The Honorable Robert E. Schneider Opinion No. H-869 

Executive Director 

Texas Water Rights Commission 

P. 0. Box 13207 

Austin, Texas 78711 

Re: Whether section 

25.031(c), Water Code, 

authorizing special 

districts to purchase a 

portion of the capacity 

of a regional waste disposal system, can be 

applied constitutionally 

to bonds authorized prior 

to the passage of the 

statute. 

Dear Mr. Schneider: 

YOU have requested our opinion regarding the authority 

of a special district to use bond proceeds to purchase a 

portion of the capacity in a regional waste disposal system. 

your first question is: 

whether Section 25.031(c) (Water Code] is 

a constitutionally valid authorization for 

Inverness Forest Water Control and Improvement District to use the (previously voted] 

bond proceeds . . . to purchase capacity in 

the Gulf Coast Waste Disposal Authority's 

regional sewage treatment plant. . . . 

Section 25.031(c) provides in pertinent part: 

Notwithstanding any provision of this 

chapter or any other law to the contrary, 

a district may use the proceeds of bonds 

issued for the purpose of constructing a 

p. 3663 
The Honorable Robert E. Schneider - page 2 (H-869) 

waste disposal system or systems, and payable 

wholly or in part from ad valorem taxes, for 

the purchase of capacity in, or a right to have 

the wastes of the district treated in, a 

waste collection, treatment, or disposal 

system and facilities owned or to be owned 

exclusively or in part by another public agency, 

and a district may issue bonds payable 

wholly or in part from ad valor-em taxes 

specifically for such purpose if a majority 

of the resident electors of the district 

have authorized the governing body of the 

district to issue bonds for that purpose 

or for the purpose of constructing a waste 

disposal system or systems.' The bonds 

shall be issued in accordance with the 

provisions of, and shall be subject to the 

same terms and conditions of, the laws 

authorizing the district to issue bonds 

for the purpose of constructing waste 

collection, treatment, and disposal systems, 

except as otherwise provided in this subsection. 

In brief, this question turns on whether section 25.031(c) 

of the Texas Water Code, as to bonds authorized prior to its 

enactment, alters the result of Attorney General Opinion H567 (1975)r which indicated that proceeds from the sale of 

bonds in 1965 by Inverness Forest Improvement District could 

not be used to contract for sewage disposal services where 

the district would neither own nor operate the facilities. 

While section 25.031(c) is designed to permit the "purchase 

of capacity" type transaction which Attorney General Opinion 

H-567 (1975) held'to be unauthorized, the enactment of that 

section does not change the basic results of Opinion H-567 

concerning the Inverness Forest "special district." 

First, there is the obvious problem of applying 

section 25.031(c) retroactively. Tex. Const. art. 1, 5 16. 

Second, as initially determined in Attorney General Opinion 

H-567 (1975), bond proceeds may only be used for the purposes 

for which they were voted. It is clear that a resolution 

calling a bond election becomes a part of the contract and 

agreement between the voters and the District, should the 

voters authorize the issuance of the bonds. Crowell 2 v 

p. 3664 
The Honorable Robert E. Schneider - page 3 (H-669) 

Cammack, 40 S.W.2d 259 (Tex. Civ. App. -- Amarillo 1931, no 

writ). To hold that the Legislature could change the 

agreement between the voters and the district could 

constitute an impairment of the obligation of contracts. 

Tex. Const. art. 1, 5 16. Third, the Legislature cannot, by 

legislative enactment, alter the results or effect of an 

election held pursuant to a constitutional mandate: 

[Tlhe Legislature shall not authorize 

the issuance of any bonds or provide 

for any indebtedness against any 

reclamation district unless such 

proposition shall first be submitted 

to the qualified property tax-paying 

voters of such district and the 

proposition adopted. Tex. Const. 

art. 16, 9 59(c). 

Ci&@ Aransas Pass v. Keeling, 247 S.W. 818 (Tex. Sup. 

In shortxnrproceeds must be used for purposes 

for which they were voted. Lewis v. 

89 S.W.Zd 975 (Tex. Sup. 

City of Fort Worth, 

1936);aZingtonY.Cokinos, 338 S 

133 (Tex. Sup. 1960); City of Beaumont v. Pzddie, 65 S.W.Zd 

434 (Tex. Civ. App. -- AustTii 1933, no Einerefore, 

the answer to your first question is that the enactment of 

section 25.031(c) of the Texas Water Code does not alter the 

conclusions reached in Attorney General Opinion H-567 (1975) 

regarding the use of previously voted bond proceeds. 

.W.2d 

If the result of H-567 is not affected and the special 

district must use the bond proceeds to purchase a proprietary 

interest in the regional sewage plant rather than entering 

into a service contract for plant capacity, you ask that we 

determine the nature and scope of the 

proprietary interest which must be 

purchased . . . . 

