State Board of Eduoation
Au&In, Texasl

Attention: Caynor Kendall,InvestmentCouneel

Dear Sir:                           opinionlo. O-4490
                                    Re: Constructionof the 7s debt
                                        ratio limitationprovidedby
                                        Article 2671, R.c.s., for
                                        eligibilityof bonds which may
                                        be purchasedfor the Permanent
                                        Free SchoolFund as appliedto
                                         the total indebtcdneseof cities
                                        for municipaland school purposes.

         We have your letterof March 6th requestingour opinionon the
above question,which reads:

          "By Article 2669, Revised Civil Statutesof 1925, as amended
    by Chapter278, A&s of the RegularSession of thb Fdrty-fititLsgis-
    lirkure, the State Board of Educationis au$horizedand empoweredto
    Investthe PermanentFree School Fund of the State in bonds of 'inde-
    pendentor ocmrmon  sahool dietriots,+i* and the bonds of incorporated
    cities and towns -,'     It is provided,however,by Article 2671 as
    slaended that 'no bonds, obligations,or pledges-    shall be 80
    purohasadwhen the indebtednessof the county,city, precinctor
    dietriotissuingfame, inclusiveof those offered,shall exceed aev~1
    (746) per cent of the assessedvaluationof the real estate +hersln.'
    The State Board of Educationis desirousof obtain- a oonatrnotlon
    of the quoted limitationin connectionwith the followingquesttill:

                                   1.

         “Wherea oity has extendedits boundariesfor schoolpurposes
    only, is the lndebtedneasfor waterworksand other municipal
    purposesoutstandingagainst the city which is includedwithin,
    the boundarieeof the schooldistrictto be includedand combined
    with the debt againstthe school districtin detenuininfl
                                                          whether
    the bonds of the school districtthus establishedare eligiblefor
    purohaeeunder the limitationabove quoted. In other words, Is
    the city as a municipalitya separateissuingagency from the
                                                                 -,      .




State Board of Education,page 2 (o-4490)



     school dletrictcreatedby the extensionof the boundaries
     of the city for echool purposesonly?

          "(a) Does any dlatlnotlonobtain in this oonneotlon
     betweencities of 5,000 populationand less.,operatingunder
     generallaws, and home-n& citieswhich have assumedoontrol
     of their schools?

                                   2.

          "Wherea city has assumedcontrolof its schools,and
     the boundariesof the district80 createdand ,those of the
     city are cotenninousie the Indebtednessfor school bui-ldings
     to be includedand combinedwith the debt exietingagainst
     the city for municipalpurposesin determiningwhetherbonds sre
     eligiblefor purchaseunder the limitationabove quoted. In
     other words, le the city a separateissuingagency from the
     independentschool districtof which It has aesumedcontrol?

         "(a) Does any distinctionobtain in this connection
    betweencities of 5,000 populationand less, operatingunder
    generallaws, and home-rulecitieswhich have assumedcontrol
    of their schools?"

          The severalquestionssubmittedby you resolvethemaelveeto 8
constructionof the underlinedportionof Article 2671, R. C. S., 1925,
ae amended,quotedbelow, as applied to a city or town which-has(under
the au+&orityof Article 11, Section 10 of the Texas Constitution)acquired
the status of "a separateand iudcpendentschool dfetrict"in additionto
its ordinarymunicipalcharacter. Such a municipalitycontrolled"eepar-
ate and independentschooldistrict"may be eithercoterminouswith tie
municipalboundariesof such city (Article2768,R. C. S., 1925; Temple
IndependentSchool Districtv. Procter,97 S.W.(2d)1047,writ of error
refused)or it may extend over an area greaterthan that of the munici-
pality proper (Article2803,R. C. S., 1325; Boesch v. Byrom, 83 S.W.
18; Snyder v. Baird IndependentSchool Dktrict, 102 Tex. 4, 111 S.W. 723).

