Court Opinion

ID: 4128774
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:42:36.847404+00
Date Added: 2024-06-11T14:10:48.669045
License: Public Domain

ATTORNEYGENERAL                       OF TEXAS
                                             GREG        ABBOTT

                                                    May 4,2005

Shirley .I. Neeley, Ed.D.                                  Opinion No. GA-0321
Commissioner of Education
Texas Education Agency                                     Re: Whether an independent school district may
1701 North Congress Avenue                                 enter into a 50-year lease with a private entity to
Austin, Texas 78701-1494                                   use and improve the entity’s land for school
                                                           purposes in exchange for $1 .OOper year and the
                                                           agreement to lease excess school district land to
                                                           the private entity for 50 years (RQ-0292-GA)

Dear Commissioner        Neeley:

          On behalf of the Port Neches-Groves Independent School District (“PNG” or “the school
district”), you ask about the authority of an independent school district to enter into a 50-year lease
with a private entity to use and improve the entity’s land for school purposes in exchange for $1 .OO
per year and the agreement to lease excess school district land to the private entity for 50 years.’

I.       Factual Background

         A letter from PNG enclosed with your request letter describes the following transaction:

                  The proposed transaction involves a tract of land owned by Huntsman
                  Petrochemicals [“Huntsman”], who has agreed to lease the land to
                  PNG for a term of 50 years, with an option to renew the lease for an
                  additional 50 years, at the sole discretion ofPNG’s School Board, in
                  exchange for the consideration of $1 .OOper year and the use of a tract
                  of unused excess land owned by PNG. Essentially, the proposed
                  transaction involves a long-term property exchange between the two
                  parties.

          ‘See Letter from Shirley J. Neeley, Ed.D., Commissioner ofEducation,   Texas Education Agency, to Honorable
Greg Abbott, Texas Attorney General (Nov. 8, 2004) [hereinafter Request          Letter]; Letter from Dr. Lani Randall,
Superintendent,   Port Neches-Groves     Independent School District, to David   A. Anderson, General Counsel, Texas
Education Agency (Nov. 2,2004) (attached to Request Letter) [hereinafter PNG     Letter] (both letters on tile with Opinion
Committee, also available af http:ilwww.oag.state.tx.us).
Shirley J. Neeley, Ed.D. - Page 2                    (GA-0321)

                         The land owned by Huntsman is considered ideal for the
                 possible construction of new schools and is almost twice the total
                 acreage of land owned by PNG that would be involved in the
                 proposed transaction. Huntsman wants the use ofPNG’s excess tract
                 for the operation of the local community soccer league that would be
                 displaced when it leases the larger tract to PNG.

PNG Letter, supra note 1, at 1. A brief submitted on PNG’s behalf further informs us that
“Huntsman will be limited to [using the school district land for the community soccer league], thus
assuring that if, at the expiration of the first 50 year lease term, PNG wishes not to exercise its
renewal option, the land’s condition would be substantially similar to the state it would be in upon
receipt by Huntsman.“z

II.      Analvsis

         PNG states “[tlhis unique proposal” requires it to resolve the following question:

                         Whether Port Neches-Groves Independent School District can
                 construct buildings using public funds upon property that is owned by
                 Huntsman Petrochemicals and that is leased rather than owned and as
                 partial consideration for such lease, provide a tract of PNG’s excess
                 and unused land to Huntsman Petrochemicals           for the use as a
                 community youth soccer program without bid or other public
                 approval.

PNG Letter, supra note 1, at 1. No statute expressly authorizes a school district to enter into this
kind oftwo-part transaction. Therefore, as PNG recognizes, we must consider separately the school
district’s authority to enter into each lease. See id. at 1-2. Accordingly we address (i) the authority
of an independent school district to construct buildings on leased land that is privately owned, and
(ii) the authority of an independent school district to lease excess school district land to a private
entity as partial consideration for the school district leasing land from the private entity.

