Honorable Bevington Reed

Commissioner, Coordinating Board Texas College &University System P. 0. Box 12788, Capitol Station Austin, Texas 78711

Dear Commissioner Reed: Opinion No. M-878 Re: Authority of Southwest Texas Junior College to issue promissory note, secured by pledge ofbank stock, tobuild faculty housing. Inyour recent letter you have set out the following facts and requested the opinion of this department on the indicated question.

"Southwest Texas Junior College proposes to borrow $100.000.00 from First State Bank ofUvalde for the purpose of constructing on-campus faculty housing, the debt tobe evidenced by promissory notewith payment secured by pledge ofbank stocks owned by the College which were donated to the College by Honorable John N. Garner. There were no restrictions with the gift of such stocks. In view of the smallness of the loan, the procedure for issuance ofRevenue Bonds authorized inSec. 51.103 of the Texas Education Code isnot practicable. "Question: Does the Board ofTrustees ofSouthwest Texas Junior College have the authority to execute such apromissory note payable over term of fifteen (15)years and secured by the collateral mentioned?" We are of the opinion that the Board does not have the authority to issue the described note.

Section 51.102 of the Texas Education Code authorizes a junior college district to issue couponbonds for certain construction purposes, thebonds tobebacked by the levy and pledge -4285 -Hon. Bevington Reed, page 2 (M-878)

of annual advalorem taxes. Section 51.103 of theCode authorizes a junior college district to issue revenue bonds for certain construction purposes, thebonds tobe secured by liens onand pledges of certain rentals, rates, charges, fees, and other resources of theboard.

Clearly the promissory note described inyour inquiry does not fallwithin the form of thebonds authorized under the sections mentioned above.

Section 51.073, Texas Education Code, provides as follows: "Theboard of trustees of junior college districts shallbe governed in the establishment, management and control of the junior collegeby the general lawgoverning the establishment, management and control of independent school districts insofar as the general law isapplicable." We do not find anygeneral law, applicable to a junior college district underArticle 51.073,which authorizes the district to issue the described note. Section 20.43 of the Texas Education Code authorizes "any school district in the State of Texas" to issue timewarrants torepair, renovate, purchase, equip, etc. school buildings. This statute applies to a junior college district under Article 51.073 quoted above, but it would .notauthorize theboard to issue the proposed note for the following reasons:

1. The language of the statute does not encompass new or original construction of a building. (Section (a)):

2. The notes (warrants are defined to include promissory notes under Section (h))must mature serially over notmore than fiveyears (Section (a));and (3) The outstanding notesmay not aggregate inexcess of $25,000 at any one time (Section (c)).
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Hon. Bevington Reed, page 3 (M-878)

The requirements for issuing interest bearing time warrants, ornotes, under this article must be strictly followed. Attorney General's Opinion No. C-197 (1963).

Article 20.48(d) of the Texas Education Code authorizes all independent school districts having within their limits a citywith apopulation of 160,000 or more to issue,notes for the construction of school buildings, but includes prwisions for vendor's lien ordeed of trust and a trust fund set aside out of certain revenues. This would not **cover** the transaction inquired about, even ifthe district included a city of the required size.

Article 20.49 isnot applicable because itprovides forborrowing money for currentmaintenance expense only.

Finding no statute authorizing theboard of the Southwest Texas Junior College district to execute the proposed note, and no general lawunder which authority might be found, we are of the opinion that theboard iswithout authority to execute the note asdescribed inyour inquiry.

"Ingeneral, a school board has no power to contract an obligation against the district until funds are available." 51Tex.Jur.2d, Schools, Section 204,page 532.
SUMMARY Neither statutory authority nor any general law authorizes theboard of the Southwest Texas Junior College to issue the note of the district in theamount of $100,000, payable over a term of 15years and secured by the pledge ofbank stock belonging to the district.

General ofTexas

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Prepared by James S. Swearingen Assistant Attorney General APPROVED: OPINION COMMITTEE Kerns Taylor, Chairman W. E.Allen, Co-Chairman Mel Corley Ben Harrison Richard Chote Wardlow Lane Hal Sharpley ME%DE F. GRIFFIN Staff Legal Assistant
ALFRED WALKER Executive Assistant NO-WHITE First Assistant

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