The Honorable Robert E. Schneider Opinion No. H-869
Executive Director
Texas Water Rights Commission Re: Whether section
P. 0. Box 13207 25.031(c), Water Code,
Austin, Texas 78711 authorizing special
districts to purchase a
portion of the capacity
of a regional waste dis-
posal system, can be
applied constitutionally
to bonds authorized prior
to the passage of the
statute.
Dear Mr. Schneider:
YOU have requested our opinion regarding the authority
of a special district to use bond proceeds to purchase a
portion of the capacity in a regional waste disposal system.
your first question is:
whether Section 25.031(c) (Water Code] is
a constitutionally valid authorization for
Inverness Forest Water Control and Improve-
ment District to use the (previously voted]
bond proceeds . . . to purchase capacity in
the Gulf Coast Waste Disposal Authority's
regional sewage treatment plant. . . .
Section 25.031(c) provides in pertinent part:
Notwithstanding any provision of this
chapter or any other law to the contrary,
a district may use the proceeds of bonds
issued for the purpose of constructing a
p. 3663
The Honorable Robert E. Schneider - page 2 (H-869)
waste disposal system or systems, and payable
wholly or in part from ad valorem taxes, for
the purchase of capacity in, or a right to have
the wastes of the district treated in, a
waste collection, treatment, or disposal
system and facilities owned or to be owned
exclusively or in part by another public agency,
and a district may issue bonds payable
wholly or in part from ad valor-emtaxes
specifically for such purpose if a majority
of the resident electors of the district
have authorized the governing body of the
district to issue bonds for that purpose
or for the purpose of constructing a waste
disposal system or systems.' The bonds
shall be issued in accordance with the
provisions of, and shall be subject to the
same terms and conditions of, the laws
authorizing the district to issue bonds
for the purpose of constructing waste
collection, treatment, and disposal systems,
except as otherwise provided in this sub-
section.
In brief, this question turns on whether section 25.031(c)
of the Texas Water Code, as to bonds authorized prior to its
enactment, alters the result of Attorney General Opinion H-
567 (1975)r which indicated that proceeds from the sale of
bonds in 1965 by Inverness Forest Improvement District could
not be used to contract for sewage disposal services where
the district would neither own nor operate the facilities.
While section 25.031(c) is designed to permit the "purchase
of capacity" type transaction which Attorney General Opinion
H-567 (1975) held'to be unauthorized, the enactment of that
section does not change the basic results of Opinion H-567
concerning the Inverness Forest "special district."
First, there is the obvious problem of applying
section 25.031(c) retroactively. Tex. Const. art. 1, 5 16.
Second, as initially determined in Attorney General Opinion
H-567 (1975), bond proceeds may only be used for the purposes
for which they were voted. It is clear that a resolution
calling a bond election becomes a part of the contract and
agreement between the voters and the District, should the
voters authorize the issuance of the bonds. Crowell 2v
p. 3664
The Honorable Robert E. Schneider - page 3 (H-669)
Cammack, 40 S.W.2d 259 (Tex. Civ. App. -- Amarillo 1931, no
writ). To hold that the Legislature could change the
agreement between the voters and the district could
constitute an impairment of the obligation of contracts.
Tex. Const. art. 1, 5 16. Third, the Legislature cannot, by
legislative enactment, alter the results or effect of an
election held pursuant to a constitutional mandate:
[Tlhe Legislature shall not authorize
the issuance of any bonds or provide
for any indebtedness against any
reclamation district unless such
proposition shall first be submitted
to the qualified property tax-paying
voters of such district and the
proposition adopted. Tex. Const.
art. 16, 9 59(c).
Ci&@ Aransas Pass v. Keeling, 247 S.W. 818 (Tex. Sup.
In shortxnrproceeds must be used for purposes
for which they were voted. Lewis v. City of Fort Worth,
89 S.W.Zd 975 (Tex. Sup. 1936);aZingtonY.Cokinos, 338 S .W.2d
133 (Tex. Sup. 1960); City of Beaumont v. Pzddie, 65 S.W.Zd
434 (Tex. Civ. App. -- AustTii1933, no Einerefore,
the answer to your first question is that the enactment of
section 25.031(c) of the Texas Water Code does not alter the
conclusions reached in Attorney General Opinion H-567 (1975)
regarding the use of previously voted bond proceeds.
If the result of H-567 is not affected and the special
district must use the bond proceeds to purchase a proprietary
interest in the regional sewage plant rather than entering
into a service contract for plant capacity, you ask that we
determine the nature and scope of the
proprietary interest which must be
purchased . . . .
It is pertinent to note that the bond propositions submitted to
the electorate of the Inverness Forest Improvement District
on August 14, 1965, authorized bonds
p. 3665
,
. .
