Can a Texas home-rule city sell land to the state for a park at less than its market value?

Texas AG Opinion JM-997: Can a City Sell Park Land to the State Below Market Value?

Plain-English summary

El Paso owns a large tract of land, about 6,833 acres, that sits inside Franklin Mountains State Park. The city wanted to sell that land to the Texas Parks and Wildlife Department for a park, but at a price far below what the land was worth on the open market. A state senator asked the Attorney General whether the city could legally do that. Three obstacles were in the way, and the opinion works through each one.

The first obstacle was the city's outstanding water-system bonds. The land was held by the city's Public Service Board, which runs the water system and had promised bondholders not to dispose of system property while the bonds were unpaid. The Attorney General's Public Finance Section read the bond documents and found that the promise only protected the revenue that pays off the bonds. The covenant expressly let the board sell property that had become unnecessary to the system. Because this park land produces no water-system revenue and is not used for water or wastewater functions, selling it, even at a low price, would not hurt the bondholders. So the bonds were no barrier.

The second obstacle was the general state law on selling city land. Chapter 272 of the Local Government Code normally requires a city to give notice, take bids, and sell for at least fair market value. But the legislature had passed a specific law, sections 22.221 through 22.223 of the Parks and Wildlife Code, directing the Parks and Wildlife Department to acquire this exact acreage, and had amended it in 1987 for the express purpose of allowing this transfer. When a specific statute and a general statute conflict, the specific one wins. So this special law overrode chapter 272, and the below-market price was allowed.

The third obstacle was the Texas Constitution. Article III, section 52 forbids the legislature from letting a city grant public money or a thing of value to an individual, association, or corporation. Selling below market value does involve an element of donation. But the Attorney General explained that a gift to the state itself is different: courts across the country have held that a state (or the federal government) is not the kind of "individual, association, or corporation" the anti-gift clauses were written to protect against. On top of that, El Paso was not really giving anything away for nothing. In exchange for the land, the city gets a state-maintained recreational park right next to town, kept up at state expense and open to its residents. That benefit is real consideration. Drawing on the Big Bend park case (King v. Sheppard) and several out-of-state decisions, the Attorney General concluded the sale did not violate article III, section 52.

The opinion was careful to say it was limited to the three questions asked. It did not pass on any contract terms, home-rule charter provisions, or other issues not squarely raised.

Currency note

This opinion was issued in 1988. 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.

The Parks and Wildlife Code, the Local Government Code, and the Government Code have all been amended and renumbered since 1988, and the specific Franklin Mountains provisions cited here have their own later history. The constitutional principle that a below-value conveyance to the state or federal government does not run afoul of article III, section 52 reflects long-standing Texas case law, but anyone weighing a similar transaction today should check the current statutes and current constitutional case law rather than relying on the 1988 provisions described here.

Who this opinion affected (as of 1988)

The city of El Paso and its Public Service Board: The opinion told the city it could go forward with the below-value sale to the state. The board's outstanding water bonds did not block a sale of land that generated no system revenue.

The Texas Parks and Wildlife Department: The opinion confirmed the department's statutory authority to acquire this identified acreage for Franklin Mountains State Park on the negotiated terms, free of the general notice, bidding, and fair-market-value requirements of chapter 272.

Other Texas home-rule cities: The opinion illustrated that a specific legislative directive to acquire named land can override the general municipal-sale statute, and that a below-value conveyance to the state is not a prohibited gift under article III, section 52.

Common questions

Could El Paso legally sell park land to the state for less than it was worth?
Yes. In this 1988 opinion the Attorney General concluded that a specific Parks and Wildlife Code provision authorized the department to acquire this acreage, and a below-market sale to the state did not violate the constitution's anti-gift clause.

Didn't the city's water bonds prevent selling the land?
No. The bond covenants only barred sales that would impair the revenue securing the bonds and allowed disposal of property no longer needed for the water system. Because the park land produced no system revenue, the covenants did not bar the sale.

Why didn't the below-market price violate the constitution's ban on gifts of public value?
Article III, section 52 bars grants of public value to an individual, association, or corporation. The Attorney General explained that a conveyance to the state itself is not such a grant, and the city receives consideration in the form of a state-maintained park accessible to its residents.

