Court Opinion

ID: 4128601
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:40:16.578724+00
Date Added: 2024-06-11T09:33:52.691911
License: Public Domain

ATTORNEY GENERAL OFTEXAS
                                       GREG       ABBOTT

                                         December 22,2006

Shirley J. Neeley, Ed.D.                            Opinion No. GA-0494
Commissioner of Education
Texas Education Agency                              Re: Whether Education Code sections 44.03 1
1701 North Congress Avenue                          and 44.033 apply to real and personal property
Austin, Texas 78701-1494                            lease-purchase contracts authorized under Local
                                                    Government Code sections 271.004 and 27 1.005
                                                    (RQ-0500-GA)

        You ask about the application of Education Code sections 44.03 1 and 44.033, which govern
procurement of school district contracts and purchases, to lease-purchase contracts for the acquisition
of real and personal property authorized under Local Government Code sections 271.004 and
271.005 respectively.’ You specifically ask the following four questions:

                1. Are school districts required to use a method authorized by
                Section[] 44.031 or 44.033 [of the Texas Education Code], as
                applicable, to enter all or part of lease-purchase agreements under
                Sections 271.004 and 271.005 [of the Texas Local Government
                Code]?

                2. If your answer to Question 1 above is “yes”, must the financing
                agreement entered into by the district be selected pursuant to a
                method authorized by Section[] 44.031 or 44.033, as applicable,
                distinct from the underlying purchase of real or personal property?

                3. May a school district enter into a lease-purchase agreement under
                Section271.004 or Section271.005 aspartofasingletransactionthtit
                includes the retention of a financial consultant under Section
                2254.003, Government Code without utilizing the procedures
                required by Section 44.031 or Section 44.033?

         ‘SeeLetterfromShirleyJ.Neeley,Ed.D.,CommissionerofEducation, TexasEducationAgency,to Honorable
GregAbbott,AttorneyGeneralof Texas,at 1 (June 12,2006)(on file withthe OpinionCommittee,also mailable al
http://~.oag.state.tx.us) [hereinatkrRequestLetter].
Shirley J. Neeley, Ed.D. - Page 2                (GA-0494)

               4. To the extent a financial consultant is contracted for under
               Chapter2254, must arequest for qualifications or similar competitive
               process be used to select the provider? Does the selection and
               negotiation procedure in Section 2254.004 apply to contracting with
               a financial consultant?

Request Letter, supra note 1, at 2-3 (footnote omitted).

I.     Statutory Background

       A.    Education     Code sections 44.031 and 44.033

        Chapter   44, subchapter B of the Education Code governs school district contracts and
purchases. See    TEX. EDUC. CODE ANN. 5s 44.031-,044 (Vernon 2006). Section 44.031 of the
Education Code    generally requires a school district to make each contract valued at $25,000 or more
by a method, of   the ten methods listed, that provides the best value:

                        Except as provided by this subchapter, all school district
               contracts, except contracts for the purchase of produce or vehicle
               fuel, valued at $25,000 or more in the aggregate for each 12-month
               period shall be made by the method, of the following methods, that
               provides the best value for the district:

                         (1)   competitive   bidding;

                         (2)   competitive   sealed proposals;

                        (3)    a request     for proposals,      for services   other     than
                construction   services;

                         (4) a catalogue purchase           as provided   by Subchapter     B,
                  Chapter 2157, Government Code;

                         (5)   an interlocal contract;

                         (6)   a design/build   contract;

                            (7) a contract to construct, rehabilitate, alter, or repair
                  facilities that involves using a construction manager;

                           (8) a job order contract for the minor construction,         repair,
                  rehabilitation, or alteration of a facility;

                         (9) the reverse auction procedure           as defined by Section
                  2155.062(d), Government Code; or
Shirley J. Neeley, Ed.D. - Page 3                (GA-0494)

                       (10) the formation of a political        subdivision   corporation
                under Section 304.001, Local Government         Code.

Id. 5 44.03 1(a) (emphasis added) (footnote omitted). In addition to contracts to purchase produce
or vehicle fuel, the statute expressly excepts from its application contracts for professional services;
computers and related equipment acquired through the Building and Procurement Commission; and
items available only from a single source. See id. 3 44.03 1(a), (t), (i)-(j). It also excepts contracts
to replace or repair equipment and school facilities in certain emergency situations.            See id.
§ 44.0310.

