   OPP,CE OF THE ATTORNEVGENERAL. STATE OF TEXAS

   JOHN CORNYN




                                            April 12,200O



The Honorable Michael P. Fleming                   Opinion No. JC-0206
Harris County Attorney
1019 Congress, 15th Floor                          Re: Whether the County Purchasing Act, TEX. Lot.
Houston, Texas 77002-1700                          Gov’TCODEANN. @j 262.021-,035 (Vernon 1999 &
                                                   Supp. 2000), applies to the purchases of a local
                                                   government corporation created by a county under
                                                   subchapter D, chapter 431 of the Transportation
                                                   Code (RQ-0139-JC)


Dear Mr. Fleming:

         You ask whether the County Purchasing Act, TEX. Lot. GOV’T CODEANN. $9 262.021-,035
(Vernon 1999 & Supp. 2000), applies to the purchases of a local government corporation created by
Harris County (the “County”) under subchapter D, chapter 431 of the Transportation Code. We
conclude that because 1999 amendments to subchapter D exempt the contracts of a local government
corporation from competitive bidding requirements applicable to the local government that created
it, the County Purchasing Act does not apply to the contracts of a local government corporation
created by a county.

        Your question pertains to the Harris County Sports and Convention Corporation (the
“Corporation”), a local government corporation created by the County under subchapter D, chapter
431 of the Transportation Code. You state that the Corporation is organized to aid and act on
behalf of the County in managing, operating, and developing the Astrodomain Complex, which
consists of the Astrodome, Astrohall, Astroarena, and related infrastructure.    See Letter from
Michael P. Fleming, Harris County Attorney, to Honorable John Comyn, Texas Attorney General
at 1,4 (Nov. 12, 1999) (on file with Opinion Committee) [hereinafter “Request Letter”]. Harris
County has leased the Astrodomain Complex to the Corporation for $1.00 a year. See Second
Amended and Restated Lease Agreement between Harris County, Texas and Harris County Sports
& Convention Corporation (Apr. 7, 1999), art. 2, para. 2.01 [hereinafter “Contract”].           The
Corporation will operate and manage the facilities for the County. See Contract, art. 4, para. 4.01,
at 7 (Purpose). Under the lease, “Harris County reserves the right to approve the Corporation’s
annual budget and agrees to fund any operating deficit and the cost of capital repairs and
replacements.” Request Letter, supra, at 4.

         The County will expend a considerable sum to improve the facilities: “The County plans to
fund or budget over $200,000,000 for improvements to the Astrodomain Complex within the next
two to three years. Funding will be provided from the general fund, commercial paper, certificates
of obligation, tax anticipation notes or other debt.” Id. We understand that these improvements will
The Honorable Michael P. Fleming      - Page 2      (X-0206)




be made by the Corporation and that the County will not be party to the contracts. Telephone
Conversation     with John R. Barnhill, Assistant County Attorney, Harris County, Texas
(Mar. 3,200O). The lease agreement between the County and the Corporation dated April 7,1999
provides that all purchases made by the Corporation with funds provided by the County will be made
in accordance with the County Purchasing Act. See Contract, art. 6, para. 6.10, at 13-14 (County
Purchasing Act). You ask whether the County Purchasing Act applies to expenditures of funds by
the Corporation “irrespective of any requirement in the Lease to comply with such Act.” Request
Letter, supua, at 1. An attorney in your office explains that when the parties entered into the lease,
there was some question regarding whether the County Purchasing Act would apply to the
Corporation.    Telephone Conversation with John R. Barnhill, Assistant County Attorney, Harris
County, Texas (Mar. 3, 2000). The Corporation believes that this question has been resolved by
 1999 legislation and would like to ask the County to amend the lease if the Corporation is not
required by law to comply with the Act. Id.

         We note that the legal memorandum submitted with your request raises issues other than
whether the Corporation is subject to the County Purchasing Act. For example, the memorandum
observes that subchapter D of chapter 43 1 of the Transportation Code does not expressly authorize
the local government that creates a local government corporation to fund the operation of the
corporation and suggests that this authority may be implied. See Request Letter, supra, at 4-5.
However, you have not asked us to address this issue or any other issue regarding the County’s
authority to contract with a local government corporation or to lease property to a local government
corporation. See, e.g., TEX.LOC. GOV’TCODE ANN. $5 263.001, ,007 (Vernon 1999 & Supp. 2000)
(competitive procedures for leasing county property). Accordingly, we limit our analysis to the
question asked, which you state as follows: “Our specific question is whether the County Purchasing
Act, irrespective of any requirement in the Lease to comply with such Act, applies to expenditures
of funds by the Corporation.” Request Letter, supra, at 1.

