for-profit entities.” You say that federal law, at least, “does not.
        require that CDBG funded projects be competitively bid if cities award a grant to a
        nonprofit corporation.” Also, you note that, while the municipal competitive bidding
        provisions in section 252.021 of the Local Government Code apply to “[a]
        contract.. . [that requires M expenditure]. . . from one or more municipl fun&”
        section 373.005(c) of the Local Government Code makes a distinction, in the context of
        municipal community development projects, between “fbderal money” and “municipal
        funds.” In our opinion, a city’s expenditures of CDBG Smds are subject to competitive
        bidding under state law when spent on %mtmcts” exceeding the threshold amounts set
        out in those laws and not falling within any of the exceptions to the bidding requirements
        set out there or elsewhere in state law.

                 Chapter 373 of the Local Government Code generally authorizes a municipalityto
         finance community development projects using federal funds received by the municipality
         as well as other 8mds of the municipality. Section 373.005(c), referenced in your request,
         reads in pertinent part:

                         A municipalitymay implementprograms to provide Snancing for
                    the acquisition, wnstruction, improvement or rehabiitation of
                    privately owned buildings and other improvements or to assist
                    private, for-profit entities ifthe assistance is necessary or appropriate
                    to carry out an economic development project, through the use of
                    loans and grants from federal money remitted to the WC-
                    ipslity. . . . A municipality may not provide municipal property or
                    municipal junrl for private purposes. The programs and financing
                    must be in keeping with an approved wmmunity development plan
                    that the municipality has determined to be a public purpose. A
Honorable David H. Cain - Page 2            PM-33 1)

           program established for financing the acquisition, wnstruction,
           improvement, or rehabilitation of buildings and improvements, or for
           financing economic development projects, through the use offerlea
          funds may prescribe procedures under which the owners of the
           buildings, improvements, or economic development projects agree to
           partially or fully reimburse the municipality. emphasis added.]

       The federal law providing for the granting of CDBG fbnds is found in 42 U.S.C.
chapter 69. See also 24 C.F.R. pt. 570. We sre aware of nothing in current federal law.
however, that specit?caUy addresses the applicabiMy of state wmpetitive bidding
requirements to the use of CDBG funds by recipient municipalities.

        Several prior opinions of this office concluded that federal ?evenue sharing”funds
received by local govemments under chapter 67 of title 3 1 of the United States Code, the
Revenue Sharing Act, now repealed. were subject to state laws generally applicable to
those entities’public 8mds.r See Attorney General Gpiions IM-716 (1987); MW-329
(1981); H-1189 (1978); H-1010; (1977), and H-127 (1973). In support of their
wnclusions, those opinions, irrrer alia, cited federal provisions specifically nuking
recipient entities’expenditures of any federal revemre sharing fbnds received subject to the
same laws and procedures applicable to other timds of those entities. See 31 U.S.C
5 6794(a) (repealed 1986). in wntrast, the federal law pertaining to CDBGs provides
merely that grantees must “comply with the other provisions of [42 U.S.C. ch. 691 cmd
wirh other apphd$e lows..” 42 U.S.C. 0 5304(b)(6) (emphasis added).

        In our opinion, however, federal timds discretionarily obtained and expended by
Texas municipalitiestake on the character of municipal funds and are generally subject to
the state laws per&ing to such funds absent specific exceptions made under state law.
We believe this to be the case even in the absence of specific federal provisions
acknowledging the applicabiity of state law, such as those in the now-repealed Revenue
Sharing Act, and indeed even ifthe pertinent federal law specificallyimposed requirements
wntrary to state law.2

       Further, as to the applicable state law here, while we think it IUlMCCSSaryittthiS
context to determine precisely what, if any, distinction the legislature intended to make in
section 373.005(c) of the Local Government Code vis~%vis the uses to which &deral

         ‘The Revenue !&ring Act wns tcpealai in 1986. Pub. Law No. 99372, TiL XIV, 0 14001(a)(l),
Apr. 7,1986,100 Stat. 327.

                                         p. 1752
Honorable David H. Cain - Page 3       (DM-331) .

timds and finds from other sources could be put by a city on wmmunity development
projects, we do not believe that the use of the distinct terms “federal money” and
“municipsJ funds” in section 373.005(c) was itself intended to exempt expenditures of
federal 8mds in the hands of a municipality tkm the operation of state law generally
applicableto municipalfunds.

