What kinds of entertainment projects can a Texas economic development corporation pay for?

Plain-English summary

Texas cities can set up economic development corporations and let them spend a portion of local sales tax on certain projects. Representative Joseph Deshotel, who chaired the House Committee on Land and Resource Management, asked the Attorney General how far one of those spending categories reaches. The category is in Local Government Code section 505.152, which a Type A corporation can tap if the city's voters approve. That section, titled "Projects Related to Recreational or Community Facilities," defines a "project" to include facilities suitable for sports, athletic, entertainment, tourist, convention, and public park purposes, and then gives a long list of examples: stadiums, ball parks, auditoriums, amphitheaters, concert halls, parks, open space, museums, exhibition facilities, and related support facilities. The Representative asked whether two specific things would count as "entertainment" projects.

The first was funding building renovations and equipment upgrades for a local, privately owned radio station. The AG started with a ground rule it has stated before: whether a particular project or expenditure is authorized involves fact questions that the opinion process does not resolve, and that a corporation's board of directors decides in the first instance. So the opinion answered the general construction question instead of the specific case. The word "entertainment" is broad, but section 505.152 narrows it by listing particular kinds of facilities. Under a long-standing rule of reading statutes, a general term used alongside specific examples takes its meaning from those examples, and an unlisted item has to be of the same kind or class as the listed ones. The listed facilities, the AG observed, all share a trait: they are spaces open and accessible to the public, where the community gathers for events or recreation. On that reading, a court could conclude that a private radio station's renovations and equipment are not the same kind or class of project, and that section 505.152 does not authorize funding them. The AG was careful to add that the board still has broad discretion to decide whether a specific project is "required or suitable for use for entertainment."

The second was funding improvements to a city-owned pavilion. As the Representative described it, the pavilion is used for public community events, such as the Southeast Texas Mardi Gras and the Zachary Breaux Jazz Festival, and residents can rent it for family gatherings and school functions. The AG said that kind of facility looks like the open, publicly accessible recreational and community facilities section 505.152 expressly authorizes, so a court would likely conclude the statute authorizes the project. As with the radio station, though, the office could not perform the factual review needed to confirm that a particular corporation may fund a particular pavilion. A footnote also flagged a separate constitutional limit: when public money benefits a private party, article III, section 52 of the Texas Constitution requires a public purpose, public controls, and adequate consideration.

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 Deshotel and the committee (as the opinion described it): The opinion answered the general construction questions, that section 505.152's "entertainment" authority reaches only projects of the same kind or class as the public facilities the statute lists, that a private radio station likely falls outside it, and that a public city pavilion likely falls within it, while leaving the specific determination to the corporation's board.

Economic development corporations and their boards (as the opinion described it): The opinion described the board as having broad discretion to decide whether a specific project is "required or suitable for use for entertainment," but bound by the same-kind-or-class limit on the listed facilities and, where public funds benefit a private party, by the article III, section 52 public-purpose test the opinion set out in a footnote.

The radio station and the city pavilion (as the opinion described it): The opinion described the private radio station's renovations and equipment upgrades as a project a court could find not authorized under section 505.152, and the publicly used city pavilion as a project a court would likely find authorized, in both cases subject to the board's factual review.

Common questions

What is a Type A economic development corporation allowed to fund?
The AG described chapters 501 to 505 as authorizing municipalities to create economic development corporations, with each corporation's permitted projects set by the statutes that govern it. A Type A corporation, governed by chapter 504, may by voter approval use sales and use tax for projects permitted under chapter 505, including the recreational and community facility projects in section 505.152.

Can a development corporation pay to upgrade a private radio station?
The AG would not decide a specific project, but explained that a court could conclude a private radio station's renovations and equipment are not the same kind or class as the public facilities section 505.152 lists, so the statute likely does not authorize that funding.

Can it fund improvements to a city-owned public pavilion?
The AG said a pavilion used for public community events, like the festivals the request described, looks like the open, publicly accessible facilities section 505.152 expressly authorizes, so a court would likely conclude the project is authorized, though the corporation's board has to confirm the facts.

Why does it matter whether a facility is open to the public?
The AG explained that the examples in section 505.152 (stadiums, parks, museums, and the like) share the trait of being open and accessible to the public, so any unlisted project has to be like them to qualify.

Does the AG decide whether a specific project qualifies?
No. The AG explained that whether a particular project or expenditure is authorized is a fact question for the corporation's board of directors in the first instance, and is not resolved in the opinion process.

Background and statutory framework

Chapters 501 to 505 of the Local Government Code authorize municipalities to create economic development corporations, with the permitted "projects" defined and limited by the chapters that apply to each corporation (Tex. Loc. Gov't Code Ann. §§ 501.001-505.355; § 501.002(13), (16) (West Supp. 2013)). A Type A corporation is governed by chapter 504, and section 504.152 lets a municipality's voters authorize the use of sales and use tax for projects permitted under chapter 505 (Tex. Loc. Gov't Code Ann. §§ 504.001-.353; § 504.152, § 504.152(b) (West Supp. 2013)). Section 505.152, "Projects Related to Recreational or Community Facilities," defines "project" to include facilities suitable for professional and amateur sports, athletic, entertainment, tourist, convention, and public park purposes, listing examples such as stadiums, ball parks, auditoriums, amphitheaters, concert halls, parks, open space improvements, museums, and exhibition facilities, plus related support facilities (Tex. Loc. Gov't Code Ann. § 505.152 (West Supp. 2013)).

