‘. 

. 

December 12, 1990 

Honorable John Whitmire Opinion NO. JM-1259 

Chairman 

Health And Human Services Re: Authority of a municipal 

Committee utility district operating 

Texas State Senate under chapter 54 of the Water 

P. 0. Box 12068 Code to acquire 

Austin, Texas 

real property 

78711 for use as a park, and related 

questions (RQ-2056) 

Dear Senator Whitmire: 

You have requested a clarification of Attorney General 

Opinion JM-1173 (1990). Specifically, you ask whether 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 of park 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 of public purposes that the amendment is 

intended to address. Subsection (a) reads as follows: 

(a) The conservation and development of 

all of the natural resources of this State, 

including the control, storing, preservation 

and distribution of its storm and flood 

waters, the waters of its rivers 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 and development of 

its forests, water and hydro-electric power, 

the navigation of its inland and coastal 

P. 6717 
Honorable John Whitmire - Page 2 (JM-1259) 

waters, and the preservation 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, 

to be 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 for the 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 the payment thereof: provided 

the 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 taxpaying voters of such district and the 

proposition adopted. 

This office recently held that "a municipal utility 

district, operating under chapter 54 of the Texas Water Code 

may not use taxes to purchase real property for the 

independent purpose of having it used as a public 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 

a proper secondary activity for a 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 of whether a municipal utility district could use non-tax funds to provide 

P. 6718 
Honorable John Whitmire - Page 3 (JM-1259) 

. . 

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

the summary of JM-1173 may be misleading. That sentence 

reads: 

A municipal utility district operating under 

chapter 54 of the Texas Water Code may not 

purchase real property for the independent 

purpose of having itused as a public park. 

However, a careful reading of the text of JM-1173 makes it 

clear that its holding is confined to the use of tax monies. 

In peason v, Orana Countv Water Control and I D 

sf. No. I, 244 z.W.2d 981 (Tex. 1952) the &$~~~~ 

Court enjoined a district subject to the' conservation 

amendment from issuing its bonds for the purpose 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 no mention of 

fire-fighting, though in 1978 it was amended, by the addition of subsection (f), t o 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 come within the contem-~ 

plation or provisions of the articles of the Constitution 

herein discussed," and that "the Legislature is without 

power to add to or withdraw from the circumstances and 

purposes specified" in the constitution. Deason, at 984. 

In a brief submitted for our consideration in preparing 

this opinion2 it is suggested that the holding in Deason is 

of questionable precedential value because it fails to 

consider the established principle that a state constitution, unlike the federal constitution, is in no sense a 

grant of power, but operates solely as a limitation of 

power, and that, therefore, an enactment of the legislature 

is constitutional Unless expressly or implicitly prohibited 

1. Tex. Const. art. VXI, S 59(f), adopted Nov. 7, 

1978, proposed by H.J.R. No. 42, S 2, Acts 1977, 65th Leg., 

at 3374. 

2. Brief of Hooper 8 Haag, Attorneys at Law, Austin, 

Texas, submitted on behalf of three municipal utility 

districts. 

P. 6719 
Honorable John Whitmire - Page 4 (JM-1259) 

. 

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 is averred that 

this line of argument was not briefed to the court considering the peason case. 

Whether or not it was argued to the Supreme Court in 

geason that the state constitution limits rather than grants 

legislative power, we think it difficult to suppose that the 

Supreme Court at that time was unaware of one of the most 

fundamental doctrines of constitutional law, or that the 

court failed to consider such a fundamental doctrine because 

it was not briefed. The principle that the legislature may 

exercise any power not denied to it by the state constitution or the federal constitution is a venerable one, and 

hardly a novel concept even forty years ago. &.g Dav Land & 

Cattle Co. v. Stak 4 S.W. 865, 874 (Tex. 1887). 

four years before ihe Deason 

Less than 

decision the Supreme Court 

restated this rule in Duncan V. Gabler 215 S.W.2d 155, 158 

(Tex. 1948). A majority of the just&s sitting at the time 

of Duncan . 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 is drafted as though it were 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 the principle that the fundamental purpose in construing 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, it appears the Deason 

court found that the intent of the people in enacting the 

conservation amendment was to strictly limit the purposes 

for which they might be made to incur debt. 

