MARK WHITE 

Altomey &lieml 

The Attorney General of Texas 

November 16, 1979 

Mr. Gerald R. Brown 

Executive Director 

Texan Industrial Commission 

Box 12728, capitol station 

Austin, Texas 78711 

opinion No. Mw-95 

Re: Whether iPsuance of bon& under the 

Development Caporation Act of 1979, 

V.T.C.S. article 5190.6, ia violetive of 

either article m, aecuon 52 or article xl# 

section 2 of the Texas Ccnstitutian. 

Dear Mr. Bmwm 

You have mqwJted an cplnh al the following questicne: a, will the 

kmmnce of tivenue bonds by en industrial developmslt caporaticn pumuant 

to the provisiam of the Development Corporation Act, article 5190.6, 

V.T.C.S., of paying the ccet of a project to bc sold cc leased to a private, 

commadal, menufecttillg cr industrial enterprise or of making a loan to 

aueh a conuncrda& manufac~ u induatdal enterprbe for the purpcac of 

provIc?ing temporary or permanent finnndng or mfimdng of all or part of 

tha cast of a prcject cmktitute a violation of article RI, section 52 of the 

Texas Ccnstitutiat Q eny other constitutional cr etatutory requirement? (2) 

k the Attorney Qeneml% approval of the bonds of an industrial development 

corporation created and rting purauen t to the provislona of the Act 

mqdmd before euch a corporatim ten bsue ita revenue bonds? 

We have cortvidard the following providona of the Constitution of 

Taart 

ARTICLE RI, SEC. 52(a) 

Except an otherwke provided by this sect& 

tbu Legblatum 8h1U have no power to authorize eny 

county, city, town or other political corporation cr 

rubdlvidcn of the State to lend its credit Q tc grant 

publie mcney cr thing of value in aid of, cr to eny 

Indlvidurl, eaociaticn or cccpcration whetaoevm, cr 

to become a etockholk in uch ccrpcratia, 

uodatial u eompeny. . 

p. 257 
, : . 

Mr. Gerald R. Brown - Page Two (Mw-951 

AR’DCLII XI, SEC. 3 

No county, city, or other municipal corporation shall hereafter become a 6ub6criber to the capital of any private cccporetim 

or amcciation, or make any appropriation cr donation to tbuasme, 

orin~~~eloanftsmdit;buttMsshsnnotbeconrrtruedtoin 

any way affect any obllgetlon h6retofcre mdertaken pumuent to 

l&W. 

It b well established that statutes are presumed to be constltutiaral and that they 

wIlI not be overturned unlem e qrecific section of the constitution clearly demonstrates 

thclr lnvalldity. Smith v. Davb, 426 S.W.2d 827 (Tex. 1968); State v. Cltv of Amtin, 331 

S.W.2d 737, 747 @es. 1980)- Teuas Neticnal Guard Armcry Board v. McC!UW, 126 S.W.2d 

627 (Teu. 1939). Thus, the knswec to your fhat qusstlat will depend at whather it clearly 

appear6 that the bsuance of revenue bonds for ths pupoges euthorlzed w ths Act violates 

the con6titutiaL 

The Act authorlxw the creatlm and establbhment of industrial development 

~a~t~ncnproflt ~corpcraticns snd arithoriues such ccrporations to issue revanue 

prpcses Secdcn 22 of ths Act provides that: 

Bonds issued under the provbions of thb Act shall be deemed not to 

comtftute a debt of the state, or the unit, a- any other polltical 

ccrpcratim, subQvlsion, or agency of this state cc a pledge of the 

faith and credit of any of them, but such bonds shsll be payable 

6olely frcm the fund6 herein provided therefor from revenuea Ail 

such revenue bonds rMl contdn on the face thereof a statement to 

ths effect that neither the state, the unit, nor any political 

corporatlm, subdlvbion, u sgency of the state shall be obligated 

to pay the same or ths interest thereon tmd that neither the faith 

and credit nor the taxing power of ths state, the unit, car 6ny other 

political corporeticn, subdivision, or agency thereof b.plec&ed to 

the payment of ths principal of or the interest on such bonds. The 

corporation shall not be authorieed to incur financial obligetiats 

uhlch csnnot be paid from proceeds of the obligations or from 

mvenues maliaed frcm the lea6c or 6aIe of a project or medical 

research project or refinance in whole cr in part e project or a 

medical research project.. . . but the corporation b not intended to 

be and rlau. not be a political s&dIvlsion or a political caporation 

within the meaning of the constitution and the law6 of the state, 

In&d@ without limitatim Article III, Sectlcn 52 of the Texas 

ht6titutim, and a unit 6tnU never d&gate to a ccrporatiat any 

of Aloh ti’r attributen of avereignty, indudhg the powa to tax, 

the powa of eminent domain, and the police power. 

p. 259 
, \ :. 

Mr. Gerald Il. Brown - PageThree (Mw-*5) 

8ecticn 25(e) of the Act prov&a in part that: 

The principal of and intercet cn any bonds Issued by the ccrporaticn 

6hsP b6 6ecumcl by a pie* of the revenue8 end receipts derived by 

ths eorporaticn from the lease cr 8ale of the project or msdtcal 

research project 8c financed or from the loan made by the 

ccrpcretion with meet to the project Q madical rcecarch project 

eofhmncedorrefinancedendmaybesecuredbyamortgage 

coveriq all cr part of euch project cr medical rwearc h prolect, 

including any enlargements of and addtlc~ to ouch project or 

malhl reeeard pojact th6reafter made. 

