Jpmorgan Chase Bank, N.A. v. City of Corsicana and Navarro County

Supreme Court of Texas

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No. 24-0102

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JPMorgan Chase Bank, N.A.,

Petitioner,

v.

City of Corsicana and Navarro County,

Respondents

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On Petition for Review from the

Court of Appeals for the Tenth District of Texas

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Argued September 11, 2025

CHIEF JUSTICE BLACKLOCK delivered the opinion of the Court.

Justice Lehrmann and Justice Devine did not participate in the

decision.

Several clauses of the Texas Constitution require that public

money be used only for public purposes. Known as the Gift Clauses,

these nineteenth-century provisions arose from skepticism about

entanglement between public funds and private enterprise. This Court

has derived three principles from the text and history of the Gift

Clauses. A grant of money to a private entity must not be gratuitous;

its predominant objective must be to accomplish a legitimate public

purpose; and the government must retain control over the funds to

ensure that the public purpose is served. See Borgelt v. Aus. Firefighters

Ass’n, 692 S.W.3d 288, 301 (Tex. 2024).

In 1987, Texans ratified article III, section 52-a, which authorizes

the legislature to permit “loans and grants of public money” for, as

relevant here, “the public purposes of development and diversification

of the economy.” Until today, this Court had not addressed the

provision. This case asks whether our longstanding Gift Clause

precedents continue to govern the economic-development grants and

loans authorized by section 52-a. The answer is yes. Economic-

development grants authorized by section 52-a remain subject to the

Gift Clauses’ requirements.

As explained below, section 52-a was adopted primarily to

establish that “development and diversification of the economy” would

qualify as a legitimate public purpose under this Court’s pre-existing

Gift Clause cases. Nothing in section 52-a’s text or history indicates a

desire to exempt economic-development projects from the kind of

constitutional scrutiny to which the Gift Clauses subject all public

expenditures in Texas. The Gift Clauses’ prohibition on gratuities and

requirement of adequate controls therefore continue to apply when state

and local governments spend public funds on economic development.

The court of appeals resolved this threshold legal question

correctly. We disagree, however, with its application of our Gift Clause

precedent to the circumstances of this case. To spur development of a

large new shopping center, the City of Corsicana and Navarro County

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pledged future sales-tax revenues to finance the construction of a

Gander Mountain store to anchor the shopping center. When the

Gander Mountain store closed after eleven years in business, the City

and the County stopped making payments under the theory that the

store’s closure extinguished the public purpose of the economic-

development agreements. The lower courts agreed with the City and

County and granted summary judgment.

We take a different view. The City and County could have

negotiated an agreement that made continued payments contingent on

continued operation of the planned Gander Mountain store. They did

not. Even so, the government cannot make an unconstitutional payment

merely because a contract purports to require it. But the constitutional

question in this case, as distinct from the contractual question, cannot

be neatly reduced to whether a particular Gander Mountain store

continued to operate throughout the life of the parties’ agreements.

What matters for constitutional purposes is whether: (1) the

expenditure is not gratuitous but instead brings a public benefit; (2) the

predominant objective is to accomplish a legitimate public purpose, not

to provide a benefit to a private party; and (3) the government retains

control over the funds to ensure that the public purpose is in fact

accomplished. Borgelt, 692 S.W.3d at 301. This constitutional inquiry

does not ask whether the parties’ economic expectations for the project

have come to pass precisely as initially envisioned. Instead, courts

assessing the constitutionality of an economic-development deal must

take into account not merely the parties’ contractual goals but also any

other facts indicating whether the deal was genuinely designed to, and

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actually did, advance the public purpose of economic development,

which the people of Texas have declared a valid public purpose.

In this case, despite the Gander Mountain store’s eventual

failure, the disputed grants apparently facilitated the development of a

shopping center that has generated considerable economic activity and

tax revenue both during and after Gander Mountain’s eleven-year

occupancy of the site. The closure of the particular business envisioned

at the outset of the arrangement does not, as a constitutional matter,

establish that the project serves no public purpose or that its controls

were constitutionally inadequate. Summary judgment for the City and

County was therefore improper. The judgments below are reversed, and

the case is remanded to the district court for further proceedings

consistent with this opinion.

I.

In December 2003, the Corsicana Chamber of Commerce pitched

now-defunct outdoor retailer Gander Mountain on a $16 million

incentive package to develop a flagship store in Corsicana. The Gander

Mountain, together with a planned Home Depot, would anchor a

132-acre business park called “Corsicana Crossing.” In return, Gander

Mountain would receive 2% of the sales tax from its store and the Home

Depot and 1% of the sales tax from any new development, among other

incentives.

Within a few months, the City of Corsicana and Navarro County

authorized agreements with the Corsicana Industrial Foundation—a

nonprofit corporation that owned the project site—to build the Gander

Mountain facility. The City granted the Foundation 1.5% of the sales

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tax generated by Gander Mountain and Home Depot and 0.75% from

other businesses in the shopping center. Navarro County granted 0.5%

and 0.25%, respectively. The Foundation agreed to use the dedicated

funds solely to repay debt incurred for the facility’s construction. To that

end, the agreements required the City and County to deposit the pledged

sales-tax proceeds into a “Grant Fund,” into which all grant proceeds

were placed and from which funds could be withdrawn only to pay the

construction-loan debt. The agreements’ stated purpose was “to

facilitate the development of the Retail Center and assist in the

implementation of the economic-development objectives of the” City and

County.

A few months later, the City, County, Foundation, and Gander

Mountain executed another agreement. This agreement stated that it

was “in the public interest to promote the economic development of the

Gander Mountain Facility” and to commit portions of sales-tax revenue

“to facilitate such economic development.” Payments would begin

“following the completion and opening of Gander Mountain.” In return,

the Foundation agreed to take out a $10 million construction loan—with

the tax payments pledged as security—and to use the money solely for

constructing the facility.

At the same time, the Foundation and Gander Mountain executed

a lease for the site. The base rent equaled the quarterly loan payment

minus the sales-tax grants. Gander Mountain could purchase the

premises for $1 once the loan was paid off or the lease expired. The lease

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also anticipated a separate development agreement that would set out

each party’s obligations concerning the project.1

The store opened in August 2004, and things worked as planned

for the next eleven years. Gander Mountain operated continuously; the

City and County together paid about $150,000 per quarter in sales-tax

revenues to the Foundation; and the Foundation used the money to

service the loan. The record leaves little doubt that “Gander Mountain

contributed to the success of the center for more than a decade,” such

that the “Corsicana Crossing [shopping center] may not have

materialized without Gander Mountain.”