         Section 44.03 1 requires a school district to select the method that provides best value and to
then compiy with the procedures applicable to that purchasing method. See id. § 44.03 l(a); Duniels
Bldg. & Co&r., Inc. v. S&bee Indep. Sch. Disk, 990 S.W.2d 947,949-50 (Tex. App.-Beaumont
 1999, pet. dism’d); see also Tex. Att’y Gen. Op. No. JC-0037 (1999) at 2-3. Subsequent provisions
in section 44.03 1 and subchapter B set forth procurement procedures and vendor selection criteria
applicable to particular listed methods. ’ Section 44.031(e) provides that “[t]o the extent of any
conflict, this subchapter prevails over any other law relating to the purchasing of goods and services
except a law relating to contracting with historically underutilized businesses.” TEX. EDUC.CODE
ANN. § 44.03 l(e) (Vernon 2006).

        Section 44.033 applies to personal property purchases of less than $25,000.. See id.
3 44.033(a). It requires a school district to purchase personal property, if its “value     is at least
$10,000 but less than $25,000, in the aggregate, for a 12-month period,” through a “vendor list”
created by the district for categories of personal property. Id. 5 44.033(a)-(b).    Before making a
purchase, a school district must obtain quotes from vendors on the list, and “the purchase shall be
made from the lowest responsible bidder.” Id. 5 44.033(c). “In the alternative, the school district
may purchase those items in accordance with Section[] 44.03 l(a) [competitive bidding] and (b)
[competitive sealed proposals]~.” Id. 5 44.033(a).

        B.     Public Property Finance Act

          Chapter 271, subchapter A of the Local Government Code, the Public Property Finance Act
(the “Act”), furnishes “governmental agencies with a feasible means to purchase or otherwise
acquire, use, and finance public property.” TEX. Lot. GOV’TCODE ANN. §$ 271.001, .002(b)
(Vernon 2005). The Act authorizes contracts, includmg lease-purchase contracts, to acquire personal
and real property. See id. @ 271.004-,005.            Section 271.004, which applies solely to school
districts, authorizes a school district to “execute, perform, and make payments under a contract under
this Act for the use or purchase or other acquisition of real property or an improvement to real

         %~TEX.EDUC.CODEANN. $544.03l(g) (Vemon2006)           (publicationofnoticeforbidsandproposals),44.035
 (evaluationof constructionservicebidsandproposals),44.036(facilitydesign-buildcontratits),44.037(constmction
 manager-agentcontracts),44.038(constructionmanager-at-risk     contracts),44.039(selectingconstructionservices
 contractorthroughsealedproposals),44.040(selecting construction services throughbids),44.041(facility
                                                                                                     job order
 contracts).
Shirley J. Neeley, Ed.D. - Page 4                  (GA-0494)

property.” Id. § 271.004(a) (emphasis added)? A real property contract in the form of a lease-
purchase contract must be submitted to and approved by the attorney general. See id. 5 271.004(g).

        Section 271.005 authorizes governmental agencies generally,, which by definition include a
school district, to “execute, perform, and make payments under a contract          for the use or the
purchase or other acquisition of anypersonalproperty,    or the financing thereof.” Id. 5 271 .OOS(a)~
(emphasis added); see also id. § 271.003(4) (“‘Governmental agency’ means amunicipality, county,
school district, conservation and reclamation district, hospital organization, or other political
subdivision of this state.“). The personal property contract may be in the form of a lease, a lease-
purchase, an installment purchase, “or any other form considered appropriate by the governing body
including       an instrument which would be required to be approved by the attorney general under
Chapter 1202, Government Code.” Id. § 271.005(a)(2); see also TEX. GOV’T CODE ANN.
5 1202.003(a) (Vernon 2000) (requiring issuers to submit public securities for attorney general
approval before the securities are issued).

