Untitled Texas Attorney General Opinion ( 1990 )

‘.
.
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