                                             KEN PAXTON
                                        ATTORNEY GENERAL OF TEXAS



                                            December 14, 2015



The Honorable Robert L. Nichols                            Opinion No. KP-0046
Chair, Committee on Transportation
Texas State Senate                                         Re: Authority of the Metropolitan Transit
Post Office Box 12068                                      Authority of Harris County to participate in
Austin, Texas 78711-2068                                   the Uptown Houston Transit Project
                                                           otherwise known as the Post Oak Boulevard
                                                           Dedicated Bus Lanes Project (RQ-0028-KP)

Dear Senator Nichols:

       You seek our opinion on the authority of the Metropolitan Transit Authority of Harris
County (METRO) to participate in the Uptown Houston Transit Project, otherwise known as the
Post Oak Boulevard Dedicated Bus Lanes Project ("Project"). 1

       In 2003, Harris County voters approved a referendum on METRO's transit authority
system, including the METRO Solutions Transit System Plan ("Transit Plan"). See Scarbrough v.
Metro. Transit Auth. of Harris Cty., 326 S.W.3d 324, 327-29 (Tex. App.-Houston [1st Dist.]
2010, pet. denied) (discussing the referendum election, referencing METRO's Resolution No.
2003-93 and Resolution No. 2003-77, and acknowledging the voter's approval of the Transit Plan).
The Transit Plan included a METRORail component that contained, among other segments, an
Uptown/West Loop segment involving approximately 4.4 miles of commuter light rail along Post.
Oak Boulevard. See Notice of Special Election, METRO, at 1 (Resolution No. 2003-77 & Exhibits
A, A-4). 2 You tell us that "[i]nstead of constructing light rail on Post Oak, the current project,
which is a joint ventur~ between the City of Houston, METRO and Uptown, intends to utilize the
same approved light rail route along Post Oak but with a different technology; known as a Bus
Rapid Transit." Request Letter at I. Yo.u also tell us that the Project will "allegedly not be built
or funded by METRO, but METRO will nevertheless fully participate in the Project by operating
and maintaining the dedicated Project bus lanes and dedicated Project buses." Id And you state
that METRO will develop "bus specifications, operating plans, fare collection policy and systems,
bus schedules and ·other system characteristics necessary to operate the dedicated bus service.

         1
          See Letter from Honorable Robert L. Nichols, Chair, Senate Comm. on Transp., to Honorable Ken Paxton,
 Tex. Att'y Gen. at 1-2 (June 15, 2015), https://www.texasattomeygeneral.gov/opinion/requests-for-opinion-rqs
 ("Request Letter"). Your question is the same question that was before a court in Cosmopolitan Condominium
 Owners Ass 'n v. Metropolitan Transit Authority of Harris County, No. 2015-34192 (270th Dist. Ct., Harris Cty.,
 Tex. June 15, 2015). This cause has been dismissed by the court and the question is no longer in litigation. See
 Order of Dismissal (10/29/2015) (on file with the Op. Comm.).

         2
          Available at https://ridemetro.org/METROPDFs/AboutMETRO/Referendum/Referendum2003-web.pdf.
 The Honorable Robert L. Nichols - Page 2                  (KP-0046)



 METRO will also procure the dedicated buses." Id You therefore question whether METRO's
 involvement in the Project is illegal "in that it would violate the contract METRO entered into
 with the voters via the 2003 referendum," given that the voters approved light rail on Post Oak.
 Id at 2.

          The "contract with the voters" doctrine stems from article I, section 16 of the Texas
  Constitution, which prohibits laws that impair the obligation of contracts. TEX. CONST. art. I,§ 16
  notes of decisions; see San Saba Cty. v. McCraw, 108 S.W.2d 200, 202-04 (Tex. 1937) (orig.
  proceeding). This doctrine is "grounded in ... election orders and propositions." Tex. Att'y Gen.
  Op. No. JC-0400 (2001) at 5. Essentially, the election order calling for a bond election and
  establishing the purposes for which bonds will be issued becomes a contract with the voters once
  the voters approve the bonds. See id. Thus, proceeds of bonds approved by voters "may only be
  expended for the purpose for which they were approved." Tex. Att'y Gen. L0-98-060, at 2. "They
  may not be expended for an additional or different project." Id. When an election order states
  only a general purpose for which bonds will be issued and does not specify particular projects for
  which the proceeds will be used, the governing body is free to exercise its discretion in expending
  the funds within the scope of the general purpose. Id. at 2-3. Where the election order specifies
· the projects for which bond proceeds will be used; the proceeds can only be used for those projects
  and cannot be applied to other projects. See id. at 3; see generally Fletcher v. Ely, 53 S.W.2d 817,
  818 (Tex. Civ. App.-Amarillo 1932, writ ref d) (distinguishing discretion of governmental body
  to expend bond proceeds when bond proposal does not identify the specific road to be paved but
  indicates only that route must be between two points against its discretion when a proposal
  identifies the particular route and road to be paved).