        You do not ask about a particular lease-purchase contract.           Lease-purchase contracts
generally enable the purchaser of the property to spread the purchase price over a number of years,
while receiving immediate use of the purchased property. Tex. Att’y Gen. Op. No. JM-697 (1987)
at 1; see also ASSOCIATION      FORGOVERNMENTAL         LEASING& FINANCE,AN INTRODUCTION              TO
MUNICIPAL    LEASEFINANCNG:ANSWERSTOFREQUENTLY                 ASKEDQUESTIONS,       at 3 (July 1,2000),
available at http://www.aglf.org/downloads/Municipal_lcing.pdf                    (last visited Dec. 20,
2006) (“In a ‘financing’ lease, the lessee enjoys the benefits and bears the burdens of ownership of
the leased property.      In effect, the lease payments represent the lessee’s installment purchase of
the leased property over time.“) [hereinafter MUNICIPALLEASEFINANCING].In B typical lease-
purchase contract involving a school district, the lessor extends funds or credit to acquire the
property, and the school district as the lessee repays that amount by making fixed installment
payments over the term ofthe agreement. See, e.g., Blundlndep. Sch. Dist. v. Blue, 34 S.W.3d 547,
549 (Tex. 2000) (describing a school district lease-purchase agreement executed under the Act for
the construction of a high school building). Under such an arrangement, a school district may
execute separate and additional contracts with other vendors for the actual construction or,
improvement of the property subject to the provisions of the lease-purchase contracts. See id.; Tex.
Att’y Gen. Op. No. JM-800 (1987) at 1 (describing a proposed county lease-purchase agreement for
construction of a county jail under the Act).

         ‘Beforeexecutingsucha contract,the districtmustpublishnoticeof its intentto enterintothe contractat least
sixtydaysbeforethedateset for executionofthe contract.TEX.LOC.GOV'TCODEANN.           5 271.004(a)(Vemon2005).
If withinthe sixtydaysthe districtreceivesa petitionsignedby at leastfivepercentof the district’sregisteredvoters,
the districtmaynot “approvethe contractor publishthe firstadvertisement for bidsfor constructionof improvements”
unlessthe contractis approvedby a majorityof the votersat a referendumcalledfor that purpose.Id. 5 271.004(b).
Shirley 5. Neeley, Ed.D. - Page 5               (GA-0494)

II.    Analysis

       A.    Application    of Education    Code sections 44.031 and 44.033 to lease-purchase
             contracts

        Your first two questions essentially ask whether Education Code sections 44:03 1 and 44.033
apply to school district lease-purchase contracts authorized under the Act. See Request Letter, supra
note 1, at 2. You suggest that prior attorney general opinions, particularly Attorney General Opinion
JC-0492, indicate that sections 44.03 1 and 44.033 apply. See id.

         In Attorney General Opinion JC-0492, this office determined, based on the language of
section 44.03 1, that a school district was not authorized to participate in a political subdivision
corporation created under Local Government Code section 304.001 to purchase electricity with an
aggregate value of $25,000 or more. See Tex. Att’y Gen. Op. No. K-0492 (2002) at 5; see also Tex.
Att’y Gen. Op. Nos. JC-0205 (2000) at 6 (concluding that because use of a designated broker of
record is not authorized by sections 44.031 and 44.033, a junior college district may not use such
method to purchase insurance contracts), DM-418 (1996) at 13 (stating that a school district must
award contracts for items other than produce, professional services, or vehicle fuel in accordance
with sections 44.03 1 and 44.033). The opinion relied on the following factors: First, section 44.03 1
at that time did not expressly include participation by a school district in a political subdivision
corporation as an available purchasing method.4 See Tex. Att’y Gen. Op. No. JC-0492 (2002) at 5.
Second, the school district’s participation in a political subdivision corporation did not fit within
any of the nine contract types expressly listed in the statute at that time. Id. Finally, the opinion
concluded, “a school district may not use a purchasing method provided by a statute outside of the
Education Code that is not expressly listed or included within those methods listed in section 44.03 1
unless the [other] statute explicitly permits the school districts to do so.” Id. at 6. Local Government
Code section 304.001, which did not expressly include school districts within its definition of the
term “political subdivision,” did not explicitly authorize a school district to participate in apolitical
subdivision corporation to purchase electricity. See id. at 7.

         Section 44.03 1 does not expressly include lease-purchase contracts as one of the authorized
methods. Nor do such lease-purchase contracts fit within one of the ten methods expressly listed.
But unlike the statute addressed by Attorney General Opinion JC-0492, the Act expressly authorizes
school districts to enter into lease-purchase contracts to acquire personal and real property. Compare
id. (noting that the political subdivision corporation statute did not include school districts within
the definition of “political subdivision”), with TEX.LOC.GOV’TCODEANN. 5 271.003(4) (Vernon
2005) (including school districts within the definition of “governmental agency”), and id § 271.004
(authorizing school districts to execute lease-purchase contracts for real property). Consequently,
the question here is not whether a school district may execute lease-purchase contracts, but “whether
the competitive procedures under sections 44.03 1 and 44.033 must be used to enter into agreements

        ‘In 2003,the legislatureamendedsection44.031to add subsection(a)(lO),authorizingthe formationof a
political subdivisioncorporationas a permissiblepurchasemethod.SeeAct of June 1,2003,7SthLeg.,RX, ch.201,
5 38,2003Tex.‘An. Laws812,823.
Shirley .I. Neeley, Ed.D. - Page 6                  (GA-0494)

under [slections 271.004 and 271.005.” Request Letter, supra note 1, at 2 n.6. No Texas court or
attorney general opinion has addressed this question.