The AG explained that, while the Code Construction Act says "including" does not create a presumption that components not expressed are excluded (Tex. Gov't Code Ann. § 311.005(13) (West 2013)), an unlisted object must still be like the listed ones to fall within an illustrative list (Cnty. of Harris v. Eaton, 573 S.W.2d 177, 179 (Tex. 1978)), and a general word used with specific designations is restricted to that designation (Hilco Elec. Co-op., Inc. v. Midlothian Butane Gas Co., 111 S.W.3d 75, 81 (Tex. 2003)). Because the listed facilities are all open and accessible to the public, the AG concluded a court could find a private radio station's renovations outside the statute and a publicly used city pavilion within it, while reserving the specific determination to the board. A footnote noted that an economic development corporation's grant of public funds benefiting a private corporation is limited by article III, section 52 of the Texas Constitution, which the Texas Supreme Court has read to require a predominant public purpose, adequate public controls, and adequate consideration (Tex. Const. art. III, § 52(a); Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 384 (Tex. 2002)).

Citations

Statutory and constitutional provisions:

• Tex. Loc. Gov't Code Ann. §§ 501.001-505.355 (West Supp. 2013) (economic development corporations)
• Tex. Loc. Gov't Code Ann. § 501.002(13), (16) (West Supp. 2013) (definitions of "project")
• Tex. Loc. Gov't Code Ann. §§ 504.001-.353 (West Supp. 2013) (Type A corporations)
• Tex. Loc. Gov't Code Ann. § 504.152, § 504.152(b) (West Supp. 2013) (election to fund chapter 505 projects; possible ballot limits)
• Tex. Loc. Gov't Code Ann. § 505.152 (West Supp. 2013) (recreational or community facility projects)
• Tex. Gov't Code Ann. § 311.005(13) (West 2013) ("including" not a presumption of exclusion)
• Tex. Const. art. III, § 52(a) (limit on public funds benefiting private parties)

Cases:

• Cnty. of Harris v. Eaton, 573 S.W.2d 177, 179 (Tex. 1978)
• Hilco Elec. Co-op., Inc. v. Midlothian Butane Gas Co., 111 S.W.3d 75, 81 (Tex. 2003)
• Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 384 (Tex. 2002)

Other authority:

• Tex. Att'y Gen. Op. No. GA-0819 (2010)
• Tex. Att'y Gen. Op. No. JC-0362 (2001)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1050
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2014/ga1050.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

April 11, 2014

The Honorable Joseph Deshotel Opinion No. GA-1050
Chair, Committee on Land and
Resource Management Re: Whether section 505.152 of the Local
Texas House of Representatives Government Code authorizes an economic
Post Office Box 2910 development corporation to fund certain
Austin, Texas 78768-2910 entertainment projects (RQ-1156-GA)

Dear Representative Deshotel:

You ask whether certain projects would qualify for use as "entertainment" under section 505.152 of the Local Government Code.[1] Chapters 501 to 505 of the Local Government Code authorize municipalities to create entities commonly referred to as economic development corporations. See TEX. LOC. GOV'T CODE ANN. §§ 501.001-505.355 (West Supp. 2013). Many provisions in those chapters specify and limit the kinds of projects that a particular development corporation, depending on its authority, may fund. Id. § 501.002(13) (defining "project"). You ask about a Type A corporation, which is governed by Chapter 504 of the Local Government Code. Id. §§ 504.001-.353. Along with the specific projects authorized by chapter 504, section 504.152 permits an election procedure whereby the voters of a municipality may authorize the use of sales and use tax for projects permitted under chapter 505. Id. § 504.152; see also id. § 501.002(16). Section 505.152, titled "Projects Related to Recreational or Community Facilities," provides:

For purposes of this chapter, "project" includes land, buildings, equipment, facilities, and improvements found by the board of directors to be required or suitable for use for professional and amateur sports, including children's sports, athletic, entertainment, tourist, convention and public park purposes and events, including stadiums, ball parks, auditoriums, amphitheaters, concert halls, parks and park facilities, open space improvements, museums, exhibition facilities, and related, store, restaurant, concession, and automobile parking facilities, related area transportation facilities, and related roads, streets, and water and sewer facilities, and other related improvements that enhance any of the items described by this section.

Id. § 505.152. You ask whether specific types of projects would qualify as "entertainment projects" under this provision? Request Letter at 2-3.

You first ask whether "fund[ing] building renovations and equipment upgrades for a local radio station qualifies as an entertainment project under section 505.152." Id. at 3. You question whether the statute should be construed to authorize only projects to fund recreational and community facilities "that are open and ... accessible for public use." Id. At the outset, we note that whether a particular project or specific expenditure is authorized under the Act involves fact issues that may not be resolved in the opinion process and that are matters for the board of directors to determine in the first instance. Tex. Att'y Gen. Op. No. GA-0819 (2010) at 3. Thus, we cannot advise whether a specific economic development corporation may fund a particular project; however, we can answer your general questions about the construction of section 505.152.

