Untitled Texas Attorney General Opinion ( 2000 )

OFFICE
OFTHE
ATTORNEY
GENERAL.
STATE
OFTEXAS
JOHN CORNYN
October 17,200O
The Honorable Charles D. Penick Opinion No. K-0295
Bastrop County Criminal District Attorney
804 Pecan Street Re: Authority of a special district with powers
Bastrop, Texas 78602 and duties of a road district under article III,
section 52 of the Texas Constitution to incur
indebtedness for aperiod ofmore than one year
(RQ-0234-K)
Dear Mr. Penick:
You ask whether Bastrop County Water Control and Improvement District No. 2 (the
“District”) may, pursuant to its road district authority, incur indebtedness payable from road district
fees that will extend beyond the District’s ability to pay in one year.’ The District lacks statutory
authority to do so.
The Bastrop County Water Control and Improvement District No. 2 has been granted the
authority of a road district by the legislature. In 1989, the legislature granted the District the powers
“conferred by the general law of this state applicable to road utility districts created under Article
III, Section 52.” Act ofMay 27, 1989, 71st Leg., R.S., ch. 577, 5 2, 1989 Tex. Gen. Laws 1914.
The 1989 legislation was to expire in two years, but was extended in 1991 for an additional four
years. See id. 5 5, at 1915, amendedbyActofMay26,1991,72dLeg.,R.S., ch. 323,§ 4,199l Tex.
Gen. Laws 1363, 1366. The District lost its road utility district powers in 1995 when the bill
designed to extend this authority was not adopted. See Tex. H.B. 3 173,74th Leg., R.S. (1995). In
1997, the legislature adopted House Bill 706, granting to the District the powers and duties of a road
district. See Act ofApr. 28, 1997,75th Leg., R.S., ch. 47, 5 2, 1997 Tex. Gen. Laws 116. This bill
does not expire until all the road improvements called for under the District’s master plan are
completed and accepted by the City of Bastrop and Bastrop County. See id. 5 13, at 118.
The District “has all ofthe rights, powers, privileges, functions, responsibilities, and duties
that the general law grants a road district created under Section 52, Article III, Texas Constitution.”
Id. § 2(a), at 116. Article III, section 52 reads in part:
(b) Under Legislative provision, any county . or defined
district now or hereafter to be described and defined within the State
‘See Letter from Honorable Charles D. Penick, Bastrop County Criminal District Attorney, to Honorable
John Comyn, Texas Attorney General (May 22,200O) (on tile with Opinion Committee) [hereinafter Request Letter].
The Honorable Charles D. Penick - Page 2 (X-0295)
of Texas . upon a vote of two-thirds majority of the voting
qualified voters of such district or territory to be affected thereby,
may issue bonds or otherwise lend its credit in any amount not to
exceed one-fourth of the assessed valuation of the real property of
such district and levy and collect taxes to pay the interest thereon
and provide a sinking fund for the redemption thereof, as the
Legislature may authorize, and in such manner as it may authorize the
same, for the following purposes [including the construction,
maintenance and operation of roads].
TEX. CONST. art. III, 5 52@). Pursuant to this provision, the legislature may authorize counties,
political subdivisions, and defined districts to issue general obligation bonds and to levy a tax upon
the property within their boundaries to pay the interest and to redeem those bonds. See Bell County
v. Hines, 219 S.W. 556,557 (Tex. Civ. App.-Austin 1920, writ ref d). The taxes leviedunder article
III, section 52(b) are separate and in addition to the other county road taxes found in article VIII,
sections 1-a and 9 of the Texas Constitution. See 36 DAVID B. BROOKS,TEXASPRACTICE:COUNTY
ANDSPECIALDISTRICT LAW 5 40.3 (1989); see also 1 GEORGED. BRADEN, THE CONSTIT``ON OF
THESTATE OF TEXAS: AN ANNOTATEDANDCOMPARA~VE ANALYSIS,259 (1977) (primary original
purpose of article III, section 52(b) of Texas Constitution was to provide for additional taxes for
roads and water).
The District has within its boundaries the powers that a county commissioners court has
under Chapter 257 of the Transportation Code, “to the extent that chapter can be applied.” Act of
Apr. 28,1997,75th Leg., R.S., ch. 47,s 2,1997 Tex. Gen. Laws 116. See TEX. TRANSP.CODEANN.
