Can a Texas river authority sell surplus land to a neighbor by private sale without public bidding?

TX AG Opinion GA-0371: Can a river authority sell surplus land to a neighbor without a public sale?

Plain-English summary

When a government body in Texas sells real property, a general statute, Local Government Code section 272.001, usually makes it publish notice and take sealed bids. That public-bidding process exists to make sure public property is not handed off below its true value, by stimulating competition and preventing favoritism. But the general rule yields where a more specific statute governs.

The Sabine River Authority, a river authority created under article XVI, section 59 of the Texas Constitution and treated as a "district" under Water Code chapter 49, owned land it did not use in day-to-day operations. Its board was thinking about declaring some of that land surplus and selling it to neighboring landowners, and it was unsure whether section 272.001 or Water Code section 49.226 controlled. Section 49.226 lets a district sell surplus land "by public or private sale."

The Attorney General concluded that section 49.226 governed, so no public sale was required. Section 49.226(a) expressly lets a district sell land the board finds to be surplus and not needed "either by public or private sale." And section 49.226(b) says flatly that "Chapter 272, Local Government Code, does not apply to this section." So when a land transaction is authorized by section 49.226, the public-bid requirements of section 272.001 drop out. The office also pointed out that the newspaper-notice step in section 49.226(c) is tied to a public sale and does not apply to a private one. The bottom line: once the Authority's board determined that particular land was surplus and not needed, it could sell that land to an adjoining landowner by private sale.

Currency note

This opinion was issued in 2005. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Who this opinion affected (as of 2005)

The Sabine River Authority and similar water districts: The opinion told the Authority it could sell board-declared surplus land to an adjoining owner by private sale under Water Code section 49.226, without the public notice and sealed-bid process of Local Government Code section 272.001.

Adjoining landowners: It clarified that a neighbor could buy surplus district land directly through a private sale, rather than having to compete in a public bidding process.

Other political subdivisions: It illustrated that the general public-sale statute (section 272.001) gives way to a specific statute that authorizes private sale and expressly opts out of chapter 272.

The Authority's board and counsel: While holding that no public sale was required, the office relayed counsel's suggestion that the Authority obtain a certified appraisal of fair market value, and noted constitutional limits on aiding private parties and that the Open Meetings and Public Information Acts still applied.

Common questions

Did the Authority have to hold a public sale to sell surplus land?
No. The Attorney General concluded Water Code section 49.226 governed, and it lets a district sell surplus land by public or private sale. A private sale to an adjoining owner was permitted.

Why didn't the general public-bidding statute apply?
Because section 49.226(b) expressly states that "Chapter 272, Local Government Code, does not apply to this section." When section 49.226 authorizes the transaction, section 272.001's public-bid requirements do not apply.

Did the Authority have to publish newspaper notice?
Only for a public sale. Section 49.226(c)'s notice requirement (publishing once a week for two consecutive weeks) is tied to a public sale and does not apply to a private sale.

Was there any condition before the Authority could sell?
Yes. The board had to find that the particular land was "surplus and is not needed by the district." Once it made that determination, section 49.226(a) authorized the sale.

Did the opinion impose any cautions?
It noted, in relaying counsel's advice, that the Authority might retain a certified appraiser to set fair market value, that constitutional provisions limit aiding private parties (a fair-market-value sale is not a gratuitous transaction), and that section 49.226 does not exempt the district from the Open Meetings or Public Information Acts.

