Can a Texas transit agency build bus lanes where voters approved light rail?

Plain-English summary

Senator Robert Nichols, who chaired the Senate Transportation Committee, asked the AG whether the Metropolitan Transit Authority of Harris County (METRO) could lawfully take part in the Uptown Houston Transit Project, also called the Post Oak Boulevard Dedicated Bus Lanes Project. The concern was history: in 2003, Harris County voters approved a referendum on METRO's transit system, including a METRORail plan with an Uptown/West Loop segment of roughly 4.4 miles of light rail along Post Oak Boulevard. The new project would use that same approved Post Oak route but with Bus Rapid Transit technology instead of light rail. METRO said it would not build or fund the project but would operate and maintain the dedicated bus lanes and buses. The senator asked whether METRO's involvement would violate the "contract with the voters" created by the 2003 bond vote.

The AG explained the "contract with the voters" doctrine, which grows out of the Texas Constitution's bar on impairing contracts. When voters approve a bond election, the election order that calls the election and states the purpose of the bonds becomes a contract with the voters, and the proceeds may be spent only for the approved purpose. If the order states only a general purpose, the governing body has discretion within that purpose; if the order specifies particular projects, the proceeds can be used only for those projects. So the first task was to read METRO's 2003 election documents to see what voters actually approved.

Looking at the resolution calling the election, the ballot language, and the incorporated exhibits, the AG found that they explicitly referenced METRORail "commuter line components," and that Exhibit A-4 described the Uptown/West Loop segment as approximately 4.4 miles of rail along Post Oak Boulevard with about seven stations. From that, the AG concluded a court would likely determine that METRO's contract with the voters included spending a portion of the bond proceeds on that 4.4-mile rail segment. The AG rejected METRO's argument that only one narrow section of the notice formed the contract, since that section incorporated Exhibit A-4 by reference, and rejected the argument that the rail vote was needed only to satisfy Houston's city charter, noting METRO had submitted the proposition as binding under the Transportation Code. But the AG stopped short of deciding the ultimate question. Whether METRO's participation in the bus project actually violates the contract depends on facts (how the bond money is spent and whether the project would prevent the promised rail), and the governing standard asks only whether voters still receive substantially the benefits they expected, not literal performance. Those fact questions, the AG concluded, are beyond the purview of an attorney general opinion.

Currency note

This opinion was issued in 2015. 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. This opinion addresses a specific 2015 dispute about a 2003 referendum, and both the Post Oak project and the surrounding facts have moved on since then, so treat the dates, dollar figures, and project status here as historical.

What the opinion meant for those who asked

METRO and other transit authorities (as the opinion described it): The opinion described METRO's 2003 election documents as specifically identifying the Uptown/West Loop 4.4-mile rail segment, so it concluded a court would likely find that segment was part of METRO's contract with the voters. It described the question of whether the bus project actually breaches that contract as turning on disputed facts that an attorney general opinion does not resolve.

Voters and the public (as the opinion described it): The opinion described the contract-with-voters doctrine as requiring that bond proceeds be spent for the approved purpose, and that when an election order specifies particular projects, the proceeds can be used only for those projects. It described the test for a violation as whether voters still receive substantially the benefits they expected.

The Legislature and oversight bodies (as the opinion described it): The opinion described the Transportation Code as letting a transit board call an election on a discretionary matter and specify whether the result is binding, and noted METRO had submitted the 2003 rail proposition as binding.

Common questions

What is a "contract with the voters"?
The AG explained that when voters approve a bond election, the election order calling the election and stating the purpose of the bonds becomes a contract with the voters, and the bond proceeds may be spent only for the approved purpose.

Did the 2003 vote lock METRO into building light rail on Post Oak?
The AG concluded a court would likely find that METRO's contract with the voters included spending some of the bond proceeds on the Uptown/West Loop 4.4-mile rail segment, because the election documents and their exhibits specifically identified that rail segment.

So is the bus-lanes project illegal?
The AG did not decide that. The AG concluded that whether METRO's participation in the bus project actually violates the contract depends on fact questions (how the bond money is spent and whether the project would block the promised rail) that are beyond the purview of an attorney general opinion.

Does the law require METRO to build exactly what voters approved?
Not literally. The AG explained that the standard is whether voters receive substantially the benefits they expected; courts do not require literal performance, and a change that does not materially detract from those benefits can be substantial compliance.