Gander Mountain closed the store in 2015, apparently after

discovering structural defects in the building. The shopping center,

however, continued to operate. It also continued to generate substantial

tax revenues. Gander Mountain’s former spot in Corsicana Crossing is

now occupied by Fun Town RV, which sells RVs and related products.

In February 2016, the City and County each decided that the

closure of Gander Mountain ended the public purposes justifying the

grants. They sued the Foundation and Gander Mountain, seeking

declaratory judgment on five issues:

1. Whether closing the store extinguished the public

purposes authorizing the grants;

2. Whether the agreements and related documents lacked

sufficient controls to ensure those purposes were met;

1 This agreement is not in the record.

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3. Whether the agreements were unconstitutional because

they allowed public funds to be spent without adequate

safeguards;

4. Whether continuing to grant sales-tax revenue after the

store’s closure would be unconstitutional; and

5. Whether the agreements were unconstitutional to the

extent they required such payments once public

purposes ceased.

The defendants responded with counterclaims. JPMorgan Chase,

the project’s lender, intervened. The City and County moved for partial

summary judgment on their declaratory-judgment claims. Shortly

after, Gander Mountain filed for Chapter 11 bankruptcy. The trial court

granted summary judgment for the City and County and entered final

judgment declaring the agreements unconstitutional. The court

declared that “the closing of the Gander Mountain store extinguished

the public purposes [that] authorized the City’s and County’s grants of

public money.” It also determined that the agreements “failed to place

sufficient controls on the transaction to ensure that the public purposes

for which the original grants of sales tax were made were carried out.”

The court declared the agreements “unconstitutional, void[,] and

illegal.”

The court of appeals affirmed. 685 S.W.3d 171 (Tex. App.—Waco

2024).2 It held that article III, section 52-a does not displace the

requirements of the Gift Clauses and thus applied the framework from

Texas Municipal League Intergovernmental Risk Pool v. Texas Workers’

2 After perfecting its appeal, the Foundation assigned its rights in the

lawsuit to JPMorgan Chase. 685 S.W.3d at 177.

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Compensation Commission (TML), 74 S.W.3d 377 (Tex. 2002). 685

S.W.3d at 180. As we recently clarified in Borgelt, that framework asks

whether: (1) the expenditure is not gratuitous but instead brings a

public benefit; (2) the predominant objective is to accomplish a

legitimate public purpose, not to provide a benefit to a private party; and

(3) the government retains control over the funds to ensure that the

public purpose is in fact accomplished. 692 S.W.3d at 301.

The court of appeals agreed that the store’s closure extinguished

the public purpose of the grants and that the agreements lacked

adequate controls. 685 S.W.3d at 182–85. It held that the agreements

were unconstitutional and affirmed summary judgment for the City and

County. Id. at 186. A dissenting Justice found the evidence insufficient

at the summary judgment stage to say that the agreements failed the

constitutional test. Id. at 186–87 (Gray, C.J., dissenting).

Chase petitioned for review, arguing that the Gift Clause

framework taken from TML and Borgelt does not apply to economic-

development grants authorized by section 52-a or, alternatively, that the

lower courts misapplied it. We granted the petition.

II.

Adopted in 1987—over a century after the Gift Clauses—

article III, section 52-a provides, as relevant here:

Notwithstanding any other provision of this constitution,

the legislature may provide for the creation of programs

and the making of loans and grants of public money . . . for

the public purposes of development and diversification of

the economy of the state, the elimination of unemployment

or underemployment in the state, . . . or the development

or expansion of transportation or commerce in the state.

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TEX. CONST. art. III, § 52-a.

The initial question before us is this: Did section 52-a

categorically exempt economic development from the pre-existing

requirements of the Gift Clauses, as Chase contends? Or did

section 52-a establish that economic development qualifies as a public

purpose within the traditional Gift Clause framework, as the City and

County argue?

The provision’s text authorizes the legislature to provide for

economic-development grants and loans “[n]otwithstanding any other

provision of this constitution.” Chase argues that the “notwithstanding”

clause precludes any consideration of other constitutional provisions,

including the Gift Clauses. On the other hand, the provision authorizes

economic development by describing “development and diversification of

the economy” and related objectives as “public purposes” for which

public money may be spent. This phrasing, the City and County urge,

invokes the traditional Gift Clause analysis and speaks only to its

“public purpose” element. They further caution that reading section

52-a to liberate economic-development deals from the pre-existing

constitutional prohibition on gratuities or the requirement that

adequate controls ensure the achievement of a public purpose would

turn a provision designed merely to authorize economic-development

expenditures into one that gives those expenditures special privilege

above other uses of public funds.

Both positions enjoy some textual support, at least at first glance.

As with any constitutional provision, however, we must read the text of

section 52-a “not in a vacuum but also through the lenses of history and

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precedent.” Borgelt, 692 S.W.3d at 299. “When history indicates that

the framers chose text that carried jurisprudential baggage beyond its

plain meaning, we must understand both the text and the baggage in

order to do our job . . . .” Hogan v. SMU, 688 S.W.3d 852, 858 (Tex.

2024). The admonition that “[w]e cannot understand constitutional

provisions unless we understand their history” long pre-dates modern

debates about methods of constitutional interpretation. Henderson v.

Beaton, 52 Tex. 29, 42 (1879) (quoting THOMAS M. COOLEY, A TREATISE

ON THE CONSTITUTIONAL LIMITATIONS WHICH REST UPON THE

LEGISLATIVE POWER OF THE STATES OF THE AMERICAN UNION 58 (Boston,

Little, Brown & Co., 4th ed. 1878)). Now, as in the past, our goal when

construing the Texas Constitution “is to understand the provision the

way it would have been understood at the time of ratification, as best we

can.” Hogan, 688 S.W.3d at 858.3 In that regard, “legislative

construction and contemporaneous exposition of a constitutional

provision is of substantial value in constitutional interpretation.” In re

Abbott, 628 S.W.3d 288, 293 (Tex. 2021) (citation modified) (quoting Am.

Indem. v. City of Austin, 246 S.W. 1019, 1023 (Tex. 1922)).

