Honorable Bevington Reed Opinion No. M-878
Commissioner, Coordinating Board
Texas College & University System Re: Authority of Southwest
P. 0. Box 12788, Capitol Station Texas Junior College
Austin, Texas 78711 to issue promissory
note, secured by pledge
of bank stock, to build
Dear Commissioner Reed: faculty housing.
In your recent letter you have set out the following
facts and requested the opinion of this department on the in-
dicated question.
"Southwest Texas Junior College proposes to
borrow $100.000.00 from First State Bank of Uvalde
for the purpose of constructing on-campus faculty
housing, the debt to be evidenced by promissory
note with payment secured by pledge of bank stocks
owned by the College which were donated to the
College by Honorable John N. Garner. There were
no restrictions with the gift of such stocks. In
view of the smallness of the loan, the procedure for
issuance of Revenue Bonds authorized in Sec. 51.103
of the Texas Education Code is not practicable.
"Question: Does the Board of Trustees of Southwest
Texas Junior College have the authority to execute
such a promissory note payable over term of fifteen
(15) years and secured by the collateral mentioned?"
We are of the opinion that the Board does not have the
authority to issue the described note.
Section 51.102 of the Texas Education Code authorizes
a junior college district to issue coupon bonds for certain con-
struction purposes, the bonds to be backed by the levy and pledge
-4285 -
Hon. Bevington Reed, page 2 (M-878)
of annual ad valorem taxes. Section 51.103 of the Code authorizes
a junior college district to issue revenue bonds for certain con-
struction purposes, the bonds to be secured by liens on and
pledges of certain rentals, rates, charges, fees, and other re-
sources of the board.
Clearly the promissory note described in your inquiry
does not fall within the form of the bonds authorized under the
sections mentioned above.
Section 51.073, Texas Education Code, provides as
follows:
"The board of trustees of junior college
districts shall be governed in the establishment,
management and control of the junior college by
the general law governing the establishment,
management and control of independent school
districts insofar as the general law is applicable."
We do not find any general law, applicable to a junior
college district under Article 51.073, which authorizes the dis-
trict to issue the described note. Section 20.43 of the Texas
Education Code authorizes "any school district in the State of
Texas" to issue time warrants to repair, renovate, purchase,
equip, etc. school buildings. This statute applies to a junior
college district under Article 51.073 quoted above, but it
would .not authorize the board to issue the proposed note for
the following reasons:
1. The language of the statute does not
encompass new or original construction of a
building. (Section (a)):
2. The notes (warrants are defined to in-
clude promissory notes under Section (h)) must
mature serially over not more than five years
(Section (a)); and
(3) The outstanding notes may not aggregate
in excess of $25,000 at any one time (Section (c)).
-4286-
.
Hon. Bevington Reed, page 3 (M-878)
The requirements for issuing interest bearing time
warrants, or notes, under this article must be strictly followed.
Attorney General's Opinion No. C-197 (1963).
Article 20.48(d) of the Texas Education Code authorizes
all independent school districts having within their limits a
city with a population of 160,000 or more to issue,notes for the
construction of school buildings, but includes prwisions for
vendor's lien or deed of trust and a trust fund set aside out
of certain revenues. This would not cover the transaction in-
quired about, even if the district included a city of the re-
quired size.
Article 20.49 is not applicable because it provides
for borrowing money for current maintenance expense only.
Finding no statute authorizing the board of the South-
west Texas Junior College district to execute the proposed note,
and no general law under which authority might be found, we are
of the opinion that the board is without authority to execute
the note as described in your inquiry.
"In general, a school board has no power to contract
an obligation against the district until funds are available."
51 Tex.Jur.2d, Schools, Section 204, page 532.
SUMMARY
Neither statutory authority nor any general
law authorizes the board of the Southwest Texas
Junior College to issue the note of the district
in the amount of $100,000, payable over a term of
15 years and secured by the pledge of bank stock
belonging to the district.
General of Texas
-4287 -
,
Hon. Bevington Reed, page 4 (M-878)
Prepared by James S. Swearingen
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
Mel Corley
Ben Harrison
Richard Chote
Wardlow Lane
Hal Sharpley
ME%DE F. GRIFFIN
Staff Legal Assistant
ALFRED WALKER
Executive Assistant
NO-WHITE
First Assistant
-4288-