September 2, 1955

Dr. J. W. Edgar OpinionNo. S-171 Commissioner of Education Texas EducationAsency Re: Constitutionalityand conAustin, Texas struction of SenateBill 116, 54th Legislature&- tiele 2784e-1,V.C.S.).,regula.&glevy of taxes by school~districtsformainDear Dr. Edgar: tenance-andbond purposes.

Your letter requesting an opinion of this.offiee~~assumes that
no actlion

may be takenunder.Cbapter 528,Acts of.thfi.54th Legislature, 1955 (SenateBill 116) until.the lawbecon+eti. effective.'.

Your aseumptlod~ia correct. ThenSenate ~concurred In the House.AmendmeRtsby a voice vote, thus .maklngthe bill effective September 6, 1955, which la 90 days after adjournment.

Your questions'

are as follows:



### “(1)

“(2)

“(3)Is Senate Bill No. 116 constitutional?

Will bonds voted prior to the effective date of 'suchstatute, which bonds were voted under statutes applicable at the time of the election, includingArticle 2784e, continue.tobe limitedby the 50$? tax provision of Article q84e, and If your answer is in the affirmative,will the 50# tax limitationapply to (a)bonds outstanding on the effective date of Senate Bill No. 116, (b)bonds voted prior to such effective date but not issued until thereafter,and (c)bonds issued to refund bonds voted prior to such effective date?

Can a district lawfully elect to continue to vote and levy maintenance taxes and-

Dr. J. W. Edgar, page 2 (S-171)

“.,( 4.)



### “(5)

“(6) vote and Issuebonds pursuant toArtlcIe 2784e, or wlIi aI1 maintenance tax and bond electionssfter the effective date of SenateBill No. 116 automatically be held under the terms of said Senate Bill?

After the effective date of Senate Bill No. 116, may a district lawfully vote the maximum $1.50maintenance tax provided by Senate Bill No. 1'3.6, even though at the time of the election it has in excess of 7.5% bonded indebtedness?

Once a districthas lawfully voted malntenance taxes and bonds under Senate Bill No. 1.16,1s there any means whereby the district can revert to Its status prior to the electionand thus be governed by the tax limitationsImposedby Article 2784e?

If a district lawfully votes a maintenance tax in the maximum amount provided by Senate Bill No. I16, and lf such district validly votes and Issuesbonds, the amount of which bonds when added to outstanding bonds 1s less than.lO$,but because of a subsequentdecrease In assessed valuations of taxableproperty in the,year or years following the Issuance of said bonds, the ratio Is Increased to ll$, is the maximum maintenance tax tbatthe district may levy reduced to $1.10 on the one hundred ~dollars assessed value of taxable property within the district,or could the district under the statute levy a,malntenance tax of $1.20. In other words, pursuant to the schedules set forth in Subdivision I of Section 1, will a school districtwhich has validly come wlthin the operation of the act always be able to levy a maintenance tax of at least $1.20 regardless of its outstandingbonded indebtedness (assuming,of course, that the tax in such amount has lawfullybeen voted and authorized)?". -

Dr. J. W. Edgar, page 3 (S-171)

your first question la whether S. B. 116 Is constitutional.

The amount of tax which may be leviedby a schools district Is prescribed inArticle 7, Section 3, of the Constitution of Texas in the following language:;
,"i

. . the'Legislaturemay.author,ise an additional ad'valorem~.tax to be.levled and collected withinall school dlstrlcteheretofore formed or hereafterformed.,for the further maintenance~ofpub3l~e'free scboo1s, and for the erection and equipment-ofschool buildings therein; provided that a majority of the qualified property taxpayingvoters of the district voting at an~election to~~be held for that purpose., shallvote ,suc,h

tax not to exceed In any one year one ~($1.00) dollar on the one hundred~dollarsvaluation of the property subject to taxation in such district, but the limitationupon the amount of school district tax herein authorized shall not apply to incorporatedcltles,or~townscons.titutlngseparate and independentschool dlstrlcts, nor to independentor common school districts created by general or special law."

As to whether a municipally controlled school district with extendedboundaries comes within the above exception so as to permit the adoption of thisAct is not now passed upon. As to all other districts specified,however, it is found .;l,.thatS.B. 116 properly prescribes the qualification of voters and manner of conducting the election for malntenance and bond purposes. The'only other questions which might arise are to be found in the language of Section 3 of theAct, which section reads
as follows:

"It is the intentionof the Legislature that the provisions of thisAct shallbe cumulative of all other laws and it is further intended that the provisionshereof shall not apply to any districtuntil such time as the provisions of this Act have been adoptedby a majority- .

