The opinion
June 5, 1972
Mr. James Ii. Harwell Opinion No. M- 1136
Executive Director
Texas Industrial Commission Re: Questions relating to
P. 0. Box 12728, Capitol Station meanings of terms used
Austin, Texas 78711 in Art. lOlSj-1, V.C.S.
Dear Mr. Harwell:
Your recent letter requests the opinion of this
department as to the meaning of certain terminology used in
House Bill 226, Acts of the 62nd Legislature. That bill, as
enacted, is codified as Article 1015j-1, Vernon's Civil
Statutes.
Your first question. is as follows:
"Line three of the attached act refers to
'one percent of the city's general fund budget'.
What is a city's general fund budget? Can it
include the total of all revenues collected re-
gardless of source or regardless of account
title such as 'utility fund'? If 'general fund'
does not include all accounts or revenue funds
in'these accounts, which titled accounts do fall
under the legal definition of general fund budget
as used in this act."
Your second question is as follows:
"Line four refers to ~'and promoting its
(i.e., the city's) growth and development'. If
it were determined by a city that the extension
of utilities to an industry (cost to be paid
out of funds appropriated pursuant to this act)
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Mr. James II. lIarwell. page 2, (M-1136)
were necessary to 'promote the city and its
growth and development' would this constitute
a legal expenditure of funds on the part of
said city? If not, what types of expenditures,
other than purchase of advertising, if any, fall
under the legal definition of 'promotion' as
used in this act?"
Section 1 of Article 1015j-1 reads as follows:
"The governing body of any incorporated city
having a population of not more than 500,000
according to the last preceding Federal Census
may appropriate from the general fund an amount
not exceeding one percent of the general fund
budget for that year, such appropriation to be
for advertising such city and promoting its
growth and development."
A reply to your first question may not be made in the
absence of more facts. While state statutes govern extensively
the fiscal affairs of our cities, yet there is not complete
uniformity as to charter provisions, status,of bonded indebt-
edness, or accounting procedures and terminology. Accordingly,
in furnishing this opinion, we are necessarily confined to a
general statement without any attempt to hold that a certain
accounting procedure applies to a given city.
You have asked, What is a city's general fund
budget, etc.?" As qualified above, we are of the opinion
that a city's general fund budget generally governs the
expenditure of all income which is not by charter, ordinance,
statute, contract or bond indenture committed to paying desig-
nated portions of the city's debtsor expenses. For example,
utility revenue is commonly held apart from general funds until
interest and sinking funds on any utility bond indebtedness
are taken care of.
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Hr. James H. Harwell, page 3, (M-1136)
The cities have authority to earmark certain revenue
for a special purpose. See 40 Texas Jurisprudence 2d, page 225,
Section 535, Special Funds, for the statement,
"The governing body of a municipality oper-
ating under the general laws is authorized by
statute to provide special funds for special
purposes and to make a particular fpnd disbursa-
ble only for the purpose for which it was created."
See also Articles 1113 and 1113a, Revised Civil Statutes
of Texas, 1925, for laws relating expressly to revenue from
utilities operated by a city.
We construe.your second inquiry as including two ques-
tions. The First is whether money appropriated under Article
1015j-l* may lawfully be used to extend the city's utility lines
to serve an industry. In other words, would making utilities
available to an industry fall under the heading of promoting the
growth and development of the city as contemplated by Article
lOlSj-1. This is a fact question to be determined by the gov-
erning body of the city. The Attorney General cannot determine
fact questions. Atty. Gen. Opin. No. M-517 (1969, at p. 2470).
In City of Biq Spring v. Board of Control, 404 S.W.2d
810 (Tex.Sup. 1966), the Court said:
"Art. 1108, Vernon's Tex.Civ. Statutes is
equally as broad in giving to the city authorities
the right to contract under such terms and condi-
tions as may appear to be for the best interest of
such city or town 'with regard to furnishing water
outside the city limits.' In making this determina-
tion the City could take into consideration the
* Article lOlSj.-1 applies only to incorporated cities having a
population of not more than 500,000.
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.
Mr. James H. Harwell, page 4, (M-1136)
advantages which would accrue to the inhabitants of
the- City by virtue of the location of the hospital
adjoining their City. The City Council doubtless
considered the fact that such hospital would have
many employees who would live in the city limits
and spend a large part of their wages with the
merchants and other business and professional men
in Big Spring: and that additional ad valorem tax
revenues would become available to the City through
the ownership of property inside the City limits by
the families moving to Big Spring and employed by
the hospital.
