Honorable Thomas B. Sehon       Opinion No.   JM-1227
District Attorney
Falls County Courthouse         Re: Questions regarding ar-
P. 0. Box 413                   title III, section 52-a, of
Marlin, Texas 76661             the Texas Constitution
                                (RQ-1779)


Dear Mr. Sehon:

     You ask several questions  about a program administered   by
the Texas Department of Commerce.  Specifically, you ask about a
project proposed by the City of Marlin. See aenerkUy    10 T.A.C.
5 178.13. Your questions arise.because of the following    aspect
of the proposed transaction:

        [I]f Marlin enters into this arrangement    it
        would be required to contractually agree with
        T.D.O.C. that it would take responsibility
        for the creation of the jobs by the private
        entity.   If the private entity      fails or
        otherwise is unable to provide    the jobs as
        stated in its application,     the    contract
        between T.D.O.C.  and Marlin would provide
        that Marlin would be responsible for repaying
        a pro rata portion of the loan based upon the
        actual number of qualified   jobs which were
        created.  The program  is thus structured   as
        an indirect loan from T.D.O.C. to the private
        entity. However, Marlin would be required in
        effect to guarantee the performance of the
        private  entity. . . .   The obligation     of
        Marlin, if it should ever become due and
        owing, would be a general obligation of the
        city for which it would be required to levy
        taxes, as the City has no other funds avail-
        able to make the repayment. Marlin would be
        unable to pay the debt out of current-year
        funds.




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You ask first whether article   III, sections 51 and 52,    and
article XI, section 3, prohibit   the city from becoming,    in
effect, a guarantor for a private entity.

     Article III, section 51, prohibits the legislature from
authorizing a city to grant public money to a private
entity. Article III, section 52, of the Texas Constitution
prohibits the legislature  from authorizing a city to lend
its credit to a private entity.     Article XI, section   3,
provides in part.

           No county, city, or other municipal
        oration shall hereafter  become a subsczyb?r
        to the capital of any private corporation or
        association, or make any appropriation    or
        donation to the same, or in anywise loan its
        credit.

The proposal you describe would require the City of Marlin
to serve as a guarantor of the obligations    of a private
entity. On its face, such an arrangement     would violate
the prohibitions against a city's lending its credit to a
private entity.

     In 1987, however,.the voters amended the Texas   Consti-
tution by adding the following provision:

          Notwithstanding   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,
       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 under-
       employment in the state, the stimulation     of
       agricultural innovation, the fostering of the
       growth of enterprises   based on agriculture,
       or the development    or expansion  of trans-
       portation or commerce    in the state.
       bonds or other obligations      of a coung
       municipality, or other political   subdivisio;l
       of the state that are issued for the purpose
       of making loans or grants in connection   with
       a program authorized by the legislature under
       this section and that are payable     from ad
       valorem taxes must be approved by a vote of
       the majority   of the registered voters      of




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       Honorable Thomas B. Sehon - Page 3    (JM-1227)




               the county, municipality,  or political   sub-
               division voting on the issue. An enabling
               law enacted by the legislature in anticipa-
               tion of the adoption of this amendment is not
               void because of its anticipatory character.

       Tex. Const. art. III, 5 52-a.       We think it is clear that
       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.    See House Research Organization's      Special
       Legislative   Report'   1987 Constitutional    Amendments    and
       Referendum   Propositions,   August   17, 1987     (specifically
       mentioning the provisions    of article III,   sections 51 and
       52, and article XI, section 3, as constitutional impediments
       that section 52-a was intended to overcome);     See also Texas
       Legislative Council Information Report No. 87-2, Analyses of
       Proposed Constitutional Amendments     and Referenda   Appearing
       on the November-3,     1987 Ballot, September 1987.      Article
       III, section 52-a, however,      does not   itself expand the
       authority of cities to lend credit: it merely authorizes the
       legislature to do so.      Consequently, enabling    legislation
       would be necessary to authorize the transaction in question.

            You suggest that section 481.191(a) of the Government
       Code authorizes the transaction.  That section, which  deals
       with the authority of the Department of Commerce, provides:

                  The department   shall, under the federal
               Omnibus Budget Reconciliation    Act of 1981
               . . . administer  the state's allocation     of
               federal funds provided under the community
               development   block    grant    nonentitlement
               program authorized by Title I of the Housing
               and Community  Development   Act of 1974    (42
               U.S.C. section 5301 et seq.).

       The subject matter of section 481.191(a) of the Government
       Code is the Department   of Commerce.    It mentions  neither
       cities nor the lending of credit.     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.    See. e.a, V.T.C.S. arts. 46d-2,
       725d, 8358, 1182m, 6674v.2 (all making specific reference to
       article III, section 52-a).

            Also, the substance of section 481.191(a) significantly
       predates article  III, section 52-a. Section    481.191 was




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moved into the Government Code in 1989 as part of a non-
substantive recodification.   Acts 1989, 71st Leg., ch. 4,
5 3.01, at 235.      It was derived     from former     article
4413(301), V.T.C.S.,   which was enacted in 1987.       Article
4413(301) was adopted as part of a bill creating the Depart-
ment of Commerce.  Acts 1987, 70th Leg., ch. 374, at 1823.
That bill transferred   the administration   of the community
development block grant program      from the Department     of
Community Affairs to the newly-created     Department of Com-
merce . &    g 1 (section 2.003(b) of the new act); ZB.~
Attorney General Opinion H-1276    (1978) (Department of Com-
munity Affairs  has authority   to administer   program   esta-
blished by the Federal Housing and Community Development Act
of 1974). Neither the nonsubstantive recodification nor the
transfer of authority    from the Department     of Community
Affairs to the Department   of Commerce suggests an implicit
intent on the part of the legislature        to exercise    its
authority under article III, section 52-a.

     For the reasons set out above, we conclude that section
481.191(a) does not expand the authority of cities to lend
credit to private  entities.  You have not suggested to us
any other statute that would authorize   the city to parti-
cipate in the proposed transaction.

                       SUMMARY
           Section 481.191 of the Government Code is
        not enabling  legislation  for article   III,
        section 52-a. of the Texas Constitution.

                                   Jxy&



                                     JIM     MATTOX
                                     Attorney General of Texas

MARYEELLER
First Assistant Attorney General

Lou MccREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAELEY
Special Assistant Attorney General

RENBA HICES
Special Assistant Attorney General




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    RICK GILPIN
    Chairman, Opinion Committee

    Prepared by Sarah Woelk and William Walker
    Assistant Attorneys General




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