Court Opinion

ID: 4142401
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:21:32.529364+00
Date Added: 2024-06-11T14:49:37.857573
License: Public Domain

Honorable Ernest Quinn
County Attomey
El Paso County
El Paso, Texas

Dear Sir:
                   OpFnion Rumber O-3954
                   Re:   Water Control and Improve-
                         ment District Revenue Bonds.
          We acknowledge receipt of your opinion request of
September 9, 1941, wherein you ask the following questions:
         "1. Where a Water Control and Improvement
    District has been properly organized under the
    provisions of Section 59 of Article 16 of the
    Constitution of the State of Texas, and purely
    revenue bonds have been issued under the pro-
    visions of Article 7880, Vernon's Civil Stat-
    utes, Subdivision 90a, can the property of a
    subscriber located within the district ever
    become liable for the payment of the bond?
         “2 . Where a Water Control and I provement
    Distrlat has been organized and pure?y revenue
    bonds issued, as stated in Question Bo. 1, does
    the Board of Directors of the District have
    authority to compel any unwilling person to take
    the service whether they have adequate facilities
    of their own OP not?
         "3 . Where the revenues become inadequate, what
    are the rights of the bondholders in compelling the
    Board of Direotors to raise the PaYes for the
    services rendered?"
          Article 7880+0a, Vernon's Annotated Civil Statutes,
provides, in part, as follows:
             ,-

Honorable Ernest CSuinn,Page #2   (O-3954)

           "Thi& section shall apply only to such water
     control and improvement districts as have adopted
     (or hereafter may adopt) a plan for improvements
     designed to furnish a water system, or a sewer
     system, or a water and sewer system (either by
     construction, or purchase, or purchase and con-
     struction), for service in areas, urban or in-
     dustrial in nature, but not incorporated under
     the laws of Texas relating to the creation of
     cities. and which districts have. or have exvect-
     ancy fbr, net revenues from operations (to exclude
     al.1income from ad valorem taxes, specific assess-
     ments of benefits or taxation upon the basis of
     dollars per acre, but to embrace all other income
      or revenues) in lieu of securing its bonds as
     vrovided in gection 90 (next foreaoinsr).elective-
     iy may provide for the payment of-the-same in any
      one of the following manners, to-wit: ' * * * *
     2--by entering into contracts for the pledge of
      the net revenues of the district, as hereinafter
     defined and provided for; * * + and: The expres-
      sion 'net revenue', as used herein, shall be
     understood to exclude any money derived from
      taxation, but to include all income or increment
     which may grow out of the ownership and operation
      of the improvements or facilities produced by use
      of the money for which such bonds are given; less
      such proportion of the district's revenue income
     as reasonably may be required to provede for the
   ~.administration, efficient operation and adequate
     maintenance of the district's service facilities;
     * * *'I*

          The Supreme Court of Texas, in construing another
revenue bond statute in the case of the City of Dayton v.
Allred, 68 Se W. (2dj 172, said:
          "In other words, the holder of these bonds
     merely b.asa claim against the sever system, the
     franchise, and the revenues of said system, and
     the water system, He can never have any claim
     against tax funds".
          Therefore, your'Question Number 1 is answered in
the negative.
Honorable Ernest Quinn, Page #3    (O-3954)

          Under this plan of financing only the net revenues
of such systems are pledged to the payment of the principal
and interest of the bonds, and the holders of such bonds do
not have the right to demand payment thereof from funds raised
by taxation.
          Your Question Number 2 is answered in the negative.
We find no express provision in the Act which authorizes the
Board of Directors of said district to require any person to
subscribe to the service rendered by the district. It is our
opinion that the Board is without authority to require any
person to accept the service of the district. This is a matter
to be handled by contract between the district and the purchas-
er of the water or sewer service.
          In reply to your Question Number 3, we find no pro-
vision in the statutes covering this matter. In the absence
of any expess provision in the contract authorizing the reve-
nue bonds setting out the rights of the bondholders, it is our
opinion that their only remedy would be to compel the district
to levy and collect reasonable rates sufficient to service
the outstanding bonds.
            Trusting that this answers your questions, we are

                                   Very truly yours
                             ATTORNEY GENERAL OF TEXAS

APPROVED SEP 19, 1941
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A'l-TORRhY
         GERERAL
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APPROVED OPINION COMMITTEE
BY /s/ BWB CHAIRMAN