There is language in Deason to suggest that the legislature may never grant to a conservation and reclamation 

district a power not in furtherance of a purpose enumerated 

in the constitution (see quoted 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 it a more 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 

of article XVI when such authority will 

be used in furtherance of a constitutionally enumerated 

P. 6720 
Honorable John Whitmire - Page 5 (JM-1259) 

. . 

purpose. Subsection (c) makes it clear that taxes may be 

authorized for two purposes: (1) to repay bonded indebtedness, and (2) for the maintenance of a district and its 

improvements. As both the power to incur debt and the power 

to tax are prescribed by subsection (c), we think it logical 

that the reasoning of the Peason decision extend to the 

purposes for which a district may expend tax revenues as 

well as to the purposes for which it may incur debt. At any 

rate, there is nothing in the language of subsection (c) to 

suggest that the maintenance tax may be used to acquire 

property. Accordingly, we reaffirm the holding of Attorney 

General Opinion JM-1173. 

Under the analysis of the Qeason decision presented 

above, the legislature may grant to conservation and reclamation districts duties and powers independent of those 

enumerated in the conservation amendment, so long as such 

grant of authority is not 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 a constitutional limitation, 

such authority need not, under this analysis of the Deason 

decision, be required to be exercised in furtherance of a 

constitutionally enumerated purpose. This reading of Deason 

is in accord ~with holdings 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 it anomalous to find that 

such authority could not be 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. 

In Harris COUntV Water Control & ImDrovement Dist, No. 

110 v. e xas Water Riahts C mm'n, 

ADD. - Austin 1980, no writ?. 

593 S.W.2d 852 (Tex. Civ. 

the court considered whether a 

municipal utility district operating under chapter 54 of the 

Water Code has authority to acquire certain recreational 

facilities, specifically, a community center, three swimming 

pools, four tennis courts, and a clubhouse. No reference is 

made in the court's decision of the method by which the 

facilities were to be financed or of the source of funds 

intended to be used for the purpose. The court found that 

the proposed facilities did not further a purpose of either 

P. 6721 
Honorable John Whitmire - Page 6 (JM-1259) 

section 54.012 of the Water 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, and not whether an act of the 

Legislature is valid. 

Za, at 855. The holding in Harris 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 no purposes 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 in Harris County 

W.C.I.D. N 0. 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 is not 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 for a 

district to acquire recreational facilities independent of 

the district's conservation function. 

Since -is Countv W.C.I.D. No. 110 was 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 I gives statutory authorization to a municipal utility district to develop and maintain 

recreational facilities. Water Code 55 54.771(b) and 

54.773. 

. . 

3. Water Code 55 54.771 through 54.775, inclusive. 

P. 6722 
Honorable John Whitmire - Page 7 (JM-1259) 

. 

The Texas Water Code specifically provides for the 

issuance of revenue notes by a municipal utility district. 

Such notes may be issued for any corporate purpose and must 

be paid "solely from the revenues derived from the ownership 

of all or any designated 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 a charge on the property 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 the meaning 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 the Water Code provides as follows: 

(a) A district may not issue bonds to pay 

for the development and maintenance of recreational facilities. 

(b) Except as provided in Subsection (a) 

of this section, a district may acquire 

recreational facilities and obtain funds to 

develop and maintain them in the same manner 

as authorized elsewhere in this code for the 

acquisition, development, and maintenance of 

other facilities of the district. Without 

limiting the foregoing, a district may charge 

fees directly to the users of recreational 

facilities to pay for all or part of the cost 

of their development and maintenance. 

Section 54.772 of the Water Code provides as follows: 

As used in this 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. 

We have established that the legislature may provide 

statutory purposes and powers for districts created under 

section 59 of article XVI of the constitution so long as 

those purposes and powers do not conflict with the 

P. 6723 
Honorable John Whitmire - Page 8 (JM-1259) 

. 

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 to develop and maintain parks 

and recreational facilities, and that the issuance of 

revenue notes pursuant to section 54.303 of the Water Code 

is not constitutionally restricted. The remaining question 

is whether revenue notes issued under section 54.303 are 

Hbondsn within the meaning of section 54.774(a) of the Water 

Code. nBonds10 is not a defined term for purposes of chapter 

54 of the Water Code. 

