Can a Texas river authority give up a surplus flood easement without getting fair market value?

Plain-English summary

The San Antonio River Authority operates flood-control dams, many built on private land through "inundation easements," which let the dams store water that floods the land behind them. Over time some of those easements turned out to be larger than the dams actually need. Landowners asked the Authority to release the surplus portions, and the Authority's chairman, Darrell Brownlow, asked the Attorney General a money question: can the Authority release a surplus easement without receiving fair market value? He asked it two ways, for easements the Authority had paid for and for easements it had gotten for free.

The AG answered both from Water Code section 49.226. Subsection (a) covers a district's sale or exchange of surplus property and says property "must be exchanged for like fair market value." The AG focused on the word "exchanged." By its express terms, the fair-market-value requirement applies only to an exchange, not to a straight sale. An earlier opinion (GA-0634) had assumed the requirement might also reach sales, but the AG, looking directly at the text, concluded a court would not read subsection (a) to require fair market value for a sale. So the Authority did not have to obtain fair market value to sell a surplus easement it had purchased. For easements the Authority acquired without spending its own funds, subsection (b) was even more direct: such property may be abandoned or released "without receiving compensation." So no fair market value was required there either.

The AG then flagged the constitutional limit the chairman had raised: article III, section 52(a), the "gift clause," which bars the Legislature from authorizing a political subdivision to grant public money or a thing of value to a private party. The AG explained that a transfer made for adequate consideration is not an unconstitutional gift, and that consideration can be non-monetary, such as relief from a burden. Courts generally do not second-guess the adequacy of consideration on the face of a transaction absent something like a disguised gift, bad faith, or fraud. If a particular release does include an element of donation, it still has to satisfy the Texas Supreme Court's three-part test (a predominant public purpose, adequate public controls, and consideration to the subdivision). The AG stressed that whether any given transaction is supported by adequate consideration, and whether it meets that test, is for the Authority's governing body to decide in the first instance.

Currency note

This opinion was issued in 2020. 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 the current text of Water Code section 49.226 and the gift-clause case law before relying on any specific rule here.

What the opinion meant for those who asked

The opinion gave a river authority a green light on the fair-market-value question and a checklist on the constitutional one. For the Authority, the reading at the time was that section 49.226(a) required fair market value only for exchanges, so it could sell a purchased surplus easement without one, and section 49.226(b) let it release a non-purchased easement without compensation. For landowners seeking release of surplus easements, the opinion meant the Authority had statutory room to act without charging fair market value. On the gift clause, the opinion did not bless any specific deal; instead it told the Authority's board that it must itself determine, transaction by transaction, whether there was adequate consideration and, if a donation element existed, whether the public-purpose test was met. The AG framed those determinations as the Authority's to make in the first instance, not the AG's.

Common questions

Q: Does a river authority have to get fair market value to release a surplus easement?
A: Not necessarily, the AG concluded. Water Code section 49.226(a) requires "like fair market value" only when surplus property is exchanged, not when it is sold, and section 49.226(b) lets a district release property it acquired without spending district funds without any compensation.

Q: What's the difference between a purchased easement and a donated one here?
A: For an easement the Authority bought, subsection (a) governs and requires fair market value only for exchanges, so a sale needs no fair market value. For an easement acquired without expending Authority funds, subsection (b) allows abandonment or release without receiving compensation at all.

Q: Doesn't the Texas Constitution prohibit giving away public property?
A: Article III, section 52(a) bars gratuitous grants of public money or value, but the AG explained a transfer made for adequate consideration is not a gift, and consideration can be non-monetary. Releasing a surplus easement the Authority does not need can be supported by adequate consideration.

Q: Who decides whether a particular release is allowed?
A: The Authority's own governing body, in the first instance. The AG said the board must determine whether a transaction is supported by adequate consideration and, if it includes any element of donation, whether it satisfies the Texas Supreme Court's three-part public-purpose test.