Background and statutory framework

The Sabine River Authority is a river authority created under article XVI, section 59 of the Texas Constitution and is a "district" under Water Code chapter 49 (Tex. Const. art. XVI, § 59; Tex. Water Code Ann. § 49.001(a)(1) (Vernon Supp. 2004-05); Act of April 27, 1949, 51st Leg., R.S., ch. 110, § 1, 1949 Tex. Gen. Laws 193). The general statute on disposing of public real property, Local Government Code section 272.001, requires political subdivisions to sell real property by public notice and sealed bids, a process the courts have said protects public property from being sold below true value by stimulating competition and preventing favoritism (Tex. Loc. Gov't Code Ann. § 272.001(a)-(b) (Vernon Supp. 2004-05); Bell v. Katy Indep. Sch. Dist., 994 S.W.2d 862, 866 (Tex. App.-Houston [1st Dist.] 1999, no pet.); City of Dallas v. McKasson, 726 S.W.2d 173, 176 (Tex. App.-Dallas 1987, writ ref'd n.r.e.); West Orange-Cove Consol. Indep. Sch. Dist. v. Smith, 928 S.W.2d 773, 776 (Tex. App.-Beaumont 1996, no writ)).

Water Code section 49.226 is the specific provision. Subsection (a) lets a district sell any land found by the board to be surplus and not needed "either by public or private sale," and subsection (c) requires newspaper notice before a public sale of real property (Tex. Water Code Ann. § 49.226(a), 49.226(c) (Vernon Supp. 2004-05)). Subsection (b) authorizes various other dispositions and provides that "Chapter 272, Local Government Code, does not apply to this section" (id. § 49.226(b)). The office noted that, as originally enacted, the carve-out reached only "this subsection," but the Legislature changed "subsection" to "section" in 2001, broadening it (Act of May 25, 1995, 74th Leg., ch. 715, § 2, 1995 Tex. Gen. Laws 3755, 3775; Act of May 26, 2001, 77th Leg., R.S., ch. 1423, § 14, 2001 Tex. Gen. Laws 5069, 5072).

Reading these together, the office concluded that if a land transaction is authorized by section 49.226, the public-sale requirements of section 272.001 do not apply, and the section 49.226(c) notice requirement does not apply to a private sale. So once the Authority's board determined that land was surplus and not needed, the Authority could sell it to an adjoining landowner by private sale. In a closing footnote the office relayed counsel's advice that the Authority retain a certified appraiser to determine fair market value, observed that constitutional provisions limit aid to private parties but that a sale for fair market value is not a gratuitous transaction, and noted that section 49.226 does not exempt the district from the Open Meetings or Public Information Acts (Tex. Const. art. III, §§ 50-52; Walker v. City of Georgetown, 86 S.W.3d 249, 260 (Tex. App.-Austin 2002, pet. denied)).

Citations

Statutes and constitutional provisions:

• Tex. Water Code Ann. § 49.001(a)(1), 49.226(a), 49.226(b), 49.226(c) (Vernon Supp. 2004-05)
• Tex. Loc. Gov't Code Ann. § 272.001(a)-(b) (Vernon Supp. 2004-05)
• Tex. Const. art. XVI, § 59
• Tex. Const. art. III, §§ 50-52
• Act of April 27, 1949, 51st Leg., R.S., ch. 110, § 1, 1949 Tex. Gen. Laws 193
• Act of May 25, 1995, 74th Leg., ch. 715, § 2, 1995 Tex. Gen. Laws 3755, 3775
• Act of May 26, 2001, 77th Leg., R.S., ch. 1423, § 14, 2001 Tex. Gen. Laws 5069, 5072

Cases:

• Bell v. Katy Indep. Sch. Dist., 994 S.W.2d 862 (Tex. App.-Houston [1st Dist.] 1999, no pet.)
• City of Dallas v. McKasson, 726 S.W.2d 173 (Tex. App.-Dallas 1987, writ ref'd n.r.e.)
• West Orange-Cove Consol. Indep. Sch. Dist. v. Smith, 928 S.W.2d 773 (Tex. App.-Beaumont 1996, no writ)
• Walker v. City of Georgetown, 86 S.W.3d 249 (Tex. App.-Austin 2002, pet. denied)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0371
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2005/ga0371.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

November 3, 2005

Mr. Jerry Clark
Executive Vice President and General Manager
Sabine River Authority of Texas
Post Office Box 579
Orange, Texas 77631

