# The Attorney General of Texas
biay 30, 1981

MARK WHITE Attorney General

Honorable Charles W.Evans Chairman House Committee onGovernment Organization P.0. Box2910 Austin, Texas 78769 Opinion No. Mu-352
Re: Questions regarding proposed legislation placing the National Guard Armory Board under the administrative control of the Adjutant General’s Department
Dear Representative Evans:
You inform us that proposed legislation may amend articles 5931-l- 5931-13, V.T.C.S., the provisions governing the National Guard Armory Board. House Bill 2082 would amend article 5931-4byadding subsection (b) requiring the armory board to use the personnel of the Adjutant General’s Department to administer the act. It would also authorize the board to obtain services necessary to administer the act from other state agencies and to compensate them for these services. The bill wouldinaddition delete from article 5931-5subsection 4, which presently authorizes the board to hire an executive secretary, other officials, lawyers, agents and employees, and to prescribe their duties and fix their compensation. The other powers of the armory board would be left intact. These include the power to sue and be sued, to make contracts, to acquire property, to construct buildings, and to issue and sell bonds, debentures, and other evidence ofindebtedness to fund authorized projects.
Youaskthe following questions concerning the proposed legislation:
Would such action: (1)have the effect ofprohibiting the National Guard Armory Board from borrowing money, or issuing bonds, debentures, or other evidences of indebtedness for the purpose of constructing, remodeling, repairing, and equlping one or more buildings; and (2)would the recommendation violate cr cause to be violated by the National Guard Armory Board any existing covenants, agreements, contracts, or other obligations of the board relating to the indebtedness ofthe board?

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Weanswer both ofyour questions inthe negative.
Wenote initially that the armory board could have elected to use personnel of the Adjutant General’s Office under the provisions ofthe Interagency Cooperation Act, article 4413(32),V.T.C.S. The armory board is astate agency within the provisions of this act. Section 2defines “agency” to include “board.” The armory board is a “state agency” for purposes ofthe Sunset Act. V.T.C.S. art. 5931-la; see V.T.C.S. art. 5429k, R02(1l(A). It has been a department of state government fo*urposes of requesting Attorney General Opinions. See Attorney General Opinions H-24 (1973);M-8900971); M-396 (1969);C-242 (1964);O-5505 (1943). It is funded in the General Appropriations Act. which aoorooriates monev “for the suooort of the Judicial. Executive and Legislative Br&h& ofthe State Government

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. .I’ Acts 1979,66th Leg., ch. 843, at 2445, 2453, 2591. See Id. art. III, s1,at 2564. See also Texas National Guard Armory

-- Board v. McCraw, 126S.W. 2d 627, 640 (Tex.m(dissenting opinion). Although Attornev General Ooinion G-5505 (19431stated that the armorv board was“more nearlv like a municipal cor*poration orcity than aState d-epartment,‘;that wasfor the purposk of determining that the board did not have to request rental space through the Board ofControl. Agovernmental entity may be astate agency for purposes ofsome statutes and apolitical subdivision for others. Compare Attorney General Opinion M-3160968) with Attorney General Opinion M-126609721(community mental health centers).
As a state agency within article 4413(32),V.T.C.S., the armory board may enter into a contract with other agencies of the state “for furnishing necessary and authorized special or technical services, including the services of employees.

...I’ Sec. 3. Contracts are to be approved by the board of control which must consider

“1~1hether the proposed arrangements serve the interests ofefficient and economical administration ofthe State Government.” Sec. 5(b). Thus, House Bill 2082 merely requires of the board what was formerly alegal option under the Interagency Cooperation Act. Contracting under this statute for the services of adjutant general personnel does not affect the power ofthe armory board to issue bonds or other evidences ofindebtedness under section 8of article 5931-5. It simply permits the board to operate more efficiently by pooling resources with the adjutant general or other state agencies to acquire the services ofemployees.
We note that the indebtedness which the armory board may incur is not indebtedness within sections 49 and 50 of article III of the constitution. Texas National Guard Armory Board v. McCraw, 126 S.W. 2d 627 (Tex. 1939); Charles Scribner’s Sons v. Marrs, 262 S.W. 722 (Tex. 1924). Constitutional %Iebt” is an obligation supported by tax monies, for which there must be specific constitutional authorization. The National Guard Armory Board has no authority to issue taxsupported obligations. Its authority extends only to the issuance of revenue bonds;, which are not debt inthe constituticnal sense. See generally City ofDayton v.Allred; 68S.W.2d172(Tex. 19341,Atkinson v.City ofDallas, 353SW. 2d275(Tex. Civ. App. - Dallas 1961,writ ref’d n.r.e.1, cert. denied, 370 U.S. 939 (1962). The act granting

