r -
THE.ATTOFWEY GENERAL
OF-TEXAS
Gerald C. Mann AUSTIN~I.'~'EZAR
Hon. 0. E. Gerron Opinion NO. o-2231
County Attorney Re: The authority of an independent
Ector County
- school district - to borrow
_- money
~~ for the
Odessa, Texas erection of a football stadium beyond
the current available funds of the dis-
Dear Sirr trict.
Your request for opinion of April 15, 1940, has been
received and carefully considered by this department. We quote
from your letter of request as follows:
"1 wish an opinion as to the legality of the following
loan made by theFirst National Bank, Odessa, Texas, to the
Ector County Independent School District for the expansion
of their football stadium and field:
"STATEMENT
OF FACTS
"A warrant signed by the president and secretary of the
Board of Trustees of the Ector County Independent School
District and countersigned by the Superintendent of the
school to the amount of eighteen thousand dollars ($18,000)
made payable to the First National Bank of Odessa and se-
cured by current taxes to the amount of two hundred and
sixty four thousand dollars($264,000) delinquent taxes to
the amount of twelve thousand dollars ($12,000) and one
half of the net gate receipts of all the ball games played
by the Odessa High School football team during the duration
of the loan. The agreement between the bank officials and
the school officials was as follows:
'It That the First National Bank would make the loan
of eighteen thousand dollars ($18,000) in the above men-
tioned warrant and that although the loan was secured by
current and delinquent taxes, the bank was to permit the
loan to be repaid out of net gate receipts, the amount
yearly to vary according to gate receipts for the duration
of the loan not to exceed three years. The entire loan,
principal and interest was made for the school fiscal year
beginning September 1, 1939 to August 31, 1940, at which
time two thousand dollars ($200.00) of the principal will
have been paid and interest in full will have been paid.
On September 1, 1940, a new warrant will be issued to the
First National Bank of Odessa by the Ector County Independ-
ent School District securing the principal of sixteen
.
Hon. 0. E. Gerron, page 2 (O-2231)
thousand dollars ($16,000) with current taxes for the year
1940-41, delinquent taxes and one ~half of the net gate re-
ceipts of that year and so’on until said loan is paid, prin-
ci~pal and interest in full. The bank is permitting the
school district to pay the loan from gate receipts although
it is secured by their school taxes. However, the Board
of Trustees has agreed to pay the loan from taxes should
the gate receipts fail. The loan was made September 9,
193YJ"
Article - 2827,
-- Vernon’s Annotated Texas Civil Statutes,
reads in part as hollows:
“The public free school funds shall not be expended
except for the following purposes:
110 * * 0
“Local school funds from district taxes, tuition fees
of pupils not entitled to free tuition and other local
sources may be used for the purpose enumerated for State
and county funds and for purchasing appliances and supplies,
for the payment of insurance premiums, janitors and other
employees, for buying school sites, buying, building and re-
pairing and renting school houses, and for other purposes
necessary in the conduct of the public schools to be deter-
mined by the Board of Trustees, 0 . . ..I*
Article 2749, Vernon’s Annotated Texas Civil Statutes,
contains the following language.
II. . ..provided. that the trustees, in making contracts
with teachers, shall not create a deficiency debt against
the district *I1
The Supreme Court of Texas in the case of Collier vs.
Peacock, 54 SW 1O279 held that a Board of Trustees is not author-
ized to execute a teacher’s contract which would cause a defici-
ency debt against the school fund of a district for any particu-
lar year. The same doctrine has been extended and applied not
only to teachers’ contracts but to other obligations, such as
the purchase of supplies, equipment, and permanent improvements
to the school property.
In the case of Templeman CommonSchool District V. R.C.
Head Company, 101 SW 2d 352, two warrants were issued in payment
for septic toilets, said warrants being dated February 22, 1933,
due February 22, 1934, and ~April 1, 1934. These were renewal
warrants and there was no showing that the district had any
available funds on hand for the year for which the purchase was
Hon. 0. E. Gerron, page 3 (O-2231)
made. The court in holding that recovery could not be had &
said warrants stated:
‘%lhile the loan refused in said statute (2749) refers
specifically to a deficiency created in the employment of
teachers, it has been held that it applies with equal force
to debts incurred in the purchase of equipment. In this
connection, the Court of Civil Appeals in Stevenson vs.
Union Feeding Company, 62 SW 128, 129, in referring to the
holding of the Supreme Court in the case of Collier vs.