It is pertinent to note that the bond propositions submitted to 

the electorate of the Inverness Forest Improvement District 

on August 14, 1965, authorized bonds 

p. 3665 
, 

. . 

The Honorable Robert E. Schneider - page 4 (H-869) 

for the purpose of Pmk=zwg- structinq a water an 

system and a sewage disposal plant for 

the district. . . . (Emphasis added). 

Furthermore, similar propositions were passed in October 16, 

1967 and February 14, 1970 elections, which provided bonds 

for the purpose of purchasing and/or 

[February 14, 1970 proposition used 

"and" instead of "and/or"] constructing 

extensions and additions to the district's 

existing water and sanitary sewer system 

and drainage system. . . . 

Although Opinion H-567 did not involve the method to be 

used or what would constitute "purchasing and constructing," 

it would certainly be within the "sound judgment and 

discretion" of the special district to purchase and construct 

as they determine within the electoral guidelines. Barrington 

v. Cokinos, , at 142. Therefore, it would not be 

iiiirmle the special district to make a determination 

that purchasing and constructing, or causing to be constructed, 

an undivided, legal interest in a regional waste plant would 

satisfy the electoral mandate. The special district would 

own a portion of the physical plant rather than the mere 

contractual right to a guaranteed use or portion of the 

capacity of the regional system. Thus, the special district 

would have used the bond proceeds to purchase and construct 

a facility which the electorate had authorized. 

Since the issuance of bonds creates a contract between 

the issuer and the bondholders, C$Cy of Aransas Pass - v. - 

Keeling, supra, it should be not; nthz the definltlonof 

Wsystem" in each Bond Order is as follows: 

The term system as used in this order 

shall include and mean water works and 

sanitary sewer system owned and operated 

by the District, and all extensions and 

improvements thereof and improvements 

thereto whensoever made. 

p. 3666 
. ” 

. 

The Honorable Robert E. Schneider - page 5 (H'-869) 

Neither the bond election propositions, nor the Bond Order 

specifies how the facilities are to be purchased and constructed. 

It is, therefore, obvious that the portion of the regional 

system purchased by the special district would become part 

of the "system." Provisions of Chapter 25 of the Texas 

Water Code also support the proposed transaction since 

"[a] district may contract . . . to purchase . . 

facilities or systems." Water Code 9 25.022. 

disposal 

See Water 

Code §s 25.024; 25.025; 25.027; 27.028, Therefore, in 

answer to your second question, we believe that it would be 

reasonable, and in pursuance of the electoral mandate as 

well as the Texas Water Code, to approve issuance and use of 

bonds to purchase an undivided, legal interest in a regional 

system, if the special district decides to do so in the 

exercise of its discretion. 

In your third and final question, you ask: 

[Ilf the district should purchase a 

proprietary interest in the,regional 

system, to what extent must the district 

participate actively and directly, if at 

all, in the operation and maintenance of 

the system? 

Neither Attorney General Opinion H-567 (1975), nor the 

bond election propositions or Bond Orders specifically 

address this question. However, provisions of Chapter 25 

of the Texas Water Code specifically permit such operation 

contracts between a special district and a "district." Water 

Code SS 25.027; 25.028. Furthermore, one political subdivision of the State, such as Inverness Forest, can transfer 

money to another political subdivision of the State where 

the latter assumes the unqualified burden and duty of using 

it for a governmental function of the former; however, there 

must be a guid pro w contract. Bexar County Hospital 

District v. Crosby, 327 S.W.2d 445 (Tex. Sup. 1959): San 

Antonio Rser Authorit .--f-Y vShepherd, 299 S.W.Zd 920 (Tex. 

-57);clty e Aransas Pass v. Keeiinq, SUp;.thWZn 

SOI the operation contract should prove e only 

operation of the facilities in question with sufficient 

assurance that the special district does not delegate away 

p. 3667 
The Honorable Robert E. Schneider - page 6 (H-869) 

its governmental powers. 

s.W.2a 103 (Tex. Sup. 1975 

of an undivided, legal interest in the regional plant, to be 

operated by a "district," would not be an unlawful delegation 

of governmental powers, since the special district would be 

using the services of the operating agency without delegating 

rate making or other powers, Therefore, in answer to the 

third question, the special district may enter into an 

operation contract with a Texas Water Code "district." 

SUMMARY 

The enactment of section 25.031(c) of 

the Texas Water Code does not affect the 

validity of Attorney General Opinion H-567 

(1975) as it applies to the Inverness 

Forest Improvement District. The special 

district, limited by the bond election 

proposition submitted, may not acquire 

a contractual right to purchase a 

percentage of capacity in a regional 

system. However, the special district, 

in its discretion, may use bond proceeds 

to purchase an undivided, legal interest 

in a regional system. The special district 

may contract with a "district" for the operation 

of its portion of the regional system under 

Chapter 25 of the Water Code. 

Very truly yours, 

Opinion Committee 

Texas 

jwb 

p. 3668