         A.       School District’s Authority to Lease and Develop Privately Owned Land

                We begin with an independent school district’s authority to lease land from a private
entity and to develop the land for school district purposes. The Education Code authorizes a board
of trustees to lease real property on the school district’s behalf. The trustees of an independent
school district “as a body corporate have the exclusive power and duty to govern and oversee the
management of the public schools of the district.” TEX. EDUC. CODE ANN. 5 11.15 1(b) (Vernon

         *Brief from Chris Booth, Mehaffy Weber, on behalf of Port Neches-Groves Independent School District, to
Honorable Greg Abbott, Texas Attorney General, at l-2 (Dec. 16,2004) ( on file with Opinion Committee) [hereinafter
PNG Brief].
Shirley J. Neeley, Ed.D. - Page 3                    (GA-0321)

Supp. 2004-05). Under section 11.15 l(a) of the Education Code, the trustees of an independent
school district “in the name of the district may acquire and hold real and personal property.” Id.
5 11.15 1(a). And a board of trustees has express statutory authority to spend local school funds for
purposes it determines necessary, including obtaining school sites and renting schools. See id.
5 45.105(c) (authorizing the use of certain funds for, among other things, “buying school sites,
buying, building, repairing, and renting school buildings,    and for other purposes necessary in the
conduct of the public schools determined by the board of trustees”).3 Moreover, a school district is
also expressly authorized to construct school buildings, see, e.g., id. $8 44.031-,041 (Vernon 1996
& Supp. 2004-05) (governing school districts’ authority to enter into construction contracts),
45.105(c) (Vernon Supp. 2004-05) (authorizing use of certain funds to “build[]                 school
buildings”), and we are not aware of any statutory provision that would limit a school district to
constructing school district buildings on land owned by the school district in fee simple.

         In addition, PNG’s letter suggests that it is concerned about constitutional limitations on the
authority of a school district to use public funds to construct school buildings on privately owned
land. See PNG Letter, supra note 1, at 2. Article III, section 52(a) of the Texas Constitution limits
the authority of apolitical subdivision, including a school district, to use public funds to aid a private
entity. See TEX. CONST. art. III, 5 52(a); Lewis v. Zndep. Sch. Dist. ofAustin, 161 S.W.2d 450,452
(Tex. 1942) (“That the School District is a political corporation or subdivision of the State, as
described in Section 52 of Article 3 of the Constitution, is well established.“).          Section 52(a)
prohibits “gratuitous payments to individuals, associations, or corporations,” but “[a] political
subdivision’s paying public money is not ‘gratuitous’ if the political subdivision receives return
consideration.” Tex. Mm. League Zntergovernmental Risk Pool v. Tex. Workers ’Camp. Comm ‘n,
74 S.W.3d 377,383 (Tex. 2002). With the exception ofgratuitous transactions, which are absolutely
prohibited, a political subdivision’s use of funds or “thing of value” that aids a private entity must
serve a “public purpose” to pass constitutional muster. As the Supreme Court ofTexas has recently
held, in order to comport with article IU, section 52(a), the predominant purpose of a statute
requiring a public expenditure must be to accomplish a public purpose, not to benefit private parties,
and the statute must impose public control over the funds to ensure that the public purpose is
accomplished and to protect the public’s investment and ensure that the political subdivision receives
a return benefit. See id. at 383-84. This office has identified similar principles for determining if
a particular expenditure serves a public purpose: “In making an expenditure of [public] funds that
benefits a private person or entity, . a [political subdivision’s governing body] will avoid violating
article III, section 52 if it (i) determines in good faith that the expenditure serves a public purpose
and (ii) places sufficient controls on the transaction, contractual or otherwise, to ensure that the
public purpose is carried out.” Tex. Att’y Gen. Op. Nos. GA-01 88 (2004) at 4 (citing Young v. City
of Houston, 756 S.W.2d 813, 814 (Tex. App.-Houston [lst Dist.] 1988, writ denied), City of
Coleman Y. Rhone, 222 S.W.2d 646, 649 (Tex. Civ. App.-Eastland 1949, writ ref d)); GA-0078
(2003) at 4-5.

