Can a Texas port navigation district limit how many years a contract can keep automatically renewing?

Plain-English summary

The Port of Port Arthur Navigation District signed a two-year contract with a stevedoring company to load and unload cargo. The contract renews automatically for one-year terms whenever both sides want it to continue, with no limit on how many times it can roll over. The District considered adopting a policy that would cap the total at five years, after which it would put a new contract out for offers if the value exceeded $25,000. A state representative asked the Attorney General whether the District could adopt that cap.

The opinion concluded it could, with one caveat. A navigation district is a governmental agency with only the powers expressly delegated by statute or clearly implied from them. The District operates under several layers of law: article XVI, section 59 of the Constitution, its 1963 and later enabling acts, chapters 60 and 62 of the Water Code, and (for public-works contracts) part of the Local Government Code, though the loading-and-unloading contract is not a public-works contract. The opinion worked through chapter 60, subchapter N's purchasing rules, noting that the District's board had earlier made a factual determination that these loading-and-unloading services were "professional services" and used the request-for-proposal procedure in section 60.405, and the opinion proceeded on the assumptions that this characterization and procedure were proper (matters that could be challenged only in court). On the actual question, the opinion found that no statute either permits or forbids a policy limiting an automatic-renewal option. But the District's express authority to adopt rules and regulations to manage and regulate its affairs implies the authority to adopt such a policy. Because a navigation district may make contract terms similar to those private parties make, including automatic-renewal options, it may also by regulation limit the use of those terms, capping how many years it will let the contract renew. So the District may adopt the five-year cap, assuming the policy does not contravene any restrictions or covenants in its tax-exempt revenue bonds, which the request did not describe and the opinion therefore could not assess.

Currency note

This opinion was issued in 2001. 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. The Water Code purchasing provisions and the District's enabling acts can change, so verify the current statutes before relying on any specific section, dollar threshold, or rule here.

What the opinion meant for those who asked

The Port of Port Arthur Navigation District (what the opinion held for it): The opinion held that the District has implied authority to adopt a policy capping how many years a loading-and-unloading contract may automatically renew, subject to its bond restrictions and covenants.

Other navigation and port-authority districts (what the opinion held for them): The opinion confirmed that a district's express rulemaking power lets it limit contract terms like automatic-renewal options, just as it may include such terms in the first place.

Contractors dealing with these districts (what the opinion held for them): The opinion treated automatic-renewal limits as a permissible exercise of district authority, and noted that whether a services contract counts as "professional services" exempt from competitive bidding is a fact question the district decides, reviewable only in court.

Common questions

Can a Texas navigation district put a time limit on an auto-renewing contract?
The opinion concluded yes: its power to adopt rules to manage its affairs implies authority to cap the number of automatic renewals, here at five years.

Does any statute specifically allow or forbid such a cap?
No. The opinion found that neither chapter 60 nor chapter 62 of the Water Code nor the District's enabling acts addresses the policy, so it rested on the District's implied rulemaking authority.

Is the loading-and-unloading contract exempt from competitive bidding?
The opinion noted the District's board had found these services to be "professional services" and used the request-for-proposal procedure, and it assumed that determination was proper; whether it holds up is a fact question for the courts.

Does anything override the District's authority to adopt the cap?
The opinion conditioned its answer on the policy not conflicting with restrictions or covenants in the District's tax-exempt revenue bonds, which it could not evaluate without details.

Background and statutory framework

Navigation districts are governmental agencies under article XVI, section 59 of the Texas Constitution and Water Code section 62.102, with only expressly delegated or clearly implied powers (Tri-City Fresh Water Supply District No. 2 v. Mann). The Port of Port Arthur Navigation District was created by 1963 enabling legislation and amended by later acts, and has authority to adopt bylaws, rules, and regulations and make contracts to accomplish its purposes. It is subject to chapters 60 and 62 of the Water Code; chapter 60, subchapter N (adopted by the District) sets purchasing procedures, including noncompetitive procedures for contracts up to $25,000 and request-for-proposal or competitive-bidding procedures above that (sections 60.401-.412), with insurance and high-technology items purchasable under section 60.405. Prior letter opinions (LO-97-031, LO-97-059) addressed whether loading-and-unloading contracts must be competitively bid and treated the personal-or-professional-services question as a fact issue for the district. The opinion relied on the rule that a district may make contract terms like private parties (Ehlinger v. Clark; H-1025; JM-1043) and described automatic-renewal contracts by reference to Aetna Life Insurance Co. v. Eilers.

