JIMMATTOX AttorneyGeneral

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AnEqualOpportunity/ AffirmativeActionEmployer 

# TheAttorney General ofTexas

August 8,~1986

Eonorable Richard Hmdorf Criminal District Attorney Anderson County Cowthouse Palestine, Texas i5801 Opinion No. x4-530

Re: Whether Anderson County may expend surplus money from road bonds and from its workmen’s compensation account tobuild ajail

Dear Mr. Handorf:

You ask whether Anderson County mayspend certain county funds for the construction of a newjail. Your first question is whether Anderson County mayspend $1.4 million in surplus from an issuance of road bonds. You explain that in 1969 the voters of Anderson County voted to issue $7.30,000 in road bonds pursuant to article 752a, V.T.C.S.. repealed ‘2:~Acts 1983, 68th Leg., ch. time of that bond e:lection article 752a provided: i88, at 1526. At the

1. The original version of article 752a was adopted in 1926. Acts 1926, 39th Leg., ch. 16, at 23. In 1955the legislature adopted twoseparate amendedversions of article 752a. Acts 1955, 54th Leg., ch. 113, at 393, and Acts 1955. 54th Leg., ch. 69 at 348. Both versions appeared :.nVernon’s Texas Civil Statutes. The version of article 752a set Out in the text of this opinion is the version that appeared in chapter 113. The first paragraph of the other version was essentially the sameexcept that it did not contain the words “or for anyother lawful permanent improvement.”

Both versions passed the Senate onthe sameday. After that, the chapter 113version, which is the version set out in the text of this opinion. passed the ‘Houselater than the other version. Therefore, to the extent that the .versions are inconsistent, the chapter 113version controls. See Wr:&;ht V. Broeter. 196 S.W.2d 82, 85 (Tex. 1946)

-- (later-enacted statute controls).

p. 2440Ronorable Richard Handorf - Page 2 (JM-530)

Any county, 0:: any political subdivision of a county, or any road district that has been or may hereafter be created by any General or Special Law, is hereby authorized to issue bonds for the purpose of the construction, maintenance and operation of macirdamized, graveled or paved roads and turnpikes, or in aid thereof, in any amount not to exceed one-fourth of the assessed valuation of the real prope-rty of such county or political subdivision or ::oad district, and to levy and collect ad valorem taxes to pay the interest on such bonds and urovide a sinkinK fund for the redemption therec

’f. Suchbonds shall be issued in the manner hd!reinafter provided, and as contemplated and-authorized by Section 52, of Article 3, of the-Constitution of this State. The term ‘Political S;bdivision.’ asused in this Act, shall be construed to mean any commissioners precinct or anyjustice precinct of acounty. now or hereafter to be created and established. Provided, when tl?! principal and all interest on said bonds are fully paid. in the event there is any surplus remarning in the sinking fund, said remaining surplur-not used in the full payment of the principal anccinterest on said bond or bonds maybe used by 1:h.ecounty, political subdivision of the county, or-any local district that has been
or may hereafter be created by any General or Special Lawfor ?he purpose of the construction, maintenance, ar;i operation of macadamiaed, groveled or pavei roads and turnpikes or in the aid thereof or for any other 1: awful permanent improvement as may be determined by the Commissioners Cou;t of anycounty or the officials of any political-subdivision of a county or any said road districi,. (Emphasis added).

Acts 1955, 39th Leg., ch. 113, 51. at 393.

The election order for the 1969 bond election stated that the voters would bevoting on the following proposition:

WHETHERor not the bonds of said Anderson County, Texas, shall be issued in the amount of SEVENHUNDRED

FIFIY THOUSAND

DOLLARS($750.000). to bear interest 

### starate not to exceed the maximumprescribed by law at the time of issuance, and to mature scr’ially over a period of not to

p. 2441Honorable Richard Handorf - Page 3 m-530)

exceed TWELVE(12) years from the date thereof, in thereof, conformity Constitution conformity with the Constitution and laws of the State of Texas, Farticularly Section 52of Article Farticularly Section Article III of the Const:Ltution, as amended, for the purConst:Ltution, amended, construction, maintenance pose of the construction, maintenance and operamacadamiw?d, graveled tion of macadamiw?d, graveled or paved roads and turnpikes thereof, Anderson County, turnpikes or in aid thereof, in Anderson County, Texas; andshall advalorem taxes be levied onall valorem taxable property in said County subject to taxation for the purpose of paying the interest on said bonds and t> provide a sinking fund for the redemption therecf at maturity. (Emphasis added).

