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December 12, 1990

Honorable John Whitmire Opinion NO. JM-1259 Chairman Health And Human Services Re: Authority of amunicipal Committee utility district operating Texas State Senate under chapter 54of the Water P. 0. Box 12068 Code to acquire Austin, Texas real property 78711 foruse as apark, and related

questions (RQ-2056)

Dear Senator Whitmire:

Youhave requested a clarification ofAttorney General Opinion JM-1173 (1990). Specifically, you askwhether it is permissible for a municipal utility district created pursuant to article XVI, section 59, of the Texas Constitution and operating under chapter 54 of the Texas Water Code, to use revenue notes to finance the and park facilities. acquisition ofpark land

Municipal utility districts are among the conservation and reclamation districts created pursuant to article XVI, section 59 of the Texas Constitution [the "conservation amendment"]. The conservation amendment was added to the constitution in 1917. Subsection (a) of the conservation amendment consists of a statement of public policy and includes a listing ofpublic purposes that the amendment is intended to address. Subsection (a)reads as follows:

(a) The conservation anddevelopment of all of the natural resources of this State, including the control, storing, preservation and distribution of its storm and flood waters, thewaters of itsrivers and streams, for irrigation, power and all other useful purposes, the reclamation and irrigation of its arid, semi-arid and other lands needing irrigation, the reclamation and drainage of its overflowed lands, and other lands needing drainage, the conservation anddevelopment of its forests, water andhydro-electric power, the navigation of its inland and coastal

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waters, and thepreservation and conservation of all such natural resources of the State
are each and all hereby declared public rights and duties; and the Legislature shall pass all such laws as may be appropriate thereto.

Subsection (c)of the conservation amendment provides for taxing power and the power to incur debt. Subsection (c) reads as follows:

(c) The Legislature shall authorize all such indebtedness as may be necessary to provide all improvements and the maintenance thereof requisite to the achievement of the purposes of this amendment, and all such indebtedness may be evidenced by bonds of such conservation and reclamation districts, tobe issued under such regulations as any [may]be prescribed by law and shall also, authorize the levy and collection within such districts of all such taxes, equitably distributed, as may be necessary for the payment of the interest and the creation of a sinking fund forthe payment of such bonds; and also for the maintenance of such districts and improvements, and such indebtedness shall be a lien upon the property assessed for thepayment thereof: provided the Legislature shall not authorize the issuance ofanybonds orprovide forany indebtedness against any reclamation district unless such proposition shall first be submitted to the qualified property taxpaying voters of such district and the proposition adopted.

This office recently held that "a municipal utility district, operating under chapter 54of the Texas Water Code may not use taxes to purchase real property for the independent purpose ofhaving it used as apublic park and developed recreational area. . . .*I Attorney General Opinion JW-1173 (1990). The opinion noted, however, that the "provision of recreational facilities may be considered
aproper secondary activity fora district if furnishing them promotes a constitutional purpose." Id. See also Attorney General Opinion MW-313 (1981). Attorney General Opinion JW-1173 did not reach the issue ofwhether amunicipal utility district could use non-tax funds to provide

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.. parks. We note, in this respect, that the first sentence of

the summary ofJM-1173 may be misleading. That sentence reads:

Amunicipal utility district operating under

chapter 54 of the Texas Water Codemay not purchase real property for the independent purpose ofhaving itused as apublic park.

However, acareful reading of the text ofJM-1173 makes it clear that itsholding isconfined to the use of taxmonies.

Inpeason v, Orana Countv Water Control and ID sf.No. I, 244 z.W.2d 981 (Tex.1952) the &$~~~~ Court enjoined a district subject to the' conservation amendment from issuing itsbonds for thepurpose of acguiring fire-fighting equipment even though an express statutory authorization for the acquisition of fire-fighting eguipment was then in effect. At the time the Deason case was decided, article XVI, section 59,contained nomention of fire-fighting, though in 1978 it was amended, by the addition of subsection (f),to specifically provide that districts may engage in fire-fighting activities.1 The Deason decision states, "The Legislature can only grant the district such powers and rights as comewithin the contem-~ plation orprovisions of the articles of the Constitution herein discussed," and that "the Legislature is without power to add to or withdraw fromthe circumstances and purposes specified" inthe constitution. Deason, at 984.

Inabrief submitted for our consideration inpreparing this opinion2 it is suggested that theholding inDeason is of questionable precedential value because it fails to consider the established principle that a state constitution, unlike the federal constitution, is inno sense a grant of power, but operates solely as a limitation of power, and that, therefore, an enactment of the legislature isconstitutional Unless expressly or implicitly prohibited

1. Tex. Const. art. VXI, S59(f), adopted Nov. 7, 1978,proposed byH.J.R. No. 42, S 2,Acts 1977, 65th Leg., at 3374.

2. Brief ofHooper 8 Haag, Attorneys at Law, Austin, Texas, submitted on behalf of three municipal utility districts.

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by a specific provision of the state or federal constitution. &s.& m, -herd v. San Jacinto Junior Colleae District, 363 S.W.2d 742 (Tex.1962). It isaverred that this line of argument was notbriefed to the court considering thepeason case.

