Can a Texas Type B economic development corporation pay for a city's comprehensive plan?

Plain-English summary

State Representative Rene Oliveira, chair of the House Business & Industry Committee, asked the Attorney General whether a Type B economic development corporation could use its sales-tax money to hire an independent contractor to write a city's comprehensive plan, a long-range document covering land use, economic development, transportation, and public facilities. The city's administration had asked the development corporation to pay for the work.

The AG started by drawing a clear line. Whether one specific expenditure is an "authorized project" under the statute is a fact question, and the Attorney General does not resolve fact questions through the opinion process. That decision rests in the first instance with the development corporation's board of directors. So instead of saying yes or no, the AG explained, in general terms, how Type B sales-tax proceeds may be used.

A Type B corporation (once called a Type 4B corporation) is governed mainly by chapter 505 of the Local Government Code and may spend its economic-development sales and use tax only on authorized projects defined in chapters 505 and 501. Those chapters generally describe projects as land, buildings, equipment, facilities, targeted infrastructure, and improvements. The service of preparing a comprehensive plan is not a direct expenditure for any of those things, so it does not fit the general definition. A handful of provisions, though, treat certain "expenditures" as projects, and the AG identified two that could potentially apply. Section 501.101 covers an expenditure that is both for the creation or retention of "primary jobs" and found by the board to be required or suitable for a listed set of facilities (such as manufacturing, research, or distribution facilities). Section 501.103 covers expenditures the board finds required or suitable for a narrow, exclusive list of infrastructure, like streets, utilities, drainage, and telecommunications improvements.

The AG then circled back to its limit. Because these provisions require the corporation's board to make specific factual findings, it was especially appropriate not to give a definitive answer. If the board does make the required findings and approves the expenditure, a court reviewing the decision would apply an abuse-of-discretion standard. The upshot: a comprehensive-plan expense may be an authorized project if it fits within section 501.101 or section 501.103, but whether it does is for the board to decide in the first instance, subject to judicial review.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later Attorney General 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.

What the opinion meant for those who asked

Representative Oliveira (as the opinion described it): The opinion declined to decide whether the specific comprehensive-plan expense was authorized, explaining that this is a fact question for the development corporation's board. It advised generally that such an expense may be an authorized project to the extent it falls within section 501.101 or section 501.103 of the Local Government Code.

Type B economic development corporation boards (as the opinion described it): The opinion described the board as the body that decides, in the first instance, whether an expenditure is authorized, and described sections 501.101 and 501.103 as requiring the board to make specific findings (about primary jobs or about a defined list of infrastructure). It noted that a board's decision would be reviewed for abuse of discretion.

Cities seeking development-corporation funding (as the opinion described it): The opinion described authorized projects as generally limited to land, buildings, equipment, facilities, infrastructure, and improvements, and described a service like preparing a comprehensive plan as outside that general definition unless it fit the specific expenditure provisions in sections 501.101 or 501.103.

Common questions

Can a Type B economic development corporation pay for a city's comprehensive plan?
The AG did not decide. It explained that whether a specific expense is an authorized project is a fact question for the corporation's board, and said the comprehensive-plan expense may qualify only if it fits within section 501.101 or section 501.103.

What can Type B sales-tax money be spent on?
The AG explained that a Type B corporation may spend its economic-development sales and use tax only on authorized projects, which the statutes generally describe as land, buildings, equipment, facilities, targeted infrastructure, and improvements.

Why couldn't the Attorney General just answer yes or no?
The AG explained that whether a particular expenditure is authorized involves fact issues that the opinion process cannot resolve, and that the statutes require specific findings from the corporation's board, making it the proper decision-maker.

What do sections 501.101 and 501.103 require?
The AG described section 501.101 as covering expenditures for the creation or retention of primary jobs that the board finds suitable for listed facilities, and section 501.103 as covering an exclusive list of infrastructure (streets, utilities, drainage, telecommunications, and similar) the board finds required or suitable for business enterprises.

Who reviews the board's decision?
The AG explained that if the board makes the required findings, a court reviewing the decision would apply an abuse-of-discretion standard.