You also sent us acopy of a “Proposed Election Hand-out.” That handout states:
Proceeds of the bond issue will be used to

finance the County’s participation in Right-Of-Way and fencing of 98 miles of U.S. and State highways. The State of Texas shares equally with the county in the purchase of R-O-Wand fencing of the
same. This 98md,les of R-O-Wandfencing involves 20 projects along State Highways #155, 1294 and 819 and U.S. Hdghways #79, #84, #287 and Loop 8256.

You inform us that the projects described in that handout were not all completed. You do not inf>:m uswhoissued the handout, when it was issued, or howit wasdistributed.

Youalso provide the following information:

The $75O,OOO.(KZvoted in the Bond Election was eventually spent: on right of way costs but

. . . due to the increased amount of state participation themoneywasnot used for aconsiderable length of time and it accumulated a tremendous amount of interer,t. Theinterest andprincipal of the BondElectior. have been totally paid off.

You ask whether Anderson County mayspend the surplus money on the construction of a ni%wjail. We conclude that it may not. Standing alone, the language in article 752a that says that surplus from bonds maybe used fol, any lawful permanent improvement might be read to allow a county to spend such surplus for any permanent improvement for which a ccNu,ntycould lawfully spend money. However, that language must be read in context. Article 752a provides that bonds issued thereunder “shall be issued

. . .as contemplated and

p. 2442Honorable Richard Handorf - Page 4 (JM-530)

authorized by section 52, article 3, of the Constitution of this State." That constitutional provision authorizes the legislature to authorize counties to issue t'onds for the following purposes only:

(1) The improvement of rivers, creeks, and streams to prevent overflows, and to permit of navigation thereof, or irrigation thereof, or in aid of such purposes. (2) The construction andmaintenance of pools, lakes, reservoirs, dams, canals andwaterways for the purposes of irrigation, drainage or navigation, or in aid thereof.
(3) Theconstruction, maintenance andoperation of macadamised, :graveled or paved roads and turnpikes, or in aid thereof.

Because article 752a is based on article III, section 52, of the constitution, we think that the type of permanent improvements for which surplus from bonds x&ybe spent is limited to the purposes for which article III, section ,52, allows counties to issue bonds. See State exrel Childress v. School Trustees of Shelby County, 239S.Wx 777, 781 (Tex. 1951) (all :E:ctions of abill should be read so as to present aharmonious whole). Also, wethink that anarrow reading of article 752a makes sense in light of the well-established rule that proceeds of bonds must be spent for purposes for which they were voted. Lewis v. City of F>rt Worth, 89S.W.2d 975. 978 (Tex. 1936). As a practical matter, ths?l:e may often be some surplus after bond proceeds have been spent i'clr the purposes for which the bonds were issued and the bonds have been retired. See Madeley v. Trustees of Conroe Independent School District, 130. S.W.2d 929, 934 (Tex. Cl". ADD.- Beaumont 1939. writ;lism'd judamt car.). Butwedonot think that article 752a should br read sobroadly that it would potentially permit political subdivisic~ns to attempt to circumvent the expressed will of the voters in order to maintain asurplus for use onprojects
onwhich the voters have not voted.

In regard to the use 'J!Ebond proceeds wealso note that whenan election order or pledge does not specify projects for which bond proceeds are to be used, the governing body of the entity issuing the bonds is left free to exercise its discretion in expending the funds. Hudson v. SanAntonio Independent School District, 95S.W.2d 673, 674 (Tex. 1936). In such casec, however, the governing body must not act unreasonably or arbitrarily. Lewis v. City of Fort Worth, 89 S.W.2d 975, 978 (Tex. 1936). Also, when voters have relied on orders pledging that bond proceeds will be used on certain projects, the governing body of the entity issuing the bonds maynot arbitrarily ignore or repudiate those pledges. Hudson v. SanAntonio Independent

p. 2443,- Honorable Richard Handorf - Page 5 ml-530)

School District, 95 S.W.2d 673 (Tex. 1936). Weexpress no opinion about the nature of the elezction handout you provided to us, but we call your attention to thlz following language in a 1982 Court of Appeals case: Although it is the general rule, relied upon by

appellees. that a (contract or agreement madeby a public agency like appellee School District is valid and binding only when adopted by a resolution or order at ameeting of the governing body andentered in it!3minutes, wehave found noauthority expressly holding that a statement to the .voters designating a particular site to be purchased with the proceeds of abond issue, madeby
agoverning body with the power of site selection, under the circusstances and for the deliberate purpose and the effect alleged here by appellant, must be adopted at: ameeting entered in the minutes of the govening body before it can officially become andbe relied upon bythe voters aspart of the proposition submitted in the bond proposal. Devorsky v. LaVega Independent School District, 635 S.W.2d 904, 909 (Tex. APP. - Waco 1982, no writ); See also Inverness Forest Improvement District v. Har’dy Street Investors, 541 S.W.2d 454. 460 (Tex. Civ. App. - Houston [ist Dist.] 1976, writ ref ’d n.r.e.) (letter bydirectors of improvement Idistrict represented andpledged to voters that bond proceeds would b#eused for certain projects even though letter wasnot official action of the board). But see Garcia v. Duval County, 354 S.W.2d 237, 240 (Tex. Civ. App. - SanAntonio 1962, writ ref ’d n.r.e.).