We therefore look to the legal and historical context from which

section 52-a arose, to legislative materials concerning the proposed

amendment, as well as to contemporaneous materials describing the

amendment to the voting public—all of which are useful in our effort to

3 “The fundamental rule for the government of courts in the

interpretation or construction of a Constitution is to give effect to the intent of

the people who adopted it. The meaning of a Constitution is fixed when it is

adopted; and it is not different at any subsequent time when a court has

occasion to pass upon it.” Cox v. Robison, 150 S.W. 1149, 1151 (Tex. 1912).

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understand section 52-a’s original meaning. As explained below, these

sources lead us to agree with the City, the County, and the court of

appeals that section 52-a establishes “development and diversification

of the economy” as a legitimate public purpose but does not otherwise

exempt economic-development spending from the traditional

constitutional restrictions generally applicable to all uses of public funds

in Texas.

A.

We begin with the legal background against which section 52-a

was adopted. The amendment did not arise in isolation. It built on—

and in key respects modified—a set of longstanding constitutional

provisions that collectively bar the use of public resources for non-public

ends. To understand what the ratifiers of section 52-a intended to

permit, we must first consider what these earlier clauses were

understood, at the time, to prohibit.

“Several ‘Gift Clauses’ of the Texas Constitution prohibit

governmental entities from making ‘gifts’ of public resources to private

parties.” Borgelt, 692 S.W.3d at 293. Article III, sections 50, 51, and 52

together prohibit the legislature from granting—or authorizing others

to grant—public money, credit, or other “thing[s] of value” to private

persons or entities. Article XI, section 3 bars cities and counties from

making “any appropriation or donation” to private corporations or

associations. Article XVI, section 6 forbids “appropriation[s] for private

or individual purposes.” Though phrased differently, these clauses

share a single aim: “the protection of the public funds and the public

credit against misuse.” Bexar County v. Linden, 220 S.W. 761, 761 (Tex.

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1920). Courts have long treated them as a cohesive body of law, id., and

modern cases continue to read them together, see Borgelt, 692 S.W.3d at

298–300; In re State, 711 S.W.3d 641, 646 (Tex. 2024).

As Borgelt recounts, the clauses arose in reaction to

Reconstruction-era excesses, when cities and counties underwrote

speculative railroad schemes and other ventures “in anticipation of

benefits never realized.” 692 S.W.3d at 299 (quoting City of Cleburne v.

Gulf, C. & S.F. Ry., 1 S.W. 342, 342 (Tex. 1886)). Early cases read the

Gift Clauses as relatively stringent restraints on public spending,

describing their prohibitions as “absolute” and requiring that public

expenditures serve “strictly governmental purposes.” E.g., Linden, 220

S.W. at 762. In City of Cleburne, for instance, the Court held that a city

violated article XI, section 3 by purchasing a right of way and depot

grounds for a railway company or refunding money already paid for that

purpose. 1 S.W. at 343.4

Over time, the early cases’ insistence that public expenditures

serve only “strictly governmental purposes,” Linden, 220 S.W. at 762,

gave way to the perhaps broader formulation, “public purpose[s],” Byrd

v. City of Dallas, 6 S.W.2d 738, 740 (Tex. [Comm’n Op.] 1928). This shift

in nomenclature accompanied a trend toward more permissive

applications of the Gift Clauses. In Barrington v. Cokinos, for example,

this Court upheld on public-purpose grounds an arrangement

4As another example, a few decades later in City of Tyler v. Texas

Employers’ Insurance Ass’n, the commission of appeals concluded that a

workers’-compensation law would contravene the Gift Clauses if it authorized

payments for on-the-job injuries without municipal liability. 288 S.W. 409, 412

(Tex. Comm’n App. 1926, judgm’t adopted).

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reminiscent of the very railroad subsidies that originally animated the

Gift Clauses. 338 S.W.2d 133, 145–46 (Tex. 1960). The City of

Beaumont agreed to “furnish [the] right of way for relocation of part of

[a] railroad line,” even though the railroads could have been required to

bear the cost. Id. The Court held that the grant was not an

unconstitutional “donation” because it directly advanced public safety

and convenience by eliminating sixteen grade crossings. Id. Other mid-

twentieth-century cases reflected a broadening view of “public purposes”

in other contexts. See, e.g., Davis v. City of Lubbock, 326 S.W.2d 699,

709 (Tex. 1959) (upholding urban renewal as a public purpose); State v.

City of Austin, 331 S.W.2d 737, 745–47 (Tex. 1960) (relocation of private

utility facilities); Bullock v. Calvert, 480 S.W.2d 367, 369 (Tex. 1972)

(funding party primaries).5

Even as the scope of permissible purposes shifted, the

requirement of public control and the prohibition on gratuities remained

consistent features of Gift Clause jurisprudence. In Texas

5 This broader view of permissible purposes was reflected—and perhaps

extended—in contemporary attorney general opinions, which local officials

often sought before implementing new measures and which, in practice, seem

to have informed the common understanding of what local governments could

do with respect to public financing. See, e.g., James G. Dickson, Jr., Vital

Crucible of the Law: Politics and Procedures of the Advisory Opinion Function

of the Texas Attorney General, 9 HOU. L. REV. 495, 528 (1972) (describing the

contemporary role of attorney general opinions). Indeed, one Texas

constitutional historian writing at the time observed that “the attorney general

[was] principally responsible for taking the cited cases and drawing the new

[public-purpose] rule from them.” GEORGE D. BRADEN ET AL., THE

CONSTITUTION OF THE STATE OF TEXAS: AN ANNOTATED AND COMPARATIVE

ANALYSIS 234 (1977) (first citing Tex. Att’y Gen. LA-6, LA-9 (1973); and then

citing Tex. Att’y Gen. Op. Nos. H-120 (1973), M-391 (1969), C-584 (1966), C-530

(1965)).

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Pharmaceutical Ass’n v. Dooley, for example, the court invalidated a

grant to a private corporation because it was not “subject to any control

of the State Board of Pharmacy.” 90 S.W.2d 328, 330 (Tex. App.—Austin

1936, no writ). And in Gillham v. City of Dallas, the court upheld a bond

issue for private cold-storage facilities only “[s]o long as the City

authorities supervise[d] and control[led] the contemplated buildings and

the business conducted therein.” 207 S.W.2d 978, 983 (Tex. App.—

Dallas 1948, writ ref’d n.r.e.).

Courts likewise had long viewed consideration as an important

way of distinguishing between a lawful exchange and a prohibited gift.

