What counts as 'site improvements' a Texas economic development corporation can pay for?

Plain-English summary

Texas cities raise sales tax money for economic development corporations, and those corporations may only spend it on a tight list of "projects" the Legislature has set out. The El Campo Economic Development Corporation ran a "Revitalization and Site Improvement Campaign" that gave matching grants to local retail and industrial businesses for things like exterior painting, glass replacement, debris cleanup, accent lighting, new landscaping, and signage. The corporation said it could fund all of that under the phrase "site improvements" in section 501.103(1) of the Local Government Code. The Wharton County Attorney asked the AG whether those expenditures really qualify.

The AG split the question in two. It would not decide whether the campaign was a valid use of funds, because whether a particular expenditure is authorized is a fact question that belongs, in the first instance, to the corporation's board of directors and is reviewed by courts only for abuse of discretion. What the AG could do was define the term. "Site improvements" is not defined in the statute and no court has construed it, so the AG used the ordinary meaning of the words: a "site" is the ground on which something is built, and an "improvement" is a permanent enhancement.

The AG then narrowed that by looking at the company the word keeps. Section 501.103(1) lists "site improvements" alongside streets, roads, rail spurs, water and sewer utilities, electric and gas utilities, and drainage, all of which are about preparing ground for development. Under the noscitur a sociis canon (a word is known by the words around it), "site improvements" should be read the same way: an improvement or permanent enhancement that relates to developing the ground on which a town, building, or monument is constructed. Whether the El Campo grants fit that description was left to the board.

Currency note

This opinion was issued in 2016. 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. Chapters 501 and 504 of the Local Government Code governing economic development corporations may have been amended since 2016, so confirm the current statutes before relying on these specifics.

What the opinion meant for those who asked

The El Campo Economic Development Corporation and its board (as the opinion described it): The opinion told the board that defining whether a particular expenditure qualifies as a project was its own call in the first instance, subject to judicial review, and gave it a definition of "site improvements" to apply rather than a yes-or-no answer on the campaign.

The Wharton County Attorney (as the opinion described it): The opinion answered only the legal meaning of "site improvements" and expressly declined to opine on whether the campaign expenditures properly constituted a project.

Other Type A economic development corporations (as the opinion described it): The opinion described section 501.103 as an exclusive, limited list, so an expenditure that does not fall precisely within its terms is not an authorized project, and read "site improvements" in light of the development-related items listed alongside it.

Common questions

What does "site improvements" mean for an economic development corporation?
The AG concluded it means an improvement or permanent enhancement that relates to developing the ground on which a town, building, or monument is constructed, read in light of the other development items listed in section 501.103(1).

Can an EDC pay for storefront painting, signage, and landscaping grants?
The AG did not decide that. It said whether a specific expenditure qualifies as a project is a fact question for the corporation's board of directors in the first instance, subject to judicial review.

Why couldn't the AG just answer whether the El Campo campaign was allowed?
The AG explained that whether a particular expenditure is authorized involves fact issues that cannot be resolved in an AG opinion and belongs first to the corporation's board.

Is the list of allowed projects open-ended?
No. The AG noted this office had previously determined section 501.103 is an exclusive, limited list, so an expenditure that does not fall precisely within its terms is not an authorized project.

How is "site improvements" interpreted when the statute does not define it?
The AG used the ordinary meaning of the words and the noscitur a sociis canon, reading the term consistently with the neighboring infrastructure items (streets, utilities, drainage) that relate to preparing an area for development.

Background and statutory framework

A Type A economic development corporation is governed mainly by chapters 504 and 501 of the Local Government Code and may finance only the "projects" specified in subchapter C (Tex. Loc. Gov't Code §§ 501.002, 501.151, 504.001). Section 501.103(1) lists qualifying project expenditures found required or suitable for infrastructure necessary to promote or develop business, including streets and roads, rail spurs, water and sewer utilities, electric or gas utilities, drainage, site improvements, and related improvements (Tex. Loc. Gov't Code § 501.103). A prior opinion treated that list as exclusive.

