Court Opinion

ID: 4129589
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:53:56.01084+00
Date Added: 2024-06-11T14:37:36.392500
License: Public Domain

August 11,1999

The Honorable Bill Hill                            Opinion No. JC-0092
Dallas County District Attorney
Civil Section                                      Re: Whether chapter 312 of the Tax Code
Administration Building                            precludes a commissioners court from providing
411 Elm Street                                     an economic development grant to a private
Dallas, Texas 75202                                company under section 381.004 of the Local
                                                   Government Code pursuant to which the county
                                                   makes payments to the company that are the
                                                   economic equivalent of an abatement of real
                                                   property taxes (RQ-1068)

Dear Mr. Hill:

        On behalf of the Dallas County Commissioners Court, your predecessor in office asked
whether chapter 312 of the Tax Code, the Property Redevelopment and Tax Abatement Act,
precludes a commissioners court from providing an economic development grant to a private
company pursuant to which the county would make payments to the company that are the economic
equivalent of an abatement of real property taxes. The agreement prompting the request states that
section 381.004 of the Local Government Code authorizes the commissioners court to provide the
grant. While we conclude that chapter 3 12 neither authorizes nor precludes the county from making
payments of this kind, we also conclude that section 381.004 of the Local Government Code does
not authorize a commissioners court to make grants.

        We begin with a brief description of the relevant background. Your predecessor asked
whether chapter 312 of the Tax Code precludes the Dallas County Commissioners Court “from
providing an economic development grant to a business under Section 381.004 of the Local
Government Code, when the amount of the grant is to be determined by a specified percentage of
the additional real property tax revenues received by Dallas County from the business as a result of
the business’ development of its property.” Letter from John B. Dahill, Assistant District Attorney,
Dallas County, to Honorable Dan Morales, Attorney General 2 (Dec. 29,1997) (on tile with Opinion
Committee) [hereinafter Request Letter]. He explained that the county was not authorized to offer
the benefit as a tax abatement under the terms of chapter 3 12.

        In response to a request from this office for additional briefing regarding the legal basis for
the agreement, your office submitted a copy of an economic development agreement between Dallas
County and a private company that owns real property in the county entitled “Economic
The Honorable Bill Hill - Page 2                     (JC-0092)

Development Program Agreement” (“the Dallas County EDP Agreement” or “the agreement”).
Pursuant to the agreement, the county has promised to make yearly payments to the company for a
ten-year period. Each yearly payment is equal to fifty percent of the amount of property tax
collected in that year by the county from the private company on the value of the real property above
its 1996 value. The county’s obligation to make these yearly payments is subject to (i) the private
company’s economic performance, as measured by a set increase in the total property value and
either the company’s total number of employees or annual payroll in Dallas County, and (ii) an
Attorney General opinion stating that the county is not precluded from making the payments by
chapter 312 of the Tax Code. The agreement states that it is authorized by section 381.004 of the
Local Government Code, which permits counties to establish economic development programs. See
Letter from John B. Dahill, Assistant District Attorney, Dallas County, to Elizabeth Robinson, Chair,
Opinion Committee, Office of the Attorney General (Apr. 16, 1999) (on tile with Opinion
Committee) [hereinafter Supplemental Briefl.

         This offlice does not generally review specific contracts or interpret contractual terms. See,
e.g., Tex. Att’y Gen. Op. Nos. JC-0032 (1999) at 4 (contract interpretation beyond purview of this
office); DM-383 (1996) at 2 (interpretation ofcontract not appropriate function for opinion process);
DM-192 (1992) at 10 (“This office, in the exercise of its authority to issue legal opinions, does not
construe contracts.“); JM-697 (1987) at 6 (“review of contracts is not an appropriate function for the
opinion process”). For this reason, in responding to this opinion request, we discuss the Dallas
County EDP Agreement only by way of example.

        I. Whether Chapter 312 of the Tax Code Precludes Pavments of this Kind

         First, we address whether payments of this kind are precluded by chapter 312 of the Tax
Code. Your predecessor explained that the property subject to the Dallas County EDP Agreement
is also subject to a pre-existing municipal tax abatement agreement and that the county is therefore
limited to entering into a tax abatement agreement with the same terms. Because “[tlhe city
within which the property is located          . has elected to provide tax abatement at a different
percentage. . . Dallas County is prohibited by Tax Code Section 3 12.206(a) from entering into an
abatement agreement at the same percentage as it wishes to use in the grant formula.” Request
Letter, at 2. Noting that the payments would have the “same economic impact” as a ten year tax
abatement under chapter 3 12 of the Tax Code, your predecessor asked whether the payments would
be precluded by chapter 312.