The Honorable Robert E. Schneider - page 4 (H-869)
for the purpose of Pmk=zwg-
structinq a water an
system and a sewage disposal plant for
the district. . . . (Emphasis added).
Furthermore, similar propositions were passed in October 16,
1967 and February 14, 1970 elections, which provided bonds
for the purpose of purchasing and/or
[February 14, 1970 proposition used
"and" instead of "and/or"] constructing
extensions and additions to the district's
existing water and sanitary sewer system
and drainage system. . . .
Although Opinion H-567 did not involve the method to be
used or what would constitute "purchasing and constructing,"
it would certainly be within the "sound judgment and
discretion" of the special district to purchase and construct
as they determine within the electoral guidelines. Barrington
v. Cokinos, , at 142. Therefore, it would not be
iiiirmle the special district to make a determination
that purchasing and constructing, or causing to be constructed,
an undivided, legal interest in a regional waste plant would
satisfy the electoral mandate. The special district would
own a portion of the physical plant rather than the mere
contractual right to a guaranteed use or portion of the
capacity of the regional system. Thus, the special district
would have used the bond proceeds to purchase and construct
a facility which the electorate had authorized.
Since the issuance of bonds creates a contract between
the issuer and the bondholders, C$Cy of Aransas Pass
- v.
-
Keeling, supra, it should be not;nthz the definltlonof
Wsystem" in each Bond Order is as follows:
The term system as used in this order
shall include and mean water works and
sanitary sewer system owned and operated
by the District, and all extensions and
improvements thereof and improvements
thereto whensoever made.
p. 3666
. ”
.
The Honorable Robert E. Schneider - page 5 (H'-869)
Neither the bond election propositions, nor the Bond Order
specifies how the facilities are to be purchased and constructed.
It is, therefore, obvious that the portion of the regional
system purchased by the special district would become part
of the "system." Provisions of Chapter 25 of the Texas
Water Code also support the proposed transaction since
"[a] district may contract . . . to purchase . . disposal
facilities or systems." Water Code 9 25.022. See Water
Code §s 25.024; 25.025; 25.027; 27.028, Therefore, in
answer to your second question, we believe that it would be
reasonable, and in pursuance of the electoral mandate as
well as the Texas Water Code, to approve issuance and use of
bonds to purchase an undivided, legal interest in a regional
system, if the special district decides to do so in the
exercise of its discretion.
In your third and final question, you ask:
[Ilf the district should purchase a
proprietary interest in the,regional
system, to what extent must the district
participate actively and directly, if at
all, in the operation and maintenance of
the system?
Neither Attorney General Opinion H-567 (1975), nor the
bond election propositions or Bond Orders specifically
address this question. However, provisions of Chapter 25
of the Texas Water Code specifically permit such operation
contracts between a special district and a "district." Water
Code SS 25.027; 25.028. Furthermore, one political sub-
division of the State, such as Inverness Forest, can transfer
money to another political subdivision of the State where
the latter assumes the unqualified burden and duty of using
it for a governmental function of the former; however, there
must be a guid pro w contract. Bexar County Hospital
District v. Crosby, 327 S.W.2d 445 (Tex. Sup. 1959): San
Authorit v- Shepherd, 299 S.W.Zd 920 (Tex.
Antonio Rser .--f-Y
-57);clty e Aransas Pass v. Keeiinq, SUp;.thWZn
SOI the operation contract should prove e only
operation of the facilities in question with sufficient
assurance that the special district does not delegate away
p. 3667
The Honorable Robert E. Schneider - page 6 (H-869)
its governmental powers.
s.W.2a 103 (Tex. Sup. 1975
of an undivided, legal interest in the regional plant, to be
operated by a "district," would not be an unlawful delegation
of governmental powers, since the special district would be
using the services of the operating agency without delegating
rate making or other powers, Therefore, in answer to the
third question, the special district may enter into an
operation contract with a Texas Water Code "district."
SUMMARY
The enactment of section 25.031(c) of
the Texas Water Code does not affect the
validity of Attorney General Opinion H-567
(1975) as it applies to the Inverness
Forest Improvement District. The special
district, limited by the bond election
proposition submitted, may not acquire
a contractual right to purchase a
percentage of capacity in a regional
system. However, the special district,
in its discretion, may use bond proceeds
to purchase an undivided, legal interest
in a regional system. The special district
may contract with a "district" for the operation
of its portion of the regional system under
Chapter 25 of the Water Code.
Very truly yours,
Texas
Opinion Committee
jwb
p. 3668
Untitled Texas Attorney General Opinion
Combined Opinion