Background and statutory framework

The comprehensive plan the request described is a municipal planning tool under the comprehensive-plan statute (Tex. Loc. Gov't Code Ann. §§ 213.001-.005 (West 2008); id. § 213.002; Bd. of Adjustment of City of San Antonio v. Leon, 621 S.W.2d 431, 436 (Tex. Civ. App.-San Antonio 1981, no writ)). The AG noted at the outset that whether a particular expenditure is authorized is a fact question outside the opinion process (Tex. Att'y Gen. Op. No. GA-1050 (2014) at 2).

A Type B corporation, formerly authorized under article 5190.6, section 4B of the Revised Civil Statutes (Tex. Rev. Civ. Stat. art. 5190.6, § 4B), is now governed by chapter 505 (Tex. Loc. Gov't Code Ann. §§ 505.001-.355 (West Supp. 2013); id. § 501.002(16)) and may use its tax proceeds for authorized-project costs (id. § 505.302(1); id. § 501.152). Authorized projects appear in chapters 505 and 501 (id. § 505.151; id. § 501.002(13); id. §§ 505.151-.161; id. §§ 501.101-.108), generally defined as land, buildings, equipment, facilities, targeted infrastructure, and improvements (id. § 501.101). The AG identified the two potentially applicable expenditure provisions, section 501.101 (primary jobs plus listed facilities, id. § 501.101(1)-(2)) and section 501.103 (an exclusive infrastructure list, id. § 501.103), reading the limiting language as exclusive (Peterson v. Calvert, 473 S.W.2d 314, 317 (Tex. Civ. App.-Austin 1971, writ ref'd); cf. Pro Path Servs., L.L.P. v. Koch, 192 S.W.3d 667, 670-71 (Tex. App.-Dallas 2006, pet. denied)). Because both require board findings (id. §§ 501.101(2), .103(1)-(2) (West Supp. 2013)), it declined a definitive answer and noted abuse-of-discretion review of any board decision (Pearce v. City of Round Rock, 78 S.W.3d 642, 646-47 (Tex. App.-Austin 2002, pet. denied)). Footnotes addressed limits from a corporation's creating resolution or ballot language (id. § 505.251 (West Supp. 2013); id. § 505.160) and the definition of "primary jobs" (id. § 501.002(12)(A)(ii) (West Supp. 2013)).

Citations

Statutory provisions:

• Tex. Loc. Gov't Code Ann. §§ 213.001-.005 (West 2008) (municipal comprehensive plans)
• Tex. Loc. Gov't Code Ann. § 213.002 (contents of a comprehensive plan)
• Tex. Loc. Gov't Code Ann. §§ 505.001-.355 (West Supp. 2013) (Type B corporations)
• Tex. Loc. Gov't Code Ann. § 501.002(16) (definition of Type B corporation)
• Tex. Loc. Gov't Code Ann. § 505.302(1) (use of tax proceeds for project costs)
• Tex. Loc. Gov't Code Ann. § 501.152 (project costs)
• Tex. Loc. Gov't Code Ann. § 505.151 (Type B project definition)
• Tex. Loc. Gov't Code Ann. § 501.002(13) (definition of "project")
• Tex. Loc. Gov't Code Ann. §§ 505.151-.161 (Type B authorized projects)
• Tex. Loc. Gov't Code Ann. §§ 501.101-.108 (chapter 501 authorized projects)
• Tex. Loc. Gov't Code Ann. § 501.101 (general project definition; primary-jobs expenditures)
• Tex. Loc. Gov't Code Ann. § 501.101(1)-(2) (primary-jobs and facility findings)
• Tex. Loc. Gov't Code Ann. § 501.103 (infrastructure expenditures)
• Tex. Loc. Gov't Code Ann. §§ 501.101(2), .103(1)-(2) (West Supp. 2013) (required board findings)
• Tex. Loc. Gov't Code Ann. § 505.251 (West Supp. 2013) (election to create corporation)
• Tex. Loc. Gov't Code Ann. § 505.160 (election required for particular project)
• Tex. Loc. Gov't Code Ann. § 501.002(12)(A)(ii) (West Supp. 2013) (definition of "primary jobs")
• Tex. Rev. Civ. Stat. art. 5190.6, § 4B (former authorization for Type 4B corporations)

Cases:

