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The Attorney General of Texas
November 2, 1983
JIM MATTOX
Attorney General
Supreme Court Building Mr. Robert C. Lanier Opinion No. JM-84
P. 0. Box 12546 Chairman
Austin. TX. 76711. 2646 State Deuartment of Hiehwavs Re: Use by countv of combina-
I _
5121475-2501
and Public Transportation tion tax and revenue bonds to
Telex 9101674.1367
Telecopier 5121475-0266
Dewitt C. Greer State Highway Bldg. construct toll roads
11th and Brazos Streets
Austin, Texas 78701
714 Jackson. Suite 700
Dallas. TX. 75202.4506
Dear Mr. Lanier:
2141742.6944
You have requested our opinion regarding the authority of a
4824 Alberta Ave.. Suite 160 county to use the proceeds of combination tax and revenue bonds to
El Paso, TX. 79905.2793 construct toll roads.
9151533.3464
Article 6795b-1, V.T.C.S., authorizes Gulf Coast counties with a
1001 Texas, Suite 700 population of 50,000 or more to issue bonds to pay for the
-*ston, TX. 77002-3111 construction, operation and maintenance of causeways, bridges,
.1223-5666 tunnels, highways and turnpikes, including toll roads. You ask:
Does the use of the proceeds of combination tax
606 Broadway, Suite 312
Lubbock, TX. 79401-3479
and revenue bonds to construct toll roads,
6061747.5236 turnpikes, causeways, or bridges constitute an
unconstitutional lending of credit or grant of
public money when a user is charged a toll for the
4309 N. Tenth, Suite B
McAllen, TX. 76501-1665
use of the facility?
5121662-4547
Article III, section 52 of the Texas Constitution provides:
200 Main Plaza, Suite 400
(a) Except as otherwise provided by this
San Antonio, TX. 76205.2797
5121225-4191
section, the Legislature shall have no power to
authorize any county, city3 town or other
political corporation or subdivision of the State
An Equal Opportunity/ to lend its credit or to grant public money or
Affirmative Action Employer thing of value in aid of, or to any individual,
association or corporation whatsoever, or to
become a stockholder in such corporation,
association or company.
(b) Under Legislative provision, any county,
any political subdivision of a county, any number
of adjoining counties, or any political
subdivision of the State, or any defined district
now or hereafter to be described and defined
p. 354
Mr. Robert C. Lanier - Page 2 (JM-84)
within the State of Texas, and which may or may
not include, towns, villages or municipal
corporations, upon a vote of two-thirds majority
of the resident property taxpayers voting thereon
who are qualified electors of such district or
territory to be affected thereby, in addition to
all other debts, may issue bonds or otherwise lend
its credit in any amount not to exceed one-fourth
of the assessed valuation of the real property of
such district or territory, except that the total
bonded indebtedness of any city or town shall
never exceed the limits imposed by other
provisions of this Constitution, and levy and
collect taxes to pay the interest thereon and
provide a sinking fund for the redemption thereof,
as the Legislature may authorize, and in such
manner as it may authorize the same, for the
following purposes to wit:
(1) The improvement of rivers, creeks, and
streams to prevent overflows, and to permit of
navigation thereof, or irrigation thereof, or
in aid of such purposes.
(2) The construction and maintenance of pools,
lakes, reservoirs, dams, canals, and waterways
for the purposes of irrigation, drainage or
navigation, or in aid thereof.
(3) The construction, maintenance and
operation of macadamized, graveled or paved
roads and turnpikes, or in aid thereof.
(c) Notwithstanding the provisions of
Subsection (b) of this Section, bonds may be
issued by any county in an amount not to exceed
one-fourth of the assessed valuation of the real
property in the county, for the construction,
maintenance, and operation of macadamized,
graveled, or paved roads and turnpikes, or in aid
thereof, upon a vote of a majority of the resident
property taxpayers voting thereon who are
qualified electors of the county, and without the
necessity of further or amendatory legislation.
The county may levy and collect taxes to pay the
interest on the bonds as it becomes due and to
provide a sinking fund for redemption of the
bonds.
Article III, section 52 clearly authorizes a county, pursuant to
statute, to issue bonds for the construction, operation and
p. 355
.