        CDBG receipts would presumably be subject to the municipal budget process-
section 102.003 of the Local Govemment Code rewires funds received and available
“from all sources” to be included in the budget, Likewise, we wuld not imagine that
CDBG receipts would not have to be deposited in the municipaldepository under chapter
105 of the Local Government Code, even though those provisions wnsistently speak only
to the deposit of “municipalfunds.” See id. 58 105.014 - .015, .031. Had the legislature
intended to exempt the expenditure of CDBG grant money 8om the state wmpetitive
bidding laws, we think it would have specitMly done so. See. e.g., Local Gov’t Code
8Q212.071 (excepting certain municipal public improvement wntracts from bidding
requirements), 374.904 (exempting certain municipal sales wmlected Withurban renewal
projects from state law bidding requirements), 392.0565 (added in response to Attorney
General Opinion JTvl-573(1986) specilicaUyexempting municipalhousing authorities from
state law to extent newssary to participate in Consolidated Supply Program of
Department of Housing and Urban Development); Attorney General Gpiion JM-573
(1986) (municipal housing authority may not participate in Consolidated Supply Program
of Department of Housing and Urban Development Without also complying with state
competitive bidding laws).

       Moreover, we think it clear that the fact, in itself, that an expenditure of CDBG
funds is made to a nonprofit as opposed to a for-profit entity does not take the
expenditure out of the competitive bidding requirements. The municipal wmpetitive
bidding requirements in chapter 252 make no general distinction betvveen nonprofit and
for-profit wntractees. Section 252.022(7)(P) does make a specific bidding requirement
exception for ‘management services provided by. . . nonprofit wrporations” to certain
museums, parks, zoos, or “other facilit[ies].” This specitic exception suggests that
wntracts over the threshold amounts With nonprofit entities are generally subject to the
bidding requirements, absent specific exceptions. See also Attorney General Gpiion
I’M-385 (finding that a wunty contract with a nonprofit entity Was exempted from the
competitive bidding requirements only because a state statute specificahy applicable to
wntracts of the non-profit entities at issue there expressly excepted them from the
requirements).

       Gf wurse, whether a particular expenditure of CDBG fimds wnstitutes one under
a “wntract”s in a suEcient amount as to bring it Withinthe wmpethive bidding provisions

                                          p.   1753
Honorable David H. Cain - Page 4              (DM-331)

       Of course, whether a particular expenditure of CDBG funds constitutes one under
a ‘contract”3 in a suf&cient amount as to bring it within the competitive bidding
provisions of chapter 252, or whether a particular contract would fall within the
exceptions to the bidding requirements in that chapter or elsewhere in state law would
depend on the facts of the particular case. See, e.g., Local Gov’t Code 5 252.022(a)(4)
(“personal or professional services*’ exception to bidding requirements), (a)(1 1)
,(exceptionfor certain public improvement wntracts under chapter 212).

                                       SUMMARl

                 Expenditures by a city of Federal Community Development
            Block Grant Funds on “‘wntracts”exceeding the threshold amounts
            set out in the state’s municipal wmpetitive bidding laws and not
            falling within any of the exceptions to the bidding requirements set
            out there or elsewhere in state law are subject to competitive
            bidding.

                                                           DAN MORALES
                                                           Attorney Genera) of Texas

JORGE VEGA
First Assistant Attorney General

SAFL4I-lJ. SHIRLEY
Chair, Opinion Committee

Pmpared by William Walker
Assistant Attorney Genera)

         3We note that your tquti spealu in part of cities’expeaditurr of CDBG funds in the form of
“grants.” llte provisions of chapter 373 s@ficdlly authorize cider to make “gran0” to cutain entities,
includiq c&ain kiads of nonprofit or&zations. We do not speculate here as to whether particubu grants
must inevitably be “contracts” within the ambit of tbe bidding provisions af chapter 252. See, rg.,
Aaomey General Opinion C-246 (1964) (county may anange without a witten umbact for the cdrc of
indigents). Bat see Atlomy Gwcral Opinion JM-274 (1985)(statc wwdtotion rcqairas public entity’s
gram or knding of credit to be accompanied by sufficient control to ensure that a public purpwc of tbc
emityi%SCWCd).

                                               p.   1754