         The County Purchasing Act generally applies to county purchases. Section 262.023 of the
Local Government Code provides that “[blefore a county may purchase one or more items under a
contract that will require an expenditure exceeding $25,000, the commissioners court of the county
must comply with the competitive bidding or competitive sealed proposal procedures prescribed by
this subchapter.”     TEX. Lot. GOV’T CODE ANN. 5 262.023(a) (Vernon Supp. 2000). These
requirements apply “only to contracts for which payment will be made from current funds or bond
funds or through time warrants.” Id. 3 262.023(b); see also id. 4 262.022(l) (“‘Bond funds’ means
money in the county treasury received Tom the sale ofbonds, and proceeds of bonds that have been
voted but that have not been issued and delivered.“), (3) (“‘Current funds’ means funds in the county
treasury that are available in the current tax year, revenue that may be anticipated with reasonable
certainty to come into the county treasury during the current tax year, and emergency funds.“), (9)
(“‘Time warrant’ means any warrant issued by a county that is not payable out of current funds.“).
As the Texas Supreme Court has recognized, however, the requirements of the County Purchasing
Act may also extend to the purchases of entities separate from but under the supervision of a county:

                Public policy strongly favors protecting taxpayers         with strict
                oversight of governmental financial transactions. .       It would be
The Honorable Michael P. Fleming     - Page 3      (X-0206)




               entirely contrary to public policy to allow these boards [that handle
               millions of dollars in public funds] to operate with total autonomy
               and to avoid the public posting, bidding, purchasing and auditing
               procedures imposed on counties unless explicitly excluded.

Lohec v. Galveston County Comm’rs Court, 841 S.W.2d 361, 365 (Tex. 1992) (concluding that
purchases of county beach park board were subject to county control). We gather you are concerned
that the County Purchasing Act may apply to the Corporation because it operates on behalf of Harris
County for a county purpose and is funded with county funds. We conclude, however, that the 1999
amendments to section 43 1.101 ofthe Transportation Code exempt the Corporation from the County
Purchasing Act.

        While most of chapter 43 1 provides for transportation corporations authorized by the Texas
Transportation Commission and created to promote and develop public transportation facilities,
subchapter D authorizes the creation of local government corporations.             The term “local
government”meansamunicipalityoracounty.          S~~TEX.TRANSP.CODEANN. §431.003(3)(Vemon
1999). Section 43 1.101 provides that a local government corporation “may be created to aid and act
on behalf of one or more local governments to accomplish any governmental purpose of those local
governments.”    Id. 5 431.101(a) (V emon Supp. 2000). A local government corporation has the
powers of a transportation corporation authorized for creation by the Texas Transportation
Commission under chapter 43 1, which include the powers of a nonprofit corporation incorporated
under the Texas Non-Profit Corporation Act. See id. $5 431.062 (Vernon 1999), .101(b), (c)
(Vernon Supp. 2000).

        In 1999, the legislature amended subchapter D to provide in section 431.101(e) that

                         Section 394.904(a), Local Government Code, applies to
                property and improvements       owned by a local government
                corporation. Section 394.904(b) of that code applies to each contract
                awarded by the local government corporation.

Id. 5 43 1.101(e) (Vernon Supp. 2000) (emphasis added) ( as added by Act of May 29, 1999,76th
Leg., R.S., ch. 983,s 12, 1999 Tex. Gen. Laws 3763,376s).

         The statute to which this amendment refers, section 394.904 of the Local Government Code,
 pertains to a housing finance corporation created under the auspices of a “local government,” i.e.,
 a municipality or county, to finance residential ownership and development. See TEX. LoC. GOV’T
 CODE ANN. $3 394.002 (purpose); 394.003(10) (defining “local government”);                 394.011
 (incorporation) (Vernon 1999 & Supp. 2000). Section 394.904 provides as follows:

                     (a) The acquisition, construction, or rehabilitation of a private
                residential development or a home is not subject to requirements
                relating to public buildings,       structures, grounds, works, or
The Honorable Michael P. Fleming      - Page 4      (X-0206)




               improvements imposed       by the laws of this state, or to any other
               similar requirements.

                    (b) Any competitive bidding requirement or restriction imposed
               on the procedure regarding the award of contracts for that
               acquisition, construction, or rehabilitation or regarding the lease,
               sale, or other disposition of property of the local government is not
               applicable to any action taken under this chapter.