Your second question is whether Anderson County can spend approximately $800,000 thal: was set aside from its general fund and its road andbridge fund for payment of worker’s compensation claims. You explain that from 1972 through 1984 Anderson County chose to be self-insured for purposes of worker’s compensation. In 1972 the statute governing worker’ s compensation for county employees was codified as article 8309c. V.T.C.S. Section 16 of article 8309c provided as follows:

Sec. 16. The county is hereby authorized to set aside from available appropriations, other than itemized salary appropriations, anamountnot to exceed five per cent (5%) of the annual employee payroll of the county for the payment of all costs * adn.inistrative expenses, charges, benefits, 1nsuranc.e and awards authorized by this Act.

p. 2444Honorable Richard Handorf - ‘Page 6 (JM-530)

The amount ao :set aside shall be set up in a separate account in the records of the county, which account shall showthe disbursements authorized by this Act: provided the amount soset aside shall not exceed five per cent (5X) of the annual employee payroll at any one time. Astatement of the amount set cls’ide for the disbursements from said account shall be included in anannual report madeto the County Treasurer andthe Commissioners Court.

Article 8309c was repealed in 1973. Acts 1973, 63rd Leg., ch. 88, at 200. It wasreplaced by article 8309h, which contains ~essentially the
sameprovision:
(a) The political subdivision is hereby

authorized to set aside from available appropriations, other than itemized salary appropriations,
anamount sufficient for the payment of all costs, administrative expenses, charges, benefits, insurance, attorney fees, andawards authorized by this article.
(b) The amount so set aside shall be set up in
aseparate account in the records of the political subdivision, which account shall show the disbursements authorized by this article. Astatement of the amount set aside for the disbursements from the account shall be included in an annual report madeto the political subdivision treasurer and the duly and legally constituted governing body of the political subdivision.

V.T.C.S. art. 8309h. 07.

As background to your question, we note that all county expenditures lawfully authorized to be madeby acounty must be paid out of a county’s general fund unless there is some law that makes such expenditures a charge against a special fund. Bexar County v. Mann. 157S.W.Zd 134 (Tex. 1941). Therefore, expenditures madeout of themoney set aside pursuant to article 8309c or 8309h should have
come from the county’s general fund. However, a county may consolidate its four constitutional funds or it may transfer money into its general fund frownits road and bridge fund. See Attorney General Opinion MU-516 (198:!) (discussion of county fundsand article VIII, section 9, of the Texas Constitution). Consequently, it was not improper for Anderson County to set aside money from its road and bridge fund for worker’s ccmpensation purposes. -,

p. 2445Honorable Richard Eandorf - I?age7 (JM-530)

You explain that since 1984 Anderson County has not been self-insured but has paitl premiums to the Texas Association of Counties. Over $800,000 remains in the account set aside pursuant to articles 8309c and 8309h. You explain that the county auditor has suggested that a certain amount be set aside for expenses that might arise in connection with claims that arose before 1984. You ask whether Anderson County may spend the remaining money on the construction of ajail. Woconclude that Anderson County maydo so. Themoney in question was :aerely "set aside" in aspecial account to be used for worker's compensation costs, if needed. There was no requirement that all the moneyset aside actually be spent onworker's compensation, nor any guar'antee that the money set aside would be sufficient to meet the county's worker's compensation costs. The statutes merely allowed the county to set aside a reserve for potential costs. Once the purpose for the special account no longer exists, we see no impedim~?nt to returning the unused money to the county's general fund. Therefore, Anderson County may spend that money for any proper county purpose. See V.T.C.S. art. 2351(7) (counties have authority to 'build jails). -
SUMMARY

Anderson County maynot spend surplus from an issuance of road 'bonds on the construction of a new jail. Anderson County may spend on the construction of a newjail money set aside for worker's compensation purposes but no longer needed for such purposes.

Very truly you 

# J k

k, JIM MATTOX Attorney General of Texas

JACKRIGHTOWER First Assistant Attorney General

MARYKELLER Executive Assistant Attorney General

RICKGILPIN Chairman, Opinion Committee Prepared bySarah Woelk Assistant Attorney General

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