         Section 44.03 1 by its terms applies to all school district contracts valued at $25,000 or more
other than those specifically excepted, and it requires that all contracts subject to the statute be made
by the authorized method that provides~ the best value. See TEX. EDUC. CODEANN. 5 44.03 l(a), (c),
(e) (Vernon 2006); Daniels Bldg. & Constr., Inc., 990 S.W.2d at 949-50; see also Tex. Att’y Gen.
Op. No. JC-0492 (2002) at 6 (stating that section 44.03 1 provides an exclusive list of permissible
purchasing methods for contracts over acertain value). Additionally, section 44.03 1 by its terms is
not limited to personal property. See TEX. EDUC. CODEANN- 5 44.031 (Vernon 2006); see also id
5 44.03 l(a)(6), (8) (providing for construction and facility contracts). In contrast, section 44.033 by
its terms is limited to personal property purchases valued between $10,000 and $25,000 and requires
that such purchases be made in accordance with its vendor list method or the competitive bid and
competitive sealed proposal methods provided by section 44.03 l(a) and (b). See id 5 44.033(a); see
also Tex. Att’y Gen. Op. No. JC-0205 (2000) at 6 (stating that “[slection 44.03 1 and its sister statute,
section 44.033, establish a list of permissible purchasing methods for contracts over a certain
aggregate yearly value”). Sections 44.031 and 44.033 do not except from their application lease-
purchase contracts for personal and real property entered under the Act. See UnigardSecurity Ins.
 Co. v. Schaefer, 572 S.W.2d 303, 307 (Tex. 1978) (“When specific exclusions or exceptions to a
statute are stated by the Legislature, the intent is usually clear that no others shall apply.“).

         The Act by its terms authorizes school district contracts, including lease-purchase contracts,
for the purchase or acquisition of personal and real property. See TEX. Lot. GOV’T CODE ANN.
§§271.004,-,005 (Vemon2005); seealso id. 5 271.003(2) (“‘Contract’ means anagreemententered
into under this subchapter but does not mean a contract solely for the construction of improvements
to real property.“). But the Act does not address how a school district must award lease-purchase
contracts or select the lessor or seller of the property. See M. DAVIDGELFAND,STATEANDLOCAL
GOVERNMENT       DEBTFINANCING      49 (2000) (“The lessor may be the manufacturer of the property,
a vendor, a real estate developer, or a lease broker.“).’ Furthermore, it does not expressly except
lease-purchase contracts from Education Code sections 44.03 1 and 44.033. See TEX.EDUC.CODE
ANN..5 44.031(e) (Vernon 2006) (stating thatchapter 44, subchapter B prevails over any other law
relating to purchases of goods and services); Tex. Att’y Gen. Op. No. JC-0492 (2002) at 6 (stating
that in light of section 44.031(e), any exceptions to section 44.031 must be express). Section
 271.006, in fact, suggests that the legislature intended governmental agencies to comply with the
procurement procedures generally applicable to them in entering into the contracts authorized by the
 Act. See TEX.LOC. GOV’T CODE ANN. 5 271.006 (Vernon 2005). Section 271.006 provides that
 “[i]n entering into the contract, a municipality must comply with the requirements of Chapter 252

         ‘Thelessormayalsobe a publicfacilitycorporation~created  bya schooldistrictto specificallyacquirea “public
facility”for the solepurposeof leasingor conveyingit to the schooldistrictpursuantto the PublicFacilityCorporation
Act(the“FacilityAct”).SeeTEX.Lot. Gov’r CODE      ANN$5303.003(1I), ,023,,041(Vernon2005).Youdo not ask
sod we do not considerwhetherEducationCodesections44.03I and44.033wouldapplyto a lease-purchase            con&act
betweena~schooldistrictand its publicfacilitycorporationconstititing~a“sponsorobligation”underthe FacilityAct.
See id $3 303.003(12)(defining“sponsorobligation”),303.072(providingthat bonds issuedby a publicfacility
corporationarc payablefromfacilityrevenuesor sponsorobligations).
Shirley J. Neeley, Ed.D. - Page 7                 (GA-0494)

