                              ATTORNEY GENERAL OF TEXAS
                                            GREG ABBOTT



                                               February 16, 2011



The Honorable Allan B. Ritter                             Opinion No. GA-0843
Chair, House Committee on Natural Resources
Texas House of Representatives                            Re: Authority of the Sandy Land Underground
Post Office Box 2910                                      Water Conservation District to transfer certain
Austin, Texas 78768-2910                                  assets to an individual or other entity
                                                          (RQ-0904-GA)

Dear Representative Ritter:

        You ask about the authority ofthe Sandy Land Underground Water Conservation District (the
"District") to transfer certain assets to an individual or other entity.'

        Under chapter 36 of the Water Code, an underground water conservation district is
directed to "develop a comprehensive management plan which addresses [particular] management
goals," including, inter alia, "conservation, recharge enhancement, rainwater harvesting,
precipitation enhancement, or brush control, where appropriate and cost-effective." TEX. WATER
CODE ANN. § 36.1071(a)(7) (West 2008) (emphasis added). You tell us that the District developed
a comprehensive management plan that included among its goals that of cloud seeding for the
intended purpose of "precipitation enhancement.,,2 Request Letter at 1-2; see SANDY LAND
UNDERGROUND WATER CONSERVATION DIST., MANAGEMENT PLAN (2009-2014) at 14 (Goal #4). 3
Because state funds are no longer available for cloud seeding operations, the District proposes to
transfer certain assets of its cloud seeding program to "an individual or other entity that will
essentially carryon the program's work so that the District can continue to benefit from program data
gathering, research, and cloud seeding functions." Request Letter at 2. You ask whether, both in
statutory and constitutional terms, the District may do so. ld. at 6.

         With regard to statutory authority, section 36.158 of the Water Code provides:

                         A district may make or accept grants, gratuities, advances, or
                  loans in any form to or from any source approved by the board,


         lRequest Letter at 1-2 (available at http://www.texasattorneygeneral.gov).

         2We presume that the executive management plan was submitted to and approved by the executive administrator
of the Texas Water Development Board, in accordance with the statutory directive of sections 36.1071 and 36.1072 of
the Water Code. See TEx. WATER CODE ANN. §§ 36.1071-.1072 (West 2008).

        'Available at http://www.sandylandwater.comldocuments.html(last visited Feb. 14,2011).
The Honorable Allan B. Ritter - Page 2                 (GA-0843)



                   including any governmental entity, and may enter into contracts,
                   agreements, and covenants in connection with grants, gratuities,
                   advances, or loans that the board considers appropriate.

TEX. WATER CODE ANN. § 36.158 (West 2008). Thus, in strictly statutory terms, the District is
empowered to transfer the assets of its cloud seeding program to any entity "that the board considers
appropriate." As you note in your request, however, we must also consider constitutional issues,.
specifically section 52( a) of article III of the Texas Constitution, which prohibits the Legislature from
authorizing any subdivision of the state "to lend its credit or to grant public money or thing of value
in aid of, or to any individual, association or corporation whatsoever." TEx. CONST. art. Ill, § 52( a).

       We do not understand your request to question the facial constitutionality of section 36.158
ofthe Water Code in so far as it generally authorizes the District to "make ... grants." Rather, we
construe your request to assume the constitutionality of the statute by reading it to require any
particular grant to conform to the relevant constitutional constraints.

        The Texas Supreme Court has frequently declared that the prohibition of article Ill, section
52(a) means that the Legislature may not "require gratuitous payments to individuals, associations,
or corporations." Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Compo Comm'n, 74
S.W.3d 377, 383 (Tex. 2002); see also Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717, 740
(Tex. 1995); Davis V. City of Lubbock, 326 S.w.2d 699, 709 (Tex. 1959). A political subdivision's
transfer of public assets is not "gratuitous" if the political subdivision receives return consideration.
Tex. Mun. League Intergov 'tl Risk Pool, 74 S.W.3d at 383. Such transfers are permissible so long
as the statute authorizing them "serves a legitimate public purpose" and "affords a clear public
benefit received in return." Id:

        The Texas Supreme Court has articulated a three-part test to determine whether a statute
accomplishes a public purpose under section 52(a). The entity contemplating the grant must (1)
ensure that its purpose is to "accomplish a public purpose, not to benefit private parties"; (2) retain
public control over the public assets and/or rights associated with the transaction in order to ensure
that a public purpose is accomplished and to protect the public's investment; and (3) "ensure that the
political subdivision receives a return benefit." Id. at 384. In a prior opinion, we said that the
determination of whether a particular contract or agreement accomplishes a public purpose and
satisfies the three-part test articulated by the court is in the first instance a matter to be determined
by the board of directors of the District, subject to judicial review. Tex. Att'y Gen. Op. No. GA-
0553 (2007) at 4; see also Tex. Att'y Gen. Op. No. JC-0080 (1999) at 5.

