R-346


                         YWEA~~OKNEW              GENERAL
                        h         OF    TEXAS

     PRICE    DANIEL
     .ATTOEl*EYGENERAL

                                    April 28, 1947


           lion, E, V. Spence, Chlrman
           State Board of Water Engineers
           Austin, Texas                          Opinion No. V-169
                                                  Re:    Issuknce of revenue
                                                         bond6 by a Water
                                                         control and improve-
                                                         ment district     and
                                                         pledge of income of
                                                         irrigation    system in
                                                         payment theraof,
           Dear Sir:
                            Reference Is iaade to your letter     of April 9,
            1947, In which you state that a certain water control and
            improvsaent district    was creafed in 1941 under the authorS-
            ty of &ticlee   7880-l to 7880487,     VemQnJl airi     StatUter,
            and that the order creating     the d$ntrlct  inaluded the broad
            powers mentioned~ in Art&lee; ff88O-3 ‘and 788C-3a.     These two
            statutes include ar~ong others the powers to establish        and
            operate an irrigation’system     and to eetablleh   and OPCrate
            a water and sewer system.
                            You state that    $,n 1946 the district    issued
            bonds under the authority of     method 2 of Articte 7@8C-%a,
            which bonds are secured by a     pledw;f      the Bet revmue of
            the water and qewer ,syetti.     The proceedings    authorizing
            these bonds were approved by     the Board of Water Rngineers
            and the Attorney General and     reg;lstered,by   the Comptroller
            of Public Acoounts.
,,                            We quote.the   followIn@   from your Setter:
                                                                                   :
                   I,
                     e y t The proceedings’ authorixlnS the issu-
                   ance of saidibonde provided therein that *while
                   any of the bonds are outstand         the district
                   shall not issue any addItiona   9   ends payable
                   fraar the reveques of the System,unless    the 1160
                   of suoh addit?iQnr;C ,IPoBgsQn the fetenuee Ot the
                   system Is made junior and subordinate In all rew
                   spects to the U.en of the bonds authorized in
                   this ret901utl,onr ’

.,
Boor. E, V. Spence - Page 2 - v-169



      “The district    has requested this Board
     to advise lt whether or not additional
     -bonds can be issued by the dlatrict     for
     the purpose of making improvements to
     the Irrigation     system within the dlstrlct,
     whiah the district      proposes to take over
     and operate, and making extensions and
     Improvements to the water end sewer
      system now under construction     within the
     district,    and to pledge the net revenues
     derived from the operation of the irri-
     gation system to the payment of such
     ,additlonal    bonds.
     “Inasmuch as Article    ‘@80-139 provides
     that this Board must approve the issuance
     of bonds by any water control      and improve-
     ment district   before the same can be issued,
     we reapeatfnlly   request you to advise us
     whether or not the term *net revenues* as
     used in Article   7880~gOa lssuffioiently
     broad to include revenues derlved from the,
     operation of an irrigation     system, and
     whether or not such revenues may be pledged
     to the payment of revenue bonds lssued for
     the purposes above stated,”
            We have not deemed it necessary to re-examine
the’above-mentioned    bond record,   for we are of the opinion
that the statute itself     (Article  7880-goa] gives us the
answer to your question,      This statute was added to the
water control and improvement dlstrlct       statutea by Senate
Bill Ho. 29, enacted by the Forty-third       LeglsPature at
its Third Called Session (Acts 1934, 43rd Leg,, ch, 32,
PO 56).    Article  7880-90a (Sec. I, S, EL No, 29) pro-
videa in part as follower
           “This section shall apply only to such
     water control and improvement diutrlcts     &B
     have adopted (or hereafter   my adopt) a. plan
     for iaprovemimtr designed to fkrnlsh a .water
     eyetern, or a eeuer rystem, or a water end
     sewer system (either by conatructlon,    or pur-
     chase, or purchase md construction)      for
     service In arears, \uiban or ltiduetrfai in
     nature, but not incorporated    wn4er the lam
Hun, E, V. Spence - Page 3 - V-169

     of Texas relatinx  to the oreatlon   of
     oitlea, and uhloh, dirtriots have,   or

                              rpeoii~o as0468r
     mente or benefits   or taxation unon the
     basis of dollar8 p4r acre,
     brace
     III 1%
     vided in Seotlon 96 (next foregO$ii&),
     eleotlrely  may proolde for the p8
     of the rare In       one 0r the tell-em-
     inf$ mannem, tow1‘9 : 1 - A# provided for
     by Section 90, next forb$olT;     2-by
     entering into eontraote     or he Dledee
                                            -a8
                                            P
     3- by seauring the bonds-~ln both man:
     ners 1 and 2; and: The expression
     ‘net revenue’,   as used herein, shall be
     understood to exclude any money derived
     from taxation,   but to include all in-
     come or Increment which mav xrow out




