r . 

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 

4309 N. Tenth, Suite B 

McAllen, TX. 76501-1665 

5121662-4547 

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 

State Deuartment of Hiehwavs 

Opinion No. JM-84 

Re: Use by countv of combinabonds to 

I _ 

and Public Transportation tion tax and revenue 

Dewitt C. Greer State Highway Bldg. construct toll roads 

11th and 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 

construct toll roads. 

Article 6795b-1, V.T.C.S., authorizes Gulf Coast counties with 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, including toll 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 

public money when a user is charged a toll for the 

use of the facility? 

Article III, section 52 of the Texas Constitution provides: 

(a) Except as otherwise provided by this 

section, the Legislature shall have no power to 

authorize any county, city 3 town or other 

political corporation or 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, 

association or company. 

(b) Under Legislative provision, any county, 

any political subdivision of a county, any number 

of adjoining counties, or any political 

subdivision of the State, or any defined district 

now or hereafter to be described and defined 

p. 354 
Mr. 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-thirds majority 

of the resident property taxpayers voting thereon 

who are qualified electors of such district or 

territory to be affected thereby, in addition to 

all other debts, may issue bonds or otherwise lend 

its credit in any amount not to exceed one-fourth 

of the assessed valuation 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 

following purposes to wit: 

(1) The improvement of rivers, creeks, and 

streams to prevent overflows, and to permit of 

navigation thereof, or irrigation thereof, or 

in aid of such purposes. 

(2) The construction and maintenance of pools, 

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 

roads and 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 

p. 355 
. 

Mr. Robert C. Lanier - Page 3 (JM-84) 

/-- 

maintenance of turnpikes. In our opinion, that the county will charge 

a toll for the use of a turnpike pursuant to legislative authority is 

not in itself a constitutional impediment to the construction of the 

road. We must also determine, however, whether the use of combination 

tax and revenue bonds to finance the projects raises any 

constitutional objection. 

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 roads does not necessarily constitute an 

unconstitutional lending of credit under article III, section 52 of 

the Texas Constitution. Cf. Tex. Const. art. III, 552-b. - 

However, revenue bonds and tax bonds are not the same thing. 

When public bodies sell revenue bonds, they borrow against the future 

revenues they expect to receive rather than the future taxes they 

expect to collect. Texsan Service Co. v. City of Nixon, 158 S.W.2d 88 

(Tex. Civ. App. - San Antonio 1941, writ ref'd). Unlike tax bonds, 

revenue bonds are said not to create public debt in the constitutional 

sense because 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 

revenues have a different effect. 

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 in which courts have declared them to be not debt-producing. 

See City of Dayton v. Allred, 68 S.W.2d 172 (Tex. Comm'n App. 1934, 

jgmt adopted). Where a governmental unit 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 

facility with tax monies for as long as it takes to retire such bonds 

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 the bond amount to be retired. See City of Wichita Falls v. 

Kemp Public Library Board of Trustees, 593xW.2d 834 (Tex. Civ. App. 

- Fort Worth 1980, writ ref'd n.r.e.); Attorney General Opinion MW-337 

(1981). 

You advise that the voters 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 

p. 356 
Mr. Robert C. Lanier - Page 4 (~~-84) 

of bonds is permissive). In such circumstances we cannot pass upon 

the validity of the particular bonds, but assuming full compliance 

with constitutional and statutory requirements respecting the issuance 

of debt-creating securities for tax and "revenue" bonds wholly or 

partially secured by guarantees impacting the tag base or other public 

assets, we do not believe the use :by counties of proceeds from 

combination tax and revenue bonds for the construction of toll roads 

is violative of article III, section 52 of the Texas Constitution. 

SUMMARY 

Assuming full compliance with constitutional 

and statutory requirements respecting the issuance 

of debt-creating securities for tax and "revenue" 

bonds wholly or partially secured by guarantees 

impacting the tax base or other public 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 

Attorney General of Texas 

TOM GREEN 

First Assistant Attorney General 

DAVID R. RICHARDS 

Executive Assistant Attorney General 

Prepared by Rick Gilpin 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Rick Gilpin, Chairman 

David Brooks 

Colin Carl 

Susan Garrison 

Jim Moellinger 

Nancy Sutton 

p. 357