                           The Attorney              General of Texas
                                             November     29,   1979

MARK WHITE
Attorney General


                       Honorable Dwight Brannon                  Opinion No. Mw-91
                       Criminal District Attorney
                       UpshurCounty Courthouse                   Re: Authority of city to enter
                       Gilmer, Texas 75644                       into contract without competitive
                                                                 bidding to provide contractor a
                                                                 percentage of water fees in
                                                                 exchange for materials for water
                                                                 and sewer system.

                       .Dear Mr. Brannon:

                              You ask whether a particular contract was legally entered into by the
                       City of Gilmer even though it was not awarded on competitive bidg You
                       inform us that in 1962 the city annexed the Patterson subdivision and at the
                       same time entered into a contract with Mr. Patterson whereby he agreed to
                       fumbh all water and sewer pipe including connections, fittings and fire
                       hydrants in the addition. In exchange, the city agreed to install the water
                       and sewer lines end to pay Mr. Patterson half the money collected from the
                       sale, of water and sewer facilities in the addition until he recovered hi
                       actual ,coets. If he did not recover his ccets in five years, the city would not
                       be obligated to pay him the balance. In 1965, Mr. Patterson was given a five
4313
   N.Tenth,
          *“lbF        year  period to receive mvenues cm extensions as well as the original lines. A
McAl*n.
      TX.78601         contract similar to the 1962 contract was entered into in 1970 for street
51218824547          !:paving and the development .of newly,,annexed.property. Add@nal week
         ., .;         was done in1974 at the same,basis as in the past, and t+ city c0mci.l .h 1977
2wfin pIw,suiugD ~I .~.‘amended the minutes;to reflect $hie agreement. No competitive bide ,w,ere
SanA”to”i.3.
         TX.70201      taken for the original contract or any renewal thereof, and the amount to be
512i-225-4191          paid under it exceeded $3,000.

                            You have provided us with a copy of the 1962 contract      Article 2368a,
                       V.T.C.S., provides in part:

                                       set   2. . . . no city in this state shall hereafter
                                    make any contract calRng for or requiring the
                                ., expenditure of payment of Three Thousand Dollars
                                  l.($3,000.00) or mom out of any fund or funds of any
                                    city or county or subdivision of any county creating
                                    or imposing an obligation or liability of any nature of
                                    character upon such county or any subctivision of such




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 Honorable Dwight Brannon -       Page Two     (Mw-91)



            county, or upon such city, without first submitting such proposed
            contract to competitive bids. . . .

              ....                                                                          :<,I ,;.i,
                                                                                               ,,‘/
               Any and all such contracts or agreements hereafter made by any
            county or city in this state, without complying with the terms of
            this Section, shall be .void and shall not be enforceable in any ,court
            of this state and the performance of same’and the paymint ~of.any
            money thereunder may be enjoined by any, prcperty ’$xpaying
            citizen of such county or dty. . . .                    *   ,*,s
              ....

               Sec., ll. .Notl$ng herein shall be so construed as to preclude any
            city or town tn this State, whether organized undar General or
           Special Law or operating under special Charter, from encumbering
           or mortgaging its light system, water system, sewer system or any
           ,other utility,.either, both or all, and the franchise and the income
           thereof and,,“evsrything pertaining thereto acquired ,or to be
           .acquire4 to secure the payment of fun& to purchase same or to
            make or purchase extensions, additions, cr improvements thereto,
            as contemplated in Articles ill’ to lll8, both inclusive,“of the
           Revised Civil Statutes of ‘Texas, 1925,‘with amendments thereto,
            : . ; proviaeb ‘that in ,m@ng ‘such contracts or agreements or
           encumbrances and in ‘%?s@ngrevenue bonds, warrantsor ‘other
           obligations to be paid-out oilthe property and income from such
           system or systems, the governing body of &h city ‘or:town shall
       .,   comply, with the p~viakins of, this Act in regard to, not@ and
   .~S~,&.
           *w$tfsf’        F;%, F@ 9. fkW: to.  h *~fef+.n&
                                             : ,,.,~  : ‘~   :of.=c~ ,p+&                 ‘. I
;*    /+&       :‘&&-.y& .~ : *fz$@         ~,*      $&    ~to tibj&t .,It;~:
                                                                           &’~tb competitive : ~“.
 bid&q ‘re@ti$m,&ts of:kti+       ZSSSE ‘Wheti’the’&ntract ‘was e@t&:d~ into, article 2388a
‘jxpp~@-tq expgxlith’fn      exoei&of82,800.~ ~Saa’~~cts’1949,‘SlstLe&;‘&.‘S60, S 1 at 10S8.
‘Bven though the contm& did not xtate .a doealue’      f& ‘the materials to be delivered, it
 covered a fixed amount of work from which’the value’af ‘the &r&r&id@ould have been
 determined. This contract therefore was not within the judicial exception for contracts
 for the delivery ‘of materials which ‘izanbe terminated at any time. Jackson v No
 S.W.2d 787 (Tex. Civ. App. - Amarillo 193L writ ~dlsrntihAttorney General
                                                                        -----?+ Op nion No.
                                                                                         37
 V-506 0948). ,See Annot., .53 .A.L.R.2d, 498, 506 (1957). Although whether or not the
 contractor wot&&trmRy receive $2,OOO’dependedon’water and sewer revenues after the
 contract date, we belteve this amount was also subject to estimate.
                       ., .:
       We believe this &tract encumbers the water and e&wersystem in order to pay for
 extensions of iti See State ex ret Grimes County Taxpayers Association v. Texas
 M~~icipfd Powe Agsm, 565 8.W.2d 2;58 (Tex. Civ. App. - Holrston [Ist Dist.] 1978, no




