Can a small Texas city let the chamber of commerce use city workers and equipment for community events?

Plain-English summary

The City of Petersburg is a small Type-A general-law city in Hale County. Its chamber of commerce, a nonprofit, runs community events like "Christmas on the Plaza" and "Petersburg Days," and asks the city to chip in by lending out city employees, equipment, supplies, facilities, and property. The county attorney asked the AG whether the Texas Constitution's gift clause, Article III, section 52(a), lets the city provide that help when the events are put on by a private organization.

The AG framed the answer around the long-standing rule that public money and resources cannot be given away gratuitously for a private purpose, but can be spent to accomplish a legitimate public purpose even if a private party also benefits incidentally. The Texas Supreme Court's three-part test governs: the city must (1) make sure the use serves a public purpose, not just a private benefit; (2) keep public control over the resources so the public purpose is actually carried out; and (3) make sure the city gets a return benefit. On the first prong, a general-law city can act only within powers granted by statute or the constitution, and supporting community events can serve the city's power to promote its trade and commerce. On the second and third prongs, a written agreement or contract with the chamber can both preserve control and lock in a return benefit.

The key move in the opinion is who decides. The AG said the call belongs to the city council in the first instance, subject to court review only for abuse of discretion. So the AG would not rule, as a matter of law, that lending the resources is unconstitutional. If the city council finds a genuine public purpose plus adequate controls and a return benefit, section 52(a) permits the support. The AG added that Article III, section 51 (a parallel anti-gift provision) is judged by the same test, and pointed the city to an earlier opinion on religious elements in any Christmas display.

Currency note

This opinion was issued in 2018. 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.

What the opinion meant for those who asked

The City of Petersburg and its city council (as the opinion described them): The opinion placed the decision with the council. If it found that the chamber's use of city resources served a public purpose within the city's powers, and put controls and a return-benefit safeguard in place (the opinion noted a contract can do both), then Article III, section 52(a) authorized the support. The AG declined to call the arrangement unconstitutional on the face of the request.

The requesting county attorney (as the opinion described it): The opinion confirmed that Article III, section 52(a) was the controlling provision, that Article III, section 51 applied under the same three-part test, and that the AG was aware of no other constitutional provision bearing on the question.

The chamber of commerce and similar nonprofits (as the opinion described them): The opinion treated chamber-run community events as potentially serving the city's trade-and-commerce purpose, which could satisfy the public-purpose prong, with the chamber's obligations and the city's return benefit fixed by agreement.

Common questions

Can a Texas city give a chamber of commerce free use of city staff and equipment for an event?
Under this opinion, yes, if the city council first finds that the use serves a public purpose within the city's powers, the city keeps control over the resources, and the city receives a return benefit. The AG would not declare such support unconstitutional as a matter of law.

What is the three-part test?
From the Texas Supreme Court: the public entity must (1) ensure the transfer accomplishes a public purpose rather than just benefiting private parties, (2) retain public control over the resources to protect the public's investment, and (3) ensure the entity receives a return benefit.

How does a city satisfy the control and return-benefit parts?
The opinion said a city can use an agreement or contract that obligates the recipient to perform a function benefiting the public; the same contract can build in safeguards so the city gets a return benefit.

Who decides whether a specific expenditure is allowed?
The city council, in the first instance, subject to judicial review only for abuse of discretion. The AG does not make that factual determination for the city.

Does the gift clause flatly ban helping private groups?
No. The opinion explained that spending for a legitimate public purpose to obtain a clear public benefit is not an unconstitutional grant, even if it incidentally benefits a private interest.

Background and statutory framework

Article III, section 52(a) of the Texas Constitution bars the Legislature from authorizing a county, city, town, or other 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." The purpose is to prevent the gratuitous grant of public funds (Byrd v. City of Dallas). But spending for a legitimate public purpose to obtain a clear public benefit is constitutional even if it incidentally benefits a private interest (Edgewood Indep. Sch. Dist. v. Meno).

The Texas Supreme Court set the three-part test in Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n: the entity must ensure a public purpose, retain public control, and secure a return benefit. On the public-purpose prong, general-law municipalities may exercise only powers conferred by statute or the constitution (Town of Lakewood Vill. v. Bizios). Municipalities may generally govern for "the trade and commerce of the municipality" (Tex. Loc. Gov't Code § 51.001(1)), may manage and control municipal property (§ 51.015(b)), and a Type-A city has the governance power "necessary for the government, interest, welfare, or good order of the municipality" (§ 51.012). An expenditure that serves one of the municipality's powers serves its public purpose (State ex rel. Grimes Cty. Taxpayers Ass'n v. Tex. Mun. Power Agency; Tex. Att'y Gen. Op. No. KP-0035 (2015)).

