# THICA~TORNEX OF 

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## GENERAL

TnuAm 78711

July 2, 1974

The Honorable J. W. Edgar, Commissioner Texas Education Agency 201 East Eleventh Street Austin, Texas 78701 The Honorable Bevington Reed, Commissioner, Coordinating Board Texas College and University System P. 0. Box 12788, Capitol Station Austin, Texas 78711 Opinion No. H-339
Re: Application to Independent School Districts and Regional Junior Colleges of statute authorizing issuance ofCertificate ofIndebtedness

Gentlemen: Each ofyou has requested our opinion about the effect ofArticle 2784g-2. V. T. C. S., currently Sec. 20.51 ofthe Texas Education Code, dealing with “Certificates ofIndebtedness” issued by school districts.
Dr. Edgar asks:

In authorizing a school district board to issue certificates ofindebtedness (in amount(s) notto exceed $250,000) without the requirement ofalocal election to approve such indebtedness, does [Sec. 20.511contravene Article VII, Section 3of the Constitution ofTexas.
His second question, relating to a specific school district is:

Since [Sec. 20.511was not enacted prior tothe time when the district electorate voted anauthorized maximum maintenance tax rate (in July 1968). may a school district board legally appropriate and/or

p. 1579.

‘. ’ . .

The Honorable J.W. Edgar The Honorable Betington Reed page 2

irrevocably pledge local maintenance taxes 

### as payment for certificates ofindebtedness issued pursuant to [Sec. 20.511as amended?
Dr. Reed inquires for the Wilbarger County Junior College District about the legality ofthe issuance of such certificates by the District for the purpose of constructing physical. education facilities onthe campus ofVernon Regional Junior College which the District operates.

Pertinent provisions of 520.51 ofthe Education Code, incorporating the 1973amendment to Article 2784g-2 61 (a), are: (a) Any school district, including ajunior college district, may issue interest bearing Certificates of Indebtedness for the purpose of (1)providing funds for the erection and equipment of school buildings within the boundaries ofthe district, (2) refinancing outstanding certificates as herein provided, or (3) purchasing sites for the future construction of public school facilities. The term certificates, as used in thin Act [Section] shall include all obligations authorized to beissued hereunder and the term ohall include interest thereon, unless clearly indicated by the context that another meaning is intended. (b) The governing body ofthe district shall make provision for the payment ofthe certificates issued

. . . by.

. . the appropriation and pledge oflocal school funds derived and to be derived from maintenance taxes levied and assessed or tobe levied and assessed under authority ofSections 20.02 and 130.122 ofthis code

. . . or other similar law

. . . which limits the amount oftax which may be levied for maintenance purposes, as distinguished from bond requirements. The appropriation and pledge may be in the nature of a continuing irrevocable

p. 1580The Honorable J.W. Edgar

The Honorable Bevington Reed page 3

pledge to apply the firrt money6 collected or to be collected annually from the tax levy to the payment ofthe obligation6 or by the irrevocable prerent levy andappropriation ofthe amount ofthe maintenance tax as ir required to meet the annual debt service requirement6 ofthe obligations, in which event the governing body 6hall covenant toannually set aside the amount in the annual tax levy, showing the same is a portion ofthe maintenance tax. The governing body shall annually budget theamount required to pay the debt service requirements, principal and interest, ofthe obligations which may be scheduled to become duein any fircal year. Nothing herein shall be conetrued a6 permitting the levy of a maintenance tax in exce6a ofthe amount approved by the resident qualified property taxpaying voter6 ofthe district. (f) Certificates authorized to be irsued hereunder shall be payable at 6uchtimes, be in such form and denomination or denomination6

. . . and contain such other provision6 

### arthe governing body ofthe district may determine, butin no event rhall any certificate mature over a period in exce6s of 25year6 from the date thereof, or bear interest at a rate in exce66 of seven percent per annum. (k) Certificate6 is6ued under the provi6ions ofthi6. section shall be an indebtednerr ofthe school diltrict i6suing them, buttheholder thereof shall nothave the. right to demand payment thereof out ofany fund or fund6 other thanthoee pledged toit6 payment.

. . . *****

p. 1581The Honorable J.W. Edgar

The Honorable Bevington Reed psge 4

(n) The provi6ionr ofthis section shall be cumulative of existing law6 relating to thefinancing ofthe cost of erecting and equipping rchool building6 by 6chool districts , it being the legislative intent thatthi6 section shall be complete authority for the issuance, sale, and delivery of certificates by school districtcr.

*****
These provisions have not yet been conrtrued by the appellate **courts, but** we believe they will be held constitutional.

