                        August 19, 1988




Honorable John Vance            Opinion No. J'w942
Criminal District Attorney
Dallas County                   Re: Whether   a county may
Services Building               guarantee loans made to low
Dallas, Texas 75202             and moderate income families
                                for housing purposes and re-
                                lated questions   (RQ-1337)

Dear Mr. Vance:

     You inquire about the powers of a county to provide
financial assistance to low and moderate income families for
housing purposes.  You first ask whether   the provision  of
financial assistance  to low and moderate   income families
for housing purposes constitutes  a "public purpose" for a
county.

     This question involves two issues: whether the county
has express or implied statutory authority to provide  such
financial assistance to low and moderate income families,
and, if so, whether  such statutory authority is consistent
with the Texas Constitutional provisions which require that
public funds be spent for public purposes.  m   Tex. Const.
art. III, Of 50, 51, 52; art. VIII, 5 3.

     Attorney General Opinion JR-805 (1987) concluded     that
the provision of housing assistance   by a home rule city to
low and moderate   income families would not necessarily
violate the public purpose requirements of the constitution.
The courts have accorded great weight to          legislative
determinations of the public purpose to be served by the
provision of housing  assistance.   In Jiousina Authoritv    9
Citv of Dallas v. Hissinbotham,   143 S.W.Zd 79 (Tex. 19407,
the Texas Supreme Court upheld the Housing Authorities    Law,
which authorized   the construction    of low rent housing
projects for persons of low income.     Local Gov't Code ch.
392. The law defines "persons of low income" to mean

        families or persons who lack the amount of
        income that an authority considers necessary
        to live, without   financial assistance,  in




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                                                                  ,



        decent, safe,   and sanitary      housing   without
        overcrowding.

Local Gov't Code 5 392.002(g).   The Supreme Court determined
that the use to which the housing projects would be devoted
was a public use. 143 S.W.2d at 85 (Tex. 1940). The terms
"low income" and "moderate income" do not, in the abstract,
stand for precise amounts of income or a particular standard
of living. They are defined by evaluating income against
expenditures  for necessities,    taking into consideration
factors such as the costs of holding a job, family size, and
local cost of living.   If an individual's earnings do not
increase in proportion to inflation, his income may decline
from l*moderatel'to "low" over a period of time without any
decrease in the amount of dollars earned.     It is possible
that persons and families who have a moderate income by some
standards will meet the quoted test for 'low incomenq persons
and families because    of     local housing   shortages   or
inflation in housing.

     We will not address the constitutionality       of
housing assistance program available for low and rnod~~~~
income persons    in the state. These must be evaluated
individually, taking   into consideration   the legislature's
statement   of purpose,   the means of effectuating        that
purpose,  and the definitions of low and  moderate income.   We
simply wish to make     it clear that attaching     the label
"moderate income" to a person does not automatically    remove
him from the class of persons who may receive housing
assistance consistently with consitutional provisions      that
protect public funds from expenditure for private purposes.
&=G Attorney General   Opinion O-2474 (1940) (A person     need
not be reduced to pauperism   in the starkest meaning of the
word before assistance may be extended to him under     former
section 11 of article 2351, V.T.C.S.).

     We next consider whether    the county has statutory
authority to provide the kind of housing      assistance you
inquire about. you ask whether a county may guarantee loans
made to low and moderate      income families    for housing
purposes, either by directly guaranteeing      the loans or
indirectly, by guaranteeing the payment of debt service on
bonds issued by a housing finance corporation.

     Housing projects    for   low income    persons,   slum
clearance, urban redevelopment,   and similar programs   are
within the general police power to provide for the public
health,  safety, and    welfare.   7 McQuillan,    Municipal
Corporations ff 24.563, 24.563b   (3d rev. ed. 1981). The




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legislative findings in the Housing Authorities   Law state   a
need for the exercise of the police power:

        [Hlousing conditions are responsible for an
        increase in and spread of disease and crime,
        are a menace to the health, safety, morals,
        and welfare of the residents   of the state,
        impair economic    values, and    necessitate
        excessive and disproportionate   expenditures
        of public  funds for Crimea prevention    and
        punishment, public health and safety,    fire
        and accident protection,   and other public
        services and facilities . . . .