Whether ornot it was argued to the Supreme Court in geason that the state constitution limits rather than grants legislative power, we think itdifficult to suppose that the Supreme Court at that timewas unaware of one of the most fundamental doctrines of constitutional law, or that the court failed to consider such a fundamental doctrine because itwas notbriefed. The principle that the legislature may exercise anypower not denied to itby the state constitution or the federal constitution isa venerable one, and hardly anovel concept even fortyyears ago. &.g Dav Land & Cattle Co.v. Stak 4 S.W. 865, 874 (Tex.1887). fouryears before ihe Deason Less than decision the Supreme Court restated this rule inDuncan V. Gabler 215 S.W.2d 155, 158 (Tex. 1948). Amajority of the just&s sitting at the time ofDuncan . Gablm were also Deason de&ion. sitting at the time of the

We think it more plausible that the court in peason, without explicitly so stating, was merely construing the language of the conservation amendment as limiting language despite the fact that it isdrafted as though itwere a grant of authority. Accord Brooks, Countv and Snecial District Law, 36 Texas Practice 5 46.5 (West, 1989). The court cited as its rationale theprinciple that the fundamental purpose inconstruing a constitutional provision is to ascertain and give effect to the intent of the framers of the constitution and of the people who adopted it. **Deason**,suvra, at 984. Accordingly, itappears the Deason court found that the intent of the people in enacting the conservation amendment was to strictly limit the purposes forwhich theymight bemade to incur debt.

There is language inDeason to suggest that the legislature may never grant to a conservation and reclamation district apower not in furtherance of apurpose enumerated in the constitution (seequoted language, m). However, given the context of the narrow question before the court in Deason, A, the authority of a district to issue its bonds, we think itamore reasonable reading of the court's teaching that the legislature may only grant to a district the authority to tax and incur indebtedness as by section 59(c) specified ofarticle XVIwhen such authority will beused in furtherance of a constitutionally enumerated

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.. purpose. Subsection (c) makes itclear that taxes may be

authorized for two purposes: (1)to repay bonded indebtedness, and (2)for themaintenance ofa district and its improvements. As both thepower to incur debt and the power to tax areprescribed by subsection (c),we think it logical that the reasoning of thePeason decision extend to the purposes forwhich adistrict may expend tax revenues as well as to the purposes forwhich itmay incur debt. At any rate, there isnothing inthe language of subsection (c) to suggest that themaintenance taxmay be used to acquire property. Accordingly, we reaffirm theholding of Attorney General Opinion JM-1173.

Under the analysis of theQeason decision presented above, the legislature may grant to conservation and reclamation districts duties andpowers independent of those enumerated inthe conservation amendment, so long as such grant ofauthority isnot inconsistent with the constitutionally imposed limits on the authority of such districts to tax or incur debt. When the legislature grants a district authority not subject to aconstitutional limitation, such authority need not, under this analysis of the Deason decision, be required tobe exercised in furtherance of a constitutionally enumerated purpose. This reading of Deason is inaccord~withholdings of the Texas Supreme Court that the legislature is empowered to establish any form of special district unless limited by the constitution. See, e.a., &RR&&, suura, at 743;Davis v. Lubbock, 326 S.W.2d 699, 710 (Tex.1959); Texas Turnnrke Auth. v. Shennerd, 279 S.W.2d 302, 304 (Tex. 1955). As the legislature could statutorily create a special district to provide park and recreational facilities, we think itanomalous to find that such authority could notbe statutorily granted to a reclamation and conservation district so long as the statutory grant of authority does not conflict with the constitutional limitations on the authority of such districts to tax and issue debt.

InHarris COUntV Water Control & ImDrovement Dist, No. 110 v. exasWater Riahts Cmm'n, ADD. -Austin 1980,nowrit?. 593 S.W.2d 852 (Tex. Civ. the court considered whether a municipal utility district operating under chapter 54of the Water Code has authority to acquire certain recreational facilities, specifically, a community center, three swimming pools, four tennis courts, and aclubhouse. No reference is made in the court's decision of themethod bywhich the facilities were to be financed or of the source of funds intended tobe used for thepurpose. The court found that the proposed facilities did not further apurpose of either

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section 54.012 of theWater Code or article XVI, section 59, of the Texas Constitution and, consequently, the facilities could not be acquired by the district. The court in Harris Countv W.C.I.D. No. 110 specifically considered the argument that the proposed 'facilities were proper because they
were not expressly or implicitly prohibited by the constitution. In this regard, the court stated

In the case ,at bar the sole question is whether the proposed recreational facilities
are permissible pursuant to acts of the Legislature, andnot whether an act of the Legislature isvalid.

