May 3, 1939 

Messrs..Shlvers &-:Ke,lth 

Attorneys for Je.fferson County Water 

Control & Improvement District No.1 

'Adams Building 

Port Arthur, Texas 

A.ttention: .Mr. Allan-Shive'rs. 

.Opiriioi~ NO: .o-46% 

Re: Authorlty.of a Water.Control and 

Improvement'~,District ~o pledge net 

Revenues and.glve a'legal'flrst 

mortgage upon such.system as additional-security to. seCure'.the payment of 'taxi bonds issued.thereon 

Oentlemen:. 

.In iour:-letteti'of March~ 8, .addressed'to'the Attorney 

General, you reque+..an opinioncovering t-he ,foliowlng questions:, 

1. Can t~~"Distrlct, ‘wl,thout additilonal. authorization from. the qualified :,votera , ,'le,gaIly pledge the'net revenues of the water.system,for,,the,pa~ent of,bonds so.,aufhorized? 

1 

2..~Can the,.Doard of Direhtorslegally create a bandlng,flrst.mortgage -.l~,~~-gpon:tt?e'water system'to secure the 

payment of the tax bonds authorlzed,for the construction of the 

water and sewer system? 

Inaccordance,,y$.th,,the ,provls$ons oft Article 4399, 

requiring this,.office.-,~~..~,advise.,,~lative the proper issuance 

of bonds, ..the,following,~~gpinion,has been prepared: 

#As statedl,,gnyour .let'ter, the facts.are as foliows - 

.~i. .., 

.On S.epte.rn~ez:~i~;;.~~~~8,,,:the': qua,lified taxpaying voters 

of the Jeffe~~~~~~~ate~,iC~~~~ql~~~~~d.~.~mprd~eme,nt~.Distr~lct .No. 1 

votedbonds ~aggrega.tlng..,$255,OO'd"'alid -authoriied'.the levying 

of a tax to pay the pr'lnclpal .and interest thereon as it 
‘4. 

Messrs. Shivers &'Keith - page 2 

matured; that you are now negotiating a loan from the Reconstruction Finance Corporation for the purchase of the bonds to 

supplement a W.P.A. grant, and that the bonds to be authorized 

and' pledged against this loan from the R.F.C. are in the sum 

of $195,000. The legal counsel for the R.F.C. has suggested 

that additional security might be offered by the pledging of 

net revenues of the project and also that a first mortgage 

upon the system might also be given. 

Article 7880-147u, Sec.3, Revised Civil Statutes 

of Texas, provides that the Board of Directors of any water control and improvement district may assess and collect charges 

for maintenance and operation of the facilities .of any such 

district and such proceeds when collected should be paid into 

the maintenance fund required in Section 103 of Chapter 25, 

Qeneral Laws~ of the Thirty-nlnth~Leglslature, Regular Session 

of 1925. It further provides that ~a11 or a part of said malntenance fund may be Irrevocably pledged as additional security 

for the nayment of the nrlncinal or Interest on all bonds of 

any such district so issued and sold to the.Qovernment ,of the 

~Unlted States or to any lending agency mentioned in Section 1 

of the Act, or on all bonds of such district nledged as collateral to secure'navment of any loan made by said Government 

or agency thereof 'to any such dlstrlct,as such bonds become 

due and payable,.and moneys of said maintenance fund so pledged 

shall aCcordlngly be used for maintenance and operation when 

and only when the principal of and Interest on the bonds due 

on all preceding semi-annual Interest paymeht dates shall 

have been paid In full and,when the collection of taxes for 

the Interest and,sinklng fund account, reasonably and prudently~ 

to be anticipated by the boerd of directors of any such dlstrlct, will be sufficient to pay principal of and interest on 

the bonds becoming due on the ~semi-~annual interest payment date 

next succeeding. Provided, nevertheless, that when moneys 

of the malntenanhe fund are so used to prevent or to cure defaults In the payment of the principal of or interest on the 

bonds, the amount so used shall be repaid into said maintenance fund from the first available proceeds of the taxes levied 

pursuant to Section 2 of this Act. 