Section 505.152 authorizes projects "suitable for use for ... entertainment ... , including" a list of specific facilities. TEX. LOC. GOV'T CODE ANN. § 505.152 (West Supp. 2013). Under the Code Construction Act, use of the term "including" should not be interpreted as "creat[ing] a presumption that components not expressed are excluded." TEX. GOV'T CODE ANN. § 311.005(13) (West 2013). To be included within a statute's illustrative list, however, an unenumerated object must be like the objects enumerated. Cnty. of Harris v. Eaton, 573 S.W.2d 177, 179 (Tex. 1978) (construing a statute that lists specific examples to include others "of the same kind or class as the ones expressly mentioned"). "[W]hen words of a general nature are used in connection with the designation of particular objects ... or things, the meaning of the general words will be restricted to the particular designation." Hilco Elec. Co-op., Inc. v. Midlothian Butane Gas Co., 111 S.W.3d 75, 81 (Tex. 2003).

While section 505.152 authorizes projects for purposes of "entertainment," a more general term, it narrows that authorization by designating particular types of projects that could be funded, "including stadiums, ball parks, auditoriums, amphitheaters, concert halls, parks and park facilities, open space improvements, museums [and] exhibition facilities." TEX. LOC. GOV'T CODE ANN. § 505.152 (West Supp. 2013). The enumerated projects are each unique, but they share certain characteristics. They are all spaces or facilities that are open and accessible to the public[2] and where members of the community may gather for events or recreation. While the statute may authorize other projects not expressly listed, any unenumerated projects must be like those enumerated. Eaton, 573 S.W.2d at 179. With regard to your question, a court could conclude that funding for a private radio station's equipment upgrades and building renovations is not "of the same kind or class" of project as those projects expressly authorized in section 505.152 and that section 505.152 therefore does not authorize an economic development corporation to fund that type of project.[3] We note, however, that the Legislature granted the board of directors of an economic development corporation broad discretion in determining whether a specific project is "required or suitable for use for ... entertainment," and it is for the board to decide in the first instance.

You also ask whether funding "improvements for a city owned pavilion qualifies as an entertainment project under section 505.152." Request Letter at 3. You describe a specific pavilion at issue that "has been and continues to be used for public community events," like the Southeast Texas Mardi Gras and the Zachary Breaux Jazz Festival, and that city residents may rent for family gatherings, school functions and other privately-held events. Id. at 3-4. As you describe it, the pavilion appears to be a community facility that would be open to the public, similar to the recreational or community facilities that are expressly authorized in section 505.152. A court would likely conclude that section 505.152 authorizes the project. This office, however, cannot perform the factual inquiry and review necessary to confirm that an economic development corporation is authorized to fund a particular project.

SUMMARY

A court could conclude that funding for a private radio station's building renovations and equipment upgrades is not of the same kind or class of project as those projects expressly authorized in section 505.152 of the Local Government Code and that section 505.152 therefore does not authorize an economic development corporation to fund that proposed project. The Legislature granted the board of directors of an economic development corporation broad discretion in determining whether a specific project is "required or suitable for use for ... entertainment," and it is for the board to decide in the first instance.

A court would likely conclude that funding for a city owned pavilion is of the same kind or class of project as those projects expressly authorized in section 505.152.

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

Virginia K. Hoelscher
Assistant Attorney General, Opinion Committee

[1] See Letter from Honorable Joseph Deshotel, Chair, House Comm. on Land & Res. Mgmt., to Honorable Greg Abbott, Tex. Att'y Gen. at 2-3 (Oct. 8, 2013), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] You ask only about the types of projects authorized under section 505.152 of the Local Government Code, and this opinion is limited accordingly. The authority of a particular development corporation may be further limited by the resolution creating the corporation or ballot language restricting the use of taxes. See TEX. LOC. GOV'T CODE ANN. § 504.152(b) (West Supp. 2013).

[3] An economic development corporation's authority to grant public funds to a private corporation is limited by article III, section 52 of the Texas Constitution, which precludes political subdivisions from using public funds for private purposes. TEX. CONST. art. III, § 52(a). The Texas Supreme Court has explained that the grant of public funds that benefit a private entity will avoid violating this section if it satisfies a three-part test: (1) the predominant purpose of the expenditure is to accomplish a public purpose, not to benefit private parties; (2) there are adequate public controls in place to ensure that the public purpose is accomplished and to protect the public's investment; and (3) the political subdivision is receiving adequate consideration. Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 384 (Tex. 2002). Thus, if an economic development corporation decides to provide funds to a private entity, it must ensure that these requirements are met. See Tex. Att'y Gen. Op. No. JC-0362 (2001) at 6 (requiring "a contract or other arrangement sufficient to ensure that the funds are used for the purposes authorized, consistent with the constitutional restrictions on the expenditure of public funds").