Untitled Texas Attorney General Opinion ( 1939 )

May 3, 1939 Messrs..Shlvers &-:Ke,lth Attorneys for Je.ffersonCounty Water Control & Improvement District No.1 'Adams Building Port Arthur, Texas A.ttention: .Mr. Allan-Shive'rs. NO: .o-46% .Opiriioi~ Re: Authorlty.of a Water.Control and Improvement'~,District~to pledge net Revenues and.glve a'legal'flrst mortgage upon such.system as addi- tional-security to.seCure'.thepay- ment of 'taxi bonds issued.thereon Oentlemen:. March~8, .addressed'to'theAttorney .In iour:-letteti'of General, you reque+..an opinioncovering t-he,foliowlngques- tions:, 1. Can t~~"Distrlct,‘wl,thoutadditilonal.authoriza- , ,'le,gaIly tion from.the qualified :,votera pledge the'net reve- nues of the water.system,for,,the,pa~ent of,bonds so.,aufhorized? 1 2..~Can the,.Doardof Direhtorslegally create a band- lng,flrst.mortgage-.l~,~~-gpon:tt?e'water system'to secure the payment of the tax bonds authorlzed,for the construction of the water and sewer system? Inaccordance,,y$.th,,the ,provls$onsoftArticle 4399, requiring this,.office.-,~~..~,advise.,,~lative the proper issuance of bonds, ..the,following,~~gpinion,has been prepared: #As statedl,,gnyour.let'ter,the facts.are as foliows - .~i. .., .On S.epte.rn~ez:~i~;;.~~~~8,,,:the': qua,lifiedtaxpaying voters of the Jeffe~~~~~~~ate~,iC~~~~ql~~~~~d.~.~mprd~eme,nt~.Distr~lct .No. 1 votedbonds ~aggrega.tlng..,$255,OO'd"'alid -authoriied'.thelevying of a tax to pay the pr'lnclpal.and interest thereon as it ‘4. Messrs. Shivers &'Keith - page 2 matured; that you are now negotiating a loan from the Recon- struction Finance Corporation for the purchase of the bonds to supplement a W.P.A. grant, and that the bonds to be authorized and'pledged against this loan from the R.F.C. are in the sum of $195,000. The legal counsel for the R.F.C. has suggested that additional security might be offered by the pledging of net revenues of the project and also that a first mortgage upon the system might also be given. Article 7880-147u, Sec.3, Revised Civil Statutes of Texas, provides that the Board of Directors of any water con- trol and improvement district may assess and collect charges for maintenance and operation of the facilities .of any such district and such proceeds when collected should be paid into the maintenance fund required in Section 103 of Chapter 25, Qeneral Laws~of the Thirty-nlnth~Leglslature, Regular Session of 1925. It further provides that ~a11 or a part of said maln- tenance fund may be Irrevocably pledged as additional security for the nayment of the nrlncinal or Interest on all bonds of any such district so issued and sold to the.Qovernment ,of the ~UnltedStates or to any lending agency mentioned in Section 1 of the Act, or on all bonds of such district nledged as col- lateral to secure'navment of any loan made by said Government or agency thereof 'to any such dlstrlct,as such bonds become due and payable,.and moneys of said maintenance fund so pledged shall aCcordlngly be used for maintenance and operation when and only when the principal of and Interest on the bonds due on all preceding semi-annual Interest paymeht dates shall have been paid In full and,when the collection of taxes for the Interest and,sinklng fund account, reasonably and prudently~ to be anticipated by the boerd of directors of any such dls- trlct, will be sufficient to pay principal of and interest on the bonds becoming due on the ~semi-~annualinterest payment date next succeeding. Provided, nevertheless, that when moneys of the malntenanhe fund are so used to prevent or to cure de- faults In the payment of the principal of or interest on the bonds, the amount so used shall be repaid into said mainte- nance fund from the first available proceeds of the taxes levied pursuant to Section 2 of this Act. Subsequent to the enactment of this statute,it was determined that such districts were without s~peclflcstatutory authority to pledge net revenues as security for bonds pur- suant to the provisions of that article, and at the Third Called Session of the same Legislature Article 7880~9Oa was enacted to enable such districts to legally pledge the net -Yevenues 'as additional security for general obligation bonds Issued and sold. It also defines net revenues and enumerates the manner in which such pledges could be accomplished, and . ’ Messrs. Shivers & Keith, page 3 provided that whichever method was adopted should be first submitted to the qualified voters of such.dlstrict for ap- proval thereof. The ca tion of this bill, which was en- acted September 26, 193t , by the Forty-third Legislature, Third Called Session, recorded In General and Special Laws of that session, at page 56, Chapter 32, Section 1, states - "An Act amending Chapter 25 of the Acts of the 39th Legislature, Regular Session, adding thereto a section to be 'Section gOa,' and, in substance to provide: That certain water control and improvement districts (In addition to, or in lieu of, securing their bonds by the levy and collection of taxes, as now provided), may enter into contracts pledging their net revenues for security of their bonds; Andy,providing that, in case the district's obligations are secured both by taxation and the pledge of revenues, to com- pensate the net revenuesavailable to protect the maturities of the dlstrlct*s obligations. Defining 'net revenues'; and, requiring an elec- tion for authorlza~tlon~forexercising ~the Powers hereby aranted; also. flxinn the DrODOISitioiI to be voted on at~any such election. ,Stat%g the facts cnnstituting an imperative public ne- cessity (to enable such districts promptly to procure loans from the Fe,deralAdmInIstratIon of Public.Works, or other advantageous sources, thereby aiding to relieve unemployment) and de,' claring an emergency." The foregoing Act is not applicable to your district under the facts stated, inasmuch as you are negotiating a loan with the Federal Qovernment, or a lending agency thereof which brings your case within the purview of the Acts of the Forty- fourth Legislature, 1936, Third Called~Session, page 2092, Chapter 501,.Section 1, wherein Section 1 of the Acts of 1934, Forty-third Legislature, Second Called~Session, page 10, Chapter 4, was amended. The amendment expressly authorized the Board of Directors of N water control and Improvement district in this State to borrow money and to receive grants and other aid from the Government of the United States. the Federal Emergency Administration of Public Works, the Recon- ._ struction Finance Corporation. the Federal Reserve Banks;and any other agencies of 'thedovernment .of the United States, and which loans or grants may be made on~such terms and in ~& amounts as may be agreed upon between the Board of Directors of such d@trlcts and the United States Government, or any lending agency thereof. Messrs. Shivers & Keith, page 4 In our opinion this law authorizes the pledging of the "net revenues" by the Board of Directors of the Jeffer- son Water Control and Improvement District as additional~se- curity for the previously voted tax supported bonds without the necessity of another election. Any plan of financing other than that specified in the Act above quoted would require the submission of such further pledging of security to the qualified voters of such district, as provided in Article 7880~goa of the Revised Civil Statutes of 1925. It is also our opinion that a first mortgage cannot be given on the improvements within such districts. The sta- tutes specifically authorize the pledging of certain revenues and ad valorem taxes to the payment of bonds issued by such districts, but have failed to provide for the'mortgaging of the physical improvements therein. sunder the well established' rule of law that wherein a law falls to name matters germane to the subject, it is presumed that the intention was to exclude such unnamed matters. whence, we conclude that the Legislature did not intend that such districts should have the right to give a first mortgage on its improvements. Assuring you of this department's continued coopera- tion, we are Very truly yours ATTORNEYGENERAL OFTEXAS BY Clarence E. Crowe Assistant CEC:s:bt Approved: cc nr. Edward Edelman, Counsel Reconstruction Finance Corporation Washington, D.C. .-