               THEATTORNEYGENERAL
                       OFTEXAS
                          AUSTIN aa. TEXAS
  BVILL WILSON
*lTORN*YGENER*x.              June 21, 1962

      Col. W. B. Bates, Chairman     Opinion No.   WW-13.58
      Board of Regents
      University of Houston         Re:   Whether the Board of Regents
      Houston, Texas                      of the University of Houston
                                          may legally commence, prior
                                          to September 1, 1963, to con-
                                          struct a Student Activities
                                          Building and related ques-
                                          tions under the facts submit-
      Dear Col. Rates:                    ted.
                You have requested an opinion from this office upon the
      question of:
               "Whether the Board of Regents of University
          of Houston may legally commence, prior to Septem-
          ber 1, 1963, and without cost to the State of
          Texas, to construct a Student Activities Building
          upon its campus through funds obtained by private
          donations plus loan obtained from the United
          States of America and in connection therewith fix
          fees and charges against the students for the use
          of the building and facilities and pledge the reve-
          nues from such fees and charges for the payment of
          the loan."
                In connection with the question posed you further state
      in your letter that:
               "The University of Houston has long needed
          the proposed student activities facilities upon
          its campus.  We now have reason to believe that
           rivate donors are ready to contribute a total of
          12,000,000.00, which will cover equipment, park-
          ing lot and approximately 1/3rd of the building
          cost. We are also advised that the Federal Gov-
          ernment, through the Housing and Home Finance
          Agency, Community Facilities Administration, Col-
          lege Housing Program is now prepared to entertain
          an application for a loan of $2,375,000.00 to com-
          plete the construction of the proposed facilities.
          It is also our understanding that the University
          may apply for the loan on the basis of pledging
cola W. EL Rates, page 2   (WW-1358)


     the project revenues, and a full faith and credit
     pledge is not required.         In view of the
     great need, of the presen; br;bability of $2,000,-
     000.00 in private funds as donations, and the
     prospect of obtaining a favorable loan from the
     Federal Government of the balance needed (82,375,-
     OOO.OO), the Board of Regents feels it to be to
     the best interest and welfare of the University
     and of the people of this State, that this project
     not be delayed until After September 1, 1963, but
     on the contrary should be commenced as soon as pos-
     sible."
          Section 1 of Article 2615g, Vernon's Civil Statutes,
enacted by the 57th Legislature Regular Session, 1961, provides
for the creation of the University of Houston to be conducted,
maintained and operated under a Board of Regents. Section 2 of
Article 2615g provides for the appointment of a Board of Regents
for the University of Texas by the Governor of the State of Texas.
In this connection, it is our understanding that the Governor has
not yet, pursuant to Section 2 of Article 2615g, appointed a
Board of Regents for'the University of Houston.
          While Section 1 of Article 2615g establishes the Uni-
versity of Houston upon the effective date of Article 2615g (see
Section 15 of Article 2615g), the provisions of Section 8 of Ar-
ticle 2615g provide that:
          "The University of Houston, acting by and
     through its Board of Regents, has agreed to donate
     to the Board of Regents of the University of Hous-
     ton herein created all of the assets, real, personal,
     tangible and intangible, held in its name, whether
     of record or not, on the first day of September, 1963,
     topether wzth all of the indebtedness aeain t It n
     &hat date still outstanding to the extent se"tfor&
     j&&is   Act and from such date the University Of
     Houston creited by this Act shall hold title to all
     properties so conveyed and shall commence operations
     of such properties for the use and benefit of the
     State of Texas." (Emphasis added)
          The provisions of Section 8a (1) and Section 8a (2) of
Article 2615g set forth certain indebtedness of the University
of Houston existing prior to the enactment of Article 2615g as
well as the manner in which such indebtednesses are to be retired
and the extent to which such indebtednesses are to be assumed by
the University of Houston created by Article 2615g.
-   .