         Courts considering the question look to the relevant documents comprising the "contract
 with the voters" to ascertain the governmental body's intent with regard to the proceeds. S~e City
 of San Antonio v. Headwaters Coal., Inc., 381 S.W.3d 543, 551 (Tex. App.-San Antonio 2012,
 pet. denied). Here, we consider METRO's resolutions calling for the 2003 special election. 3 See
 id. The resolution calling for the special election stated that the proposition to be submitted to the
 voters was

                  a proposition to authorize METRO to issue bonds, notes, and other
                  obligations payable, in whole or in part, from seventy-five percent
                  (75%) of METRO's sales and use tax revenues for the acquisition,
                  construction, repair, equipping, improvement or extension of
                  METRO's transit authority system, including the METRO Solutions
                  Transit System Plan, as described herein, which includes bus service
                  expansions and construction of extensions ofMETRO's rail system
                  known as "METRORail," to approve such plan and construction of
                  the METRORail and commuter line components thereof, and to
                  dedicate twenty-five percent (25%) of METRO's sales and use tax

          3
            Initially approved on August 18, 2003, METRO Resolution No. 2003-77 called for a special election. See
  Notice of Special Election, METRO, at 1 (Resolution No. 2003-93 & Attachment 1, Resolution No. 2003-77), supra
  note 2. METRO Resolution No. 2003-93, approved on August 28, 2003, approved, adopted, ratified, and confirmed
  the August 18, 2003 resolution. See id.
The Honorable Robert L. Nichols - Page 3             (KP-0046)



               revenues through September 30, 2014, for street improvements and
               mobility projects, as authorized by law and with no increases in the
               current rate ofMETRO's sales and use tax ....

Notice of Special Election, METRO, at 1 (Resolution No. 2003-93 & Attachment 1, Resolution
No. 2003-77) (emphasis added). The ballot language sought voter approval of

                 [a]uthorization of METRO to issue bonds, notes and other
                 obligations payable, in whole or in part, from 75% of metro's sales
                 and use tax revenues in an aggregate principal amount not to exceed
                 $640,000,000 for METRO's transit authority system, including the
                 metro solutions transit system plan ... , which includes bus service
                 expansions ... and construction of extensions and new segments of
                 metro's rail system known as "metrorail," approval ofsuch plan and
                 construction of all segments of the metrorail and commuter line
                 components ... , and dedication of25% of metro's sales and use tax
                 revenues through September 30, 2014, to street improvements and
                 related projects, as authorized by law, and with no increase in the
               . current rate of metro's sales and use tax.

Id. at 2 (Exhibit D) (emphasis added). Both the resolution language and the ballot language
explicitly reference METRORail "commuter line components." As noted earlier, the commuter
line component has different rail segments, one of which is the Uptown/West Loop segment
described as "[a]pproximately 4.4 miles north from Westpark along Post Oak Blvd. and the West
Loop 610 to the Northwest Transit Center. Serves the Galleria and Uptown businesses on Post
Oak Boulevard. This segment or line will have approximately 7 stations." Id. at 1 (Exhibit A-4).
The plain language of the election order and the ballot language clearly indicate that METRO
intended some portion of the bond proceeds to be spent on commuter line components. Similarly,
the exhibits incorporated into the resolution calling for the special election clearly identify which
of the particular rail components were to benefit from the bond proceeds. See id. (Exhibits A &
A-4). Thus, a court would likely determine that METRO's contract with the voters included the
expenditure of a portion of the bond proceeds on the Uptown/West Loop 4.4 mile rail segment.
See Fletcher, 53 S.W.2d at 818 (stating that when the voters approve a specific project, "the
proceeds of the bond issue are 'earmarked' with the character of a trust fund which may not be
diverted to another purpose or project.· ... ''.) (citing Black v. Strength, 246 S.W. 79 (Tex. 1922)).