[Purchasing and Contracting Authority of Municipalities] and a county must comply with the
requirements of Subchapter C, Chapter 262 [Purchasing and Contracting Authority of Counties;
Competitive Bidding in General].“6 Id. 5 271.006(a) (emphasis added); see also id $5 271.003(2)
(defining “contract”), 27 1.0065 (providing additional procedures for “any procedure for competitive
bidding under this subchapter”). Thus, no provision in the Act expressly prohibits the application
of the procurement methods of Education Code sections 44.031 and 44.033 to lease-purchase
contracts or is inconsistent with such application. See In re Jane Doe, 19 S.W.3d 249, 255 (Tex.
2000) (“Our focus in construing this statute is to determine the Legislature’s intent; this we discern
primarily from the plain meaning of the words chosen.“).

        Finally, no inherent feature or characteristic of lease-purchase contracts precludes awarding
such contracts using a section 44.03 1 or 44.033 method. See, e.g., M. DAVID GELFAND,STATEAND
LOCAL GOVERNMENTDEBT FINANCING 28 (2000) (“In some jurisdictions, the lease-purchase
contract itself must be competitively bid or waiver or exemption obtained.“); MUNICIPALLEASE
FINANCING,at 24, supra p. 4 (“Certain state statutes would also require that the lease itself should
be publicly bid as part of the acquisition of the property to be leased.“).

         A brief submitted on behalf of Shiner Independent School District appears to contend that
lease-purchase contracts under the Act are not subject to sections 44.03 1 and 44.033 because they
are financing contracts or because they are public securities rather than purchase contracts.7 While
the brief does not articulate it, we presume that the legal argument underlying this contention is that
extension of credit or issuance of securities is not “property” to which sections 44.031 and 44.033
apply.

         First, while lease-purchase contracts may be financing contracts, they are nonetheless, by
definition, contracts for the purchase or acquisition of property. See TEX. Lot. GOV’T CODE ANN.
$5 271.004,-,005 (Vernon 2005); see alsoSpur Indep. Sch. Dist. v. K4. Halt Co., 88 S.W:2d 1071,
1073 (Tex. Civ. App.-Waco        1935, no writ) (stating that “purchase” is the “transmission ofproperty
from one person to another by voluntary a&and agreement, founded on a valuable consideration”).
The financing arranged with the lessor or creditor is simply the means of purchasing the property that
is the subject of the lease-purchase contract. See Bland Indep. Sch. Dist., 34 S.W.3d at 549
(describing school district lease-purchase transaction to acquire school building); Knight v. Int’l
Harvester Credit Corp., 627 S.W.2d 382,389 (Tex. 1982) (describing installment sale agreement
with extension of credit as a single transaction for the purchase of a truck rather than simply an
extension of credit or borrowing of money under the Deceptive Trade Practice Act).

        %‘benthe Actwasadopted,only citiesand countiesweresubjectto the competitiveb$l requirementsof the
sourcelaw(formerarticle236X&Vernon’sTexasCivilStatutes).SeeTEX.Lot. GOV’CODE
                                                                           T ANN.5271.006revisor’s
note(Vernon2005);PublicPropertyFinanceAct, 66thLeg.,R.S., ch. 749, $5,1979Tex. Gen.Laws 1839,1X41C’Each
gownmental agencycurrentlysubjecttheretoshallcomplywiththetermsof. (Article2368%Vernon’sTexasCivil
Statutes),in enteringinto contracts,includingthe requirementthatcertaincontractsbe awardedpursuantto publicbids
    “).