Because the statute does not define "site improvements" and no court had construed it, the AG used the ordinary meaning of "site" and "improvement" (William Marsh Rice Univ. v. Refaey, 459 S.W.3d 590; Karisch v. Allied-Signal, Inc., 837 S.W.2d 679), then applied the noscitur a sociis canon to read the term in harmony with the surrounding development-related items (Greater Houston P'ship v. Paxton, 468 S.W.3d 51; TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432). Whether any particular expenditure qualifies remained a determination for the board, reviewed for abuse of discretion (Pearce v. City of Round Rock, 78 S.W.3d 642).

Citations

Statutory provisions:

• Tex. Loc. Gov't Code § 501.103 (project expenditures, including "site improvements")
• Tex. Loc. Gov't Code § 501.151 (corporation as a constituted authority to finance projects)
• Tex. Loc. Gov't Code § 501.002 (definitions of corporation, project, Type A corporation)
• Tex. Loc. Gov't Code § 504.001 (Type A economic development corporations)

Cases:

• William Marsh Rice Univ. v. Refaey, 459 S.W.3d 590, 593 (Tex. 2015)
• Karisch v. Allied-Signal, Inc., 837 S.W.2d 679, 680 (Tex. App.-Corpus Christi 1992, no writ)
• Greater Houston P'ship v. Paxton, 468 S.W.3d 51, 61 (Tex. 2015)
• TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 441 (Tex. 2011)
• Pearce v. City of Round Rock, 78 S.W.3d 642 (Tex. App.-Austin 2002, pet. denied)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0065
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2016/kp0065.pdf

Original opinion text

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

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

February 16, 2016

The Honorable G. A. Maffett III Opinion No. KP-0065
Wharton County Attorney
100 South Fulton Street, Suite 105 Re: Definition of the term "site
Wharton, Texas 77488 improvements" for purposes of section 501.103
of the Local Government Code, relating to an
economic development corporation's funding
of the same (RQ-0048-KP)

Dear Mr. Maffett:

You ask for an opinion on the meaning of the term "site improvements" under section 501.103 of the Local Government Code. [1] Specifically, you inquire whether a program of the El Campo Economic Development Corporation ("Corporation") falls within the scope of the term. See Request Letter at 2. You explain that the Corporation has created a "Revitalization and Site Improvement Campaign" ("campaign") to promote certain businesses located in the City of El Campo. Id. You tell us the campaign uses Corporation funds to "provide matching grants to qualified El Campo businesses (both retail and industrial) to enhance their property and provide visual improvements to their facilities." Id. Under the campaign, eligible improvements include "exterior painting, glass replacement, general property clean-up or removal of debris, architectural or accent lighting, new landscaping, and signage." Id. You inform us that the Corporation bases its authority to use its economic development funds for this campaign on the term "site improvements" contained in subsection 501.103(1) of the Local Government Code. Id. You ask whether the Corporation's expenditures for these improvements qualify as site improvements under section 501.103. Id. As this office has previously observed, the question whether a particular expenditure of an economic development corporation is authorized is one that involves fact issues and cannot be resolved in an attorney general opinion. See Tex. Att'y Gen. Op. No. GA-1066 (2014) at 1 (relating to the propriety of expenditures of a Type B economic development corporation under chapters 501 and 505, Local Government Code). The question "is a matter in the first instance for the corporation's board of directors." Id. at 2. Thus, we can advise you only generally about the meaning of the term "site improvements." See id.

A Type A economic development corporation is governed primarily by chapters 504 and 501 of the Local Government Code. [2] See TEX. LOC. GOV'T CODE §§ 504.001-.353 (governing Type A corporations); id. § 501.002(15) (defining a Type A corporation as one governed by chapter 504). Under chapter 501 of the Local Government Code, a Type A "corporation is a constituted authority for the purpose of financing one or more projects." Id. § 501.151; see also id. § 501.002(5) (defining corporation as a corporation organized under subtitle C1, title 12, Local Government Code). A "project" is a "project specified as such under subchapter C." See id. § 501.002(13); see also id. §§ 501.101-.108 (subchapter C). Subsection 501.103(1), about which you ask, includes as a "project" those "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 related improvements." Id. § 501.103(1). This office has previously determined that section 501.103 is an exclusive, or limited, list such that "an expenditure ... that does not fall precisely within [its] contours ... is not an authorized project." Tex. Att'y Gen. Op. No. GA-1066 (2014) at 3.