For the second and third prongs, a public entity can retain control and secure a return benefit by contract (Tex. Att'y Gen. Op. No. KP-0104 (2016)). Whether a particular use satisfies the test is for the city council subject to abuse-of-discretion review (Tex. Att'y Gen. Op. Nos. KP-0104 (2016), GA-0078 (2003), JM-1255 (1990)). Article III, section 51 is a parallel anti-gift provision evaluated under the same test (Edgewood Indep. Sch. Dist. v. Meno). The opinion also referenced prior opinions applying section 52(a) to public personnel and property (Tex. Att'y Gen. Op. Nos. JC-0113 (1999), JM-431 (1986), MW-89 (1979)) and, for any religious aspect of a Christmas display, KP-0116 (2016).

Citations

Statutes and constitutional provisions:

• Tex. Const. art. III, §§ 51, 52(a)
• Tex. Loc. Gov't Code §§ 51.001(1), 51.012, 51.015(b)
• Tex. Att'y Gen. Op. Nos. KP-0116 (2016), KP-0104 (2016), KP-0035 (2015), KP-0007 (2015), GA-0078 (2003), JC-0113 (1999), JM-1255 (1990), JM-431 (1986), MW-89 (1979)

Cases:

• Byrd v. City of Dallas, 6 S.W.2d 738 (Tex. 1928)
• Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717 (Tex. 1995)
• Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377 (Tex. 2002)
• Town of Lakewood Vill. v. Bizios, 493 S.W.3d 527 (Tex. 2016)
• State ex rel. Grimes Cty. Taxpayers Ass'n v. Tex. Mun. Power Agency, 565 S.W.2d 258 (Tex. Civ. App.—Houston [1st Dist.] 1978, writ dism'd)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0181
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2018/kp0181.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

February 15, 2018

The Honorable James M. Tirey Opinion No. KP-0181
Hale County Attorney
500 Broadway, Suite 340 Re: Authority under article III, section 52(a)
Plainview, Texas 79072 of the Texas Constitution of a Type-A general-
law municipality to expend funds or resources
on various tasks related to events sponsored by
the area chamber of commerce, such as
Christmas on the Plaza and Petersburg Days
(RQ-0174-KP)

Dear Mr. Tirey:

    On behalf of the City of Petersburg, you ask several questions about the authority of a Type-A general-law municipality to allow the use of city resources for various tasks related to events sponsored by the chamber of commerce. [1] You tell us the City of Petersburg (the "City") is a Type-A general-law city with a population of 1,202. See Request Letter at 2, Exhibit A at 1. You also tell us that the Petersburg Area Chamber of Commerce (the "Chamber") is a nonprofit organization that promotes the Petersburg community, including sponsoring events such as "Christmas on the Plaza" and "Petersburg Days." Request Letter at 2. You tell us that the Chamber describes the Christmas on the Plaza event as "an evening of holiday fun and shopping" in the storefronts and on Main Street, and includes a visit from Santa. [2] Id. You also tell us that Petersburg Day "involves a parade, vendors, a barbeque cook-off, and a motorcycle 'fun run'" and according to the Chamber, draws former residents back to the community for class and family reunions and constitutes "one of the best ways to promote our community." Id. In connection with these events, the Chamber asks the City for the use of its employees, equipment, and supplies, as well as facilities and property. See Exhibit A at 1. You question whether article III, section 52(a) of the Texas Constitution authorizes the City to allow the use of its employees, equipment and supplies, and facilities and property for this private purpose. See Request Letter at 1-2.

    Article III, section 52(a) of the Texas Constitution provides:

            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(a). The purpose of this provision is "to prevent the gratuitous grant of [public] funds to any individual, corporation, or purpose whatsoever." Byrd v. City of Dallas, 6 S.W.2d 738, 740 (Tex. 1928). Spending public funds for a legitimate public purpose to obtain a clear public benefit is not an unconstitutional grant of public funds. See Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717, 740 (Tex. 1995). Further, an expenditure to directly accomplish a legitimate public purpose is constitutional even though it may incidentally benefit a private interest. See id.

    The Texas Supreme Court articulated a three-part test to determine whether an expenditure of public funds or use of other public resources satisfies article III, section 52(a). See Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 384 (Tex. 2002); see also Tex. Att'y Gen. Op. Nos. JC-0113 (1999) (considering a school district's use of school district funds, personnel, and property to raise funds for charitable organization); JM-431 (1986) (considering whether the use of county personnel for private purposes violated article III, section 52(a)); MW-89 (1979) (determining that school district policy allowing teachers to work for professional associations while receiving salaries from school district is unconstitutional). The public entity making the expenditure or authorizing the use of its other resources must: (1) ensure that the transfer is to "accomplish a public purpose, not to benefit private parties; (2) retain public control over the funds to ensure that the public purpose is accomplished and to protect the public's investment; and (3) ensure that the political subdivision receives a return benefit." Tex. Mun. League Intergov'tl Risk Pool, 74 S.W.3d at 384.

