Court Opinion

ID: 4130210
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:01:35.647948+00
Date Added: 2024-06-11T14:37:36.771128
License: Public Domain

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                                  December 12, 1990

         Honorable John Whitmire         Opinion   NO.   JM-1259
         Chairman
         Health And Human Services       Re:   Authority of a municipal
            Committee                    utility   district    operating
         Texas State Senate              under chapter 54 of the Water
         P. 0. Box 12068                 Code to acquire   real property
         Austin, Texas   78711           for use as a park, and related
                                         questions   (RQ-2056)

         Dear Senator Whitmire:

              You have requested a clarification of Attorney General
         Opinion JM-1173 (1990). Specifically, you ask whether it is
         permissible for a municipal utility district created pur-
         suant to article XVI, section 59, of the Texas Constitution
         and operating under chapter 54 of the Texas Water Code, to
         use revenue notes to finance the acquisition of park land
         and park facilities.

              Municipal utility districts are among the conservation
         and reclamation districts created pursuant to article    XVI,
         section 59 of the Texas Constitution     [the "conservation
         amendment"].  The conservation  amendment was added to the
         constitution in 1917.   Subsection (a) of the conservation
         amendment consists  of a statement of public policy       and
         includes a listing of public purposes that the amendment   is
         intended to address. Subsection (a) reads as follows:

                     (a) The conservation   and development  of
                 all of the natural resources of this State,
                 including the control, storing, preservation
                 and distribution   of its storm and flood
                 waters, the waters of its rivers and streams,
                 for irrigation, power and all other useful
                 purposes, the reclamation   and irrigation  of
                 its arid, semi-arid and other lands needing
                 irrigation, the reclamation   and drainage  of
                 its overflowed lands, and other lands needing
                 drainage, the conservation and development of
                 its forests, water and hydro-electric   power,
                 the navigation  of its inland and coastal

                                         P. 6717
Honorable John Whitmire - Page 2   (JM-1259)

       waters,   and the preservation and conservation
        of all such natural resources    of the State
        are each and all hereby declared public
        rights and duties; and the Legislature   shall
        pass all such laws as may be appropriate
        thereto.

Subsection (c) of the conservation amendment provides    for
taxing power and the power to incur debt. Subsection     (c)
reads as follows:

            (c) The Legislature   shall authorize  all
        such indebtedness   as may be necessary     to
        provide all improvements and the maintenance
        thereof requisite to the achievement of the
        purposes of this amendment,     and all such
        indebtedness may be evidenced by bonds of
        such conservation and reclamation   districts,
        to be issued under such regulations as any
        [may] be prescribed   by law and shall also,
        authorize the levy and collection within such
        districts   of all    such taxes,    equitably
        distributed, as may be necessary      for the
        payment of the interest and the creation of a
        sinking fund for the payment of such bonds;
        and also     for the    maintenance  of   such
        districts   and improvements,   and such in-
        debtedness shall be a lien upon the property
        assessed for the payment thereof: provided
        the Legislature    shall not authorize     the
        issuance of any bonds or provide for any in-
        debtedness against any reclamation    district
        unless  such proposition     shall first    be
        submitted   to the qualified property     tax-
        paying voters of such district       and   the
        proposition adopted.

     This office recently held that "a municipal     utility
district, operating under chapter 54 of the Texas Water Code
may not use taxes to purchase        real property  for the
independent purpose of having it used as a public park and
developed  recreational    area. . . .*I   Attorney  General
Opinion JW-1173 (1990).    The opinion noted, however,  that
the "provision of recreational facilities may be considered
a proper  secondary activity   for a district if furnishing
them promotes    a constitutional   purpose."  Id.  See also
Attorney General   Opinion MW-313 (1981). Attorney   General
Opinion JW-1173 did not reach the issue of whether a munici-
pal utility district could use non-tax funds to provide

                               P. 6718
      Honorable John Whitmire - Page 3    (JM-1259)

      parks. We note, in this respect, that the first sentence of
      the summary of JM-1173 may be misleading.    That sentence
      reads:
. .
              A municipal utility district operating under
              chapter 54 of  the Texas Water Code may not
              purchase real property for the independent
              purpose of having itused as a public park.

      However, a careful reading of the text of JM-1173 makes   it
      clear that its holding is confined to the use of tax monies.

