Can a Texas county pay a private economic development group, like one tied to a chamber of commerce, to bring in business, even though the county cannot pay chamber dues?
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This page answers the general question as of 1986. Ezel answers yours: what it means for your facts, under current Texas law, with citations.
Texas AG Opinion JM-516: County Contracts for Economic Development
Plain-English summary
The Nueces County Attorney asked whether the county could contract for business or industrial development services with a corporation that would essentially operate as an agency of a chamber of commerce. The wrinkle was an earlier AG opinion holding that a county cannot be a dues-paying member of a chamber of commerce. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
JM-516 concluded the county could enter such a contract. A county's authority to contract is limited to what the constitution or statutes confer, but two statutes, article 1581g-2 (county industrial commissions) and article 2352d (county boards of development), give a county authority to promote local business and industry, and a county may contract for services it is authorized to perform itself. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
The key was the difference between a gift and a service contract. Article III, section 52 of the Texas Constitution bars a county from granting public money or lending its credit to a private corporation, which is why paying chamber dues was off-limits: it was, in essence, a gift. A contract for specific services is different, as long as the contract serves a public purpose, the county receives adequate consideration, and the deal assures the public purpose will actually be accomplished. The AG compared it to the accepted practice of a county contracting with a private hospital for specific services even though it could not donate funds to the hospital. Whether any particular contract meets those standards is a question of fact. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
Currency note
This opinion was issued in 1986. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. The statutes it cites (articles 1581g-2 and 2352d, V.T.C.S.) have since been recodified into the Local Government Code, and Texas has enacted broader economic development authority since 1986. Treat this page as historical context, not current legal advice, and verify the current code provisions before relying on any rule mentioned here.
Common questions
Can a Texas county pay dues to a chamber of commerce?
No, according to the earlier opinion JM-516 relies on. Attorney General Opinion H-397 (1974) concluded that article III, section 52 of the Texas Constitution prohibits a county from becoming a dues-paying member of a private corporation such as a chamber of commerce, because paying dues for general benefits amounts to a gift the constitution was designed to prevent. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
So how can a county pay a chamber-affiliated group at all?
By contracting for specific services rather than paying dues. JM-516 drew the line between a gift (dues for vague general benefits) and a bargained-for contract (specific development services with adequate consideration). A properly structured service contract is not a gift, even if the contracting corporation is tied to a chamber of commerce. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
What makes an economic development contract valid under this opinion?
Three things: the contract must serve a public purpose, the county must receive adequate consideration, and the contract must provide sufficient assurance that the public purpose will actually be accomplished. The AG said whether a given contract meets those requirements is a question of fact that depends on the nature of the particular contract. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
Where does the county get authority to promote business and industry in the first place?
From statute. The opinion pointed to article 1581g-2, V.T.C.S., which allows a county industrial commission, and article 2352d, V.T.C.S., which allows a county board of development. A county may contract for services it is authorized to perform itself. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
Why is a service contract treated differently from a donation?
Because the county gets something specific in return. The AG used the analogy of a private hospital: a county cannot donate funds to a private hospital, but it can contract with one for specific services. The same logic applies to economic development, so long as the consideration is adequate and the public purpose is assured. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
Background and statutory framework
The opinion began with the rule that a county's authority to contract is limited to authority conferred expressly or by reasonable implication by the constitution or statutes, citing Canales v. Laughlin. It then identified the source of the county's economic development power: article 1581g-2, V.T.C.S. (county industrial commission) and article 2352d, V.T.C.S. (board of development). Because a county may contract for services it is authorized to perform itself, and it may perform business and industrial development under those statutes, it may contract for those services. The AG cited its own earlier opinion JM-65 (1983) for the principle that a county can contract with a private entity for specific services. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
The constitutional analysis centered on article III, section 52, which forbids the legislature from authorizing a county to lend its credit or grant public money to any individual, association, or corporation. The AG explained that this does not prevent counties from contracting with private corporations; it prohibits gifts. A valid contract must serve a public purpose, be supported by adequate consideration, and provide sufficient assurance the public purpose will be accomplished, citing JM-65 (1983), MW-373 (1981), and H-912 (1976). Attorney General Opinion H-397 (1974) had found dues to a chamber of commerce to be an unconstitutional gift because they were not sufficiently insulated from the abuses section 52 targets. A specific-services contract, by contrast, is bargained-for and enforceable, and the AG analogized it to contracting with a private hospital for services (permitted) versus donating to the hospital (not permitted). Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
Citations and references
The opinion cited the following authorities. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
Constitutional and statutory provisions:
- Tex. Const. art. III, § 52
- V.T.C.S. art. 1581g-2
- V.T.C.S. art. 2352d
Cases:
- Canales v. Laughlin, 214 S.W.2d 451, 453 (Tex. 1948)
The opinion also cited Attorney General Opinions JM-65 (1983), H-397 (1974), MW-373 (1981), and H-912 (1976).
