                                 ATTORNEY             GENERAL           OF TEXAS
                                               GREG        ABBOTT




                                                  January 30,2007



The Honorable Dennis Bonnen                                       Opinion No. GA-0506
Chair, Committee on Environmental             Regulation
Texas House of Representatives                                    Re: Whether a city may operate a commercial
Austin, Texas 78768-2910                                          compostimulch business that sells its products
                                                                  outside the city’s limits (RQ-050%GA)

Dear Representative       Bonnen:

        You ask whether a city may operate a commercial compost/mulch business and sell its
products outside ‘the city’s limits.’ You state that certain cities produce, market, and sell
compostimulch products in direct competition with private businesses that produce and sell similar
products. See Request Letter, supra note 1, at 1. You do not object to the cities producing
compost/mulch and providing such products “to homeowners in their communities free of any
charge, or using compost/mulch in their city parks and common areas.” Id. at 2. In your view here,
“[t]he cities, however, should not be permitted to compete with private enterprises in the State of
Texas nor in any way supply landscape contractors or sell bagged products to nurseries.” Id.

       As we understand it, in connection with the management and processing of municipal solid
waste and wastewater, Texas cities such as Plano, Denton, Brenham, and Texarkana engage in
“cornposting”’ of the solid waste and sludge’ and sell the resulting products such as compost, soil,
and mulch to the public inside and outside their respective city limits4 Prior to these composting


          ‘See Letter fkom Honorable Dennis Bonnen, Chair, Committee on Environmental Regulation, Texas House of
Representatives, to Honorable Greg Abbott, Attorney General of Texas, at 2 (July 12,2006) (on file with the Opinion
Committee, also available af http://w.oag.state.tx.us)  [hereinafter Request Letter].

           ‘“Cornposting” is “the controlled biological decomposition of organic solid waste under aerobic conditions.”
 TEX. HEALTH & SAFETY CODE ANN. 5 361.003(6) (Vernon 2001); see also id. 5 361.421(2) (similarly defming
,composting). “‘Compost is the disinfected and stabilized product of the decomposition process that is used or sdld for
 use as a soil amendment, artificial top soil, growing medium amendment, or other similar uses.” Id. $ 361.421(l).

         ‘“‘Sludge’ means solid, semisolid, or liquid waste generated from a municipal, commercial, or industrial
wastewater treatment plant, water supply treatment plant, or air pollution control facility, excluding the treated effluent
from a wastewater treatment plant.” Id. 5 361.003(33).

        %%e Letter from A. Vance Kemler, Director, Solid Waste Services, City ofDenton, to Nancy S. Fuller, Chair,
Opinion Committee, Office ofthe Attorney General of Texas, at 2 (Aug. 3 I, 2006) [h ereinafter Denton Briefl; see also
                                                                                                       (continued...)
The Honorable Dennis Bonnen           - Page 2            (GA-0506)




programs, the cities buried the solid waste and sludge in landfills. See Denton Brief, supra note 4,
at 2; Austin Brief, supra note 4, at 1. The revenues generated from these sales are used to fund the
cost of the composting programs. See Denton Brief, supra note 4, at 7; Plan0 Brief, supra note 4,
at 2; Brenham Brief, supra note 4, at 2. Based on your question and letter, we do not understand you
to question the cities’ authority to engage in composting or to distribute compost products to the city
residents. See Request Letter, supra note 1, at l-2. Rather you question only the cities’ authority
to sell the compost products outside their city limits. See id. at 2.

        The cities you ask about are home-rule cities that derive their powers from article XI, section
5 of the Texas Constitution.’ See TEX. CONST.art. XI, 5 5; Quick v. City ofAustin, 7 S.W.?d 109,
122 (Tex. 1999); Lower Cola. Riv. Auth. v. City ofSan Marcos, 523 S.W.2d 641,643 (Tex. 1975).
A home-rule city has “all the powers of the state not inconsistent with the Constitution, the general
laws, or the city’s charter.‘? Proctor v. Andrews, 972 S.W.2d 729, 733 (Tex. 1998) (citing TEX.
CONST. art. XI, 5 5). “[I]t is necessary to look to the acts of the legislature not for grants of power
to such cities but only for limitations on their powers.” Lower Cola. Riv. Auth., 523 S.W.2d at 643.
The Legislature may circumscribe a home-rule city’s broad power, but only if it does’ so with
“unmistakable clarity.” Id. at 645. Accordingly, to answer your specific question, we first consider
whether the sale of compost products comports with state law and next consider whether the
Legislature has, with unmistakable clarity, limited a home-rule city’s authority to sell compost
products outside the city limits. We assume, for purposes of this analysis, that the sale is consistent
with the cities’ respective charters. See, e.g., Tex. Att’y Gen. Op. Nos. JC-0142 (1999) at 4
(assuming for the purposes of such an analysis, that the city ordinance at issue was authorized by the
city charter); JM-846 (1988) at 1 (“As a matter of policy, this off&does       not interpret city charter
provisions.     .“).