       The legislature enacted the statutory predecessor to chapter 3 12, former article 1066f of the
Revised Civil Statutes,’ to implement article VIII, section l-g, a 1981 amendment to the Texas
Constitution. See Act ofAug. 10, 1981,67thLeg.,   1st C.S., ch. 5, 5 9, 1981 Tex. Gen. Laws 53,57
(former article 1066f, Property Redevelopment and Tax Abatement Act, to take effect upon adoption

         ‘Former article 1066f was repealed and codified in chapter 312 of the Tax Code in 1987. See Act of May 1,
 1987,70thLeg., ch. 191, g§ 1 (adopting title3 ofTaxCode), 12(repealingformerarticle 1066fj, 1987Tex. Gen.Laws
 1410, 1421-25, 1466.
The Honorable Bill Hill - Page 3                     (JC-0092)

of Tex. Const. art. VIII, 5 l-g); see also Tex. Att’y Gen. LO-89-31, at 3 (noting that Tax Increment
Financing Act of 198 1 and Property Redevelopment and Tax Abatement Act enacted in anticipation
of adoption of Tex. Const. art. VIII, 5 l-g). Article VIII, section l-g specifically permits “[tlhe
legislature by general law [to] authorize cities, towns, and other taxing units to grant exemptions or
other relief from ad valorem taxes on property located in a reinvestment zone for the purpose of
encouraging development or redevelopment and improvement of the property.” TEX. CONST. art.
VIII, 5 l-g. As originally enacted, former article 1066f authorized cities to abate taxes; counties
were, for all practical purposes, required to participate in municipal tax abatement agreements and
were not authorized to enter into separate agreements with respect to property not subject to a
municipal agreement.* Counties were not authorized to enter into their own tax abatement
agreements until 1985, when the legislature enacted amendments to former article 1066f now
codified as subchapter C of chapter 312.3

         Subchapter C of chapter 312 authorizes a county commissioners court to designate an area
of the county “that does not include area in the taxing jurisdiction of a municipality” as a
reinvestment zone. See TEX. TAX CODE ANN. 5 312.401(a) (Vernon 1992). Before designating an
area as a reinvestment zone, the county must hold a public hearing on the designation and find that
the designation “would contribute to the retention or expansion of primary employment or would
attract major investment in the zone that would be a benefit to the property to be included in the zone
and would contribute to the economic development of the county.” Id. 5 312.401(b). The
commissioners court must provide public notice of the hearing. Id. Once it has designated a
reinvestment zone, the commissioners court may execute a tax abatement agreement with an owner
of taxable real property located in the zone. Id. 5 312.402(a) (Vernon Supp. 1999). Pursuant to a
tax abatement agreement, a county, like a city, may agree “to exempt from taxation a portion of the
value of the real property. . for a period not to exceed 10 years      on the condition that the owner
of the property make specific improvements or repairs to the property.” Id. $ 312.204(a) (Vernon
 1992). Significantly, however, the tax-abatement authority of a county with respect to property
located in the taxing jurisdiction of a city is more circumscribed. Under section 312.206(a) of the
Tax Code, if a municipality has entered into a tax abatement agreement with a property owner, a
county may abate taxes on the property only pursuant to an agreement containing terms identical to
the municipal tax abatement agreement. See id. 5 312.206(a) (Vernon Supp. 1999). Although the
legislature recently amended section 3 12.206(a) to remove this limitation, that amendment does not
 apply to tax abatement agreements entered into prior to its effective date, September 1, 1999.4

        Although Dallas County’s authority to enter into a tax abatement agreement regarding the
property at issue was limited by an existing municipal tax abatement, we conclude that the payments
of the kind provided in the Dallas County EDP Agreement were not precluded by chapter 3 12.

        ‘See Act of Aug. 10, 1981,67th Leg., 1st C.S., ch. 5,s 2, 1981 Tex. Gen. Laws 53.53-54,

        ‘See Act of May 10, 1985,69th Leg., RX, ch. 104,§ 3,1985 Tex. Gen. Laws 548,549.

        %eeTex. H.B. 3034, 76th Leg., R.S. (1999).
The Honorable Bill Hill - Page 4                 (JC-0092)

Chapter 312 prevented a county from entering into a tax abatement agreement with respect to
property subject to a municipal tax abatement agreement containing terms different from those in
the municipal agreement. But the payments at issue here are not tax abatements. The owner of
property subject to a chapter 3 12 tax abatement agreement is entitled to exemption from taxation by
a taxing unit “of all or part of the value of the property as provided by the agreement.” TEX. TAX
CODEANN. 5 11.28 (Vernon 1992). Thus, an owner who is party to a tax abatement agreement does
not pay the taxes that are abated pursuant to the agreement. Pursuant to an agreement like the Dallas
County EDP Agreement, however, the private company is not entitled to any tax exemption and will
pay county property taxes on the entire value of its property. Rather, the private company is entitled
to ten yearly grant payments “determined by a specified percentage of the additional real property
tax revenues received by Dallas County from the business as a result of the business’ development
of its property.” Request Letter, at 2. Chapter 312 simply does not speak to this kind of
arrangement. While chapter 312 does not authorize this kind of arrangement, neither does chapter
3 12 preclude it.