         ‘See also Tex. Att’y Gen. Op. No. JM-1000 (1988) at 3, 5 (concluding   that former Education   Code section
23.26 authorized a school district to rent portable classroom).
Shirley J. Neeley, Ed.D. - Page 4                     (GA-0321)

          With respect to constructing     buildings with public funds on leased property, this office has
stated:
                           It is well established that the Texas Constitution does not
                  prohibit the state or a political subdivision from constructing
                  improvements on leased property. [Under article III, section 52(a)
                  and similar provisions,]       .    [aIdequate consideration    for the
                  expenditure     must flow to the public, and adequate controls,
                  contractual or otherwise, must be in place to ensure that the public
                  purpose will be carried out. The fact that improvements are to be
                  constructed on leased property, and the terms ofthe lease, are relevant
                  to the determination whether the state receives adequate consideration
                  for, and retains adequate control over, the expenditure.

Tex. Att’y Gen. LO-97-078, at 2 (citing Attorney General Opinions JM-1030 (1989) at 3
(expenditure of public funds to improve realty owned by private parties), MW-290 (1981) at 1,4
(county may improve building acquired by lease), H-41 6 (1974) at 3 (grant or loan of state funds for
construction or improvement of municipal airport located on leased land), H-403 (1974) at 3 (state
agency may spend public funds to build, repair, or maintain improvements on leased property),
M-512 (1969) at 2 (state agency may refurbish leased building)).

         Whether using public funds to construct buildings on leased land comports with these
requirements involves questions of fact and cannot be resolved by this office. See id.4 Based on the
information you have provided, it appears that the PNG board of trustees could reasonably conclude
that constructing school buildings on the leased land would serve a school district purpose. See PNG
Letter, supra note 1, at l-2 (stating that the Huntsman tract is ideal for school construction and that
a loo-year lease term would exceed the structures’ useful life). Your letter also suggests that the
lease agreement would grant the school district an exclusive right to use the buildings for 50 to 100
years. Such a lease term could fulfill the PNG board of trustees’ obligation to place sufficient
controls on the transaction to ensure that the public purpose is carried out.

          B.      School District’s Authority to Lease School Land to a Private Entity

                 Next, we address an independent school district’s authority to lease excess school
district land to a private entity as partial consideration for the school district leasing land from the
private entity, which is the more complicated issue.

                  1.       The Education Code and Implied Authority

                        A board of trustees holds school property in trust to be used for the benefit
of school children in the district. See Love v. City ofDallas, 40 S.W.2d 20,26 (Tex. 193 1). Section

          4SeegenerailyTex.Att’yGen.      Op.Nos. GA-0128 (2003)at5 (aquestionrequiringresolutionofparticularfacts
is “not one in which this offke ordinarily engages in the opinion process”); GA-0106 (2003) at 7 (“This office cannot
find facts OI resolve fact questions in an attorney general opinion.“).
Shirley J. Neeley, Ed.D. - Page 5               (GA-0321)

11.15 1(c) of the Education Code provides that “[a]11 rights and titles to the school property of the
district, whether real or personal, shall be vested in the trustees and their successors in office. The
trustees may, in any appropriate manner, dispose of property that is no longer necessary for the
operation of the school district.” TEX. EDUC. CODE ANN. § 11.151(c) (Vernon Supp. 2004-05).
Section 11.154(a) further provides that a “board of trustees of an independent school district may,
by resolution, authorize the sale of any property, other than minerals, held in trust for public school
purposes.” Id. 5 11.154(a) (Vernon 1996).

          While sections 11.151(c) and 11.154 authorize a boardoftrustees     to dispose ofreal property
that is no longer necessary for the operation of the school district and to sell property, no provision
expressly authorizes a board of trustees to lease school real property to another entity. However, in
Royse Independent School District v. Reinhardt, 159 S.W. 1010 (Tex. Civ. App.-Dallas 1913, writ
ref d), the court concluded that a board of trustees’ statutory authority impliedly authorizes a board
to lease school real property to another entity. In that case, the court held that the board’s exclusive
power to manage and control school property included the power to lease a school baseball field to
the Royse Booster Club during summer months for a three-year term in exchange for the club’s
agreement to make certain improvements to the property. The court observed that “[tlhe primary
object in granting the privilege to the Royse Booster Club to use its school grounds as a place to play
baseball is to subserve a public purpose, and not to promote some private end.” Royse, 159 S.W.
at 1011. Moreover, it concluded that the lease would not harm the property or interfere with school
activities, given that it was limited to the summer months, and would “result in quite a financial
advantage to the school district.” Id.