        ‘SeeBrieffromGeorgeE. Grimes,Jr.,Walsh,Anderson,Brown,Schulz &Aldridge,P.C.,onbehalfof Shiner
 IndependentSchoolDistrict,to NancyS. Fuller,Chair,OpinionCommittee,Officeof the AttorneyGeneralof Texas
 (Aug.4,2006) [hereinafterShinerISDBriefj.
Shirley J. Neeley, Ed.D. - Page 8                  (GA-0494)

          Second, lease-purchase contracts as provided for under sections 271.004 and 271.005 ofthe
Act are not described as, nor are they, public securities as a matter of law. See TEX.~LOC.GOV’T
CODE ANN. 55 271.004.005          (Vernon 2005). Compare id., with id. $5 271.050 (stating that
certificates of obligations are subject to Government Code provisions dealing with “public
securities”), 271.053 (stating that certificates of obligation “are ‘security’ within the meaning of
Chapter 8, Business &Commerce Code”). A section 27 1.005 contract for the acquisition of personal
property may be in the form of “an instrument which would be required to be approved by the
attorney general under Chapter 1202, Government Code,” i.e., a public security, but is not required
to be in that form. Id § 271.005(a)(2); see also TEX. GOV’T CODE ANN. § 1202.003(a) (Vernon
2000) (requiring governmental issuers to submit public securities for review and approval by the
attorney general). That a personal property lease-purchase contract is not, as a matter of law, in that
form is evidenced by the fact that it is not otherwise required to be submitted to the attorney general
for approval. See TEX. Lot. GOV’T CODE ANN. 5 271.007 (Vernon 2005) (providing that a
governing body may submit a contract providing for the payment of $100,000 or more). As the brief
notes, section27 1.004(g) specifically requires area1 property lease-purchase contractto be submitted
to the attorney general for review and approval. See id. § 271.004(g); Shiner ISD Brief, supra note
 7, at 5. That requirement, however, does not support the briefs contention that the contract is a
public security. If section 271.004 did not specifically require it, real property lease-purchase
contracts, like the personal property lease-purchase contracts, would not be subject to such approval
 under Government Code chapter 1202 because they would generally not meet the definition ofpublic
 security. See TEX. GOV’TCODEANN. $5 1202.001(3) (Vernon Supp. 2006), .003(a) (Vemon2000).

         Chapter 1202 ofthe Government Code generally requires attorney general approval ofpublic
securities issued by or on behalf of governmental entities. See id. 5 1202.001(2) (Vernon Supp.
2006) (defining “issuer”); id. 5 1202.003(a) (Vernon 2000) (requiring issuers to submit public
securities for review and approval). Section 1202.001(3) defines “public security,” consistently with
the established definition of the term “security,” as follows:

                         “Public security” means an instrument, including a bond, note,
                certificate of obligation, certificate of participation       or other
                instrument evidencing aproportionate interest inpayments due to be
                paid by an issuer, or other type of obligation that:

                               (A) is issued* or incurred by an issuer under the issuer’s
                 borrowing power, without regard to whether it is subject to annual
                 appropriation; and

                               (B) is represented by an instrumentissued in bearer or
                 registeredform or is not represented by an instrument but the transfer
                 ofwhich is registered on books maintainedfor that purpose by or on
                 behalf of the issuer.

         ‘SeeTEX.Gov’r CODE   ANN.5 1202.001(l)(VernonSupp.2006)(“‘Issuance’        meansthe initialdeliveryby an
issuerof evidenceof an obligationof a publicsecurityissuedby the issuerto the initialpurchaserin exchangefor the
purchasepriceof the publicsecurity.“).
Shirley J. Neeley, Ed.D. - Page 9                (GA-0494)

Id. 5 1202.001(3) (emphasis and footnote added); seealso TEX.BUS.& COMM.CODEANN. 5 8.102
(15) (Vernon Supp. 2006) (defining “security”); id. § 8.102 cmt. 15 (Vernon 2002) (summarizing
and explaining the section 8.102( 15) definition of “security” as an interest or participation that is (i)
fully transferable because the issuer maintains transfer books or it is in registered or bearer form; (ii)
one of a class or series rather than an individual contractual obligation; and (iii) of a type dealt in or
traded on securities markets or exchanges, or is a medium of investment specifically governed by
article 8 of the Business and Commerce Code, Uniform Commercial Code-Investment Securities).