How did a special law let the city skip the usual sale rules?
Sections 22.221 through 22.223 of the Parks and Wildlife Code directed the department to acquire this exact land and impliedly excepted the transfer from chapter 272 of the Local Government Code. A specific statute controls over a general one.

Background and statutory framework

The land at issue, roughly 6,833 acres, lies within the boundaries of Franklin Mountains State Park, which the legislature delineated in 1979 (Acts 1979, 66th Leg., ch. 736) and redrew in 1987 to exclude five sections (Acts 1987, 70th Leg., ch. 304). The Parks and Wildlife Code places the park under the department's jurisdiction and directs it to acquire by purchase, gift, lease, or condemnation all of the described land except the deleted tracts. Parks and Wildlife Code §§ 22.221 through 22.223; § 22.222(a). The land was administered by El Paso's Public Service Board, which holds it as agent for the city and manages the water system and its supporting bonds. V.T.C.S. art. 1109a; San Antonio Indep. School Dist. v. Water Works Bd. of Trustees, 120 S.W.2d 861 (Tex. Civ. App. - Beaumont 1938, writ ref'd).

On the bonds, the Public Finance Section found that the management of the waterworks system is vested in the Public Service Board by a 1952 city ordinance whose subsections D and E have been carried forward by all later bond ordinances. Subsection D is a general covenant not to impair the lien of the bonds on system revenues; subsection E bars sale of the system or a substantial part of it until the bonds are paid, but expressly excepts property that in the board's judgment has become inexpedient to use in connection with the system. Because the property produces no revenue used to pay debt service and is not used for water or wastewater functions, a sale in accordance with these provisions, even below market value, would not impair the bondholders' interests. City of Aransas Pass v. Keeling, 247 S.W. 818 (Tex. 1923).

On statutory authority, sections 22.221 through 22.223 of the Parks and Wildlife Code were adopted in 1979 to govern acquisition of the identified land and were amended in 1987 to facilitate the proposed transfer agreement. The Attorney General read these provisions as a specific law authorizing the sale of the El Paso property to the department on these terms, removing the transaction from the general statutes that ordinarily govern sales of land by a city, in particular chapter 272 of the Local Government Code. See Government Code §§ 311.003, 311.023, 311.025; Flowers v. Pecos River R. Co., 156 S.W.2d 260 (Tex. 1941, writ granted); Townsend v. Terrell, 16 S.W.2d 1063 (Tex. 1929) (specific statute controls over general statute). Chapter 272 requires political subdivisions to give notice and take bids before selling or exchanging land, and although land conveyed to a governmental entity with the power of eminent domain is excepted from notice and bidding, such land may not be conveyed for less than fair market value. Local Government Code § 272.001. Sections 22.221 through 22.223 impliedly except the Franklin Mountains transfer from chapter 272, so the fair-market-value floor did not apply.

On the constitution, article III, section 52(a) provides that, except as otherwise provided, the legislature shall have no power to authorize any county, city, town, or other political subdivision to lend its credit or grant public money or a thing of value in aid of, or to, any individual, association, or corporation. The proposed below-value sale involves an element of donation. In Texas Nat'l Guard Armory Bd. v. McGraw, 126 S.W.2d 627 (Tex. 1939), the Supreme Court did not decide whether a city could constitutionally donate land to the Armory Board, because the legislature had not authorized municipalities to donate armory sites. In Attorney General Opinion H-108 (1973), this office concluded that Beaumont could give land in fee simple to the Department of Mental Health and Mental Retardation for a public purpose, reasoning that the transaction was not a gift because the improvement of the property and the resulting benefit to the city supplied consideration, and citing El Paso County v. City of El Paso, 357 S.W.2d 783 (Tex. Civ. App. - El Paso 1962, no writ), and City of San Antonio v. Congregation of the Sisters of Charity of the Incarnate Word, 360 S.W.2d 580 (Tex. Civ. App. - Waco 1962, writ ref'd n.r.e.). See also Attorney General Opinion H-1256 (1978).