         Based on these facts, the court concluded that “such use [of the property] is not so
inconsistent with the purposes to which the property has been dedicated or set apart as renders the
contract       illegal or unauthorized.”   Id. Relying on Royse, attorney general opinions have
recognized boards of trustees’ implied authority to permit private groups to lease school property
when the lease does not interfere with the property’s school purpose. See, e.g., Tex. Att’y Gen. Op.
Nos. WW-1364 (1962) at 7 (concluding that a school district board of trustees was authorized to
lease school property to a tire protection district so long as the lease “does not impede or interfere
with the operation of the school”); O-5354 (1943) at 9 (concluding that a school district board of
trustees was authorized to lease a school building to a religious sect for a summer religious school
provided that the school district received reasonable consideration and the lease did not “interfere[]
with the use of such property for school purposes”).

         While judicial and attorney general opinions after Royse have not questioned school district
boards of trustees’ implied authority to lease school district land, subsequent opinions addressing
long-term leases have concluded that boards of trustees lack authority to enter into a lease that
interferes with the property’s use for school purposes or that relinquishes the board’s authority to
control the property’s use. For example, in 1972 this office concluded that an independent school
district lacked authority to lease an unused school facility and grounds for use as a neighborhood
center for a 20-year term:

               [A] minimum twenty-year lease bythepresent trustees oftheproperty
               in question, without any discretion being left in the trustees of the
Shirley J. Neeley, Ed.D. - Page 6               (GA-0321)

                future for possible needed use for school purposes, would exceed the
                recognized discretionary leasing authority of the school         The
                lease would not be deemed a temporary, casual, or incidental use and
                would amount to an impermissible         diversion of governmental
                property from its intended use for school purposes.

Tex. Att’y Gen. Op. No. M-1047 (1972) at 3,

        And even more significantly, in 1986, in the last judicial opinion to consider a school district
lease’s validity, the court declared the lease ultra vires and void. See River Rd. NeighborhoodAm ‘n
v. S. Tex. Sports, 720 S.W.2d 551,559.60 (Tex. App.-San Antonio         1986, writ dism’d). In that case,
the court considered a school district’s authority to lease a football stadium to a private entity, STS,
according to terms described in part as follows:

                        The lease is for a primary term of 30 years and grants to
                lessee, STS, the right to extend the term for two additional IO-year
                periods. The lease is, thus, for a minimum period of 30 years, and if
                STS chooses to exercise its options, for an additional 20 years.

                        The lease gives STS the right to the “exclusive use” of the
                leased premises for “all lawful purposes,” without paying until at
                least February 1, 1986.

Id. at 559. The plaintiffs did not question the district’s right to permit a private organization to use
district property in a manner that would not interfere with the property’s use for school district
purposes, but contended that the lease relinquished the board’s right to manage and control the
property, including its right to allow other groups to use the property. Id. The court agreed:

                         There can be no doubt that [the] District’s Board exceeded its
                powers when it, by the lease in question, effectively divested itself of
                the exclusive right to manage and control the property in question,
                including, for a period of perhaps 50 years, the exclusive right to
                determine when the District itself could use the school property for
                school purposes. The invalidity of such abdication of power and
                diversion ofproperty held for public purposes has been recognized in
                Texas at least since 1887.

Zd. at 560.

         In sum, a school district board of trustees has implied authority under the Education Code
to lease district real property to a private entity, but that authority is limited. In leasing district
property, a board of trustees may not (i) permit uses of the property that would interfere with the
property’s use for district purposes, or (ii) divest itself of the exclusive right to manage and control
the property in question. See Tex. Att’y Gen. Op. No. GA-0252 (2004) at 6.
Shirley J. Neeley, Ed.D. - Page 7                        (GA-0321)

         With respect to the proposed lease, we disagree with the suggestion that the PNG board of
trustees need not concern itself with these traditional limitations on its authority because the school
district would lease its land to Huntsman as partial consideration for its lease ofHuntsman land. See
PNG Letter, supra note 1, at 1. Nor do we agree with PNG counsel’s suggestion that any loss of
control over the school district land would be mitigated by the control the PNG would gain over the
larger, more valuable Huntsman tract. See generally Love, 40 S.W.2d at 26 (a board of trustees
holds school property in trust td be used for the benefit of school children in the district).