$ 257.021 (Vernon 1999) (commissioners court of a county to establish road districts as provided
by Texas Constitution, article III, section 52). The Board of the District may impose a monthly
charge of five dollars for each lot, tract, or reserve, to be used for constructing, maintaining, or
repairing public streets or roadways in the District. Act of Apr. 28, 1997,75th Leg., R.S., ch. 47,
5 6,1997 Tex. Gen. Laws 116,117. It may not “issue bonds or authorize a tax under. [House Bill
7061 unless the bond or tax is approved by a two-thirds majority ofthe voters ofthe district who vote
at an election called and held for that purpose.” Id. § 7(a), at 117. “Bonds, notes, or other
obligations ofthe district issued or incurred under this Act may not exceed one-fourth ofthe assessed
valuation of the real property in the district.” Id. 5 7(b). These sections are the “Legislative
provision[s]” adopted under article III, section 52(b) authorizing the District to issue tax-secured
obligations “upon a vote oftwo-thirds majority ofthe voting qualified voters.” TEX. CONST.art. III,
5 52(b); see Tex. Att’y Gen. Op. No. JM-1276 (1990) at 1, 3 (creation of debt in road districts is
governed by Texas Constitution article III, section 52 and legislation enacted pursuant to that
provision).
You state that the District has in the past authorized road construction only to the extent that
road district fees have been collected and are available for such projects, thus limiting the amount
The Honorable Charles D. Penick - Page 3 (JC-0295)
of road work that can be done in any year.* The District Board would like to borrow the total funds
necessary to complete a long-term project, repaying the loan from the road district fees, which are
collected annually, over a period ofyears. See Penick Brief, note 2, at 2. You ask the following two
questions about the District’s authority to borrow money:
1. If the Water District, acting under its road district authority does
not impose a property tax but looks only to the road district fees for
the repayment of the debt, may the District, under its road district
authority, incur indebtedness which will extend beyond the ability of
the road district to pay in the current year without holding a property
owners election in the District?
2. If the answer to question #I is in the negative, then the Water
District Board wishes to submit this question: May the Water District
Board incur indebtedness requiring repayment over a period of more
than one (1) year, without imposing a property tax, with approval of
two-thirds (2/3) of the voters in accordance with the requirements of
the statute, for incurring indebtedness?
Id.
If the District wished to authorize a tax and issue bonds or other obligations secured by the
tax, article III, section 52 of the Texas Constitution and House Bill 706 would require the approval
of a two-thirds majority ofthe qualified voters voting at an election held for that purpose. See TEX.
CONS. art. III, 5 52; Act of Apr. 28, 1997, 75th Leg., R.S., ch. 47, 5 7, 1997 Tex. Gen. Laws 116,
117; Tex. Att’y Gen. Op. No. JM-1276 (1990). Obligations payable from the future tax revenues
of a political subdivision are debts within article III, section 52 and other constitutional
authorizations for tax-secured bonds and may be issued only in accord with constitutional
requirements. See McNeil1 v. City of Waco, 33 S.W. 322, 324 (Tex. 1895); City of Corsicana v.
Mills, 235 S.W. 220,225 (Tex. Civ. App.-Texarkana 1921, writ ref d).
If, however, a political subdivision enters into a one-year contract payable from its current
revenues, such as taxes or fees, it would not be entering into debt for purposes of provisions like
article III, section 52. See McNeill, 33 S.W. at 324; Bonham v. Southwest Sanitation, Inc., 871
S.W.2d 765, 768-69 (Tex. App.-Texarkana 1994, writ denied) (contract that runs for more than a
year but gives the political subdivision a right to terminate it at the end of each year commits current
revenues only and does not create debt). In addition, obligations with a term extending beyond a
year that are payable from an income source other than tax revenues, such as revenue bonds, are not
debts within article III, section 52 and similar constitutional provisions. SeeLower Cola. River Auth.
v. McGraw, 83 S.W.2d 629,633 (Tex. 1935); Texsan Serv. Co. v. CityofNixon, 158 S.W.2d 88,92
(Tex. Civ. App.-San Antonio, 1941 writ ref d); Tex. Att’y Gen. Op. No. JM-84 (1983) at 2. Thus,
‘Brief from Honorable Charles D. Penick, Bastiop County Criminal District Attorney, to Honorable John
Comyn, Texas Attorney General at 1-2 (May 22,200O) [hereinafter Penick Brief].