Citations

Constitutional and statutory provisions:

• Tex. Const. art. XVI, § 59(a), (b)
• Tex. Water Code Ann. §§ 60.401, 60.403, 60.404, 60.405, 60.406, 60.407, 60.408, 60.412, 62.001(1), 62.021, 62.102 (Vernon 1988 & Supp. 2001)
• Tex. Loc. Gov't Code Ann. § 271.024 (Vernon 1999)
• Act of May 13, 1963, 58th Leg., R.S., ch. 197, 1963 Tex. Gen. Laws 528 (creating District); Act of Mar. 21, 1979, 66th Leg., R.S., ch. 25, § 1, 1979 Tex. Gen. Laws 41; Act of May 27, 1999, 76th Leg., R.S., ch. 1577, § 1, 1999 Tex. Gen. Laws 5411

Cases:

• Aetna Life Ins. Co. v. Eilers, 367 S.W.2d 732 (Tex. Civ. App.-Waco 1963, writ ref'd)
• Tri-City Fresh Water Supply Dist. No. 2 v. Mann, 142 S.W.2d 945 (Tex. 1940)
• Ehlinger v. Clark, 8 S.W.2d 666 (Tex. 1928)

Prior Attorney General opinions:

• Tex. Att'y Gen. Op. Nos. JC-0202 (2000); JC-0233 (2000); JC-0326 (2001); H-1025 (1977); JM-1043 (1989)
• Tex. Att'y Gen. LO-97-031; LO-97-059

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0354
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2001/jc0354.pdf

Original opinion text

Best-effort transcription from the official scanned PDF. Minor character-level errors from the source OCR have been corrected; the linked PDF is authoritative.

OFFICE OF THE ATTORNEY GENERAL - STATE OF TEXAS

JOHN CORNYN

March 14, 2001

The Honorable Ron Lewis
Chair, Committee on Energy Resources
Texas House of Representatives
P.O. Box 2910
Austin, Texas 78768-2910

Opinion No. JC-0354

Re: Whether the Port of Port Arthur Navigation District may adopt a policy limiting the number of years it will consent to allow an existing loading and unloading contract to automatically renew to five (RQ-0298-JC)

Dear Representative Lewis:

The Port of Port Arthur Navigation District of Jefferson County (the "Navigation District" or "District") has entered a two-year contract with a stevedoring company to load and unload cargo. The contract provides that it will automatically be renewed for one-year terms if "both parties wish" the agreement to continue. Request Letter, supra, at 1; see Aetna Life Ins. Co. v. Eilers, 367 S.W.2d 732, 735 (Tex. Civ. App.-Waco 1963, writ ref'd) (describing contract that extends its term automatically as "self-operative at a predetermined point agreed upon"). The Navigation District evidently has discussed adopting a policy that would limit the number of years that the District's governing body may agree to the contract's automatic renewal to a total period of five years. See Request Letter, supra, at 1-2. At that time, we assume that, if the contract is valued at more than $25,000, the District would notify the public that it will award a new contract and invite interested parties to submit offers. If the policy you describe does not contravene any restrictions or covenants in the District's tax-exempt revenue bonds, we conclude that the Navigation District may adopt it.

(Footnote: Letter from Honorable Ron Lewis, Chair, Committee on Energy Resources, House of Representatives, to Honorable John Cornyn, Attorney General of Texas (Oct. 17, 2000) (on file with Opinion Committee) [hereinafter Request Letter].)

As a governmental agency, see TEX. CONST. art. XVI, § 59(a), (b) (designating navigation districts as governmental agencies); TEX. WATER CODE ANN. § 62.102 (Vernon 1988) (same), the Navigation District has "only those powers that are expressly delegated to it by statute or that are clearly implied from its express powers." See Tex. Att'y Gen. Op. No. JC-0202 (2000) at 2 (citing Tri-City Fresh Water Supply Dist. No. 2 v. Mann, 142 S.W.2d 945, 946 (Tex. 1940)). Implied powers are "'indispensable'" to accomplishing the purposes for which the district was created; they are more than "'merely convenient'" or "'useful.'" Id. (quoting Tri-City Fresh Water Supply Dist. No. 2, 142 S.W.2d at 947). Applicable statutes define the extent of the Navigation District's express and implied powers.