Background and statutory framework

The Authority is a conservation and reclamation district created by special act under article XVI, section 59 of the Texas Constitution, with broad powers recognized in City of San Antonio v. Trease, and its enabling act (section 3(k)(4)) lets it dispose of property not necessary to its business; an easement is a nonpossessory property interest (Roberson v. City of Austin). The general framework is Water Code chapter 49 (applicable to districts under section 49.002(a)), with section 49.226 governing surplus property: subsection (a) requires "like fair market value" only for an exchange, and subsection (b) allows release of property acquired without district funds without compensation. The AG read the text directly (Brazos Elec. Power Coop. Inc. v. Tex. Comm'n on Envtl. Quality; Jones v. State on the disjunctive "or"), distinguishing its earlier assumption in GA-0634 and citing LO-96-106 and GA-0371. On the gift clause, the AG applied Edgewood Indep. Sch. Dist. v. Meno, Tex. Mun. League Intergov'tl Risk Pool v. Tex. Worker's Comp. Comm'n (the three-part test), Walker v. City of Georgetown, and City of Lubbock v. Phillips Petroleum Co., with the adequacy-of-consideration determination left to the Authority (GA-0894; GA-0599; DM-268).

Citations and references

Constitutional and statutory provisions:

• Tex. Water Code § 49.226 (sale, exchange, abandonment, or release of surplus district property); § 49.002
• Tex. Const. art. III, § 52 (gift clause); art. XVI, § 59 (conservation and reclamation districts)
• Enabling Act § 3(k)(4), San Antonio River Authority (Act of May 3, 1937, 45th Leg., R.S., ch. 276, as amended)

Cases:

• Marx v. FDP, LP, 474 S.W.3d 368 (Tex. App.-San Antonio 2015, pet. denied)
• City of San Antonio v. Trease, 243 S.W.2d 187 (Tex. App.-San Antonio 1951, writ ref'd)
• Roberson v. City of Austin, 157 S.W.3d 130 (Tex. App.-Austin 2005, pet. denied)
• First Am. Title Ins. Co. v. Willard, 949 S.W.2d 342 (Tex. App.-Tyler 1997, writ denied)
• Brazos Elec. Power Coop. Inc. v. Tex. Comm'n on Envtl. Quality, 576 S.W.3d 374 (Tex. 2019)
• Jones v. State, 175 S.W.3d 927 (Tex. App.-Dallas 2005, no pet.)
• Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717 (Tex. 1995)
• Tex. Mun. League Intergov'tl Risk Pool v. Tex. Worker's Comp. Comm'n, 74 S.W.3d 377 (Tex. 2002)
• Walker v. City of Georgetown, 86 S.W.3d 249 (Tex. App.-Austin 2002, pet. denied)
• City of Lubbock v. Phillips Petroleum Co., 41 S.W.3d 149 (Tex. App.-Amarillo 2000, no pet.)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0316
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2020/kp-0316.pdf

Original opinion text

June 15, 2020

Mr. Darrell T. Brownlow
Chairman
San Antonio River Authority
100 East Guenther Street
San Antonio, Texas 78204-1401

Opinion No. KP-0316

Re: Whether the San Antonio River Authority may release an inundation easement that has been declared surplus without receiving fair market value (RQ-0325-KP)

Dear Mr. Brownlow:

You ask whether the San Antonio River Authority ("Authority") may release an inundation easement that has been declared surplus without receiving fair market value.[1] Specifically, you ask whether the Authority may release the surplus easements without receiving fair market value when, (1) the easement had been acquired without the payment of valuable consideration, or (2) the easement had been acquired for valuable consideration.[2] See Request Letter at 1.

You describe the Authority's management of flood control structures in its territory, telling us that most "of the dams were built on private lands through the acquisition of land rights in the form of easements." Brief at 1. You state that the easements "include inundation easements authorizing the storage of water that may be impounded by the dams." Id. You tell us that "[s]ome of these easements were acquired for valuable consideration and others were acquired without the payment of valuable consideration." Id.