The Honorable Charles D. Penick - Page 4 (JC-0295)
the legislature may authorize a governmental entity to incur an obligation payable from non-tax
revenues without holding an election. See Texas Pub. Bldg. Auth. v. Mattox, 686 S.W.2d 924,928
(Tex. 1985).
However, this does not end our analysis. Statutory authority is necessary to incur a long-term
obligation secured by revenues other than taxes. See Lnsater v. Lopez, 217 SW. 373, 376 (Tex.
1919) (county may not issue negotiable instruments absent express authority); see also Sun Antonio
Union Junior CoNegeDist. v. Daniel, 206 S.W.2d 995,998 (Tex. 1947) (juniorcolleges); FirstBank
& Trust Co. Y. Dumas Indep. Sch. Dist., 527 S.W.2d 499, 502 (Tex. Civ. App.-Waco 1975, writ
ref d n.r.e.) (school district). Accordingly, we must determine whether any statute authorizes the
District to incur a long-term obligation secured by road fees.
House Bill 706 authorizes the District to issue obligations that are secured by taxes, but it
doesnot expresslyauthorizeanyotherformofborrowing. See Act ofApr. 28,1997,75thLeg.,R.S.,
ch. 47, 5 7, 1997 Tex. Gen. Laws 116, 117. House Bill 706 also grants the District the powers
granted by general law to a road district created under article III, section 52 of the Texas
Constitution, and the powers of a commissioners court under Transportation Code chapter 257. See
id. 5 2(a), at 116. We will examine these other sources of law for authority to borrow money on the
security of future road district fees.
Chapter 257 of the Transportation Code sets out certain powers of road districts, while
chapter 1471 of the Government Code addresses a road district’s authority to borrow money and
issue bonds for road improvements. See TEX. GOV’T CODE ANN. ?j§ 1471.001(3)(Vemon 2000)
(chapter 1471 of the Government Code applies to a road district); .Ol l(b) (authorizing issuance of
bonds in the manner provided by article III, section 52, Texas Constitution, for road and turnpike
purposes). We find no provision in either statute that authorizes a road district to borrow money
secured by road district fees. Chapter 1471 authorizes a road district to issue tax bonds, See id.
5 1471 ,011. A road district may also issue refunding bonds or certificates of assessment3 to
refinance any portion of its outstanding bonded indebtedness under the circumstances set out in
section 1471.051 ofthe Government Code. See id. 3 1471.051; see also id. 5 1471.052 (bonds or
certificates of indebtedness must be secured by pledge of money received from assessment against
all taxable real property in the district). Neither chapter 257 ofthe Transportation Code nor chapter
1471 of the Government Code includes any provision authorizing the District to borrow money on
the security of road district fees to be collected in future years.
House Bill 706 grants the District “all of the rights, powers, privileges, functions,
responsibilities, and duties that the general law grants a road district created under Section 52,
Article III, Texas Constitution.” Act of Apr. 28, 1997, 75th Leg., R.S., ch. 47, 5 2(a), 1997 Tex.
Gen. Laws 116. On the basis of this language, you suggest that the District has the powers of road
utility districts under chapter 441 of the Transportation Code. See Penick Brief, supra note 2, at 2.
Road utility districts are also created “under Section 52, Article III, Texas Constitution” to construct,
‘Certificates of assessment are secured by a pledge of revenues received from an assessment against all taxable
real property in the district. See TEX.Gov’r CODEANN.9 1471.052 (Vernon 2000).
The Honorable Charles D. Penick - Page 5 (JC-0295)
acquire, improve, and provide financing for roads. See TEX. TRANSP. CODE ANN. 5 441 .Ol 1 (Vernon
1999). They are not, however, “road districts” within the language of House Bill 706. The
legislature has distinguished between the terms “road districts” and “road utility districts” in other
enactments. Section 23.20 of the Tax Code, authorizing a property owner to waive the right to
special appraisal of real property, provides that “[t]he rules of the commissioners court apply to
waivers applicable to taxing units that are road districts created by the commissioners court. [and
the] rules of the Texas Transportation Commission apply to waivers applicable to taxing units that
are road utility districts subject to the jurisdiction of the commission.” TEX. TAX CODE ANN.