Local Gov't Code 9 392.003(2). &9 &&DD v. Citv of Dallas,
235 S.W. 513    (Tex. 1921)   (providing that police power
authorizes  government   to   protect the health,    safety,
comfort, and welfare of the public). The Texas Housing
Finance Corporations   Act also includes a finding that it
will promote the public health, safety, morals, and welfare.
Local Gov*t Code 9 394.002(b)(l).

     The commissioners courts may exercise only~such   powers
as the constitution or the statutes have conferred        upon
them. mles     v. Lauchlin   214 S.W.Zd 451, 453 (Tex. 1948).
Although the commissioners'courts   have broad discretion   in
exercising powers expressly conferred    on them, the legal
basis for any action by a commissioners court must be found
in the constitution or the statutes. Q&     Unlike home rule
cities, counties have no general police power.        Commis-
si ners Court of Harris Countv v. Kaiser, 23 S.W.Zd 840
(kx. Civ. APP. - Galveston      1929, writ ref'd); Attorney
General Opinion JM-863 (1988); M    Local Gov*t Code 9 54.004
(general police power of home-rule cities).

     An examination of the relevant statutes persuades  us
that a commissioners   court lacks authority  to guarantee
loans for housing purposes   either directly or indirectly
through guaranteeing the payment of debt service on bonds
issued by a housing finance corporation.

     The Texas Housing Finance Corporations Act provides   a
means of using tax-exempt   financing to generate mortgage
funds. Etter & Fraser, Housing Finanace Corporations:    The
Texas Experience    (A & M  Real Estate Research     Center,
September 1986); g.9~ Local Gov*t Code S 394.002(a).      It
authorizes the governing body of any city or county to
approve the incorporation of public, nonprofit corporations
which may issue bonds to defray costs of residential




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development or the costs of purchasing      or funding home
mortgages for persons of low or moderate      income.    Local
Gov't Code 55 394.003(8)(11);     394.011; 394.037(a).     The
corporation may pledge all or a part of its revenues,
receipts,   or resources,   including revenues   or receipts
received from residential development or home mortgages,    to
the payment of principle and interest on its bonds.      Local
Gov*t Code   § 394.037(b).   Section 394.055 of the Local
Government Code provides that bonds     issued by a housing
finance corporation      are limited    obligations   of   the
corporation, payable solely from the revenue, receipts,    and
other resources pledged to their payment.   The local govern-
ment and the state are "not liable in any way regarding
bonds issued by the housing finance corporation."        Local
Gov't Code &? 394.055(b).    Section  394.055 of the Local
Government Code further states that:

           The bonds do not constitute, within     the
        meaning   of a statutory   or constitutional
        provision, an indebtedness, an obligation, or
        a loan of credit of the state, the local
        government,  or    any  other   municipality,
        county,   or other municipal   or    political
        corporation or subdivision of the state. The             ^
        bonds do not create a moral obligation       on
        the part of     any of   those    governmental
        entities with respect to the payment of the
        bonds. nose covernmental    entities mav not
        1.
        (Em;haEis adied:)

Local Gov't Code 8 394.055(c).     The underlined   sentence
prohibits cities and counties from paying debt service on
bonds issued by a housing finance corporation.  Accordingly,
a county lacks authority to guarantee   the payment of debt
service on such bonds.

     Nor does a county have statutory authority to guarantee
mortgage loans made by a housing   finance corporation to a
low or moderate income person or family. The Texas Housing
Finance Corporations Act defines "home mortgage" in part as

       an interest-bearing loan to a mortgagor,   or   a
       participation in such a loan, that is:

          .   .   .   .

          (D) except as provided by Section 394.906,
       guaranteed or insured by the United States, an




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            instrumentality of the United States,  or a
            private mortgage insurance or surety company
            to the extent the loan amount exceeds 80
            percent of the lesser of the appraised value
            of the home at the time the loan is made or
            the sale price of the home.

     Local Gov't Code § 394.003(7). Under section 394.906 of the
     Local Government Code, a federal guarantee or home mortgage
     insurance   is not required   if the the housing      finance
     corporation's bonds are guaranteed or insured by an agency,
     department, or instrumentality of the United States or by an
     insurance or surety company authorized   to issue municipal
     bond insurance.

