Can a Texas city sell a building and land sitting in the middle of a city street?

Plain-English summary

Tyler County Criminal District Attorney Joe R. Smith asked, on behalf of the City of Ivanhoe, whether a city may sell real property that includes a building and other improvements sitting in the middle of a city street. Ivanhoe is a Type-A (general-law) municipality that began as a private community and incorporated in 2009. The tract in question lies in the middle of a street leading into the city and holds a building once used as a guardhouse, a community sign paid for and put up by the Ivanhoe Property Owners Improvement Association (IPOIA), and other improvements. A developer had executed a quitclaim deed in 2013 purporting to convey his interest in the street and structures to the city, and the IPOIA, wanting to keep using the sign, offered to buy the tract.

The AG did not decide whether the specific sale Smith described is allowed. The city's title, right, or interest in the tract was not clear from the information provided, and answering the precise question would have required investigating and resolving factual questions, which is outside the opinion process. Instead the AG laid out the general legal principles that govern a city's authority to sell streets and other real property.

A Type-A municipality has general authority to "lease, grant, or convey" real property, but only to carry out a municipal purpose. When the property is a public street, the AG explained, more rules apply: a city may hold legal title to its streets, but it holds that title as trustee for the state and the public, not in its own right, and a general-law city has only the street authority the Legislature or the Constitution grants it. The Legislature has given general-law cities exclusive control over their streets and the power to change a street, and has authorized cities to sell an abandoned part of a street or alley, including the improvements on it.

The AG also explained the procedure. A city generally must sell its land or real property interests by giving notice and taking sealed bids, but several statutory exceptions let a city sell without bidding depending on the circumstances, such as selling small strips or abandoned streets and alleys to abutting owners, or conveying property to a nonprofit organization under an agreement requiring the nonprofit to use it in a way that primarily promotes a public purpose. Whether any exception fits a given sale depends on the particular facts and the terms of the sale.

Finally, on the constitutional questions, the AG explained that article III, section 52(a) and article XI, section 3 of the Texas Constitution bar gratuitous payments to private parties, but a sale to a private entity is not "gratuitous" when the city receives adequate return consideration. A conveyance is constitutional if it serves a legitimate public purpose and affords a clear public benefit in return. Before conveying public property to a private entity, the city's governing body should determine that the conveyance will serve a predominantly public purpose, that the city will keep enough control to ensure that purpose is carried out, and that the city will receive a return benefit.

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

District Attorney Smith and the City of Ivanhoe (as the opinion described it): The opinion did not decide whether the city could sell the specific tract and building in the street, explaining that the city's title was unclear and that resolving it required determining factual questions outside the opinion process. The opinion instead described the general principles a Type-A city must satisfy: conveying property only for a municipal purpose, treating any street title as held in trust for the public, following notice-and-bidding requirements unless an exception applies, and satisfying the public-purpose test before selling to a private entity.

General-law (Type-A) municipalities (as the opinion described it): The opinion described a general-law city as having only the authority over its streets that the Legislature or Constitution grants, including exclusive control over streets, the power to change a street, and the power to sell an abandoned part of a street or alley together with improvements. It described the default sale procedure as notice and sealed bids, with statutory exceptions for small strips, abandoned streets and alleys sold to abutting owners, and conveyances to qualifying nonprofits.

Private buyers and nonprofit organizations (as the opinion described it): The opinion described article III, section 52(a) and article XI, section 3 as not prohibiting a sale of public property to a private entity, provided the transaction serves a legitimate public purpose and the city receives a public benefit in return. It described one bidding exception as a conveyance to a nonprofit under an agreement requiring the nonprofit to use the property in a manner that primarily promotes a public purpose of the city.

Common questions

Can a Texas city sell a building that sits in the middle of a city street?
The AG did not answer for the specific Ivanhoe property, because the city's title was unclear and the question turned on facts the opinion process does not resolve. The AG explained that a Type-A city may sell such property only as authorized by the Texas Constitution and statutes.

Does a city own its streets the way a private owner owns land?
No. The AG explained that while a city may hold legal title to its streets, it holds that title as trustee for the benefit of the state and the public, not in its own right, and a general-law city has only the street authority granted by the Legislature or the Constitution.

Does the city have to take competitive bids before selling?
Generally yes. The AG explained that municipal land and real property interests must usually be sold by giving notice and taking sealed bids, but several statutory exceptions exist, including sales of small strips or abandoned streets and alleys to abutting owners and conveyances to certain nonprofits.

