ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

February 13, 2008

The Honorable Marsha Momoe

Terrell County Attorney

Post Office Box 745

Sanderson, Texas 79848

Dear Ms. Momoe:

Opinion No. GA-0602

Re: Whether, under Local Government Code

chapter 334, Terrell County may borrow money to

construct an approved venue project, to be repaid

from the venue project fund (RQ-0618-GA)

Local Government Code chapter 334 authorizes a county to construct an approved venue

project and to establish a venue project fund to pay costs associated with the project. See generally

TEX. Loc. GOy'T CODE ANN. ch. 334 (Vernon 2005 & Supp. 2007). You ask whether, under Local

Government Code section 334.042, Terrell County (the "County") may "borrow funds" to construct

an approved venue project.! You explain that "[t]he loan will be paid offfrom" sales and use taxes

"as they are collected." Request Letter, supra note I, at 1-2; see also TEx. Loc. GOy'T CODE ANN.

§ 334.081(a) (Vernon 2005) (authorizing a county to impose a sales and use tax).

I. The Relevant Statute: Local Government Code Chapter 334

Under chapter 334, a county may plan, acquire, establish, develop, construct, or renovate a

venue project if, among other things, voters approve the project. See TEx. Loc. GOy'T CODE ANN.

§ 334.021(a) (Vernon 2005). For purposes of chapter 334, a "venue project" is a venue, such as a

sports facility, a convention center facility, a tourist development area, or a project authorized by

article 5190.6, section 4A or 4B ofthe Revised Civil Statutes, and related infrastructure "that is

planned, acquired, established, developed, constructed, or renovated under" chapter 334. Id. §

334.001(4)-{5); see also TEX. REy. CIV. STAT. ANN. art. 5190.6, §§ 4A-4B (Vernon Supp. 2007)

(authorizing the creation of development corporations in certain municipalities). An "approved

venue project" is a venue project that has been approved by the county's voters. TEx. Loc. GOy'T

CODE ANN. § 334.001(1) (Vernon 2005).

ISee Letter from Honorable Marsha Monroe, Terrell County Attorney, to Honorable Greg Abbott, Attorney

General ofTexas, at2 (Sept. 4, 2007) (on file with the Opinion Committee, also available athttp://www.oag.state.tx.us)

[hereinafter RequestLetter]; see also TEX. Loc. GOV'TCODEANN. § 334.042 (Yernon 2005) (requiring the establishment

of a venue project fund in a municipality or a county in which an approved venue project is located).
The Honorable Marsha Monroe - Page 2 (GA-0602)

A county has broad power under chapter 334 to "perform any act necessary" to fully exercise

its "powers under this chapter." Id § 334.041(a). A county has specific authority to finance an

approved venue project by imposing varioustypes oftaxes, including a voter-approved sales and use

tax. See id § 334.081(a), (c). A county also may, under section 334.043(a), issue "bonds, including

revenue bonds and refunding bonds, or other obligations to pay the costs ofthe approved venue

project." Id § 334.043(a); see also id § 334.043(b) (requiring the bonds and other obligations to

be approved "as required by" Government Code chapter 1202); TEX. GOy'T CODE ANN. § 1202.003

(Vernon 2000) ("Review and Approval ofPublic Securities"). The "bonds or other obligations must

be payable from and secured by the revenues in the venue project fund." TEx. Loc. GOy'T CODE

ANN. § 334.043(c) (Vernon 2005).

In accordance with section 334.042, a county in which an approved venue project is located

must establish a "venue project fund" into which the county must deposit the proceeds ofany taxes

approved by the voters under chapter 334, as well as bond revenues and certain other money. See

id § 334.042(a)-(b). Section 334.042(d) expressly authorizes a county to use its venue project fund

to:

(l) reimburse or pay the costs of planning, acqumng,

establishing, developing, constructing, or renovating one or more

approved venue projects in the ... county;

(2) pay the principal of, interest on, and other costs relating

to bonds or other obligations issued by the ... county or to refund

bonds, notes, or other obligations; or

(3) pay the costs of operating or maintaining one or more

approved venue projects.

Id § 334.042(d).

