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### THE.ATTOFWEY GENERAL OF-TEXAS Gerald C. Mann AUSTIN~I.'~'EZAR

Hon. 0. E. Gerron Opinion NO. 

### o-2231 County Attorney Re: The authority Ector County school district to

- - of an independent borrow moneyfor the _- ~~ Odessa, Texas erection of a football stadium beyond the current available funds of the disDear Sirr trict.

Your request for opinion of April 15, 1940, has been received andcarefully considered by this department. Wequote from your letter of request as follows:

"1 wish an opinion as to the legality of the following loan madeby theFirst National Bank, Odessa, Texas, to the Ector County Independent School District for the expansion of their football stadium andfield: "STATEMENT

OFFACTS "Awarrant signed by the president andsecretary of the Board of Trustees of the Ector County Independent School District and countersigned by the Superintendent of the school to the amountof eighteen thousand dollars ($18,000) madepayable to the First National Bankof Odessa and secured by current taxes to the amountof two hundred and sixty four thousand dollars($264,000) delinquent taxes to the amountof twelve thousand dollars ($12,000) andone half of the net gate receipts of all the ball gamesplayed 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 Bankwould makethe loan of eighteen thousand dollars ($18,000) in the above mentioned warrant andthat although the loan was secured by current anddelinquent taxes, the bankwas 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 madefor the school fiscal year beginning September 1, 

### 1939to 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. OnSeptember 1, 1940, anewwarrant will be issued to the First National Bank of Odessa by the Ector County Independent 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 receipts of that year and so ’on until said loan is paid, princi~pal andinterest in full. Thebank 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. 

### 193YJ" Theloan was madeSeptember 9,

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: 11 0 * * 0

“Local school funds from district taxes, tuition fees of pupils not entitled to free tuition andother local sources maybe used for the purpose enumerated for State andcounty funds andfor purchasing appliances andsupplies, for the payment of insurance premiums, janitors andother employees, for buying school sites, buying, building andrepairing andrenting school houses, andfor other purposes necessary in the conduct of the public schools to be determinedby 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 TheSupremeCourt of Texas in the case of Collier vs. Peacock, 

### 54SW1O279held that aBoard of Trustees is not authorized to execute ateacher’s contract which would cause adeficiency debt against the school fund of a district for anyparticular year. The samedoctrine has been extended andapplied not only to teachers’ contracts but to other obligations, such as the purchase of supplies, equipment, andpermanent improvements to the school property.

In the case of TemplemanCommon School District V. R.C. HeadCompany, 101 SW2d 352, twowarrants were issued in payment for septic toilets, said warrants being dated February 22, 

### 1933, dueFebruary 22, 1934, and~April 1, 1934. These were renewal warrants andthere was no showing that the district had any available funds onhandfor the year for which the purchase wasHon. 0. E. Gerron, page 

### 3 (O-2231)

made. Thecourt 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, 

### 62SW128, 129, in referring to the holding of the SupremeCourt in the case of Collier vs. Peacock, supra, said:

“‘It is held that awarrant for teacher’s salary in excess of the sumapportioned to the district for the year
‘can not be madea 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, wethink the construction based upon it by the SupremeCourt applies with equal force to the articles controlling the purchase of school furniture.‘” This samedoctrine has been applied to independent school districts. Trustees of Crosby Independent School District VS~MestDisinfectant Company, 121 SW2nd 661; First National Bankvs. Murcheson Independent School District, 114 SW2nd 382* In the last cited case, the suit was uponwarrant accruing one, two andthree 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 amountsnecessary to conduct the school anyavailable fund out of these these debts could be paid.” Wequote from the case of Harlingen Independent School District vs. B. H, Page &Bros., (Comm.of App. 1932) 48SW2d 

### 983,as follows:

“Fromthe above it is evident that the powers of the school board to expend the funds of the district are at all times limited to anavailable fund, andto the particular thing prescribed by the statute, Theboard never has any authority .to expend funds that are not available.* Opinion No. O-1387 of this department holds that an independent school district mayuse anysurplus fund in its local maintenance fund for the purpose of erecting a school building, andmayissue its evidence of indebtedness in contemplation of current revenue; but whatever the form of said evidence ofHon. 0. E. Gerron, page 4

indebtedness the board of a deficiency debt against the person advancing such funds accumulated for the (O-2231)

trustees is not authorized to create said fund for future years, andthat moneymust look solely to the surplus year said obligation was created and

.. .. ^ not to the revenue of subsequent years, tne time sor payment not bein%controlling. Weenclose herewith a copy of opinion No, O-13 7 of this department.