You explain that the Authority has developed a process to review a landowner's request that the Authority release the landowner's property from the easement.[3] See id. In order to evaluate the landowner's request, the Authority "has conducted engineering analysis . . . to identify portions of the property . . . that exceed the areas necessary for the operation and maintenance of the dam and that are not required to be subject to an inundation easement by applicable state law." Id. You note that many of the easements are blanket easements[4] and "could be reduced without adversely affecting public health and safety and without falling short of legal requirements." Id. Lastly, you tell us that the Authority co-holds some of these easements with the Alamo Soil and Water Conservation Services, which "supports the release of these surplus portions of the inundation easements." Id. (inviting us to assume the release "will be found to be acceptable to the co-holders of the easement," as well as relevant state and federal regulatory bodies). With this background, we consider your question.

By special act, the Legislature created the Authority as a conservation and reclamation district under article XVI, section 59 of the Texas Constitution.[5] See City of San Antonio v. Trease, 243 S.W.2d 187, 189 (Tex. App.-San Antonio 1951, writ ref'd) (discussing the Authority's broad and extensive powers). Under its enabling act, the Authority may "sell or otherwise dispose of any property of any kind, real, personal, or mixed, or any interest therein, which shall not be necessary to the carrying on of the business" of the Authority. Enabling Act § 3(k)(4) (providing the disposal authority is subject to the provisions of the Enabling Act); see also Roberson v. City of Austin, 157 S.W.3d 130, 135-36 (Tex. App.-Austin 2005, pet. denied) (recognizing that an easement is a nonpossessory property interest). This provision authorizes the Authority to sell or otherwise dispose of the easements provided they are not necessary to the business of the Authority. See Brief at 1 (stating that there are some circumstances where the easements could be reduced without adversely affecting public health and safety).

We next examine the Authority's power under the general statutes. You tell us the Authority is a "district" for purposes of Water Code chapter 49. See id. at 2. Chapter 49 generally applies to all general and special districts. See TEX. WATER CODE § 49.002(a). Section 49.226 governs a district's sale or exchange of real or personal property. In relevant part, section 49.226 provides:

(a) Any . . . interest in land owned by the district which is found by the board to be surplus and is not needed by the district may be sold under order of the board either by public or private sale, or the . . . interest in land . . . may be exchanged for other land, interest in land, or personal property needed by the district. Except as provided in Subsection (b), . . . [an] interest in land . . . must be exchanged for like fair market value, which value may be determined by the district. In connection with the sale of surplus land, the board, at its discretion, may impose restrictions on the development and use of the land.

(b) Any property dedicated to or acquired by the district without expending district funds may be abandoned or released to the original grantor, the grantor's heirs, assigns, executors, or successors upon terms and conditions deemed necessary or advantageous to the district and without receiving compensation for such abandonment or release. District property may also be abandoned, released, exchanged, or transferred to another district, municipality, county, countywide agency, or authority upon terms and conditions deemed necessary or advantageous to the district. . . . Chapter 272, Local Government Code, does not apply to this section.

Id. § 49.226(a)-(b) (emphasis added).