        II. Whether a Countv is Authorized to Make Pavments of this Kind

        The conclusion that chapter 3 12 neither precludes nor authorizes this kind of arrangement
does not end our analysis. Courts of this state have long held “that although a commissioners court
may exercise broad discretion in conducting county business, the legal basis for any action taken
must be grounded ultimately in the constitution or statutes.” Guynes v. Galveston County, 861
S.W.2d 861, 863 (Tex. 1993) (citing Canales v. Laughlin, 214 S.W.2d 451, 453 (Tex. 1948)).
Specifically with respect to contracts, courts have held that the authority of a commissioners court
to make contracts on behalf of the county is limited to that conferred either expressly or by necessary
implication by the constitution and laws ofthe state. See, e.g., Childress County v. State, 92 S.W.2d
1011, 1016 (Tex. 1936); Jackv. State, 694 S.W.2d 391, 397 (Tex. App.-San Antonio 1985, writ
ref d n.r.e.). Thus, the conclusion that payments of this kind are not precluded by chapter 3 12 does
not establish that a commissioners court is authorized to make them. Such payments are authorized
only if the commissioners court has authority to enter into this type of agreement. That authority
must be express or necessarily implied by statute.

        A. Section 381.004 of the Local Government Code

        Both the request letter and the supplemental brief assert that section 38 1.004 of the Local
Government Code authorizes a commissioners court to make economic development grants and
therefore permits agreements of this kind. Section 381.004 provides in pertinent part as follows:

                   (b) To stimulate business and commercial activity in a county, the
                commissioners court of the county may develop and administer a
                program :

                        (1) for state or local economic development;
The Honorable Bill Hill - Page 5                 (JC-0092)

                        (2) for small or disadvantaged business development;

                      (3) to stimulate, encourage, and develop business location
               and commercial activity in the county; or

                       (4) to improve the extent to which women and minority
               businesses are awarded county contracts.

                   (c) The commissioners court may:

                       (1) contract with another entityfor the administration    of the
               program;

                       (2) authorize the program to be administered on the basis of
                county commissioner precincts;

                        (3) use county employees orfunds for the program; and

                       (4) accept contributions, gifts, or other resources to develop
                and administer the program.

TEX.   Lot. GOV’T CODE ANN. 5 381.004(b), (c) (V emon 1999) (emphasis added). In section
38 1.004, the term “another entity” is defined to include “the federal government, the State of Texas,
a municipality, school or other special district, finance corporation, institution of higher education,
charitable or nonprofit organization, foundation, board, council, commission, or any other person.”
Id. 5 381.004(a)(l).

        Again, a commissioners court’s authority to make a contract must be express or necessarily
implied by statute. Childress County, 92 S.W.2d 1011; Jack, 694 S.W.2d 391. As we discuss at
some length below, the legislature generally provides express authority for economic development
grants. See statutes discussed infra pp. S-10. Section 381.004, by contrast, does not provide this
authority expressly. Subsection (b) of section 381.004 expressly authorizes a commissioners court
in general terms to develop a program for “state or local economic development” and “to stimulate,
encourage, and develop business location and commercial activity in the county.” TEX. Lot. GOV’T
CODE ANN. 8 381.004@)(l),         (3) (V emon 1999). Subsection (c) specifically authorizes a
commissioners court to contract with another entity “for the administration of the program,” id.
5 38 1.004(c)(l), and to use “county employees or funds for the program,” id. 5 381.004(c)(3). This
office has concluded that the express language authorizing a commissioners court to contract for the
administration of a program indicates that the commissioners court lacks authority under section
381.004 to enter into other kinds ofcontracts. See Tex. Att’y Gen. LO-98-007 (construing section
38 1.004 to preclude commissioners court from providing funds to small business development center
because statute “does not authorize a commissioners court to appropriate funds to aprogram that was
not developed by the county and is not administered either by the county or by another entity under
The Honorable Bill Hill - Page 6                 (X-0092)

contract with the county”). None of these provisions expressly authorizes a commissioners court
to enter into agreements such as the Dallas County EDP Agreement whereby the county agrees to
make payments of county funds to a private company on the condition that the companyincrea,se
the value of its property and employ a certain number of employees or maintain a certain annual
payroll in the county. And, again, no express provision in section 381.004 gives a commissioners
court the more general authority to make economic development grants.

        Nor do we believe that the authority to enter into an agreement like the Dallas County EDP
Agreement, or the more general authority to make economic development grants, may be implied
from section 381.004. A commissioners court may carry out programs to foster economic
development in any number of ways. Because the authority to enter into agreements of this kind,
or to make economic development grants, is generally expressly provided by the legislature, see TEX.
TAX CODEANN. ch. 312 (Vernon 1992 & Supp. 1999) and statutes discussed infra pp. 8-10, and is
not necessary to foster economic development, we conclude that this authority cannot be implied
from the authority to adopt programs to foster economic development.