           In peason v, Orana     Countv Water Control and I D
             sf. No. I, 244 z.W.2d 981      (Tex. 1952) the &$~~~~
      Court enjoined    a district    subject to the' conservation
      amendment from issuing its bonds for the purpose of acguir-
      ing fire-fighting equipment even though an express statutory
      authorization for the acquisition      of fire-fighting  eguip-
      ment was then in effect. At the time the Deason case was
      decided, article XVI, section 59, contained      no mention   of
      fire-fighting, though in 1978 it was amended, by the addi-
      tion of subsection   (f), t o specifically   provide that dis-
      tricts may engage in fire-fighting activities.1     The Deason
      decision  states,   "The Legislature     can only grant      the
      district such powers and rights as come within the contem-~
      plation or provisions   of the articles of the Constitution
      herein discussed,"   and that "the Legislature      is without
      power to add to or withdraw       from the circumstances     and
      purposes specified" in the constitution.     Deason, at 984.

           In a brief submitted for our consideration in preparing
      this opinion2 it is suggested that the holding in Deason  is
      of questionable  precedential  value because   it fails to
      consider the established  principle that a state constitu-
      tion, unlike the federal constitution, is in no sense a
      grant of power, but operates solely as a limitation       of
      power, and that, therefore, an enactment of the legislature
      is constitutional Unless expressly or implicitly prohibited

           1. Tex. Const. art. VXI, S 59(f), adopted Nov. 7,
      1978, proposed by H.J.R. No. 42, S 2, Acts 1977, 65th Leg.,
      at 3374.

           2. Brief of Hooper 8 Haag, Attorneys at Law,      Austin,
      Texas, submitted  on behalf of three municipal         utility
      districts.

                                     P. 6719
Honorable John Whitmire - Page 4    (JM-1259)

                                                                  .

by a specific provision of the state or federal constitu-
tion. &s.& m,      -herd     v. San Jacinto Junior   Colleae
District, 363 S.W.2d 742 (Tex. 1962).    It is averred that
this line of argument was not briefed to the court consider-
ing the peason case.

     Whether or not it was argued to the Supreme Court       in
geason that the state constitution limits rather than grants
legislative power, we think it difficult to suppose that the
Supreme Court at that time was unaware of one of the most
fundamental doctrines   of constitutional    law, or that the
court failed to consider such a fundamental doctrine because
it was not briefed.   The principle that the legislature    may
exercise any power not denied to it by the state constitu-
tion or the federal constitution    is a venerable one, and
hardly a novel concept even forty years ago. &.g Dav Land &
Cattle Co. v. Stak    4 S.W. 865, 874 (Tex. 1887). Less than
four years before ihe Deason decision the Supreme         Court
restated this rule in Duncan V. Gabler    215 S.W.2d 155,   158
(Tex. 1948). A majority of the just&s      sitting at the time
of Duncan   . Gablm were also sitting at the time of the
Deason de&ion.

     We think it more plausible that the court in peason,
without explicitly   so stating, was merely construing     the
language of the conservation amendment as limiting    language
despite the fact that it is drafted      as though  it were a
grant of authority.      Accord Brooks, Countv and Snecial
District Law, 36 Texas Practice 5 46.5 (West, 1989).       The
court cited as its rationale the principle that the funda-
mental purpose in construing a constitutional provision     is
to ascertain and give effect to the intent of the framers
of the constitution     and of the people who adopted      it.
Deason , suvra, at 984.    Accordingly, it appears the Deason
court found that the intent of the people in enacting      the
conservation amendment was to strictly     limit the purposes
for which they might be made to incur debt.

     There is language in Deason to suggest that the legis-
lature may never grant to a conservation and reclamation
district a power not in furtherance of a purpose  enumerated
in the constitution (see quoted language, m).       However,
given the context of the narrow question before the court in
Deason, A,     the authority of a district to issue its
bonds, we think it a more reasonable reading of the court's
teaching that the legislature may only grant to a district
the authority  to tax and incur indebtedness as specified
by section 59(c) of article XVI when such authority     will
be used in furtherance   of a constitutionally    enumerated

                               P. 6720
      Honorable John Whitmire - Page 5   (JM-1259)

      purpose. Subsection (c) makes it clear that taxes may be
      authorized for two purposes:    (1) to repay bonded   indebted-
      ness, and   (2) for  the maintenance   of a  district  and its
. .
      improvements.   As both the power to incur debt and the power
      to tax are prescribed by subsection (c), we think it logical
      that the reasoning of the Peason decision extend to the
      purposes for which a district may expend tax revenues        as
      well as to the purposes for which it may incur debt. At any
      rate, there is nothing in the language of subsection (c) to
      suggest that the maintenance     tax may be used to acquire
      property.  Accordingly, we reaffirm the holding of Attorney
      General Opinion JM-1173.