         You do not reference and we have not found a state or federal constitutional provision that
on its face is contravened by a city’s sale of compost products outside the city limits or by a city
acting as a “market participant.” See Request Letter, supra note 1, at 2. The Commerce Clause to
the United States Constitution, article I, section 8, clause 3, does not restrain a city from acting as
a market participant. See, e.g., White v. Muss. Council of Constr. Employers, 460 U.S. 204,208
(1983) (“[Wlhen a state or local government enters the market as a participant it is not subject to the



          ‘(...continued)
Letter from Thomas H. Muehlenbeck, City Manager, City of Plano, to Nancy S. Fuller, Chair, Opinion Committee,
Office of the Attorney General of Texas, at 1 (Aug. 4,2006) [hereinafter Plano Brief]; Letter 6om David Allan Smith,
City Attorney, City of Austin, to Honorable Greg Abbott, Attorney General of Texas, at 1 (Aug. 3 1,2006) [hereinafter
Austin Brief]; Letter from Gary L. Bovey, City Attorney, City of Bra&am, to Nancy S. Fuller, Chair, Opinion
Committee, Office of the Attorney General of Texas, at 2 (Aug. 3 1, 2006) [hereinafter Brenham Brief]; Letter from
Wiley Stem, III, Assistant City Manager, City of Waco, to Nancy S. Fuller, Chair, Opinion Committee, Office of the
Attorney General of Texas, at 1-2 (Sept. 5, 2006) [hereinafter Waco Briefl; Letter from Adam S. Block, Texas
Municipal League, to Nancy S. Fuller, Chair, Opinion Committee, Oftice of the Attorney General of Texas, at 1 (Aug.
25, 2006) (all briefs on tile with the Opinion Committee).

          ‘See http://www.municode.com/resources/online%2OLibra~.asp  (city charters for Plano, Denton and
Texarkana); http://www.ci.brenham.tx.us/CHOOO-~-PART~I~SPECIAL~CHARTER.pdf           (Brenham) (websites last
visited Jan. 12,2007).
The Honorable Dennis Bonnen              - Page 3               (GA-0506)




restraints of the Commerce Clause.“); Reeves, Inc. v. Stake, 447 U.S. 429, 437 (1980) (“[T]he
Commerce Clause responds principally to state taxes and regulatory measures impeding free private
trade in the national.marketplace. There is no indication of a constitutional plan to limit the ability
of the States themselves to operate freely in the free market.“) (citations omitted); U.S. CONST. art.
I, !$ 8, cl. 3.


           Nor have we found any state statutes contravened, as a matter of law, by a city’s sale of
 compost products outside its city limits. Maximizing the sale of compost, in fact, would appear to
 be consistent with state laws generally encouraging reduction “to the maximum extent that is
technologically and economically feasible” of municipal solid waste through “reuse or r&cycling”
 and of municipal sludge through “marketing and distribution of sludge and sludge products,” TEX.
 HEALTH&SAFETY          CODEANN. 5 361.022(a),       (b)(2), (c)(3) (V emon2001)(PublicPolicyConcerning
 Municipal Solid Waste and Sludge); see also id. § 363.002 (stating that it is the state’s policy to
 encourage reduction in solid waste and the proper management of solid waste, including its disposal
 and processing to extract usable materials); 30 TEX. ADMIN. CODE 5 332.2( 16) (2006) (Tex. Comm’n
 on Environmental Quality, Cornposting) (“Distribute--To sell, offer for sale, expose for sale . .“).
And such activity would appear to be consistent with state law spetiifically encouraging cornposting
 and reuse of cornposting products. See TEX. HEALTH & SAFETY CODE ANN. 5 361.428(am)
 Vernon      Supp. 2006);    see also Schulman v. City of Houston, 406 S.W.2d 219, 222 (Tex. Civ.
App.-Tyler        1966, writ ref d n.r.el) (stating that a home-rule city’s garbage compost plant is “for the
public purpose of disposing of garbage and for the welfare of the community” and is “a lawful
‘business andan operation not subject to abatement”). Texas Health and Safety Code section 361.428
 directs the Texas Commission on Environmental Quality (the “Commission”) to provide incentives
 for cornposting programs capable of reducing municipal solid waste streams that would be disposed
 in landfills and to adopt rules for permitting compost facilities. See TEX. HEALTH & SAFETY CODE
ANN. 5 361.428(a)-(b) (Vernon Supp. 2006). Pursuant to this authority, the Commission has
 adopted rules governing the operation of cornposting facilities, including facilities operated by cities.
See 30 TEX. ADMIN. COOS 5 332.3 (2006) (applicability); id. 5 332.2(38) (defining operator of
 facility), (42) (defining permit), (43) (defining person).6 Neither the state law provisions nor the
 Commission rules limit the sale or distribution of compost products to particular geographical areas.