Za, at 855. The holding inHarris Countv W.C.I.D. No. 110 is, thus, based on the statutory purposes of municipal utility districts as set forth in section 54.012 of the Water Code. Section 54.012 closely tracks the language of article XVI, section 59(a),but states additional, albeit closely related, purposes. Article XVI, section 59(a), states nopurposes which are not stated in section 54.012, though article XVI, section 59(f), provides that conservation and reclamation districts activities. may engage in fire-fighting

Had the facilities at issue inHarris County W.C.I.D. N0. Q been fire-fighting facilities instead of recreational facilities, the authority for the acquisition for such facilities could have been found in the constitution, even though fire-fighting isnot enumerated as a purpose in section 54.012 of the Water Code. This is mentioned to demonstrate that the court's mention of article XVI, section 59,does not necessarily indicate that the court was basing its opinion on constitutional language, but, rather, shows that the court looked both to statutory and constitutional language in searching for authority fora district to acquire recreational facilities independent of the district's conservation function.

Since -is Countv W.C.I.D. No. 110was decided, the legislature has amended chapter 54 of the among other things, adding Water Code by, subchapter 1.3 Acts 1985, 69th Leg., ch. 100, 5 1. Subchapter Igives statutory authorization to amunicipal utility district todevelop andmaintain recreational facilities. Water Code 55 54.771(b) and 54.773. ..

3. Water Code 55 54.771 through 54.775, inclusive.

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. The Texas Water Code specifically provides for the issuance of revenue notes by amunicipal utility district. Such notes may be issued forany corporate purpose and must bepaid "solely from the revenues derived from the ownership of all or anydesignated part of the district's works, plant, improvements, facilities, or equipment after deduction of the reasonable cost of maintaining and operating the facilities." Water Code 55 54.302, 54.303. The notes may not constitute acharge on theproperty of the district or the taxes levied or collected by the district. Id. Revenue notes issued pursuant to section 54.303 would not constitute an indebtedness within themeaning of article WI, section 59(c) of the Texas Constitution. mower Colorado River Auth. v.McGraw, 83 S.W.2d 629, 633 (Tex. 1935).

Section 54.774 of theWater Code provides as follows:

(a) Adistrict may not issuebonds to pay for the development and maintenance of recreational facilities.

(b) Except asprovided inSubsection (a) of this section, a district may acquire recreational facilities and obtain funds to develop andmaintain them in the same manner as authorized elsewhere in this code for the acquisition, development, andmaintenance of other facilities of the district. Without limiting the foregoing, adistrict may charge feesdirectly to the users of recreational facilities topay forall orpart of the cost of their development andmaintenance.

Section 54.772 of theWater Code provides as follows:

As used inthis subchapter:

(1) 'Recreational facilities' means parks and recreational equipment and facilities.

(2) 'Develop and maintain' means to acquire/own, develop, construct, improve, manage, maintain, and operate.

Wehave established that the legislature may provide statutory purposes and powers for districts created under section 59of article XVI of the constitution so long as those purposes and powers do not conflict with the

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. constitutional limitations on the authority of such districts to tax and issue debt. We have further established that the legislature has provided statutory authority for municipal utility districts todevelop andmaintain parks and recreational facilities, and that the issuance of
revenue notes pursuant to section 54.303 of the Water Code isnot constitutionally restricted. The remaining question iswhether revenue notes issued under section 54.303 are Hbondsn within themeaning of section 54.774(a) of theWater Code. nBonds10isnot adefined term forpurposes of chapter 54of theWater Code.

The Code Construction Act provides, inpart, that:

(a) Words and phrases shall be read in context and construed according to the rules ofgrammar and common usage.
(b) Words andphrases that have acquired
a technical orparticular meaning, whether by legislative definition or otherwise, shall be construed accordingly.

Inordinary usage, abond isa-debt security evidencing
apromise to"pay thebondholder. See. e.a,, Black's Law pictionarv pp. 161-164 (5th ed. 1979). The term. as ordinarily used, and as in factused inmany statutes, is certainly broad enough to encompass the kind of security envisioned by section 54.303 of the Water Code. For instance, the Bond Procedures Act of 1981defines "bonds*'to include

allbonds, certificates, notes, book-entry

obligations, and other obligations authorized to be issued by any issuer by any statute, city home-rule charter, or the Texas Constitution.

V.T.C.S. art. 717k-6, 5 l(b).