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power to the board to issue revenue bonds, payable from lease revenues from the Adjutant General’s Department, was held constitutional in Texas National Guard Armory Board v. McCraw, -. The conduit financing thus approved isnot adebt of the state. The legislature appropriates funds to the adjutant general, from which said department pays rent to the armory board for the armories constructed bythe board. Those rents are the only security for the board’s revenue bonds issued to construct the armories; the full faith and credit ofthe state does not lie behind the bonds.
An amicus brief submitted for the armory board advances the position that by causing the board to utilize administrative staff of the adjutant general, the board loses all independence, that, in effect, once the board must utilize the staff of the adjutant general, the adjutant general would be both lessor (presently the role of the armory board) andlessee. Interms ofindebtedness incurred bythe board, according to the position advanced by the brief, the adjutant general would be both the issuer of the bonds and the security for the payment of same; he would “in one capacity pledge to himself in another capacity the amounts which he would pay as rentals to meet the bondobligations. ” Brief ofattorneys for the armory board at page 9. Wesubmit that nosubstantive change has actually occurred in the security for the bonds or inthe issuer ofthe bonds. The board still retains, inter alia, the right to sue or to be sued, the right to enter contracts, to acquire property, to issue bonds. The security for such bondshas not changed. That security isstill in the lease payments of the adjutant general to the armory board, not out of the general revenues ofthe state, but from the state appropriation to the adjutant general.
The board retains by the proposed amendment all the characteristics it had save the ability to hire its own administrative staff. The adjutant general is still required to make lease payments, subject to alegislative appropriation for such. The board can still bebrought to court in event of a default. Unless there is some infirmity in the legislature ordering to be done what could be done optionally formerly, wecan see no wayinwhich the security ofthe boards outstanding bonds orthe ability to issue future bonds wouldbeimpaired.
In holding the act establishing the National Guard Armory Board constitutional the Texas Supreme Court stated:

... The Legislature has seen fit to enact this law for the purpose of procuring sites and erecting armories, and has furnished the method for financing the plan. The wisdom or expendiency ofthis law lsleft exclusively to the Legislature to determine, and courts are concerned only with its validity.
Te supra, at 631. Since the court found the law valid, implementation is clearly left in the hands of the legislature. The court certainly appears to recognize the plenary power of the leglslature to prescribe the method of implementation inthe constitutionally valid undertaking. Seealso Attorney General OpiniOn G-6598 0943) at 11(opinion also cites powers of the board, of which

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the power to maintain an administrative staff is one power out of seven enumerated). There lsno negative effect on the power of the armory board to issue bonds brought about by mandating that the board should utilize administrative services of the adjutant general. The board retains all powers which would goto their ability to issue bonds and Secure such bonds orother evidences ofindebtedness.
The second part of your query concerns the possible violation of existing covenants by the change in the act. Since the board effected an advance refunding under article 717k. V.T.C.S.. the oroceedines relatinrr to such refundinu contain all extant covenants.

. See National duard Ariory Boari Refunding Bonds;Scrics 1979, Resolution AuthorizE the Issuance of Bonds, August 25, 1979, section 22. These covenants contain no guarantee to maintain the administration as then constituted. The covenants do pledge efficient and economical management (Resolution, su ra, section 22,at (cl). Apurpose ofthe Interagency Cooperation Act isto serve ef icient + and economical administration of state government. The board could effect through this statute the same administrative changes that the proposed amendment to the enabling legislation mandates. Noviolation ofoutstanding covenant iseffected bythe proposed chanae. Bondholders have novested rizht azainst a chanee in the law. unless

bondholders took the bonds with notice of such legislation and with notice that the board could voluntarily undertake to use another entity’s administrative staff. Were this to comprise a substantial impairment of their contract, there would have been covenants proscribing utilization of the Interagency Cooperation Act in the bond resolution. As we have demonstrated above, mandating what could have been voluntarily undertaken is permissible. If the voluntary act would not have impaired existing covenants, there is nobasis for concluding that legislation mandating the act will impair covenants, and certainly nobasis for concluding that the mandate goes to substantial rights under the contract.
SUMMARY

Legislation requiring the armory board to utilize the administrative facilities of the adjutant general will not preclude the board from issuing bonds or other evidences of indebtedness, nor wlll such action violate existing covenants relating to the board’s indebtedness.

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MARK WHITE Attorney General ofTexas
JOHN W.FAINTER, JR. First Assistant Attorney General
RICHARD E.GRAY, III Executive Assistant Attorney General Prepared bySusan L.Garrison Assistant Attorney General Susan Lee Voss
APPROVED: OPINION COMMITTEE
Susan L.Garrison, Chairman Rick Gilpin Jim Moelinger Susan Lee Voss

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