         Furthermore, when the legislature has authorized an entity to make incentive payments based
on improvements to real property, it has included procedural requirements designed to protect the
tax-paying public. Although the payments contemplated by the agreement are not tax abatements,
they are, as your predecessor noted, identical in economic effect. See Request Letter, at 1 (“The
economic consequence of the grant to both the company and the county is the same as would occur
if the county granted [a] tax abatement to the company for the same duration as the grant and at the
same percentage as is used in the grant formula.“). Chapter 312 of the Tax Code authorizes a
commissioners court to offer tax abatements only after it has provided public notice, held a public
hearing, and formally designated a reinvestment zone according to statutory criteria, see TEX. TAX
CODEANN. 5 3 12.402 (Vernon 1992 & Supp. 1999), and only pursuant to an agreement containing
statutorily prescribed terms and conditions, see id. $5 312.204, .205. To construe section 381.004
to authorize a commissioners court to offer economic incentives akin to those that the legislature has
expressly authorized in chapter 3 12 would undermine these procedural protections. See TEX. GOV’T
CODE ANN. 6 311.023(4), (5) (Vernon 1998) (providing that in construing statutes court may
consider both laws on similar subjects and consequences of particular construction) (Code
Construction Act).

        B. Section 381.004 and Article III, Section 52-a of the Texas Constitution

        The request letter urges this office to broadly construe section 381.004 because it “appears
to be enabling legislation” for article III, section 52-aofthe Texas Constitution. See Request Letter,
at 3. That 1987 constitutional amendment provides that “[n]otwithstanding any other provision of
this constitution, the legislature may provide for the creation of programs and the making of loans
and grants of public money          for the public purposes of development and diversification of the
The Honorable Bill Hill - Page 7                 (JC-0092)

economy of this state.      .” TEX. CONST. art. III, 5 52-a.5 ln support of the contention that section
381.004 implements article III, section 52-a, the brief notes that the statute was adopted by the same
legislature that adopted section 380.001 of the Local Government Code, enabling legislation for
article III, section 52-a that expressly authorizes cities to make economic development loans and
grants. See discussion of TEX. Lot. GOV’T CODE ANN. 9 380.001 (Vernon 1999) and Tex. Att’y
Gen. Op. No. DM-185 infra p. 13. Dallas County’s submissions to this office suggest that section
38 1.004 should be construed to authorize a county to undertake any economic development activity
contemplated by article III, section 52-a. The supplemental brief, for example, asserts that section
38 1.004 “parallels Article III, Section 52-a     by using the word ‘program,’ which seems to give
broad discretion to the county to determine the types of measures it may establish.” Supplemental
Brief, at 2. That brief also suggests that because the term “program” derives from the constitution,
“the county’s decision that its proposal is a program to promote economic development is to be
given great weight.” Id. at 3.

        In the past, this office has specifically reserved the question of whether section 38 1.004
implements article III, section 52-a. See Tex. Att’y Gen. LO-98-007, at 3 n.1; LO-96-035, at 3 n.2.
Because the legislature enacted section 381.004 in 1989, just two years after it proposed article III,
section 52-a6 and in the same session it enacted article III, section 52-a enabling legislation for
cities, it seemed likely that the legislature enacted section 381.004 as article III, section 52-a
enabling legislation for counties. Given Dallas County’s reliance on article III, section 52-a for its
construction of section 381.004, we now examine the relationship of section 381.004 to article III,
section 52-a in some detail. After reviewing the purpose of article III, section 52-a, statutes enacted
to implement it, and the legislative history of section 38 1.004, we conclude that section 38 1.004 is
not article III, section 52-a enabling legislation and, moreover, that the legislature did not intend
section 38 1.004 to authorize counties to make economic development grants.

        1. Article III, Section 52-a

        We begin with some background about article III, section 52-a which provides in pertinent
part:

                Notwithstanding any other provision of this constitution, the
                legislature may providefir the creation ofprograms and the making
                of loans and grants of public money, other than money otherwise
                dedicated by this constitution to use for a different purpose, for the
                public purposes of development and diversification of the economy
                of the state, the elimination of unemployment or underemployment
                in the state, the stimulation of agricultural innovation, the fostering

         ‘ProposedbyActofMay20,1987,70thLeg.,R.S.,H.J.R.     5,§ 1,1987Tex. Gen. Laws4122,4123,adopted
at Nov. 3, 1987 election.
The Honorable Bill Hill - Page 8                   (X-0092)

                   of the growth of enterprises based on agriculture, or the development
                   or expansion of transportation or commerce in the state.

