The Attorney General of Texas
November 16, 1979
MARK WHITE
Altomey&lieml
Mr. Gerald R. Brown opinion No. Mw-95
Executive Director
Texan Industrial Commission Re: Whether iPsuance of bon& under the
Box 12728, capitol station Development Caporation Act of 1979,
Austin, Texas 78711 V.T.C.S. article 5190.6, ia violetive of
either article m, aecuon 52 or article xl#
section 2 of the Texas Ccnstitutian.
Dear Mr. Bmwm
You have mqwJted an cplnh al the following questicne: a, will the
kmmnce of tivenue bonds by en industrial developmslt caporaticn pumuant
to the provisiam of the Development Corporation Act, article 5190.6,
V.T.C.S., of paying the ccet of a project to bc sold cc leased to a private,
commadal, menufecttillg cr industrial enterprise or of making a loan to
aueh a conuncrda& manufac~ u induatdal enterprbe for the purpcac of
provIc?ingtemporary or permanent finnndng or mfimdng of all or part of
tha cast of a prcject cmktitute a violation of article RI, section 52 of the
Texas Ccnstitutiat Q eny other constitutional cr etatutory requirement? (2)
k the Attorney Qeneml% approval of the bonds of an industrial development
corporation created and rting purauent to the provislona of the Act
mqdmd before euch a corporatim ten bsue ita revenue bonds?
We have cortvidard the following providona of the Constitution of
Taart
ARTICLE RI, SEC. 52(a)
Except an otherwke provided by this sect&
tbu Legblatum 8h1U have no power to authorize eny
county, city, town or other political corporation cr
rubdlvidcn of the State to lend its credit Q tc grant
publie mcney cr thing of value in aid of, cr to eny
Indlvidurl, eaociaticn or cccpcration whetaoevm, cr
to become a etockholk in uch ccrpcratia,
uodatial u eompeny. .
p. 257
, : .
Mr. Gerald R. Brown - Page Two (Mw-951
AR’DCLIIXI, SEC. 3
No county, city, or other municipal corporation shall here-
after become a 6ub6criber to the capital of any private cccporetim
or amcciation, or make any appropriation cr donation to tbuasme,
orin~~~eloanftsmdit;buttMsshsnnotbeconrrtruedtoin
any way affect any obllgetlon h6retofcre mdertaken pumuent to
l&W.
It b well established that statutes are presumed to be constltutiaral and that they
wIlI not be overturned unlem e qrecific section of the constitution clearly demonstrates
thclr lnvalldity. Smith v. Davb, 426 S.W.2d 827 (Tex. 1968); State v. Cltv of Amtin, 331
S.W.2d 737, 747 @es. 1980)- Teuas Neticnal Guard Armcry Board v. McC!UW, 126 S.W.2d
627 (Teu. 1939). Thus, the knswec to your fhat qusstlat will depend at whather it clearly
appear6 that the bsuance of revenue bonds for ths pupoges euthorlzed w ths Act violates
the con6titutiaL
The Act authorlxw the creatlm and establbhment of industrial development
~a~t~ncnproflt ~corpcraticns snd arithoriues such ccrporations to issue revanue
prpcses Secdcn 22 of ths Act provides that:
Bondsissuedunder the provbions of thb Act shall be deemed not to
comtftute a debt of the state, or the unit, a- any other polltical
ccrpcratim, subQvlsion, or agency of this state cc a pledge of the
faith and credit of any of them, but such bonds shsll be payable
6olely frcm the fund6 herein provided therefor from revenuea Ail
such revenue bonds rMl contdn on the face thereof a statement to
ths effect that neither the state, the unit, nor any political
corporatlm, subdlvbion, u sgency of the state shall be obligated
to pay the same or ths interest thereon tmdthat neither the faith
and credit nor the taxing power of ths state, the unit, car6ny other
political corporeticn, subdivision, or agency thereof b.plec&ed to
the payment of ths principal of or the interest on such bonds. The
corporation shall not be authorieed to incur financial obligetiats
uhlch csnnot be paid from proceeds of the obligations or from
mvenues maliaed frcm the lea6c or 6aIe of a project or medical
research project or refinance in whole cr in part e project or a
medical research project.. . . but the corporation b not intended to
be and rlau. not be a political s&dIvlsion or a political caporation
within the meaning of the constitution and the law6 of the state,
In&d@ without limitatim Article III, Sectlcn 52 of the Texas
ht6titutim, and a unit 6tnU never d&gate to a ccrporatiat any
of Aloh ti’r attributen of avereignty, indudhg the powa to tax,
the powa of eminent domain, and the police power.
p. 259
, \ :.
Mr. Gerald Il. Brown - PageThree (Mw-*5)
8ecticn 25(e) of the Act prov&a in part that:
The principal of and intercet cn any bonds Issued by the ccrporaticn
6hsP b6 6ecumcl by a pie* of the revenue8 end receipts derived by
ths eorporaticn from the lease cr 8ale of the project or msdtcal
research project 8c financed or from the loan made by the
ccrpcretion with meet to the project Q madical rcecarch project
eofhmncedorrefinancedendmaybesecuredbyamortgage
coveriq all cr part of euch project cr medical rwearc h prolect,
including any enlargements of and addtlc~ to ouch project or
malhl reeeard pojact th6reafter made.
