Under the 1989 Texas law creating the Child Care Development Board, can the state build a brand-new building just to house a child care center for state employees, and can it lease that space to a child care provider for less than what the space would normally rent for?

Texas AG Opinion JM-1156: Where State Child Care Facilities May Go and How They May Be Leased

Plain-English summary

The Lieutenant Governor asked the Attorney General to interpret Senate Bill 1480, the 1989 law that created the Child Care Development Board to develop child care services for state employees working in state-owned buildings, and that amended the State Purchasing and General Services Act's rules for leasing space in state buildings.

The opinion answered four questions. First, child care facility sites must be located in state-owned buildings; the bill's caption, its legislative bill analysis, and a provision requiring the state to lease the site "at a reasonable rate" (which only makes sense if the state owns the site) all point the same direction. Second, the board cannot have a brand-new building constructed solely to house a child care facility; the statute only lets a child care facility be included when the state is already constructing or substantially renovating a state office building of at least 100,000 square feet for other reasons, and the amendment's "inclusion" language shows the legislature meant child care space to piggyback on other construction, not drive it. Third, once a child care site exists, the state may lease it to a child care provider at less than fair market value, because supporting employee child care (which the legislature found reduces absenteeism and turnover and improves morale) counts as a public purpose that satisfies the constitutional ban on gratuitous gifts of public property, so long as the arrangement includes adequate controls to ensure that purpose is actually achieved. Fourth, the "reasonable rate" that governs the lease is set by the State Purchasing and General Services Commission, not by the Child Care Development Board, whose rulemaking power under the statute covers lease terms and conditions, not the rental rate itself.

Currency note

This opinion was issued in 1990. 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.

Common questions

Could Texas build a brand-new state building just to house a child care center for state employees under Senate Bill 1480?
No. The opinion concluded the bill only allows a child care facility to be included in a building the state is already constructing or substantially renovating for other purposes (at least 100,000 square feet), not a building built solely to house child care.

Can the state charge a child care provider less than fair market rent for space in a state building?
Yes. The opinion held that leasing space for child care at less than fair market value does not violate the constitutional ban on gifts of public property, because supporting employee child care serves a public purpose, provided there are adequate controls to make sure that purpose is actually achieved.

Who decides what counts as a "reasonable rate" for a child care facility lease, the Child Care Development Board or the Purchasing Commission?
The State Purchasing and General Services Commission. The opinion read the board's rulemaking authority as limited to setting lease terms and conditions, not to fixing the rental rate itself.

Background and statutory framework

Senate Bill 1480 (Acts 1989, 71st Leg., ch. 1207) created the Child Care Development Board under V.T.C.S. article 6252-3e to develop and administer child care services for state employees in state-owned buildings, and amended the State Purchasing and General Services Act, V.T.C.S. article 601b, which governs the lease of state building space to private tenants. Article 601b, section 5.01(a), long-standing since 1979, gives the Purchasing and General Services Commission general authority to construct, acquire, and remodel buildings for state purposes; new subsection (b), added by Senate Bill 1480, requires the Child Care Development Board to determine whether a child care facility should be included whenever the state constructs a new state office building of at least 100,000 square feet or substantially renovates an existing one of that size, and requires the commission to include the facility if the board so determines.

Article 6252-3e, section 7(a), requires the commission to lease a state child care facility site "at a reasonable rate" to a provider selected by the board, and gives the board rulemaking power over what provisions must or must not appear in such a lease. Section 4.15(f) of article 601b, as amended by Senate Bill 1480, lets the commission select a child care provider for such space through procedures other than competitive bidding, at the board's discretion, unlike the general competitive-bidding rule for other private tenants. The opinion read section 7(a) and section 4.15 together to mean the "reasonable rate" for child care space need not match market rate for other commercial uses of the same space. On the constitutional question, the opinion applied the settled public-purpose exception to article III, section 51 of the Texas Constitution (which otherwise bars gratuitous grants of public money or property to private entities), citing prior Attorney General Opinions JM-1091 (1989) and WW-373 (1981), and pointed to the bill's own legislative history describing reduced absenteeism, turnover, and improved morale as the public benefit justifying below-market child care leases.