TEX. CONST.art. III, 9 52-a (emphasis added). Prior to the adoption of this 1987 constitutional
provision,’ sections 5 1 and 52 of article III, which prohibit the legislature or a political subdivision
from granting public money or lending public credit to a private entity, had been interpreted by the
courts and this office to require that public money must be expended for the direct accomplishment
ofapublic purpose. Seegenerally Tex. Att’y Gen. Op. Nos. JM-1227 (1990) at 2; JM-1255 (1990)
at 2-3. Article III, section 52-a “was intended by the legislature, and by the voters who adopted it,
to create exceptions to the pre-existing constitutional prohibitions on the lending of public credit.”
Tex. Att’y Gen. Op. No. JM-1227 (1990) at 3. It did this by providing that programs fostering
economic growth or loans or grants of public funds to assist private businesses to foster economic
growth serve a public purpose. See Tex. Att’y Gen. Op. No. JM-1255 (1990) at 8-9 (article III,
section 52-a does not dispense of requirement that public funds must be used to achieve a public
purpose but rather “adds to the purposes for which the legislature may authorize the loan or grant
of public funds”).

         Article III, section 52-a is not self-enacting; rather it permits the legislature to enact
legislation providing for economic development. See Tex. Att’y Gen. Op. No. JM-1227 (1990) at
3. It authorizes the legislature to provide for economic development in two different ways-by
providing for the creation ofprograms and the making of loans and grants ofpublic money. Section
381.004, which makes no mention of loans or grants, stands in stark contrast to a number of
provisions enacted pursuant to article III, section 52-a that expressly authorize the use of public
money for economic development grants and loans. Furthermore, in contrast to section 38 1.004, it
is clear from references in their statutory language or their legislative history that these provisions
were enacted to implement article III, section 52-a.

        2. Statutes Enacted to ImDlement Article III, Section 52-a

         Several statutes enacted to implement article III, section 52-arelate to economic development
undertaken by municipalities. For example, in section 380.001 of the Local Government Code,
which was enacted to implement section 52-a, see Tex. Att’y Gen. Op. No. DM-185 (1992) at
4 (noting that author of section 380.001 testified that bill was enabling legislation for article III,
5 52-a); HOUSECOMM.ONURBANAFFAIRS,BILLANALYSIS,                   Tex. H.B. 3192,71st Leg., R.S. (1989)
(hill analysis for legislation enacting section 380.001 indicating that bill was enabling legislation for
article III, 5 52-a), the legislature has expressly authorized the governing body of a municipality to
“establish and provide for the administration of one or more programs, including programs for
making loans and grants ofpublic money and providing personnel and services of the municipality,
to promote state or local economic development and to stimulate business and commercial activity
in the municipality.” TEX. Lot. GOV’T CODEANN. 4 380.001(a) (Vernon 1999) (emphasis added).

        ‘See id.
The Honorable Bill Hill - Page 9                        (JC-0092)

        Similarly, the legislature expressly created municipal management districts to accomplish
the purposes of article III, section 52-a. See TEX. Lot. GOV’T CODE ANN. fj§375.001 (Vernon
1999) (legislative statement that municipal management district is essential to accomplishment
of purposes of Tex. Const. art. III, 5 52-a); 376.001, ,002, ,006 (Houston Downtown Management
District created to accomplish purposes of Tex. Const. art. III, 5 52-a); 376.041, ,042,
,046 (Westchase Area Management District created to accomplish purposes of Tex. Const. art. III,
4 52-a); 376.081, ,086 (Greater Greenspoint Management District created to accomplish purposes
of Tex. Const. art. III, $ 52-a); 376.111, .116 (First Colony Management District created to
accomplish purposes ofTex. Const. art. III, 9 52-a); 376.121, ,122, .126 (Upper Kirby Management
District created to accomplish purposes ofTex. Const. art. III, 5 52-a); 376.211, .212, ,216 (Harris
County Improvement District No. 2 created to accomplish purposes of Tex. Const. art. III, § 52-a).
These districts have the express authority to make loans and grants to a public or private corporation
or any other person. See id. $8 376.026 (Houston Downtown Management District authority to
make grants and loans); 376.064 (Westchase Area Management District authority to make grants and
loans); 376.100 (Greater Greenspoint Management District authority to make grants and loans);
 376.135 (First Colony Management District authority to make grants and loans); 376.235 (Harris
 County Improvement District No. 2 authority to make grants and loans).

        In implementing article III, section 52-a, the legislature has also authorized other entities to
make loans and grants for economic development. Certain river authorities, for example, may
sponsor economic development programs pursuant to section 3 of article 717~ of the Revised Civil
Statutes. See TEX. REV. Crv. STAT. ANN. art. 717p, 5 3 (Vernon Supp. 1999). The legislature has
expressly found that programs authorized by this provision are a specific public purpose of a river
authority in accordance with article III, section 52-a.* Article 717~ expressly provides that “[a]
program under this section may involve grants or loans of money, services, or property to a person
engaged in an economic development activity.” Id. § 3(d)?

