Can a Texas water district give public funds to a federal agency for a conservation program?

Plain-English summary

Representative Doug Miller, chair of the House Special Purpose Districts Committee, asked the Attorney General three questions about whether the Edwards Aquifer Authority could pay the U.S. Fish & Wildlife Service to run a "refugia" program. The EAA is a special regional water district created by the Legislature to protect the Edwards Aquifer and the life that depends on it. Carrying out its duties, like regulating groundwater withdrawals, can result in the "taking" of endangered species, which federal law forbids, so the EAA and other parties obtained a federal incidental-take permit tied to a habitat conservation plan. The plan requires the EAA to support a set of off-site refugia, protected facilities at USFWS's San Marcos, Uvalde, and Inks Dam sites where covered species can be cared for and kept safe from drought, disease, and water-quality problems. USFWS proposed a contract under which it would own the buildings and equipment, on federal land, and the EAA would fund the work.

On the first question, the EAA worried that paying USFWS might be an unconstitutional gift of public funds under Article III, section 52 of the Texas Constitution, which bars the Legislature from letting a political subdivision grant public money to "any individual, association or corporation." The AG explained that the Texas Supreme Court has held a state agency is not an "individual, association or corporation" under section 52, so the ban does not reach transfers to a state agency. Although no case squarely addressed a federal agency, the AG reasoned the same logic applies, so a court would likely conclude USFWS is not such an entity and section 52 would not bar the EAA from funding the refugia program consistent with the EAA's purposes.

On the second question, the AG pointed to the EAA Act, which gives the EAA broad authority to enter contracts and all the powers necessary to manage, conserve, preserve, and protect the aquifer. If the EAA decides the refugia contract is necessary to those purposes, a court would likely find it has the authority, and the AG read the Water Code's joint-project provisions as additional grants of authority that do not limit the EAA's broad contracting power. On the third question, the AG concluded the Water Code's construction-contract procurement rules (chapter 49, subchapter I) likely do not apply, because the deal is for USFWS's services to operate the program rather than for construction work, and even if a court saw it as construction work, USFWS is the only source for the program, which falls within the sole-source exception.

Currency note

This opinion was issued in 2015. 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

The Edwards Aquifer Authority (as the opinion described it): The opinion described the EAA as likely free, under Article III, section 52 and its own enabling Act, to fund and contract with USFWS for the refugia program if the EAA determines the contract is necessary to manage and protect the aquifer. It treated USFWS's sole ownership of the facilities on federal land as not, by itself, a constitutional barrier.

The legislative oversight committee (as the opinion described it): The opinion answered each of the chair's three questions in the EAA's favor while framing them as likelihoods a court would reach, not guarantees, and expressly declined to address some related issues (such as the propriety of USFWS conditioning a permit on the applicant funding federal structures or employees).

Other Texas water and special-law districts (as the opinion described it): The opinion described the gift-of-public-funds clause as reaching grants to private individuals, associations, and corporations, and read Texas Supreme Court precedent to place a government agency, state or federal, outside that clause. It also described chapter 49's joint-project provisions as grants of authority rather than limits on a district's broader contracting power.

Parties to the habitat conservation plan and permit (as the opinion described it): The opinion described the EAA's funding obligation as flowing from the conservation plan and incidental-take permit, and treated the refugia work as within the EAA's statutory mission.

Common questions

Can the Edwards Aquifer Authority pay a federal agency to run a conservation program?
The AG concluded it likely can. The Texas Supreme Court has held a state agency is not an "individual, association or corporation" under Article III, section 52, and the AG reasoned a federal agency like USFWS is not either, so the gift-of-public-funds clause would not bar the funding.

Does it matter that USFWS, not the EAA, would own the buildings on federal land?
The AG did not treat that ownership arrangement as a constitutional problem by itself. Because USFWS is not the kind of private entity Article III, section 52 targets, the AG concluded the funding consistent with the EAA's purposes would likely be permitted.