Opinion No. GA-0371

Re: Whether the Sabine River Authority of Texas may sell surplus real property to an adjoining landowner without holding a public sale (RQ-0342-GA)

Dear Mr. Clark:

You ask whether the Sabine River Authority of Texas (the "SRA") may sell surplus real property to an adjoining landowner without holding a public sale.[1]

You state that the SRA is a river authority created under article XVI, section 59 of the Texas Constitution and is a "district" governed by Water Code chapter 49. See Request Letter, supra note 1, at 1.[2] You inform us that the SRA owns "various lands which are not used in its day-to-day operations." Id. As the result, the board of directors "is considering declaring certain portions of such real property to be surplus and disposing of it" by selling it to adjoining landowners. Id. You explain that there is some confusion regarding whether such a transaction would be governed by section 272.001 of the Local Government Code, which generally requires political subdivisions to sell real property by providing public notice and accepting sealed bids,[3] or section 49.226 of the Water Code, which permits districts to sell certain property by public or private sale. See id.

Section 49.226 of the Water Code provides in pertinent part:

             (a) Any personal property valued at more than $300 or any land or interest in land owned by the district which is found by the board to be surplus and is not needed by the district may be sold under order of the board either by public or private sale, or the land, interest in land, or personal property may be exchanged for other land, interest in land, or personal property needed by the district. Except as provided in Subsection (b), land, interest in land, or personal property must be exchanged for like fair market value, which value may be determined by the district. In connection with the sale of surplus land, the board, at its discretion, may impose restrictions on the development and use of the land.

             (c) Before a public sale of real property, the district shall give notice of the intent to sell by publishing notice once a week for two consecutive weeks in one or more newspapers with general circulation in the district.

TEX. WATER CODE ANN. § 49.226(a), (c) (Vernon Supp. 2004-05) (emphasis added).

Section 49.226(b) authorizes a district to dispose of other types of real property, but also contains a more general reference to chapter 272 of the Local Government Code:

             (b) Any property dedicated to or acquired by the district without expending district funds may be abandoned or released to the original grantor, the grantor's heirs, assigns, executors, or successors upon terms and conditions deemed necessary or advantageous to the district and without receiving compensation for such abandonment or release. District property may also be abandoned, released, exchanged, or transferred to another district, municipality, county, countywide agency, or authority upon terms and conditions deemed necessary or advantageous to the district. Narrow strips of property resulting from boundary or surveying conflicts or similar causes, or from insubstantial encroachments by abutting property owners, or property of larger configuration that has been subject to encroachments by abutting property owners for more than 25 years may be abandoned, released, exchanged, or transferred to such abutting owners upon terms and conditions deemed necessary or advantageous to the district. Chapter 272, Local Government Code, does not apply to this section.

Id. § 49.226(b) (emphasis added). As originally enacted, section 49.226(b) provided that chapter 272 of the Local Government Code "shall not apply to this subsection"; the exception from chapter 272 was limited to those specific transactions authorized by section 49.226(b). See Act of May 25, 1995, 74th Leg., ch. 715, § 2, 1995 Tex. Gen. Laws 3755, 3775. However, the legislature changed "subsection" to "section" in 2001. See Act of May 26, 2001, 77th Leg., R.S., ch. 1423, § 14, 2001 Tex. Gen. Laws 5069, 5072.

Section 49.226(a) expressly authorizes a district to sell surplus land by public or private sale. See TEX. WATER CODE ANN. § 49.226(a) (Vernon Supp. 2004-05) ("any land or interest in land owned by the district which is found by the board to be surplus and is not needed by the district may be sold under order of the board either by public or private sale"). Moreover, by its plain terms, section 49.226(b) provides that chapter 272 of the Local Government Code "does not apply to this section." Id. § 49.226(b). Thus, if a land transaction is authorized by section 49.226, public sale requirements prescribed by section 272.001 of the Local Government Code do not apply. In addition, the notice requirement set forth in section 49.226(c) for a public sale of real property does not apply to a private sale. See id. § 49.226(c).