• Bd. of Adjustment of City of San Antonio v. Leon, 621 S.W.2d 431, 436 (Tex. Civ. App.-San Antonio 1981, no writ)
• Peterson v. Calvert, 473 S.W.2d 314, 317 (Tex. Civ. App.-Austin 1971, writ ref'd)
• Pro Path Servs., L.L.P. v. Koch, 192 S.W.3d 667, 670-71 (Tex. App.-Dallas 2006, pet. denied)
• Pearce v. City of Round Rock, 78 S.W.3d 642, 646-47 (Tex. App.-Austin 2002, pet. denied)

Prior Attorney General opinions:

• Tex. Att'y Gen. Op. No. GA-1050 (2014)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1066
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2014/ga1066.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

June 16, 2014

The Honorable Rene O. Oliveira Opinion No. GA-1066
Chair, Committee on Business & Industry
Texas House of Representatives Re: Whether a Type B economic development
Post Office Box 2910 corporation may use sales tax funds to hire an
Austin, Texas 78768-2910 independent contractor for the purpose of
developing a comprehensive plan for future
development of the city (RQ-1174-GA)

Dear Representative Oliveira:

You ask whether a Type B economic development corporation may use sales tax funds to hire an independent contractor for the purpose of developing a comprehensive plan for the future development of a city.[1] You explain that the envisioned comprehensive plan would be "a long range development tool for the municipality that would include provisions on land use, economic development, transportation, and public facilities, in accordance with section 213.002 of the Local Government Code." Request Letter at 2; see TEX. LOC. GOV'T CODE ANN. §§ 213.001-.005 (West 2008) (providing for municipal comprehensive plans). You indicate that the "comprehensive plan would be used by the corporation and the city to coordinate and guide them in the selection and establishment of development regulations and economic development projects and in making decisions about growth and development." Request Letter at 2; see Bd. of Adjustment of City of San Antonio v. Leon, 621 S.W.2d 431, 436 (Tex. Civ. App.-San Antonio 1981, no writ) (describing comprehensive plan as one "designed to control and direct the use and development of property in the municipality"). You state that the city's administration requested that the economic development corporation fund the cost of hiring an independent contractor to prepare and produce this comprehensive plan. Request Letter at 2. You ask for an opinion "regarding whether this expense is a qualified project that the ... [e]conomic [d]evelopment [c]orporation may fund from its available 4B sales tax revenues." Id. The question of whether a particular expenditure is authorized by the statute is one that involves fact issues and cannot be resolved by an attorney general opinion. See Tex. Att'y Gen. Op. No. GA-1050 (2014) at 2.

Instead, it is a matter in the first instance for the corporation's board of directors. See id. Assuming the proposed expenditure otherwise complies with the other statutory requirements, we advise you generally on the use of Type B sales tax proceeds.[2]

Formerly known as a Type 4B economic development corporation due to initial authorization in article 5190.6 section 4B of the Revised Civil Statutes, a Type B economic development corporation is now primarily governed by chapter 505 of the Local Government Code. See TEX. LOC. GOV'T CODE ANN. §§ 505.001-.355 (West Supp. 2013) (governing Type B corporations), id. § 501.002(16) (defining Type B corporations as those governed by chapter 505). Under section 505.302, a Type B corporation may use its economic development sales and use tax proceeds to pay the costs of authorized projects. Id. § 505.302(1); see id. § 501.152 (pertaining to "costs" associated with projects). The different types of authorized projects are enumerated in chapters 505 and 501. See id. §§ 505.151 (defining project to include the definition of project in chapter 501), 501.002(13) (defining "project" by reference to subchapter C, chapter 501); see also id. §§ 505.151-.161 (subchapter D, chapter 505, identifying authorized projects); §§ 501.101-.108 (subchapter C, chapter 501, identifying authorized projects). Generally, chapters 501 and 505 define projects in terms of "land, buildings, equipment, facilities, . . . targeted infrastructure, and improvements." See id. § 501.101; see also id. § 505.151 (referring to "land, buildings, equipment, facilities, ... and improvements"). An expenditure for the service of preparing a comprehensive plan is not a direct expenditure for land, buildings, equipment, facilities, targeted infrastructure and improvements and thus may not constitute a project as contemplated by these definitions. However, a few provisions in chapters 501 and 505 expressly identify a project to include an "expenditure." Id. §§ 501.101, .103, .104, .105, 505.157(b), .158(a)-(b). Most of these provisions involve an expenditure for projects with a specific focus not relevant in the context of the preparation of a comprehensive development plan or not applicable to the city at issue. See id. §§ 501.104 ("Projects Related to Certain Military Bases or Missions"); 501.105 ("Career Center Projects Outside of Junior College District"); 505.157 ("Projects Related to Business Enterprises in Landlocked Communities"); 505.158 ("Projects Related to Business Development in Certain Small Municipalities").