          The Texas Housing Finance     Corporations Act does not
     authorize a county to guarantee   mortgage loans financed by a
     corporation established  under    that act.    The legislature
     intended that such guarantees     be provided by federal or
     private entities,  and not by      the city or county that
     established the housing finance   corporation.

          It is suggested that section 394.036 of the Local
P.
     Government Code authorizes counties to guarantee   mortgage
     loans made by housing     finance corporations,  but   this
     provision merely  authorizes  such corporations  to accept
     financial assistance from any source:

                A housina     finance corporation may   amle
             f r a d ac it           its own behalf or on
             bihal: of z:other'ierson,     advances,   loans,
             grants,    contributions,    guarantees,    rent
             supplements, mortgage    assistance, and other
             forms of financial       assistance  from    the
             federal government,   the state, a county,     a
             municipality, or any other public or guasi-
             public body, corporation,    or foundation,   or
             from any other public or private source,     for
             any of     the purposes     of this     chapter.
             (Emphasis added.)

     Local Gov*t    Code 5 394.036(a). This provision gives such
     corporations    broad authority to accept financial assistance,
     but it does    not authorize the enumerated public and private
     entities to    grant financial assistance.

           In Attorney  General Opinion JM-604 (1986), we held
     that a city could not designate     a credit union as its
P.   depository, even though credit unions had express authority




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to serve as depositories of the United States, its agencies
or instrumentalities, any state, or any city, county, school
district, municipal corporation,  political subdivision,  or
other taxing authority  of Texas or any other state.     The
statutes authorizing the city to place funds in a depository
governed the kind of financial institution which the city
could use.    m     w    Attorney  General  Opinions  JW-832
(1987); MW-534 (1982); MW-224 (1980); H-723 (1975).

     State agencies must have legislative authorization    to
receive gifts and grants, since the conditions attached    to
gifts may be inconsistent with the powers and duties given
that agency.    Attorney  General Opinions   H-1180   (1978);
O-4681 (1942). Section 394.036 of the Local Government Code
makes it clear that a housing finance corporation may accept
gifts from any source and may include 'reasonable         and
appropriate terms, not inconsistent   with the purposes    of
this chapter" in a contract for financial assistance.   Local
Gov't Code 5 394.036(b).

     We conclude  that a county does not have express     or
implied authority  under chapter 394 of the Local Government
Code to guarantee  mortgage loans made to low and moderate
income people and families.

     Nor may the county, in our opinion, guarantee   mortgage
loans under its authority to "[plrovide for the support     of
paupers."  V.T.C.S. art. 2351(6). The program authorized by
chapter 394 represents an exercise of the state's police
power far broader than the authority delegated to counties
by paragraph 6 of article 2351, V.T.C.S.     The legislature
has provided in chapter 394 of the Local Government Code a
means whereby   a county may increase the availability      of
mortgage loan funds to low and moderate income persons      in
the county, subject to strict controls protecting its tax
revenues. The county may not use the purpose       clause   in
chapter 394 as authority for a different method of providing
mortgage funds which   ignores the controls  imposed by that
chapter.   Cf. Letter Advisory      No. 119   (1977)    (Texas
Opportunity Plan Fund established by article III, section
50(b), may not be used as ~a reserve      fund for insuring
student loans).

     Since we conclude that a county does not have statutory
authority to guarantee bonds issued by a housing     finance
corporation or mortgage loans made to low or moderate income
people, we need not consider whether the provision of such
guarantees would be a loan of the county's credit in viola-
tion of article III, section 52, of the Texas Constitution.




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    But see Attorney   General Opinion H-120    (1973); Letters
    Advisory Nos. 119 (1977); 9 (1973) (providing that article
    III, section 52 does not bar lending of credit for a public
    purpose).

                            SUMMARY
               A county lacks authority to guarantee   the
            payment of bonds issued by a housing   finance
            corporation under chapter 394 of the Local
            Government  Code   or to    guarantee    loans
            provided to low and moderate income persons
            for housing purposes.




                                       JIM     MATTOX
                                       Attorney General of Texas
    MARYEELLER
h
    First Assistant Attorney General

    Lou MCCREARY
    Executive Assistant Attorney General

    JUDGE ZOLLIE STEAELEY
    Special Assistant Attorney General

    RICK GILPIN
    Chairman, Opinion Committee

    Prepared by Susan L. Garrison
    Assistant Attorney General




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