Dr. J. W. Edgar, page 4 (S-171)

vote of the qualified voters of such district who own property which has been duly rendered for taxation on the tax rolls of the county for that purpose."

The Supreme Court of Texas has previouslyruled that the Attorney General should approve bonds sought to be issued by municipal and quasi-municipalcorporationswhere the law and his resultant duties are clear; otherwise, the proposed issue shouldbe disapproved since any questionmust be resolved against the Issuing agency.
Section 3 of Senate Bill 116 presents questions concerning the sufficiencyof the caption, proper quallflcatlonsof voters, proper rolls for rendition purposes and the proper interpretationof some of its language. While it is lmportant that school finance not become stagnant, it is more lmportant that no posslblllty exist that a school district issue unlimited tax bonds when it has not compliedwith all of the conditionsprecedent. Section 3, if constltutlonal, requires then

adoption of the .provlslonsof theAct in order for the district to have the power to issue unlimited tax bonds.

The procedure hereinafter set out is cumbersome,and is recommended solely because it takes into account the possible constructionsof the provisions of Section 3 and thereby removes any doubt as .tothe meaning of the Act., If this procedure la followed, the duty of theAttorney General will be clear.

Three separate election orders shouldbe entered calling an election to determine if the district shouldadopt the provlslons of S.B. 116. The elections couldbe held at the same time and place with the same election officials. Such election orders, however,would vary as to the proper qualificationsof the voters as follows:
(1) Submission to the "qualifiedvoters of such district who own propertywhich has been duly rendered for taxation on the tax rolls of the county" as required by Section 3 of Senate Bill 116.
(2)Submission to the "qualified.electorswho own taxable property in the

. s
. district

. e
. and who have duly rendered the same for taxation' on the district rolIs, asDr. J. W. Edgar, page 5 (S-171)

contemplatedby-ArtFcle 6, Sectlon 3(a)landperhapsArticle 7, Section 3, of the Constitution of Texas-.
(3) Submission to the poll tax holders as contemplated by Article 6, Section 2, of the Constitution of Texas*
(As to common school districts, only methods 1 and 3 would be required in .thelight of Subsection 4 of Section 1 of S.B. 116).

If all of these propositions carry, there can be no question but that the district has lawfullyadopted the provisions of theAct.

It would a&o be possible to enter still another election order (or as a~part-of number 2 above) to submit to the resldent qualifled~property taxpayingvoters who have duly rendered their property for taxation on the district .rollstwo addl-~ tlonal proposltlons, i.e., the adoptlon of the~maintenance tax provislon'asauthorized by Subsection 1 of Section 1 of S.B. 116, and a proposition for the issuanceof additional bonds under the unlimited tax provisions,as authorized by Section 1, Subsection 2 of S.B:116. Of course,. it would not be mandatory to vote addItiona bonds, but lf the,maFntenancetax provisions of S.B. 116 are adopted, It necessarilyfollows that future issues of bonds must come under Subsection 2 of Section 1 as unlimited tax bonds.

It shouldbe noted that Section 3 also speaks of a "majority vote of the qualified voters of such district"but in so doing does not specially provide for an election. Section 2, however, supplies this deficiencyby saying that the general,laws appllcable to calling and holdingbond and tax elections "shall govern such district in the callingand holding of the election permitted or required under this Act." Thus, all of the propositionsmay be submitted at a single election which should be called in the time and manner prescribedby Article 2785.

Your second question is whether the tax which may be levied for the payment of bonds voted prior to the effective date of Senate Bill 116 will be limited to 50# per one hundred dollars taxable valuation as providedby Article 2784e. It is an elementalprinciple of law that all statutes,decisions, and constitutionalprovisions which are in effect at the time of the issuance of the bonds form an integralpart of the contract between the issuing agency and the bondholder. Norton v. Tom- 1

Dr. J. W. Edgar, page 6 (S-171)

182 S.W. 2d 849, 851(Tex.Clv.App.,1944, writ

C:F48); of den. 325 U.S. 861, 65 S. Ct. 1200, 89 L. Ed. 1928;

McAIlen City of Houston

v. Danlel,~147

v.Allred, Tex.123 62, Tex. 211 S.W. 334, 71 2d S.W. 944,947 2d 251,259 247 S.W.11934);~City of Aransas Pass v. Keeling, 112 Tex. 339,

818 (1923).

