                                           The Attorney                   General of Texas
                                                                   March 11,     1983

     JIM MATTOX
     Attorney General

                                         Mr. C. A. Wilkins                                          opinion     No.   JM-9
    Supreme   Court Building             Executive   Director,   TX. Aeronautics           Corm.
    P. 0. Box 12546                      P. 0. Box 12607, Capitol     Station                       Re:     Loan8    to  cities   and
    Austin. Tx. 78711.2548               Austin,   Texas     78711                                  counties      by    the     Texas
    5121475.2501
                                                                                                    Aeronautics    Commission
    Telex 9101a74.1367
    Tekcopier    5121475-0266
                                         Dear Mr. Wilkins:

     ,607 Main ?.I.. Suite 1400                 You have    asked   whether      the Texas     Aeronautics     Commission   is
     oa,,as, TX. 75201.4709
                                         prohibited    by the Texas Constitution         from making loans to cities       and
    -2141742.8944
                                         counties    for airport    construction       and development     without requiring
                                         them to provide     a revenue source       for the payment of interest       and the
    4624 Alberta     Ave.. Suite   160   creation   of a sinking   fund to retire       the debt.
    E, Paso. TX.     79905-2793
    9~51533.3484
                                                Article       46c-6.    subdivision       10, V.T.C.S..          as amended in 1981,
P                                        authorizes       the commission      to provide      funds “through         loan agreements or
         0 Dallas Ave.. Suite 202        grant     contracts”        to any governmental          entity     in the state        “for    the
    tious!on.    TX. 77002-6986          establishment,         construction,      reconstruction,         enlargement       or repair of
    7 131650-0666                                        airstrips.       or air    navigational        facilities.”
                                         airports,                                                                            In Attorney
                                         General Opinion          H-416 (1974).       this office       concluded       that subdivision
    806 Broadway.      Swte 312          10 of       the    statute,      as it     then    read,     was not        violative      of   the
    Lubbock.  TX,     79401-3479         constitutional         prohibitions      against     loans and grants           of public     funds
    W,6,747-5236                         for improper purposes.             The opinion      did not address         the constitutional
                                         authority      of a municipality        to assume debt, however.
    4309 N. Tenth, Suite B
    M~AII~~. TX. 78501-1685                     Two provisions     of the Texas Constitution        speak to the assumption
    ‘512I682-4547                        of debt by cities      and counties.     Section   5 of article     11 declares   that
                                         “no debt shall      ever be created     by any city,     unless    at the same time
                                         provision    be made to assess       and collect    annually    a sufficient    sum to
     200 Main Plaza. Suite 400
                                         pay the. interest     thereon   and creating     a sinking    fund of. at least    two
     San Anlonio.  TX. 782052797
     5121225-4191
                                         percent   thereon.”     Section   7 of article     11, as amended in 1973, reads
                                         in part:

     An EaualOpporlunilyl                              [N]o debt for any purpose       shall    ever be incurred
     Aflirmative    Action   Employer
                                                       in   any manner by any        city    or    county    unless
                                                       provision   is made, at the time of creating              the
                                                       same, for levying    and collecting      a sufficient     tax
                                                       to pay the interest     thereon    and provide      at least
                                                       two percent   (2%) as a sinking     fund;   . . .

    -.




                                                                                 p.   36
Mr. C. A. Wilkins         - Page 2        (JM-9)




         The Texas Supreme Court has defined               the term “debt” used in the
foregoing      provisions      as “any pecuniary       obligation     imposed by contract.
except     such as were, at the date of the contract,                    within    the lawful
and reasonable          contemplation     of the parties,         to be satisfied      out of
current     revenues      for the year,      or out of some fund then within                the
immediate       control     of the corporation.”            Neil1   v. City of Waco, 33
S.W.322.      324 (Tex.       1895);   Stevenson      v. Blake,      113 S.W.2d 525.        527
(Tex. 1938).          See also Brown v. J efferson          County, 406 S.W.2d 185, 188
(Tex.     1966);    City     DfWichita     Falls    v. Kemp Public        Library    Board of
Trustees,      593 S.W.21i 834 (Tex. Civ. App. - Fort Worth 1980, writ ref’d
n.r.e.).       A loan agreement or “contract             grant” which obligates         a city
or county       upon some contingency           or at a time certain            to repay the
amount of the loan or grant,                 or to undertake          some other      monetary
obligation.        is    a “debt”     within    the constitutional          meaning    if   the
obligation       is not to be satisfied           out of current        revenues    or a fund
currently     within the control         of the governmental        unit.

