The Attorney General of Texas 

July 5. 1982 

MARK WHITE 

Attorney General 

Supreme Court Building 

P. 0. Box 12546 

Austin, TX. 76711. 2546 

512/475-2501 

Telex 9101674-1367 

Telecopier 5121475.0266 

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An Equal OpportunityI 

Affirmative Action Employer 

Honorable William P. Clements, 

Governor of the State of Texas 

Office of the Governor 

State Capitol Building 

Austin, Texas 78711 

Dear Governor Clements: 

Jr. Opinion No.MW-484 

lk: Texas Deepwater Port 

Authority 

You ask whether there is statutory authority for the Texas 

Deepwater Port Authority to issue tax exempt industrial revenue bonds 

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 19.001 of the act provides: 

(1) Texas urgently needs an offshore deepwater 

port capable of accommodating supertankers for 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 

offshore port; 

(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 

companies under contract; 

p. 1707 
Honorable William P. Clements, Jr. - Page 2 (MW-484) 

(4) protecting the environment is essential to 

the proper operation of such a port; 

(5) the credit of the State of Texas shall not 

be pledged to finance such a port; and 

(6) the Texas Deepwater p,ort Authority be 

created to implement this policy. 

Section 19.131 provides in subsection (1) that the authority may 

borrow money from time to time for any corporate purpose or in the aid 

of any corporate purpose and in subsection (3) "issue and sell bonds 

and provide the terms and conditions for repayment with interest and 

rights of the bondholders." Sections 19.132 and 19.134, respectively, 

provide for the form of the bonds and the security therefor. The 

latter section provides that the bonds may be secured by a "pledge of 

all or any part of the revenues or receipts of the authority or 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 

agreements with any person, corporation, trust, or partnership for the 

financing, construction, operation, maintenance, and sale by 

installment or otherwise of a deepwater port or any facilities 

relative to a deepwater port." (Emphasis added). 

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 receipts under the installment 

sale contract to the payment of the bonds. You also ask that should 

our answer be in the affirmative that we cite statutory authority 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 created as an agency of the state and pursuant to Article 

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 constitutional mandate in the aforementioned 

section of the constitution to "pass all such laws as may be 

appropriate... [in] [t]he conservation and development of all of the 

natural resources of this State including... the navigation of its 

inland and coastal waters." This section of the constitution declares 

that "the preservation and conservation of all such natural resources 

of the State are each and all... public rights and duties...." Tex. 

Const. art. XVI, §59. 

p. 1708 
Honorable William P. Clements, Jr. - Page 3 (VW-484) 

Sections 50, 51 and 52(a) of article III of the Texas 

Constitution read 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 

corporation whatsoever. 

Sec. 51. The Legislature shall have no 

power to make any grant or authorize the making of 

any~ grant of public moneys to any individual, 

association of individuals, municipal or other 

corporations whatsoever.... 

Sec. 52. (a) Except as otherwise provided 

by this section, the Legislature shall have no 

power to authorize any county, city, town or other 

political corporation or subdivision of 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, 

association or company. 

Sections 19.036(b) and (c) and 19.149(a) and (b) of the act 

follow these mandates of the constitution, viz: 

Section 19.036 

(b) No license or permit may be requested or 

accepted by the authority nor may the state be a 

party to a license or permit which would impose on 

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 indemnified without 

expense of state funds. 

(c) With the exception of the initial 

appropriations from the General Revenue Fund to 

the Texas Deepwater Port Authority and revenues of 

the authority, the state may not pledge its faith 

and credit or contribute any state funds to a 

p. 1709 
Honorable William P. Clements, Jr. - Page 4 (MW-484) 

project of the Texas Deepwater Port Authority or 

for expenses of carrying out the powers and duties 

of the authority. Bonds issued under the 

provisions of this chapter shall not be deemed to 

constitute a debt of the state or a pledge of the 

faith and credit of the state. The authority is 

not authorized to incur any liability or 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 lending of 

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 the purchasers and successive holders 

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 

of bonds or notes. 

(b) This chapter shall not be construed as 

obligating this state to the holders of any of 

those bonds or notes nor to constitute a contract 

on the part of this state to make money available 

for any of the authority's needs. 

This opinion is consistent with over thirty years of 

interpretation by this office in approving bond issues authorized by 

similar statutes for port authorities. river authorities and cities in 

providing funds for the construction of such projects as port 

facilities, pollution control facilities, airports, and electric 

generation plants. All such facilities have been construed as being 

for a public purpose and within the framework of the Texas 

Constitution. 

We specifically do not rule on a particular financial plan or on 

any particular contract at this time. Such review and decision will 

be made when and if bonds are submitted for approval as required by 

section 19.141 of the act. 

SUMMARY 

The Texas Deepwater Port Authority has been 

crested as an agency of the state of Texas by 

p.1710 
Honorable William P. Clements, Jr. - Page 5 (MW-484) 

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 deepwater port by installment sale 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. 

First Assistant Attorney General 

RICHARD E. GRAY III 

Executive Assistant Attorney General 

Prepared by John W. Fainter, Jr. 

First Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Susan L. Garrison, Chairman 

John W. Fainter, Jr. 

Patricia Hinojosa 

Susan Lee Voss 

p. 1711