           Under the analysis of the Qeason decision       presented
      above, the legislature may grant to conservation and recla-
      mation districts   duties and powers   independent   of those
      enumerated in the conservation amendment, so long as such
      grant of authority   is not inconsistent with the constitu-
      tionally imposed limits on the authority of such districts
      to tax or incur debt. When the legislature grants a dis-
      trict authority not subject to a constitutional    limitation,
      such authority need not, under this analysis of the Deason
      decision, be required to be exercised    in furtherance of a
      constitutionally enumerated purpose. This reading of Deason
      is in accord ~with holdings  of the Texas Supreme Court that
      the legislature   is empowered to establish     any form of
      special district unless limited by the constitution.      See,
      e.a., &RR&&,     suura, at 743; Davis v. Lubbock, 326 S.W.2d
699, 710 (Tex. 1959); Texas Turnnrke Auth. v. Shennerd, 279
S.W.2d 302, 304    (Tex. 1955). As the legislature       could
      statutorily create a special district to provide park and
      recreational facilities, we think it anomalous to find that
      such authority could not be statutorily granted to a recla-
      mation and conservation   district so long as the statutory
      grant of authority does not conflict with the constitutional
      limitations on the authority of such districts to tax and
      issue debt.

           In Harris COUntV Water Control & ImDrovement Dist, No.
      110 v.  exas Water Riahts C mm'n, 593 S.W.2d 852 (Tex. Civ.
      ADD. - Austin 1980, no writ?. the court considered whether a
      municipal utility district operating under chapter 54 of the
      Water Code has authority to acquire certain     recreational
      facilities, specifically, a community center, three swimming
      pools, four tennis courts, and a clubhouse.  No reference is
      made in the court's decision of the method by which the
      facilities were to be financed or of the source of funds
      intended to be used for the purpose. The court found that
      the proposed facilities did not further a purpose of either

                                     P. 6721
Honorable John Whitmire - Page 6   (JM-1259)

section 54.012 of the Water Code or article XVI, section 59,
of the Texas Constitution and, consequently, the facilities
could not be acquired by the district.  The court in Harris
Countv W.C.I.D. No. 110   specifically considered the argu-     ..
ment that the proposed 'facilities were proper because  they
were not expressly or implicitly prohibited by the constitu-
tion. In this regard, the court stated

          In the case ,at bar the sole question     is
          whether the proposed recreational facilities
          are permissible   pursuant to acts of the
          Legislature, and not whether an act of the
          Legislature is valid.

Za, at 855. The holding    in Harris Countv W.C.I.D. No. 110
is, thus, based on the statutory purposes       of municipal
utility districts   as set forth in section 54.012 of the
Water Code. Section 54.012 closely tracks the language     of
article XVI, section 59 (a), but states additional,    albeit
closely related, purposes.     Article  XVI, section   59(a),
states no purposes which are not stated in section    54.012,
though article XVI, section   59(f), provides that conserva-
tion and reclamation districts may engage in fire-fighting
activities.   Had the facilities at issue in Harris    County
W.C.I.D. N 0.   Q been fire-fighting   facilities instead of
recreational facilities, the authority for the acquisition
for such facilities could have been found in the constitu-
tion, even though    fire-fighting  is not enumerated   as a
purpose in section 54.012 of the Water Code.         This is
mentioned to demonstrate that the court's mention of article
XVI, section   59, does not necessarily indicate that the
court was basing its opinion on constitutional      language,
but, rather, shows that the court looked both to statutory
and constitutional language in searching for authority for a
district to acquire recreational facilities independent    of
the district's conservation function.

     Since -is     Countv W.C.I.D. No. 110 was decided,  the
legislature has amended chapter 54 of the Water Code by,
among other things, adding subchapter 1.3 Acts 1985, 69th
Leg., ch. 100, 5 1. Subchapter I gives statutory authoriza-
tion to a municipal utility district to develop and maintain
recreational   facilities.   Water  Code 55 54.771(b)    and
54.773.

     3.   Water Code 55 54.771 through 54.775, inclusive.

                               P. 6722
Honorable John Whitmire - Page 7      (JM-1259)

                                            .