Article 2802e-1, Vernon’s Annotated Texas Civil Statutes, reads as followsl

“Section 1. All independent school districts, andall cities which have assumedthe control of the public schools situated therein, shall have power to build or purchase buildings andgrounds located within or without the district or city, for the purpose of constructing gymnasia, stadia, or other recreational facilities, andto mortgage andencumber the same, and the income, tolls, fees, rents, and other revenues therefrom, andeverything pertaining thereto 9 acquired or to be acquired, andto evidence the obligation therefor by.,the issuance of bonds to secure the payment of funds to purchase or to construct, or to purchase andconstruct the same, including the purchase of equipment and appliances for use therein, andas additional security therefor by the terms of such encumbrance, maygrant to the purchaser under sale or foreclosure thereof afranchise to operate said properties so purchased for a term of not morethan ten (10) years after such purchase. Nosuch obligation shall ever be adebt of anysuch.school district or city, but solely a charge upon the property so encumbered, andshall never be reckoned in determining the power 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 samemaybe 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 character andsupported by charges other than taxation.

“Sec. 3. Suchbonds shall be payable from the net revenues of the project together with all future extensions 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 afirst charge against such revenue, the maintenance and operating expenses to include only suchHon. 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 expenses a sufficient amountof the revenues remaining shall be set aside in afund knownas the Gymnasiumor Stadium BondInterest andRedemption Fundto provide for the paymentof principal and interest upon such bonds plus a reasonable amountas amargin for safety. Suchfund shall be used for no other purpose than to pay the principal of and interest on said bonds. Any revenues renalnine after mak

### ingthe payments hereinabove provided for mayGeused for 

### mY lawful purpose.
law “Sec. 4. Every bond issued or executed under this shall contain the following clause:

“‘The holder hereof shall never have the right to demandpayment of this obligation out of anyfunds raised or to be raised by taxation.’

“Such bonds shall be presented to the Atto-*neyGeneral for his approval of other school bonds andin such cases the bonds shall be registered by the State Comptroller as in the case of other school bonds.

“Sec. !ie Nobonds authorized to be issued or executed under this Act shall be issued or executed after the expi-. ration of two 2 years from the effective date of this a:t.

t 1

“Sec. 

### 6. Noland uponwhich is situated any of the school improvements other than as described herein shall ever be subject to the payment of anyindebtedness created hereunder, nor shall any encumbrance ever be executed thereon.

“Sec. 

### 7. That all acts performed, proceedingd had and contracts executed by school districts to which this Act is applicable, andby 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 hadthe samebeen in force at such time, are hereby validated, ratified, approved and confirmed in all respects, as fully as though they had been duly andlegally performed, had and executed in the first instance.” Article 2802e-1 became effective March25, 

### 1939,and only provides for the issuance of bonds in the mannerandfor the purposes stated therein. with Article 

### 2802e-1, supra, Anyproject financed in accordance

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 construct or to purchase andconstruct the same, including the purchase of equipment andappliances 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 andofficers over funds belonging to school districts, andthe mannerin which those powers shall be exercised. The course prescribed by law mustbe followed to the exclusion of all other methods and any authority given to boards andofficers to drawon school funds is governed andlimited by the provisions of the general statute. Thompsonvs. ElmoIndependent School District, 

### 269SW

### 868;Texas Juris., Vol. 

### 37spage 

### 968.

Wequote from Texas Jurisprudence, Vol. 

### 37spage 970, as follows:

“Trustees are authorized to expend fund derived from local sources, andthe Surplus from the state and county available school funds, for any andall the purposes enumerated by law, andfor such other purposes as, in the discretion of the board, maybe reasonably necessary in the maintenance of the schools. The powers granted are sufficiently broad to authorize the appropriation of surplus funds to the construction of living quarters for teachers. Thepowers of the trustees are also sufficiently broad to authorize the expenditure of local funds for the establishment of ahealth department and its maintenance as a part of the school system, andfor the employment of anattorney to represent the trustees in legal proceedings respecting school affairs.

“The board is authorized to use public funds to pay premiumsupon 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 statementof 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 andthe balance out of future xevanuec.. Qsabove stated, it is clear that the trustees of school districts are authorized to expend funds derived from local sources andthe surplus in the state and county available school funds for any and all purposes enumerated by law andfor such other purposes as, in the discretion of the board, maybe 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 andgrounds located within or without the atstrict for the purpose of constructing gymnasia, stadla, or other recreational facilities, andto mortgage and encumberthe same, andthe income, tolls, fees, rents, andother 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.

Bsshownby 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. Andthat the Board of Trustees is not authorized to create a deficiency debt against School's Local Maintenance Fund. Youare further advised that it is the opinion of this department that the loan obtained by the district was not such aloan as the district was authorized to negotiate, andthat the above described agreement is invalid as it attempts to pledge future tax revenues of the school district andthat no bonds have been issued in compliance with ktitle 2802e-1.

Trusting that the foregoing fully answers your inquiry, we remain Yours very truly ATTORNEY

GENERAL

OFTEXAS By/s/ Ardell Williams graell Williams, &sistant APPROVED:

JUN12, 1940 /s/ Gerald C. Mann ATTORNEY

GENERAL

OFTEXAS (This opinion considered and approved in limited conference) AW:AW:wb