Untitled Texas Attorney General Opinion

THE ATJTORNEY GENERAL OF TEXAS Hon. Leroy Jeffers, Chairman Opinion No. WW-121 The Board of Regents University of Texas Re: Interpretation of SeC- Esperson Building tions 17 and 18 of Art. Houston 2, Texas VII of the Constitution of Texas a5 they relate Hon. M. T. Harrlngton, Chancellor to the authority of the Texas A. & M. College Systam Board of Director5 of the College Station, Texas Agricultural and Mechani- 61 College of Texas to Issue bonds'or note5 thereunder prior and sub- sequent to their repeal Gentlemen: as of January 1, 1958. Your request for an opinion presents the following questions: 1. Are the Boar~d of Director5 of the Agricultural and Mechanical College of Texas and the Board of Regents of the University of Texas authorized to issue bond5 or notes pursuant to Section 17 of Article VII of the Constitution of Texas on behalf of Prairie View Agricultural and Mechanical College of Texas, Tarleton State College and Arlington State College for purposes described ther.ein payable after January 1, 1958 from proceeds of taxes levied by said Section of the Con- stitution during or before the calendar year 1957? 2. If the answer to the first question is in the negative, will the Board be author- ized to issue on behalf of such institutions bonds or notes after January, 1958, pursuant to Section 18 of Article VII of the Constitu- tion for purposes described therein and use for payment of the principal of and the inter- est on such bond5 or note5 the proceeds of taxes levied by Section 17 of Article VII of the Constitution during or before the calendar year 19577 Hon. Leroy Jeffers Hon. M. T. Harrington - Page 2 (WW-121) Article VII, Section 17, of the Constitution of Texas (ratified by the electorate in 1947) authorized the issuance of bonds or notes by designated State institutions of higher learning to acquire, construct and initially equip buildings or other perma- nent improvements. The obligation5 to be issued are to be se- cured by a pledge of the State ad valorem tax of 5k per one hundred dollars' valuation as apportioned to the various insti- tutions. The Constitution states that the tax is to be levied for thirty years; requires that this time shall be divided into three ten-year periods; and prohibit5 the pledge of the tax pro- ceeds to the payment of obligations except within the ten-year period in which such bonds are issued. The first ten-year period comes to a close on Decembe,r31, 1957. In November of 1956, this constitutional provision was amended, with the provision that the amendment is to "become operative or effective so as to supersede or repeal the former provision5 on January 1, 1958", which is the beginning of the second ten-year period originally prescribed. The two constitutional provisions (adopted in 1947 and 1956) are substantially the same, except a5 to the institutions who are eligible recipients of the proceeds of the ad valorem tax. Four schools are eliminated from participation in the proceeds of the future tax levies by the amendment which is to become operative on January 1, 1958, namely: Prairie View Agricultural and Mechanical College at Prairie View, Tarleton State College at Stephenvllle, Arlington State College at Arlington and Texas Western College of the University of Texas at El Paso. Simultaneously with this change in Article VII, Section 17, of the Constitution, these four institutions, as a part of the Texas Agricultural and Mechanical College and the University of Texas, were given the authority to issue bonds Secured solely by a pledge of the revenue5 of the Permanent University Fund by the change in the provisions of Article VII, Section 18, of the Con- stitution. Your first question is whether these four institutions may, after January 1, 1958, issue bonds or notes under the provisions of Article VII, Section 17, of the Constitution, and provide that such obli ations will be payable from taxes levied during the years 194 8 -1957 which are not collected until after January 31, 1957. Your first question is answered In the negative for the follow- ing reasons: Hon. Leroy Jeffers Hon. M. T. Harrlngton - Page 3 (WW-121) (1) On January 1, 1958, there will be no authority, under Article VII, Section 17, as amended, for these partlcu- lar Institutions to Issue obligations of any type. It is fundamental that the power to issue negotiable bonds or notes must be implicit and express. (2) If operation under the 1947 amendment were per- mitted, the obligations -; by constitutional requirement -- would mature not later than December 31, 1957, which date would be prior to the date of their proposed issuance. Attorney Gen- eral Opinion m-176 (1955). Your second question is whether these instltutlons, after Janu- ary 1, 1958; may issue bonds or notes under the provisions of Article VII, Section 18, of the Constitution, and use the money receivedafter December 31, 1957, from taxes levied during the years 1948-57, inclusive, to pay such obligations. The stating of your question assumes that the four institutions will be entitled to receive a portion of"the money collected af- ter December 31, 1957, from the levies made under the 1947 amend- ment which added Article VII, Section 17, to our Constitution in its present form. t Two prior