The term "site improvements" is undefined by chapters 501 and 504. And we find no judicial opinion defining the term. Thus, we look to its ordinary meaning. See William Marsh Rice Univ. v. Refaey, 459 S.W.3d 590, 593 (Tex. 2015) (stating that courts "give undefined words 'their common, ordinary meaning unless the statute clearly indicates a different result'"). "Site" is commonly defined as "an area of ground on which a town, building, or monument is constructed." NEW OXFORD AMERICAN DICTIONARY 1634 (3d ed. 2010). "Improvement" means "an example or instance of improving or being improved" or a permanent enhancement. Id. at 875; Karisch v. Allied-Signal, Inc., 837 S.W.2d 679, 680 (Tex. App.-Corpus Christi 1992, no writ) (defining "improvement" to "include everything that permanently enhances the value"). Together, the two words may be generally construed to mean the improvement or permanent enhancement of an area of ground on which a town, building, or monument is constructed.

Subsection 501.103(1) provides additional, relevant context. Along with "site improvements," subsection 501.103(1) lists other items for which an expenditure constitutes a project. See TEX. LOC. GOV'T CODE § 501.103(1). These terms-"streets and roads, rail spurs, water and sewer utilities, electric utilities, or gas utilities, [and] drainage"-all relate to preparing an area for development. Id. Noscitur a sociis is a canon of statutory construction providing "that the meaning of a word or phrase, especially one in a list, should be known by the words immediately surrounding it." Greater Houston P'ship v. Paxton, 468 S.W.3d 51, 61 (Tex. 2015) (citing TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 441 (Tex. 2011)). Given the limited nature of the other items in subsection 501.103(1), the term "site improvement" should be construed similarly to mean an improvement or permanent enhancement that relates to the development of an area of ground on which a town, building, or monument is constructed. But, as noted previously, it is for the Corporation's board of directors to determine, in the first instance and subject to judicial review, whether the expenditures qualify as an improvement or permanent enhancement that relates to the development of an area of ground on which a town, building, or monument is constructed. [3] See Tex. Att'y Gen. Op. No. GA-1066 (2014) at 2-3 (citing Pearce v. City of Round Rock, 78 S.W.3d 642-47 (Tex. App.-Austin 2002, pet. denied) (utilizing abuse of discretion standard to review decision of city's development review board)).

SUMMARY

Under subsection 501.103(1) of the Local Government Code, the term "site improvement" should be construed to mean an improvement or permanent enhancement that relates to the development of an area of ground on which a town, building, or monument is constructed. The question whether any particular expenditure constitutes a project under section 501.103 is a question in the first instance for the board of the economic development corporation to determine.

Very truly yours,

KEN PAXTON
Attorney General of Texas

CHARLES E. ROY
First Assistant Attorney General

BRANTLEY STARR
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 G. A. Maffett III, Wharton Cty. Att'y, to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (Aug. 17, 2015), https://www.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").

[2] You tell us the Corporation was created as a Section 4A Economic Development Corporation. See Request Letter at 1.

[3] We address only the definition of the term "site improvements." See Request Letter at 1-2. We cannot opine about the ultimate determination of whether the Corporation's expenditures in furtherance of the campaign properly constitute a project under subsection 501.103(1). See TEX. LOC. GOV'T CODE § 501.103(1) (requiring an expenditure to be "required or suitable for infrastructure necessary to promote or develop new or expanded business enterprises"). This determination is also one for the Corporation's board of directors. See Tex. Att'y Gen. Op. No. GA-1066 (2014) at 2.