Does the EAA have authority to sign this kind of contract?
The AG said the EAA Act gives the EAA broad authority to enter contracts and all powers necessary to manage and protect the aquifer, so if the EAA finds the refugia contract necessary to those purposes, a court would likely conclude it has the authority.

Do the Water Code's competitive-bidding construction rules apply to the refugia contract?
The AG concluded chapter 49, subchapter I likely does not apply, because the contract is for USFWS's services to operate the program rather than for construction work, and even if it were construction work, USFWS is a sole source exempt under section 49.278.

Did the opinion settle whether the federal permit conditions themselves are proper?
No. The AG expressly did not address the propriety of USFWS requiring an applicant to fund structures on USFWS property or fund USFWS employees, or the federal government's constitutional authority to regulate the taking of the covered species.

Background and statutory framework

The Edwards Aquifer Authority is a special regional management district created by the Edwards Aquifer Authority Act to protect terrestrial and aquatic life, water supplies, existing industries, and the economic development of the state (EAA Act § 1.01), with duties that include regulating groundwater withdrawals (EAA Act § 1.15). Because carrying out those duties can "take" endangered species in violation of the federal Endangered Species Act (16 U.S.C.A. § 1538(a)(1)(B); see § 1532(19)), the EAA and other parties obtained an incidental-take permit, which requires a plan to "minimize and mitigate" any taking (16 U.S.C.A. § 1539(a)(1)(B), (a)(2)(A)(i-ii)). The resulting habitat conservation plan obligates the EAA to support off-site refugia at USFWS facilities.

For the constitutional question, Article III, section 52(a) bars the Legislature from authorizing a political subdivision to lend its credit or grant public money "to any individual, association or corporation" (Tex. Const. art. III, § 52(a)). Texas courts have treated some local governmental entities, such as school districts, as corporations for this purpose (San Antonio Indep. Sch. Dist. v. Bd. of Trs. of San Antonio Elec. & Gas Sys., 204 S.W.2d 22 (Tex. Civ. App.-El Paso 1947, writ ref'd n.r.e.)), but the Texas Supreme Court has held that a state agency does not qualify as an "individual, association or corporation" under section 52(a) (Tex. Mun. League Intergov'l Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377 (Tex. 2002); Harris Cnty. Flood Control Dist. v. Mann, 140 S.W.2d 1098 (Tex. 1940)). The AG applied that rationale to a federal agency.

For the statutory-authority question, the EAA Act grants the EAA authority to enter contracts (EAA Act § 1.11(d)(2); Tex. Att'y Gen. Op. No. GA-0708 (2009)) and all powers necessary to manage, conserve, preserve, and protect the aquifer, including authority under chapters 36, 49, and 51 of the Water Code (EAA Act § 1.08; see In re Edwards Aquifer Auth., 217 S.W.3d 581 (Tex. App.-San Antonio 2006, orig. proceeding)). The AG read the Water Code's joint-action provisions (Tex. Water Code Ann. § 49.213(a); § 49.227) as affirmative grants that do not limit that authority. For the procurement question, chapter 49, subchapter I governs contracts "for construction work" (Tex. Water Code Ann. § 49.271(a); see § 49.276(b)), but exempts professional-services and sole-source contracts (Tex. Water Code Ann. § 49.278(a)(2), (4)). Because the EAA would be contracting for USFWS's services and USFWS is the only source for the program, the AG concluded subchapter I likely does not apply.