El Paso similarly benefits from transferring its land, which will be maintained at state expense as part of a recreational park accessible to city residents; that benefit, not merely the cash paid, is consideration. In King v. Sheppard, 157 S.W.2d 682 (Tex. Civ. App. - Austin 1941, writ ref'd w.o.m.), the court upheld an appropriation to buy land deeded to the federal government for Big Bend National Park against a challenge under article III, sections 50, 51, and 52, quoting at length from Malone v. Peay, 17 S.W.2d 901 (Tenn. 1929), for the proposition that the United States is not an individual, association, or corporation within such constitutional provisions and that transferring land for park purposes relieves the state of maintenance expense while its residents keep the park's benefits. Authorities from other jurisdictions agree that the state is not such an entity. See City of Sacramento v. Adams, 153 P. 908 (Cal. 1915); Lancey v. King County, 45 P. 645 (Wash. 1896); Ransom v. Rutherford County, 130 S.W. 1057 (Tenn. 1910). On this reasoning the Attorney General concluded the city may transfer the land below market value without violating article III, section 52.

Citations

Statutory authority:

• Parks and Wildlife Code §§ 22.221 through 22.223; § 22.222(a) (department's duty to acquire the described Franklin Mountains land)
• V.T.C.S. art. 1109a (Public Service Board holds land as agent for the city)
• Local Government Code § 272.001 (notice, bidding, and fair-market-value requirements for sales of political-subdivision land)
• Government Code §§ 311.003, 311.023, 311.025 (statutory construction)
• Texas Constitution art. III, § 52 (limit on grants of public value to individuals, associations, or corporations)

Cases:

• San Antonio Indep. School Dist. v. Water Works Bd. of Trustees, 120 S.W.2d 861 (Tex. Civ. App. - Beaumont 1938, writ ref'd)
• City of Aransas Pass v. Keeling, 247 S.W. 818 (Tex. 1923)
• Flowers v. Pecos River R. Co., 156 S.W.2d 260 (Tex. 1941, writ granted)
• Townsend v. Terrell, 16 S.W.2d 1063 (Tex. 1929)
• Texas Nat'l Guard Armory Bd. v. McGraw, 126 S.W.2d 627 (Tex. 1939)
• El Paso County v. City of El Paso, 357 S.W.2d 783 (Tex. Civ. App. - El Paso 1962, no writ)
• City of San Antonio v. Congregation of the Sisters of Charity of the Incarnate Word, 360 S.W.2d 580 (Tex. Civ. App. - Waco 1962, writ ref'd n.r.e.)
• King v. Sheppard, 157 S.W.2d 682 (Tex. Civ. App. - Austin 1941, writ ref'd w.o.m.)
• Malone v. Peay, 17 S.W.2d 901 (Tenn. 1929)
• City of Sacramento v. Adams, 153 P. 908 (Cal. 1915)
• Lancey v. King County, 45 P. 645 (Wash. 1896)
• Ransom v. Rutherford County, 130 S.W. 1057 (Tenn. 1910)

Related opinions:

• Attorney General Opinion H-108 (1973)
• Attorney General Opinion H-1256 (1978)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-997
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1988/jm0997.pdf

Original opinion text

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

December 21, 1988

Honorable H. Tati Santiesteban
Chairman
Natural Resources Committee
Texas State Senate
P.O. Box 12068
Austin, Texas 78711

Opinion No. JM-997

Re: Authority of a home rule city to convey land to the state for use as a park, where the transfer is made at a price below market value (RQ-1572)

Dear Senator Santiesteban:

You ask a question about the state's acquisition of a specific parcel of land owned by the city of El Paso and administered by the city's Public Service Board. This land, consisting of approximately 6,833.9 acres, is within the boundaries of the Franklin Mountains State Park which were delineated by the legislature in 1979 and redrawn to exclude five sections of land in 1987. See Acts 1979, 66th Leg., ch. 736, at 1804; Acts 1987, 70th Leg. ch. 304, at 1676. The Parks and Wildlife Code establishes the park under the jurisdiction of the Parks and Wildlife Department and provides that the department "shall acquire by purchase, gift, lease, or condemnation all of the land described" in the 1979 legislation, except for the tracts deleted in 1987. Parks & Wild. Code §§ 22.221; 22.222(a). A proposed agreement between El Paso and the state provides for transferring the land to the state at a "modest price" that is considerably less than market value.