Source
- Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0516
- Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0516.pdf
Original opinion text
Best-effort transcription from a scanned PDF via OCR. Minor OCR errors may remain; the linked PDF is authoritative.
The Attorney General of Texas
July 11, 1986
JIM MATTOX
Attorney General
Honorable Carlos Valdez
Nueces County Attorney
Courthouse, Room 205
Corpus Christi, Texas 78401
Opinion No. JM-516
Re: Validity of a contract between Nueces County and an economic development corporation
Dear Mr. Valdez:
You have requested an opinion on the following question:
Taking into consideration the fact that a county cannot be a dues-paying member of a chamber of commerce, does Nueces County have the authority to contract for business or industrial development services with a corporation that will in essence be an agency of a chamber of commerce?
A county's authority to enter into a contract is limited to authority conferred on it, either expressly or by reasonable implication, by the constitution or statutes. Canales v. Laughlin, 214 S.W.2d 451, 453 (Tex. 1948). A county has authority to promote the development of businesses and industries in the county through a county industrial commission established under article 1581g-2, V.T.C.S., or through a board of development established under article 2352d, V.T.C.S. A county may contract for services that the county is authorized to perform itself. Attorney General Opinion JM-65 (1983). Therefore, under articles 1581g-2 and 2352d, a county has authority to contract for business or industrial development services.
You are concerned, however, about the relevance of a 1974 attorney general opinion that concluded that a county could not pay dues to a chamber of commerce. Attorney General Opinion H-397 (1974). In that opinion, this office held that article III, section 52, of the Texas Constitution prohibits a county from becoming a dues-paying member of a private corporation such as a chamber of commerce. Article III, section 52, provides, in part:
Except as otherwise provided by this section, the Legislature shall have no power to authorize any county, city, town or other political corporation or subdivision of the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever, or to become a stockholder in such corporation, association or company.
That provision does not prevent counties from contracting with private corporations. Attorney General Opinion JM-65 (1983). Rather, it prohibits gifts to a private corporation. As a corollary, it requires that a county contract with a private corporation serve a public purpose and that the county receive adequate consideration. Attorney General Opinion MW-373 (1981). Also, such a contract must provide sufficient assurance that the public purposes will be accomplished. Id.; Attorney General Opinion H-912 (1976).
In Attorney General Opinion H-397 this office concluded that paying dues to a private corporation such as a chamber of commerce in order to secure "general benefits resulting from encouragement of private industry and business" was not "sufficiently insulated from the abuses" that article III, section 52, was designed to prevent. Implicit in that conclusion is a determination that paying dues to a chamber of commerce did not adequately assure that any public purpose would be accomplished and therefore that the dues would be, in essence, a gift to the private corporation.
A contract for specific services presents a different situation. For purposes of article III, section 52, the difference between paying dues to an organization that may provide general benefits to the county and contracting with an organization for specific services is analogous to the difference between donating county funds to a private hospital and contracting with a private hospital for specific services. In Attorney General Opinion JM-65 (1983) we held that although a county could not donate funds to a private hospital, it could contract with a private hospital for specific services. Similarly, we think that a county may contract with a private corporation for business and industrial development services. Of course, the county must receive adequate consideration, and the contract must provide adequate assurance that the public purpose will be accomplished. Whether a county receives adequate consideration and whether a contract provides adequate assurance that its public purpose will be accomplished are questions of fact that would depend on the nature of any particular contract.
SUMMARY
A county has authority to promote the development of business and industry in the county under article 1581g-2, V.T.C.S., and article 2352d, V.T.C.S. A county may contract with a private corporation such as a chamber of commerce for the provision of business and industrial development services if the county receives adequate consideration and if the contract provides adequate assurance that the public purpose will be accomplished.
Very truly yours,
JIM MATTOX
Attorney General of Texas
JACK HIGHTOWER
First Assistant Attorney General
MARY KELLER
Executive Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Sarah Woelk
Assistant Attorney General
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