Untitled Texas Attorney General Opinion ( 1974 )

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THICA~TORNEX GENERAL
OF
AU==% TnuAm 78711
July 2, 1974
The Honorable J. W. Edgar, Commissioner Opinion No. H-339
Texas Education Agency
201 East Eleventh Street Re: Application to
Austin, Texas 78701 Independent School Districts
and Regional Junior Colleges
The Honorable Bevington Reed, of statute authorizing issuance
Commissioner, Coordinating Board of Certificate of Indebtedness
Texas College and University System
P. 0. Box 12788, Capitol Station
Austin, Texas 78711
Gentlemen:
Each of you has requested our opinion about the effect of Article
2784g-2. V. T. C. S., currently Sec. 20.51 of the Texas Education Code,
dealing with “Certificates of Indebtedness” issued by school districts.
Dr. Edgar asks:
In authorizing a school district board to issue
certificates of indebtedness (in amount(s) not to
exceed $250,000) without the requirement of a local
election to approve such indebtedness, does [Sec.
20. 511 contravene Article VII, Section 3 of the
Constitution of Texas.
His second question, relating to a specific school district is:
Since [Sec. 20.511 was not enacted prior to the
time when the district electorate voted an authorized
maximum maintenance tax rate (in July 1968). may a
school district board legally appropriate and/or
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The Honorable J. W. Edgar
The Honorable Betington Reed page 2
irrevocably pledge local maintenance taxes as
payment for certificates of indebtedness issued
pursuant to [Sec. 20.511 as amended?
Dr. Reed inquires for the Wilbarger County Junior College District
about the legality of the issuance of such certificates by the District for the
purpose of constructing physical. education facilities on the campus of Vernon
Regional Junior College which the District operates.
Pertinent provisions of 5 20.51 of the Education Code, incorporating
the 1973 amendment to Article 2784g-2 61 (a), are:
(a) Any school district, including a junior college
district, may issue interest bearing Certificates of
Indebtedness for the purpose of (1) providing funds for
the erection and equipment of school buildings within
the boundaries of the district, (2) refinancing outstanding
certificates as herein provided, or (3) purchasing sites
for the future construction of public school facilities.
The term certificates, as used in thin Act [Section] shall
include all obligations authorized to be issued hereunder
and the term ohall include interest thereon, unless
clearly indicated by the context that another meaning is
intended.
(b) The governing body of the district shall make
provision for the payment of the certificates issued
. . . by. . . the appropriation and pledge of local
school funds derived and to be derived from main-
tenance taxes levied and assessed or to be levied
and assessed under authority of Sections 20.02 and
130.122 of this code . . . or other similar law . . .
which limits the amount of tax which may be levied
for maintenance purposes, as distinguished from
bond requirements. The appropriation and pledge
may be in the nature of a continuing irrevocable
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The Honorable J. W. Edgar
The Honorable Bevington Reed page 3
pledge to apply the firrt money6 collected or to
be collected annually from the tax levy to the pay-
ment of the obligation6 or by the irrevocable
prerent levy and appropriation of the amount of the
maintenance tax as ir required to meet the annual debt
service requirement6 of the obligations, in which
event the governing body 6hall covenant to annually
set aside the amount in the annual tax levy, showing
the same is a portion of the maintenance tax. The
governing body shall annually budget the amount
required to pay the debt service requirements, prin-
cipal and interest, of the obligations which may be
scheduled to become due in any fircal year. Nothing
herein shall be conetrued a6 permitting the levy of
a maintenance tax in exce6a of the amount approved
by the resident qualified property taxpaying voter6
of the district.
(f) Certificates authorized to be irsued hereunder
shall be payable at 6uch times, be in such form and
denomination or denomination6 . . . and contain such
other provision6 ar the governing body of the district
may determine, but in no event rhall any certificate
mature over a period in exce6s of 25 year6 from the
date thereof, or bear interest at a rate in exce66 of
seven percent per annum.
(k) Certificate6 is6ued under the provi6ions of thi6.
section shall be an indebtednerr of the school diltrict
i6suing them, but the holder thereof shall not have the.
right to demand payment thereof out of any fund or
fund6 other than thoee pledged to it6 payment. . . .
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The Honorable J. W. Edgar
The Honorable Bevington Reed psge 4
(n) The provi6ionr of this section shall be
cumulative of existing law6 relating to the financing
of the cost of erecting and equipping rchool building6
by 6chool districts , it being the legislative intent
that thi6 section shall be complete authority for the
issuance, sale, and delivery of certificates by school
districtcr.
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These provisions have not yet been conrtrued by the appellate courts,
but we believe they will be held constitutional.