The Navigation District is subject to several "layers" of laws. First, article XVI, section 59 of the Texas Constitution authorizes the legislature to create conservation and reclamation districts as "governmental agencies and bodies politic and corporate with [the] powers of government" authorized to exercise rights, privileges, and functions to conserve and reclaim natural resources "as may be conferred by law." TEX. CONST. art. XVI, § 59(a), (b). Second, in accordance with its authority under article XVI, section 59, the legislature in 1963 adopted specific enabling laws creating the Navigation District to improve navigation; to maintain, develop, extend, and improve port facilities, wharf and dock facilities; and to develop the Port of Port Arthur. See Act of May 27, 1999, 76th Leg., R.S., ch. 1577, § 1, sec. 1(a), 1999 Tex. Gen. Laws 5411, 5411-12; see also Act of May 13, 1963, 58th Leg., R.S., ch. 197, 1963 Tex. Gen. Laws 528, 528-39 (creating District). The District has "all powers, rights, privileges[,] and functions conferred by General Law upon any district . . . created" under article XVI, section 59 of the constitution and may adopt bylaws, rules, and regulations to manage and regulate its affairs and to make contracts necessary to accomplish its purposes. Act of Mar. 21, 1979, 66th Leg., R.S., ch. 25, § 1, secs. 2(e), (f), 20, 1979 Tex. Gen. Laws 41, 41-42. Third, the District is subject to chapter 60 of the Water Code, which provides generally for navigation districts, see TEX. WATER CODE ANN. ch. 60 (Vernon 1988 & Supp. 2001), and to chapter 62 of the Water Code, which applies to navigation districts created under article XVI, section 59 of the Texas Constitution, see id. §§ 62.001(1), .021 (Vernon 1988). Certain of the District's public-works contracts are also subject to chapter 271, subchapter B of the Local Government Code, but the contract about which you ask is not a public-works contract subject to these provisions. See TEX. LOC. GOV'T CODE ANN. § 271.024 (Vernon 1999) (limiting competitive-bidding procedures set out in that subchapter to contracts to construct, repair, or renovate structure, road, highway, "or other improvement or addition to real property").

You state that the Navigation District has adopted the contracting requirements in chapter 60, subchapter N of the Water Code. See Request Letter, supra note 1, at 1. Section 60.401 of the Water Code, part of subchapter N, states that the subchapter applies only to a port-authority district that properly has adopted the subchapter "for a particular purchase or period or for all purchases and contracts." TEX. WATER CODE ANN. § 60.401(a), (b) (Vernon 1988). Chapter 60, subchapter N articulates noncompetitive procedures that may be used to award a contract valued at no more than $25,000 and request-for-proposal or competitive-bidding procedures for a contract valued at more than $25,000. See id. §§ 60.403, .406(a) (Vernon Supp. 2001). Insurance or high-technology items may be purchased using the statutory request-for-proposal procedures in section 60.405. See id. § 60.405 (Vernon 1988). Purchases that will be competitively bid are subject to the competitive-bidding procedures in section 60.404, concerning notice of a proposed purchase, see id. § 60.404 (Vernon Supp. 2001); section 60.407, providing for opening of the bids, see id. § 60.407 (Vernon 1988); and section 60.408, governing the contract award, see id. § 60.408. A contract to purchase "personal or professional services" is exempt from the requirements of sections 60.404 (containing competitive-bidding notice requirements) and 60.405 (containing request-for-proposal requirements). See id. §§ 60.404, .405, .412 (Vernon 1988 & Supp. 2001).

A stevedoring company has executed a contract with the Navigation District to perform loading and unloading services. See Request Letter, supra note 1, at 1. You indicate that the primary term of the contract is limited to two years "[d]ue to certain restrictions and covenants contained in tax-exempt revenue bonds issued and sold by the" District. Id. The contract provides for its automatic renewal at the end of the two-year primary term "in the event both parties wish to continue" the relationship. Id. If the contract is automatically renewed, the contract continues in effect for an additional year. See id. We understand that the contract does not limit the number of times the contract may be automatically renewed. See id.

This office has considered various aspects of this particular contract before. Letter Opinion 97-031 concludes that the proposed contract, which we were informed was primarily for loading and unloading services, must be competitively bid if its value exceeds $25,000. See Tex. Att'y Gen. LO-97-031, at 2, 3. The opinion reasons that such a contract is not one for personal or professional services that is excepted from chapter 60, subchapter N's competitive-bidding requirements even though it includes incidental professional services, such as accounting. See id. at 2. Letter Opinion 97-059 subsequently affirmed that a contract that requires "only the provision of loading and unloading services" is not a contract for personal or professional services that is exempt from statutory competitive-bidding requirements. See Tex. Att'y Gen. LO-97-059, at 1. Nevertheless, Letter Opinion 97-059 continues, whether a particular contract for services that includes loading and unloading services is a contract for personal and professional services and therefore exempt from competitive-bidding requirements is a fact question that the Navigation District must resolve. See id. at 1-2. After Letter Opinion 97-059 was issued, you recount, the District's "Board of Commissioners made a factual determination that the services to be provided under the loading and unloading contract involved significant and varied management and marketing functions which required special knowledge and a high order of learning[,] skill[,] and intelligence and concluded that the services to be provided under the loading and unloading contract . . . constitute professional services." Request Letter, supra note 1, at 1. "Therefore, . . . the Port utilized the request for proposals procedures set forth in Section 60.405 of the Texas Water Code." Id.