The Code Construction Act provides, in part, that: 

(a) Words and phrases shall be read in 

context and construed according to the rules 

of grammar and common usage. 

(b) Words and phrases that have acquired 

a technical or particular meaning, whether by 

legislative definition or otherwise, shall be 

construed accordingly. 

In ordinary usage, a bond is a-debt security evidencing 

a promise to"pay the bondholder. See. e.a,, Black's Law 

pictionarv pp. 161-164 (5th ed. 1979). The term. as 

ordinarily used, and as in fact used in many 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 1981 defines "bonds*' to 

include 

all bonds, 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 a rule of statutory construction 

that when a word or phrase is used in different parts of a 

statute, a clear meaning appearing in one 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 in chapter 54 

of the Water Code, the term "bondtl is used extensively in 

subchapters E, F, and G of chapter 54. As the term is used 

in those subchapters, a bond is clearly distinguishable from 

P. 6724 
Honorable John Whitmire - Page 9 (JM-1259) 

a revenue note. For example, a bond may be repaid from ad 

valorem taxes, district revenues from the ownership or 

operation of its property, or from a combination of these 

sources. Water Code 9 54.503. Additionally a bond may be 

secured by a mortgage lien on all or part of the property 

of the district. Ig, 5 54.504. Bonds may have maturities 

of up to forty years from their date of issue, and bear 

interest at any rate permitted by law. Id. S 54.502. 

However, revenue notes may not have a maturity of more than 

20 years from their date of issue, may bear no more than ten 

per cent interest per year, may not be payable from tax 

revenues of the district's property, and may not be secured 

by the property or taxes of the district. 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 on Natural Resources. On 

_ _ . . March 14, 1985, it was reportea aaversely, witn a favorable 

committee substitute. The committee substitute contains 

section 54.774 in the form eventually enacted into law. The 

bill analysis of the committee substitute for Senate Bill 

618 states: 

The right of MUDS to own, operate, and 

finance parks and recreational facilities is 

being questioned by the Department of Water 

Resources. The department concluded that it 

is probable 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 be very severe 

and probably in many instances ruinous. 

Also, they suggest that the opportunity 

exists for the abuse of the district's taxing 

power by developers who wish to construct 

recreational facilities as a means to attract 

home buyers within a new subdivision with the 

intention of selling these facilities to a 

P. 6725 
Honorable John Whitmire - Page 10 (JM-1259) 

district as quickly as possible so that they 

can be taken over and supported through tax 

revenues. 

Additionally, the Department contended 

that SB 618 may 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 it does exist. There are legal 

arguments pro and con but 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, to provide firefightT:g 

equipment, although an express statutory 

authorization for such firefighting equipment 

was then in effect. 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 the Deason case as well as the 

problems inherent in permitting a district's tax base to be 

encumbered by recreational facilities which might be of more 

benefit to a developer's short-term marketing strategy than 

to the long-term fiscal health of the district. The prohibition found in subsection (a) of section 54.774 against 

the issuance of bonds to fund recreational facilities seems 

aimed at avoiding constitutional restrictions on the issuance of debt and untoward encumbrances on a district. As 

revenue notes do not permit encumbering either the taxes or 

the property of the district, and as their use is not 

constitutionally restricted, it appears that such a funding 

mechanism may well have been within the contemplation of the 

legislature in enacting subsection (b) of section 54.774. 

Accordingly, we believe that the term *'bonds" as used 

in section 54.774 of the Water Code is consistent in meaning 

with the use of the term elsewhere in chapter 54, and does 

not include "revenue notes' as provided for by section 

54.303. Your question is answered in the affirmative: it 

P- 6726 
Honorable John Whitmire - Page 11 (JM-1259) 

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 acquisition of park land 

and park facilities. 

SUMMARY 

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 

acquisition of park land and park facilities. 

Very tuly Y , 

J A;,. h 

JIM MATTOX 

Attorney General of Texas 

MARYKELLER 

First Assistant Attorney General 

Lou MC-Y 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

RENEA HICKS 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by John Steiner 

Assistant Attorney General 

P. 6727