II. Factual Background

You indicate that in November 2000 County voters approved imposing a sales and use tax

to finance a "venue project[] and related infrastructure."2 Request Letter, supra note 1, at 1-2. The

County has placed the tax proceeds in the County's venue project fund. Id at 2. The County Judge

now asks "whether the [Clounty may borrow funds to pay for construction ofthe convention center

facility, which is part ofthe venue project." Id You further inform us that the loan will be repaid

from the proceeds ofthe sales and use tax dedicated to the venue project "as they are collected" and

'Attorney General Opinion GA-0156, issued in 2004, considers another aspect ofthe County's use of venueproject sales and use tax proceeds. See Tex. Att'y Gen. Op. No. GA-0156 (2004) at 1-2. That opinion analyzes whether

the County could use the proceeds on a venue project consisting of"a convention and visitors center, two annexes to the

center, and related infrastructure." Id at 2. You advise that the County "has proceeded with its venue project in

accordance with that opinion." Request Letter, supra note I, at 2.
The Honorable Marsha Monroe - Page 3 (GA-0602)

that the loan documents will recognize this "repayment scheme." Id. You therefore ask whether

chapter 334 authorizes the County "to borrow funds, to be repaid from the venue tax proceeds, to

pay for the construction ofthe convention center facility." Id.

III. Analysis

On its face, section 334.042(d) authorizes a county to use its venue project fund to pay the

costs ofconstructing an approved venue project, including costs relating to bonds or other obligations

issued to finance the project. See TEx. Loc. GOy'T CODE ANN. § 334.042(d)(1 )-(2) (Vernon 2005).

Consequently, the County may use money from the venue project fund to repay funds borrowed, in

the manner authorized by chapter 334, to construct an approved venue project.

We next consider a county's authority to borrow funds to pay the costs ofan approved venue

project. In general, a county may not borrow money "except through the issuance of bonds,

certificates ofobligation, or otherforms ofindebtedness" that are specifically authorized by law. Tex.

Att'y Gen. Op. No. JM-274 (1984) at 1. "Counties have no [general] statutory authority to merely

borrow money from a bank." Tex. Att'y Gen. Op. No. JC-0139 (1999) at 3 (quoting 35 DAVID B.

BROOKS, TEXAS PRACTICE: COUNTY AND SPECIAL DISTRICT LAW § 17.27 (1989»; see also TEx.

CONST. art. XI, § 7 (prohibiting a county from incurring debt without the concomitant provision of

a sinking fund). And "[s]tatutes respecting the power oflocal governments to create a debt must be

strictly and narrowly construed." Lopez v. Ramirez, 558 S.W.2d 954, 957 (Tex. Civ. App.-San

Antonio 1977, no writ); accord Tex. Att'y Gen. Op. No. JC-0036 (1999) at 10.

A county may borrow funds "to pay the costs ofan approved venue project" only as permitted

by section 334.043, which authorizes a county to "issue bonds ... or other obligations" that are

submitted to the attorney general forreview and approval as Government Code chapter 1202 requires,

that are payable from and secured by the venue project fund, and that mature within thirty years of

"their date ofissuance." TEx. Loc. GOy'T CODE ANN. § 334.043(a)-(d) (Vernon 2005). No other

statute in chapter 334 authorizes the borrowing of funds by other means. Thus, consistently with

section 334.043, a county may not borrow money to pay the costs of an approved venue project by

means other than the issuance of bonds or other obligations. See id. § 334.043(a).

You indicate that the County wishes to borrow money and contemplates a loan, but you do

not further describe the means by which the County proposes to borrow the money or to evidence the

loan. See Request Letter, supra note I, at 1-2; cf Tex. Att'y Gen. Op. No. JC-0139 (1999) at 3,5

(suggesting that a loan may be evidenced by the issuance of "obligations ... sold to purchasers in

exchange for money," but also suggesting that the requestor "would like to obtain a loan ... without

following statutorily required procedures"). Nor do you ask about the legality ofa particular method

of financing. See Request Letter, supra note 1, at 1-2. Consequently, we do not consider whether

any particular means offinancing or of evidencing the loan constitutes a permissible issuance of an

obligation under section 334.043. But cf Tex. Att'y Gen. Op. No. JC-0139 (1999) at 3,5 (stating that

statutes that authorize a county to borrow funds for road and bridge construction require the county

to issue and sell bonds or other obligations in compliance with statutory procedures and that these

"procedures are not optional").
The Honorable Marsha Monroe - Page 4 (GA-0602)

SUMMARY

A county, such as Terrell County, may use money in its venue

projectfund to payany ofthe costs ofconstructing an approved venue

project. The countymay borrowmoneyto paysuch costs,to be repaid

from the venue project fund, only by the "issuance of bonds ... or

other obligations."

KENT C. SULUVAN

First Assistant Attorney General

ANDREW WEBER

Deputy Attorney General for Legal Counsel

NANCY S. FULLER

Chair, Opinion Committee

Kymberly K. Oltrogge

Assistant Attorney General, Opinion Committee