Citations

Constitutional, statutory, and federal provisions:

• Tex. Const. art. III, § 52(a) (gift-of-public-funds clause)
• Tex. Water Code Ann. § 49.213(a), § 49.227 (joint projects by districts)
• Tex. Water Code Ann. § 49.271(a) (construction-work contracts); § 49.276(b) (progress payments)
• Tex. Water Code Ann. § 49.278(a)(2), (4) (professional-services and sole-source exceptions)
• 16 U.S.C.A. § 1532(19) (definition of "take"); § 1538(a)(1)(B) (prohibited takings)
• 16 U.S.C.A. § 1539(a)(1)(B), (a)(2)(A)(i-ii) (incidental-take permit and plan)
• Edwards Aquifer Authority Act §§ 1.01, 1.08, 1.11(d)(2), 1.15 (uncodified)

Cases:

• San Antonio Indep. Sch. Dist. v. Bd. of Trs. of San Antonio Elec. & Gas Sys., 204 S.W.2d 22, 25 (Tex. Civ. App.-El Paso 1947, writ ref'd n.r.e.)
• Tex. Mun. League Intergov'l Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 384 (Tex. 2002)
• Harris Cnty. Flood Control Dist. v. Mann, 140 S.W.2d 1098, 1103 (Tex. 1940)
• In re Edwards Aquifer Auth., 217 S.W.3d 581, 587-88 (Tex. App.-San Antonio 2006, orig. proceeding)
• GDF Realty Invs., Ltd. v. Norton, 326 F.3d 622, 640-41 (5th Cir. 2003)
• People for the Ethical Treatment of Prop. Owners v. U.S. Fish & Wildlife Serv., No. 2:13-cv-00278-08, 2014 WL 5743294, at *8 (D. Utah Nov. 5, 2014)

Prior Attorney General opinion referenced:

• Tex. Att'y Gen. Op. No. GA-0708 (2009)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0008
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2015/kp0008.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

March 9, 2015

The Honorable Doug Miller Opinion No. KP-0008
Chair, Special Purpose Districts Committee
Texas House of Representatives Re: Whether the Edwards Aquifer Authority
Post Office Box 2910 may provide funding to the U.S. Fish &
Austin, Texas 78768-2910 Wildlife Service for the implementation of a
refugia program (RQ-1220-GA)

Dear Representative Miller:

You ask three questions related to whether the Edwards Aquifer Authority ("EAA") may provide funding to the U.S. Fish & Wildlife Service ("USFWS") for the implementation of a refugia program under certain terms and conditions proposed by USFWS. [1]

EAA is "a special regional management district" created by the Legislature through the Edwards Aquifer Authority Act ("EAA Act"). [2] The stated purposes of EAA are "to protect terrestrial and aquatic life, domestic and municipal water supplies, the operation of existing industries, and the economic development of the state." EAA Act § 1.01. Among other duties, EAA is responsible for the regulation of withdrawals of groundwater from the aquifer by well owners. Id. § 1.15. EAA has recognized that performing its statutory duties could result in the "taking" of endangered species, which is prohibited by federal law under the Endangered Species Act ("ESA"). 16 U.S.C.A. § 1538(a)(1)(B) (West 2010). [3] Therefore, EAA, joined by several other entities, sought and obtained from USFWS an incidental take permit. [4] The Permit precludes liability under the ESA for any taking that is "incidental to, and not the purpose of, the carrying out of an otherwise lawful activity." Id. § 1539(a)(1)(B).

To obtain the Permit, the ESA required EAA and other stakeholders to submit a plan that specified the steps they would take to "minimize and mitigate" the impact of any taking. Id. § 1539(a)(2)(A)(i-ii). Accordingly, EAA and a number of other entities prepared a habitat conservation plan outlining specific measures that the applicants would undertake to protect the covered species. [5] USFWS approved the Plan and issued the Permit in February 2013. Permit at 1. "The authorization granted by [the Permit is] subject to full and complete compliance with, and implementation of, the" Plan. Id.

As part of the Plan, EAA is required to "support and coordinate with the USFWS on the work relating to the ... operation and maintenance of a series of off-site refugia at USFWS's San Marcos, Uvalde, and Inks Dam facilities." See Plan, § 5.1.1. You describe a refugia in this context as "an off-site facility designed and dedicated to the care, housing, and maintenance of individuals or populations of Covered Species in an artificial habitat to protect them from and to avoid the negative effects of drought disturbance, disease outbreaks, and water quality impairment in the Comal and San Marcos Springs and Rivers ecosystems." Request Letter at 7. You explain that USFWS has proposed "a management contract that would contain the terms and conditions under which it would be willing to contract with the EAA to implement the refugia program." Id. at 8. Under the terms of that proposed contract, USFWS would acquire or construct buildings, facilities, equipment and supplies, which would be owned by USFWS and located on federal land. Id.