Can a city sell street property to a private group like the property owners' association?
The AG explained that article III, section 52(a) and article XI, section 3 of the Texas Constitution do not prohibit selling public property to a private entity if the transaction serves a legitimate public purpose and the city receives a public benefit in return. Whether a particular sale qualifies depends on the facts.

What should a city council check before conveying public property to a private buyer?
The AG explained that the governing body should determine that the conveyance will serve a predominantly public purpose, that the city will retain sufficient control to ensure the public purpose is carried out, and that the city will receive a return benefit.

Background and statutory framework

A Type-A municipality has general authority to "lease, grant, or convey" real property, but only "[t]o carry out a municipal purpose" (Tex. Loc. Gov't Code Ann. § 51.015(a) (West 2008)). When the property is a public street, the AG explained, a municipality may hold legal title but does so as trustee for the benefit of the state and the public rather than in its own right (Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 645 (Tex. 2004); Mission v. Popplewell, 294 S.W.2d 712, 715 (Tex. 1956)), and a general-law municipality has only the street authority the Legislature or the Constitution has granted (Mission, 294 S.W.2d at 715). The Legislature has granted general-law municipalities the right of exclusive control over their streets and the authority to change a street (Tex. Transp. Code Ann. § 311.002(a) (West 2013)) and has authorized them to "sell and convey land or an interest in land ... that is an abandoned part of a street or alley," a sale that "may include the improvements on the property" (Tex. Loc. Gov't Code Ann. § 253.001(a) (West Supp. 2013)).

Municipal land and real property interests generally must be sold by giving notice and taking sealed bids (id. § 272.001(a)). Statutory exceptions allow sales without notice and bidding in some circumstances: section 272.001 allows a city to sell small strips of land and "streets or alleys, owned in fee or used by easement" without bidding, but only to owners of abutting property (id. § 272.001(b)(1)-(2), (c)), and section 253.011 allows a city to convey real property to a "nonprofit organization" without notice and bidding when the transaction is governed by an agreement requiring the organization "to use the property in a manner that primarily promotes a public purpose of the municipality" (id. § 253.011(c)-(d) (West 2005)). Whether a particular exception applies depends on the facts and terms of the sale.

On the constitutional questions, article III, section 52(a) and article XI, section 3 both prohibit "gratuitous payments to individuals, associations, or corporations" (Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 383 (Tex. 2002); see also Barrington v. Cokinos, 338 S.W.2d 133, 139-40 (Tex. 1960)). A conveyance is not "gratuitous" if the political subdivision receives adequate return consideration, and is not unconstitutional if it "(1) serves a legitimate public purpose; and (2) affords a clear public benefit received in return" (Tex. Mun. League, 74 S.W.3d at 383; see also Barrington, 338 S.W.2d at 140). The AG drew the three-part screen a governing body should apply before conveying public property to a private entity from prior opinions of the office (Tex. Att'y Gen. Op. Nos. GA-0583 (2007) at 3, GA-0033 (2003) at 9). The AG noted that a quitclaim deed conveys only whatever rights the grantor has, if any (Geodyne Energy Income Prod. P'ship I-E v. Newton Corp., 161 S.W.3d 482, 486 n.12 (Tex. 2005)), that determining real estate title is not a function of an opinion (Tex. Att'y Gen. Op. Nos. GA-0750 (2009) at 2, GA-0471 (2006) at 5-6), and that a city's interest in a street can take different forms depending on the facts (Miller v. R.R. Comm'n of Tex., 185 S.W.2d 223, 224-25 (Tex. Civ. App.-Austin 1945, writ ref'd)).

Citations

Constitutional and statutory provisions:

• Tex. Const. art. III, § 52(a) (prohibition on gratuitous grants)
• Tex. Const. art. XI, § 3 (prohibition on municipal gratuitous grants)
• Tex. Loc. Gov't Code Ann. § 51.015(a) (West 2008) (Type-A authority to convey property for a municipal purpose)
• Tex. Transp. Code Ann. § 311.002(a) (West 2013) (exclusive control over and authority to change streets)
• Tex. Loc. Gov't Code Ann. § 253.001(a) (West Supp. 2013) (sale of abandoned part of a street or alley, including improvements)
• Tex. Loc. Gov't Code Ann. § 272.001(a) (notice-and-bidding requirement for sales of municipal land)
• Tex. Loc. Gov't Code Ann. § 272.001(b)(1)-(2), (c) (exception for small strips and streets/alleys sold to abutting owners)
• Tex. Loc. Gov't Code Ann. § 253.011(c)-(d) (West 2005) (conveyance to a nonprofit for a public purpose)