Article 7, Sec. 3, of the Constitution of Texas reads in part as
follows:
. . . and the Legislature may authorize an additional
ad valorem tax to be levied and collected within all
school districts heretofore formed or hereafter formed,
for the further maintenance of public free schools, and
for the erection and equipment of school buildings
therein; provided that a majority of the qualified property
taxpaying voter6 of the district voting at an election to be
held for that purpose, &all vote such tax not to exceed
in any one year one ($1.00) dollar on the one hundred
dollars valuation of the property subject to taxation in
such district, but the limitation upon the amount of
school district tax herein authorized shall not apply to
incorporated cities or towns constituting separate and
independent 6chool di6tricts. nor to independent or
common school district6 created by general or special
law. (Emphasis added)
Although the portion of Article 7, Sec. 3, here considered appears to
refer to a single tax to be voted for maintenance and school building purposes,
the Lgiilrtum, historically, has treated taxes for such respective purpose6
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The Honorable J. W. Edgar
The Honorable Bevington Reed, page 5
as separate, distinct taxes, each requiring separate voter approval.
(See, Seer. 20.02, 20.04, 130.122, V. T. C.S., Education Code).
In Madeley v. Trustee6 of Conroe I. S. D., 130 S.W.2d 929 (Tex.
Civ. App. , Beaumont, 1939, err. dt6%n., judgment car. ), the Court
conridered two statutory forerunner6 of the above noted Education Code
provisions. All the public free 6ChOOl6 in the dirtrict were adequately
maintained and a large surplur had accumulated in the maintenance tax
fund which the Trustee6 proposed to 6pend for building improvementr.
What shall the Trustees do with thir ru,~lur? It
cannot be expended in the support and maintenance
of the public free 6ch0016, for it is not needed for that
purpose; it cannot be diverted from public free school
purposes, for under the Conrtitution it was collected
for that purpore. It cannot be returned to the tax
payers.
It6 allocation to the maintenance fund was by
legislative edict for the purpore of rupporting and
maintaining the public free rchool. When that
purpose ha6 been effectuated, the fund io no longer
6ubject to the control of the statutes, for the purpore
of the statute6 has been fully effectuated, If and
when the statutes cease to control the fund, then
it becomes a conrrtitutional fund and not a rtatutory
fund, and may be ured by the trurteer for the con-
stitutional nurpose6; one of the constitutional purposes
is ‘the erection and equipment of rchool buildingr’
within the dirtrict. (Emphasir added)
In Allen v. Channelview Ind.Sch. Dist., 347 S.W.2d 27 (Tex. Civ.App.,
Xaco, i961, writ ref’d. ) the plaintiff attacked the constitutionality of
Article 2786e, V. T. C. S., now Sec. 20.43(a) of the Education Code,
which authorized school districts to issue time warrants against main-
tenance tax proceeds for certain purposes, including the repair, pur-
chase, renovation and equipment of 6ChOOl properties. The rtatute, in
effect, pledged “delinquent taxerr (except bond taxes) penalties and
interest to the payment of outstanding warrants.” But the Court denied
that Article 7, Sec. 3 of the Constitution forbade deficit financing.
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The Honorable J. W. Edgar
The Honorable Bevington Reed, page 6
The plaintiff argued that the previour maintenance tnx elections had
authorized levy and collection of taxes for maintenance only for a current
year, and that no new elections had been held to authorize the collection
of taxes to pay such time warrants. But Ue Court noted that only
“available” maintenance trx money, collected purmant to an election,
properly held, was used. [Prelrumably, surplus tax money rimilar
to the hind discuseed in the Madeley case: note Sec. 3 of Acts 1953,
53rd Leg., R. S., p. 1038, ch. 427, and see Attorney General Opinion
C-197 (1963)].
In discussing thi6 claim, the Court said:
They contend the statute unconstitutionally
authorizes issuance of warrant6 payable from taxes
without an election at which the tax is voted. If by
this is meant a special election at the time the
warrants are irsued, Section 3 does not require it,
and there is no contention maintenance taxes ‘available’
were not properly voted. (Emphasis added)
The Madeley case would seem to teach that where the statute authorize6
the collection of the tax for current year maintenance purpo6e6 only, the
money cannot be ueed for anything else until all maintenance requirements
for the year have been met. The Allen case teaches that maintenance tax
..
funds “available” can be pledged to pay time warrants, if the practice is
legislatively sanctioned.
In our view, surplus maintenance tax receipts, remaining unexpended
after maintenance purpose6 have been fulfilled, may be pledged as payment
for Certificates of Indebtedners under the above-quoted portions of Sec. 20.51,
whether the election authorizing the levy of the maintenance tax funds Used
for iia accomplishment occurred before or after the effective date of
Sec. 20. 51.
SUMMARY
Surplus maintenance tax receipts, remaining
unexpended after maintenance purposes have been
fulfilled, may be pledgriar payment for Certificate6
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The Honorable J. W. Edgar
The Honorable Bevington Reed, page 7
of Indebtedne66 under the above-quoted portion6
of Sec. 20.51, whether the election authorizing
the levy of the maintenance t6x fund6 ured for it6
accomplirhment occurred before or after the
effective date of Sec. 20.51.
Very truly yours,
DAVID M. KENDALL, Chairman
Opinion Committee
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