Can a Texas city spend its 4B economic development sales tax on a park or youth sports field?

Plain-English summary

Representative Jim Solis, on behalf of the Gun Barrel City Economic Development Corporation, asked the Attorney General whether the corporation could use its section 4B economic development sales tax to fund a project that does not promote business development. The specific plan was to build a youth league football field at the city park. The corporation itself had concluded the field would benefit the community but had "no discernable economic advantage," so it would not promote economic development, much less business development.

The Attorney General concluded the corporation could not spend the 4B tax on the football field. The reasoning turned on what the voters had approved. The Development Corporation Act of 1979 lets an eligible city, with voter approval, levy a sales and use tax that a city development corporation uses to fund authorized "projects." But the proceeds can be spent only for the purposes the voters approved, what earlier opinions call the "contract with the voters," and that contract can be narrower than the full range the statute would allow. Gun Barrel City's 1997 ballot proposition authorized the half-cent tax "for the promotion and development of new and expanded business enterprises." Because that language limited the tax to business development, the corporation could fund only projects that promote business development, and a project that does not, like the football field, was off-limits. The opinion noted that section 4B(a)(2)(A) lists various facilities (parks, sports, and the like) without expressly tying them to economic development, and that the Act has become "less than a coherent or consistent statute" over the years, but it did not have to resolve whether that subsection alone would allow non-economic projects, because the narrower ballot proposition controlled.

Currency note

This opinion was issued in 2002. 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. According to the Attorney General's own records, this opinion was later overruled to the extent it is inconsistent with Attorney General Opinion GA-0265 (2004).

What the opinion meant for those who asked

The Gun Barrel City Economic Development Corporation and its board (what the opinion held for them): The opinion held that the board could use the section 4B sales tax proceeds only for projects that promote business development, as the 1997 ballot proposition required, and so could not fund the youth football field.

Cities and development corporations levying a 4B tax (what the opinion held for them): The opinion held that a voter-approved 4B sales tax may be spent only for the purposes stated in the ballot proposition, which can be narrower than what the statute authorizes, so the ballot language, not just the statute, defines the permissible uses.

On the question the opinion did not reach: The opinion declined to decide whether section 4B(a)(2)(A) of the Development Corporation Act generally permits projects that do not promote economic development, because the City's specific ballot proposition resolved the matter.

Common questions

Can a 4B economic development sales tax pay for a city park or sports field?
The opinion concluded that in Gun Barrel City it could not, because the voters approved the tax only for promoting and developing business enterprises, and the field did not do that.

Why does the ballot language matter so much?
The opinion explained that when voters must approve a tax, the proceeds can be used only for the purposes the voters approved. That voter-approved proposition is treated as a contract with the voters and can be narrower than the statute.

Did the statute itself forbid the football field?
The opinion did not decide that. It noted section 4B(a)(2)(A) lists facilities like parks and sports venues without expressly requiring economic benefit, but it resolved the case on the narrower ballot language instead.

Is this opinion still good law?
Per the Attorney General's records, it was later overruled to the extent inconsistent with Attorney General Opinion GA-0265 (2004). Check current law and that later opinion before relying on it.

Background and statutory framework

The Development Corporation Act of 1979, article 5190.6 of the Revised Civil Statutes, lets a city, county, or district create an industrial development corporation to finance authorized projects that promote economic development. Tex. Rev. Civ. Stat. Ann. art. 5190.6 (Vernon 1987 & Supp. 2002). Section 4B authorizes an eligible city to create such a corporation, id. § 4B(b) (Vernon Supp. 2002), and to levy a sales and use tax for the corporation if a majority of voters approve at an election called for that purpose. Id. § 4B(d). The city delivers the proceeds to the corporation to finance authorized projects. Id. § 4B(g), (g)(1)-(2). Those projects, defined in section 4B(a)(2)(A)-(B), include both a list of sports, entertainment, park, and related facilities and projects that "promote or develop new or expanded business enterprises." Id. § 4B(a)(2)(A)-(B). Some 4B provisions require specific ballot descriptions for particular project types. Id. § 4B(a-3)(2), (a-5), (p). The Act's broader economic-development purpose appears in its definitions and findings. Id. § 2(11)(A) (Vernon Supp. 2002); id. § 3(a)(1)-(4); id. § 21.