Article 7, Sec. 3, ofthe Constitution of Texas reads in part as follows:

. . . and the Legislature may authorize anadditional

advalorem tax to be levied and collected within all school districts heretofore formed or hereafter formed, for the further maintenance ofpublic free schools, and for the erection and equipment of school buildings therein; provided that a majority ofthequalified property taxpaying voter6 of the district voting at an election to be held for **that purpose,**  **&all vote**  such tax not to exceed in any one year one ($1.00) dollar on the one hundred dollars valuation ofthe property subject totaxation in such district, but thelimitation uponthe amount of school district tax herein authorized shall not apply to incorporated cities or towns constituting separate and independent 6chool di6tricts. nor toindependent or common school district6 created bygeneral or special law. (Emphasis added) Although the portion ofArticle 7, Sec. 3, here considered appears to refer toa single tax to be voted for maintenance and school building purposes, the Lgiilrtum, historically, has treated taxes for such respective purpose6

p. 1582,

The Honorable J. W. Edgar The Honorable Bevington Reed, page 5

as separate, distinct taxes, each requiring separate voter approval. (See, Seer. 20.02, 20.04, 130.122, V. T. C.S., Education Code).
In Madeley v. Trustee6 of Conroe I.S.D., 130S.W. 2d 929 (Tex. Civ. App. , Beaumont, 1939, err. dt6%n., judgment car. ), the Court conridered two statutory forerunner6 ofthe above noted Education Code provisions. All the public free 6ChOOl6in the dirtrict were adequately maintained and a large surplur had accumulated in the maintenance tax fundwhich the Trustee6 proposed to 6pend for building improvementr.

What shall the Trustees dowith thir ru,~lur? It cannot be expended in the support andmaintenance ofthe public free 6ch0016, for it is not needed for that purpose; it cannot be diverted from public free school purposes, for under the Conrtitution it was collected for thatpurpore. It cannot be returned to the tax payers. It6 allocation to the maintenance fundwas by legislative edict for the purpore ofrupporting and maintaining the public free rchool. When that purpose ha6 been effectuated, the fund io nolonger 6ubject to the control ofthe statutes, for the purpore ofthe statute6 has been fully effectuated, Ifand when the statutes cease to control the fund, then it becomes a conrrtitutional fund and not a rtatutory fund, and may be ured by the trurteer for the constitutional nurpose6; one ofthe constitutional purposes is ‘the erection and equipment of rchool buildingr’ within the dirtrict. (Emphasir added)
InAllen v. Channelview Ind.Sch. Dist., 347S.W.2d 27 (Tex. Civ.App., Xaco, i961, writ ref ’d. )the plaintiff attacked the constitutionality of Article 2786e, V. T. C.S., now Sec. 20.43(a) ofthe Education Code, which authorized school districts to issue time warrants against maintenance tax proceeds for certain purposes, including the repair, purchase, renovation and equipment of 6ChOOlproperties. The rtatute, in effect, pledged “delinquent taxerr (except bond taxes) penalties and interest to the payment ofoutstanding warrants.” Butthe Court denied that Article 7, Sec. 3ofthe Constitution forbade deficit financing. p. 1583. The Honorable J. W. Edgar

The Honorable Bevington Reed, page 6

The plaintiff argued that thepreviour maintenance tnx elections had authorized levy and collection oftaxes for maintenance only for 

### acurrent year, and that nonew elections had been held to authorize the collection oftaxes to pay such time warrants. But Ue Court noted that only

“available” maintenance trx money, collected purmant to an election, properly held, was used. [Prelrumably, surplus tax money rimilar to the hind discuseed in the Madeley case: note Sec. 3ofActs 1953, 53rd Leg., R.S., p. 1038, ch.427, and see Attorney General Opinion C-197 (1963)].
In discussing thi6 claim, the Court said:

They contend the statute unconstitutionally authorizes issuance ofwarrant6 payable from taxes without an election atwhich the tax is voted. If by this is meant a special election at the time the warrants are irsued, Section 3 does not require it, and there is nocontention maintenance taxes ‘available’ were notproperly voted. (Emphasis added) The Madeley case would seem to teach that where the statute authorize6 the collection ofthe tax for current year maintenance purpo6e6 only, the money cannot be ueed for anything else until all maintenance requirements for theyear have been met. The Allen case teaches thatmaintenance tax funds “available” can be pledged topay time warrants, if the practice is legislatively sanctioned.
In our view, surplus maintenance tax receipts, remaining unexpended after maintenance purpose6 have been fulfilled, may be pledged as payment for Certificates ofIndebtedners under the above-quoted portions ofSec. 20.51, whether the election authorizing the levy of the maintenance tax funds Used for iia accomplishment occurred before or after the effective date of Sec. 20. 51. SUMMARY

Surplus maintenance tax receipts, remaining unexpended after maintenance purposes have been fulfilled, may bepledgriar payment for Certificate6 ..

p. 1584:*

. The Honorable J. W. Edgar

The Honorable Bevington Reed, page 7

ofIndebtedne66 under the above-quoted portion6 ofSec. 20.51, whether the election authorizing the levy ofthe maintenance t6x fund6ured for it6 accomplirhment occurred before or after the effective date ofSec. 20.51. Very truly yours,

DAVID M. KENDALL, Chairman Opinion Committee

p. 1585