5 23.20(e)(VemonSupp. ~OOO);X````~TEX.TRANSP.CODEANN. $441.002 (Vernon 1999)(Texas
Transportation Commission may adopt rules to implement chapter 441 ofthe Transportation Code).
Section 375.091 of the Local Government Code grants municipal management districts the powers
of “road districts and road utility districts created pursuant to Article III, Section 52, of the Texas
Constitution,” also indicating that the term “road district” does not include “road utility districts.”
TEX. Lot. GOV’T CODE ANN. 5 375.091(c) (Vernon 1999); see also TEX. TRANSP. CODE ANN.
$5 431.068,472.003 (Vernon 1999).
Legislation applicable to the District in the past expressly granted it the powers of a road
utility district, but House Bill 706 does not do so. A bill adopted in 1989 and amended in 1991
granted the District “all of the rights, powers, privileges, authority, duties, and functions conferred
by the general law of this state applicable to road utility districts created under Article III, Section
52, ofthe Texas Constitution.” Act ofMay 27, 1989, 71st Leg., RX, ch. 577, 5 2, 1989 Tex. Gen.
Laws 1914. This legislation expired in 1995. See Act ofMay 26, 1991,72d Leg., R.S., ch. 323, § 4,
1991 Tex. Gen. Laws 1363, 1366 (changing expiration date from September 1, 1991, to September
1, 1995). House Bill 706 grants the District the powers that “the general law grants a road district
created under Section 52, Article III, Texas Constitution.” Act of Apr. 28, 1997, 75th Leg., R.S.,
ch. 47, 5 Z(a), 1997 Tex. Gen. Laws 116. The District no longer has the authority of a road utility
district. We may not look to Transportation Code chapter 441 for statutory authority for the District
to incur indebtedness payable from road district fees that will extend beyond the District’s ability
to pay in one year.4
You have not suggested any other provision of law that might authorize the District to incur
indebtedness payable from road district fees that will extend beyond the District’s ability to pay in
one year, and we are aware ofnone. In the absence of statutory authority, the District may not incur
such indebtedness, even if it secured the approval ofthe voters. Moreover, the District may not hold
an election for that purpose, absent express statutory authority to do so. See Countz v. Mitchell, 38
S.W.2d 770, 774 (Tex. 1931); Ellis v. Ha&, 478 S.W.2d 172, 176 (Tex. Civ. App.-Dallas 1972,
writ ref d n.r.e.); Smith v. Morton Indep. Sch. Disk, 85 S.W.2d 853, 857 (Tex. Civ. App.-Amarillo
1935, writ dism’d) (statutory or constitutional authorization is necessary to call an election). We
answer both of your questions in the negative.
‘In view of our conclusion that House Bill 706 does not grant the District any powers of a road utility district
under Transportation Code chapter44 1, we need not attempt to ccmstrue provisions ofthat chapter or determine whether
a particular provision is incorporated by reference into House Bill 706. Seegenerally San Antonio UnionJunior College
Disf V.Daniel, 206 S.W.Zd995,998 (Tex. 1947); Lasater V.Lopez, 217 S.W. 373,376 (Tex. 1919); Tex. Att’y Gen.
Op. No. JC-0291 (2000).
The Honorable Charles D. Penick - Page 6 (X-0295)
SUMMARY
The Bastrop County Water Control and Improvement District
No. 2 has the powers of a road district established under article III,
section 52 of the Texas Constitution, but does not have the powers of
a road utility district. The District has no statutory authority to incur
indebtedness payable from road district fees that will extend beyond
the District’s ability to repay in one year.
Attorney General of Texas
ANDY TAYLOR
First Assistant Attorney General
CLARK KENT ERVIN
Deputy Attorney General -. General Counsel
SUSAN D. GUSKY
Chair, Opinion Committee
Susan L. Garrison
Assistant Attorney General - Opinion Committee