Two provisions, sections 501.101 and 501.103, potentially apply to the expenditure about which you ask. Under section 501.101, a project includes an expenditure that satisfies two requirements. The first is that the expenditure must be "for the creation or retention of primary jobs."[3] Id. § 501.101(1). The second is that the expenditure must be found by the economic development corporation's board "to be required or suitable for the development, retention, or expansion of" a list of twelve types of centers and facilities. Id. § 501.101(2) (identifying manufacturing and industrial facilities, research and development facilities, military facilities, transportation facilities, disposal, recycling and pollution facilities, distribution, warehouse, job training facilities, and corporate headquarters facilities). A municipal comprehensive plan could impact a municipality's economy, but to qualify as an authorized project it must directly relate to the creation or retention of primary jobs as measured by the standards in section 501.101(1)-(2).

Section 501.103 relates to expenditures that are "found by the board of directors to be required or suitable for infrastructure necessary to promote or develop new or expanded business enterprises, limited to: (1) streets and roads, rail spurs, water and sewer utilities, electric utilities, or gas utilities, drainage, site improvements; and . . . ; (2) telecommunications and Internet improvements ...." Id. § 501.103. The limiting language in section 501.103 indicates this is an exclusive list. See Peterson v. Calvert, 473 S.W.2d 314, 317 (Tex. Civ. App.-Austin 1971, writ ref'd) ("The specification of one particular class excludes all other classes."); cf. Pro Path Servs., L.L.P. v. Koch, 192 S.W.3d 667, 670-71 (Tex. App.-Dallas 2006, pet. denied) (discussing noninclusive nature of statutory language "including"). An expenditure for a comprehensive plan that does not fall precisely within the contours of section 501.103 is not an authorized project under that section.

As noted previously, the question of whether a particular expenditure is authorized by the statute is one that we cannot resolve. See supra page 1. Here, it is particularly appropriate for this office to refrain from providing a definitive answer given the fact that potentially relevant statutes require specific findings from the economic development corporation's board. See TEX. LOC. GOV'T CODE ANN. §§ 501.101(2), .103(1)-(2) (West Supp. 2013). In the event the corporation's board makes the required findings, any judicial review would utilize an abuse of discretion standard. Cf. Pearce v. City of Round Rock, 78 S.W.3d 642, 646-47 (Tex. App.-Austin 2002, pet. denied) (utilizing abuse of discretion standard to review decision of city's development review board).

SUMMARY

To the extent an expenditure of Type B sales tax proceeds for the services involved in the preparation of a municipal comprehensive plan by an independent contractor is within the scope of sections 501.101 or 501.103 of the Local Government Code, it may be an authorized project under the statute. It is, however, for the board of directors of the economic development corporation to determine, in the first instance and subject to judicial review, whether an expenditure is authorized under the statute.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

Charlotte M. Harper
Assistant Attorney General, Opinion Committee

[1] See Letter from Honorable Rene O. Oliveira, Chair, House Comm. on Bus. & Indus., to Honorable Greg Abbott, Tex. Att'y Gen. at 1 (Dec. 20, 2013), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] The authority of a development corporation may be limited by any resolution creating the corporation or any ballot language restricting the use of Type B tax proceeds. See TEX. LOC. GOV'T CODE ANN. §§ 505.251 (West Supp. 2013) (providing for election to create development corporation), 505.160 (pertaining to election required for particular project).

[3] "Primary jobs" is defined in section 501.002(12) and refers to a job included in the "North American Industry Classification System (NAICS)." TEX. LOC. GOV'T CODE ANN. § 501.002(12)(A)(ii) (West Supp. 2013).