Because it involves an interest in land that is purchased, we first consider subsection 49.226(a) and address your second question. See Request Letter at 1. Attorney General Opinion GA-0634 assumed without deciding that the "fair market value" requirement in subsection 49.226(a) applied to a sale of property as well as an exchange of property. See Tex. Att'y Gen. Op. No. GA-0634 (2008) at 3-4. This office noted that "[w]hile by its literal terms this provision regarding fair market value applies to an exchange of real property, [but the parties] assume that it also applies or would effectively apply as a matter of practice to the proposed sale of real property here." Id. In directly considering the issue here, we examine the text as the best indicator of the Legislature's intent. See Brazos Elec. Power Coop. Inc. v. Tex. Comm'n on Envtl. Quality, 576 S.W.3d 374, 383-84 (Tex. 2019). Subsection (a) authorizes a district to do two things with a surplus interest in land: it may sell it "by public or private sale" or it may exchange it for other "land, interest in land, or personal property." See TEX. WATER CODE § 49.226(a); see also Tex. Att'y Gen. LO-96-106, at 2 (distinguishing a sale of property from an exchange of property); Jones v. State, 175 S.W.3d 927, 932 (Tex. App.-Dallas 2005, no pet.) ("Typically, the term 'or' is disjunctive and signifies a separation between two distinct ideas.") (citation omitted); Tex. Att'y Gen. Op. No. GA-0371 (2005) at 3 (determining that if a private sale of land is authorized by section 49.226(a), the requirements of Local Government Code chapter 272 regarding the sale of public property does not apply). By its express terms, subsection (a) requires "like fair market value" only with respect to an "exchange" of property. See TEX. WATER CODE § 49.226(a). Thus, a court is not likely to construe subsection (a) to require a district to obtain fair market value in a sale of its surplus personal or real property. Accordingly, the Authority is not required to obtain fair market value for the public or private sale of a surplus inundation easement that the Authority has acquired through purchase.

Your remaining first question involves an easement the Authority acquired by dedication or otherwise, i.e., that the Authority did not purchase. See Request Letter at 1. Subsection (b) provides an option other than what is provided for in subsection (a) that applies to surplus property a district acquired "without expending district funds." TEX. WATER CODE § 49.226(b). Such property may be "abandoned or released" to the specified persons on terms and conditions a district deems necessary or advantageous. See id. And a district may abandon or release such property "without receiving compensation." Id. (providing also that such property may be "abandoned, released, exchanged, or transferred to another district . . . upon terms and conditions deemed necessary or advantageous to the district"). Under the express terms of subsection (b), the Authority may release property it acquired without expending Authority funds and is not required to obtain compensation for the property. Accordingly, the Authority is not required to obtain fair market value to release a surplus inundation easement that it did not purchase.

You raise article III, section 52(a) of the Texas Constitution. See Brief at 2. Article III, section 52(a) prohibits the Legislature from authorizing a "political corporation or subdivision of the State 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). Yet, a transfer of a real property interest in exchange for adequate consideration is not an unconstitutional gratuity under article III, section 52(a) of the Texas Constitution. See Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717, 739-40 (Tex. 1995). "A political subdivision's paying public money is not 'gratuitous' if the political subdivision receives return consideration." Tex. Mun. League Intergov'tl Risk Pool v. Tex. Worker's Comp. Comm'n, 74 S.W.3d 377, 383 (Tex. 2002); see also Walker v. City of Georgetown, 86 S.W.3d 249, 260 (Tex. App.-Austin 2002, pet. denied) (recognizing that a city's lease of lands was supported by valuable consideration and thus was not a gratuitous donation). Adequate consideration may take the form of a non-monetary benefit to the Authority or relief from a burden. See Tex. Att'y Gen. Op. Nos. GA-0894 (2011) at 2 (recognizing nonmonetary consideration), DM-268 (1993) at 3 (same). Courts generally do not look beyond the face of a transaction to determine the adequacy of consideration absent evidence the conveyance was tantamount to a gift or the result of unconscionability, bad faith, or fraud. City of Lubbock v. Phillips Petroleum Co., 41 S.W.3d 149, 161 (Tex. App.-Amarillo 2000, no pet.) (holding that conveyance of pipeline easement did not violate article III, section 52). In any given transaction, the adequacy of consideration is for the Authority to determine. Tex. Att'y Gen. Op. No. GA-0894 (2011) at 3.

To the extent the release or sale of the surplus easements involve an element of a donation, the transaction implicates article III, section 52(a). Article III, section 52(a) does not prohibit a public expenditure or grant that "incidentally benefits a private entity if it is made for the accomplishment of a legitimate public purpose." Walker, 86 S.W.3d at 260. The Texas Supreme Court has established a three-part test to determine if a public expenditure accomplishes a public purpose. See Tex. Mun. League, 74 S.W.3d at 384. A public gift that benefits a private person does not violate article III, section 52(a) if (1) the "predominant purpose is to accomplish a public purpose, not to benefit private parties"; (2) there are adequate public controls in place to "ensure that the public purpose is accomplished and to protect the public's investment"; and, (3) the "political subdivision receives consideration." Id. It is for the governmental body of the Authority in the first instance to determine whether the transaction satisfies the Texas Municipal League three-part test. See Tex. Att'y Gen. Op. No. GA-0599 (2008) at 4.