Given these statutory provisions, in the event the SRA board of directors determines that land is "surplus and is not needed by the district," the district may sell the land by private sale under section 49.226(a) of the Water Code. See id. § 49.226(a). The requirements of section 272.001 of the Local Government Code would not apply. Thus, in answer to your specific question, the SRA may sell real property, which the board has determined is surplus and is not needed by the SRA, to an adjoining landowner without holding a public sale.[4]

                                   SUMMARY

                    In the event the Sabine River Authority board of directors determines that land is "surplus and is not needed" by the river authority, section 49.226 of the Water Code authorizes the river authority to sell the land by private sale. Because the transaction is governed by section 49.226, public sale requirements prescribed by section 272.001 of the Local Government Code would not apply. Thus, the Sabine River Authority may sell such surplus real property to an adjoining landowner without holding a public sale.

                                         Very truly yours,

GREG ABBOTT
Attorney General of Texas

BARRY R. McBEE
First Assistant Attorney General

NANCY S. FULLER
Chair, Opinion Committee

Mary R. Crouter
Assistant Attorney General, Opinion Committee

Footnotes

[1] See Letter from Jerry Clark, Executive Vice President and General Manager, Sabine River Authority of Texas, to Honorable Greg Abbott, Texas Attorney General (May 2, 2005) (on file with Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

[2] See also Act of April 27, 1949, 51st Leg., R.S., ch. 110, § 1, 1949 Tex. Gen. Laws 193 (creating the Sabine River Authority under article XVI, section 59 of the Texas Constitution); TEX. WATER CODE ANN. § 49.001(a)(1) (Vernon Supp. 2004-05) ("As used in this chapter [] 'District' means any district or authority created by authority of either Sections 52(b)(1) and (2) Article III, or Section 59, Article XVI, Texas Constitution, regardless of how created.").

[3] See TEX. LOC. GOV'T CODE ANN. § 272.001(a)-(b) (Vernon Supp. 2004-05); see also Bell v. Katy Indep. Sch. Dist., 994 S.W.2d 862, 866 (Tex. App.-Houston [1st Dist.] 1999, no pet.) (Section 272.001 "protect[s] public property in order that it might not be disposed of for less than true value. The notice and bidding requirements . . . stimulate competition, prevent favoritism and secure the best price for the property.") (citing City of Dallas v. McKasson, 726 S.W.2d 173, 176 (Tex. App.-Dallas 1987, writ ref'd n.r.e.); West Orange-Cove Consol. Indep. Sch. Dist. v. Smith, 928 S.W.2d 773, 776 (Tex. App.-Beaumont 1996, no writ)).

[4] Counsel for the SRA observes that section 49.226 does not establish procedures or requirements for a private land sale and advises that "a reasonable private sale should incur no legal consequences to the [SRA]. However, when possible, the [SRA] should retain a certified appraiser to determine fair market value of the real property prior to its sale." Opinion Letter from Charles W. Goehringer, Jr., Attorney, Germer Gertz, L.L.P., to Jerry Clark, Sabine River Authority of Texas, at 1 (May 1, 2005) (submitted as part of Request Letter, on file with Opinion Committee, also available at http://www.oag.state.tx.us); see also TEX. WATER CODE ANN. § 49.226(c) (Vernon Supp. 2004-05). In this regard, we add that the SRA may also wish to consider whether a land sale comports with the Texas Constitution. See TEX. CONST. art. III, §§ 50-52 (limiting the legislature's and political subdivisions' authority to aid individuals and private entities). Certainly a land sale for fair market value could not be challenged as a gratuitous transaction. Cf. Walker v. City of Georgetown, 86 S.W.3d 249, 260 (Tex. App.-Austin 2002, pet. denied) ("[T]he lease entered into here was supported by valuable consideration. As such, it was not a gratuitous donation of public funds or a thing of value.") (considering challenge to municipal real property lease under article III, section 52). We also note that section 49.226 does not exempt a district from the requirements of the Open Meetings or Public Information Acts.