As this Court held in the then-seminal Gift Clause case, Linden,

“If . . . the effect of the statute is to bestow funds of the State upon [an

entity] as a gratuity . . . it would be invalid.” 220 S.W. at 762. Thus, “a

pure gift or donation”—a grant or payment not supported by “legal

consideration”—plainly violates the Gift Clauses. Tompkins v.

Williams, 62 S.W.2d 70, 71 (Tex. Comm’n App. 1933, judgm’t approved).

On the other hand, “[i]t is not the granting of a gratuity for the county

to grant a privilege for which it receives substantially the value thereof

in return.” Dodson v. Marshall, 118 S.W.2d 621, 624 (Tex. App.—Waco

1938, writ dism’d).

Thus, there remained a settled understanding in the years

preceding section 52-a’s ratification—even as prevailing conceptions of

permissible “public purpose” evolved—that any public expenditures in

connection with private enterprise must “include[] sufficient controls to

assure that the public purpose would actually be served” and provide

“assurance that the contracting governmental entity would receive

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adequate consideration or benefit for the services provided to private

parties.” E.g., Tex. Att’y Gen. Op. No. H-1010, 2 (1977).

Although the scope of permissible public purposes seems to have

expanded over time, it was typically not thought to include expenditures

for pure economic development. The Court wrote in Barrington that

while the Gift Clauses do not prohibit “business dealings with private

corporations and associations” so long as a public purpose is directly

accomplished, public funds still “may not be used simply to obtain for

the community and its citizens the general benefits resulting from the

operation of such an enterprise.” 338 S.W.2d at 140.

Barrington’s conception of public purpose had the effect of

frustrating various economic-development proposals in the years

leading up to section 52-a’s enactment. In 1973, the attorney general

declined to approve industrial-development revenue bonds by the City

of McAllen to fund the purchase of land for commercial development.

See BRADEN, supra, at 234 (discussing this episode); see also City of

McAllen v. Hill, No. B-4315, 17 Tex. Sup. Ct. J. 128 (Dec. 19, 1973)

(mandamus relief denied without opinion). The next year, the Texas

Industrial Commission asked for an attorney general opinion on

whether “a city may purchase property to be used by private industry by

giving a note to be repaid out of the revenues generated by the property.”

Tex. Att’y Gen. Op. No. H-357, 1 (1974). The attorney general concluded

that “it is not considered a public purpose within this legal context[]

when municipal credit is used to obtain for the community and its

citizens the general benefits resulting from the operation of a private

industry.” Id. at 5 (citing Barrington, 338 S.W.2d at 140). Also in 1974,

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a county’s proposal to fund its local chamber of commerce for the purpose

of “promoting industrial development in the county” was disapproved by

the attorney general, who called the proposal an impermissible “attempt

to secure for the community and its citizens by subscription to a private

corporation general benefits resulting from encouragement of private

industry and business.” Tex. Att’y Gen. Op. No. H-397, 1–2 (1974)

(citing Barrington, 338 S.W.2d at 140).

Thus, in the years leading up to section 52-a’s adoption, it was

“generally conceded in Texas that ‘pure’ industrial development bonds

of the type involved in McAllen vs. Hill [were] not permissible.” Mike

Willatt, Constitutional Restrictions on Use of Public Money and Public

Credit, 38 TEX. B.J. 413, 417 (1975). Nevertheless, the precise contours

of the “public purpose” requirement remained shifting and elusive,

prompting a 1984 attorney general opinion to observe—regrettably, but

not without foundation—that “[n]o fixed rule delineates exactly what

constitutes a public purpose.” Tex. Att’y Gen. Op. No. JM-220, 4 (1984).

B.

Against this legal background, the primary historical impetus for

section 52-a was the 1980s oil bust. Crude prices dropped from $35 a

barrel in 1981 to around $10 by 1986. See M. RAY PERRYMAN, SURVIVE

AND CONQUER: TEXAS IN THE ’80S, at 40–41, 82, 106–11 (1990). A Texas

economy heavily dependent on oil suffered widespread layoffs, business

failures, and sharp drops in state and local revenues. Id. In the wake

of the bust, “economic development” soon became “the ‘buzz word’ in

legislative and business circles across Texas.” Amy Kems,

Diversification Called Key to State Problems, BAYTOWN SUN, Oct. 16,

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1987, at 1-A.6 As the 70th Legislature prepared to convene in 1987, the

question was not whether it should do something about economic

development, but what it would do.

Before the 1987 legislative session began, House Speaker Gib

Lewis created an “Economic Advisory Group” to “suggest ways to

revitalize the state’s economy.” See Jack Keever, Speaker Lewis

Announces Economic Advisory Panel, KERRVILLE DAILY TIMES, May 30,

1986, at 5-A. The resulting report called for state-sponsored efforts to

“create research parks, assemble venture capital, facilitate the creation

of business incubators, and the like.” ECON. ADVISORY GRP.,

ALTERNATIVES FOR REVITALIZING AND DIVERSIFYING THE ECONOMY OF

TEXAS 5 (1987).

The report identified an obstacle: constitutional uncertainty over

using public funds to support private enterprise. Id. at 23. It noted that

“[m]any of [its] proposed recommendations . . . call[ed] for the use of

public funds for loans, grants, and other types of assistance to private

entities.” Id. But there was “uncertainty with respect to the

constitutionality of the Texas Legislature providing direct grants and

loans to accomplish the purpose of economic diversification.” Id. “The

best legal position,” the report concluded, “is that public moneys can be

used for a program as long as the legislature is accomplishing a public

purpose.” Id. But “[t]he problem with this is that the determination of

6 Not everyone was sold on the idea: “The wise watcher of public affairs

will keep eyes and ears open for the next seven months for what is done in the

name of the newest Texas buzzword—‘economic development.’” Sam Kinch,

Jr., Beware of ‘Economic Development’ Promises, LAKE TRAVIS VIEW, Nov. 5,

1986, at 4.

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public purpose is subject to review by the Attorney General or the courts

to determine whether the legislature or the political subdivisions have

abused their discretion in determining that a public purpose will be

accomplished.” Id.

The report continued: “In an effort to eliminate this confusion and

uncertainty, the Advisory Group recommends that there be a

Constitutional Amendment [that] would clearly authorize the

legislature to make grants and loans for a wider range of projects [that]

would stimulate economic diversification and encourage employment.”