The Public Service Board of the city of El Paso is appointed by the city and has responsibility for administering the water system for the city and the bond issues supporting the water system. The lands in question have been designated Public Service Board lands, and the board holds them as agent for the city. See V.T.C.S. art. 1109a; San Antonio Indep. School Dist. v. Water Works Bd. of Trustees, 120 S.W.2d 861 (Tex. Civ. App. - Beaumont 1938, writ ref'd). Concern has been expressed as to the city's authority to transfer these lands to the state at a time when the Public Service Board of the city of El Paso still has outstanding bonds.

Your question is as follows:

Does the City of El Paso, through its duly elected governing body, have the power and authority to make the transfer of land to the State for inclusion in the state park system at a price which may be less than market value?

Your question raises the following three issues: the effect of the outstanding bonds on the city's transfer of these lands; the statutory authority for selling the land at less than market value; and the constitutionality of this transaction under article III, section 52, of the Texas Constitution.

We will first address your concern that provisions of prior bond issues might prevent the city of El Paso from selling this property at less than market value. The Public Finance Section of this office has reviewed the relevant bond documents and has found that the management and control of the city waterworks system (hereinafter the "system") is vested in the Trustees of the Public Service Board by city ordinance of May 22, 1952. Included as subsections D and E of section 12 of this ordinance are covenants on the disposition of the system's property which have been carried forward by all subsequent bond ordinances.

Subsection D is a general covenant by which the board agrees not to take any action whereby the lien of the bonds on the revenues of the system might be lost or impaired. Subsection E specifically addresses the board's authority to dispose of the property of the system. This covenant reads in part as follows:

E. That the city will not sell, encumber or in any manner dispose of the system or any substantial part thereof, including any and all extensions and additions that may be made thereto, until the bonds herein authorized to be issued shall have been paid in full as to both principal and interest (provided that this covenant shall not be construed to prevent the disposal by the city of property which in the Board's judgment has become inexpedient to use in connection with the system . . .).

We are informed that the property to be sold does not generate any revenues from which the debt service on the bonds is paid, nor is it used for water or wastewater system functions. If this information is correct and if the board makes the required determination, these covenants do not prevent the sale of this property. The city's contract with the bondholders protects them from property sales which will impair their source of repayment and permits sales of property not needed for the system. Sale of the land in accordance with these provisions, even if at less than market value, will not impair the bondholder's interests. See generally City of Aransas Pass v. Keeling, 247 S.W. 818 (Tex. 1923).

We next consider whether the city of El Paso has statutory authority to transfer this land to the Parks and Wildlife Department at less than market value.

Sections 22.221 through 22.223 of the Parks and Wildlife Code authorize the Parks and Wildlife Department to acquire the specific acreage you inquire about. Acts 1979, 66th Leg., ch. 736, at 1804. The bill analysis of the 1979 bill which established the Franklin Mountains State Park states as follows:

Background:

The only state park near El Paso, Hueco Tanks State Historical Park, is located twenty-six miles east of the city and is a limited access, historical preservation park. The city and county parks are small and for 'playground' recreation.

The proposed park in the Franklin Mountains includes the majority of the high mountains in the Franklin Range and some of the remaining wild desert mountains in El Paso County. The area contains many unique features, such as prehistoric and historic archaeological sites . . . .

The closeness of the proposed area to El Paso would enable residents and visitors to hike mountain trails and study a unique natural environment.

The bill would require the Texas Parks and Wildlife Department to acquire the portion of the Franklin Mountains of El Paso County north of Trans-Mountain Road (Loop 375) to create a state recreational park. The department would acquire the land by purchase, gift, or condemnation with funds from the Texas Park Development Fund.

Bill Analysis, Tex. H.B. 867, 66th Leg. (1979).