     The Texas Water Code specifically    provides   for the
issuance of revenue notes by a municipal utility district.
Such notes may be issued for any corporate purpose and must
be paid "solely from the revenues derived from the ownership
of all or any designated    part of the district's     works,
plant,    improvements,  facilities,   or equipment     after
deduction   of the reasonable    cost of maintaining      and
operating the facilities." Water Code 55 54.302, 54.303.
The notes may not constitute a charge on the property of the
district or the taxes levied or collected by the district.
Id. Revenue notes issued pursuant to section 54.303 would
not constitute an indebtedness within the meaning of article
WI,    section  59(c) of the Texas Constitution.        mower
Colorado River Auth. v. McGraw,   83 S.W.2d 629, 633   (Tex.
1935).

     Section 54.774 of the Water Code provides as follows:

           (a) A district may not issue bonds to pay
        for the development and maintenance of re-
        creational facilities.

            (b) Except as provided in Subsection   (a)
        of this section, a district may acquire
        recreational facilities and obtain funds to
        develop and maintain them in the same manner
        as authorized elsewhere in this code for the
        acquisition, development, and maintenance   of
        other facilities of the district.     Without
        limiting the foregoing, a district may charge
        fees directly to the users of recreational
        facilities to pay for all or part of the cost
        of their development and maintenance.

Section 54.772 of the Water Code provides as follows:

        As used in this subchapter:

           (1) 'Recreational facilities' means parks
        and recreational equipment and facilities.

            (2)  'Develop and    maintain'  means   to
        acquire/own,    develop, construct,   improve,
        manage, maintain, and operate.

     We have established that    the legislature may provide
statutory purposes and powers    for districts created under
section 59 of article XVI of     the constitution so long as
those purposes   and powers      do not conflict with     the

                                P.   6723
Honorable John Whitmire - Page 8    (JM-1259)

                                .

constitutional limitations   on the authority of such dis-
tricts to tax and issue debt. We have further established
that the legislature   has provided  statutory authority   for
municipal utility districts   to develop  and maintain   parks
and recreational    facilities,  and that the issuance of
revenue notes pursuant to section 54.303 of the Water     Code
is not constitutionally restricted.   The remaining  question
is whether   revenue notes issued under section 54.303 are
Hbondsn within the meaning of section 54.774(a) of the Water
Code. nBonds10 is not a defined term for purposes of chapter
54 of the Water Code.

     The Code Construction Act provides, in part, that:

           (a) Words and phrases shall be read in
        context and construed according to the rules
        of grammar and common usage.

           (b) Words and phrases that have acquired
        a technical or particular meaning, whether by
        legislative definition or otherwise, shall be
        construed accordingly.

     In ordinary usage, a bond is a-debt security evidencing
a promise  to"pay the bondholder.    See. e.a,, Black's  Law
pictionarv  pp. 161-164    (5th ed. 1979).    The term. as
ordinarily used, and as in fact used in many statutes,     is
certainly broad enough to encompass the kind of security
envisioned  by section 54.303 of the Water Code.         For
instance, the Bond Procedures Act of 1981 defines "bonds*' to
include

        all bonds, certificates,   notes, book-entry
        obligations, and other obligations authorized
        to be issued by any issuer by any statute,
        city home-rule charter, or the Texas Consti-
        tution.

V.T.C.S. art. 717k-6, 5 l(b).

     However, it is also a rule of statutory    construction
that when a word or phrase  is used in different parts of a
statute, a clear meaning appearing  in one instance will be
attached to it elsewhere. Boris k       Boriack, 541 S.W.2d
237, 240   (Tex. Civ. App. - 'C&p:;     Christi   1976, writ
dism'd); see also, 67 Tex. Jur. 3d nStatutesO' 5 108, and
authorities cited therein. Though not defined in chapter 54
of the Water Code, the term "bondtl is used extensively    in
subchapters E, F, and G of chapter 54. As the term is used
in those subchapters, a bond is clearly distinguishable from

                                P. 6724
Honorable John Whitmire - Page 9     (JM-1259)

a revenue note. For example, a bond may be repaid from ad
valorem taxes, district revenues    from the ownership    or
operation of its property, or from a combination of these
sources. Water Code 9 54.503.    Additionally a bond may be
secured by a mortgage  lien on all or part of the property
of the district.  Ig, 5 54.504.   Bonds may have maturities
of up to forty years from their date of issue, and bear
interest at any rate permitted by law.       Id.  S 54.502.
However, revenue notes may not have a maturity of more than
20 years from their date of issue, may bear no more than ten
per cent interest per year, may not be payable from tax
revenues of the district's property, and may not be secured
by the property  or taxes of the district.    Id. 5 54.303;
         *                                                  Sav.
x        Texap'       *
                  666 S.W.2d 203 (Tex. Civ. APP- - Houston
[14th Dist.] '1983,   no writ).     The   term   "bondstl '
consistently used throughout   chapter  54 to refer to 'i
securitv not subject to the restrictions       applicable to
revenue-notes.   -

