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JIM MATTOX Attorney General

Supreme Court Building P. 0. Box 12546 Austin. TX. 76711. 2646 5121475-2501 Telex 9101674.1367 Telecopier 5121475-0266

714 Jackson. Suite 700 Dallas. TX. 75202.4506 2141742.6944

4824 Alberta Ave.. Suite 160 El Paso, TX. 79905.2793 9151533.3464

1001 Texas, Suite 700 -*ston, TX. 77002-3111 .1223-5666

606 Broadway, Suite 312 Lubbock, TX. 79401-3479 6061747.5236

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200 Main Plaza, Suite 400 San Antonio, TX. 76205.2797 5121225-4191

An Equal Opportunity/ Affirmative Action Employer 

# The Attorney General of Texas

November 2, 1983

Mr. Robert C. Lanier Chairman StateDeuartmentof Hiehwavs OpinionNo. JM-84
Re: Use by countv of combinabonds to I

_ and PublicTransportation tion tax and revenue Dewitt C. Greer StateHighwayBldg. constructtoll roads 11thand Brazos Streets Austin, Texas 78701
Dear Mr. Lanier:
You have requested our opinion regarding the authority of a county to use the proceeds of combination tax and revenue bonds to constructtoll roads. Article 6795b-1,V.T.C.S., authorizesGulf Coast countieswith a population of 50,000 or more to issue bonds to pay for the construction, operation and maintenance of causeways, bridges, tunnels,highways and turnpikes,includingtoll roads. You ask:

Does the use of the proceeds of combination tax and revenue bonds to construct toll roads, turnpikes, causeways, or bridges constitute an unconstitutional lending of credit or grant of publicmoneywhen a user is chargeda toll for the use of the facility? Article III, section 52 of theTexas Constitutionprovides:

(a) Except as otherwise provided by this section, the Legislature shall have no power to authorize any county, city3 town or other political corporationor subdivision of the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever, or to become a stockholder in such corporation, associationor company. (b) Under Legislative provision, any county, any political subdivisionof a county, any number of adjoining counties, or any political subdivisionof the State, or any defined district now or hereafter to be described and defined

p. 354Mr. Robert C. Lanier - Page 2 (JM-84)

within the State of Texas, and which may or may not include, towns, villages or municipal corporations,upon a vote of two-thirdsmajority of the residentproperty taxpayersvoting thereon who are qualified electors of such district or territory to be affected thereby, in addition to all other debts,may issuebonds or otherwise lend its credit in any amount not to exceed one-fourth of the assessedvaluation of the real property of such district or territory,except that the total bonded indebtedness of any city or town shall never exceed the limits imposed by other provisions of this Constitution, and levy and collect taxes to pay the interest thereon and provide a sinking fund for the redemption thereof, as the Legislature may authorize, and in such manner as it may authorize the same, for the followingpurposes towit: (1) The improvement of rivers, creeks, and streams to prevent overflows, and to permit of navigation thereof, or irrigation thereof, or in aid of suchpurposes. (2) The constructionandmaintenance ofpools, lakes, reservoirs, dams, canals, and waterways for the purposes of irrigation, drainage or navigation,or in aid thereof. (3) The construction, maintenance and operation of macadamized, graveled or paved roadsand turnpikes,or in aid thereof. (c) Notwithstanding the provisions of Subsection (b) of this Section, bonds may be issued by any county in an amount not to exceed one-fourth of the assessed valuation of the real property in the county, for the construction, maintenance, and operation of macadamized, graveled, or paved roads and turnpikes,or in aid thereof,upon a vote of a majority of the resident property taxpayers voting thereon who are qualified electors of the county, and without the necessity of further or amendatory legislation. The county may levy and collect taxes to pay the interest on the bonds as it becomes due and to provide a sinking fund for redemption of the bonds. Article III, section 52 clearly authorizes a county, pursuant to statute, to issue bonds for the construction, operation and