[1] See Letter and Brief from Mr. Darrell T. Brownlow, Chairman, San Antonio River Auth., to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (Dec. 18, 2019) ("Request Letter" and "Brief," respectively).

[2] "Consideration is a fundamental element for any valid enforceable contract. A contract without consideration is unenforceable. Consideration is a bargained-for exchange of promises or return performance and consists of benefits and detriments to the contracting parties." Marx v. FDP, LP, 474 S.W.3d 368, 378 (Tex. App.-San Antonio 2015, pet. denied) (citations omitted).

[3] Fair market value would take into account the value of the property as encumbered by the easement. See Tex. Att'y Gen. Op. No. GA-0634 (2008) at 8 (determining that the valuation of real property owned and proposed for sale by a river authority but leased to private individuals should be valued as encumbered by the leases).

[4] A blanket easement is "[a]n easement without a metes and bounds description of its location on the property." First Am. Title Ins. Co. v. Willard, 949 S.W.2d 342, 344 n.2 (Tex. App.-Tyler 1997, writ denied).

[5] See Act of May 3, 1937, 45th Leg., R.S., ch. 276, 1937 Tex. Gen. Laws 556, 556-64, amended by Act of Mar. 24, 1939, 46th Leg., R.S., ch. 9, 1939 Tex. Spec. Laws 1083, 1083-97, Act of Mar. 25, 1953, 53d Leg., R.S., ch. 60, 1953 Tex. Gen. Laws 82, 82-6, Act of May 16, 1957, 55th Leg., R.S., ch. 504, Tex. Gen. Laws 1469, 1469-70, Act of Mar. 18, 1959, 56th Leg., R.S., ch. 37, 1959 Tex. Gen. Laws 78, 78-9, Act of May 11, 1961, 59th Leg., R.S., ch. 233, 1961 Tex. Gen. Laws 466, 466-91, Act of May 15, 1969, 61st Leg., R.S., ch. 836, 1969 Tex. Gen. Laws 2488, 2488-93, Act of May 17, 1975, 64th Leg., R.S., ch. 301, 1975 Tex. Gen. Laws 776, 776-86, Act of May 30, 1975, 64th Leg., R.S., ch. 604, 1975 Tex. Gen. Laws 1893, 1893-96, Act of Apr. 2, 1981, 67th Leg., R.S., ch. 60, 1981 Tex. Gen. Laws 123, 123-34, Act of May 27, 1987, 70th Leg., R.S., ch. 701, 1987 Tex. Gen. Laws 2568, 2568-2570, Act of May 31, 2015, 84th Leg., R.S., ch. 1148, § 15, 2015 Tex. Gen. Laws 3862, 3866 ("Enabling Act").

S U M M A R Y

Water Code section 49.226 provides for the sale or exchange of surplus real or personal property of certain water districts. The San Antonio River Authority may dispose of, sell, or release a surplus inundation easement without receiving fair market value pursuant to section 49.226.

A transfer of a real property interest in exchange for adequate consideration is not an unconstitutional gratuity under article III, section 52(a) of the Texas Constitution, which prohibits the gratuitous donation of public funds or a thing of value.

It is for the governing body of the San Antonio River Authority in the first instance to determine whether any particular transaction is supported by adequate consideration; and, if the transaction includes any element of donation, whether the transaction satisfies article III, section 52(a).

Very truly yours,

KEN PAXTON
Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

RYAN L. BANGERT
Deputy First Assistant Attorney General

RYAN M. VASSAR
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

CHARLOTTE M. HARPER
Assistant Attorney General, Opinion Committee