4     .




                THIEA?L~TT~RNEY                   GENERAL
                                OFTEXAS




Honorable J. W. Edgar                     Opinion     No. WW-147.
Commissioner   of Education
Texas Education   Agency                  Re:     Authority  of Vidor Independ-
Austin,  Texas                                    ent School District     to enter
                                                  into a rental-purchase        con-
                                                  tract for acquisition       of
Dear Dr.    Edgar:                                additional   school  facilities.

               We quote   from your     request     for   an opinion,      dated   May
1,   1957, as follows:
               “The Vidor Independent          School District,
       Orange County, is in need of additional                 school
       facilities.         & reliable    firm,   Structo    School
       Corporation,       Boston,     Massachusetts,      has indi-
       cated an interest          in designing,     constructing
       and equipping        the needed ‘modular plan’ school
       building      on a suitable      site to be designated
       by the Board of Education.              It is contemplated
       after     construction       is complete   to lease the
       building      to the Board of Education          for a length
       of time not exceeding           40 years.     Upon payment
       of the agreed upon rentals            and expiration       of the
       agreed time, title          to the building      and site
       would rest in the Board of Education.                 . . .

              “In view of the ever increasing            need for
       additional     school buildings      and facilities        in
       this State,     the possibilities       for the acquisi-
       tion of same under a contemplated            modular plan
       construction-leasing       plan wherein private          com-
       panies or corporations        would construct        or have
       constructed     the same under lease plan agreements
       entered into between local          school    districts      and
       corporations      or companies,     and the importance
       that the question      herein     submitted be thoroughly
       considered     and firm conclusions        reached,     we
       would appreciate      an opinion     from your office
       therein.”

               Following   receipt  of your       request   and as a result  of
a conference       between a representative          of this office  and Mr.
Honorable    J. W. Edgar,      page    2   (W-147)



Chester Ollison   of the Texas Education    Agency     it was mutually
agreed that your request   could be satisfactor    i ly handled by
our consideration   of the following   questions:

      lo     Is an independent         school   district  authorized
             to contract    with      reference    to the rental   of
             school  buildings?

      2.     What, if any, are the limitations              with respect
             to the term or duration  of such             a contract?

       3.    May an independent      school   district     by such a
             contract   pledge the available        school   funds of
             the district    thereby    guaranteeing     the annual
             payment of rentals?

          In consideration   of your first    question,    we refer                to
Section 2 of Article   2827 of Vernon’s   Civil  Statutes,    which
reads in part as follows:

             “Local school    funds from district    taxes,   tui-
       tion fees of pupils not entitled       to free tuition
       and other local    sources   may be used for . . . buy-
       ing, building    and repairing   and renting    school
       houses.   . . .I’

The authorization         to expend local       funds for “buying,        building,
repairing,        and renting   school houses” necessarily            bestows upon
local    school     boards the right to contract            with reference     thereto.
To hold otherwise         would be contrary        to the evident       purposes    of
Article     2827 and so restrict         said boards in the execution            of
their    official     duties   as to be detrimental          to the proper admin-
istration       of our public     school    system.       The provision     of the
proposed      contract    which provides       that after      the payment of stfp-
ulated rentals        for a period     of forty     years,     the building     shall
become the property          of the school      district,      does not materially
alter    the nature of the contract.

             Your second question      involves    the authority      of the
school   board to so contract     as will     be binding    on succeeding
school   boards.    The statutes    contain    no express    limitation      upon
the :duration    or term of the type of contract         here involved,        and
Texas Case Law upon the precise         point is surprisingly         limited.
It has been held that the contracts           of a Commissioners’        Court
may not ordinarily     be repudiated     merely because the personnel            of
the body has subsequently       changed.      It is only where the employ-
ment by a Commissionerss       Court is personal      and confidential,         as
in the case of ,an attorney,      that it is held that one Commission-
ers’ Court has no power to bind its successors.                For example,
.   _




        Honorable     J.   W. Edgar,    page   3    (W-147)


        the rule is not applicable      to contracts     essential    to the per-
        formance of public    works.    Gulf Bitulithic      Co. v. Nueces County,
         (Comm.App.~, 11 S.W.2d 305, 34 Tex.Jur.,         45       The case of
                             (Civ.App.)    65 S.W.2d 417,3ie1d       that a change
        in the membershi;    of a school    board, prior to approval by the
        county superintendent     of valid   teachers’    contracts    previously
        made, did not authorize      the new board and the superintendent
        arbitrarily   to revoke such contracts,       without    any charge of fraud,
        imposition   or mistake.

                      We see no reason why the foregoing            general    rules would
        not have application         to the proposed     contract    here under consid-
        eration.      We do not say, however,        and neither     do the foregoing
        authorities,     that a school board may arbitrarily              and designedly
        unde,rtake to tie the hands of future            boards in the orderly         and
        economical     administration      of the school by entering          into con-
        tracts    of long duration      contrary   to the public       interest.     In the
        exercise     of discretion     conferred   upon them in such matters,           school
        boards must be guided in their           decisions     only by matters affect-
        ing the public      interest    and act in reasonable        accordance     with the
        necessities     of the circumstances       confronting      them.     The case of
        Board of Com’rs of Edwards Countv                Simmor~ 151 P.2d 960, sets
        forth    the general     rule in the following       term;:

                       “The test generally       applied    is whether the
               contract     is an attempt to bind successors           in
               matters incidental       to such successor’s         adminis-
               tration     and responsibility,        or whether it is a
               commitment of a sort reasonably            necessary    for
               protection     of public     property,    interest,    or af-
               fairs    being administered,       and in the former case
               the contract     is generally      held to be invalid       and
               in the latter      case valid.”

