Honorable Ernest Quinn
County Attomey
El Paso County
El Paso, Texas
Dear Sir:
OpFnion Rumber O-3954
Re: Water Control and Improve-
ment District Revenue Bonds.
We acknowledge receipt of your opinion request of
September 9, 1941, wherein you ask the following questions:
"1. Where a Water Control and Improvement
District has been properly organized under the
provisions of Section 59 of Article 16 of the
Constitution of the State of Texas, and purely
revenue bonds have been issued under the pro-
visions of Article 7880, Vernon's Civil Stat-
utes, Subdivision 90a, can the property of a
subscriber located within the district ever
become liable for the payment of the bond?
“2 . Where a Water Control and I provement
Distrlat has been organized and pure?y revenue
bonds issued, as stated in Question Bo. 1, does
the Board of Directors of the District have
authority to compel any unwilling person to take
the service whether they have adequate facilities
of their own OP not?
"3 . Where the revenues become inadequate, what
are the rights of the bondholders in compelling the
Board of Direotors to raise the PaYes for the
services rendered?"
Article 7880+0a, Vernon's Annotated Civil Statutes,
provides, in part, as follows:
,-
Honorable Ernest CSuinn,Page #2 (O-3954)
"Thi& section shall apply only to such water
control and improvement districts as have adopted
(or hereafter may adopt) a plan for improvements
designed to furnish a water system, or a sewer
system, or a water and sewer system (either by
construction, or purchase, or purchase and con-
struction), for service in areas, urban or in-
dustrial in nature, but not incorporated under
the laws of Texas relating to the creation of
cities. and which districts have. or have exvect-
ancy fbr, net revenues from operations (to exclude
al.1income from ad valorem taxes, specific assess-
ments of benefits or taxation upon the basis of
dollars per acre, but to embrace all other income
or revenues) in lieu of securing its bonds as
vrovided in gection 90 (next foreaoinsr).elective-
iy may provide for the payment of-the-same in any
one of the following manners, to-wit: ' * * * *
2--by entering into contracts for the pledge of
the net revenues of the district, as hereinafter
defined and provided for; * * + and: The expres-
sion 'net revenue', as used herein, shall be
understood to exclude any money derived from
taxation, but to include all income or increment
which may grow out of the ownership and operation
of the improvements or facilities produced by use
of the money for which such bonds are given; less
such proportion of the district's revenue income
as reasonably may be required to provede for the
~.administration, efficient operation and adequate
maintenance of the district's service facilities;
* * *'I*
The Supreme Court of Texas, in construing another
revenue bond statute in the case of the City of Dayton v.
Allred, 68 Se W. (2dj 172, said:
"In other words, the holder of these bonds
merely b.asa claim against the sever system, the
franchise, and the revenues of said system, and
the water system, He can never have any claim
against tax funds".
Therefore, your'Question Number 1 is answered in
the negative.
Honorable Ernest Quinn, Page #3 (O-3954)
Under this plan of financing only the net revenues
of such systems are pledged to the payment of the principal
and interest of the bonds, and the holders of such bonds do
not have the right to demand payment thereof from funds raised
by taxation.
Your Question Number 2 is answered in the negative.
We find no express provision in the Act which authorizes the
Board of Directors of said district to require any person to
subscribe to the service rendered by the district. It is our
opinion that the Board is without authority to require any
person to accept the service of the district. This is a matter
to be handled by contract between the district and the purchas-
er of the water or sewer service.
In reply to your Question Number 3, we find no pro-
vision in the statutes covering this matter. In the absence
of any expess provision in the contract authorizing the reve-
nue bonds setting out the rights of the bondholders, it is our
opinion that their only remedy would be to compel the district
to levy and collect reasonable rates sufficient to service
the outstanding bonds.
Trusting that this answers your questions, we are
Very truly yours
ATTORNEY GENERAL OF TEXAS
APPROVED SEP 19, 1941
h/~;;;~s;;;~ps
A'l-TORRhY
GERERAL
COB-s:mjs
APPROVED OPINION COMMITTEE
BY /s/ BWB CHAIRMAN