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/-- maintenanceof turnpikes. In our opinion, that the countywill charge

a toll for the use of a turnpikepursuant to legislativeauthority is not in itself a constitutional impediment to the constructionof the road. We must also determine,however,whether theuse of combination tax and revenue bonds to finance the projects raises any constitutionalobjection. Article III, section 52 clearly contemplates the use of the proceeds of tax bonds to finance the building of turnpikes. The use of public funds is constitutionally permissible so long as the expenditure serves "the direct accomplishment of a legitimate public
. . . purpose." Barrington v. Cokinos, 338 S.W.2d 133, 140 (Tex. 1960); see Letter Advisory No. 9 (1973). We believe there can be no doubt that the construction of a county toll road can serve a legitimate public purpose. We conclude, therefore, that the use of bond proceeds to finance toll roadsdoesnot necessarilyconstitutean unconstitutional lending of credit under article III, section 52 of theTexas Constitution. Cf. Tex. Const. art. III, 552-b. - However, revenue bonds and tax bonds are not the same thing. When public bodies sell revenuebonds, they borrow against the future revenues they expect to receive rather than the future taxes they expect to collect. Texsan ServiceCo.v. City ofNixon, 158 S.W.2d 88 (Tex. Civ. App. - San Antonio 1941,writ ref'd). Unlike tax bonds, revenuebonds are saidnot to createpublicdebt in the constitutional sensebecause they do not legally obligate the tax base when they are to be paid solely from revenues. Texas Turnpike Authority v. Shepperd, 279 S.W.2d 302 (Tex. 1955). Bonds not secured solely by revenueshave a differenteffect. When bondholders are entitled not only to be paid from income generated by a facility, but also to insist that tax money, the proceeds from tax bonds, or other public property be used to generate that income, then the bonds are not payable "solely from revenues" in the sense inwhich courtshave declared them tobe not debt-producing. See City of Dayton v. Allred, 68 S.W.2d 172 (Tex. Comm'n App. 1934, jgmt adopted). Where a governmentalunit agrees to pledge both ad valorem taxes and the revenues of a facility to the payment of bonds issued to construct such facility and to maintain and operate the facilitywith taxmonies for as long as it takes to retire suchbonds out of revenues of the facilities and the ad valorem taxes pledged thereto, then the tax base has been additionally obligated to the extent of thebond amount tobe retired. See City ofWichita Fallsv. Kemp Public Library Board of Trustees, 593xW.2d 834 (Tex.Civ.App.

- FortWorth 1980,writ ref'dn.r.e.);AttorneyGeneralOpinionMW-337 (1981).
You advise that thevoters of Harris County,pursuant to article 6795b-1, V.T.C.S., recently authorized the issuance of bonds to construct and operate a toll road -- bonds not yet submitted to this office for approval. (Under section 2 of article 6745b-1 submission

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of bonds is permissive). In such circumstanceswe cannot pass upon the validity of the particular bonds, but assuming full compliance with constitutionaland statutoryrequirementsrespectingthe issuance of debt-creating securities for tax and "revenue" bonds wholly or partially securedby guarantees impactingthe tagbase or otherpublic assets, we do not believe the use :by counties of proceeds from combination tax and revenue bonds for the constructionof toll roads isviolative of article III, section52 of the Texas Constitution.
SUMMARY Assuming full compliance with constitutional and statutoryrequirementsrespectingthe issuance of debt-creating securities for tax and "revenue" bonds wholly or partially secured by guarantees impactingthe taxbase or otherpublic assets, the use by counties of proceeds from combination tax and revenue bonds for the construction of toll roads is not violative of article III, section 52 of the Texas Constitution.izpti

JIM MATTOX AttorneyGeneral of Texas TOM GREEN FirstAssistantAttorneyGeneral
DAVID R. RICHARDS ExecutiveAssistantAttorneyGeneral Preparedby Rick Gilpin AssistantAttorneyGeneral
APPROVED: OPINION COMMITTEE Rick Gilpin, Chairman David Brooks Colin Carl SusanGarrison Jim Moellinger Nancy Sutton

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