We address your question - whether the Navigation District may adopt a policy under which a contract for loading and unloading services, which provides for its automatic renewal each year, may be renewed no more than five years - based upon several assumptions. We assume first that the Navigation District correctly determined that this contract for loading and unloading services is excepted from chapter 60, subchapter N's competitive-bidding requirements. (Footnote: But see generally Tex. S.B. 670, 77th Leg., R.S. (2001), Tex. H.B. 1062, 77th Leg., R.S. (2001). These companion bills, which were identical when filed, would validate and confirm "in all respects" certain governmental acts or proceedings taken by a port-authority district "before March 1, 2001." Tex. S.B. 670, §§ 2, 3, 77th Leg., R.S. (2001); Tex. H.B. 1062, § 2, 3, 77th Leg., R.S. (2001).) Because of its fact-based nature, the District's determination may be challenged only in court. See Tex. Att'y Gen. LO-97-059, at 1. Second, we assume that this contract properly may be awarded using the request-for-proposal procedure set forth in section 60.405 of the Water Code. (Footnote: But see generally note 2, supra. To review a similar situation involving the Port of Beaumont Navigation District, compare Attorney General Opinion JC-0233: "This office concluded in Letter Opinion 97-031 that the Port of Beaumont Navigation District must competitively bid a contract for the loading and unloading of cargo. See Tex. Att'y Gen. LO-97-031, at 3. The Port does not concur with the letter opinion but argues that the loading and unloading services must comply with competitive bidding requirements or proposal procedures, and therefore it sought proposals pursuant to section 60.405 of the Water Code instead of competitive bids under section 60.404. [Citation omitted.]" Tex. Att'y Gen. Op. No. JC-0233 (2000) at 1 n.1. Because the procedural issues were "not germane" to the question presented in Attorney General Opinion JC-0233, we did not address them. See id. The legality of the request-for-proposal procedure used by the Port of Port Arthur Navigation District here likewise is not germane to the issue you present.) See TEX. WATER CODE ANN. § 60.405(a) (Vernon 1988) (stating that "[i]nsurance or high technology items may be purchased under the procedure provided by this section."). Construing analogous statutory language, we recently have indicated that the statutory competitive-sealed-proposal procedure with which a municipality must comply may be used only to procure high-technology items or to purchase insurance. See Tex. Att'y Gen. Op. No. JC-0326 (2001) at 4 (suggesting that statute permitting municipality to use competitive-sealed-proposal procedure "only for high technology procurements or . . . the purchase of insurance" does not apply to advertising contract).

Nothing in the statutes either permits or prohibits the Navigation District to adopt a policy limiting the term of an automatic-renewal option. Chapter 60, subchapter N of the Water Code does not mention such a policy, even assuming that a contract for personal or professional services may be awarded under section 60.404 or 60.405. See TEX. WATER CODE ANN. § 60.412(a)(4) (Vernon 1988). Similarly, neither chapter 62 of the Water Code nor the District's enabling acts address the type of policy the Navigation District wishes to adopt.

In our opinion, the District's express authority to adopt rules and regulations to manage and regulate its affairs, see Act of Mar. 21, 1979, 66th Leg., R.S., ch. 25, § 1, secs. 2(e), 20, 1979 Tex. Gen. Laws 41, 41, 45, implies authority to adopt a policy limiting the number of times a contract may be automatically renewed. A navigation district may execute contract terms "similar to those made by citizens generally." Cf. Tex. Att'y Gen. Op. No. H-1025 (1977) at 2 (quoting Ehlinger v. Clark, 8 S.W.2d 666, 671 (Tex. 1928)) (referring to county authority to include automatic-extension provision in lease); Tex. Att'y Gen. Op. No. JM-1043 (1989) at 2 (same). Thus, a navigation district may include in a contract an option to extend the contract or to automatically renew the lease. See Tex. Att'y Gen. Op. Nos. JM-1043 (1989) at 3; H-1025 (1977) at 2. Conversely, a navigation district may, by regulation, limit the use of those terms, including the automatic-renewal option, by adopting a policy to limit the number of years that the District may agree to continue the contract.

Thus, the Navigation District may adopt a policy limiting the number of years it will permit a contract for loading and unloading services automatically to renew. We assume such a policy comports with any applicable restrictions and covenants contained in tax-exempt revenue bonds issued by the District. You do not describe any restrictions and covenants; consequently, we cannot comment upon the impact they may have on a District policy.

SUMMARY

The Port of Port Arthur Navigation District may adopt a policy limiting to five the number of years it will permit a contract for loading and unloading services automatically to renew, assuming that the policy does not contravene any restrictions or covenants in the District's tax-exempt revenue bonds.

JOHN CORNYN
Attorney General of Texas

ANDY TAYLOR
First Assistant Attorney General

CLARK KENT ERVIN
Deputy Attorney General - General Counsel

SUSAN D. GUSKY
Chair, Opinion Committee

Kymberly K. Oltrogge
Assistant Attorney General - Opinion Committee