Cases:

• Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 645 (Tex. 2004)
• Mission v. Popplewell, 294 S.W.2d 712, 715 (Tex. 1956)
• Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 383 (Tex. 2002)
• Barrington v. Cokinos, 338 S.W.2d 133, 139-40 (Tex. 1960)
• Geodyne Energy Income Prod. P'ship I-E v. Newton Corp., 161 S.W.3d 482, 486 n.12 (Tex. 2005)
• Miller v. R.R. Comm'n of Tex., 185 S.W.2d 223, 224-25 (Tex. Civ. App.-Austin 1945, writ ref'd)

Prior Attorney General opinions:

• Tex. Att'y Gen. Op. No. GA-0583 (2007)
• Tex. Att'y Gen. Op. No. GA-0033 (2003)
• Tex. Att'y Gen. Op. No. GA-0750 (2009)
• Tex. Att'y Gen. Op. No. GA-0471 (2006)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1084
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2014/ga1084.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

October 13, 2014

The Honorable Joe R. Smith Opinion No. GA-1084
Tyler County Criminal District Attorney
Courthouse Annex Re: Authority of a municipality to sell real
100 West Bluff property including a building and improvements
Woodville, Texas 75979 located in the middle of a city street
(RQ-1196-GA)

Dear Mr. Smith:

You ask about the authority of a municipality to sell real property including a building and improvements located in the middle of a city street.[1]

You inform us that the City of Ivanhoe (the "City"), a Type-A municipality, began as a private community and was incorporated in 2009. Request Letter at 1; City Letter at 2. The property you ask about is a small tract located in the middle of a street that provides entrance into the City. Request Letter at 1. The tract contains a building formerly used as a guardhouse prior to the City's incorporation, a community sign paid for and erected by the Ivanhoe Property Owners Improvement Association (IPOIA), and other improvements. Id. You tell us that the developer executed a quitclaim deed in 2013 conveying his interest in the street and the structures to the City. City Letter at 1-2.[2] You further explain that the IPOIA wishes to continue using the sign and has offered to purchase the small tract including the building, the sign, and other improvements. Request Letter at 1.

Your first three questions ask whether the Texas Constitution and statutes, in particular, Texas Constitution article III, section 52(a) and article XI, section 3, prohibit a municipality from "sell[ing] a building that is constructed on a city street and right-of-way." Id. at 2. You also ask whether a municipality must comply with open-bidding and public-notice requirements before the municipality may agree to such a sale. Id. As a preliminary matter, we understand your questions to concern municipal authority to sell not only the building but also whatever title, right, or interest the City has in the land on which the building is located. The City's title, right, or interest in the tract, however, is not clear from the information you have provided. To answer your questions with respect to the specific transaction you describe would require the investigation and determination of factual questions, which is outside of the opinion process.[3] We will, however, discuss general legal principles of municipal authority to sell streets or other real property.

A Type-A municipality has general authority to "lease, grant, or convey" real property, but only "[t]o carry out a municipal purpose." TEX. LOC. GOV'T CODE ANN. § 51.015(a) (West 2008). When the property is a public street, however, there are additional considerations. While a municipality may hold legal title in its streets, it does so not in its own right, but as trustee for the benefit of the state and the public. Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 645 (Tex. 2004); Mission v. Popplewell, 294 S.W.2d 712, 715 (Tex. 1956).[4] A general-law municipality has only the authority over its streets that the Legislature or the Texas Constitution has granted. Mission, 294 S.W.2d at 715. The Legislature has granted general-law municipalities the right of exclusive control over their streets and the authority to change a street. TEX. TRANSP. CODE ANN. § 311.002(a) (West 2013). It has also authorized municipalities to "sell and convey land or an interest in land ... that is an abandoned part of a street or alley," and such a sale "may include the improvements on the property." TEX. LOC. GOV'T CODE ANN. § 253.001(a) (West Supp. 2013).