You first ask whether EAA may provide funding to USFWS to implement the refugia program if the "buildings, works, facilities, and equipment must be owned solely by [USFWS] and be physically located on real property owned by" USFWS. Id. at 4. You are specifically concerned that EAA's provision of funding to USFWS may implicate the prohibition against gratuitous grants of public credit and funds under article III, section 52(a) of the Texas Constitution. Id. at 13.

Article III, section 52 prohibits the Legislature from authorizing a political subdivision "to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation." TEX. CONST. art. III, § 52(a). Answering your question first requires a determination as to whether a court would consider USFWS, a federal agency, an "individual, association or corporation" for purposes of article III, section 52. Id. Courts have considered some local governmental entities, such as school districts, to be corporations for purposes of article III, section 52. See, e.g., San Antonio Indep. Sch. Dist. v. Bd. of Trs. of San Antonio Elec. & Gas Sys., 204 S.W.2d 22, 25 (Tex. Civ. App.-El Paso 1947, writ ref'd n.r.e.) (concluding that article III, section 52 prohibits a city from donating "its funds to an independent municipal corporation such as an independent school district"). The Texas Supreme Court, however, has concluded that a state agency does not "qualify as an individual, association or corporation under section 52(a)" and that the provision therefore "does not prohibit transfers to a state agency." Tex. Mun. League Intergov'l Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 384 (Tex. 2002); see also Harris Cnty. Flood Control Dist. v. Mann, 140 S.W.2d 1098, 1103 (Tex. 1940) (orig. proceeding) (concluding that statutes authorizing a district to cooperate with the federal government in carrying out the purposes of the district did not violate article III, section 52). Although we find no case expressly stating that a federal agency is not an "individual, association or corporation" for purposes of section 52, the same rationale that applies to a state agency would likely apply to a federal agency. Thus, a court is likely to conclude that a federal agency like USFWS is not an "individual, association or corporation" under article III, section 52 and that the constitutional provision would not prohibit EAA from providing funds to USFWS to implement the refugia program consistent with EAA's purposes.

In your second question, you ask whether EAA has the statutory authority to enter into a non-joint refugia project contract with USFWS. Request Letter at 2. The Legislature has granted EAA broad authority to "enter into contracts." EAA Act § 1.11(d)(2); Tex. Att'y Gen. Op. No. GA-0708 (2009) at 3. Furthermore, the EAA has "all of the powers, rights, and privileges necessary to manage, conserve, preserve, and protect the aquifer," expressly including the authority granted by chapters 36, 49, and 51 of the Water Code. [6] EAA Act § 1.08. Thus, if EAA determines that entering into the refugia project contract with USFWS under the terms USFWS proposes is necessary to manage, conserve, preserve and protect the aquifer, a court would likely conclude that the EAA has statutory authority to do so. [7]

You suggest that two provisions in chapter 49 of the Water Code may prohibit the EAA from contracting with USFWS "unless and only if the project is, in fact, jointly constructed, financed, owned, and operated." Request Letter at 20. The two provisions you raise are sections 49.213(a) and 49.227, which authorize special law districts to contract for joint projects with other entities. Subsection 49.213(a) provides:

A district may contract with a person or any private or public entity for the joint construction, financing, ownership, and operation of any works, improvements, facilities, plants, equipment, and appliances necessary to accomplish any purpose or function permitted by a district, or a district may purchase an interest in any project used for any purpose or function permitted by a district.

TEX. WATER CODE ANN. § 49.213(a) (West 2008). Section 49.227 states:

A district or water supply corporation may act jointly with any other person or entity, private or public, whether within the State of Texas or the United States in the performance of any of the powers and duties permitted by this code or any other laws.