Id. 5 394.904 (Vernon 1999) (emphasis added). Subsection (b) of section 394.904, the relevant
provision for our purposes, exempts from competitive bidding a housing finance corporation’s
contracts for “that acquisition, construction, or rehabilitation,” referencing contracts relating to a
private residential development or home in subsection (a), and contracts for “the lease, sale, or other
disposition of property.” Id. This exemption appears to distinguish between contracts relating to
private and public projects.

         Given the differences between housing finance corporations            and local government
corporations, particularly the great difference in their breadth ofpurpose, and the distinction section
394.904(b) appears to make between private and public projects, the reference to section 394.904(b)
in section 43 1.101(e) ofthe Transportation Code is perplexing. We conclude, however, that section
431.101(e) exempts all contracts of a local government corporation from competitive bidding
requirements applicable to the contracts of the local government that created it. In citing section
394.904(b) of the Local Government Code, the legislature referenced an exemption to competitive
bidding that exempts certain contracts from municipal and county competitive bidding requirements
that might otherwise apply. Furthermore, the legislature provided that this exemption “applies to
each contract awarded by the local government corporation,” TEX. TRANSP.CODEANN. 9 43 I. 101 (e)
(Vernon Supp. 2000) (emphasis added), and thus clearly intended this exemption to apply to all
contracts awarded by a local government corporation.          Therefore, although it might have been
preferable for the legislature to have provided this competitive bidding exemption in a
straightforward fashion, we have no choice but to conclude that the purpose of section 431.101(e)
is to exempt all contracts of a local government corporation from competitive bidding requirements
applicable to the contracts of the local government that created it.

         Given that section 43 1.101 (e) exempts the contracts of a local government corporation from
competitive bidding requirements applicable to the contracts of the local government that created
it, the contracts of a local government corporation created by a county are not subject to the
competitive bidding requirements of the County Purchasing Act. We note, however, that any
contracts the county enters into for a local government corporation payable from current funds, bond
funds, or through time warrants will be subject to the County Purchasing Act. See TEX. LOC. GOV’T
CODE ANN. § 262.023(a), (b) (Vernon Supp. 2000).

        Accordingly, we conclude that by virtue of section 431.101(e) of the Transportation Code
the Harris County Sports and Convention Corporation’s contracts are not subject to the competitive
bidding requirements of the County Purchasing Act. Therefore, the Harris County Commissioners
The Honorable Michael P. Fleming     - Page 5     (X-0206)




Court may decide whether to renegotiate its lease with the Corporation to amend the term requiring
the Corporation to comply with the County Purchasing Act, keeping in mind the beneficial purposes
of competitive bidding and the best interests of the County. See generally Texas Highway Comm ‘n
v. Texas Ass ‘n ofSteeZZmporters,Znc., 372 S.W.2d 525 (Tex. 1963) (“‘[The] purpose [ofcompetitive
bidding] is to stimulate competition, prevent favoritism and secure the best work and materials at
the lowest practicable price, for the best interests and benefit of the taxpayers and property
owners.“‘) (citing Sterrett v. Bell, 240 S.W.2d 516,520 (Tex. Civ. App.-Dallas 1951, no writ)); see
also Lohec, 841 S. W.2d at 365; TEX. TRANSP. CODE ANN. 5 43 1.104(b) (Vernon 1999) (“A local
government that assumes the powers and duties of a local government corporation assumes the assets
and liabilities of the corporation.“) (emphasis added). Of course, any contracts for improvements
to the Astrodomain to which the County is a party will be subject to the County Purchasing Act.
The Honorable Michael P. Fleming     - Page 6      (~~-0206)




                                       SUMMARY

                        Because section 431.101 of the Transportation        Code as
               amended by the Seventy-sixth Legislature exempts the contracts of
               a local government          corporation    from competitive    bidding
               requirements applicable to the contracts of the local government that
               created it, the contracts of a local government corporation created by
               a county are not subject to the competitive bidding requirements of
               the County Purchasing Act.            See TEX. TRANSP. CODE ANN.
               § 43 l.lOl(e)(VemonSupp.        2000)(as addcdbyActofMay29,1999,
               76th Leg., R.S., ch. 983, 5 12, 1999 Tex. Gen. Laws 3763,376s).

                                              Y   rsve    truly.



                                           4J4ii
                                              JOHN     CORNYN
                                              Attorney General of Texas



ANDY TAYLOR
First Assistant Attorney General

CLARK RENT ERVJN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

Mary R. Crouter
Assistant Attorney General - Opinion Committee