Thus, the Parks and Wildlife Code provisions were adopted to govern the acquisition of identified land which included the specific land in question. The legislature amended these provisions in 1987 to facilitate the proposed transfer agreement which is the subject of your request. The Bill Analysis to the 1987 legislation stated in part:

Background:

In 1979 the 66th Legislature created the Franklin Mountains State Park. The park is . . . the largest urban park in the United States. The Public Service Board of El Paso owns land that is within the boundary of the Park (approximately 8,100 acres) which is presently valued at $40,000,000. The State is currently in litigation involving the purchase of this parcel of land from the City of El Paso. The Public Service Board has offered to sell to the State 4,780 acres . . . at a substantially lower price ($250,000) if the 5 sections (3,320 acres) on the eastern border of the park may be exempted as proposed park lands. The property described as Sections 24, 17, 16, 9, and 4 are considered to be prime developable lands and should not be a part of a wilderness park.

Provides that 5 sections of land within the Franklin Mountains State Park be deleted from the land described for acquisition in Section 2 of the Act.

Bill Analysis, Tex. H.B. No. 1839, 70th Leg. (1987).

The legislature thus contemplated that sections 22.221 through 22.223 of the Parks and Wildlife Code would provide comprehensive statutory authority for the department to acquire land designated for Franklin Mountains State Park, including the authority to acquire land from the city of El Paso at less than market value. These provisions constitute a specific law authorizing the sale of the El Paso property to the department on these terms and they remove this transaction from general statutes that ordinarily govern the sale of land by a city, in particular from chapter 272 of the Local Government Code. See, e.g., Gov't Code §§ 311.003; 311.023; 311.025. See also Flowers v. Pecos River R. Co., 156 S.W.2d 260, 263 (Tex. 1941, writ granted); Townsend v. Terrell, 16 S.W.2d 1063, 1064 (Tex. 1929) (specific statute controls over general statute).

Chapter 272 of the Local Government Code requires political subdivisions to comply with notice and bidding requirements before selling or exchanging land. Local Gov't Code § 272.001. These notice and bidding requirements do not apply to land conveyed to a governmental entity that has the power of eminent domain, but such land may not be conveyed for less than its fair market value. Id. Sections 22.221 through 22.223 of the Parks and Wildlife Code impliedly excepts the transfer of the Franklin Mountains land from the requirements of chapter 272 of the Local Government Code. Thus, the requirement that land be conveyed at not less than market value does not apply to the transfer of the designated land from El Paso to the Parks and Wildlife Department.

We finally consider whether article III, section 52, of the Texas Constitution prohibits the city of El Paso from selling the land to the department at less than market value. Article III, section 52 provides in part:

(a) 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 . . . .

Tex. Const. art. III, § 52. The proposed sale at less than market value involves an element of donation.

In Texas Nat'l Guard Armory Bd. v. McGraw, 126 S.W.2d 627 (Tex. 1939), the Supreme Court determined that the attorney general was within his right in refusing to approve revenue bonds to finance the construction of armories for the Texas National Guard. The attorney general argued that part of the security for the bonds would be invalid because it would consist of rentals from armory sites donated to the Armory Board by incorporated cities in violation of article III, section 52, of the Texas Constitution. 126 S.W.2d at 630. The Supreme Court stated as follows in response to this argument:

This Act [the National Guard Armory Board Act] does not undertake to authorize municipal corporations to donate sites for armories; nor has the Legislature enacted any law which undertakes to confer on such cities that power. Since the Legislature has not by law authorized municipal corporations to donate sites for armories, it becomes unnecessary to decide the power of the Legislature to authorize municipal corporations to lend their aid to the Board by donating sites for armories under the provisions of Section 52 of Article 3 of the Constitution.

126 S.W.2d at 638. Thus, the Supreme Court did not determine whether a city could constitutionally donate land to the National Guard Armory Board.

In Attorney General Opinion H-108 (1973), this office considered a question very similar to the one not reached in Texas Nat'l Guard Armory Bd. v. McGraw and decided that the city of Beaumont could give the Department of Mental Health and Mental Retardation ten acres of land in fee simple as a site for constructing a ward building at the Beaumont State Center for Human Development.