Id. This recommendation, it appears, was the genesis of section 52-a.7

House Joint Resolution 5 proposed a constitutional amendment

“authorizing the legislature to provide for loans and grants of public

money related to state economic development.” Act of May 20, 1987,

70th Leg., R.S., 1987 Tex. Gen. Laws 4122 (Tex. H.J. Res. 5) (filed Feb.

6, 1987). The resolution proposed the text of section 52-a substantially

as adopted. Id.

Testimony at public hearings emphasized that the amendment

was needed to remove uncertainty in determinations of public purpose,

particularly as to the economic-development legislation then being

proposed. Representative Ashley Smith, the amendment’s sponsor,

urged that proponents of these efforts did not “want to continue to have

7 See Hearings on H.J. Res. 5 Before the House Comm. on Sci. & Tech.,

70th Leg., R.S. (Mar. 3, 1987) [hereinafter Committee Hearing] (statement of

Jerry Turner) (tape available from the House Video/Audio Servs. Off.) (Side A -

14:38–14:48) (“I suppose I should mention that the recommendation for this

legislation [proposing section 52-a] grew out of the Speaker’s task force on

economic development.”).

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to go back to the courts to ask for an interpretation of what public

purpose is, nor . . . to go back each time to the attorney general and ask

for a determination of public purpose.” Committee Hearing (8:15–8:26).

The proposed constitutional amendment, Smith explained, would thus

“clarify the specific applications under this series of bills . . . [and] give

definition to the public purpose.” Id. (8:45–8:58).

The theme of resolving uncertainty about what constitutes a

public purpose carried through as the proposal moved to the House and

Senate floors. In both chambers, the measure was presented not as a

break with the Gift Clauses but as a clarification, intended to remove

lingering constitutional doubts and to affirm that programs promoting

economic diversification could rest securely on a declared public

purpose.8

Several official bill analyses reinforced this understanding. One

warned that Texas would “have difficulty in implementing these models

of financing for economic development . . . until constitutional language

that clarifies economic development as a public purpose is adopted.”

House Comm. on Sci. & Tech., Bill Analysis, Tex. H.J. Res. 5, 70th Leg.,

R.S. 1 (1987). Another observed that “the courts have generally

interpreted existing constitutional provisions to permit grants for public

purposes” and that, “[s]ince the product development fund and the small

business incubator fund are intended to benefit the public by fostering

economic growth and diversity, this proposed change is in the spirit of

8 Debate on H.J. Res. 5 on the Floor of the House, 70th Leg., R.S. (Apr.

7, 1987) (tape available from the House Video/Audio Servs. Off.) (24:49–25:02);

Debate on H.J. Res. 5 on the Floor of the Senate, 70th Leg., R.S. (May 14, 1987)

(tape available from the Tex. State Libr. & Archives Comm’n) (6:00–6:20).

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the current provisions.” House Rsch. Org., Bill Analysis, Tex. H.J. Res.

5, 70th Leg., R.S. 2 (1987). Yet because uncertainty persisted, “it would

be prudent to clarify that public loans and grants for economic

development . . . are indeed for public purposes and constitutionally

acceptable.” Id. Another analysis chalked the need for the amendment

up to the attorney general’s historical view that “a grant for the purpose

of obtaining the general benefits resulting from the operation of a

private industry is not for a public purpose.”9

The legislative record thus reveals a consistent theme. At each

stage of section 52-a’s progress toward passage, lawmakers accepted

that the Gift Clauses barred the use of public funds for private ends but

recognized that existing interpretations had cast doubt on whether

assistance to private enterprise could ever serve a public purpose.

Section 52-a resolved that tension. It clarified that programs promoting

economic diversification, employment, agriculture, and industrial

development would qualify as serving a public purpose even when the

immediate recipients were private entities.

C.

By the time section 52-a reached the ballot in November 1987, it

was one of a “record 25 proposed constitutional amendments plus two

9 LEGIS. COUNCIL, ANALYSES OF PROPOSED CONSTITUTIONAL

AMENDMENTS AND REFERENDA APPEARING ON THE NOVEMBER 3, 1987, BALLOT

14 (1987) (citing Tex. Att’y Gen. Op. No. H-357 (1974)).

20

referenda”—the longest constitutional ballot in Texas history.10 Amid

the clutter, Proposition 4—the measure proposing section 52-a—

received comparatively little attention, overshadowed by other

proposals (like whether to permit racetrack betting).11 What

descriptions there were of the amendment tended to be fairly generic:

“To provide public monies to private companies encouraging

development.”12

The amendment was often presented as part of a package of

“Build Texas” amendments comprising constitutional authorization for

toll-road expansion, business and agricultural development funds, tax

exemptions, public-works financing, and $500 million to attract a

federal supercollider project.13 What little focused attention the

amendment received in the press was generally consistent with the view

10 Too Many Questions on November Ballot, AMARILLO SUNDAY NEWS-

GLOBE, Aug. 16, 1987 (emphasis omitted) (clip on file with the Legis. Reference

Libr.).

11 See Bruce Hight, Texas Voters Must Tackle Amendments, AUS. AM.-

STATESMAN, July 23, 1987 (clip on file with the Legis. Reference Libr.) (“The

issue that probably will attract the most voter attention is whether to permit

pari-mutuel betting on horse races.”); Kenneth F. Bunting, Voting May Seem

More Like 20 Questions, FT. WOR. STAR-TELEGRAM, Oct. 18, 1987 (clip on file

with the Legis. Reference Libr.) (“[B]ecause the spotlight seems to be trained

on racing, advocates of other propositions are scrambling to focus attention on

their causes.”).

12 Texas Voter’s Guide, HONDO ANVIL HERALD, Oct. 29, 1987, at 13B; see

also, e.g., Enterprise Recaps Lengthy Ballot List, BEAUMONT ENTER., Oct. 31,

1987 (clip on file with the Legis. Reference Libr.) (“Amendment 4, which would

allow public loans and grants for economic development.”).

13 See, e.g., Build Texas Package Deserves Voters’ OK, BEAUMONT

ENTER., Oct. 28, 1987 (clip on file with the Legis. Reference Libr.) (describing

the Build Texas package and listing Proposition 4).

21

that it was thought to clarify what counts as a public purpose. The

Texas Research League explained to voters that “the courts have

interpreted [the Gift Clauses] to permit grants or loans as long as they

are deemed to be for ‘public purposes.’” A Constitutional Heritage Left

by the Carpetbaggers: The 1987 Constitutional Amendments, Tex. Rsch.

