                          July 1, 1968

sonorable Frank C. Erwin      Opinion NO.&253
Zhairman, The University of
   Texas Board of Regents     Re:   Authority of the University
'Jniversityof Texas                 of Texas Board of Regents to
hstin, Texas                        contract with Central Energy
                                    Corporation for heating and
                                    air conditioning services
                                    for The University of Texas
                                    Medical,School, and related
3ear Mr. Erwin:                     question.
         Your request for an opinion reads as follows:
         "The Board of Regents of The University
    of Texas.System has entered into a contract
    with Central Energy Corporation of Dallas,
    Texas, for heating .and air conditioning serv-
    ices for The University of Texas Medical School
    at San Antonio, Texas. The factual situation
    relating to the negotiation of this agreement
    has been discussed on several occasions with
    members of your staff, but an official opinion
    is desired inconnection with the permanent
    financing of this project. Therefore, we
    would appreciate very much your opinion as
    to the following questions:
          "1. Are the customer and lease agreements,
    which are attached to this opinion request,
    dated October 6, 1967, by and between the
    Board of Regents of The University of Texas
    System and the Central Energy Corporation valid
    and binding obligations of the State of Texas,
    enforceable in accordance with the terms of the
    said instruments?
           "2. Is the Board of Regents of The
     University of Texas System the appropriate
     agency to contract with Central Energy Cor-
     proation for heating and air conditiong serv-
     ices for The University of Texas Medical
     School at San Antonio as contemplated by the
     customer agreement?
                              -1230-
Eon. Frank c. Erwin, page 2 04-253)


          "We appreciate your cooperation in this
     connection. If additional data are needed,
     please let us know."
          The contractual agreement referred to in your re-
guest is for the construction of a central plant and an under-
ground distribution system to provide chilled water and steam.
to those buildings constituting The University of Texas Medical
School at San Antonio. The agreement further provides that the
Board of Regents shall pay the Central Energy Corporation rates
prescribed in the contract for producing and circulating chilled
water and also agrees to pay Central Energy Corporation rates
called for in the contract for producing and circulating steam.
The term of the contract is for a period of time ending August
31, 1993.
          Section 26 provides:
          "No Indebtedness Created. This agreement
           beating
     shall not                          an indebtedness
     against the State of Texas, and all obligations of
     the Board hereunder are subject to the availability
     of appropriations by the Legislature of the State
     of Texas."
          In view of the various provisions of the contract re-
ferred to above,-it is our opinion that the principle of law an-
nounced by the Supreme Court of Texas in City of Big Spring'v.
Board of Control, 404 S.W.Zd 810 (Tex.Sup. 1966), governs the
construction of this contract. In that case the Court was de-
termining the validity of a contract between the city and the
State, whereby the city agreed to furnish water for use with
the Big Spring State Hospital "as long as the State of Texas
shall in good faith retain and operate said hospital on said
site."
          In answer to the contention that the contract was in
violation of Section 49 of Article III of the Constitution Of
Texas, prohibiting the creation of a debt, the Court stated:
          "The contention that the purchase contract
     was invalid because there then existed no legis-
     lative appropriation to pay for the water to be
     furnished in the future is answered by this Court's
     opinion in Charles Scribner's Sons v. Warrs, 114
     Tex. 11, 262 S.W. 722 (1924). In that case an
     attack was made on an order of the State Textbook
     Commission purchasing certain textbooks for the
     public schools of Texas from Scribner's Sons.
                             - 1231-
Hon. Frank C. Erwin, page 3 @l-253)


    Among other objections it was urged that the
    contract to buy textbooks for a five-year period
    was invalid because it was for longer than the
    two-year period of legislative appropriations
    and created a debt which could not be paid for
    out of the reserves for the biennium in which
    created. This Court said:
         "'This contract obligates the state to
    introduce into and use relator's books in the
    public free schools for a period of five years.
    It obligates relator to furnish, offer, and sell
    these books to the state each year for five years,
    upon the requisition of the school authorities
    each.year for such books as may be needed. Pay-
    ment for them is to be made out of the current
    fund each year as they are purchased. The ob-
    ligation of the contract is not to buy a fixed
    number or amount of books, but only so many as
    are.needed by the schools of the state. Liability
    is fixed only for such amounts as are requisitioned
    by the trustees of the schools. The number of
    books purchased for any year and the amount of
    money applied thereto is wholly within the con-
    trol of the school authorities.
         "'The contract is for uniform text-books
    for a period of five years. No quantity is
    stipulated and no promise to pay, only an agree-
    ment to use the books in the schools. The statute
    and the contract provide that no debt is created.
    The obligation to pay arises only upon the pur-
    chase and delivery of books for the year when
    needed, and according to the purchase. The books
    so furnished and so purchased during any year do
    not make a charge on the future resources of the
    state, but are paid for each year as the purchases
     are   made.’

          "This Court quoted from the Fase of City
     of Tyler v. L. L. Jester & Co., 97 Tex. 344,
     78 S.W. 1058 (1904), in which a long-term water
     purchase contract was attacked: 'The making
     of a contract for water for a number of years, to
     be delivered in the future did not create a debt
     against the city, but the liability of the city
     arose upon the use by it of the water during each
     year. '"

                            -1232-
Hon. Frank C. Erwin, page 4   (M-253)



          You are therefore advised that the contract in
question is valid and constitutes a valid and binding obli-
gation of the State of Texas enforceable in accordance with
the terms of the contract.
          Since the Board of Regents of The University of
Texas System is the governing board for The University of
Texas Medical School at San Antonio, you are advised in answer
to your second question that the Board is the appropriate
agency to execute the contract in question.
                         SUMMARY
          A contract between the Board of Regents of
     The University of Texas System and the Central
     Energy Corporation whereby the Central Energy
     Corporation agrees to construct a central plant
     and an underground distribution system to provide
     chilled water and steam to those buildings con-
     stituting The University of Texas Medical School
     at sariAntonio and to provide chilled.water and
     steam at rates specified in the contract for a
     term ending August 31, 1993, constitutes a valid
     and binding obligation of the State of Texas.
     City of Big Spring v. Board of Control, 404
     S.W.?d 810 (Tex.Sup. 1966).




                                            eneral of Texas
Prepared by John Reeves
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Hawthorne Phillips, Chairman
Kerns Taylor, Co-Chairman
James McCoy
James Broadhurst
Scott Garrison
Dan Jones
A. J. CARUBBI, JR.
Executive Assistant

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