opinions of this office, m-176 (1955')and MS-221 (1955), considered the constitutional provision-wherein itstates: "Fun&s raised from said Five (5#) Cents tax levy for the ten-year period beginning Janu- ary 1, 1948, are hereby allocated to the fol- lowing institutions . O . and in the following proportions . . O't Those prior opinions take the view that the Constltutlon itself, by the employment of the above language, makes the allocation for the first ten-year prior. We adhere to this view. 2 ,:. The provislon which becomes effective and operative on Jan$&ry 1, 1958, reads, in part: : $ "Nor shall the provislons of this amendment affect in any way the prior allocation of the revenue for the ten-year period beginning January 1, 1948, as heretofore authorized bye ;! the provisions of Section 17, of Article VII, ': of this Constitution as adopted August 23, 1947." Hon. Leroy Jeffers Hon. M. T. Harrfngton - Page 4 (WW-121) Thus, It 1s clear that your basic assumption is a correct one, the only question being, what disposition may be made of such money when received,bythe institutions? First, all bonds or notes issued during the first ten-year period must be paid as required by the old and new constitu- tional provlslons and by the contract rights of the holder of the obligations. Second, the Constitution requires that the tax moneys may be used only to pay the principal and interest on bonds or notes. Attorney General Opinions V-798, V-799(1949). Institutions have previously been cautioned not to issue bonds or notes in excess of the Comptroller of Public Accounts' estimate of avail- able funds since the validity of such instruments necessarily depends upon adequate provision havina been made to nav the obligation. Cit; of Athens v. Moodg -115 Tex. 247 (i9!?6),280 S.W. 514, Owasso Board of Education ;. Short, 89 Okla. 2, 213 UP. 857(1923). Attorney General Opinion MS-176 (1955). In Attorney General Opinion MS-176(1955), the distinction was drawn between the right to pledge taxes to the yment of ob- ligations to become due prior to January 1, 195f? , and the paver to use the funds collected after that date where such funds were obtained from the tax levies for the years 1.948-1957(whether delinquent or current collections) and stated: "After payment of notes or bonds issued during the initial period, any surplus thereafter remaininn mav be used bv the respective institutions"during the"suc- ceeding periods for the purpose originally authorized." This opinion (MS-176) and Attorney General Opinion V-798 (1949) are, despite the subsequent amendment to the Constitution, con- trolling as to the use of the fundsfor the institutions in- cluded in both the 1947 and 1956 amendments to Article VII,' Section 17, of the Constitution of Texas, but do not control as to Section 18, as amended in 1956. As to these four institutions, however, you will note that Article VII, Section 18, of the Constitution (as amended in 1956) reads, in part: Han, Leroy Jeffers Han, M, TO Rarrington - Page 5 (WW-121) "Any bonds issued hereunder shall be payable solely out of the income from the Permanent University Fund." It is, of course, necessary to construe all of the constitu- tlonal provisions together in arriving at the intent of the people in adopting such provisions. The Constitution re- qulres that . the . moneys - allocated _ __ to these four institutions shall remaln In force ana effect, yet, have, in effect, pro- hibited the use of such tax proceeds to pay obligations is- sued under the provisions of either Article VII, Sections 17 or 18, if all outstanding obligations have been paid. If it had been intended that such moneys could not be expended, then there would have been no necessity to preserve the previous allocation to these four institutions. You are, therefore, respectfully advised that the tax moneys allocated to these four institutions by the 1947 amendment to Article VII, Section 17, of the Constitution of Texas, may be used for acquiring, constructing and initially equipping build- ings or other permanent improvements at such institutions with- out the issuance of bonds or notes under either Article VII, Sections 17 or 18, SUMMARY The Board of Directors of the Agricultural and Mechanical College of Texas and the Board of Regents of the University of Texas, for and on behalf of Prairie View Agricul- tural and Mechanical College at Prairie View, Tarleton State College at Stephenville, Ar- lington State,College at Arlington, and Texas Western College of the University of Texas at El Paso may not issue bonds or notes under Article VII, Section 17, of the Con- stitution. Nor may bonds or notes issued under Article VII, Section 18, of the Con,- stitution, be paid from t,axeslevied during the years 1948-1957 but not collected until ;;t;;epnuary 1, 1958. Such tax moneys may , without the issuance of bonds or notes, for the purpose of acquiring, . - -- -1 Hon. Leroy JePPers Hon. M. T. Harrlngton - Page 6 (w-121) constructing, and initially equlpping buildings or other permanent improve- ments at such institutions. Very truly yours, WILL WILSON Attorney General BY - m- APPROVED: Assistant OPINION COMMITTEE: H. Grady Chandler, Chairman Marietta McGregor Payne R. E. Fletcher Edvin Horner REVIEWED FOR THE ATTORNEY GENERAL BY: Geo. P. Blackburn