Id. § 49.227. The language of sections 49.213(a) and 49.227 provides affirmative grants of authority for districts to act jointly with other entities; however, nothing in either provision suggests that those statutes are intended to limit the EAA's broad contracting authority granted in the EAA Act.

Your final question asks whether chapter 49, subchapter I of the Water Code will apply to the refugia contract between EAA and USFWS. Request Letter at 2-3. Chapter 49, subchapter I is titled "Construction, Equipment, Materials and Machinery Contracts," and it outlines a number of procurement requirements for "[a]ny contract made by the board for construction work." TEX. WATER CODE ANN. § 49.271(a) (West Supp. 2014); see generally id. §§ 49.271-.279 (West 2008 & Supp. 2014). In particular, you question whether section 49.276 of the Water Code prohibits EAA from making advance payments to USFWS for the construction of the additional improvements necessary to operate the refugia program. [8] As you describe it, although the proposed management contract between EAA and USFWS will require USFWS to either acquire or construct facilities and improvements, EAA will be contracting for USFWS's services to operate the refugia program. You explain that USFWS will have "[c]ontrol over the design, construction and equipment plans and specifications," which suggests that the contract between EAA and USFWS itself may not be a contract for construction work, making subchapter I inapplicable. Request Letter at 8. Even if a court were to conclude that the contract between EAA and USFWS were a contract for construction work, section 49.278 excepts certain contracts from the application of subchapter I, including contracts for "professional services" and "contracts for services or property for which there is only one source or for which it is otherwise impracticable to obtain competition." TEX. WATER CODE ANN. § 49.278(a)(2), (4) (West 2008). Under the terms of the contract, USFWS is the only source that may provide and operate a refugia program. For these reasons, a court would likely conclude that chapter 49, subchapter I does not apply to a contract between EAA and USFWS for the operation of a refugia program. [9] You do not ask, and we do not address, the propriety of USFWS requiring as a condition of an incidental take permit that the applicant fund structures on USFWS property or fund USFWS employees.

SUMMARY

Article III, section 52 of the Texas Constitution prohibits the Legislature from authorizing a political subdivision "to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation." Based on Texas Supreme Court precedent, a court is likely to conclude that the United States Fish and Wildlife Service is not an "individual, association or corporation" under article III, section 52, and that the constitutional provision therefore would not prohibit the Edwards Aquifer Authority from providing funds to the United States Fish and Wildlife Service to implement a refugia program.

If the Edwards Aquifer Authority determines that entering into the refugia project contract with the United States Fish and Wildlife Service under the terms the Service proposes is necessary to manage, conserve, preserve and protect the aquifer, a court would likely conclude that the Edwards Aquifer Authority Act provides statutory authority to do so.

A court would likely conclude that chapter 49, subchapter I of the Water Code does not apply to a contract between the Edwards Aquifer Authority and the United States Fish and Wildlife Service for the operation of a refugia program.

Very truly yours,

KEN PAXTON
Attorney General of Texas

CHARLES E. ROY
First Assistant Attorney General

BRANTLEY STARR
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Doug Miller, Co-Chair, Edwards Aquifer Legislative Oversight Comm. to Honorable Greg Abbott, Tex. Att'y Gen. at 2-3 (Sept. 3, 2014), https://www.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").