"The judgment of the City Council has been
borne out by the fact that the hospital did provide
a new payroll to Big Spring, and at the time of the
trial it was stipulated between the parties that
such payroll amounted to $91,000.00 per month. The
same is true with regard to ad valorem taxes that
would be available to Big Spring. At the time of the
trial it was stipulated by the parties that hospital
employees residing in the city limits were paying
$3.000.00 per year in ad valorem taxes to the City.
It was also stipulated that in,addition to the
approximately $875,000.00 original appropriation
for construction of the hospital plant, the State
has spent in excess of $18,000,000.00 in establish-
ing the hospital facilities." (at p. 812-813).
The Court here points out many of the benefits accruing to the
city from the nearby location of a hospital. A new industry
in or near a city or town might be equally beneficial to the
growth and development of the city.
A city clearly has authority to serve users beyond
its limits under Article 1108, Vernon's Civil Statutes, Section
3, reading as follows:
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Mr. James H. Harwell, page 5, (M-1136)
"any townor city in this State which has or
may be chartered or organized under the general
laws of Texas, or by special Act or charter, and
which owns or operates waterworks, sewers, gas or
electric lights, shall have the power and right:
I#
. . . .
"3 . To extend the lines of such systems out-
side the limits of such towns or cities and to sell
water, sewer, gas, and electric light and power
privileges or service to any person or corporation
outside of the limits of such towns or cities, or
permit them to connect therewith under contract as
may appear to be for the best interest of such town
or city; provided that no electric lines shall, for
the purposes stated in this section, be extended
into the corporate limits of another incorporated
town or city."
In the 1966 Supreme Court case, City of Big Snrins v.
Board of Control, supra, the Court expressly approved of Article
1108 in the following language:
"Art. 1108, Section 3, Vernon's Texas Civil
Statutes expressly confers the power upon a city
such as Big Spring to enter.into the contract we
have here. The legislative and judicial history
of this Act can leave no doubt as to the intent
of the Legislature in the passage of this Act. . . .I'
(at p. 812).
We are of the opinion that in view of the legislative
and judicial history of Article 1108, a city may extend its
utility lines beyond the city limits.'
1 City of Sweetwater v. Hamner, 259 S.W. 191 (Tex.Civ.App. 1924,
error dism.), holding Article III, Section 52, and Article XI,
Section 3, Texas Constitution, forbids such extension of the
City's utility lines, is no longer the law in view of the Big
Spring case, supra; and see also City of Texarkana v. Wiqqins,
151 Tex. 100, 246 S.W.2d 622, 627 (1952).
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Mr. James H. Harwell, page 6, (M-1136)
We do not regard Article 1108, Section 3, and the Biq
Sprinq and Texarkana decisions as being in conflict with Article
970a, the Municipal Annexation Act enacted in 1963. Article 970a
pertains only to the general territorial jurisdictions of cities,
overlapping jurisdictions, and annexations. The right of a city
to serve others with extension of utility services beyond the
city limits is not expressly dealt with in the Municipal Annexa-
tion Act but is expressly authorized in Section 3 of Article 1108.
With reference to your second inquiry, you also request
that we name the types of expenditures, other than purchase of
advertising, if any.' that fall under the legal definition of
"promotion" as used in Article lOlSj-1. We cannot do so, because
that is entirely too broad a question, and would require our
dealing in speculative hypothetical problems. Each proposal
must be considered on its own merits as the problem arises.
SUMMARY
_--__--
As a general rule, a.city's general fund budget
generally governs the expenditures of all income
which is not by charter, ordinance, statute, con-
tract or bond indenture committed to paying designated
portions of the city's debts or expenses.
Under Article 1108, V.C.S., any town or city in
this State which has or may be chartered as authorized
under the general laws of Texas, or by special Act or
charter, and which owns or operates waterworks, sewers,
gas or electric lights, shall have the power and right
to extend the lines of such systems outside of the
limits or such towns or cities.
truly yours,
General of Texas
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.
1
.
Mr. James H. Harwell, page 7, (M-1136)
Prepared by James S. Swearingen
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
John Banks
James Quick
Lewis Jones
Mel Corley
SAMUEL D. MCDANIEL
Staff Legal Assistant
ALFREDWALKER
Executive Assistant
NOLA WHITE
First Assistant
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