Background and statutory framework

The "contract with the voters" doctrine stems from article I, section 16 of the Texas Constitution, which prohibits laws impairing the obligation of contracts (Tex. Const. art. I, § 16; San Saba Cty. v. McCraw, 108 S.W.2d 200, 202-04 (Tex. 1937)). Under it, an election order calling a bond election and stating the bonds' purpose becomes a contract with the voters once approved, and the proceeds may be spent only for that purpose; where the order specifies particular projects, the proceeds cannot be diverted to other projects (Fletcher v. Ely, 53 S.W.2d 817, 818 (Tex. Civ. App.-Amarillo 1932, writ ref'd); Black v. Strength, 246 S.W. 79 (Tex. 1922)). Courts look to the documents comprising the contract to find the governmental body's intent (City of San Antonio v. Headwaters Coal., Inc., 381 S.W.3d 543, 551 (Tex. App.-San Antonio 2012, pet. denied)).

Applying that framework, the AG examined METRO's resolutions and ballot language for the 2003 special election (discussed in Scarbrough v. Metro. Transit Auth. of Harris Cty., 326 S.W.3d 324, 327-29 (Tex. App.-Houston [1st Dist.] 2010, pet. denied)) and found that the election documents and Exhibit A-4 specifically identified the Uptown/West Loop 4.4-mile rail segment, supporting the conclusion that a court would likely treat that segment as part of the contract with the voters. The AG addressed METRO's contrary arguments, including its reliance on a narrower section of the notice and its claim that the rail vote was needed only for Houston city-charter purposes, noting that the Transportation Code lets a board specify whether an election result is binding and that METRO had made this one binding (Tex. Transp. Code § 451.072(b)). On the ultimate breach question, the AG applied the standard that voters must receive substantially the benefits they expected, with no requirement of literal performance (Thayer v. Greer, 229 S.W.2d 833, 836 (Tex. Civ. App.-Amarillo 1950, writ ref'd n.r.e.); Fletcher, 53 S.W.2d at 821), and concluded that resolving whether METRO's participation breaches the contract requires fact-finding beyond an attorney general opinion.

Citations

Constitutional and statutory provisions:

• Tex. Const. art. I, § 16 (no law impairing the obligation of contracts)
• Tex. Transp. Code § 451.072(b) (transit authority board may call an election and specify whether the result is binding)

Cases:

• Scarbrough v. Metro. Transit Auth. of Harris Cty., 326 S.W.3d 324, 327-29 (Tex. App.-Houston [1st Dist.] 2010, pet. denied)
• San Saba Cty. v. McCraw, 108 S.W.2d 200, 202-04 (Tex. 1937)
• Fletcher v. Ely, 53 S.W.2d 817, 818 (Tex. Civ. App.-Amarillo 1932, writ ref'd)
• City of San Antonio v. Headwaters Coal., Inc., 381 S.W.3d 543, 551 (Tex. App.-San Antonio 2012, pet. denied)
• Thayer v. Greer, 229 S.W.2d 833, 836 (Tex. Civ. App.-Amarillo 1950, writ ref'd n.r.e.)
• Black v. Strength, 246 S.W. 79 (Tex. 1922)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0046
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2015/kp0046.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

December 14, 2015

The Honorable Robert L. Nichols Opinion No. KP-0046
Chair, Committee on Transportation
Texas State Senate Re: Authority of the Metropolitan Transit
Post Office Box 12068 Authority of Harris County to participate in
Austin, Texas 78711-2068 the Uptown Houston Transit Project
otherwise known as the Post Oak Boulevard
Dedicated Bus Lanes Project (RQ-0028-KP)

Dear Senator Nichols:

You seek our opinion on the authority of the Metropolitan Transit Authority of Harris County (METRO) to participate in the Uptown Houston Transit Project, otherwise known as the Post Oak Boulevard Dedicated Bus Lanes Project ("Project"). [1]

In 2003, Harris County voters approved a referendum on METRO's transit authority system, including the METRO Solutions Transit System Plan ("Transit Plan"). See Scarbrough v. Metro. Transit Auth. of Harris Cty., 326 S.W.3d 324, 327-29 (Tex. App.-Houston [1st Dist.] 2010, pet. denied) (discussing the referendum election, referencing METRO's Resolution No. 2003-93 and Resolution No. 2003-77, and acknowledging the voter's approval of the Transit Plan). The Transit Plan included a METRORail component that contained, among other segments, an Uptown/West Loop segment involving approximately 4.4 miles of commuter light rail along Post Oak Boulevard. See Notice of Special Election, METRO, at 1 (Resolution No. 2003-77 & Exhibits A, A-4). [2] You tell us that "[i]nstead of constructing light rail on Post Oak, the current project, which is a joint venture between the City of Houston, METRO and Uptown, intends to utilize the same approved light rail route along Post Oak but with a different technology; known as a Bus Rapid Transit." Request Letter at 1. You also tell us that the Project will "allegedly not be built or funded by METRO, but METRO will nevertheless fully participate in the Project by operating and maintaining the dedicated Project bus lanes and dedicated Project buses." Id. And you state that METRO will develop "bus specifications, operating plans, fare collection policy and systems, bus schedules and other system characteristics necessary to operate the dedicated bus service. METRO will also procure the dedicated buses." Id. You therefore question whether METRO's involvement in the Project is illegal "in that it would violate the contract METRO entered into with the voters via the 2003 referendum," given that the voters approved light rail on Post Oak. Id. at 2.