Mr. Robert C. Lanier - Page 3 (JM-84)
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maintenance of turnpikes. In our opinion, that the county will charge
a toll for the use of a turnpike pursuant to legislative authority is
not in itself a constitutional impediment to the construction of the
road. We must also determine, however, whether the use of combination
tax and revenue bonds to finance the projects raises any
constitutional objection.
Article III, section 52 clearly contemplates the use of the
proceeds of tax bonds to finance the building of turnpikes. The use
of public funds is constitutionally permissible so long as the
expenditure serves "the direct accomplishment of a legitimate
public . . . purpose." Barrington v. Cokinos, 338 S.W.2d 133, 140
(Tex. 1960); see Letter Advisory No. 9 (1973). We believe there can
be no doubt that the construction of a county toll road can serve a
legitimate public purpose. We conclude, therefore, that the use of
bond proceeds to finance toll roads does not necessarily constitute an
unconstitutional lending of credit under article III, section 52 of
the Texas Constitution. -Cf. Tex. Const. art. III, 552-b.
However, revenue bonds and tax bonds are not the same thing.
When public bodies sell revenue bonds, they borrow against the future
revenues they expect to receive rather than the future taxes they
expect to collect. Texsan Service Co. v. City of Nixon, 158 S.W.2d 88
(Tex. Civ. App. - San Antonio 1941, writ ref'd). Unlike tax bonds,
revenue bonds are said not to create public debt in the constitutional
sense because they do not legally obligate the tax base when they are
to be paid solely from revenues. Texas Turnpike Authority v.
Shepperd, 279 S.W.2d 302 (Tex. 1955). Bonds not secured solely by
revenues have a different effect.
When bondholders are entitled not only to be paid from income
generated by a facility, but also to insist that tax money, the
proceeds from tax bonds, or other public property be used to generate
that income, then the bonds are not payable "solely from revenues" in
the sense in which courts have declared them to be not debt-producing.
See City of Dayton v. Allred, 68 S.W.2d 172 (Tex. Comm'n App. 1934,
jgmt adopted). Where a governmental unit agrees to pledge both ad
valorem taxes and the revenues of a facility to the payment of bonds
issued to construct such facility and to maintain and operate the
facility with tax monies for as long as it takes to retire such bonds
out of revenues of the facilities and the ad valorem taxes pledged
thereto, then the tax base has been additionally obligated to the
extent of the bond amount to be retired. See City of Wichita Falls v.
Kemp Public Library Board of Trustees, 593xW.2d 834 (Tex. Civ. App.
- Fort Worth 1980, writ ref'd n.r.e.); Attorney General Opinion MW-337
(1981).
You advise that the voters of Harris County, pursuant to article
6795b-1, V.T.C.S., recently authorized the issuance of bonds to
construct and operate a toll road -- bonds not yet submitted to this
office for approval. (Under section 2 of article 6745b-1 submission
p. 356
Mr. Robert C. Lanier - Page 4 (~~-84)
of bonds is permissive). In such circumstances we cannot pass upon
the validity of the particular bonds, but assuming full compliance
with constitutional and statutory requirements respecting the issuance
of debt-creating securities for tax and "revenue" bonds wholly or
partially secured by guarantees impacting the tag base or other public
assets, we do not believe the use :by counties of proceeds from
combination tax and revenue bonds for the construction of toll roads
is violative of article III, section 52 of the Texas Constitution.
SUMMARY
Assuming full compliance with constitutional
and statutory requirements respecting the issuance
of debt-creating securities for tax and "revenue"
bonds wholly or partially secured by guarantees
impacting the tax base or other public assets, the
use by counties of proceeds from combination tax
and revenue bonds for the construction of toll
roads is not violative of article III, section 52
of the Texas Constitution. izpti
JIM MATTOX
Attorney General of Texas
TOM GREEN
First Assistant Attorney General
DAVID R. RICHARDS
Executive Assistant Attorney General
Prepared by Rick Gilpin
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Rick Gilpin, Chairman
David Brooks
Colin Carl
Susan Garrison
Jim Moellinger
Nancy Sutton
p. 357
Untitled Texas Attorney General Opinion
Combined Opinion