    Regarding the first prong, general-law municipalities may exercise only that power specifically conferred on them by statute or the constitution. Town of Lakewood Vill. v. Bizios, 493 S.W.3d 527, 531 (Tex. 2016). Generally, all municipalities may govern "for the good government, peace, or order of the municipality or for the trade and commerce of the municipality." TEX. LOC. GOV'T CODE § 51.001(1); see also id. § 51.015(b) ("The governing body of the municipality may manage and control the property belonging to the municipality."). Additionally, a Type-A general-law municipality has that governance power "necessary for the government, interest, welfare, or good order of the municipality." Id. § 51.012. To the extent a municipal expenditure or use of resources serves one of the municipality's powers or functions, it serves the public purpose of the municipality. See State ex rel. Grimes Cty. Taxpayers Ass'n v. Tex. Mun. Power Agency, 565 S.W.2d 258, 265 (Tex. Civ. App.—Houston [1st Dist.] 1978, writ dism'd) (stating that to satisfy the public purpose test for a particular governmental entity, "[t]he purpose for which the ... payment ... was made must be within the powers of the entity ... making the payment"); Tex. Att'y Gen. Op. No. KP-0035 (2015) at 3 ("[M]unicipalities may expend or transfer municipal funds or property only to serve public purposes that are within the municipality's powers, not merely to benefit the public in general."). Community events such as the ones you raise may arguably serve the public purpose of improving the trade and commerce of the municipality.

    With regard to the second prong, a public entity may retain public control over the use of its resources by entering into an agreement or contract that imposes an obligation on the recipient to perform a function benefitting the public. See Tex. Att'y Gen. Op. No. KP-0104 (2016) at 2. The same contract can also serve to satisfy the third prong by imposing safeguards to ensure the public entity receives a return benefit. See id.

    Determining whether a particular expenditure or use of public resources satisfies the three-part test is for the city council in the first instance and subject to judicial review for abuse of discretion. See Tex. Att'y Gen. Op. Nos. KP-0104 (2016) at 2, GA-0078 (2003) at 4, JM-1255 (1990) at 3. Accordingly, we cannot conclude as a matter of law that the use of City employees, equipment and supplies, and facilities and property by the Chamber for the community events is unconstitutional. Yet, should the city council find that the use of city resources for the Chamber's events serve a public purpose of the municipality, article III, section 52(a) authorizes the use of resources in this way. See Tex. Att'y Gen. Op. No. KP-0007 (2015) at 3.

    You also ask whether article III, section 52(a) is the controlling law for your questions or whether there are other relevant constitutional provisions that apply. See Request Letter at 2. Aside from article III, section 51, which provides that "[t]he legislature shall have no power to make any grant or authorize the making of any grant of public moneys to any individual, association of individuals, municipal or other corporations whatsoever," and for which compliance is determined by the same three-part test, we are unaware of other constitutional provisions that would apply to the use of public resources about which you ask. TEX. CONST. art. III, § 51; see Edgewood Indep. Sch. Dist., 917 S.W.2d at 739-40.

                                   SUMMARY

                 Article III, section 52(a) of the Texas Constitution prohibits the gratuitous payment of public funds for a private purpose. Because the determination whether a particular expenditure or use of public resources is gratuitous is, in the first instance, for the city council subject to judicial review for abuse of discretion, we cannot determine as a matter of law that the use of city resources in these circumstances is constitutional.

                  Upon a finding by the city council that the Chamber's use of city resources serves a public purpose of the municipality and that sufficient controls exist to ensure the public purpose is carried out and a return benefit is received, article III, section 52(a) authorizes the use of city resources for these purposes.

                                          Very truly yours,

                                          KEN PAXTON
                                          Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy First Assistant Attorney General

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

CHARLOTTE M. HARPER
Assistant Attorney General, Opinion Committee

[1] See Letter and attached Exhibit A from Honorable James M. Tirey, Hale Cty. Att'y, to Honorable Ken Paxton, Tex. Att'y Gen. at 1-2 (Aug. 10, 2017), https://texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter" & "Exhibit A" respectively).

[2] In the event the City provides funds for a Christmas display, if the display includes a religious aspect we refer the City to Attorney General Opinion KP-0116, addressing a display's compliance with the United States Supreme Court's Establishment Clause jurisprudence. See Tex. Att'y Gen. Op. No. KP-0116 (2016) at 3-4 (discussing Supreme Court jurisprudence regarding Christmas displays and decorations).