        In briefing submitted to this office, METRO argues that its contract with the voters
comprises only section 14 of the Notice of Special Election, entitled METRO's Agreement with
the Voters, which section does not contain a requirement for rail only on Post Oak Boulevard. 4
Yet, section 14 refers to and incorporates by reference Exhibit A-4, which describes 4.4 miles of
light rail along Post Oak Boulevard. See Notice of Special Election, METRO, at 1 (Resolution
No. 2003-93 & Attachment 1, Resolution No. 2003-77) (Exhibit A-4). A court would likely


         4
           See Brief from Alva I. Trevino, Gen. Counsel, METRO at 5-6 (Nov. 10, 2015) (hereinafter "METRO
 Brief') (on file with the Op. Comm.).
The Honorable Robert L. Nichols - Page 4                (KP-0046)



consider the entirety of the order and notice of the election to determine the nature of the contract
made by the voters. See generally City ofSan Antonio v. Headwaters Coal., Inc., 381 S.W.3d 543,
552 (Tex. App.-San Antonio 2012, pet. denied) (determining that the plain language of the bond
ordinance constitutes the contract with the voters). In addition, METRO argues that "[v]oter
approval of the planning and construction of additional light rail lines and bus service expansions
was needed" only to satisfy Houston City Charter requirements. METRO Brief at 4. METRO
asserts it "did not need voter approval to construct light rails, but it was required to g~t City of
Houston approval to utilize rail on Houston's city streets." Id. The Transportation Code authorizes
metropolitan rapid transit authorities to "call an election to determine the voters' will on any issue
that the board is authorized to decide under this chapter or on the exercise of any discretionary
power of the board under this chapter." TEX. TRANSP. CODE § 451.072(b). Importantly, this
provision allows the board to "specify whether the results of the election are binding on the
authority." Id. In submitting the question oflight rail to the voters in the 2003 election, METRO
submitted the proposition as a binding one. These arguments are unavailing.

        Whether METRO' s participation in the Project violates that contract it made with the voters
is a separate question. The voters must receive "substantially the benefits expected by them when
they cast their votes." Thayer v. Greer, 229 S.W.2d 833, 836 (Tex. Civ. App.-Amarillo 1950,
writ ref d n.r.e.). In determining whether a governmental body violates its contract with the voters,
"[t]he law does not require a literal performance, but there must be left to the parties substantially
the benefits expected." Fletcher, 53 S.W.2d at 821. If there is a change in the use of the proceeds
as approved by the voters but "the changes have not materially detracted from these benefits,"
courts will generally find that there has been substantial compliance with the "contract." Id. The
question whether METRO's participation in the Project ultimately violates its contract with the
voters will require the resolution of several fact questions, including questions regarding the actual
expenditure of the bond proceeds and whether the Project will prevent the development of the
promised rail segment, 5 and is beyond the purview of an attorney general opinion. See Tex. Att'y
Gen. Op. No. GA-0876 (2011) at 1 (noting that this office does not resolve disputed fact questions
in attorney general opinions).




         5
           In connection with a previous request for an attorney general opinion, RQ-1217-GA (2014 ), which was
 subsequently withdrawn, METRO acknowledged that it "cannot ~gree to build a bus line to the exclusion of the
 METRORail that the voters specifically approved." See Letter and brief from Honorable Vince Ryan, Harris Cty.
 Att'y, to Honorable Greg Abbott, Tex. Att'y Gen. at 4 (Aug. 28, 2014) (on file with the Op. Comm.).
The Honorable Robert L. Nichols - Page 5         (KP-0046)



                                     SUMMARY

                      A court would likely determine that the Metropolitan Transit
              Authority's contract with the voters included the expenditure of a
              portion of the bond proceeds on the Uptown/West Loop 4.4 mile rail
              segment. Whether METRO's participation in the Uptown Houston
              Transit Project violates that contract with the voters requires the
              resolution of fact issues that are beyond the purview of an attorney
              general opinion.

                                            Very truly yours,




                                            KEN PAXTON
                                            Attorney General of Texas



CHARLES E. ROY
First Assistant Attorney General

BRANTLEY STARR
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

CHARLOTTE M. HARPER
Assistant Attorney General, Opinion Committee