It is equally well established that where the Constitution authorizes the levy of a special tax by the qualified property taxpaying voters, such tax is not leviedby the school district or munlclpalltybut by the delegated taxing power of the owners of the propert School District, IO5 Tex. 19 r Crabb v. Celeste Indenendent

, I46 130 Tex. 54, 108 :::I 81 Countyv. McGraw, 1
C.J;S., p. 666. ?d 20~g~9~7s~-

In the Crabb case, sunra, the court said (at page 530):

"It is safe and proper to say that no special tax authorizedby the Constitutionto be levied by the vote of the qualifiedproperty taxpaying paying voters of any munlclpalltyor school dlstrlct can ever'lawfullybe levied without offering the opportunity to dent in such territory such property owners reslliege of the ballot." of exercising their prlv-

;;tthegza;o;;lba

case, sunra,we find the following statement

"In the case at bar the qualified taxpaying voters of San Saba County voted under a law that secured to them the right to vote off such tax in two years, and, further, such voters voted under a law that guaranteed to them that the proceeds of such tax could never be charged with a bond issue. This law was passed for the purpose of putting into effect the constitutionalprovisionauthorizing such tax. Now, after .suchtax is voted, the LeglsIature, without the consent of the voters, has
-- attempted to impair and destroy their rights existing at the time of the vote. To our minds such a legislativeact not only violates the very constitutionalprovisions authorizing the tax to be voted, but violates section 16 of article 1 of our State Constitutionas well." (Emphasis supplied)Dr. J. W. Edgar, page 7 (S-171)

The case of David v. Timon, 183 S.W. 88 (Tex.Clv.App.,1916) Involveda~situation where 'thelaw In existenceat the t-w of the voting of certain bonds required that the bondsbe sold at grand accrued interest. The statutewas amended after the vote of the people but before thebonds were **is** sued so as to permit the bonds to be sold at a discount. The court,stated (at page 91):

"There can be no doubt ,thatthe provlslonof law i,n effect when~thebonds were~votedwasmandatory and binding upon every one concerned. It became a nart of the contract for the issuance .andsaIe of the'bonde, and was a pz& of the considerationfor'= au~orlzation cTh= Issuance." (Bmphasls supplied)

Thus, It is clear that in voting bonds prior to the effective date of Senate Bill 116, the residentqualifiedproperty taxpaying voters authorized the issuanceof thebonds and that the 50$ limitation contained inArticle 2784e became a part of the,contract ,which may not be changed without the express consent of the quaIlfledproperty taxpayingvoters who have duly rendered theirpropertyfor taxation.

Another reason for answering your secondquestionin the affirmative 1s found in the PrOVisiOnSof SenateBill 116. Section 2 of theAct provides that the schooldistrict "may issuebonds and may levy ad valorem taxes

. . .",clearly showing that theAct is prospective in operationonly. The caption of theAct reads, in part:

**11** and providing that saiddistrictsmay li& ad valorem taxes in an amount sufficient to pay the interest and principalof all bonds hereafter issued for such purpose
. . ." (Emphasis supplied)
Thus, the caption and.body of thebill conformas required by Article III, Section 35, of the Constltutlonof the State of Texas, and your second question is answered in the affirxative.

For the reasons above stated, the remainderof your questions
are thus answered: Bonds voted under the provisionsof- .

Dr. J. W. Edgar, page 8 (S-171)

Article 2784e, "

wbether~

issued or not, ~~111 be subject to the 50# tax llmltatlon. .Thereis no provision to permit the resident qualified proDerty taxpayingvoters to vote upon t.beissuance,ofrefundingbonds under the unlimited tax statute,'and for.the reasons heretofore stated,bonds to refund'llmlted tax obllgatlonswill necessarilybe limited tax bonds. Article 2789 V.C.S. The power to issue refundlne bonds is not hIDlied. but must be obtained from the Legislature." SanAntonio Union Junior College Dlst. v. Daniel, 146 Tex. 241, 206 S.W. 2d $395(1947).

As to your third and fifth questions,a reading of the entireAct clearly lndlcates that the Legislature co~ntemplated that SenateBill 116 and Article 2784e,Vernon's Civil Statutes, will be considered as alternativemethods of securing school.bondswhich are voted after the~effectivedate of the Act. T.hus,the districts could choose not to accept theprovisions of the'

new.Act and vote;and issue~llmlted tax bonds,
or it could adopt t,he provisionsof Senate Bill 116 (assuming' ellgibillty to.

do so by debt,structure)and thereafter issue.T unlimited taxbonds. Once.the districthas adopted the provisions of~senate Bill 116,'there is no provision for it to return to its former statusunderArticle 2784e.