     Section 54.774 was added to the Water Code by Senate
Bill 618    (Acts 1985, 69th Leg., ch. 100, 5 1).             As
originally   introduced, Senate Bill 618 provided,         under
certain circumstances,   for the issuance of a district's
bonds for recreational    facilities.  Senate Bill     618   was
referred to the Senate Committee_ _on Natural  Resources.
                                              . .              On
March 14, 1985, it was reportea aaversely, witn a favorable
committee substitute.    The committee   substitute   contains
section 54.774 in the form eventually enacted into law. The
bill analysis of the committee substitute     for Senate    Bill
618 states:

           The right of MUDS to own, operate,         and
        finance parks and recreational facilities      is
        being questioned by the Department of Water
        Resources.   The department concluded that     it
        is probable that affluent districts would be
        able to take on the additional        burden   of
        providing   recreational   facilities     without
        serious problems. However, with respect to
        newly formed districts       without   a    sound
        financial base, and other districts providing
        recreational facilities could be very severe
        and probably    in many instances        ruinous.
        Also, they suggest that the          opportunity
        exists for the abuse of the district's taxing
        power by developers who wish to construct
        recreational facilities as a means to attract
        home buyers within a new subdivision with the
        intention of selling these facilities to a

                                P. 6725
Honorable John Whitmire - Page 10 (JM-1259)

        district as quickly as possible so that they
        can be taken over and supported through  tax
        revenues.

           Additionally,   the Department     contended
        that SB 618 may be subject to a constitution-
        al challenge.    Texas. Constitution,   Article
        XVI, Section 59, which names all functions of
        these districts,   does not mention the word
        'recreation' and such a function must be
        implied, if it does exist. There are legal
        arguments pro and con but the leading case in
        this field, peason vs. Oranae Countv Water
        >            d                            0.
        (1952;   held that     districts   lacked      the
        constiiutional   authorization:    either        -
        pressed or implied, to provide     firefightT:g
        equipment,   although an express      statutory
        authorization for such firefighting equipment
        was then in effect.     It is quite possible
        that under the precedent of the Deason case,
        legislation authorizing districts to provide
        recreational facilities and equipment        could
        be declared unconstitutional.    In this case,
        the Department would close down existing
        parks and recreational facilities.

     The bill analysis of the committee    substitute   shows
that the legislature was mindful of the constitutional
difficulties presented by the Deason case as well as the
problems inherent in permitting a district's tax base to be
encumbered by recreational facilities which might be of more
benefit to a developer's short-term marketing strategy   than
to the long-term fiscal health of the district.  The prohi-
bition found in subsection (a) of section 54.774      against
the issuance of bonds to fund recreational facilities   seems
aimed at avoiding constitutional  restrictions on the issu-
ance of debt and untoward encumbrances   on a district.    As
revenue notes do not permit encumbering either the taxes or
the property   of the district,  and as their use is not
constitutionally restricted, it appears that such a funding
mechanism may well have been within the contemplation of the
legislature in enacting subsection (b) of section 54.774.

      Accordingly, we believe that the term *'bonds" as used
in section 54.774 of the Water Code is consistent in meaning
with the use of the term elsewhere in chapter 54, and does
not include "revenue notes' as provided     for by section
54.303.    Your question is answered in the affirmative:  it

                                P- 6726
Honorable John Whitmire - Page 11 (JM-1259)

is permissible  for a municipal   utility district   created
pursuant to article XVI, section 59, of the Texas Constitu-
tion and operating under chapter 54 of the Texas Water Code,
to use revenue notes to finance the acquisition of park land
and park facilities.

                       SUMMARY
           It is permissible for a municipal  utility
        district created pursuant to article     XVI,
        section 59, of the Texas Constitution     and
        operating under chapter 54 of the Texas Water
        Code, to use revenue notes to finance the
        acquisition of park land and park facilities.

                                    Very
                                     truly        Y   ,

                                   J JIM
                                        h  A;,.
                                             MATTOX
                                     Attorney General of Texas

MARYKELLER
First Assistant Attorney General

Lou MC-Y
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by John Steiner
Assistant Attorney General

                                 P. 6727