        Additionally, the legislature has authorized state entities to make loans and grants pursuant
to provisions implementing article III, section 52-a. Chapter 44 of the Agriculture Code, for
example, authorizes the Texas Agricultural Finance Authority board of directors to create an
agricultural diversification program. The legislature specifically provided that the statutory
predecessor to chapter 44 creating the agricultural diversification program would take effect only
upon the voters’ approval of article III, section 52-a. r” The board is expressly authorized to make

         %ee Act of May 19,1995,74th Leg., RX, ch. 326, $2,1995 Tex. Gen. Law 2828,283O.

          ‘For other examples of statues pertaining to political subdivisions and districts, see TEX.Lot. GOV’TCODE
ANN.9 383.021 (Vernon 1999)(authorizing creation of county management districts in counties with population under
400,000); TEX.GOV’TCODEANN.$§ 2301.001(6), .007 (Vernon 1999) (authorizing a county, municipality, certain
districts and authorities “to make loans and grants ofpublic money or property [for projects relating to the development
of the super collider facility] that contribute to the public purposes of development and diversification of the economy
of the state, the elimination of underemployment and unemployment in the state, or the development or expansion of
transportation or commerce in the state”); 2301.068 (making express reference to article III, section 52-a).

         ‘?%e Act of July 20, 1987,7Oth Leg., 2d C.S., ch. 32, art. 1, $ 2, 1987 Tex. Gen. Laws 108, 112.
The Honorable Bill Hill - Page 10                   (JC-0092)

loans and grants under the agricultural diversification program. See TEX. AGRIC. CODE ANN.
§ 44.012 (Vernon Supp. 1999). And subchapter D of the Transportation Code, another provision
enacted pursuant to article III, section 52-a, authorizes the Texas Department of Transportation to
loan money to a corporation that provides passenger rail service in the state. See TEX. TRANSP.CODE
ANN. $ 456.062(a) (Vernon 1999) (“Under the authority of Section 52-a, Article III, Texas
Constitution, and from funds appropriated from the general revenue fund for this purpose, the
commission may loan money to an eligible corporation that provides rail passenger service in the
state.“).

         In light of these article III, section 52-a enabling statutes, all of which expressly authorize
entities to make economic development loans or grants with public funds, the omission of any
reference to loans or grants in section 38 1.004 of the Local Government Code is striking. We note
in particular that section 380.001 of the Local Government Code expressly authorizing municipal
economic development loans and grants was enacted in 1989 by the Seventy-first Legislature, the
same legislature that enacted section 38 1.004.” As the Texas Supreme Court has said: “‘It is a rule
of statutory construction that every word of a statute must be presumed to have been used for a
purpose. Likewise, we believe every word excluded from a statute must also be presumed to have
been excluded for a purpose.“’ Laidlaw Waste Sys., Inc. v. City of Wilmer, 904 S.W.2d 656,659
(Tex. 1995) (citing Cameron v. Terre11 & Garrett, Inc., 618 S.W.2d 535,540 (Tex. 1981)); see also
Jones v. Houston Gen. Ins. Co., 736 S.W.2d 860, 863 (Tex. App.-Waco 1987, writ denied) (“The
existence or non-existence of legislative intent may be inferred from the fact that a certain provision
is missing horn a statute.“). Based on our review of these statutes, we believe that when the
legislature intends to authorize a public entity to make article III, section 52-a economic
development loans and grants, it provides that authority expressly. AccordTex. Att’y Gen. Op. No.
JM-1227 (1990) at 3 (“We think that if the legislature intended to expand the authority of cities to
lend credit pursuant to article III, section 52-a, it would, at the very least, specifically mention cities’
lending of credit, or section 52-a.“).

        3. Le&.lative Historv of Section 381.004

        Our conclusion that the lack of express language in section 381.004 referencing article III,
section 52-a or authorizing economic development loans and grants suggests that the statute is not
intended to implement the constitutional provision or to authorize economic development grants is
confirmed by the legislative history of section 381.004, which contains no mention of article III,
section 52-a, and, moreover, indicates that the legislature did not intend section 38 1.004 to authorize
a commissioners court to make economic development grants.

      Section 381.004 was enacted as Senate Bill 24 in 1989. As first introduced, Senate Bill 24
amended former article 2351i of the Revised Civil Statutes to authorize the Harris County
Commissioners Court to engage in community and economic development projects, particularly