    Col. W. B. Rates, page 3   (WW-1358)


              Section 8a (3) of Article 2615g further provides that:
              "The present University of Houston, on the
         effective date of this Act, will owe current ob-
         ligations and accounts, but anticipates and
         pledges sufficient cash will be transferred to
         the University of Houston created by this Act
         to liquidate all of such current accounts. Such
         indebtedness and liabilities shall not be assumed
         by the University of Houston created by this Act
         save and except to the extent of the unencumbered
         cash transferred to it at that time. No other
         debts or liabilities of the present Universitv of
         Houston (save and exceDt those stated in this
         Section %a. and onlv to the extent nrovided iQ
         this Section %a) shall be in anv manner or to any
         extent assumed bv or become debts or liabilities
         ;. the U i ersit of
         of                                                '1
         (Emphasis added)
              While the present Board of Regents of the University of
    Houston would apparently be authorized to enter into an arrange-
    ment, such as the one presently proposed, pursuant to the provi-
    sions of Section 6 of Article 2815k, Vernon's Civil Statutes, and
    while Section 11 of Article 2615g would seem to indicate that the
    erection of a Student Activities Building by the Board of Regents
    of the University of Houston created by Article 26156 under an
    arrangement such as is being considered by the present Board of
    Regents of the University of Houston, would be authorized at a
    date subsequent to August 31, 1963, we are of the opinion that by
    virtue of the provisions of Section 8a (3) of Article 2615g,
    quoted heretofore the University of Houston created pursuant to
    Article 2615g could not assume any indebtednesses or liabilities,
    in any manner or to any extent, incurred by the erection of a
    Student Activities Building commenced prior to September 1, 1963.
              The Legislature in enacting Article 2615g specifically
    set forth in Section 8a thereof the existing indebtednesses and
    liabilities that would be assumed by the University of Houston
    created by Article 2615g and the extent towhich such liabilities
    and indebtednesses were to be assumed. The assumption of any
    further forms of indebtednesses is expressly prohibited by the
    provisions of Section 8a(3) of Article 261.!Yg,
                                                  which provide in
    part that:
             II
              . . . No other debts or liabilities of the
        present University of Houston (save and except
        those stated in this Section 8a, and only to the
        extent provided in this Section 8a) shall be in
Col. W. B. Rates, page 4   ON-13581


     any manner or to any extent assumed by or become
     debts or liabilities of the University of Houston
     created by this Act."
          While under the proposed arrangement the lending agency
could look only to revenue derived from fees and charges assessed
against the students for the use of the Student Activities Build-
ing and its facilities for repayment of the loan, we are of the
opinion this would constitute an indebtedness against this asset
being donated to the University of Houston not provided for in
Section 8a of Article 2615g, as any revenue accruing to the Uni-
versity of Houston in the future operation of the proposed build-
ing and its facilities would be encumbered until all indebtedness
incurred in the erection of the facility was retired.
          While it has been suggested in connection with the pro-
posed arrangement that the Legislature did not intend that the
restrictive language used in Section 8a of Article 2615g would
apply to a loan secured wholly by a pledge of the net revenues to
be derived from the operation of the Student Activities Building
we can not agree with this position for the reason that Section 8
of Article 2615g provides for the transfer of oroperty from the
present University of Houston to the University of Houston cre-
ated by Article 2615g I'. . . together with all of the indebted-
ness against it on that date [September 1, 19631 still outstand-
ing to the extent set forth in this Act. . . .I' (Ruphasis added)
          Section 8a of Article 2615g sets forth the "extentf'and
includes therein the remaining unpaid portion ($825,000) of a
University of Houston dormitory bond issue secured by revenues
from the operation of designated University of Houston projects.
Consequently, it is evident that the Legislature, in Article
2615g, considered obligations secured wholly by revenues to be
an indebtedness of the University of Houston.


                              SUMMARY
          The Board of Regents of the University of
     Houston, created by Article 2615g, could not
     assume any indebtednesses or liabilities incurred
     by the erection of a Student Activities Building
     commenced prior to September 1, 1963, and the
     pledging of revenue derived from fees and charges
     assessed against students for the use of such a
     Student Activities Building for repayment of in-
     debtednesses connected with the erection of such
Cal. W. B. Bates, page 5   &W-1358)



      building would constitute an indebtedness or
      liability as contemplated by Section 8a of Ar-
      title 2615g.
                                Very truly yours,
                                WILL WILSON
                                Attorney General of Texas


                                ByPL- b-J-Q-4
                                      Pat Bailey
PB:wb                                 Assistant        4
APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Morgan Nesbitt
Gr~~tiW~~~iams
Frank Booth
REVIEWED FOR THE ATTORNEY GENERAL
BY:   Leonard Passmore
