THE A-RNEY GNNERAL 

OP TEXAS 

The Honorable Hugh C. Yantis, Jr. 

Executive Director 

Texas Water C2uality Board 

P. 0. Box 13246 

Austin, Texas 78711 

Opinion No. H- 740 

Re: Constitutionality of procedures 

by which waste disposal systems 

’ are financed. 

Dear Mr. Yantis: 

You have requested our opinion regarding the financing of waste disposal 

systems by various special districts. 

Your first question is whether the Regional Waste Disposal Act, section 

25.001, et a, Texas Water Code, grants to all districts created pursuant to 

article 16, section 59 or article 3, section 52 of the Texas Constitution, the 

authority to issue bonde to finance the acquisition, construction, improvement, 

enlargement, extension or repair of disposal systems, without regard to the 

district’s previous water pollution control efforts. A portion of the Regional 

Waste Disposal Act, section 25.051 provides: 

In order to acquire, construct, improve, 

enlarge, extend, or repair disposal systems, 

the district may issue bonds secured by a 

pledge of all or part of the revenue from any 

contract entered into under this chapter and 

other income of the district. 

Neither of the referenced constitutional provisions nor section 25.051 imposes 

any requirement that the bond issuance be related to the primary activities of 

the district or that the district itself be or have been engaged in the actual 

operations of waste collection, treatment and disposal. We therefore answer 

your first question in the affirmative. 

p. 3146 
. . . 

The Honorable Hugh C. Yantis, Jr., - page two (H-740) 

You also ask whether a district’s role in providing waste collection, 

transportation, treatment and disposal systems may be limited to its financing 

of such facilities, and, if not, whether a pr’ocedure must be followed whereby 

title to the facilities is transferred from the district to the contracting company 

which would be the ultimate owner or operator of the facilities. By the terms of 

the Water Code, a district is empowered to “acquire, construct, improve, enlarge, extend, repair, operate and maintain one or more disposal systems, ” 

section 25.021; to “purchase or sell” such facilities, section 25.022; and to 

“lease to or from any person, ” section 25.023. A district is not granted the 

authority simply to “finance” a waste disposal system. Consequently, the district 

must at some point have title to the system, so that it may sell or lease the system 

to the company. 

Your next question is whether a district’s ownership of a system is to be 

considered by the Texas Water Quality Board in certifying the facilities as being 

for water pollution control purposes, or by some other agency. The Board is required to make the essential determination that a system’s “plans and specifications. . . conform to the waste discharge requirements and water quality 

’ standards established by the board. ” Water Code 5 21.086(c). The Attorney 

General, however, is responsible for determining that “the bonds are authorized 

and that the contract is made in accordance with the constitution and laws of this 

state. . . .‘I Water Code 0 25.0561~). In order to be able to certify that the 

bonds are authorized and that the contract is made pursuant to law, the Attorney 

General must of course ascertain that the district does in fact have title to the 

system. 

Finally, you ask whether the Texas Constitution would prohibit a contracting company from realizing a profit from the sale of a by-product which is 

removed from the waste stream. Article 3, section 51 of the Constitution proscribes any “grant of public moneys ‘I to a private individual or corporation. 

Article 3, section 52 prohibits a governmental entity from “lend[ing] its credit” 

for any private purpose. If a waste disposal system has been financed through a 

public bond issue, and the contracting company realizes a profit from the sale of 

a by-product removed from the waste stream, and hence the profit is solely derived from the company’s ownership of the system, it could be stated as a general 

p. 3147 
, . 

The Honorable Hugh C. Yantis, Jr., page three (H-740) 

proposition that the contracting governmental entity has acted in contravention of either or both of these constitutional provisions. 

In Barrington V. Cokinos, 338 S. W. 2d 133 (Tex. Sup. 1960). however, 

the Supreme Court held that a grant of public money or a loan of credit 

is not unlawful if it is for a valid public purpose and is not fraudulent, 

arbitrary or capricious, even though “a privately owned business may be 

benefited thereby. ” 338 S. W. 2d at 140. The construction and operation 

of pollution control facilities unquestionably serves a valid public purpose, 

Tex. Const. art. 16, § 59(a); Parker V. San Jacinto County Water Control 

and Improvement District No. 1, 273 S. W. td 586 (Tex.Sup. 1954). 

In State v. City of Austin, 331 S. W. 2d 737 (Tex. Sup. 1960). the Supreme 

Court, in upholding the reimbursement to certain utility companies of the 

cost of relocation of facilities necessitated by highway construction, “noted 

that no net gain accrues to the utility. . . . ” 331 S. W. 2d at 472. See also 

Harris County V. Dowlearn, 489 S. W. 2d 140 (Tex. Civ. App. --Houston 

114th Dist. ] 1972, writ ref’d n. r. e. ). This office will need to study each bond 

presentation and make a determination based on the facts of each case as to 

whether or not the issue falls within or without the reasoning of these applicable authorities. 

SUMMARY 

All districts created pursuant to article 16, 

section 59 or article 3. section 52 of the Texas 

Constitution have the authority to issue bonds for 

the acquisition, construction and repair of waste 

disposal systems without regard to the district’s 

previous water pollution control efforts. A district may not simply “finance” a waste disposal 

p. 3148 
. ___ 

The Honorable Hugh C. Yantir, Jr., - page four (H-740) 

system, but it may purchase, sell or lease 

such a facility to or from a private entity. 

The Attorney General is responsible for determining that a district’s bonds are authorized 

and that its contracts are made in accordance 

with law. 

Very truly yours, 

Attorney General of Texas 

- APPROVED: 

DAVID Mz KENDALL, First Assistant 

C. ROBERT HEATH, Ch’iirman 

Opinion Committee 

jad: 

p. 3x49