        The Commission of Appeals                noted in Andrus v. Crystal               City,     265
S.W.550      (Tex.      Comm’n App. 1924).            that no purchase         authorized         by a
statute     could be valid          which violated         these express      provisions        of the
constitution.           Id.    at 522.        The court       concluded,     however.       that the
statute      at issue         there      contemplated        compliance     with,     rather       than
violation      of,     sections      5 and 7 of article          11.    &      See also Wheeler
                                                                                                          ?
v.   city     of Brownsville,             220 S.W.2d 457 (Tex.            1949).      We reach        a
similar     conclusion         here.       Subsection      (a) of subdivision          10. article
46c-6.     V.T.C.S.,        expressly       requires      that any funds provided              by the
commission        “must be expended             by the governmental             entity     . . . in
conformity      with the laws of this state.”                   In our opinion,        the instant
legislation        contemplates         that the commission          will    not make loans or
grants      to     cities       or    counties       that     would    create     debts       in    the
constitutional           sense.       Agreements       to do so would be void,                 in any
event.      See T. & N.O.R.R.             Company v. Galveston         County,    169 S.W.2d 713
(Tex. 19m;          Andrus V. Crystal          City, supra.

      We advise        that    the Texas           Aeronautics       Commission    is   without
authority     to make loans or grants              to cities     or counties    that have not
complied      with    sections     5 and            7 of     article     11 of      the    Texas
Constitution,      if applicable.

      In anticipation   of the answer                given to your first           question.     you
have also asked how the commission                    should comply with           its   statutory
responsibility    to make loans.

      First,   we note that article        46c-6.   subdivision      10, V.T.C.S..    is
not a legislative       mandate that the commission make loans.           Subdivision
10, subsection      (a),   declares    that the commission       “may provide    funds,
through    loan agreements       or grant   contracts,     appropriated     to it for
that purpose      by the Legislature.”        Subsection     (f)   of subdivision     10
                                                                                                          ?
does say that       “[lloans     shall   be made in lieu         of grants    whenever




                                              p.   37
    Mr. C. A. Wilkins     - Page 3      (JM-9)
~,~ :




   feasible . . .", but it stops far short of issuing                    an imperative      that
   the commission make loans to cities and counties.

           Assuming   --    without    deciding     --     that      there    are   no   other
  constitutional       impediments,      there  is nothing        to prevent      cities    and
  counties     from complying     with the "debt"       provisions       in order to obtain
  loans     or grants    from the commission.          ice,    e.g.,     City of Dayton v.
  Allred,     68 S.W.2d 172 (Tex.       1934);   City of Ingleside          v. Stewart,     554
  S.W.2d 939,       946 (Tex.     Civ.   App. - Corpus Christi             1977. writ    ref'd
  n.r.e.);     City of Nederland v. Callihan,          299 S.W.2d 380 (Tex. Clv. App.
  - Beaumont 1957, writ ref'd          n.r.e.).

                                        SUMMARY

                   The Texas    Aeronautics    Conrmission   is   without
               authority     to make loans   or grants     to cities    or
               bounties    that have not complied     with sections       5
               and 7 of article     11 of the Texas Constitution,       If
               applicable.




                                                           JIM      MATTOX
                                                           Attorney  General   of   Texas

  TOM GREEN
  First Assistant      Attorney    General

  DAVID R. RICHARDS
  Executive Assistant       Attorney    General

  Prepared    by Bruce Youngblood
  Assistant    Attorney General

  APPROVED:
  OPINION COMMITTEE

   Susan L. Garrison,      Chairman
   Jon Bible
    Rick Gilpin
    Jim Moellinger
    Bruce Youngblood




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