        “Section 380.001 of the Local Government Code was enactedby Act of May 28, 1989,71st Leg., R.S., ch.
555,§ 1, 1989 Tex. Gen. Laws 1856.
The Honorable Bill Hill - Page 11               (JC-0092)

those under Title I of the Housing and Community Development Act of 1974. See Tex. S.B. 24,7 1st
Leg., R.S. (1989) (as introduced). The senate committee substitute would have achieved the same
purpose by adding section 381.004 to the Local Government Code. See Tex. C.S.S.B. 24,7lst Leg.,
R.S. (1989) (Senate Committee Substitute). The analysis by the Senate Committee on Inter-
governmental Relations ofthe committee substitute bill suggests that Harris County was particularly
concerned about its legal authority “to enter into projects. . with other local governments, political
subdivisions, and other public and private entities.” SENATECOMM.ON INTERGOVERNMENTAL
RELATIONS,   BILLANALYSIS,Tex. C.S.S.B. 24,71st Leg., R.S. (1989). In the bill analysis and the
committee hearing on the committee substitute, no mention was made of article III, section 52-a or
the authority to make economic development grants. See id.; see also Hearings on Tex. C.S.S.B. 24
Before the Senate Comm. on Intergovernmental Relations, 71st Leg., R.S. (Feb. 14, 1989) (audio
tape available Tom Senate Staff Services Office).

        A subcommittee of the House Committee for County Affairs jettisoned the version of Senate
Bill 24 that pertained only to Harris County and substituted the following:

                      Chapter 38 1, Local Government Code, is amended by adding
               Section 381.004 to read as follows:

                    Section 381.004. COMMUNITY                   AND ECONOMIC
               DEVELOPMENT PROGRAMS.

                   (a) The commissioners court of a county may develop and ad-
               minister a program for state or local economic development to
               stimulate business and commercial activity in the county.

                   (b) A program established under this section is subject to
               approval of the commissioners court.

                   (c) The commissioners court may:

                        (1) contract with the federal government, the state, a political
               subdivision of the state, a nonprofit organization, or any other person
               or entity for the administration of the program; and

                      (2) accept contributions, gifts, or other resources to develop
               and administer the program.

Tex. C.S.S.B. 24,71st Leg., R.S. (1989) (House Committee Report).

         Importantly, this language incorporated portions of another bill, House Bill 203, which
 authorized a commissioners court “to develop and administer a program” among other things “for
 state or local economic development” and “to stimulate, encourage, and develop business location
The Honorable Bill Hill - Page 12                (X-0092)

and commercial activity in the county.” See Tex. H. B. 203,7lst Leg., R.S. (1989) (as introduced).
Given the close proximity between the language of House Bill 203 and the final version of Senate
Bill 24, the House Committee on County Affair’s hearing on House Bill 203 is significant. During
that hearing, the author of House Bill 203 indicated that the primary purpose of the bill was to
authorize commissioners courts to expend funds to market their counties and to cooperate with cities
in these kinds ofmarketing efforts. Hearings on Tex. H.B. 203 Before the House Comm. on County
Affairs, 71st Leg., R.S. (Feb. 14, 1989) (testimony of Rep. Eckels, House Sponsor) (audio tape
available from House Video/Audio Services). While the author indicated that the bill would give
counties broad authority, he also said the bill would “stop short” of one thing: “there was some
concern that [counties would] be able to make loans, direct loans, and grants. I don’t think this bill
would authorize that, although we’re checking into it.” Id. He continued that under the bill counties
might be able to “do small business incubation . . but I don’t think it would allow them to give
money directly to private business.” Id. The general counsel to the County Judges and
Commissioners Association also stated that the bill would “not extend any authority to make loans
or grants of public money.” Id. (testimony of Jim Allison, General Counsel, County Judges &
Commissioners Assoc.). The hearing includes no mention of article III, section 52-a.

        During the House Committee on County Affair’s hearing on the house committee substitute
version of Senate Bill 24, the committee chair explained that Senate Bill 24 had been revised to
incorporate House Bill 203 and described the bill in general terms but did not address whether the
bill authorized a commissioners court to make economic development grants. Hearings on Tex.
C.S.S.B. 24 Before House Comm. on County Affairs, 71st Leg., R.S. (March 21, 1989) (statement
of Rep. John Willy) (audio tape available from House Video/Audio Services). Senate Bill 24 was
later amended on the house floor. Those amendments are not directly relevant to the issues here.

        The differences between the House and Senate versions of Senate Bill 24 were reconciled
in conference committee. For our purposes, the conference committee made two important changes
to the version of Senate Bill 24 reported by the house committee. First, it added the language in
section 38 1,004(b)(3) providing that a commissioners court may adopt and administer a program “to
stimulate, encourage, and develop business location and commercial activity in the county.” Second,
it added the language in section 381.004(c)(3) providing that a commissioners court may “use county
employees or funds for the program.”