Tim Texan Supreme Ceurt hna heM thnt bon& which are peyable solely from 

revenue6 do not cmate a Tlebtw within the meaning of the Canatitutian. Ci 

Purthar, the Tsxar Supreme Court hsr treeted the question of VcbtW end ‘lending of 

F as bedqg identical @ nature with respect to mvenue bon&. Texea Natiaml Gtmrd 

a’~ 

279 aw 2d 202 ff 

Beard v. HcCraw~7f44~W.2d 627 (TM. 1929)i s V. 

6rd, . . 

lln63, it I6 clearly 86tabIbhad tlmt W6btn and %ding of cmdit* do not occur whsn 

bend6 6~ b6ued which are pqyabla aobly fmm revenued. 

We do not believe that ‘pubfic mcm@ b invdved in the bsuance of revenue bonds 

Ly en indwtrial development corporaticn under the Act. The mcney received from the 

mile of such revenue baqda wffl come solely from private source8 (private investmslt 

benkece cr tmderwritein), and the money used to pay the principal of and intemet cn such 

bondawRlelaoeomefremaprivaterource. .TheActepeeifienUyprovldestlmtan 

indwtrial dcvelcpmmt ecrpcratian creeted pumuant to ‘the Act b not a political 

61bdki6ia1 or a polithd corporation within the mWd!Ig of th? oonstituticn end lawa of 

th state. Awordh@y, it wculd appear that tke could be no wanta cc Wonaticn~ of 

‘publtc mcnep in any economic u constitutiaml6en6e. 

k to tha other con6titutional m6traint 6gah6t cupcrate dockholdlng, it appears 

tint bacawe a capcratian -ted under the4 Act ipfll have no stock end no membaq 

there will be no vMaticn of ccnstituticnal prohibiti”~ ,““M’” Rlbdvbicn 

becoming a rlockhclder in a oaparatia See Southem 

200 tTex. Cemm. App. 1929, j-t adopts 

tY . cweng 12 &W.2d 

FInally, we note tht * ldmiler etatutim have been upheld by the courta of eeverrl 

atete1S LeRlane v. Police Jury of Parbh of Rapida, 189 So.2d 121 (La. CL App4, writ 

dustrial Daveloomcnt AuthuriW~ 

3$&i& d!!!$&~~~$%~~~~$$est v. hdustrbl Devacpment Scard 

1 

FitY of PIrmI v. Nelaon, SOS’ P.2d 705, 7lO &r-h-m (en bench 

elwment Authority ai 

G men v. CitY of Mt. 

p. 259 
Mr. Gerald R. Brown - P-e Pour (m-95) 

F’laasmt 131 N.W.2d S,17 (Iowa 1964)~ City of Pi 

rWlnnI9?O)i Uhl6 v. State a ml. City d Chety~~~~~~~.ZiY “” 5’S 

Bad tpcn the foregoing, it b our opinion that the bsuance of such bonds would not 

violate artiele RI, 6ection 32 Q article Xl, lreotian S of the Taxa Constitution. 

16 to your wcond quartion, wi? find that the Texan Constitution doss not require 

that the Attorney Qeneral approve bond6 price to their bsuance or 6ale. See Love v. 

Rockwall Independent School Dbtrict, 228 S.W. 942, 644-45 (Tex. Comm%TmT 

jdgmt. adopted) Although 6u6h approval b often required by statute, 6ee 

art. 709, it b &t neceaary that a datute authceizing b6uence of bo -id? requim v*T.c*a arch 

approval. Amsteter v. An 

mftl na.e.1~ MaQulllan 

275 S.W.2d 95,103 lTex. Civ. App - Rl Par0 1954, writ 

el Cqmratiam S 43.46 U970). Aa one treatbe eqUne, 

an bsuer b nrbjeot ody to th6 requiremat esprmly prarcribed by kw. McQdUan, 

6 m at S 43.47. It b, ttnm, cur cpinim Unt approW tq the Attornay Qeneral b not 

+t req rad~~a~tion~tedrnderthsActgn~eitsrsvsnuebonda 

SUMMARY 

The bmmnce cf rwenue bonds by M indlmtri6tl development 

corpatian for authorized pupoats, pursuant to the Development 

Cbporation Act, article 5190.6, V.T.C.S., will not violate article 

lIl, 6aetion 52 of th6 Texa6 Con6titution Q any ether con6titutid 

cr statutuy requimmatt. Tha Attorney Generals approval of atch 

bond6bnotreqtdredbefare~ 

zmM 

MARK WHITE 

Attorney General of Texnm 

JOHN W. PNNTRR, JR. 

Pint Awiatant Attorney Ganeral 

TED L. HARTLRY 

R6ecutive krbtant Attorney tined 

Repwed by R&art T. Lewb 

Ambtant Attcmay General 

APPROVRD: 

OPINIONCOHMITTEE . 

C. Robert Reath, Cha&mq 

p. 260 
Mr. Gerald R. Brown - Page Five (MN-85) 

Bob Gammqe 

Susan Garrison 

DM King 

Robert T. Lewia 

WilliemGReid 

P. 261