League, Sep.–Oct. 1987, at 5. “However, the general principles used to

determine what constitutes a ‘public purpose’ often leave doubt in any

given case.” Id. “Thus, some feel that specific constitutional authority

is needed to prevent challenges to various economic programs that

might be undertaken and funded by the state and/or local governments.”

Id.

Likewise, an editorial-board endorsement noted that the

amendment “would clarify that public loans and grants for economic

development . . . are for public purposes and constitutionally

acceptable.” Amendment 4, KERRVILLE DAILY TIMES, Oct. 20, 1987, at 4.

Others explained that the amendment was necessary because, “in order

to use state money or credit for anything other than strictly public

purposes, a separate constitutional exception must be made.”14

The ballot language rather vaguely asked voters to approve “[t]he

constitutional amendment authorizing the legislature to provide

assistance to encourage economic development in the state.” Sample

14 Sam Kinch, Jr., A Quiet, But Radical, Shift, DALL. MORNING NEWS,

Aug. 7, 1987 (clip on file with the Legis. Reference Libr.); see also Voters Guide:

Constitutional Amendment Election November 3, 1987, TULIA HERALD, Oct. 22,

1987, at 24 (“It would clarify that loans and grants for public purposes such as

the Product Development Fund, the Small Business Incubator Fund, and the

Agricultural Fund included in proposed Amendment 6 are constitutionally

acceptable and would prevent any delay or confusion . . . .”).

22

Ballot, POLK CNTY. ENTER., Nov. 1, 1987. In the end, Proposition 4

passed narrowly, with 51.7% of the vote, although half of the measures

in the “Build Texas” package failed. See Final Vote Totals, TULIA

HERALD, Nov. 12, 1987, at 5.

D.

The legal and historical background preceding section 52-a, as

well as the contemporaneous debate and commentary surrounding its

enactment, together demonstrate that section 52-a was thought, at the

time, to resolve a discrete legal problem: uncertainty over whether

governments were pursuing a permissible public purpose when they

spent public money to promote private economic growth. The

amendment resolved that uncertainty by expressly describing

“development and diversification of the economy of the state” and

related goals as “public purposes.” Nothing suggests that anyone

thought they were approving gratuitous payments to private companies,

dispensing with the need for controls sufficient to ensure the

achievement of a public purpose, or otherwise affording special status to

economic-development spending not enjoyed by any other category of

government spending under longstanding Gift Clause precedent.

The principal effect of section 52-a, instead, was this: There may

no longer be any judicial second-guessing that “development and

diversification of the economy” is a valid public purpose for which

governments in Texas may spend public funds. In other words, unlike

before section 52-a, governments may now use public funds for the

public purpose of obtaining “the general benefits resulting from the

operation” of private enterprise. Contra Barrington, 338 S.W.2d at 140.

23

The long-recognized, separate requirements of control and

consideration—applicable to all government spending, not just to

economic development—remain the means by which courts and

taxpayers can distinguish a valid economic-development grant from an

unconstitutional give-away. Continuing to require control and

consideration under the Gift Clauses does not undermine or conflict with

section 52-a’s authorization of economic-development spending. It

instead ensures that expenditures labeled “economic development” are

genuinely made in pursuit of, and designed to actually achieve, their

ostensible public purpose. Our constitution, after all, “must be obeyed

in reality, not just in form.” Borgelt, 692 S.W.3d at 310. And “it is easy

to adorn an otherwise-illegal transfer to a private recipient with a mere

bauble of public purpose.” Id. at 304.

This approach remains faithful to section 52-a’s text and our

precedent. Section 52-a allows the legislature to authorize the use of

“public money . . . for the public purposes of development and

diversification of the economy of the state.” TEX. CONST. art. III, § 52-a.

By 1987, whether a grant of public funds accomplished a “public

purpose” had become one of the three key components of the Gift Clause

test. See supra II.A–C; see also TML, 74 S.W.3d at 383–84; Borgelt, 692

S.W.3d at 301. And while ordinarily “we presume that the Legislature

acted with knowledge of [the] background law and with reference to it,”

In re Facebook, Inc., 625 S.W.3d 80, 97 (Tex. 2021) (citation modified),

in this case no presumption is needed. Those who proposed section 52-a

said so plainly. They cast the amendment as a clarification within the

existing Gift Clause framework, designed to dispel uncertainty about

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what constituted a public purpose, not to discard the parallel

requirements of consideration and control. Put simply,

there is no language in either section 52-a or in the relevant

commentary to suggest that the amendment was intended

to change the requirements that public resources and

powers be used for “the direct accomplishment of a public

purpose” and that transactions using such resources and

powers contain sufficient controls “to [e]nsure that the

public purpose be carried out.”

Tex. Att’y Gen. Op. No. JM-1255, 8–9 (1990) (quoting Tex. Att’y Gen.

Op. No. JM-1229, 6 (1990)). We therefore hold that section 52-a

establishes “development and diversification of the economy” as a

legitimate public purpose but does not otherwise supplant the

traditional Gift Clause scrutiny that has long been applicable to

government spending in Texas.

III.

With that understanding in mind, we turn to the facts of this case

to determine whether the economic-development arrangement in

question satisfies section 52-a and the Gift Clauses. We conclude that

it likely does, which means that summary judgment for the City and

County was improper.

A.

The first question under section 52-a is whether the payments at

issue were “for” the “public purposes of development and diversification

of the economy.” TEX. CONST. art. III, § 52-a. If the payments were “for”

those purposes, as they would have been understood in 1987, then the

constitutional inquiry on this point is complete. To answer that

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question, we look not to present-day policy preferences but to the

understanding of economic development and diversification that

prevailed when section 52-a was adopted, and to the kinds of

arrangements that the amendment was intended to bring within

constitutional bounds.

We need not explore the outer bounds of what expenditures may

be “for the public purposes of development and diversification of the

economy.” Even under a restrained view, the arrangement here—an

agreement by which local governments dedicated portions of the tax

revenue associated with a construction project and its related

commercial area in order to attract new businesses and create jobs in

the area—comfortably falls within that category. The history of section

52-a makes clear that this is precisely the kind of “conventional

economic-development grant[]” that the framers of the amendment

intended to authorize. In re State, 711 S.W.3d at 647.