Subsequent to the enactment of this statute, it was 

determined that such districts were without s~peclflc statutory 

authority to pledge net revenues as security for bonds pursuant to the provisions of that article, and at the Third 

Called Session of the same Legislature Article 7880~9Oa was 

enacted to enable such districts to legally pledge the net 

-Yevenues 'as additional security for general obligation bonds 

Issued and sold. It also defines net revenues and enumerates 

the manner in which such pledges could be accomplished, and 
. ’ 

Messrs. Shivers & Keith, page 3 

provided that whichever method was adopted should be first 

submitted to the qualified voters of such.dlstrict for approval thereof. The ca 

acted September 26, 193 t 

tion of this bill, which was en- 

, by the Forty-third Legislature, 

Third Called Session, recorded In General and Special Laws 

of that session, at page 56, Chapter 32, Section 1, states - 

"An Act amending Chapter 25 of the Acts of 

the 39th Legislature, Regular Session, adding 

thereto a section to be 'Section gOa,' and, in 

substance to provide: That certain water control 

and improvement districts (In addition to, or in 

lieu of, securing their bonds by the levy and 

collection of taxes, as now provided), may enter 

into contracts pledging their net revenues for 

security of their bonds; Andy, providing that, in 

case the district's obligations are secured both 

by taxation and the pledge of revenues, to compensate the net revenuesavailable to protect 

the maturities of the dlstrlct*s obligations. 

Defining 'net revenues'; and, requiring an election for authorlza~tlon~for exercising ~the Powers 

hereby aranted; also. flxinn the DrODOISitioiI 

to be voted on at~any such election. ,Stat%g 

the facts cnnstituting an imperative public necessity (to enable such districts promptly to 

procure loans from the Fe,deral AdmInIstratIon of 

Public.Works, or other advantageous sources, 

thereby aiding to relieve unemployment) and de,' 

claring an emergency." 

The foregoing Act is not applicable to your district 

under the facts stated, inasmuch as you are negotiating a loan 

with the Federal Qovernment, or a lending agency thereof which 

brings your case within the purview of the Acts of the Fortyfourth Legislature, 1936, Third Called~Session, page 2092, 

Chapter 501,.Section 1, wherein Section 1 of the Acts of 1934, 

Forty-third Legislature, Second Called~Session, page 10, 

Chapter 4, was amended. The amendment expressly authorized 

the Board of Directors of N water control and Improvement 

district in this State to borrow money and to receive grants 

and other aid from the Government of the United States. the 

Federal Emergency Administration of Public Works, the Recon- 

._ struction Finance Corporation. the Federal Reserve Banks;and 

any other agencies of 'the dovernment .of the United States, and 

which loans or grants may be made on~such terms and in ~& 

amounts as may be agreed upon between the Board of Directors 

of such d@trlcts and the United States Government, or any 

lending agency thereof. 
Messrs. Shivers & Keith, page 4 

In our opinion this law authorizes the pledging 

of the "net revenues" by the Board of Directors of the Jefferson Water Control and Improvement District as additional~security for the previously voted tax supported bonds without 

the necessity of another election. Any plan of financing other 

than that specified in the Act above quoted would require the 

submission of such further pledging of security to the qualified 

voters of such district, as provided in Article 7880~goa of the 

Revised Civil Statutes of 1925. 

It is also our opinion that a first mortgage cannot 

be given on the improvements within such districts. The statutes specifically authorize the pledging of certain revenues 

and ad valorem taxes to the payment of bonds issued by such 

districts, but have failed to provide for the'mortgaging of 

the physical improvements therein. sunder the well established' 

rule of law that wherein a law falls to name matters germane to 

the subject, it is presumed that the intention was to exclude 

such unnamed matters. whence, we conclude that the Legislature 

did not intend that such districts should have the right to 

give a first mortgage on its improvements. 

Assuring you of this department's continued cooperation, we are 

Very truly yours 

ATTORNEYGENERAL OFTEXAS 

BY Clarence E. Crowe 

Assistant 

CEC:s:bt 

Approved: 

cc nr. Edward Edelman, Counsel 

Reconstruction Finance Corporation 

Washington, D.C. 

.-