Citations

Statutory and constitutional provisions:

• V.T.C.S. art. 6252-3e, § 7(a)
• V.T.C.S. art. 601b, §§ 4.15, 5.01
• TEX. CONST. art. III, § 51

Prior Attorney General opinions cited: JM-1091 (1989); WW-373 (1981).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1156
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1156.pdf

Original opinion text

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

April 16, 1990

Honorable William P. Hobby
Lieutenant Governor
The State of Texas Office of the Lieutenant Governor
P. O. Box 12068
Austin, Texas 78711-2068

Opinion No. JM-1156

Re: Child care facilities in building owned or leased by the State of Texas (RQ-1905)

Dear Governor Hobby:

You ask several questions about Senate Bill 1480. Acts 1989, 71st Leg., ch. 1207, at 4904. That bill established the Child Care Development Board, which is charged with developing and administering a program to provide child care services for state employees who work in state-owned buildings. V.T.C.S. art. 6252-3e. The bill also made several amendments to the provisions of the State Purchasing and General Services Act, article 601b, V.T.C.S., that deal with the lease of space in state-owned buildings to private tenants.

Your first question is whether the site must be located in a state-owned building.[1] The language of Senate Bill 1480 and the legislative history make clear that the legislature contemplated that the site for a child care facility would be in a state-owned building. The caption to Senate Bill 1480 states that the act relates "to the creation of a Child Care Development Board and a Child Care Advisory Committee and to using state-owned buildings for child care facilities." A bill analysis prepared for Senate Bill 1480 states that the purpose of the bill is to "implement a program to use state-owned buildings for child care facilities." Bill Analysis, S.B. 1480, 71st Leg. (1989). Also, section 7 of article 6252-3e provides that the Purchasing and General Services Commission shall lease a state child care facility site at a reasonable rate. A requirement that the State Purchasing and General Services Commission lease the space for the facility at a reasonable rate makes sense only if the facility site is owned by the state. See V.T.C.S. art. 601b, § 4.15 (dealing with lease of space in state-owned buildings to private tenants). We think that the caption to Senate Bill 1480 and the provisions discussed above make clear that child care facilities developed under article 6252-3e were intended to be in state-owned buildings.

Your second question is:

Under SB 1480 and Article 5, State Purchasing and General Services Act, may a child care facility site be located in a building of appropriate size that would be newly constructed specifically for the board by the commission, or is the board limited respecting newly constructed state buildings to buildings that contain at least 100,000 square feet of net usable space, under section 5.01(b), State Purchasing and General Services Act?

Most of the provisions of Senate Bill 1480 deal with the development of a child care facility in existing state-owned space. Nothing in the bill suggests that the legislature intended that a building be built solely for child care. Our conclusion that Senate Bill 1480 does not authorize the construction of a building solely for the purpose of providing a child care facility is supported by section 5.01 of article 601b, which provides:

(a) Under such terms and conditions as may be provided by law, the commission may acquire necessary real and personal property, modernize, remodel, build, and equip buildings for state purposes, and enter into contracts necessary to carry out and effectuate the purposes herein mentioned in keeping with appropriations authorized by the legislature. The commission shall not sell or dispose of any real property of the state except by specific authority from the legislature.

(b) The Child Care Development Board shall determine if a child care facility may be included in a state-owned office building constructed after September 1, 1989, that contains at least 100,000 square feet of net usable space and shall notify the commission of that determination. The commission shall notify the Child Care Development Board of a project to rehabilitate or renovate substantially an existing state-owned office building containing at least 100,000 square feet of net usable space before developing the rehabilitation or renovation plan. Not later than the 30th day after the date on which the Child Care Development Board receives the notice, the board shall determine if a child care facility may be included in the rehabilitation or renovation project and shall notify the commission of that determination. The commission shall include a child care facility in a construction, rehabilitation, or renovation project if the Child Care Development Board determines that the child care facility should be included.

