Honorable HenryWade

District Attorney Dallas County Dallas, Texas Opinion No. M-4

Se: Use ofbond proceeds.

Dear Mr.Wader

You have requested our opinion concerning the use of the proceeds of $7,500,000 ofbonds issued by Dallas County Hospital District' under the certain facts submitted with your opinion request.

The Board ofHospital Managers2 of theDistrict officially concluded that certain specific improvements to the District should be made. AIIamount for each specified improvement was set forth in the Board's minutes and the total amount for all improvements was $7,500,000. The Board resolved that the Dallas County Commissioners' Court3 be requested to call an election onOctober 13, 1964, on the question of issuance of $7,500,000 inbonds "for said Hospital District improvements". On December 12, 1964, the Commissioners' Court submitted the following proposition, as relevant herein, to the electorate:

"Shall the Commissioners' court ofDallas County, Texas, have the power and authority to issue the bonds of theDallas County Hospital District, . . .in the aggregate principal amount'of $7,500,000, . . .for the purpose of constructing enlargements and improvements to theDistrict's hospital

. . .'I .

Hereinafter referred to as "theDistrict". Hereinafter referred to as "theBoard". 3 Hereinafter referred to as "theCommissioners' Court".

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Honorable HenryWade, Page 2 (~-4)

You further state that there isno reference in theMinutes of the Commissioners' Court to themeeting or minutes of saidmeeting of the Board atwhich the resolution was made concerning the improvements. A private group of citizens interested in the approval of these bonds circulated abrochure setting out proposed purposes and "estimated costs" similar to those in the Board's resolution. The voters of the District approved the issuance of thebonds. Thereafter an official "Notice of Sale" of ~thesebonds was published which stated that thebond prcceedswould be used "substantiallyN as specified therein and set forth purposes and amounts similar to those in the Board"s resolution. The bonds were subsequently issued, sold and delivered and the proceeds received by theDistrict.

It now appears that the lowest andbest bids for constructing certain of the specified improvements will exceed the amounts previously contemplated. You ask:

"In light of the stated fact situation, may theDallas County Hospital District
use agreater amount ofbond proceeds than
are earmarked for a listed project even though thismay cause a shortage of funds for the later projects on the list of improvements?"

Itmust first be determined whether therewere valid designations upon which thevoters could rely as to the particular improvements tobemade and the amount tobe spent on each. Once valid designations have been made and relied upon, they cannot be ignored or repudiated without perpetrating a fraud or its equivalent on the voters. Black v. Strength, 112Tex.188, 246S.W. 79 (1922). All valid pre-election orders, and not only the voted proposition, must be considered indetermining whether there has been avalid designation. There must be compliance with allvalid pre-election orders to insure that the electorate will receive thebenefits expected at the time of the election. Thaver v. Greer, 229 S.W.Zd 833(Tex.Civ.App. 1950,
error ref. n.r.e.). See alsoMoore v. Coffman, 109Tex. 93, --.

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Honorable HenryWade, Page 3 (~-4)

a, 200 S.W. 374 (1918) andFletcher v. ~lv, 53S.W.Zd 817 (Tex.Civ.App. 1932, error ref.). Where the proceeds of
abond issue are designated for **a**particular use or uses either in anorder calling abond election or in a contemporaneous order, then such order or orders must be treated as a contract between the governing body, the Commissioners' Court in this instance, and the electorate. Wriqht v. Allen, 257 S.W. 980 (Tex.Civ.App. 1924, error ref.). Under the facts submitted, the only order entered by the Commissioners' Court was the order calling the **election** which clearly did **not** make any designations regarding the use of the bond proceeds.

The District was created pursuant to the provisions ofArticle 4494n, V.C.S., which authorizes the Commissioners' Court to issue bonds for the purposes set forth in the proposition which was submitted to the voters. Under Section 3of Article 4494n the Commissioners' Court **may** call abond election on its ownmotion or it shall call an election at the request of the Board.

Since there was no specific designation by the Commissioners' Court regarding the use of the proceeds of thebonds inquestion, itmust be determined whether the Commissioners' Court was acting at the request of the Board in calling the election or in anyway adopted or ratified the Board's resolution in the pre-election proceedings. Under the submitted facts, the Commissioners' court did not refer to the Board's resolution to request the Commissioners' Court to call anelection in either the order calling the election or in theminutes of themeeting atwhich the election was called. There isno indication inthe fact statement set forth inyour opinion request that the Commissioners' Court adopted or ratified the Board's resolution, either directly or indirectly, prior to the election which authorized the issuance of thebonds inquestion. The proposition which was submitted to the electorate asked onlywhether theywould approve the issuance of $7,500,000 ofbonds "forthe purpose of constructing enlargements and improvements to the District's hospital". The Commissioners' court did not set forth various projects, or the amount of money tobe expended on each project, at any time prior to

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Honorable HenryWade, Page 4 (K-4)

the election, although such designation could have been made had the Commissioners' Court sodesired. Further, the Commissioners' Court did not call the election on the date mentioned Lnthe Board's resolution. In the light of the fa'ctsset forth inyour opinion request we must conclude that the Commissioners' Court was acting on its
ownmotion in calling thebond election onDecember 12, 1964. We accordingly hold that the only restriction placed on theDistrict in the expenditure of the proceeds from the sale of the bonds inquestion is that the funds must be spent 

### on constructing enlargements and improvements of theDistrict's hospital in compliance with the provisions ofArticle 4494n. So long as the funds are so expended, the voters are notbeing deprived of anybenefits which could have been expected by them at the time of the election. See Lewis v. City ofFort Worth, 126Tex. 458, 89 S.W.Zd 975 (1936) and Garcia v.Duval County, 354 S.W.Zd 237 (Tex.Civ. App. 1962, error ref. n.r.e.).

Under the facts submitted, the pre-election publicitybrochure was never adopted or ratified by appropriate order of the Commissioners' Court, and it is therefore merely an expression of opinion by thosewho signed it and does not constitute apre-election promisf by the Board or the Commissioners' Court. Conrad v. Pendleton County, 209 Ky. 509, 273 S.W.57 (1925). Clearly the notice of sale of thebonds could nothave been relied upon by the electorate, as itwas published subsequent to the election authorizing the issuance of thebonds.

SUMMARY

Under the facts submitted, the only restriction placed upon the expenditure of the proceeds of thebonds inquestion is that the fundsmust be expended on constructing enlargements and improvements of theDistrict's hospital.

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truly yours,

JWPJr-s
Prepared by JOHNW. FAINTER, JR. Assistant Attorney General

AFFROvEDr OPINION COMMITTEE

Hawthorne Phillips, Chairman W. V. Geppert, Co-chairman Robert **Flowers** Pat Bailey Ralph Raeh John Reeves

Staff Legal Assistant A. J. Carubbi, Jr.

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