Peacock, supra, said:
“‘It is held that a warrant for teacher’s salary in ex-
cess of the sum apportioned to the district for the year
‘can not be made a charge upon the funds of a subsequent
year. gPticle 3959 (now Article 2749) was construed as a
limitation upon the powers of the trustee to contract any
debt which would cause a deficiency in the school fund of
the district. While the article applies alone to contracts
for teachers salaries, we think the construction based upon
it by the Supreme Court applies with equal force to the
articles controlling the purchase of school furniture.‘”
This same doctrine has been applied to independent
school districts. Trustees of Crosby Independent School District
VS~ Mest Disinfectant Company, 121 SW 2nd 661; First National
Bank vs. Murcheson Independent School District, 114 SW 2nd 382*
In the last cited case, the suit was upon warrant accruing one,
two and three years after date, bearing six per cent interest,
payable out of the local maintenance fund for furniture or money
advanced to purchase furniture. The court stated:
Vor were there, for the particular years over and
above the amounts necessary to conduct the school any avail-
able fund out of these these debts could be paid.”
We quote from the case of Harlingen Independent School
District vs. B. H, Page & Bros., (Comm. of App. 1932) 48 SW 2d
983, as follows:
“From the above it is evident that the powers of the
school board to expend the funds of the district are at
all times limited to an available fund, and to the particu-
lar thing prescribed by the statute, The board never has
any authority .to expend funds that are not available.*
Opinion No. O-1387 of this department holds that an
independent school district may use any surplus fund in its lo-
cal maintenance fund for the purpose of erecting a school build-
ing, and may issue its evidence of indebtedness in contemplation
of current revenue; but whatever the form of said evidence of
Hon. 0. E. Gerron, page 4 (O-2231)
indebtedness the board of trustees is not authorized to create
a deficiency debt against said fund for future years, and that
the person advancing such money must look solely to the surplus
funds accumulated for the year said obligation
.. . . was^ created and
not to the revenue of subsequent years, tne time sor payment
not bein controlling. We enclose herewith a copy of opinion
No, O-13 %7 of this department.
Article 2802e-1, Vernon’s Annotated Texas Civil Stat-
utes, reads as followsl
“Sect ion 1. All independent school districts, and all
cities which have assumed the control of the public schools
situated therein, shall have power to build or purchase
buildings and grounds located within or without the district
or city, for the purpose of constructing gymnasia, stadia,
or other recreational facilities, and to mortgage and en-
cumber the same, and the income, tolls, fees, rents, and
other revenues therefrom, and everything pertaining thereto 9
acquired or to be acquired, and to evidence the obligation
therefor by.,the issuance of bonds to secure the payment of
funds to purchase or to construct, or to purchase and con-
struct the same, including the purchase of equipment and
appliances for use therein, and as additional security
therefor by the terms of such encumbrance, may grant to the
purchaser under sale or foreclosure thereof a franchise to
operate said properties so purchased for a term of not
more than ten (10) years after such purchase. No such ob-
ligation shall ever be a debt of any such. school district
or city, but solely a charge upon the property so encum-
bered, and shall never be reckoned in determining the pow-
er of any such school district or city, to issue bonds for
any other purpose authorized by law; provided that no
election for the issuance of the bonds herein authorized
shall be necessary, but the same may be authorized by a
majority vote of the board of trustees of such independent
school district or the governing body of such city.
%ece 2, Projects financed in accordance with thfs
law are hereby declared to be self-liquidating in charac-
ter and supported by charges other than taxation.
“Sec. 3. Such bonds shall be payable from the net
revenues of the project together with all future exten-
sions or additions thereto or replacements thereof, and
the governing body of such such school district, or city,
shall provide in the ordinance or resolution authorizing
the bonds, that the cost of maintaining and operating the
project shall be a first charge against such revenue, the
maintenance and operating expenses to include only such
Hon. 0. E. Gerron, page 5 (O-2231)
items as are set forth in said ordinance or resolution0
After the payment of such maintenance and operating ex-
penses a sufficient amount of the revenues remaining shall
be set aside in a fund known as the Gymnasium or Stadium
Bond Interest and Redemption Fund to provide for the pay-
ment of principal and interest upon such bonds plus a rea-
sonable amount as a margin for safety. Such fund shall be
used for no other purpose than to pay the principal of and
interest on said bonds. Any revenues renalnine after mak-
ing the payments hereinabove provided for may Ge used for
mY lawful purpose.
“Sec. 4. Every bond issued or executed under this
law shall contain the following clause:
“‘The holder hereof shall never have the right to de-
mand payment of this obligation out of any funds raised
or to be raised by taxation.’
“Such bonds shall be presented to the Atto-*ney General
for his approval of other school bonds and in such cases the
bonds shall be registered by the State Comptroller as in the
case of other school bonds.
“Sec. !ie No bonds authorized to be issued or executed
under this Act shall be issued or executed after the expi-.
ration of two t 2 1 years from the effective date of this a:t.