Your fourth questlo,nls whether the districtmay vote the maximum maintenance tax of $1.50 even though by reason of its debt~structurethe, districtwould.haveauthority to levy a. tax'of only.$1.40, accordin' to the f0rmul.a contalned In Section 1 of Senate Bill 112 ~~ . Your.queation ,lsanswered in the affirmative. The' Act of ~theLegislature contemplates .' the voting of a maintenance tax of not to exceed a certain amount and then restricts or limits the amount which may,be levied in accordance'with the formulawhich is based on the debt structure. ',~ ~.

In addition to this interrelationand dependence of the malntenance tax upon the debt structure, it should be noted that Section 3 apea@ of adopting "theprovisions of thisAct.". ~ Thus, it ,would

not be possible .toadopt the unlimited tax bond provisionswithout the.adoptionof the maintenance tax provisionsundoerS.B. 116. The provisions limiting the number of maintenance tax electlons (Article2792) would not be applicable.to the,flrstmaintenancetax eLection under S.B. 116 since the new ~statuteconfers a new and original authority. That restriction,however, thereafter would become applicable.. .

Dr. J. W. Edgar, page 9 (S-171)

Your sixth question is, as follows:

"Ifa district,lawfully-votesa~mslntenance. tax in the maximum amount providedby Senate Bill No. 116, and if such district validly votes and issuesbonds,~the amount of~whichbonds when ' added.to outstanding bonds ~1sless than lO$, but becau,seof a subsequent decrease ln'assessed valuations of taxable property ln.theyear or years following the issuance of saidbonds, the ratio .isincreased to ll$, is the maximum maintenance tax that the districtmay levy reduced to $1.10 on the one hundred dollera assessed value. of taxable property within~thedistrict, or could the di~strlct

under the statute levy a maintenance tax of $1.20. In other words, pursuant to the schedule set forth in Subdivision 1 of Section 1, will a school district which has validly come within the operation of the act always be able to levy a maintenance tax of at least $1.20~ regardless,of its outstandingbonded Indebtedness (assuming,of course, that the tax in such amount has.IawfuIIybeen voted and authorlzed)?ni

Section 1 of the Act reads, &part, as follows:

"Incommon and independent school dlstricts, rural high school districts, and cities and towns constituting independent school districts, and.ln all other school districts for ,thefurther maintenance of public free schools,an annual ad 1 valorem tax may be levied not to exceed, in districts having a bonded indebtednessof seven per cent (7%) or less of its total assessed value of taxable property, One Dollar and Fifty Cents ($1.50)on the One Hundred Dollars ($100.00) assessed value of taxable property in the district. For each one per cent (1s) or major fraction thereof, increase in bonded lndebtedness beyond seven ner cent (7%) of the assessed value of taxable property in such school district, themaximum maintenance rate shallbe decreased bv Ten Cents (log!). The maximum maintenance rates which may be levled,annuallyin any district shall conform to the following schedule:Dr. J. W. Edgar, page 10 (S-171)

Bonded indebtedness in the amount of
seven per cent (7%)or less of the assessed value of taxable property $1.50

Bonded'indebtednessin the amount of eight per cent (8%) of the assessed value of taxable property $1.40

Bonded indebtedness in the amount of nine per cent (9%)of the assessed value of taxable property $1.30

Bonded indebtednessin the amount of ten per cent (10%)of the assessed value of taxable property $1.20

. . . " (Emphasissupplied).

All of the language of theAct must be given effect, and the underlined language demonstratesthat an increase in the bonded debt .musthave a direct effectupon the amount of maintenance tax which may be levied. The next sentence does not modify or change the rule, but merely sets forth a schedule for purposes of illustration. This view is strengthened when it is remembered that the first sentence speaks of "fractions" of one per centand the schedulemakes no such allowantes. Thus, if a districthas a bonded debt of 9.9 of the assessed value of taxableproperty,but because of a decrease in the taxable values, the ratio becomes ll$, the maximum maintenance tax which couldbe levied would be $1.10 ~$r one hundred dollars valuation.

The constitutional tion .3,are met by 116. Section 3 of nlte and uncertain requirementsof Article 7, Secthe provisions of Senate Bill thatAct, however, Is lndeflin meaning, but the prescribed procedure will permit operationunder theAct. The provisions of SenateBill 116 are to be considered as an alternatemethod of school finance, but once this method is adopted, It must be followed for all purposes-andthere is no provision SUMMARYDr. J. W. Edgar, page 11 (S-171)

to return to Its former status. The amount of tax which may be levied for maintenance-purposes has a direct relation to the amount of bonds outstanding

### and may~be less thah $1.20 per one bundrqd doLlara valuation.

Very truly yours,

Elbert M. Moftiow

:.Assistant

EMM-a Frank Pinedo Assistant