[2] EAA Act § 1.01, http://www.edwardsaquifer.org (Legislation and Rules). The EAA Act remains uncodified. Citations are to the EAA Act's current sections, without separate reference to amending sections. Official citations are included in the session laws. See Act of May 30, 1993, 73d Leg., R.S., ch. 626, 1993 Tex. Gen. Laws 2350, amended by Act of May 16, 1995, 74th Leg., R.S., ch. 524, 1995 Tex. Gen. Laws 3280; Act of May 29, 1995, 74th Leg., R.S., ch. 261, 1995 Tex. Gen. Laws 2505; Act of May 6, 1999, 76th Leg., R.S., ch. 163, 1999 Tex. Gen. Laws 634; Act of May 25, 2001, 77th Leg., R.S., ch. 1192, 2001 Tex. Gen. Laws 2696; Act of May 27, 2001, 77th Leg., R.S., ch. 966, §§ 2.60-.62, 6.01-.05, 2001 Tex. Gen. Laws 1991, 2021-22, 2075-76; Act of May 25, 2001, 77th Leg., R.S., ch. 1192, 2001 Tex. Gen. Laws 2696; Act of June 1, 2003, 78th Leg., R.S., ch. 1112, § 6.01(4), 2003 Tex. Gen. Laws 3188, 3193; Act of May 23, 2007, 80th Leg., R.S., ch. 510, 2007 Tex. Gen. Laws 900; Act of May 28, 2007, 80th Leg., R.S., ch. 1351, §§ 2.01-2.12, 2007 Tex. Gen. Laws 4612, 4627-34; Act of May 28, 2007, 80th Leg., R.S., ch. 1430, §§ 12.01-12.12, 2007 Tex. Gen. Laws 5848, 5901-09; Act of May 21, 2009, 81st Leg., R.S., ch. 1080, 2009 Tex. Gen. Laws 2818.

[3] Under the ESA, to "take" is defined as "to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct." 16 U.S.C.A. § 1532(19) (West 2010). Section 1538(a)(1)(B) provides, with certain exceptions, that "with respect to any endangered species of fish or wildlife listed pursuant to section 1533 of this title, it is unlawful for any person subject to the jurisdiction of the United States to ... take any such species within the United States or the territorial sea of the United States." Id. § 1538(a)(1)(B).

[4] See EAA Act § 1.11(d)(9) (expressly authorizing the EAA to hold permits under the ESA); USFWS Permit TE63663A-0, http://www.eahcp.org/files/admin-records/NEPA-and-HCP/USFWS_Permit_03-18-2013_rcvd_1030_a.m._Final.pdf ("Permit").

[5] See Edwards Aquifer Authority Recovery Implementation Program, Habitat Conservation Plan (Nov. 2012) ("Plan"), http://www.eahcp.org/ ("Documents and Publications," "Habitat Conservation Plans and Appendices").

[6] Subsection 1.08(a) of the EAA Act provides that the EAA's authority includes that granted by chapters 50, 51 and 52 of the Water Code. Chapters 50 and 52 were repealed by the Legislature in 1995 and replaced with chapters 49 and 36, respectively. Courts have since held that the recodified chapters apply to the EAA. See, e.g., In re Edwards Aquifer Auth., 217 S.W.3d 581, 587-88 (Tex. App.-San Antonio 2006, orig. proceeding).

[7] You also ask in relation to this question whether EAA may provide advance funding to USFWS for construction, equipment and supplies "without contravening the gratuitous grant prohibition of Article III, Section 52(a)." Request Letter at 17. Because we have already concluded that a court is unlikely to consider USFWS an "individual, association or corporation" under article III, section 52, we do not address this question further.

[8] Subsection 49.276(b) of the Water Code provides that "[t]he district will make progress payments under construction projects monthly as the work proceeds, or at more frequent intervals as determined by the board or its designee, on estimates approved by the board or its designee." TEX. WATER CODE ANN. § 49.276(b) (West 2008).

[9] You do not ask, and we do not address, the constitutional authority of the federal government to regulate the taking of the endangered species that are part of the Plan. See GDF Realty Invs., Ltd. v. Norton, 326 F.3d 622, 640-41 (5th Cir. 2003) (holding that application of the ESA's take provision to intrastate species is a constitutional exercise of the Commerce Clause power); but see People for the Ethical Treatment of Prop. Owners v. U.S. Fish & Wildlife Serv., No. 2:13-cv-00278-08, 2014 WL 5743294, at *8 (D. Utah Nov. 5, 2014) (holding that the Commerce Clause "does not authorize Congress to regulate takes of a purely intrastate species that has no substantial effect on interstate commerce").