The opinion stated as follows:

The fact that the transaction is denominated "a gift" does not invalidate it unless the Beaumont City charter contains restrictive provisions unknown to us. The proposed use is clearly for a public purpose and thus does not violate Article 3 §§ 50, et. seq., of the Texas Constitution. Similar donations were involved and approved by the courts in El Paso County v. City of El Paso . . . [357 S.W.2d 783 (Tex. Civ. App. - El Paso 1962, no writ)], and City of San Antonio v. Congregation of the Sisters of Charity of the Incarnate Word, 360 S.W.2d 580 (Tex. Civ. App. - [Waco] 1962, [writ ref'd, n.r.e.]).

Actually, the transfer is not a gift. The improvement of the property and the consequent benefit to the city of Beaumont supply consideration for the transaction. In the El Paso case, supra, the county order approving the transaction recited as consideration for its transfer that 'it will reduce the fire insurance rate in El Paso.'

Attorney General Opinion H-108 at 4 (1973).

The city of El Paso similarly benefits from transferring its land to the Parks and Wildlife Department because it will be maintained at state expense as part of a state recreational park easily accessible to residents of the city. Consideration for the transfer of land to the state is provided by these benefits to the city, and not merely by the cash sum it receives. See Attorney General Opinion H-1256 (1978).

The judicial opinion in King v. Sheppard, 157 S.W.2d 682 (Tex. Civ. App. - Austin 1941, writ ref'd w.o.m.) addresses a question analogous to the question before us. The legislature appropriated funds to purchase land for the Big Bend National Park which would be deeded to the federal government to use for national park purposes only. A taxpayer challenged the appropriation as violating sections 50, 51, and 52 of article III, which "inhibit the lending or giving of the credit of the State, or the granting of public money . . . to any individual, association, corporation, etc." 157 S.W.2d at 686.

The court quoted at some length from Malone v. Peay, 17 S.W.2d 901 (Tenn. 1929), a Tennessee case dealing with the transfer of state land to the federal government for a national park. The Tennessee court cited authorities to the effect that the United States was not an individual, association, or corporation within state constitutional provisions forbidding the gift or grant of public funds. The court also stated that a transfer of the lands from the state to the United States for park purposes would not impair the beneficial rights of the people of Tennessee, who are also citizens of the United States. The transfer relieved the state from the continuing expense of maintaining the park, while its residents still had the benefits of the park system.

The King v. Sheppard court concluded that the Tennessee decision was sound and should be followed as the law of the case. 157 S.W.2d at 686. Much of the reasoning followed in King v. Sheppard applies to the transfer of the Franklin Mountains property from El Paso to the Parks and Wildlife Department. The benefits of the Franklin Mountains State Park will accrue to El Paso, its residents and visitors. Moreover, authorities from other jurisdictions have held that the state is not an individual, association, company or corporation within constitutional provisions comparable to article III, sections 50, 51, and 52. See, e.g., City of Sacramento v. Adams, 153 P. 908 (Cal. 1915) (city donated land to state for site for state buildings); Lancey v. King County, 45 P. 645 (Wash. 1896) (use of county land for public improvements undertaken by state and United States); Ransom v. Rutherford County, 130 S.W. 1057 (Tenn. 1910) (city and county bonds finance purchase of sites and construction of buildings for state teacher's college).

On the basis of the reasoning and authorities cited above, we believe that the city of El Paso may transfer the land in question to the Department of Parks and Wildlife at less than market value without violating article III, section 52 of the Texas Constitution.

Our opinion is limited to the questions discussed. We do not consider any contract provisions, home rule charter provisions, or other provisions not expressly addressed.

SUMMARY

Under sections 22.221 through 22.223 of the Parks and Wildlife Code, the city of El Paso may sell land at less than market value to the Parks and Wildlife Department for inclusion in the Franklin Mountains State Park. The transfer at less than market value does not violate article III, section 52, of the Texas Constitution. Based on the information submitted to us, the fact that the land has been designated land of the El Paso Public Service Board and that the board has outstanding bonds does not bar sale of this land at less than market value.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Susan L. Garrison
Assistant Attorney General