         But this does not mean that we believe that these limitations on the board’s authority preclude
it from leasing the school land to Huntsman, or that the school district’s lease of the Huntsman tract
may not be taken into account as a relevant factor in considering the school district’s authority to
lease its land to Huntsman. In contrast to the actively used school district facilities at issue in Royse
and River Road, PNG describes the property it would lease to Huntsman as “unused excess land.”
PNG Letter, supra note 1, at 1. The fact that the land is not used by the school district is relevant
to whether the proposed lease would permit uses of the property that would interfere with the
property’s use for district purposes.       See, e.g., Tex. Att’y Gen. Op. No. JM-531 (1986) at 3
(addressing a school district’s authority to lease for a 50-year term undeveloped land that it did not
plan to use for instructional purposes and distinguishing River Road on the basis that the facility in
that case was actively used by school district sports teams). But the board of trustees must also
consider whether PNG may need the land for school district purposes over the term of the lease and,
if so, whether the lease would permit the school district to use the land. See, e.g., Tex. Att’y Gen.
Op. Nos. GA-0252 (2004) at 7 (concluding that a junior college district may not divest itself of the
right to control campus facilities constructed under a lease); M-1047 (1972) at 3 (concluding that
school district lacked authority to lease an unused elementary school for a 20-year term with no right
to terminate). The PNG letter indicates that Huntsman will not agree to a lease that gives PNG the
right to terminate. See PNG Letter, supra note 1, at 2. A lease divesting PNG of any right to manage
and control the property for a term of 50 to 100 years is problematic under relevant precedent, unless
the board of trustees can expressly find that the property is no longer necessary for the operation of
the school district. Cj: TEX. EDUC. CODE ANN. 5 11.15 l(c) (Vernon Supp. 2004-05) (authorizing
a school district board of trustees to dispose ofproperty “that is no longer necessary for the operation
of the school district”). In making such a finding, the board of trustees could take into account the
fact that the Huntsman tract would be available for school purposes.

        In the end, the final determination whether a lease comports with these limitations involves
questions of fact and contract interpretation and is thus beyond the purview of an attorney general
opinion. See Tex. Att’y Gen. Op. No. GA-0252 (2004) at 6 (junior college district’s authority to
lease campus land to private foundation involves questions of fact and contract interpretation); see
also Tex. Att’y Gen. Op. No. JM-531 (1986) at 2 (whether a school district’s agreement to lease
school district land for a 50-year term interfered with the property’s school district use and the
board’s authority “is essentially a question of fact”).’ We suggest that the PNG board of trustees
consider and make express findings regarding these issues.

          ‘Seegenera& Tex. Att’y Gen. Op. Nos. GA-0176(2004) at 2 (attorneygeneral opinions may “address a public
entity’s authority to agree to a particular contract term, if the question can be answered as a matter of law,” but they do
not construe contracts); GA-0078 (2003) at 2 (same).
Shirley J. Neeley, Ed.D. - Page 8                      (GA-0321)

                  2.        Other Limitations on Authority to Lease School District Land

                        The Local Government Code and the Texas Constitution                  also impose
limitations on the authority of a school district to lease real property to a private entity that the board
of trustees must address.

        First, PNG describes the transaction at issue as a “long-term property exchange.” PNG
Letter, supra note 1, at 1. The Local Government Code requires political subdivisions, including
school districts, to sell or exchange land using competitive procedures, and, in some instances, a
long-term lease (or “long-tennproperty exchange”)   by apolitical subdivisionmaybe  subject to these
requirements.

         Section 272.001 of the Local Government Code governs the authority of political
subdivisions to sell or exchange land, generally requiring a political subdivision to provide notice
and to obtain bids. See TEX. Lot. GOV’T CODE ANN. 5 272.001 (Vernon Supp. 2004-05). Courts
construe the term “political subdivision” to embrace school districts. See City ofE1 Paso Y. El Paso
Cmty. Junior Coil. Dist., 729 S.W.2d 296, 299 (Tex. 1987).6 Section 272.001 “protect[s] public
property in order that it might not be disposed of for less than true value. The notice and bidding
requirements stimulate competition, prevent favoritism, and secure the best price for the property.”
Bell Y. Katy Indep. Sch. Dist., 994 S.W.2d 862,866 (Tex. App.-Houston [lst. Dist.] 1999, no pet.)
(citing CityofDallas v. McKasson, 726 S.W.2d 173,176 (Tex. App.-Dallas 1987, writ ref d n.r.e.);
West Orange-Cove Consol. Indep. Sch. Dist. v. Smith, 928 S.W.2d 773,776 (Tex. App.-Beaumont
1996, no writ)).