          A lease-purchase contract, unlike a bond, note, certificate of obligation, certificate of
participation, or similar instrument, does not represent a proportionate interest in the payments
to be paid by the school district. See, e.g., LEASEPURCHASEAGREEMENT,                  BETWEENAIG
COMMERCIAL       EQUIPMENT      FINANCE,Irjc. AND SHINERINDEPENDENT         SCHOOLDISTRICT     (July 1,
2005).9 Nor is such contract “issued” in bearer or registered form or fully transferable. See, e.g., id.
While the lease-purchase          contract may serve as the underlying source of payment for
securities-bonds     or certificates of participation”-that may be issued and sold to obtain the funds
necessary to acquire the property, the contract itself is not such a security. See TEX. GOV’TCODE
ANN. 5 1202.001(3) (Vernon Supp. 2006); TEX. Bus. & COMM. CODEANN. 5 8.102(15)(Vernon
Supp. 2006); seealso M. DAWD GELFANLI,            STATEANDLOCALGOVERNMENT         DEBTFINANCING,      at
 50-51 (2000) (stating that while certificates of participation in governmental lease-purchase
agreements have been deemed “municipal securities” under federal securities law, “[a] series of SEC
no-action letters       suggest that single investor municipal lease tinancings will not constitute a
 ‘security”‘).

         In answer to yours first and second questions, we conclude that because Education           Code
sections 44.031 and 44.033 apply to all school district purchase contracts other than                those
specifically excepted and because the Act does not state that sections 44.031 and 44.033            do not
apply, the two statutes apply to school district lease-purchase contracts entered ,under             Local
Government Code sections 271.004 and 271.005.

        B.    Procedures applicable to financial consultant services contract

        In your fourth question, you ask whether under Government Code chapter 2254 a financial
consultant must be selected pursuant to a request for qualification or similar competitive process and
whether the section 2254.004 selection and negotiation procedures apply to such selection. See
Request Letter, supra note 1, at 3.

        ?Seeattachmentto RequestLetter,supranote 1 (ExhibitC).

         ?See Tex. Dep’t ofCorrections Y. Anderson County Appraisal Disk, 834 S.W.2d 130, 130-31 (TM.
App.-Tyler 1992,writdenied)(describingcertificatesofparticipationissuedbya trusteebankandsecuredbythelease-
purchasecontractpaymentsassignedto the trusteeby the lessor);In re An&, ,936 P.2d 637, 639 n.3 (Haw.1997)
(describinglease-purchasetransactionand certificatesof participationissuedby a trusteeevidencingproportionate
interestsin the rentalpaymentsunderthe lease);MUNICIPALLEASE    FNQWNG, at 13-15,supra p. 4 (discussing  the
structureof certificatesof participationand leaserevenuebondssecuredby financingleases).
Shirley J. Neeley, Ed.D. - Page 10             (GA-0494)

         Section 44.031(f) provides that “[tlhis section does not apply to a contract for professional
services rendered, including services of an architect, attorney, or fiscal agent.” TEX.EDUC.CODE
ANN. 5 44.03 l(f) (Vernon 2006). The statute, however, proceeds to expressly address the services
of a financial consultant: “A school district may, at its option, contract for professional services
rendered by a financial consultant or a technology consultant in the manner provided by Section
2254.003, Government Code [Professional Services Procurement Act], in lieu of the methods
provided by this section.” Id In other words, in selecting a financial consultant, a school district
may choose to comply with either section 44.031(a) or Government Code section 2254.003.

        The Professional Services Procurement Act, chapter 2254, subchapter A of the Government
Code (the “Professional Services Act”), prohibits a governmental entity from selecting a provider
ofprofessional services or awarding a contract for professional services on the basis of competitive
bids. See TEX. GOV’TCODEANN. 5 2254.003 (Vernon 2000); see also id. 5 2254.002(2) (defining
“professional services”).    Section 2254.003 requires that such professional service providers
be selected and the contracts for such services be awarded “on the basis of demonstrated
competence and qualifications to perform the services” and “for a fair and reasonable price.” Id.
5 2254.003(a)(1)-(2).   Section2254.003 does notmandate anyparticular selection process. Section
2254.004 sets forth additional procedures that a governmental entity must follow in procuring three
of the nine expressly listed types of professional services: architectural, engineering, or land
surveying services. See id. @ 2254.002(2), .004(a). The governmental entity must select the most
highly qualified service provider and then attempt to negotiate with that provider a fair and
reasonably priced contract. Id. 3 2254,004(a)(1)-(2).  If a satisfactory contract cannot be negotiated
with the most highly qualified provider, the governmental entity must terminate negotiations
with that provider and select and negotiate with the next most highly qualified provider. See id.
3 2254.004(b)(1)-(3).   The governmental entity must repeat the process “until a contract is entered
into.” Id. 5 2254.004(c).