The "contract with the voters" doctrine stems from article I, section 16 of the Texas Constitution, which prohibits laws that impair the obligation of contracts. TEX. CONST. art. I, § 16 notes of decisions; see San Saba Cty. v. McCraw, 108 S.W.2d 200, 202-04 (Tex. 1937) (orig. proceeding). This doctrine is "grounded in ... election orders and propositions." Tex. Att'y Gen. Op. No. JC-0400 (2001) at 5. Essentially, the election order calling for a bond election and establishing the purposes for which bonds will be issued becomes a contract with the voters once the voters approve the bonds. See id. Thus, proceeds of bonds approved by voters "may only be expended for the purpose for which they were approved." Tex. Att'y Gen. LO-98-060, at 2. "They may not be expended for an additional or different project." Id. When an election order states only a general purpose for which bonds will be issued and does not specify particular projects for which the proceeds will be used, the governing body is free to exercise its discretion in expending the funds within the scope of the general purpose. Id. at 2-3. Where the election order specifies the projects for which bond proceeds will be used, the proceeds can only be used for those projects and cannot be applied to other projects. See id. at 3; see generally Fletcher v. Ely, 53 S.W.2d 817, 818 (Tex. Civ. App.-Amarillo 1932, writ ref'd) (distinguishing discretion of governmental body to expend bond proceeds when bond proposal does not identify the specific road to be paved but indicates only that route must be between two points against its discretion when a proposal identifies the particular route and road to be paved).

Courts considering the question look to the relevant documents comprising the "contract with the voters" to ascertain the governmental body's intent with regard to the proceeds. See City of San Antonio v. Headwaters Coal., Inc., 381 S.W.3d 543, 551 (Tex. App.-San Antonio 2012, pet. denied). Here, we consider METRO's resolutions calling for the 2003 special election. [3] See id. The resolution calling for the special election stated that the proposition to be submitted to the voters was

a proposition to authorize METRO to issue bonds, notes, and other obligations payable, in whole or in part, from seventy-five percent (75%) of METRO's sales and use tax revenues for the acquisition, construction, repair, equipping, improvement or extension of METRO's transit authority system, including the METRO Solutions Transit System Plan, as described herein, which includes bus service expansions and construction of extensions of METRO's rail system known as "METRORail," to approve such plan and construction of the METRORail and commuter line components thereof, and to dedicate twenty-five percent (25%) of METRO's sales and use tax revenues through September 30, 2014, for street improvements and mobility projects, as authorized by law and with no increases in the current rate of METRO's sales and use tax ....

Notice of Special Election, METRO, at 1 (Resolution No. 2003-93 & Attachment 1, Resolution No. 2003-77) (emphasis added). The ballot language sought voter approval of

[a]uthorization of METRO to issue bonds, notes and other obligations payable, in whole or in part, from 75% of metro's sales and use tax revenues in an aggregate principal amount not to exceed $640,000,000 for METRO's transit authority system, including the metro solutions transit system plan ..., which includes bus service expansions ... and construction of extensions and new segments of metro's rail system known as "metrorail," approval of such plan and construction of all segments of the metrorail and commuter line components ... , and dedication of 25% of metro's sales and use tax revenues through September 30, 2014, to street improvements and related projects, as authorized by law, and with no increase in the current rate of metro's sales and use tax.

Id. at 2 (Exhibit D) (emphasis added). Both the resolution language and the ballot language explicitly reference METRORail "commuter line components." As noted earlier, the commuter line component has different rail segments, one of which is the Uptown/West Loop segment described as "[a]pproximately 4.4 miles north from Westpark along Post Oak Blvd. and the West Loop 610 to the Northwest Transit Center. Serves the Galleria and Uptown businesses on Post Oak Boulevard. This segment or line will have approximately 7 stations." Id. at 1 (Exhibit A-4). The plain language of the election order and the ballot language clearly indicate that METRO intended some portion of the bond proceeds to be spent on commuter line components. Similarly, the exhibits incorporated into the resolution calling for the special election clearly identify which of the particular rail components were to benefit from the bond proceeds. See id. (Exhibits A & A-4). Thus, a court would likely determine that METRO's contract with the voters included the expenditure of a portion of the bond proceeds on the Uptown/West Loop 4.4 mile rail segment. See Fletcher, 53 S.W.2d at 818 (stating that when the voters approve a specific project, "the proceeds of the bond issue are 'earmarked' with the character of a trust fund which may not be diverted to another purpose or project. ...") (citing Black v. Strength, 246 S.W. 79 (Tex. 1922)).

