# The Attorney General of Texas
July 5. 1982 MARK WHITE Attorney General

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An Equal OpportunityI Affirmative Action Employer HonorableWilliam P. Clements, Governorof the State of Texas Office of the Governor StateCapitolBuilding Austin, Texas 78711
Dear GovernorClements: Jr. OpinionNo.MW-484 lk: Texas Deepwater Port Authority

You ask whether there is statutory authority for the Texas Deepwater Port Authority to issue tax exempt industrialrevenuebonds to finance the construction of a privately owned and controlled deepwater port facility. As noted in your letter, the pertinent statutory provisions governing Texas Deepwater Port Authority, an agency of the state of Texas, are sections 19.001, et seq. of the Water Code [hereinafter the "act"]. The act does not specifically mention "tax exempt industrial revenue bonds" and we note that the determination of whether interest on a particular bond issue is tax exempt is a matter of federal law to be determined by the Internal Revenue Service. Section 19.001of theact provides:

(1) Texasurgentlyneeds an offshoredeepwater port capableof accommodatingsupertankersfor the importation of crude oil and other fluid commodities that may be carried in ships of that size; (2) it is most desirable for private enterprise to own, construct,and operate such an offshoreport; (3) in the absence of any active and viable plan to develop a deepwater, offshore port by private enterprise, the State of Texas should construct such a facility, which should be self-supporting and whose design, construction, and operation should be carried out by private companiesunder contract;

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(4) protecting the environmentis essential to theproper operationof such a port; (5) the credit of the State of Texas shallnot be pledged to finance such a port; and (6) the Texas Deepwater p,ort Authority be created to implementthispolicy. Section 19.131provides in subsection (1) that the authoritymay borrowmoney from time to time for any corporatepurpose or in the aid of any corporate purpose and in subsection (3) "issue and sell bonds and provide the terms and conditions for repaymentwith interest and rights of thebondholders." Sections 19.132and 19.134,respectively, provide for the form of the bonds and the security therefor. The latter sectionprovides that the bonds may be securedby a "pledge of all or anypart of the revenuesor receiptsof the authorityor by the revenues of any one or more... contracts... specified by the resolution of the board." Subchapter (D) of the act states further the powers and duties of the authority. Section 19.054 provides in subsection (b) that the authority "may enter into contracts or agreementswith anyperson, corporation,trust, orpartnership for the financing, construction, operation, maintenance, and sale by installment or otherwise of a deepwater port or any facilities relative to a deepwaterport." (Emphasisadded). Therefore, in response to your initial question, there is ample statutory authority for the authority to issue revenue bonds to construct a deepwater port and to sell the deepwater port by installment sale or otherwise to a private corporation. The act authorizes the authority to pledge the receiptsunder the installment sale contract to the payment of the bonds. You also ask that should our answer be in the affirmative thatwe cite statutoryauthority for the authority to issue bonds to finance the construction. This we have done in treating the first question.
You next ask, "Is such statutory authority constitutional?" Section 19.011 of the act recites that "[T]he Texas Deepwater Port Authority is createdas an agency of the stateand pursuant toArticle XVI, Section 59, Subsection (a)of the Texas Constitution." It is our opinion that the creation of the Texas Deepwater Port Authority is a proper exercise of the constitutionalmandate in the aforementioned section of the constitution to "pass all such laws as may be appropriate... [in] [t]he conservationand development of all of the natural resources of this State including... the navigation of its inlandand coastalwaters." This sectionof the constitutiondeclares that "the preservationand conservationof all such natural resources of the State are each and all... public rights and duties...." Tex. Const. art.XVI, §59.

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Sections 50, 51 and 52(a) of article III of the Texas Constitutionread as follows:

Sec. 50. The Legislature shall have no power to give or to lend, or to authorize the giving or lending, of the credit of the State in aid of, or to any person, association or corporation, whether municipal or other, or to pledge the credit of the State in any manner whatsoever, for the payment of the liabilities, present or prospective, of any individual, association of individuals, municipal or other corporationwhatsoever.
Sec. 51. The Legislature shall have no power tomake any grant or authorize themaking of any~grant of public moneys to any individual, association of individuals, municipal or other corporationswhatsoever....
Sec. 52. (a) Except as otherwise provided by this section, the Legislature shall have no power to authorizeany county, city, town or other political corporationor subdivisionof the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever, or to become a stockholder in such corporation, associationor company. Sections 19.036(b) and (c) and 19.149(a) and (b) of the act follow thesemandates of the constitution,viz:

Section 19.036 (b) No license or permit may be requested or acceptedby the authority nor may the state be a party to a licenseor permitwhichwould imposeon the State of Texas or the authority any liability or financial obligation by virtue of contract, tort, or otherwise unless that liability or financial obligation is fully indemnifiedwithout expense of state funds. (c) With the exception of the initial appropriations from the General Revenue Fund to the Texas DeepwaterPortAuthorityand revenuesof the authority, the statemay not pledge its faith and credit or contribute any state funds to a

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project of the Texas Deepwater Port Authority or for expenses of carryingout thepowers and duties of the authority. Bonds issued under the provisions of this chapter shall not be deemed to constitutea debt of the state or a pledge of the faith and credit of the state. The authority is not authorized to incurany liabilityor financial obligations which cannot be serviced from the revenues of the authority or from the initisl appropriations. Section 19.149 (a) The provisions of this chapter shall not be construed to authorize the giving or lendingof the credit of the state or to be a pledge of the credit of the state for the payment of any bonds or notes issued under the provisions of this chapter,and thepurchasersand successiveholders of any bonds or notes shall never have the right to demand payment from any money or revenues of the authority except those pledged to the payment ofbonds or notes. (b) This chapter shall not be construed as obligating this state to the holders of any of thosebonds or notes nor to constitutea contract on the part of this state to make money available for any of theauthority'sneeds. This opinion is consistent with over thirty years of interpretationby this office in approving bond issues authorized by similar statutes forport authorities.river authoritiesand cities in providing funds for the construction of such projects as port facilities, pollution control facilities, airports, and electric generation plants. All such facilitieshave been construed as being for a public purpose and within the framework of the Texas Constitution.
We specificallydo not rule on a particular financialplan or on any particular contract at this time. Such review and decisionwill be made when and if bonds are submitted for approval as required by section 19.141of the act.
SUMMARY

The Texas Deepwater Port Authority has been crested as an agency of the state of Texas by

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sections 19.001, et seq. of the Water Code. Such legislation grants authority to such agency to design, construct, and operate a deepwater port, to sell such deepwaterport by installmentsale or otherwise, and to issue revenue bonds for such purpose to be secured by the receipts payable to the authority pursuant to contracts, including an installment sale contract. Such legislation is consistent with the requirement in article XVI, section 59 of the Texas Constitution, requiring the legislature to pass all laws as may be appropriate for the conservation of natural resources.

MARK WHITE Attorney General of Texas
JOHN W. FAINTER,JR. FirstAssistantAttorneyGeneral
RICHARD E. GRAY III ExecutiveAssistantAttorney General Preparedby JohnW. Fainter,Jr. FirstAssistantAttorneyGeneral
APPROVED: OPINION COMMITTEE
SusanL. Garrison,Chairman JohnW. Fainter,Jr. PatriciaHinojosa SusanLee Voss

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