The language that is now subsection (a) has been in article 601b since it was adopted in 1979. Acts 1979, 66th Leg., ch. 773, at 1908. Subsection (a) addresses the authority of the State Purchasing and General Services Commission to construct new state buildings. Senate Bill 1480 added subsection (b), which deals with inclusion of space for a child care facility in a newly-constructed state building. The fact that subsection (b) refers to the "inclusion" of a child care facility in a newly constructed building indicates that the legislature did not intend that new state buildings be constructed solely for the purpose of housing a child care facility.

Your third question is:

Once a site is obtained, may it be leased to a child care provider at a reasonable rate that is less than fair market value under Section 4.15(b), State Purchasing and General Services Act; Section 7(a), Article 6252-3e, Revised Statutes; Article III, Section 51, of the Texas Constitution; and other relevant law?

Section 7(a) of article 6252-3e provides in part:

The [State Purchasing and General Services] commission shall lease a state child care facility site at a reasonable rate to a child care provider selected by the board.

Section 4.15 of article 601b deals with the lease of space in state-owned buildings to private tenants. Senate Bill 1480 amended subsection (f) of section 4.15 to provide as follows:

The commission may lease space in a building after the lease is negotiated with the tenant or after the tenant is selected through a competitive bidding process. In either case, the commission shall follow procedures that promote competition and protect the interests of the state; except that, if the space is leased for the purpose of providing child ~~day~~ care services for state employees ~~of the building~~, the Child Care Development board, in its sole discretion, ~~commission~~ may select the child care provider ~~tenant~~ through procedures other than competitive bidding. (Language added by S.B. 1480 emphasized; language deleted by S.B. 1480 overstricken.)

Read together, those provisions indicate that space for a child care facility is to be leased at a rate that is reasonable to charge for a child care facility, not necessarily at the rate that could be charged for the same space if it could be leased for other purposes. Therefore, we conclude that space to be used as a child care facility is not required to be leased at fair market value.

You ask whether leasing space for child care facilities at a rate lower than fair market value would be a donation of public property and therefore in violation of article III, section 51, of the constitution. Article III, section 51, would not prohibit lease of public property for less than fair market value if it served a public purpose.[2] Attorney General Opinions JM-1091 (1989); WW-373 (1981). The bill analysis to Senate Bill 1480 sets out the public purpose to be achieved by leasing space for child care facilities at a rental rate that may be less than fair market rates:

Various studies have shown that absenteeism, tardiness and employee turnover can be reduced substantially when employees with young children have convenient, economical, quality child-care services available. Such studies have also shown positive effects on employee morale, job satisfaction, and productivity.

Bill Analysis, S.B. 1480, 71st Leg. (1989). We think the courts would agree with the legislature that leasing space for child care facilities at a rate less than fair market value in order to improve employee performance is a public purpose.

Your fourth question is:

Under Section 7(a), Article 6252-3e, Revised Statutes, may the board determine and set what constitutes a reasonable rate for the lease as part of the board's power to prescribe by rule provisions that must be included in a lease to a child care provider?

Section 7(a) of article 6252-3e provides:

The [State Purchasing and General Services] commission shall lease a state child care facility site at a reasonable rate to a child care provider selected by the board. The [Child Care Development] board by rule may prescribe provisions that must be included in a lease and provisions that may not be included in a lease.

We think the plain meaning of that provision is that the determination of a "reasonable" rental rate was to be a matter for the State Purchasing and General Services Commission, not the Child Care Development Board.

SUMMARY

Senate Bill 1480, Acts 1989, 71st Leg., ch. 1207, authorizes the development of child care facilities in state-owned buildings. It does not authorize the state to lease space for child care facilities in privately owned buildings. The bill does not authorize the construction of a new state building solely for the purpose of housing a child care facility. The bill authorizes the State Purchasing and General Services Commission to rent space for a child care facility at a rate that is "reasonable" to charge for a child care facility; that rate may be less than fair market value. It is for the State Purchasing and General Services Commission, not the Child Care Development Board, to determine what constitutes a "reasonable" rental rate.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Sarah Woelk
Assistant Attorney General

[1] We do not consider what particular financing arrangements may qualify a building as a "state-owned building."

[2] There must also be adequate controls to assure that the public purpose is achieved.