The Honorable Robert E. Schneider Opinion No. H-869
Executive Director
Texas Water Rights Commission     Re: Whether section
P. 0. Box 13207                   25.031(c), Water Code,
Austin, Texas 78711               authorizing special
                                  districts to purchase a
                                  portion of the capacity
                                  of a regional waste dis-
                                  posal system, can be
                                  applied constitutionally
                                  to bonds authorized prior
                                  to the passage of the
                                  statute.
Dear Mr. Schneider:
        YOU have requested our opinion regarding the authority
of a special district to use bond proceeds to purchase a
portion    of the capacity in a regional waste disposal system.
     your first question is:
          whether Section 25.031(c) (Water Code] is
          a constitutionally valid authorization for
          Inverness Forest Water Control and Improve-
          ment District to use the (previously voted]
          bond proceeds . . . to purchase capacity in
          the Gulf Coast Waste Disposal Authority's
          regional sewage treatment plant. . . .
Section 25.031(c) provides in pertinent part:
             Notwithstanding any provision of this
          chapter or any other law to the contrary,
          a district may use the proceeds of bonds
          issued for the purpose of constructing a




                         p. 3663
The Honorable Robert E. Schneider - page 2 (H-869)


         waste disposal system or systems, and payable
         wholly or in part from ad valorem taxes, for
         the purchase of capacity in, or a right to have
         the wastes of the district treated in, a
         waste collection, treatment, or disposal
         system and facilities owned or to be owned
         exclusively or in part by another public agency,
         and a district may issue bonds payable
         wholly or in part from ad valor-emtaxes
         specifically for such purpose if a majority
         of the resident electors of the district
         have authorized the governing body of the
         district to issue bonds for that purpose
         or for the purpose of constructing a waste
         disposal system or systems.' The bonds
         shall be issued in accordance with the
         provisions of, and shall be subject to the
         same terms and conditions of, the laws
         authorizing the district to issue bonds
         for the purpose of constructing waste
         collection, treatment, and disposal systems,
         except as otherwise provided in this sub-
         section.
In brief, this question turns on whether section 25.031(c)
of the Texas Water Code, as to bonds authorized prior to its
enactment, alters the result of Attorney General Opinion H-
567 (1975)r which indicated that proceeds from the sale of
bonds in 1965 by Inverness Forest Improvement District could
not be used to contract for sewage disposal services where
the district would neither own nor operate the facilities.
While section 25.031(c) is designed to permit the "purchase
of capacity" type transaction which Attorney General Opinion
H-567 (1975) held'to be unauthorized, the enactment of that
section does not change the basic results of Opinion H-567
concerning the Inverness Forest "special district."
     First, there is the obvious problem of applying
section 25.031(c) retroactively. Tex. Const. art. 1, 5 16.
Second, as initially determined in Attorney General Opinion
H-567 (1975), bond proceeds may only be used for the purposes
for which they were voted. It is clear that a resolution
calling a bond election becomes a part of the contract and
agreement between the voters and the District, should the
voters authorize the issuance of the bonds. Crowell 2v



                           p. 3664
The Honorable Robert E. Schneider - page 3 (H-669)


Cammack, 40 S.W.2d 259 (Tex. Civ. App. -- Amarillo 1931, no
writ). To hold that the Legislature could change the
agreement between the voters and the district could
constitute an impairment of the obligation of contracts.
Tex. Const. art. 1, 5 16. Third, the Legislature cannot, by
legislative enactment, alter the results or effect of an
election held pursuant to a constitutional mandate:
          [Tlhe Legislature shall not authorize
          the issuance of any bonds or provide
          for any indebtedness 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. Tex. Const.
          art. 16, 9 59(c).
Ci&@    Aransas Pass v. Keeling, 247 S.W. 818 (Tex. Sup.
        In shortxnrproceeds     must be used for purposes
for which they were voted. Lewis v. City of Fort Worth,
89 S.W.Zd 975 (Tex. Sup. 1936);aZingtonY.Cokinos,      338 S .W.2d
133 (Tex. Sup. 1960); City of Beaumont v. Pzddie, 65 S.W.Zd
434 (Tex. Civ. App. -- AustTii1933, no Einerefore,
the answer to your first question is that the enactment of
section 25.031(c) of the Texas Water Code does not alter the
conclusions reached in Attorney General Opinion H-567 (1975)
regarding the use of previously voted bond proceeds.
     If the result of H-567 is not affected and the special
district must use the bond proceeds to purchase a proprietary
interest in the regional sewage plant rather than entering
into a service contract for plant capacity, you ask that we
          determine the nature and scope of the
          proprietary interest which must be
          purchased . . . .
It is pertinent to note that the bond propositions submitted to
the electorate of the Inverness Forest Improvement District
on August 14, 1965, authorized bonds