        Whether article Ill, section 52(a) authorizes the transfer contemplated here will depend upon
the facts of any particular transaction, including, inter alia, whether the transfer will accomplish the


          'The Texas Supreme Court's decision was concerned with the facial constitutionality of the statute at issue in
the Risk Pool case. As we have noted, we are concerned in the present instance only with the question of whether the
statute under consideration here, section 36.158 ofthe Water Code, may be constitutionally applied by the District. See
Tex. Mun. League Intergov'tl Risk Pool, 74 S.W.3d at 383-84.
The Honorable Allan B. Ritter - Page 3          (GA-OS43)



statntory goals of the District, e.g., precipitation enhancement. Because you have not provided us
with sufficient information about the details of the transaction, we cannot determine whether the
transfer in question satisfies the constitutional test.

         You also ask a series of questions about the circumstances and conditions under which the
District may generally transfer assets from the cloud seeding program, including, potentially, a
transfer of title to one or more aircraft. Request Letter at 6-7 . You suggest, inter alia, that the Board
may wish to transfer assets to one or more members of the Board, or to its officers and/or employees.
[d. To the extent these questions implicate the constitutional authority of the District to accomplish
the referenced transfer of assets, we will address them together. However, we lack the necessary
information to make that determination because such an inquiry would necessarily involve mixed
questions of law and fact, and is therefore beyond the scope of an attorney general opinion. Like the
determination about the constitutionality of the transfer of the District's assets, these matters belong,
in the first instance, to the sound discretion of the District's board of directors, subject to judicial
review. We can here, however, briefly advise you of certain statutory provisions that must be
addressed when considering a transfer to any current director, officer, or employee of the District.

        Chapter 176 of the Local Government Code applies to a member of the governing board of
the District, as well as to any officer and certain employees and vendors of the District. TEX. Loc.
GOV'TCODEANN. §§ 176.001-.003, .005 (West200S). A person to whom chapter 176 is applicable
is required, under certain circumstances, to file a "conflicts disclosure statement" under section
176.003, the contents of which are described by section 176.004. See generally Tex. Att'y Gen. Op.
No. GA-0446 (2006).

        Likewise, chapter 171 of the Local Government Code is applicable to every "local public
official," defined to include a member of the board of directors of the District. See TEX. LOc. GOV'T
CODE ANN. § 171.001(1) (West 200S). If a current District director "has a substantial interest in a
business entity," and a transaction between the District board and that business entity will have a
"special economic effect on the business entity that is distinguishable from the effect on the public,"
then the director is required to "file, before a vote or decision on any matter involving the business
entity ... an affidavit stating the nature and extent of the interest," and to "abstain from further
participation in the matter." [d. § 171.004(a). Violation of section 171.004 constitutes a class A
misdemeanor. [d. § 171.003(b). Before the board of directors of the District enters into any
transaction to dispose of the assets described in your request, we urge the board to consult with its
attorney.
The Honorable Allan B. Ritter - Page 4      (GA-0843)



                                      SUMMARY

                      The board of directors of the Sandy Land Underground Water
              Conservation District has broad statutory authority to transfer
              certain assets to any individual or entity. Whether it may do so under
              article ill, section 52(a) of the Texas Constitution depends upon
              whether such transfer comports with the public purpose analysis
              promulgated by the Texas Supreme Court in Texas MunicipalLeague
              Intergovernmental Risk Pool v. Texas Workers' Compensation
              Commission, 74 S.W.3d 377 (Tex. 2002), and its progeny.




DANIEL T. HODGE
First Assistant Attorney General

DAVID J. SCHENCK
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Rick Gilpin
Assistant Attorney General, Opinion Committee