            The use of the broad terms “net revenues from
operations, ” “all other income or revenues,” and “net
revenues of the district,”   at first   glance weuld indicate
that any revenue6 of the district     could be pledged toe
the payment OS its bonds.    However, we do not believe that
this construction   was the one intended by the Legislature.
Moreover, it is our opinion that Article      7880-900 does not
authorize the Issuance of revenue bonds for any purpose
other than for a water and/or 8ewer system and th6t it Wea
not authoriee the pled%      or any revenue6 of the district
other than those derived 3 ram its water and/or aerer aps-
tea.
Hon. E, V1 Spance - Page 4 - V-169


           You ~111 notiae that part of the statute
whlih provides that “net revenue” shall include “all
inoome or Increment which may grow out of the owner-
ship and operation of the Improvements or facilftfes
produced by the use of the money for whloh such bonds
8re givmJ less ruah proportion of the dfetrlat~s
revenue income ae pay be zreqxkred to provide        fsr   the
 administration,   efftcient operation and adequate nWn-
 tenanaa of the dfsttifctla  servfee faoflitleo,”    St %a
our opinion that this language alearly      refers bask to
 the earlier   Ianguage in the &zatute which reads “water
,ryatem, or a sewer system, or a water and sewer eF?item
        for service in areas, upban OP fnduatriag, 5.m
Z;akGe, i . G”
           Sn the first place, the only purposes ,speel-
fled in the statute are water and/or sewer purpoae& Xn
the second place, the emergency clause of Senate BflS.
Ilo, 29 alew%y shows that the Legf@faW%? h&d in rfrd
omly water mad/or 8ewer purpssas,  for said clause pso-
vldes    in part aa ioUowsn
              “The uthortnerss of this eeusftm of
        the Legfslaturep    and, the fact that various
        uater control and 3,mprovemeet dfstr$cts    cm-

        necessity  to become I.ncoWpsroted as eft$es,
        coupPed with the fact that certaim @)f these
        distr%cta,  while stherw%se approved, a$e          -
        beinu denied Poane bu the Federal



                                    Bmphasfe added
It le clear Srom the underscored %angm$e that %a Legis-
intended  that the statute authoWze the PI&&e of only
the water and/or rwter revenues0
             In the third   lace it would not seem reasonable
te rant a district    of  ? he  type mentioned 18 Artlole
&-9Oa    the power to pledge any and alIZ of ffr revenue8
no matter the souroe and mat gruat the t#ams OP a rlmllar~
right to other dlrtrlotr,
             In the aase of Keel v, Pulte    (Corn, App,),       10 S.W,
(24)    694, the court stated as follower
.   -




        Hon. E. V. Spence - Page 5.. - V-169


                    “The power to lesue negotiable  paper for
             public improvements, or for money borrowed for
             the purpose of acquiring such lmprovementrr lr
             a power which Is regarded as belng beyond the
             scope of power of the governing body of a city
             or a county unless it be specially    granted*
             This extraordinary   power, when granted, oan be
             exerclacd only in the mode and for the purpose@
             specified   In the grant. . . .’
        Even though the bonds in question would be revenue bonds,          we
        think that the principle announoed above 1s applicable,
                   In view of the foregoing, you are advfsed        that
        your question Is answered ln the negative.
                   We wish to add that the aonolusions   announced
        herein are consistent  with those long followed by the Attor-
        ney Qeneral in the csxamlnatlon of bond records.    Moreover,
        If bonds of the type inquired about were submitted for our
        examination,  for the reasons stated such bond0 would be dle-
        approved,



                   A water control distrlot   has‘& author%-
             ty under Article    7880~90a to lssue.revenue
             bonds for the purpose of lmprovlng Its lrri-
             gatlon system and of making improvements and
             extensions  to lta water and aewep system whlah
             bonda wotid be secured by a pledge of the net
             revenues derived from the operation of lte
             irrigation   system.
                                               Very truly   yours
                                         ATTORNEY
                                                QENEFUL
                                                      OF TEXAS

                                                 A-4-a              w
                                         w         George W. Spark8
                                                          Assistant

                                         ,AP~P


        QWS:s:bt                         ATTOBHEfQ-           OF TEXAS