The Attorney General of Texas
March 24, 1981
MARK WHITE
Attorney General
Honorable Mike Driscoll Opinion No. MW-314
Harris County Attorney
1001Preston, Suite 634 Re: Clarification of Attorney
Houston, Texas 77002 General Opinion MW-290 with
respect to encumbrance for rental
payments on Center Pavilion
Hospital Project
Dear Mr. Driscoll:
You ask three questions seeking clarification of Attorney General
Opinion MW-290 (1981). That opinion concluded that Harris County could
spend bond proceeds and other county funds to improve the Center Pavilion
Hospital building which the county had leased. We also answered several
questions regarding the county auditor’s responsibility with respect to
financial transactions arising from the lease, for example, payment of rent.
You ask for clarification of the following sentences in Attorney General
Opinion MW-290:
Section 3 of the lease agreement provides that the
leasehold estate shall commence as of the date of the
execution of the lease. The encumbrance for any
rent payment should be set up as of that date. (Your
emphasis).
You inform us that no rent was due in 1980, and that annual rentals in
varying amounts are due, subject to the year-by-year budget appropriation
by the commissioners court in 1981 and the following years. The total rent
due over the life of the lease has been estimated to be $29,592,100.
You first ask:
L Is the opinion to be interpreted to mean that
the rent payment encumbrance is to be (a) the
amount of the yeal-by-year appropriation budgeted
by [the1 commissioners court (estimated to be
approximately $1,400,000); or (b) the entire rental for
the lease life (approximately $29,592,100)?
p. 1000
Honorable Mike Driscoll - Page Two (MVr-314)
The rent payment encumbrance is the amount of the year-by-year appropriation
budgeted by the commissioners court. Clearly, with a year-to-year lease such as that
executed by Harris County and the Harris County Hospital Authority, an encumbrance
for the entire rental for the projected lease life is inappropriate. The commissioners
court may withdraw from the lease at the end of any fiscal year by falling to
appropriate.
You next ask:
2. For the year 1980, when no rent was payable, should the
encumbrance, which will be carried forward, be zero or
$29,592,100?
For the year 1980, when no rent was payable, the encumbrance would be zero.
You finally ask.
3. For the year 1981, the first year of the rental payment
liability, should the encumbrance be approximately $1,379,500
(the first year’s estimated rental) or $29,592,100? If the first
amount ($1,379,500), should a similar scheduled annual basic
rental amount be freshly encumbered year-by-year, pursuant to
appropriation of [the] commissioners court? If the latter
amount, the unexpended portion would be carried forward
annually as a new encumbrance.
Again, following the reasoning in our answer to your first question, the 1981
encumbrance should be for the first year’s estimated rental and the scheduled annual
rental amount should be freshly encumbered year-by-year. Due to the nature of the
leasehold estate herein involved there is no encumbrance lasting beyond a year.
In Attorney General Opinion MW-290 we used the term “encumbrance” in the
sense that the leasehold estate was encumbered by a need to meet a rental payment.
The encumbrance, however, can only ba consistent with the terms of the lease.
Therefore, a year-to-year lease clearly dictates a year-to-year encumbrance.
SUMMARY
The encumbrance for rental payments for the Harris County
lease on the Center Pavilion Hospital is the amount of the year
by-year appropriation budgeted by the commissioners court.
For the year 1980, when no rent was payable, the encumbrance
would be zero. For the year 1981, the first year of rental
payment liability, the encumbrance should be for the first year’s
estimated rentaL The scheduled annual rental amount should be
freshly encumbered year-by-year.
p. 1001
Honorable Mike Driscoll - Page Three (Mw-314)
MARK WHITE
Attorney General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistant Attorney General
Prepared by Susan L. Garrison
Assistant Attorney General
APPROVED:
OPINION COMMlTTEE
Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Susan Voss
p. 1002