In briefing submitted to this office, METRO argues that its contract with the voters comprises only section 14 of the Notice of Special Election, entitled METRO's Agreement with the Voters, which section does not contain a requirement for rail only on Post Oak Boulevard. [4] Yet, section 14 refers to and incorporates by reference Exhibit A-4, which describes 4.4 miles of light rail along Post Oak Boulevard. See Notice of Special Election, METRO, at 1 (Resolution No. 2003-93 & Attachment 1, Resolution No. 2003-77) (Exhibit A-4). A court would likely consider the entirety of the order and notice of the election to determine the nature of the contract made by the voters. See generally City of San Antonio v. Headwaters Coal., Inc., 381 S.W.3d 543, 552 (Tex. App.-San Antonio 2012, pet. denied) (determining that the plain language of the bond ordinance constitutes the contract with the voters). In addition, METRO argues that "[v]oter approval of the planning and construction of additional light rail lines and bus service expansions was needed" only to satisfy Houston City Charter requirements. METRO Brief at 4. METRO asserts it "did not need voter approval to construct light rails, but it was required to get City of Houston approval to utilize rail on Houston's city streets." Id. The Transportation Code authorizes metropolitan rapid transit authorities to "call an election to determine the voters' will on any issue that the board is authorized to decide under this chapter or on the exercise of any discretionary power of the board under this chapter." TEX. TRANSP. CODE § 451.072(b). Importantly, this provision allows the board to "specify whether the results of the election are binding on the authority." Id. In submitting the question of light rail to the voters in the 2003 election, METRO submitted the proposition as a binding one. These arguments are unavailing.

Whether METRO's participation in the Project violates that contract it made with the voters is a separate question. The voters must receive "substantially the benefits expected by them when they cast their votes." Thayer v. Greer, 229 S.W.2d 833, 836 (Tex. Civ. App.-Amarillo 1950, writ ref'd n.r.e.). In determining whether a governmental body violates its contract with the voters, "[t]he law does not require a literal performance, but there must be left to the parties substantially the benefits expected." Fletcher, 53 S.W.2d at 821. If there is a change in the use of the proceeds as approved by the voters but "the changes have not materially detracted from these benefits," courts will generally find that there has been substantial compliance with the "contract." Id. The question whether METRO's participation in the Project ultimately violates its contract with the voters will require the resolution of several fact questions, including questions regarding the actual expenditure of the bond proceeds and whether the Project will prevent the development of the promised rail segment, [5] and is beyond the purview of an attorney general opinion. See Tex. Att'y Gen. Op. No. GA-0876 (2011) at 1 (noting that this office does not resolve disputed fact questions in attorney general opinions).

SUMMARY

A court would likely determine that the Metropolitan Transit Authority's contract with the voters included the expenditure of a portion of the bond proceeds on the Uptown/West Loop 4.4 mile rail segment. Whether METRO's participation in the Uptown Houston Transit Project violates that contract with the voters requires the resolution of fact issues that are beyond the purview of an attorney general opinion.

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

CHARLOTTE M. HARPER
Assistant Attorney General, Opinion Committee

[1] See Letter from Honorable Robert L. Nichols, Chair, Senate Comm. on Transp., to Honorable Ken Paxton, Tex. Att'y Gen. at 1-2 (June 15, 2015), https://www.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter"). Your question is the same question that was before a court in Cosmopolitan Condominium Owners Ass'n v. Metropolitan Transit Authority of Harris County, No. 2015-34192 (270th Dist. Ct., Harris Cty., Tex. June 15, 2015). This cause has been dismissed by the court and the question is no longer in litigation. See Order of Dismissal (10/29/2015) (on file with the Op. Comm.).

[2] Available at https://ridemetro.org/METROPDFs/AboutMETRO/Referendum/Referendum2003-web.pdf.

[3] Initially approved on August 18, 2003, METRO Resolution No. 2003-77 called for a special election. See Notice of Special Election, METRO, at 1 (Resolution No. 2003-93 & Attachment 1, Resolution No. 2003-77), supra note 2. METRO Resolution No. 2003-93, approved on August 28, 2003, approved, adopted, ratified, and confirmed the August 18, 2003 resolution. See id.

[4] See Brief from Alva I. Trevino, Gen. Counsel, METRO at 5-6 (Nov. 10, 2015) (hereinafter "METRO Brief") (on file with the Op. Comm.).

[5] In connection with a previous request for an attorney general opinion, RQ-1217-GA (2014), which was subsequently withdrawn, METRO acknowledged that it "cannot agree to build a bus line to the exclusion of the METRORail that the voters specifically approved." See Letter and brief from Honorable Vince Ryan, Harris Cty. Att'y, to Honorable Greg Abbott, Tex. Att'y Gen. at 4 (Aug. 28, 2014) (on file with the Op. Comm.).