Tim Texan Supreme Ceurt hna heM thnt bon& which are peyable solely from
revenue6 do not cmate a Tlebtw within the meaning of the Canatitutian. Ci
Purthar, the Tsxar Supreme Court hsr treeted the question of VcbtW end ‘lending of
F as bedqg identical @ nature with respect to mvenue bon&. Texea Natiaml Gtmrd
a’~ Beard v. HcCraw~7f44~W.2d 627 (TM. 1929)i s V.
6rd, 279aw . 2d 202 ff .
lln63, it I6 clearly 86tabIbhad tlmt W6btn and %ding of cmdit* do not occur whsn
bend6 6~ b6ued which are pqyabla aobly fmm revenued.
We do not believe that ‘pubfic mcm@ b invdved in the bsuance of revenue bonds
Ly en indwtrial development corporaticn under the Act. The mcney received from the
mile of such revenue baqda wffl come solely from private source8 (private investmslt
benkece cr tmderwritein), and the money used to pay the principal of and intemet cn such
bondawRlelaoeomefremaprivaterource. .TheActepeeifienUyprovldestlmtan
indwtrial dcvelcpmmt ecrpcratian creeted pumuant to ‘the Act b not a political
61bdki6ia1 or a polithd corporation within the mWd!Ig of th? oonstituticn end lawa of
th state. Awordh@y, it wculd appear that tke could be no wanta cc Wonaticn~ of
‘publtc mcnep in any economic u constitutiaml6en6e.
k to tha other con6titutional m6traint 6gah6t cupcrate dockholdlng, it appears
tint bacawe a capcratian -ted under the4 Act ipfll have no stock end no membaq
there will be no vMaticn of ccnstituticnal prohibiti”~ ,““M’” Rlbdvbicn
becoming a rlockhclder in a oaparatia See Southem tY . cweng 12 &W.2d
200 tTex. Cemm. App. 1929, j-t adopts
FInally, we note tht *ldmiler etatutim have been upheld by the courta of eeverrl
atete1S LeRlane v. Police Jury of Parbh of Rapida, 189 So.2d 121 (La. CL App4, writ
dustrial Daveloomcnt AuthuriW~
3$&i& d!!!$&~~~$%~~~~$$est v. hdustrbl Devacpment Scard
1 elwment Authority ai
FitY of PIrmI v. Nelaon, SOS’ P.2d 705, 7lO &r-h-m (en bench Gmen v. CitY of Mt.
p. 259
Mr. Gerald R. Brown - P-e Pour (m-95)
F’laasmt 131N.W.2d S,17 (Iowa 1964)~City of Pi
rWlnnI9?O)i Uhl6 v. State a ml. City d Chety~~~~~~~.ZiY “” 5’S
Bad tpcn the foregoing, it b our opinion that the bsuance of such bonds would not
violate artiele RI, 6ection 32 Q article Xl, lreotian S of the Taxa Constitution.
16 to your wcond quartion, wi? find that the Texan Constitution doss not require
that the Attorney Qeneral approve bond6 price to their bsuance or 6ale. See Love v.
Rockwall Independent School Dbtrict, 228 S.W. 942, 644-45 (Tex. Comm%TmT
jdgmt. adopted) Although 6u6h approval b often required by statute, 6ee
art. 709, it b &t neceaary that a datute authceizing b6uence of bo -id? requim arch
v*T.c*a
approval. Amsteter v. An 275 S.W.2d 95,103 lTex. Civ. App - Rl Par0 1954, writ
mftl na.e.1~ MaQulllan el Cqmratiam S 43.46 U970). Aa one treatbe eqUne,
an bsuer b nrbjeot ody to th6 requiremat esprmly prarcribed by kw. McQdUan,
6 m at S 43.47. It b, ttnm, cur cpinim Unt approW tq the Attornay Qeneral b not
+t
req rad~~a~tion~tedrnderthsActgn~eitsrsvsnuebonda
SUMMARY
The bmmnce cf rwenue bonds by M indlmtri6tl development
corpatian for authorized pupoats, pursuant to the Development
Cbporation Act, article 5190.6, V.T.C.S., will not violate article
lIl, 6aetion 52 of th6 Texa6 Con6titution Q any ether con6titutid
cr statutuy requimmatt. Tha Attorney Generals approval of atch
bond6bnotreqtdredbefare~
zmM MARK WHITE
Attorney General of Texnm
JOHN W. PNNTRR, JR.
Pint Awiatant Attorney Ganeral
TED L. HARTLRY
R6ecutive krbtant Attorney tined
Repwed by R&art T. Lewb
Ambtant Attcmay General
APPROVRD:
OPINIONCOHMITTEE .
C. Robert Reath, Cha&mq
p. 260
Mr. Gerald R. Brown - Page Five (MN-85)
Bob Gammqe
Susan Garrison
DM King
Robert T. Lewia
WilliemGReid
P. 261