         Specifically, section 272.001(a) requires that “before land owned by a political subdivision
of the state may be sold or exchanged for other land, notice to the general public of the offer of the
land for sale or exchangemust be published in anewspaper of general circulation,” with information
about sealed bidding procedures. See TEX. Lot. GOV’T CODE ANN. 5 272.001(a) (Vernon Supp.
2004-05). Section 272.001(b) excepts certain types of land and interests from the section 272.001(a)
notice and bidding requirements, including, for example, “land that the political subdivision wants
to have developed by contract with an independent foundation.” Id. $272.001 (b)(4).’ However, the
land and interests described by section 272.001(b), including section 272.001(b)(4), “may not be
conveyed, sold, or exchanged for less than the fair market value of the land or interest unless the

          %e Education Code also indicatesthat section 272.001generallyapplies to school district land sales. Chapter
45, subchapter D of the Education Code authorizes a board of trustees to sell real property and to issue revenue bonds
payable from the proceeds of the sale, see TEX. EDUC. CODEANN. $5 45.08 l-.086 (Vernon 1996 & Supp. 2004-05), and
expressly provides that Local Govemment Code section 272.001 does not apply to a real property sale conducted under
the subchapter,see id. 5 45.083 (Vernon 1996); see also Bell v. Kaiy Indep. Sch. Dist., 994 S.W.Zd 862, 865-66 (Tex.
App.-Houston   [lst Dist.] 1999, no pet.) (holding that subchapter D applies only when a school district issues revmoe
bonds from the land sale proceeds and suggesting that section 272.001 otherwise applies).

          ‘See also Tex. Att’y Gen. LO-97.076, at 3 (“[A]ny contract of sale under the tern of Local Govemment Code
section 272.001 (b)(4) between a political subdivision and a private foundation for the development of a parcel ofpublic
land owned by the political subdivision must include an undertaking that the foundation will develop the land as the
political subdivision determines.“).
Shirley .I. Neeley, Ed.D. - Page 9                     (GA-0321)

conveyance, sale, or exchange is with one or more abutting property owners who own the underlying
fee simple.” Id. 5 272.001(b).

         Whether a lease arrangement is a sale or exchange of land subject to section 272.001 depends
upon the lease’s terms, such as the lease’s duration, the political subdivision’s right to control the
land during the lease term, andthe political subdivision’s right to improvements at termination. See
Tex. Att’y Gen. LO-96-053, at 3 (noting that a court could “conclude that a transaction in which a
county transfers equitable title to county real property to another entity with an irrevocable option
to purchase constitutes a sale of land for purposes of section 272.001”). A court of appeals recently
concluded that section 272.001 does not apply when a political subdivision temporarily leases land
to a private entity. See Walker-v. City of Georgetown, 86 S.W.3d 249,259 (Tex. App.-Austin 2002,
pet. denied). In that case, the court found that “there was no permanent disposition of land. The City
of Georgetown entered into a ten-year lease, with a ten-year renewal option, during which the City
retains significant control over the use of the property. Upon termination of the lease, if renewed,
the City will acquire the batting cages [built on city property by the private lessee].” Id. at 258.

