R-346
YWEA~~OKNEW GENERAL
h OF TEXAS
PRICE DANIEL
.ATTOEl*EYGENERAL
April 28, 1947
lion, E, V. Spence, Chlrman
State Board of Water Engineers
Austin, Texas Opinion No. V-169
Re: Issuknce of revenue
bond6 by a Water
control and improve-
ment district and
pledge of income of
irrigation system in
payment theraof,
Dear Sir:
Reference Is iaade to your letter of April 9,
1947, In which you state that a certain water control and
improvsaent district was creafed in 1941 under the authorS-
ty of &ticlee 7880-l to 7880487, VemQnJl airi StatUter,
and that the order creating the d$ntrlct inaluded the broad
powers mentioned~ in Art&lee; ff88O-3 ‘and 788C-3a. These two
statutes include ar~ong others the powers to establish and
operate an irrigation’system and to eetablleh and OPCrate
a water and sewer system.
You state that $,n 1946 the district issued
bonds under the authority of method 2 of Articte 7@8C-%a,
which bonds are secured by a pledw;f the Bet revmue of
the water and qewer ,syetti. The proceedings authorizing
these bonds were approved by the Board of Water Rngineers
and the Attorney General and reg;lstered,by the Comptroller
of Public Acoounts.
,, We quote.the followIn@ from your Setter:
:
I,
e y t The proceedings’ authorixlnS the issu-
ance of saidibonde provided therein that *while
any of the bonds are outstand the district
shall not issue any addItiona 9 ends payable
fraar the reveques of the System,unless the 1160
of suoh addit?iQnr;C ,IPoBgsQn the fetenuee Ot the
system Is made junior and subordinate In all rew
spects to the U.en of the bonds authorized in
this ret901utl,onr ’
.,
Boor. E, V. Spence - Page 2 - v-169
“The district has requested this Board
to advise lt whether or not additional
-bonds can be issued by the dlatrict for
the purpose of making improvements to
the Irrigation system within the dlstrlct,
whiah the district proposes to take over
and operate, and making extensions and
Improvements to the water end sewer
system now under construction within the
district, and to pledge the net revenues
derived from the operation of the irri-
gation system to the payment of such
,additlonal bonds.
“Inasmuch as Article ‘@80-139 provides
that this Board must approve the issuance
of bonds by any water control and improve-
ment district before the same can be issued,
we reapeatfnlly request you to advise us
whether or not the term *net revenues* as
used in Article 7880~gOa lssuffioiently
broad to include revenues derlved from the,
operation of an irrigation system, and
whether or not such revenues may be pledged
to the payment of revenue bonds lssued for
the purposes above stated,”
We have not deemed it necessary to re-examine
the’above-mentioned bond record, for we are of the opinion
that the statute itself (Article 7880-goa] gives us the
answer to your question, This statute was added to the
water control and improvement dlstrlct statutea by Senate
Bill Ho. 29, enacted by the Forty-third LeglsPature at
its Third Called Session (Acts 1934, 43rd Leg,, ch, 32,
PO 56). Article 7880-90a (Sec. I, S, EL No, 29) pro-
videa in part as follower
“This section shall apply only to such
water control and improvement diutrlcts &B
have adopted (or hereafter my adopt) a. plan
for iaprovemimtr designed to fkrnlsh a .water
eyetern, or a eeuer rystem, or a water end
sewer system (either by conatructlon, or pur-
chase, or purchase md construction) for
service In arears, \uiban or ltiduetrfai in
nature, but not incorporated wn4er the lam
Hun, E, V. Spence - Page 3 - V-169
of Texas relatinx to the oreatlon of
oitlea, and uhloh, dirtriots have, or
rpeoii~o as0468r
mente or benefits or taxation unon the
basis of dollar8 p4r acre,
brace
III 1%
vided in Seotlon 96 (next foregO$ii&),
eleotlrely may proolde for the p8
of the rare In one 0r the tell-em-
inf$ mannem, tow1‘9 : 1 - A# provided for
by Section 90, next forb$olT; 2-by
entering into eontraote or he Dledee
-a8
P
3- by seauring the bonds-~ln both man:
ners 1 and 2; and: The expression
‘net revenue’, as used herein, shall be
understood to exclude any money derived
from taxation, but to include all in-
come or Increment which mav xrow out
The use of the broad terms “net revenues from
operations, ” “all other income or revenues,” and “net
revenues of the district,” at first glance weuld indicate
that any revenue6 of the district could be pledged toe
the payment OS its bonds. However, we do not believe that
this construction was the one intended by the Legislature.