Generally, municipal land and real property interests must be sold by giving notice and taking sealed bids. Id. § 272.001(a). There are several statutory exceptions that allow a sale of real property without complying with notice and bidding procedures, depending on the circumstances. For example, section 272.001 allows a municipality to sell small strips of land and "streets or alleys, owned in fee or used by easement" without following bidding procedures, but only to owners of abutting property. Id. § 272.001(b)(1)-(2), (c). Another exception, section 253.011 of the Local Government Code, allows a municipality to convey real property to a "nonprofit organization" without complying with notice and bidding requirements, provided the transaction is governed by an agreement requiring the organization "to use the property in a manner that primarily promotes a public purpose of the municipality." Id. § 253.011(c)-(d) (West 2005). Whether a particular exception allows a general-law municipality to sell real property and interests to a private entity without following notice and bidding procedures will depend on the particular facts and circumstances of the property and the terms of the sale.

Article III, section 52(a) and article XI, section 3 of the Texas Constitution both prohibit "gratuitous payments to individuals, associations, or corporations." Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 383 (Tex. 2002) (regarding article III, section 52(a)); see also Barrington v. Cokinos, 338 S.W.2d 133, 139-40 (Tex. 1960) (regarding article XI, section 3). A political subdivision's conveyance of property is not "gratuitous" as contemplated by these constitutional provisions if the political subdivision receives adequate return consideration. See Tex. Mun. League, 74 S.W.3d at 383. Moreover, such a conveyance is not unconstitutional if it "(1) serves a legitimate public purpose; and (2) affords a clear public benefit received in return." Id.; see also Barrington, 338 S.W.2d at 140 (a transfer of public assets "for the direct accomplishment of a legitimate public and municipal purpose is not rendered unlawful by the fact that a privately owned business may be benefited thereby"). Before conveying public property to a private entity, the municipal governing body should determine that (1) the conveyance will serve a predominantly public purpose; (2) the municipality will retain sufficient control to ensure the public purpose is carried out; and (3) the municipality will receive return benefit. See Tex. Att'y Gen. Op. No. GA-0583 (2007) at 3 (determining that a political subdivision that grants a public thing of value to a private entity should comply with the Texas Supreme Court's "public purpose" test in Texas Municipal League); see also Tex. Att'y Gen. Op. No. GA-0033 (2003) at 9 (determining that "[a] contract that imposes upon a recipient an obligation to perform a function benefitting the public may provide adequate controls for constitutional purposes"). These constitutional provisions do not prohibit a municipality from selling real property to a private entity if the transaction serves a legitimate public purpose of the municipality and provides a return public benefit to the municipality.

SUMMARY

A Type-A municipality may sell a building located in the middle of a street only as authorized by the Texas Constitution and statutes. Generally, a municipality must sell its land or other real property interest by complying with statutory notice and bidding requirements. Whether a particular exception allows a general-law municipality to sell real property and interests to a private entity without following notice and bidding procedures will depend on the particular facts and circumstances of the property and the terms of the sale.

Article III, section 52(a) and article XI, section 3 of the Texas Constitution do not prohibit a municipality from selling a public property to a private entity provided the transaction serves a public purpose and the municipality receives a public benefit in return.

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

William A. Hill
Assistant Attorney General, Opinion Committee

[1] See Letter from Honorable Joe R. Smith, Tyler Cnty. Crim. Dist. Att'y, to Office of Att'y Gen. at 2 (Jan. 7, 2014) ("Request Letter"), http://www.texasattorneygeneral.gov/opin, and attached Letter from David Baier, Councilman & Charles Jack Brockhouse, Mayor, City of Ivanhoe, Tex. (Mar. 14, 2014) ("City Letter").

[2] See Geodyne Energy Income Prod. P'ship I-E v. Newton Corp., 161 S.W.3d 482, 486 n.12 (Tex. 2005) (stating that a quitclaim deed does not convey property, only whatever rights the grantor has in the property, if any).

[3] Determining real estate title is not a function of an attorney general opinion. See Tex. Att'y Gen. Op. Nos. GA-0750 (2009) at 2 (stating that this office cannot investigate and resolve mixed questions of fact and law); GA-0471 (2006) at 5-6 (stating that, in a particular case, whether a property interest is part of a public road is a question of fact).

[4] See Miller v. R.R. Comm'n of Tex., 185 S.W.2d 223, 224-25 (Tex. Civ. App.-Austin 1945, writ ref'd) (observing that, depending on the facts, a municipality may own a street in fee, subject to the public's street easement, or merely hold easement to use the property of abutting owners for street purposes).