March 26, 1975
The Honorable Hugh C. Yantis, Jr. Opinion No. H- 567
Executive Director
Texas Water Quality Board Re: Ability of special districts
P. 0. Box 13246 to use bond proceeds to purchase
A us tin, Texas a portion of the capacity in a re-
gional waste disposal system.
Dear Mr. Yantis:
In 1965 the&voters of the Inverness Forest Improvement District
approved a .-ballot proposition authorizing the issuance of construction
bonds to finance the erection of a waterworks and sanitary sewer system
to be owned and operated by the District. None of the bonds have yet
been issued. The Gulf Coast Waste Disposal Authority has proposed
that the District participate in a regional plant owned and operated by
the Authority. As proposed, the plan calls for connection of the District’s
sewage system to a regional sewage treatment plant to be constructed
and operated by the Authority which would secure the necessary permits
from regulatory agencies. The water district would pay the Authority
a monthly charge based upon gallons of sewage treated and would also
pay a lump sum for a guaranteed percentage share of capacity in the
plant. This lump sum payment for capacity in the plant would be paid
from money derived from the sale of the previously authorized bonds.
The District would not own any specific part of the sewage treatment
plant or have any specific interest in the facilities themselves. The
*Bond Order issued by the District shortly after the election and pursuant
to the authorization of the electorate contains certain stipulations and
representations concerning the methods and purposes of the bond
authorization and the retirement of any bonds issued.
You have explained that unless capital contributions from member
governments to regional sewage systems in return for contractual guarantees
p. 2542
,
The Honorable Hugh C. Yantis page 2 (H-567)
for a percentage of the regional system can be financed by the sale of
bonds, the purpose of Chapter 21 of the Texas Water Code (which
encourages regional systems) cannot be accomplished, and you ask:
May the money obtained from the sale of bonds
containing the above covenants be used to purchase
a contract for capacity in a regional sewage treat-
ment plant owned and operated by the Gulf Coast
Waste Disposal Authority?
=It’is.-elementary-that the proceeds of bonds voted by the people
.must be expended~for~ the purposes for which they were~voted. It is
also elementary that in instances where the law visits upon a govern-
ing body the duty to exercise its sound judgment and discretion, courts
have no right to interfere so long as such body acts lawfully. Barrington
v. Cokinos, 338 S. W. 2d 133 (Tex. Sup. 1960); Lewis v. City of Fort Worth,
89 S. W. 2d 975 (Tex. Sup., 1936); 47 Tex. Jur. 2d, Public Securities and
Obligations, section 31. But where, as here, the ballot proposal and
Bond Order issued by the governing body particularly describe the
purposes for which the bond proceeds will be used, and among them is
a provision that certain municipal facilities will be purchased and
constructed for the governmental body involved, the use of such proceeds
to acquire contractual’ rights that do not result in the ownership or opera-
tion of’the facilities by the governmental body is not authorized. City of
Beaumont v. Priddie, 65 S. W. 2d 434 (Tex. Civ.’ App. --Austin 1933),
judgment reversed and cause dismissed for mootness, 95 S. W. 2d 1290
(1936).
Though the Priddie case was ultimately adjudged a moot exercise,
the opinion of the Court of Civil Appeals was later approved by the Supreme
Court in State v. City of Austin, 331 S. W. 2d 737 (Tex. Sup. 1960), and
carefully distinguished by the Supreme Court in Barrington, when it held a
much broader ballot proposal not to prohibit the arrangement considered
there.
In our opinion, a contractual arrangement by the District with the
Authority in. which the Authority would agree to build and operate a regional
p. 2543
The Honorable Hugh C. Yantis page 3 (H-567)
sewage treatment plant and provide for a fee sewage treatment services
of a guaranteed capacity to the District, but in which the District would
neither own nor operate any part of the facilities, was not within the
contemplation of the electorate when it authorized the District to issue
bonds
. . . for
the purpose of purchasing and constructing
a water and sanitary sewer system and a sewage
disposal plant for the District, and for the further
purpose of purchasing and constructing for the District
a drainage system for the drain&e of lands within the
District. . . . u Inverness Forest Improvement District,
Bond Order.
Nor do we believe such a project is within the scope of the Bond Order which
states,
The term ‘system! as used in this order shall ~include
and mean the waterworks and sanitary sewer system
owned and operated by the District, and all extensions
and replacements thereof and improvements thereto
whensoever made.
The conclusion we have reached above makes it unnecessary for
us to decide whether the Inverness Forest Improvement District could,
in other circumstances, legally finance its participation in a regional
waste disposal system by the sale of public securities.
SUMMARY
Proceeds from the sale of bonds authorized
in 1965 by the electorate of the Inverness Forest
Improvement District may not be used to contract
for sewage treatment services from the Gulf Coast
Waste Disposal Authority where the District would
neither own nor operate the sewage system facilities.
Attorney General of Texas
p. 2544
,
The Honorable Hugh C. Yantis page 4 (H-567)
APPROVED:
DAVID M. KENDALL, First Assistant
C. ROBERT HEATH, Chairtnan
Opinion Committee
p. 2545