The opinion applied the rule that the taxing power may be exercised only for purposes the law authorizes, Tri-City Fresh Water Supply Dist. v. Mann, 142 S.W.2d 945, 948 (Tex. 1940), together with the principle from prior opinions that 4B proceeds may be used only for purposes both authorized by statute and approved by the voters in the election proposition. The Gun Barrel City Council called a May 3, 1997 election by Ordinance No. 1997-005, submitting the proposition to adopt the half-cent tax "for the promotion and development of new and expanded business enterprises," and the voters approved it. Because that proposition limited the tax to business development, the corporation could not fund a project that did not promote business development.

Citations

Statutory provisions:

• Tex. Rev. Civ. Stat. Ann. art. 5190.6 (Vernon 1987 & Supp. 2002)
• Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(b) (Vernon Supp. 2002)
• Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(d)
• Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(g), (g)(1)-(2)
• Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(a)(2)(A)-(B)
• Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(a-3)(2), (a-5), (p)
• Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 2(11)(A) (Vernon Supp. 2002)
• Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 3(a)(1)-(4)
• Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 21

Cases:

• Tri-City Fresh Water Supply Dist. v. Mann, 142 S.W.2d 945, 948 (Tex. 1940)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0494
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2002/jc0494.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

OFFICE OF THE ATTORNEY GENERAL - STATE OF TEXAS
JOHN CORNYN

April 23, 2002

The Honorable Jim Solis Opinion No. JC-0494
Chair, Economic Development Committee
Texas House of Representatives Re: Whether the Gun Barrel City Economic
P.O. Box 2910 Development Corporation may use Development
Austin, Texas 78768-2910 Corporation Act of 1979, section 4B sales and use
taxes to fund a project that does not promote
business development (RQ-0462-JC)

Dear Representative Solis:

When the law requires that voters approve a tax, proceeds of the tax may only be used for the purposes approved by the voters. Under section 4B of the Development Corporation Act of 1979, article 5190.6 of the Revised Civil Statutes (the "Act"), an eligible city may collect sales and use tax, if approved by the city's voters, to be used by a city-created industrial development corporation to fund authorized projects. On May 3, 1997, the voters of Gun Barrel City (the "City") approved the adoption of a one-half percent sales and use tax "for the promotion and development of new and expanded business enterprises." On behalf of the Board of Directors of the Gun Barrel City Economic Development Corporation (the "Corporation"), you ask about its authority under section 4B(a)(2)(A) of the Act to use the sales tax proceeds to fund a project that does not promote business development.[1] Consistent with the voter-approved election proposition, the sales taxes collected in the City may be used only for the promotion and development of business enterprises. The Board may not use the sales tax proceeds to fund a project that does not promote business development.

To provide a legal context for your request, we briefly review the Act's provisions regarding approval and use of the section 4B sales taxes. The Development Corporation Act of 1979 authorizes a city, county, or district to create an industrial development corporation to finance the cost of authorized "projects" that generally promote economic development. See TEX. REV. CIV. STAT. ANN. art. 5190.6 (Vernon 1987 & Supp. 2002). In particular, section 4B of the Act authorizes an eligible city to create an industrial development corporation governed by that section, see id. § 4B(b) (Vernon Supp. 2002), and authorizes the city to levy a sales and use tax for the benefit of the corporation, but only if approved by a majority of the voters at an election called for that purpose, see id. § 4B(d). Other than the rate of the tax and descriptions of particular projects, section 4B does not generally specify the contents of the tax election proposition or ballot to be submitted to the voters. See id.; see also id. §§ 4B(a-3)(2) (requiring voter approval for specific venue projects "clearly described on the ballot"); (a-5) (requiring ballot proposition at election to adopt tax to clearly describe project if project involves water supply facilities or water conservation programs); (p) (requiring ballot to provide for voting for or against use of sales tax for "cleanup of contaminated property"). Upon receipt of the sales tax proceeds, the city must deliver the tax proceeds to the corporation, see id. § 4B(g), to be used to finance costs of authorized "projects." See id. § 4B(g)(1)-(2). Those "projects" include "facilities and improvements" found by the board of directors of the corporation to:

