Strategic Planning Through Interlocal Agreements
When Texas became a state in 1845, local governmental functions were performed by counties. Counties were responsible for law enforcement, the judicial system, public records, and the public schools. As the population grew and became more concentrated in cities, the demand for public services increased. The Texas Legislature responded by expanding the powers of cities and creating independent school districts. Counties retained their basic responsibilities, but cities and state agencies became the primary vehicles for additional services.
However, in the 1960s, population growth patterns began to out-strip municipal boundaries. Residential and commercial development followed improved transportation into the unincorporated areas. Reluctant to expend funds for infrastructure and services, cities left these developments outside their annexed boundaries. Urban sprawl became a common problem for Texas counties.
As citizens turned to counties for solutions, counties faced a dilemma. With limited powers, counties could not afford to develop full county departments and personnel to provide new services. For 100 years, counties, cities, and state agencies had exercised independent jurisdiction with little communication or cooperation between them. However, the issues posed by increased population and growth demanded additional tools and greater efficiency.
To meet this demand, the Texas Constitution was amended to specifically authorize counties and other political subdivisions to contract with one another for the performance of governmental functions under such terms and conditions as the Legislature may prescribe. In 1971, the Legislature provided for these intergovernmental contracts by the adoption of the Interlocal Cooperation Act, codified as Chapter 791, Government Code. The purpose of the act is to increase the efficiency and effectiveness of local governments by authorizing them to contract, to the greatest possible extent, with one another, and with agencies of the state. The Act has been amended several times to clarify the procedures for developing and implementing interlocal agreements.
The Interlocal Cooperation Act has been enthusiastically embraced by Texas counties, and most counties have adopted multiple contracts under its provisions. For example, we have prepared Interlocal Agreements for law enforcement services, subdivision regulation in the ETJ of a city, tax collection services, payroll, personnel and administrative services, jail inmate medical services, highway projects with both cities and the Texas Department of Transportation, emergency medical services, economic development projects, solid waste services and landfill operations, regional public defender projects, city prisoner jail agreements, fire protection services, property lease agreements, and others. The use of these agreements has undoubtedly saved millions of taxpayer dollars.
These Interlocal Agreements have become an integral part of county strategic planning. When evaluating their ability to provide county services within their budgetary limits, commissioners courts have often relied upon Interlocal Agreements to stretch their funding.
However, the ability to fully utilize these agreements in long-term strategic county planning has been limited to the terms of Section 7 of Article XI, Texas Constitution, known as the “Public Debt” provision. As interpreted by the courts, this provision required any obligation of a county or city to be payable from current funds; otherwise a property tax and sinking fund must be established to pay the obligation. Applying this provision to Interlocal Agreements has effectively prevented mutual long-term project agreements. All Interlocal Agreements have been subject to annual renewal to ensure payment from current funds. With this limitation, counties and cities have been unable to jointly finance projects, forcing a single entity to assume the cost and exposure of these projects.
To remove this impediment, the Legislature passed SJR 26 and SB 760 to authorize extended-term interlocal contracts between counties and cities. With the approval of the constitutional amendment by the voters on Nov. 8, 2011, counties may increase their efficiency and effectiveness through the joint ownership, financing, and operation of projects and services over an extended term.
Several counties have initiated plans for extended-term projects under this new legislation. While it has certainly expanded our options for mutual projects, such as joint information technology centers, law enforcement centers and others, there are some necessary terms in these agreements.
First, the extended Interlocal Agreement must have a definite term. Whether two years or 200 years is a matter for negotiation, and it may be renewed. Include language such as “This Agreement extends for a term of years and may be renewed by the Parties.”
Second, while the Legislature has generally waived the defense of governmental immunity for enforcement of contracts for goods and services, this defense has not been waived for agreements involving real estate. If real property or buildings will be involved in the extended Interlocal Agreement, to be enforceable in court, it should include a waiver of the defense of governmental immunity, such as “The Parties specifically waive the defense of governmental immunity for the limited purpose of the remedy of specific performance of the terms of this Agreement.”
Obviously, the execution of an extended term Interlocal Agreement should be approached with caution. Qualified legal assistance is always recommended. However, I believe that our taxpayers will benefit from the proper implementation of this additional tool for more efficient county government.