However, it is also arule of statutory construction thatwhen aword orphrase isused indifferent parts of a statute, a clear meaning appearing inone instance will be attached to it elsewhere. Boris k Boriack, 541 S.W.2d 237, 240 (Tex. Civ. App. - 'C&p:; Christi 1976, writ dism'd); see also, 67 Tex. Jur. 3d nStatutesO' 5 108, and authorities cited therein. Though not defined inchapter 54 of theWater Code, the term "bondtl isused extensively in subchapters E, F,and G of chapter 54. As the term is used inthose subchapters, abond isclearly distinguishable from

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arevenue note. For example, a bond may be repaid from ad valorem taxes, district revenues from the ownership or operation of its property, or from acombination of these
sources. Water Code 954.503. Additionally abond may be secured by amortgage lien on all or part of the property of the district. Ig, 5 54.504. Bonds may have maturities ofup to fortyyears fromtheir date of issue, and bear interest at any rate permitted by law. Id. S 54.502. However, revenue notes may nothave amaturity ofmore than 20years from their date of issue,may bear 

### nomore than ten per cent interest per year, may notbe payable from tax 

### revenuesof the district's property, andmay notbe secured by the property or taxes of thedistrict. Id. 5 54.303;

x Texap' *

* Sav.

666 S.W.2d 203 (Tex.Civ. [14th Dist.] '1983, APP- - Houston no writ). The term "bondstl ' consistently used throughout chapter 54 to refer to 'i securitv not subject to the restrictions applicable to revenue-notes. -
Section 54.774 was Bill 618 (Acts 1985, originally introduced, certain circumstances, bonds for recreational referred to the Senate added to the Water Code by Senate 69th Leg., ch. 100, 5 1). As Senate Bill 618 provided, under for the issuance of a district's facilities. Senate Bill 618 was Committee onNatural Resources. On

_ _ .. March 14, 1985, itwas reportea aaversely, witn a favorable committee substitute. The committee substitute contains section 54.774 inthe formeventually enacted into law. The bill analysis of the committee substitute for Senate Bill 618 states:

The right ofMUDS toown, operate, and

finance parks and recreational facilities is being questioned by the Department of Water Resources. The department concluded that it isprobable that affluent districts would be able to take on the additional burden of providing recreational facilities without serious problems. However, with respect to newly formed districts without a sound financial base, and other districts providing recreational facilities could bevery severe and probably in many instances ruinous. Also, they suggest that the opportunity exists forthe abuse of the district's taxing power by developers whowish to construct recreational facilities as ameans to attract home buyers within anew subdivision with the intention of selling these facilities to a

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district asquickly aspossible so that they
canbe taken over and supported through tax revenues. Additionally, the Department contended that SB 618may be subject to a constitutional challenge. Texas. Constitution, Article XVI, Section 59,which names all functions of these districts, does not mention the word 'recreation' and such a function must be implied, if itdoes exist. There are legal arguments pro and conbut the leading case in this field, peason vs. Oranae Countv Water > (1952; d 0.

held that constiiutional districts lacked the authorization: either - pressed or implied, toprovide firefightT:g equipment, although an express statutory authorization for such firefighting equipment
was then ineffect. It is quite possible that under the precedent of the Deason case, legislation authorizing districts to provide recreational facilities and equipment could be declared unconstitutional. In this case, the Department would close down existing parks and recreational facilities.

The bill analysis of the committee substitute shows that the legislature was mindful of the constitutional difficulties presented by theDeason case as well as the problems inherent inpermitting adistrict's tax base to be encumbered by recreational facilities which might be ofmore benefit to adeveloper's short-term marketing strategy than to the long-term fiscalhealth of thedistrict. The prohibition found in subsection (a)of section 54.774 against the issuance ofbonds to fund recreational facilities seems aimed at avoiding constitutional restrictions on the issuance ofdebt and untoward encumbrances on adistrict. As revenue notes donot permit encumbering either the taxes or the property of the district, and as their use is not constitutionally restricted, itappears that such a funding mechanism may well have beenwithin the contemplation of the legislature inenacting subsection (b)of section 54.774.
Accordingly, we believe that the term *'bonds"as used insection 54.774 of theWater Code isconsistent inmeaning with the use of the term elsewhere inchapter 54, and does not include "revenue notes' asprovided for by section 54.303. Your question is answered inthe affirmative: it

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ispermissible for amunicipal utility district created pursuant to article XVI, section 59,of the Texas Constitution and operating under chapter 54of the Texas Water Code, touse revenue notes to finance the acquisition ofpark land andpark facilities.

SUMMARY

It ispermissible foramunicipal utility district created pursuant to article XVI, section 59, of the Texas Constitution and operating under chapter 54of the Texas Water Code, to use revenue notes to finance the acquisition ofpark land and park facilities.



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JIM MATTOX Attorney General of Texas

MARYKELLER First Assistant Attorney General

LouMC-Y Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY Special Assistant Attorney General

RENEA HICKS Special Assistant Attorney General

RICK GILPIN Chairman, Opinion Committee
Prepared byJohn Steiner Assistant Attorney General

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