            (A) be required or suitable for use for professional and amateur (including children's) sports, athletic, entertainment, tourist, convention, and public park purposes and events, including stadiums, ball parks, auditoriums, amphitheaters, concert halls, learning centers, parks and park facilities, open space improvements, municipal buildings, 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 those items;

            (B) promote or develop new or expanded business enterprises, including a project to provide public safety facilities, streets and roads, drainage and related improvements, demolition of existing structures, general municipally owned improvements, as well as any improvements or facilities that are related to any of those projects and any other project that the board in its discretion determines promotes or develops new or expanded business enterprises.

Id. § 4B(a)(2)(A)-(B) (emphasis added).

With this background, we turn to your question. You inform us that there is "a desire in Gun Barrel City to utilize Section 4B tax revenues to construct a youth league football field at the city park." Request Letter, supra note 1. Although the football field would benefit the community, "there is no discernable economic advantage associated with the project." See id. As we understand it, the Corporation has determined that the project would not promote economic development much less "business development," arguably a more specific subset of economic development. See id.; Tex. Att'y Gen. Op. No. JC-0362 (2001) at 5 (determination of whether particular project will promote economic development purposes of Act is generally a question of fact within discretion of development corporation's board of directors in the first instance). The Corporation's Board of Directors requests clarification of its project funding authority under section 4B(a)(2)(A) of the Act. Specifically, the Board asks:

            Since Section 4B[(a)](2)(A) lacks reference to job creation, expansion, retention, promotion of business and commerce, etc., and since such references are evident in similar sections, e.g., in Section 2(11)(A),[2] Section 33 and Section 4B[(a)](2)(B), may it be presumed that projects may be undertaken under Section 4B[(a)](2)(A) without consideration of some predictable positive economic impact?

Request Letter, supra note 1 (footnotes added).

Section 4B(a)(2)(A) by its terms does not require that the specific projects authorized in that section promote economic development, notwithstanding that the overarching purpose of the Act is the promotion of economic development. See TEX. REV. CIV. STAT. ANN. art. 5190.6, § 4B(a)(2)(A) (Vernon Supp. 2002); see, e.g., id. §§ 3 (legislative findings regarding economic development purpose and supporting measures authorized by Act); 21 (authorizing city, county, or district to utilize industrial development corporation to finance projects to promote economic development). Given the numerous and rather selective changes to the Act since it was first adopted in 1979, it is less than a coherent or consistent statute. See generally Tex. Att'y Gen. Op. No. JC-0118 (1999) (reviewing sections 4A and 4B provisions); 1 OFFICE OF THE TEXAS ATTORNEY GENERAL, HANDBOOK ON ECONOMIC DEVELOPMENT LAWS FOR TEXAS CITIES 2-3, 5-6 (2002) (discussing Act's legislative evolution). However, because the Corporation's authority to undertake projects is limited by the particular sales tax election proposition submitted to and approved by the City voters, we do not reach the Corporation's question whether section 4B(a)(2)(A) generally allows noneconomic development projects to resolve the question presented here.

Use of section 4B sales tax is limited not only by the statutory provisions of the Act, but also by the particular tax election authorizing the tax. Proceeds of the section 4B sales tax, of course, may be used only for the purposes authorized by the statute. See Tri-City Fresh Water Supply Dist. v. Mann, 142 S.W.2d 945, 948 (Tex. 1940) (taxing power may be exercised only for purposes distinctly included in constitutional or legislative authorization); see also Tex. Att'y Gen. Op. No. JC-0118 (1999) (section 4B sales tax proceeds may only be used for projects authorized by statute). Additionally, they may be used only for the purposes expressly represented to and approved by the voters, i.e., the contract with the voters, which may be more limited than the purposes allowed by the statute. See Tex. Att'y Gen. Op. No. JC-0400 (2001) at 4-5 (and cases cited therein); see also Tex. Att'y Gen. Op. No. JC-0488 (2002) at 4. "The contract with the voters clearly includes the purposes stated in an election ordinance or order formally adopted by a governing body and the election proposition submitted to the voters." See Tex. Att'y Gen. Op. No. JC-0488 (2002) at 4. It may also include representations made by the governing body outside the formal election proceedings, for example, such as statements made before the election to the public regarding specific purposes for which the proceeds will or will not be used. See id. at 4. We assume for the purposes of this opinion that neither the governing body of the City nor of the Corporation made any representations limiting the use of the sales and use tax proceeds beyond that in the election proposition approved by the City's voters.