“Sec. 6. No land upon which is situated any of the
school improvements other than as described herein shall
ever be subject to the payment of any indebtedness created
hereunder, nor shall any encumbrance ever be executed there-
on.
“Sec. 7. That all acts performed, proceedingd had and
contracts executed by school districts to which this Act is
applicable, and by the governing bodies thereof, which acts,
proceedings and contracts were unauthorized by law at the
time of their performance or execution, but which wou1.d
have been authorized under the terms of this Act had the
same been in force at such time, are hereby validated, rati-
fied, approved and confirmed in all respects, as fully as
though they had been duly and legally performed, had and
executed in the first instance.”
Article 2802e-1 became effective March 25, 1939, and
only provides for the issuance of bonds in the manner and for
the purposes stated therein. Any project financed in accordance
with Article 2802e-1,supra, 1s declared by the statute “to be
self-liquidating in character and supported by charges other
,than taxation.” The obligations created in financing any of the
-
Hon. 0. E. Gerron, page 6 (O-2231)
above mentioned projects are to be evidenced “by the issuance
of bonds to secure the payment of funds to purchase or to con-
struct or to purchase and construct the same, including the
purchase of equipment and appliances for use therein.” None
of the above mentioned obligations shall ever be a debt of any
city or school district, but solely a charge upon the property
encumbered.
&ticle 2827, supra, prescribes the general powers of
boards and officers over funds belonging to school districts,
and the manner in which those powers shall be exercised. The
course prescribed by law must be followed to the exclusion of
all other methods and any authority given to boards and officers
to draw on school funds is governed and limited by the provi-
sions of the general statute. Thompson vs. Elmo Independent
School District, 269 SW 868; Texas Juris., Vol. 37s page 968.
We quote from Texas Jurisprudence, Vol. 37s page 970,
as follows:
“Trustees are authorized to expend fund derived from
local sources, and the Surplus from the state and county
available school funds, for any and all the purposes enum-
erated by law, and for such other purposes as, in the dis-
cretion of the board, may be reasonably necessary in the
maintenance of the schools. The powers granted are suffi-
ciently broad to authorize the appropriation of surplus
funds to the construction of living quarters for teachers.
The powers of the trustees are also sufficiently broad to
authorize the expenditure of local funds for the establish-
ment of a health department and its maintenance as a part
of the school system, and for the employment of an attor-
ney to represent the trustees in legal proceedings respect-
ing school affairs.
“The board is authorized to use public funds to pay
premiums upon insurance policies issued to cover every
school building in the State, the title to which is vested
either in the State, county or district.”
Under the facts as stated (paragraph 2 of the state-
ment of facts) apparently it is contemplated by the contracting
parties that the note would not be paid from the revenues of
current school years, but only a portion thereof would be so
paid and the balance out of future xevanuec.. Qs above stated,
it is clear that the trustees of school districts are author-
ized to expend funds derived from local sources and the surplus
in the state and county available school funds for any and all
purposes enumerated by law and for such other purposes as, in
the discretion of the board, may be reasonably necessary in
the maintenance of the schools.~ Also, the board of trustees is
_ . . -
Bon. 0. 6. Gerron, page 7 (O-2231)
authorized and given the power to build or purchase building
and grounds located within or without the atstrict for the pur-
pose of constructing gymnasia, stadla, or other recreational
facilities, and to mortgage and encumber the same, and the in-
come, tolls, fees, rents, and other revenues therefrom, and
everything pertaining thereto, acquired or to be acquired, and
to evidence the obligation therefor by the issuance of bonds to
secure the payment of said fund, under Article 2802e-1.
Bs shown by the statement of facts in your inquiry the
school district has not complied with Article 2802e-1 In that no
“,,o;$&ave been issued in accordance with the provisions of said
Neither is the above mentioned contract authorized by
kticle’2827, suprae
In view of the foregoing, you are respectfully advised
that it is the opinion of this department that an independent
school district has no authority to pledge or expend funds of
the district that are not available. And that the Board of Trus-
tees is not authorized to create a deficiency debt against
School's Local Maintenance Fund. You are further advised that
it is the opinion of this department that the loan obtained by
the district was not such a loan as the district was authorized
to negotiate, and that the above described agreement is invalid
as it attempts to pledge future tax revenues of the school dis-
trict and that no bonds have been issued in compliance with k-
title 2802e-1.
Trusting that the foregoing fully answers your inquiry,
we remain
Yours very truly
ATTORNEY
GENERAL
OF TEXAS
By /s/ Ardell Williams
graell Williams, &sistant
APPROVED:JUN 12, 1940
/s/ Gerald C. Mann
ATTORNEY GENERAL
OF TEXAS
(This opinion considered and approved in limited conference)
AW:AW:wb