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Honorable Dwight Brannon     -   Page Three       (MN- 9 1)



writ) (an encumbrance on revenues of a system is an encumbrance on the system). The
contract is therefore subject to section 11 of article 2368a, V.T.C.S. See also V.T.C.S.
arts. llll - lll8. Fisher v. City of Bartlett, 76 S.W.2d 535 (Tex. Civ. App. - Austin 1934,
writ dism’d), dealt with a taxpayer’s claim that a contract for a municipal electric light
plant entered into pursuant to articles llll through Ill8 was void because the competitive
bidding provisions of article 2368a were not complied with. The court determined that
article 2368a conferred no right upon a taxpayer to enjoin the contract encumbering
revenues. It stated that article 2368a, section 2 was limited to contracts for public works
which constitute a charge on tax revenues         Thus, the only provisions of article 2368a
applicable to contracts encumbering water and sewer systems as a means of financing
them are those specifically mentioned in section 11, the provisions for notice, competitive
bids and the right to a referendum. In our opinion, the contract for delivery of materials
was subject to the competitive bidding provisions of article 2368a.

      Although this contract should have been put out to competitive bids, the provider of
materials may be able to recover his costs on a quantum meruit theory. See Wyatt Metal
& Boiler Works v. Fannin County, 111S.W.2d 787 (Tex. Civ. App. - Texarkana 1937, writ
dism’d); Attorney General Opinion H-482 6974); see also City of Nederland v. Csllihan,
299 S.W.2d 380 (Tex. Civ. App. - Beaumont 1957, writ ref’d n.r.e.); Attorney General
Opinion C-128 (1963).         --

      You also suggest that the contract    may violate article   III, section 52 of the Texas
Constitution which provides as follows:

           The Legislature shall have no power to authorize any county, city,
            town or other political corporation or subdivision of the State to
           lend its credit or to grant public money or thing of value in aid of,
           or to any individual, association or corporation whatsoever. . . .

Cities are not required to reimburse the developer for the cost of water main and sewer
system extensions.    Crownhill Homes, Inc. v. City of San Antonio, 433 S.W.2d 448 (Tex.
 Civ. App. - Corpus Christi 1978, writ ref’d n.r.e.).      However, such facilities serve a
governmental purpose. Id. See State v. City of Austin, 331 S.W.2d 737 (Tex. 1960). The
initial contract did not, Fouourpinion, violate article III, section 52. Nor can we see any
basis for concluding that the 1970 and 1974 contracts violated this provision.         In our
opinion, however, there is mme question as to whether the 1965 renewal of the 1962
contract was consistent with article III, section 53 of the constitution which provides:

              The Legislature shall have no power to grant, or to authorize any
           county or municipal authority to grant, any extra compensation,
           fee or allowance to a public officer, agent, servant or contractor,
           after service has been rendered, or a contract has been entered
           into, and performed in whole or in part. . . .

See State v. Haldeman, 163 S.W. 1020 (Tex. Civ. App. - Austin 1913, writ ref’d); m
County v. Gibson, 44 SW. 302 (Tex. Civ. App. 1898, writ ref’d). The renewal must have




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        Honorable Dwight Brannon      -    Page Four    (MW-91)



        been supported by new consideration in order to comply with article LB, section 53. In
        1965 the term of the initial contract was extended for three years. Apparently additional
        work was done on extensions of the sewer lines which could provide consideration for the
        lengthening of the initial contract term. Although there remains the question of whether
        the installation of extensions to water and sewer mains provided adequate consideration
        fcr the renewal of the initial contract and for the receipt of revenues on the extensions,
        the question is for the determination of the city council in the first instance.

               You finally ask whether the city has a civil or criminal liability to the taxpayers of
        the citv. A citv official acting within the scooe of his DUbliC duties is not oersonallv liable
        for negligence-or mismanage&nt.        Dallas County Flood Control District v. Pow&r, 280
        S.W.2d 336 (Tex. Civ. App. - Waco 1955, writ ref’d n.r.e.); Ross v. Gonxales, 29 S.W.2d
        437 (Tex. Civ. App. - San Antonio 1930, writ dism’d w.o.j.1. Article 2368a. V.T.C.S., does
        not provide criminal penalties for failure to comply with its competitive               bidding
        provisions, nor do we find any other provision imposing a criminal penalty on council
        members who neglect to follow the competitive         bidding laws.      However, if a public
        servant intentionally   or knowingly violates the competitive bidding laws with intent to
        benefit himself, his act may be official misconduct within section 39.01 of the Penal Code.

                                               SUMMARY

                   A contract to provide a city with materials for water and sewer
                   systems in exchange for a percentage of water revenues is subject
                   to the competitive bidding provisions of article 2368a, V.T.C.S.
                   Although the contract was entered into without complying with the
                   competitive bidding laws, the contractor may be able to recover his         *
                   costs on a quantum meruit theory. City council members would not
                   have civil or criminal liability for negligent failure to follow
                   competitive bidding laws.




                                                       MARK     WHITE
                                                       Attorney General of Texas

        JOHN W. FAINTER, JR.
        First Assistant Attorney General

        TED L. HARTLEY
        Executive Assistant Attorney General

        Prepared by Susan Garrison
        Assistant Attorney General




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      Honorable Dwight Brannon -   Page Five   (NW-91)



      APPROVBD:
      OPINIONCOMMITTEE

      C. Robert Heath, Chairman
      Jim Allison
      David B. Brooks
      Walter Davis
      SusanGarrison
      Rick Gilpin
      William G Reid
      Bruce Youngblood




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