        Finally, you do not reference and we have not found any statutory provisions whereby the
Legislature has with unmistakable clarity limited a home-rule City’s authority to sell compost
products. A letter submitted to this office suggests that chapter 756, subchapter G, Health and Safety
Code limits a city’s authority to sell compost products outside its city limits.7 Section 756.101
authorizes a city to “provide landscaping services, including tree-trimming, tree disposal,        and


          ‘See also Waco Brief, supra note 4, at 1 (“[Waco] is in the process of obtaining the necessary authorization
from the [Commission]       to produce compost       .“); ,Letter from Thomas H. Muehlenbeck, City Manager, City of
Piano, to Ms. Nancy Fuller, Chair, Opinion Committee, Office of the Attorney General of Texas, at 2 (Sept. 5,2006)
(on file with the Opinion Committee) (“All compost facilities must comply with state regulations. The City ofPIano is
listed with [the Commission]   as a Notifications   Operation.“).

        ‘See Letter from Honorable Vicki Truitt, Texas House of Representatives, to Nancy S. Fuller, Chair, Opinion
Committee, Oftice ofthe Attorney General ofTexas, at I (July 25,2006) (on file with the Opinion Committee).
The Honorable Dennis Bonnen       - Page 4          (GA-0506)




recycling services” to persons inside and outside the corporate limits of the city “only if the
governing body of the municipality makes written findings as required by Section 756.102.” TEX.
HEALTH & SAFETYCODE ANN. § 756.101 (Vernon Supp. 2006). Section 756.102 requires the city
to (1) identify the problem raising the need for providing the landscaping services; (2) identify the
public health, safety, or welfare concern; (3) describe previous actions taken to address the problem;
and (4) specify a definite time period necessary to address the problem. Id. 5 756.102. Subchapter
G, by its terms, addresses landscaping services rather than cornposting of municipal waste and the
sale of compost products.       See id. $5 756.101-,102; see also SENATE COMM. ON NATCJRAL
RESOURCES,BILLANALYSIS,T~~. S.B. 585,78thLeg., R.S. (2003) (enrolledversion) (“Thisbillalso
authorizes certain landscaping services under certain conditions.“).        It does not evidence with
unmistakable clarity the Legislature’s intent to prohibit or limit a home-rule city’s authority to sell
compost products outside the city limits.

          Your letter suggests that because the production and sale of compost products may be a
proprietary rather than a governmental function, the cities may not sell the products to persons
outside the city limits. See Request Letter, supva note 1, at l-2. The proprietary-governmental
distinction has generally been used to determine a city’s immunity from suit for tortious conduct.
Tooke v. City of Mexia, 197 S.W.3d 325, 343 (Tex. 2006); see also TEX. CONST. art. XI, 5 13
(authorizing the Legislature to define and reclassify for all purposes municipal functions that are to
be consider&d governmental and those that are proprietary); TEX. CIV. PRAC. &REM. CODE ANN.
5s 101 .OOl-,109 (Vernon 2005 & Supp. 2006) (Texas Tort Claims Act). The distinction may also
be relevant to a city’s contractual liability. See Tex. Att’y Gen. Op. No. JC-0154 (1999) at 2-3
(discussing estoppel against a city acting in its proprietary capacity as distinguished from its
governmental capacity). In addition, it may be relevant under federal law with respect to the
application of economic regulation under the Commerce Clause. See Jefferson County Pharm.
Ass’n, Inc. v. Abbott Labs., 460 U.S. 150, 154 n.6 (1983) (“It is too late in the day to suggest that
Congress cannot regulate States under its Commerce Clause powers when they are engaged in
proprietary activities.“). But whether the cotipost activity is a proprietary or governmental function
would appear to be irrelevant to a city’s authority to sell compost products outside the city limits and
is not a distinction that makes a difference here.

         Lastly, your letter generally suggests that cities are not permitted to compete with private
enterprises. See Request Letter, supra note 1, at 1-2. But you do not cite and we have not found any
authority that as a matter of law prohibits cities from competing with private enterprises.

        Because a home-rule city’s sale of compost products to persons outside the city limits does
not generally appear to contravene constitutional or statutory law, and because the Legislature has
not with unmistakable clarity forbidden a home-rule city to sell compost products outside its city
limits, we conclude that a home-rule city may sell compost products outside its city limits.
The Honorable Dennis Bonnen        - Page 5      (GA-0506)




                                        SUMMARY

                       Because a home-rule city’s sale of compost products to
              persons outside the city limits does not generally appear to contravene
              constitutional or statutory law, and because the Legislature has not
              with unmistakable clarity forbidden a home-rule city to sell compost
              products outside its city limits, a home-rule city may sell compost
              products outside its city limits.




KENT C. SULLIVAN
First Assistant Attorney General

ELLEN L. WITT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Sheela Rai
Assistant Attorney General, Opinion Committee