As discussed above, prior to section 52-a, courts generally took a

dim view of claims that economic-development spending advanced a

public purpose. See, e.g., Barrington, 338 S.W.2d at 140. Thus, an

arrangement much like the one here, in which a city financed a private

facility with debt tied to the project’s future revenues, was considered

an unconstitutional “attempt to secure for the community and its

citizens the general benefits resulting from encouragement of private

industry.” Tex. Att’y Gen. Op. No. H-357, 5 (1974).

Section 52-a was adopted to change that result. Indeed, the

official bill analysis traced the need for section 52-a to Attorney General

Opinion No. H-357, which disapproved a city’s use of revenue-backed

26

financing to acquire land for lease to private industry, with repayment

tied to revenues generated by the project. See LEGIS. COUNCIL, supra,

at 14. The conclusion of Opinion No. H-357 could almost have been

written in response to a request for advice on the very project at issue in

this case:

It is not constitutionally permissible for a city to purchase

land for future industrial development by means of a

promissory note to be paid out of revenues generated by the

land without recourse to the city when the benefit to the

public from such a purchase is such benefit as may be

derived from the attraction of new industry.

Tex. Att’y Gen. Op. No. H-357, 5 (1974).

There is therefore no doubt that those who adopted section 52-a

would have understood revenue-backed financing of the kind at issue

here as among the valid means of pursuing the newly declared public

purpose of economic development. As in the programs that prompted

Attorney General Opinion No. H-357 and the adoption of section 52-a,

the City and County committed a defined share of future public revenues

associated with the new development to service debt incurred to pay for

property that a private enterprise would occupy and operate. The

pledged tax revenues and rental income were dedicated to repaying the

loan, while the governments retained no ownership or operational role

in the facility but expected that their participation would stimulate

commerce, employment, and tax growth in the surrounding area. This

structure fits comfortably within the type of activity the 1987

amendment was plainly designed to allow. Cf. id. at 1–5. The

expenditures at issue were thus “for” the “public purposes of

27

development and diversification of the economy” as those words would

have been understood in 1987. TEX. CONST. art. III, § 52-a.

B.

The court of appeals approached the question of public purpose

by identifying the particular economic activity the deal sought to bring

about and then asking whether the deal continued to generate that

specific activity and contained controls to ensure it would do so. The

court identified the deal’s public purpose as the operation of the Gander

Mountain store, a purpose that of course vanished when the store closed.

685 S.W.3d at 181–83. The district court took a similar view, declaring

that “the closing of the Gander Mountain store extinguished the public

purposes [that] authorized the City’s and County’s grants of public

money.”

This approach misapprehended the constitutional inquiry. The

relevant question is not whether the specific economic activity

envisioned by the parties has been accomplished and sustained. The

question, instead, is whether the arrangement genuinely serves the

purpose of economic development, which the people of Texas have

declared to be public and valid—and whether it contains controls

adequate to ensure economic development actually takes place.

A tenant-specific approach to the constitutional question lacks

grounding in the constitutional text and would generate curious results.

Consider a city that agrees to subsidize the construction of a private

commercial facility on the premise that it will attract visitors, create

jobs, and generate tax revenue. Suppose the original business later

closes, and another company steps in to run a similar enterprise,

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producing the same or greater public benefits. But the city refuses to

continue the subsidy because the new owner lacks the original operator’s

political ties. Could the city set up the Gift Clauses as a defense to

continued payments on the theory that the purpose of the incentives was

beneficiary-specific? Surely not. That scenario illustrates the very

cronyism the Gift Clauses exist to prevent.

Next, suppose the economic-development agreement says that the

subsidy is “for the operation of the XYZ Retail Store.” Years later, that

store closes and a new retailer opens in the same building, generating

the same economic activity, jobs, and tax revenue that justified the

public investment in the first place. Does the constitution obligate the

city to cease payments—even though the expenditures continue to be

“for” the “public purposes of development and diversification of the

economy of the state”—because the original contract was specific to a

particular retailer? Again, surely not. Contractual purpose is not

coterminous with constitutional purpose. Cf. Borgelt, 692 S.W.3d at 308

(“[A] breach of contract is not necessarily evidence that the contract is

itself unconstitutional. . . . Not all contractual violations (indeed, very

few) are of constitutional significance.” (footnote omitted)). The

government is free to use contracts to restrict the scope of what it is

permitted to pay for, but it cannot use contracts to restrict the scope of

what the constitution will permit it to pay for.

The lower courts’ singular focus on the lifespan of the Gander

Mountain store was therefore misplaced. The constitutional question is

not whether a particular tenant—or any other particular economic

activity envisioned at the outset of the deal—remains in place. The

29

question is whether the expenditures by the City and County genuinely

serve the public purpose of economic development in some concrete and

actual way—even if it is not in precisely the way the parties initially

envisioned. A deal that is genuinely designed to promote economic

development, and actually does so, does not cease to be constitutional

merely because the economic benefits it generates down the road are not

the same ones the parties initially envisioned. In other words, the

continued operation of a Gander Mountain store would have been one

way for the deal’s proponents to demonstrate that their arrangement

actually promoted economic development. But it was not the only way.

Chase contends that the disputed grants were designed to—and

actually did—facilitate not just an eleven-year tenancy by Gander

Mountain but also the development of a shopping district that has

generated considerable economic activity and tax revenue both during

and after Gander Mountain’s departure. That appears to be the case,

based on the limited record before us. In any event, summary judgment

for the City and County premised on the closure of the Gander Mountain

store was improper and must be reversed.

C.

An overly narrow conception of the deal’s public purpose also

infected the lower courts’ analysis of controls. Because they treated the

Gander Mountain store itself as the only constitutionally relevant

objective, the lower courts asked whether the contracts contained

sufficient controls to ensure the store’s continuing operation. The

answer, of course, was no—there is no longer a Gander Mountain store

in Corsicana. On that mistaken premise—that the sole public purpose

30

was the continued operation of a single store—the courts concluded that

the agreements lacked sufficient controls to ensure the accomplishment

of a public purpose. Properly considered, however, these agreements

likely contained sufficient safeguards to satisfy the constitutional

requirement that the government “retain public control over the funds

to ensure that the public purpose [of economic development] is

accomplished and to protect the public’s investment.” TML, 74 S.W.3d

at 384.