                           p. 3665
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            The Honorable Robert E. Schneider - page 4 (H-869)


                     for the purpose of Pmk=zwg-
                     structinq a water an
                     system and a sewage disposal plant for
                     the district. . . . (Emphasis added).
            Furthermore, similar propositions were passed in October 16,
            1967 and February 14, 1970 elections, which provided bonds
                      for the purpose of purchasing and/or
                      [February 14, 1970 proposition used
                      "and" instead of "and/or"] constructing
                      extensions and additions to the district's
                      existing water and sanitary sewer system
                      and drainage system. . . .
            Although Opinion H-567 did not involve the method to be
            used or what would constitute "purchasing and constructing,"
            it would certainly be within the "sound judgment and
            discretion" of the special district to purchase and construct
            as they determine within the electoral guidelines. Barrington
            v. Cokinos,      , at 142. Therefore, it would not be
            iiiirmle         the special district to make a determination
            that purchasing and constructing, or causing to be constructed,
            an undivided, legal interest in a regional waste plant would
            satisfy the electoral mandate. The special district would
            own a portion of the physical plant rather than the mere
            contractual right to a guaranteed use or portion of the
            capacity of the regional system. Thus, the special district
            would have used the bond proceeds to purchase and construct
            a facility which the electorate had authorized.
                 Since the issuance of bonds creates a contract between
            the issuer and the bondholders, C$Cy of Aransas Pass
                                                            -    v.
                                                                 -
            Keeling, supra, it should be not;nthz   the definltlonof
            Wsystem" in each Bond Order is as follows:
                      The term system as used in this order
                      shall include and mean water works and
                      sanitary sewer system owned and operated
                      by the District, and all extensions and
                      improvements thereof and improvements
                      thereto whensoever made.




                                        p. 3666
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                 .



        The Honorable Robert E. Schneider - page 5 (H'-869)


        Neither the bond election propositions, nor the Bond Order
        specifies how the facilities are to be purchased and constructed.
        It is, therefore, obvious that the portion of the regional
        system purchased by the special district would become part
        of the "system." Provisions of Chapter 25 of the Texas
        Water Code also support the proposed transaction since
        "[a] district may contract . . . to purchase . .   disposal
        facilities or systems." Water Code 9 25.022. See Water
        Code §s 25.024; 25.025; 25.027; 27.028, Therefore, in
        answer to your second question, we believe that it would be
        reasonable, and in pursuance of the electoral mandate as
        well as the Texas Water Code, to approve issuance and use of
        bonds to purchase an undivided, legal interest in a regional
        system, if the special district decides to do so in the
        exercise of its discretion.
             In your third and final question, you ask:
                 [Ilf the district should purchase a
                 proprietary interest in the,regional
                 system, to what extent must the district
                 participate actively and directly, if at
                 all, in the operation and maintenance of
                 the system?
        Neither Attorney General Opinion H-567 (1975), nor the
        bond election propositions or Bond Orders specifically
        address this question. However, provisions of Chapter 25
        of the Texas Water Code specifically permit such operation
        contracts between a special district and a "district." Water
        Code SS 25.027; 25.028. Furthermore, one political sub-
        division of the State, such as Inverness Forest, can transfer
        money to another political subdivision of the State where
        the latter assumes the unqualified burden and duty of using
        it for a governmental function of the former; however, there
        must be a guid pro w   contract. Bexar County Hospital
        District v. Crosby, 327 S.W.2d 445 (Tex. Sup. 1959): San
                      Authorit v- Shepherd, 299 S.W.Zd 920 (Tex.
        Antonio Rser .--f-Y
        -57);clty        e Aransas Pass v. Keeiinq, SUp;.thWZn
        SOI the operation contract should prove e only
        operation of the facilities in question with sufficient
        assurance that the special district does not delegate away




                                  p. 3667
The Honorable Robert E. Schneider - page 6 (H-869)


its governmental powers.
s.W.2a 103 (Tex. Sup. 1975
of an undivided, legal interest in the regional plant, to be
operated by a "district," would not be an unlawful delegation
of governmental powers, since the special district would be
using the services of the operating agency without delegating
rate making or other powers, Therefore, in answer to the
third question, the special district may enter into an
operation contract with a Texas Water Code "district."
                      SUMMARY
          The enactment of section 25.031(c) of
          the Texas Water Code does not affect the
          validity of Attorney General Opinion H-567
          (1975) as it applies to the Inverness
          Forest Improvement District. The special
          district, limited by the bond election
          proposition submitted, may not acquire
          a contractual right to purchase a
          percentage of capacity in a regional
          system. However, the special district,
          in its discretion, may use bond proceeds
          to purchase an undivided, legal interest
          in a regional system. The special district
          may contract with a "district" for the operation
          of its portion of the regional system under
          Chapter 25 of the Water Code.
                                Very truly yours,



                                                    Texas




Opinion Committee
jwb



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