        Although we have been unable to locate any legislative history that would illuminate the
conferees’ intent in adding these provisions, we do not believe these additions may be read to
authorize a commissioners court to make economic development grants. First, House Bill 203 as
introduced contained identical language authorizing a commissioners court to develop and
administer a program “to stimulate, encourage, and develop business location and commercial
activity in the county.” Tex. H.B. 203,71st Leg., R.S. (1989) (as introduced). Again, testimony on
House Bill 203 before the House Committee on County Affairs includes no mention of article III,
section 52-a and indicates that that bill was not intended to authorize a commissioners court to make
economic development grants or loans. Second, Senate Bill 24 as introduced would have authorized
the Harris County Commissioners Court to use county “manpower” and “financial resources” in
The Honorable Bill Hill - Page 13                 (JC-0092)

establishing and administeringprojects,seeTex. S.B. 24,71st Leg., R.S. (1989) (as introduced), and
the senate committee substitute would have authorized the Harris County Commissioners Court “to
use county employees or funds for the program.” Tex. C.S.S.B. 24,71stLeg.,R.S. (1989). Again,
no mention was made in the Senate Committee on Intergovernmental Relation’s bill analysis or the
public hearing on that bill regarding article III, section 52-a or authority to make economic
development grants. See SENATECOMM.ONINTERGOVERNMENTALRELATIONS,BILLANALYSIS,
Tex.C.S.S.B.   24,7lst Leg., R.S. (1989); see also Hearings on Ten. C.S.S.B. 24 Before the Senate
Comm. on IntergovernmentalRelations,      71st Leg., R.S. (Feb. 14,1989) (audio tape available from
Senate Staff Services Office).

         In sum, in contrast to the article III, section 52-a enabling statutes discussed above, see supra
pp. S-10, neither the text nor the legislative history of section 381.004 contains any mention of
article III, section 52-a. Furthermore, the legislative history confirms that section 381.004 was not
enacted to implement that constitutional provision and, moreover, that the legislature did not intend
section 381.004 to authorize a commissioners court to make economic development grants,
Therefore, contrary to the County’s assertions, see Supplemental Brief, at 2-3, we conclude that the
term “program” in section 381.004 may not be construed to include economic development grants
or to authorize a county to undertake any economic development activity contemplated by article
III, section 52-a.

         We note that both the request letter and the supplemental brief discuss section 381.004 in
reference to the legislative history of section 380.001 and Attorney General Opinion DM-185. In
that opinion, this office discussed the legislative history of section 380.001, which was also enacted
in 1989, in some detail, and noted, in particular, that the author of section 380.001 testified before
the House Committee on Urban Affairs that the bill was intended to “authorize a municipality to do
the same thing that the legislature had just authorized counties to do, i.e., to participate in economic
development matters.” Tex. Att’y Gen. Op. No. DM-185 (1992) at 4 n.2. Although the author may
have been referring to legislation enacting section 38 1.004 of the Local Government Code, see id.,
his general reference to that legislation with regard to section 380.001 does not seem relevant to the
legislature’s specific intent in enacting section 38 1.004, particularly when viewed in light of the
complete absence of any reference to article III, section 52-a in the legislative history of section
381.004 and the testimony indicating that the legislature did not intend section 38 1.004 to authorize
county economic development grants and loans. Furthermore, as noted above, see discussion supra
pp. 8, 10, the Seventy-first Legislature’s express language authorizing municipal “loans and grants
 ofpublic money” in section 380.001 compels us to conclude that the legislature authorizes economic
 development grants by express provision and its omission of any mention of grants or loans in
 section 381.004 indicates that it did not intend section 381.004 to authorize county economic
 development grants.

         III. Conclusion

        In conclusion, chapter 3 12 of the Tax Code neither precludes nor authorizes a commissioners
 court agreement to make payments of county funds to a private company that are the economic
The Honorable Bill Hill - Page 14               (JC-0092)

equivalent of an abatement ofreal property taxes. We also conclude, however, that section 38 1.004
ofthe Local Government Code, which Dallas County cites as the basis for its authority to make such
payments, neither expressly or impliedly authorizes a commissioners court to enter into an
agreement of this kind. The legislative history indicates that the legislature did not intend section
38 1.004 to implement article III, section 52-aofthe Texas Constitution and, moreover, confirms that
the legislature did not intend section 381.004 to authorize county economic development loans and
grants.

                                        SUMMARY

                        Chapter 3 12 of the Tax Code neither precludes nor authorizes
                a commissioners court agreement to make payments of county funds
                to a private company that are the economic equivalent of an
                abatement of real property taxes. However, section 381.004 of the
                Local Government Code, which Dallas County cites as the basis for
                its authority to make such payments, neither expressly or impliedly
                authorizes a commissioners court to enter into an agreement of this
                kind. The legislative history indicates that the legislature did not
                intend section 381.004 to implement article III, section 52-a of the
                Texas Constitution and, moreover, confirms that the legislature did
                not intend section 381.004 to authorize county economic
                 development loans and grants.

                                               Attorney General of Texas

 ANDY TAYLOR
 First Assistant Attorney General

 CLARK RENT ERVIN
 Deputy Attorney General - General Counsel

 ELIZABETH ROBINSON
 Chair, Opinion Committee

 Mary R. Crouter
 Assistant Attorney General - Opinion Committee