                      The term or duration        of the contract         in question      is un-
        usually    long.     It goes without      saying that the organization               and
        needs of our school         districts    are undergoing       constant     change.        To
        reasonably     project    the needs of a particular            school   district      for
        some forty     years,    and to commit it to a definite             course of action
        in light     of such projection,        would require       considerable      vision
        and foresignt.         In view of these considerations,             we have no doubt
        that the courts would subject            such a contract        to the closest         scru-
        tiny.     As to whether the courts would uphold it must depend in
        each instance      upon the existence        of such facts        and circumstances
        as to render same amenable to the peculiar                 needs of the school
        district   e Only the Board of Trustees,              in the exercise       of sound
        and reasonable      discretion,       can initially      determine     the existence
        or non-existence        of such supporting        factors.      In any event,        the
        authority     of a school board to so contract              is necessarily       limited
                                                                                          .   _




Honorable    J. W, Edgar,      page   4   (WW-147)


by our answer      to your    third   question    which     follows0         ’

             The school     district    cannot,   however,    by means of such
a contract,     pledge the future revenues          of the school     district
for the payment of rentals           as same accrue.       School trustees     have
no legal    authority     to create    any indebtedness      which cannot be
liquidated     by application      of available     school   funds of the dis-
trict   for the scholastic        year in which the debt arises.            37 Tex.
Jur. 972.      Article    2749 of Vernon’s      Civil Statutes     prohibits    a
common school      district    from creating     a deficiency     debt in making
contracts    with teachers.        The courts have expanded the rule to
include    debts generally.        Teag,ue Independent      School District     et
al. v. Mason.       t al     233   B.W 2d l’/b    C lli er v. YeacockgmeWWe
1025 j First Nationa;‘Bank         of ithens    5. iur chison    Independent
School District,       114 S.W.2d 382; Trustees         of Crosbv Indenesdent
School District       v. West Disinfecting       CQ., 121 S.W.2d 661.

             Section    3 of Article     VII, Constitution         of Texas, pro-
vides in part that the “Legislature              may authorize       an additional
ad valorem tax to be levied          and collected       within    all school     dis-
tricts.   a *for the further        maintenance      of public     free schools,
and for the erection        and equipment of school buildings              therein.”
Articles   2784e, 2785, 2786 and 2?87 are the enabling                  bond and
tax statutes     pursuant to the Constitutional             provision.      Article
2784e authorizes      the voting     of bonds and the levy of a bond tax
“for the purchase.       construction.        eo. ir        auioment of public
free school buildings        within    the &tts       Es zuch district       and
the purchase     of the necessa.ry      sites    therefor.     . *‘I &nphasis
added) .   Article    2787 requires       that the proceeds        of such bonds
issued   and sold “shall      be disbursed       only for the purpose for
which the said bonds were issued.”               It is noted that ,there is
no statutory     or constitutional       provision      authorizing     the voting
or issuance    of bonds for leasing          or renting     of school buildings.

           The conventional    method for financing      long-term    obli-
gations in connection    with school     construction   projects   is
through the issuance    of bonds and the levy of a tax for the re-
tirement  of same as provided     by Articles     27&e,  2785, 2786 and
2787. This method offers      reasonable     guarantees  of protection
to all parties  which the proposed lease-purchase         method does
not and cannot fully    offer e

             In view of the foregoing            and with    respect   to   the   third
quest ion   propounded, we conclude:

       1.     Annual rentals   accruing    under the proposed
       lease-purchase    contract   could be paid solely     from
       local   surplus maintenance     funds of the district*
Honorable    J.   W. Edgar,     page     5’ tww-147)



      2.    Bonds cannot be voted for the purpose of
            renting  or leasing     a school building  and
            It necessarily    follows   that bond proceeds
            could not ordinarily      be used for paying
            such rentals.

       3.    The ability      of the school      district  to pay
             the required       rentals   would be contingent
             upon the availability          of surplus mainten-
             ance funds which could be used for such
             purposes    for the particular         year in which
             the rental     became due.       The rental   accru-
             ing in one year but not paid, due to a lack
             of available       funds,   could not become a con-
             tractual    liability      against   the funds of a
             subsequent     year even though there should be
             surplus   funds available        for such purposes
             in said year.

            Your third        question    is   accordingly       answered   in the
negative.

                                         SUMMARY

             The Vidor Independent         School District       is
      authorized      by law to contract       with reference       to
      the rental      of school buildings.         The term or
      duration     of such a contract       rests within the
      sound discretion       of the Board of Trustees          in
      light    of the needs and circumstances            of the dis-
      trict.      The school    cannot,   however,     by means of
      such a contract       pledge the future       revenues    of the
      school    district    thereby    guaranteeing     to the
      builder-owner      the payment of rentals         as same ac-
      true , since school       trustees    have no legal      author-
      ity to create      any indebtedness       or obligation       which
      cannot be liquidated         by application      of available
      school    funds of the district        for the scholastic
      year in which the debt arises.

                                           Yours    very     truly,

                                           WILL WILSON
                                           Attorney General           of Texas




                                               Leonard Passmore
LP:wam:wb                                      Assistant
                                                   --




Honorable   J.   W. Edgar,   page   6   (Wd-147)


APPROVED:

OPINION COMMITTEE

H. Grady Chandler,     Chairman
Wallace Finfrock
Lonny Zwiener
Houghton Brownlee,     Jr.

REVIEWEDFOR THE ATTORNEYGENERAL

BY:         George   P. Blackburn