Three features of the arrangement inform that conclusion. First,

the interlocal agreement provided that payments would only begin

“following the completion and opening of Gander Mountain.” In other

words, public funds would not be spent until the initial economic-

development goal—attracting an anchor store for the new shopping

district—was achieved. That “pay-for-performance” design is a useful

control: it prevents “no-strings-attached” payments, ties disbursements

to a defined economic deliverable, and ensures that public funds are not

advanced for speculative private uses that may not actually turn out to

serve public purposes. All of these, we have held, are core aims of the

Gift Clauses. See Borgelt, 692 S.W.3d at 308–10; In re State, 711 S.W.3d

at 646–47.15

15 Indeed, speculative cash advances on construction projects were one

of the very evils that gave rise to the Gift Clauses. See DEBATES IN THE TEXAS

CONSTITUTIONAL CONVENTION OF 1875, at 116, 131–32 (Seth Shepard McKay

ed., 1930); SETH SHEPARD MCKAY, SEVEN DECADES OF THE TEXAS

CONSTITUTION OF 1876, at 110 (1942) (“The extravagant abuse of [cash grants

to railways] by the radical Davis administration, which increased the bonded

debt of the state by several million dollars, caused the people to amend the

constitution in 1874 by forbidding money subsidies . . . .”).

31

Second, the agreements required that the City’s and County’s

contributions be held in a separate account to be used “solely” to pay off

the debt from the construction project. The funds in the account could

“not be used for any other purpose.” That structure prevented public

funds from being spent on unrelated private ventures. As Borgelt

explained, restrictions that confine the use of funds to specified,

authorized purposes are a recognized means of retaining public control

and ensuring that the public purpose is accomplished. 692 S.W.3d at

309–10; see also Jefferson County v. Bd. of Cnty. & Dist. Rd.

Indebtedness, 182 S.W.2d 908, 913 (Tex. 1944) (“[T]hese funds are not

granted to such counties for unrestricted use by them. Such funds can

be used only for the purpose of constructing public roads . . . .”).

Third, the agreements tied the governments’ financial obligations

to the economic activity generated by the project by pegging the amount

of each payment to a percentage of sales-tax revenue generated within

the shopping district. Public funds were not granted in fixed amounts

or lump sums; they moved in direct proportion to the success of the

project’s economic goals. This structure conditioned the flow of public

money on whether or not economic activity and development was

actually happening as promised, thereby closely aligning the public

expenditures with their constitutionally permitted purpose.

These features of the deal, taken together, tend to demonstrate

sufficient “public control over the funds to ensure that the public

purpose [of economic development] is accomplished and to protect the

public’s investment.” TML, 74 S.W.3d at 384. Summary judgment for

32

the City and County on the question of adequate controls was therefore

improper.

D.

The final requirement is that the government receive a return

benefit in exchange for its expenditures. Borgelt, 692 S.W.3d at 301–02;

TML, 74 S.W.3d at 384–85. The record reflects that the City and County

received such a benefit. No one disputes that a large retail store capable

of anchoring the new shopping district was built. Nor does anyone

dispute that the funds in the Grant Fund were used solely in relation to

the debt incurred from that construction and were not “subverted to

private purposes.” Borgelt, 692 S.W.3d at 310. The Gander Mountain

facility was built and operated for more than a decade, anchoring a

shopping district that apparently has generated and continues to

generate jobs, commerce, and additional tax revenue. That the original

tenant later closed does not erase the consideration the governments

received. And although the record on this point is somewhat murky, it

suggests that the sales-tax contributions owed by the City and County

would have continued in roughly the same amounts (around $150,000

per quarter) even after Gander Mountain closed—indicating that new

development spurred by public investment had, over time, begun

contributing to sales-tax revenue. This is in line with an uncontroverted

affidavit stating that “Gander Mountain contributed to the success of

the center for more than a decade,” such that “Corsicana Crossing may

not have materialized without Gander Mountain.” Finally, no one

disputes that the former Gander Mountain facility is now occupied by

another large retailer, Fun Town RV.

33

Although the record is not entirely clear on the point, construction

of the Gander Mountain facility seems largely to have achieved its

intended purpose by attracting additional tenants and substantially

increasing economic activity and sales-tax revenue in the shopping

district. If true, this public benefit was easily sufficient consideration

for Gift Clause purposes. By declaring that the “development and

diversification of the economy” is a valid public purpose, the people of

Texas took the view that fostering private enterprise can, when properly

structured, generate real public value in return. That declaration would

ring hollow if courts assessing the constitutionality of such programs

were to disregard or restrictively construe the economic benefits such

programs yield. The people of Texas decided, in amending their

constitution, that public expenditures for economic development serve a

genuine public purpose. To the extent there is lingering judicial

skepticism of the wisdom of the people’s judgment in that regard, it must

play no role in the courts’ approach to these questions.

Thus, even though economic-development programs remain

subject to the Gift Clauses’ other requirements, courts should resist

reading those safeguards so broadly that they prohibit the very core of

the activity section 52-a was adopted to permit. The Gift Clauses still

serve their essential role—to prevent gratuities and ensure

accountability—but they ought not be stretched so far as to prohibit

what the people themselves have declared to be a public purpose. On

the record before us, the evidence suggests that the governments’

investment produced the very kind of public benefit section 52-a was

designed to achieve.

34

IV.

For these reasons, summary judgment for the City and County

was improper. The courts below erred in concluding that the closure of

a particular store extinguished the constitutional purpose supporting

the economic-development agreements and in holding the agreements

unconstitutional on that basis.

The viability of the local governments’ Gift Clause claims largely

hinges on their effort to narrowly define the deal’s public purpose as the

continued operation of the Gander Mountain store. That theory having

failed, it appears based on the available record that neither section 52-a

nor the Gift Clauses prohibits the City or County from honoring its

agreement to continue making payments under the deal it struck, which

apparently has generated and continues to generate economic

development in the local area.

While the materials before us support this conclusion, the record

remains unclear and underdeveloped as to various matters, including

the development of new businesses in the shopping district over the

years, as well as alleged construction defects or other irregularities in

the project’s execution that have been alleged by the City and County.

Those and potentially other factual questions may, if necessary, be

further explored on remand, which is the disposition requested by

Chase.

The judgment of the court of appeals is reversed, and the case is

remanded to the district court for further proceedings consistent with

this opinion.

35

James D. Blacklock

Chief Justice

OPINION DELIVERED: May 8, 2026

36