                       The Attorney              General of Texas
                                          March 24, 1981
MARK WHITE
Attorney General

                    Honorable Mike Driscoll                  Opinion No.     MW-314
                    Harris County Attorney
                    1001Preston, Suite 634                   Re: Clarification    of Attorney
                    Houston, Texas 77002                     General    Opinion  MW-290 with
                                                             respect to encumbrance for rental
                                                             payments     on Center   Pavilion
                                                             Hospital Project

                    Dear Mr. Driscoll:

                         You ask three questions seeking clarification     of Attorney General
                    Opinion MW-290 (1981). That opinion concluded that Harris County could
                    spend bond proceeds and other county funds to improve the Center Pavilion
                    Hospital building which the county had leased. We also answered several
                    questions regarding the county auditor’s responsibility     with respect to
                    financial transactions arising from the lease, for example, payment of rent.
                    You ask for clarification of the following sentences in Attorney General
                    Opinion MW-290:

                               Section 3 of the lease agreement provides that the
                               leasehold estate shall commence as of the date of the
                               execution of the lease.    The encumbrance for any
                               rent payment should be set up as of that date. (Your
                               emphasis).

                         You inform us that no rent was due in 1980, and     that annual rentals in
                   varying amounts are due, subject to the year-by-year       budget appropriation
                   by the commissioners court in 1981 and the following      years. The total rent
                   due over the life of the lease has been estimated to be   $29,592,100.

                         You first ask:

                                  L Is the opinion to be interpreted to mean that
                              the rent payment encumbrance         is to be (a) the
                              amount of the yeal-by-year      appropriation budgeted
                              by [the1 commissioners       court (estimated    to be
                              approximately $1,400,000); or (b) the entire rental for
                              the lease life (approximately $29,592,100)?




                                                     p.   1000
Honorable Mike Driscoll - Page Two      (MVr-314)




      The rent payment encumbrance is the amount of the year-by-year appropriation
budgeted by the commissioners court. Clearly, with a year-to-year lease such as that
executed by Harris County and the Harris County Hospital Authority, an encumbrance
for the entire rental for the projected lease life is inappropriate. The commissioners
court may withdraw from the lease at the end of any fiscal year by falling to
appropriate.

     You next ask:

              2. For the year 1980, when no rent was payable, should the
           encumbrance,  which will be carried forward, be zero or
           $29,592,100?

For the year 1980, when no rent was payable, the encumbrance   would be zero.

     You finally ask.

                3. For the year 1981, the first year of the rental payment
           liability, should the encumbrance be approximately $1,379,500
           (the first year’s estimated rental) or $29,592,100? If the first
           amount ($1,379,500), should a similar scheduled annual basic
           rental amount be freshly encumbered year-by-year, pursuant to
           appropriation    of [the] commissioners court?     If the latter
           amount, the unexpended portion would be carried forward
           annually as a new encumbrance.

      Again, following the reasoning in our answer to your first question, the 1981
encumbrance should be for the first year’s estimated rental and the scheduled annual
rental amount should be freshly encumbered year-by-year.       Due to the nature of the
leasehold estate herein involved there is no encumbrance lasting beyond a year.

      In Attorney General Opinion MW-290 we used the term “encumbrance” in the
sense that the leasehold estate was encumbered by a need to meet a rental payment.
The encumbrance, however, can only ba consistent with the terms of the lease.
Therefore, a year-to-year lease clearly dictates a year-to-year encumbrance.

                                   SUMMARY

               The encumbrance for rental payments for the Harris County
           lease on the Center Pavilion Hospital is the amount of the year
           by-year appropriation budgeted by the commissioners court.
           For the year 1980, when no rent was payable, the encumbrance
           would be zero.     For the year 1981, the first year of rental
           payment liability, the encumbrance should be for the first year’s
           estimated rentaL The scheduled annual rental amount should be
           freshly encumbered year-by-year.




                                            p. 1001
Honorable Mike Driscoll - Page Three   (Mw-314)




                                       MARK      WHITE
                                       Attorney General of Texas

JOHN W. FAINTER, JR.
First Assistant Attorney General

RICHARD E. GRAY III
Executive Assistant Attorney General

Prepared by Susan L. Garrison
Assistant Attorney General

APPROVED:
OPINION COMMlTTEE

Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Susan Voss




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