         Neither the PNG letter nor its counsel’s brief addresses section 272.001. See PNG Letter,
supra note 1; PNG Brief, supra note 2. This office cannot ultimately determine whether the
proposed lease at issue here would constitute a permanent disposition of land subject to section
272.001. See, e.g., Tex. Att’y Gen. Op. No. GA-0252 (2004) at 8; Tex. Att’y Gen. LO-96-053,
at 3 (“the determination whether a particular lease-purchase agreement constitutes a sale [subject to
section 272.001] would involve questions offact and contract interpretation and is therefore beyond
the scope of an attorney general opinion”). However, the proposed lease term, 50 to 100 years with
no right to terminate, suggests that the lease could rise to a sale or exchange under section 272.001.
We urge PNG to consider section 272.001’s requirements and exceptions before proceeding with
the transaction.8

          In addition, a school district’s agreement to permit a private entity to use its land constitutes
a “thing of value” for purposes of article III, section 52(a). See Walker, 86 S.W.3d at 260
(addressing whether city’s lease ofpark land to private company violated article III, section 52(a));
Tex. Att’y Gen. Op. Nos. GA-0252 (2004) at 8-9 (addressing whetherjunior college district’s lease
of campus land to private foundation violated article III, section 52(a)), GA-0084 (2003) at 9
(addressing whether a city lease agreement with avolunteer firefighters association violated article
III, section 52(a)), JC-0582 (2002) at 5-6 (addressing whether a county lease agreement with a
museum violated article III, section 52(a)). Thus, a school district lease to a private entity must

         *Forexample, it may be possible for the school district to enter into an agreementwith Huntsmanafterproviding
notice and accepting bids for an exchange of property. See TEX.Lot. GOV’T CODE ANN. $272.001(a), (d) (Vernon
Supp. 2004-05)(“This section does not require the goveming body of a political subdivision to accept any bid or offer
or to complete any sale or exchange.“). Alternatively, it may be possible for PNG to lease the school district land for
an independent foundation to develop athletic fields under section 272.001(b)(4)without notice and bids. See also note
7 supra. PNG suggeststhat the value ofthe Huntsmantract equals or exceeds the fair market value of the school district
land. See PNG Letter, sup-a note 1, at 2; TEX. Lot. GOV’TCODEANN. 5 272.001(b) (Vernon Supp. 2004-05)(generally
requiring that land or an interest under subsection(b) may not be conveyed, sold, or exchanged for less than fair market
Willie).
Shirley .I. Neeley, Ed.D. - Page 10             (GA-0321)

satisfy the public purpose test. See, e.g., Tex. Att’y Gen. Op. Nos. GA-0084 (2003) at 8 (applying
the public purpose test to a city lease agreement with a volunteer firefighters association), JC-0582
(2002) at 4 (applying the public purpose test to a county lease agreement with a museum).

          Here, PNG asserts that in exchange for leasing its property to Huntsman, it would “obtain
an interest in a valuable piece of land, without any significant cost and certainly far below fair market
value.” PNG Letter, supra note 1, at 1. It also states that the Huntsman land “is considered ideal
for the possible construction of new schools and is almost twice the total acreage” of the land PNG
would lease to Huntsman. Id. These statements indicate that the lease would serve a school district
purpose, school construction, and would be supported by valuable consideration.              Under these
circumstances, assuming the lease includes sufficient controls to ensure the public purpose is carried
out, we believe a court could conclude that the lease of school land to Huntsman would comply with
article III, section 52(a). See Walker, 86 S.W.3d at260 (“[Tlhe lease entered into here was supported
by valuable consideration.     As such, it was not a gratuitous donation of public funds or a thing of
value.“).
Shirley J. Neeley, Ed.D. - Page    11          (GA-0321)

                                        SUMMARY

                        An independent school district is authorized to lease land
               from a private entity and to develop the land for school district
               purposes. An independent school district has implied authority to
               lease school land to a private entity, but in leasing school property the
               board of trustees may not (i) permit uses of the property that would
               interfere with the property’s use for district purposes, or (ii) divest
               itself of the exclusive right to manage and control the property. A
               long-term exchange of school land for private land may be subject to
               section 272.001 of the Local Government Code, in which case the
               school district may be required to provide notice and accept bids.

                        Article III, section 52(a) of the Texas Constitution does not
               prohibit a school district from using public funds to construct
               buildings on leased property or from leasing school land to a private
               entity if the board of trustees determines that the expenditure or use
               of the thing of value serves a public purpose and places sufficient
               controls on the transaction to ensure that the public purpose is carried
               out.

BARRY R. MCBEE
First Assistant Attorney General

DON R. WLLLETT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Mary R. Crouter
Assistant Attorney General, Opinion Committee