Moreover, it is our opinion that Article 7880-900 does not
authorize the Issuance of revenue bonds for any purpose
other than for a water and/or 8ewer system and th6t it Wea
not authoriee the pled% or any revenue6 of the district
other than those derived 3 ram its water and/or aerer aps-
tea.
Hon. E, V1 Spance - Page 4 - V-169
You ~111 notiae that part of the statute
whlih provides that “net revenue” shall include “all
inoome or Increment which may grow out of the owner-
ship and operation of the Improvements or facilftfes
produced by the use of the money for whloh such bonds
8re givmJ less ruah proportion of the dfetrlat~s
revenue income ae pay be zreqxkred to provide fsr the
administration, efftcient operation and adequate nWn-
tenanaa of the dfsttifctla servfee faoflitleo,” St %a
our opinion that this language alearly refers bask to
the earlier Ianguage in the &zatute which reads “water
,ryatem, or a sewer system, or a water and sewer eF?item
for service in areas, upban OP fnduatriag, 5.m
Z;akGe, i . G”
Sn the first place, the only purposes ,speel-
fled in the statute are water and/or sewer purpoae& Xn
the second place, the emergency clause of Senate BflS.
Ilo, 29 alew%y shows that the Legf@faW%? h&d in rfrd
omly water mad/or 8ewer purpssas, for said clause pso-
vldes in part aa ioUowsn
“The uthortnerss of this eeusftm of
the Legfslaturep and, the fact that various
uater control and 3,mprovemeet dfstr$cts cm-
necessity to become I.ncoWpsroted as eft$es,
coupPed with the fact that certaim @)f these
distr%cta, while stherw%se approved, a$e -
beinu denied Poane bu the Federal
Bmphasfe added
It le clear Srom the underscored %angm$e that %a Legis-
intended that the statute authoWze the PI&&e of only
the water and/or rwter revenues0
In the third lace it would not seem reasonable
te rant a district of ? he type mentioned 18 Artlole
&-9Oa the power to pledge any and alIZ of ffr revenue8
no matter the souroe and mat gruat the t#ams OP a rlmllar~
right to other dlrtrlotr,
In the aase of Keel v, Pulte (Corn, App,), 10 S.W,
(24) 694, the court stated as follower
. -
Hon. E. V. Spence - Page 5.. - V-169
“The power to lesue negotiable paper for
public improvements, or for money borrowed for
the purpose of acquiring such lmprovementrr lr
a power which Is regarded as belng beyond the
scope of power of the governing body of a city
or a county unless it be specially granted*
This extraordinary power, when granted, oan be
exerclacd only in the mode and for the purpose@
specified In the grant. . . .’
Even though the bonds in question would be revenue bonds, we
think that the principle announoed above 1s applicable,
In view of the foregoing, you are advfsed that
your question Is answered ln the negative.
We wish to add that the aonolusions announced
herein are consistent with those long followed by the Attor-
ney Qeneral in the csxamlnatlon of bond records. Moreover,
If bonds of the type inquired about were submitted for our
examination, for the reasons stated such bond0 would be dle-
approved,
A water control distrlot has‘& author%-
ty under Article 7880~90a to lssue.revenue
bonds for the purpose of lmprovlng Its lrri-
gatlon system and of making improvements and
extensions to lta water and aewep system whlah
bonda wotid be secured by a pledge of the net
revenues derived from the operation of lte
irrigation system.
Very truly yours
ATTORNEY
QENEFUL
OF TEXAS
A-4-a w
w George W. Spark8
Assistant
,AP~P
QWS:s:bt ATTOBHEfQ- OF TEXAS