The election proposition presented to the City voters limited the use of the section 4B sales tax to business development purposes. On March 11, 1997, the City Council of Gun Barrel City adopted an ordinance calling a special election to be held on May 3, 1997, to allow City residents to vote on the "question of the adoption of an additional sales and use tax for the purpose of the promotion and development of new and expanded business enterprises." GUN BARREL CITY, TEX., ORDINANCE No. 1997-005 (1997). The ordinance directed the submission to the voters of the following proposition: "The adoption of an additional [one-half] of one percent sales and use tax for the promotion and development of new and expanded business enterprises." Id.[4] Compare id. with Tex. Att'y Gen. Op. No. JC-0400 (2001) at 4 (City of Sonora proposition submitted to voters: "The adoption of an additional one-half of one percent sales and use tax within the City pursuant to the provisions of Article 5190.6 . . . , with the proceeds thereof to be used and applied in the manner and to the purposes authorized by Section 4B of the Act, including but not limited to . . . ."). We understand that the sales tax revenues at issue here are collected pursuant to the May 3, 1997 election because no other sales and use tax election in the City has been called and held pursuant to the Act.

In sum, because the City's voter-approved sales tax election proposition limits their use "for the promotion and development of new and expanded business enterprises," see GUN BARREL CITY, TEX., ORDINANCE NO. 1997-005 (1997) at 1, the Corporation's Board of Directors may use the sales tax proceeds to fund only projects that promote business development. Accordingly, we conclude that the Corporation's Board of Directors may not use the section 4B tax revenues to fund a project that does not promote business development.

                                    SUMMARY

            Consistent with the particular 1997 voter-approved election proposition, the sales taxes collected in Gun Barrel City under section 4B of the Development Corporation Act of 1979 may be used only for projects that promote business development. The Board of Directors of the Gun Barrel City Economic Development Corporation may not use the sales tax proceeds to fund a project that does not promote business development.

                                       JOHN CORNYN
                                       Attorney General of Texas

HOWARD G. BALDWIN, JR.
First Assistant Attorney General

NANCY FULLER
Deputy Attorney General - General Counsel

SUSAN DENMON GUSKY
Chair, Opinion Committee

Sheela Rai
Assistant Attorney General, Opinion Committee

[1] See Letter from Honorable Jim Solis, Chair, Committee on Economic Development, Texas House of Representatives, to Honorable John Cornyn, Texas Attorney General (Nov. 7, 2001) (on file with Opinion Committee) [hereinafter Request Letter].

[2] Section 2(11)(A) of the Act defines the term "[p]roject," in part, as: the land, buildings, equipment, [and] facilities . . . to promote new and expanded business development or found by the board of directors to be required or suitable for the promotion of development and expansion of manufacturing and industrial facilities, job creation and retention, job training. . . . Project also includes job training required or suitable for the promotion of development and expansion of business enterprises and other enterprises described by this Act, as provided in Section 38 of this Act. TEX. REV. CIV. STAT. ANN. art. 5190.6, § 2(11)(A) (Vernon Supp. 2002).

[3] Section 3(a) sets out legislative findings and determinations generally to the effect that the welfare of the state requires as a public purpose the "promotion and development of new and expanded business enterprises and the promotion and development of job training[;] . . . that the existence, development, and expansion of business, commerce, industry," higher education, and job training are essential to the state's economic growth; and that the measures authorized by the Act promote the economic welfare of the state "by the securing and retaining of business enterprises and the resulting maintenance of a higher level of employment, economic activity, and stability[.]" Id. § 3(a)(1)-(4).

[4] See also GUN BARREL CITY, TEX., ORDINANCE No. 1997-007 (1997) (canvassing special election returns and finding that the "proposition for the adoption of a Section 4B sales and use tax at the rate of one-half of one percent" submitted at the election on May 3, 1997, was passed by voters).