         In answer to your fourth question, we conclude that Education Code section 44.03 1 permits
a school district to contract for financial consultant services pursuant to the Professional Services
Act. Under the Professional Services Act, a financial consultant. may, but is not required to, be
selected through a request for qualifications or similar competitive process. We note that the most
reasonable way to assure that such service providers are selected on the basis of demonstrated
competence and qualification to perform the services, as the statute mandates, is through a request
for qualifications or similar competitive process. Additionally, because the negotiation procedure
of section 2254.004 of the Professional Services Act applies only to architectural, engineering, or
land surveying services, those procedures are not required when contracting with a financial
consultant.

        C.    Application of sections 44.031 and 44.033 to lease-purchase      contracts that
              include financial consultant services

       In your third question, you ask whether a school district may enter into a lease-purchase
agreement under the Act that includes the services of a financial consultant retained under
Government Code section 2254.003 without complying with Education Code sections 44.03 1 or
44.033. See Request Letter, supra note 1, at 3.
Shirley J. Neeley, Ed.D. - Page 11              (GA-0494)

        We assume that your question is premised on the conclusion of a 1990 attorney general
opinion. In Attorney General Opinion JM-1189, this office construed the statutory predecessor to
the Professional Services Act to prohibit a governmental entity from awarding a design-build
contract on the basis of competitive bids because professional services would comprise a component
ofthe contract. See Tex. Att’y Gen. Op. No. JM-1189 (1990) at 34. Attorney General Opinion JM-
 1189, however, does not address the authority for such contracts, nor does it address sections 44.03 1
or 44.033, or the Act.

          The Act authorizes lease-purchase contracts for the use, purchase, or other acquisition of
real andpersonal property. See TEx.Loc. GOV’TCODEANN. $5 271.002, .004(a), .005(a) (Vernon
2005); see also id. 5 271.005(c) (authorizing contracts for the materials and labor incident to the
installation of personal property). Because financial consultant services are neither real nor personal
property, the Act does not authorize lease-purchase contracts for acquiring financial consultant
services. See id.,$5 271.004-,005. Thus, a school district is not authorized to combine the services
of a financial consultant with the acquisition of property under a~lease-purchase contract entered
under the Act. Second, even if financial consultant services were authorized to be combined with
the acquisition of property under a lease-purchase contract, it is unclear how this would allow such
a contract to be procured under the Professional Services Act. On the one hand, the Professional
Services Act does not apply to contracts for the acquisition of property. See TEX. Gov’TCODEANN.
 $5 2254.002%1003 (Vernon 2000). On the other hand, sections 44.03 1 and 44.033 specifically do
apply to such property contracts. See TEX. EDUC. CODE ANN. $5 44.031, ,033 (Vernon 2006); see
also supra p. 9. Moreover, the Education Code provisions prevail over conflicting procurement
provisions. See id. 4 44.03 l(e). Finally, Attorney General Opinion JM-1189 is premised on the
Professional Services Act’s prohibition against selecting providers of professional services subject
to the statute on the basis of competitive bids. See Tex. Att’y Gen. Op. No. JM-1189 (1990) at 2-3.
However, this prohibition does not apply here because a school district may contract for financial
 consultant services using one of the methods authorized under Education Code section 44.033(a),
 including competitive bidding. See TEX. EDUC. CODEANN. $44.03 1(a), (e)-(f) (Vernon 2006); see
 also supra p. 10. Thus, Attorney General Opinion JM-1189 is inapplicable.             Accordingly, we
 conclude that a school district is not authorized to enter into a lease-purchase contract under the Act
 that includes the services of a financial consultant without complying with Education Code section
 44.031 or 44.033.
Shirley J. Neeley, Ed.D. - Page 12          (GA-0494)

                                      SUMMARY

                       Education Code sections 44.03 1 and 44.033 apply to school
              district lease-purchase contracts entered under Local Government
              Code sections 271.004 and 271.005.

                        Section 44.031 ofthe Education Code allows a school district
              to contract for financial consultant services pursuant to chapter 2254,
              subchapter A of the Government Code, which permits but does not
              require a financial consultant to be selected through a request for
              qualifications or similar competitive process.        Additionally, the
              negotiation procedures of Government Code section 2254.004 do not
              apply to contracting with a financial consultant. A school district
              would not avoid the applicability of section 44.031 or 44.033 of the
              Education Code to a lease-purchase contract under Local Government
               Code section 271.004 or 271.005 by including the services ‘of a
               financial consultant in the contract.

                                                         eneral of Texas

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