          Article 2671, as last emendedby Acts 1939, 46th Legislature,
page 276, reads:

         "The Comptrollerof State Board shall carefullyexamine
    the bonds, obligations,or pledges80 offeredand investigate
    the facts tendingto show the validitythereof;and such Board
    may declineto purchase~eme unless satisfiedthat-theyare a
    safe and proper investmentfor such fund. No bonds. obligations,
    or pledgesshall be 80 purchasedthat bear lees than two and
    one-half(2%) per cent interest. No bonds, obligationfr,  or
    pledgesexcept those of the United Statee, the State of Texas, and
    the Universityof Texas, shall be 80 purchasedwhen the indebted-
    ness of the oounty,city? precinctor districtiseuingsame,
.      .




    State Board of Education,page 3 (O-4490)



           lncluelveof those so offered,shall exceed seven (7%) per
           cent of the aeseesedvalue of the real estate therrln. If
           defaultbe madeIn the paymentof Intsreetdue upon ruoh bondr,
           obllg8tlone,or pledges,the State Board of Eduo8tionmay at -
           any time prior to the psymentof euoh overdueInteresteleot
           to treat the prlnclpalae due, and the s8me mhall thereupon,
           at the option of said Board, become due and payable;and
           paymentof both such principaland Interestehall In all 0888s
           be enforcedIn the manner providedby law, and the right to
           enforaesuch collectionshall never be barred by 8ny law or
           limitationwhatever."

              The wordingof the above provisionhas bwn changed to some
    extent since its originalenactmentIn 1905 in the couree of three
    amendmentsend two codifloations(1909,1911, 1925, 1929, and 1939),
    but except for changesto make eligiblethe bonds of additionalgovern-
    mental agencies,the apparentpurposeof the underlined portionof
    Article2671 8s quotedabove is no differentfrom what It was 86 orlgi-
    nally enacted In Section4 of S.B. 218, Chapter 124, page 263, Acts 1905,
    RegularSession,29th Legislature,reading:
                ". . . and no countybonds or bonds of any incorporated
           city or Independentschooldistrictshall bs purchgsedas an
           investmentfor the permanentpublic free school fund when the
           Indebtedness of such county, incorporatedaity or Independent
           school distriot,Inclusiveof the bonds so offered,shall exceed
           seven per cent of the aeeessedvalue of the 'realestate in such
           county or incorporated city or independentschooldistrict,. . ."

              It is to be noted that the eligibllltyof bonds for purchaseby
    the permanentpublic free school fund (as defined In the originalenaot-
    ment In 1905 and In all subsequentamendmentstheretoIncludingArticle
    2671, R.C.S., 1925, as now constituted)does not requirethat the real
    estatewithin the politicalsubdivisionconstitutingthe ieeuIngagency
    shall not be encmbered beyond 7% of its assessedvalue for 811 public
    debts; but It requiresonly that the debt ratio of the part&i&    politIca
    subdivisionwhose bonds are consideredfor purchasebe not In exaeeeof
    7% of the assessedvalue of the real estatewithin that partlaularaub-
    division. For example,the real estatewIthIn particular
    Independentschooldistrictmay be encumbered:w,thebond issuers    UI UN
    county,a road districtand a drainagedistrIct“embraoing   or overlapping
    this same real estate,constitutinga tot81 Indebtednessfar In excess of
    7% of its assessedvalue, and yet the bonds of the Independentschool
    districtwould still be eligibleso long as the schooldistrictIndebted-
    ness (consideredindependently  of the Indebtednessof other overlapping
    politicalsubdivisions)  did not exceed 7% of the assessedvaluationof
    the school district. Our pr6blem,therefore,is to determinewhether the
    Independentschool districtcreatedwhen a city assumesoontrolof the
    schoolswithin its limits (under the authorityof Article 11, Section 10
    of the Constitution)is in fact an Independentsohooldistrict and a
                                                            .     .




State Board of Education,page 4 (o-4490)


separatepoliticalentity as dlatIngulehedfrom the munlcip8litywhich
has assumedoontrolthereof. If such a sohool districtconstitutes
8 "dietriot"as dietingulehedfrom 8 "oity,"aa thoeewords are found
In Article2671, then the Indebtedneeeof the city for munioipalpur-
poses‘ienot to be lumpedwith the Indebtedness of the olty In Its
aapacity8s 8n Independenteohool districtIn applyingthe’7$ debt ratio
requirement. It may be helpful to 8soert8Inthe legisl8tlveIntentwith
respectto the 7% debt ratio limitationby referringto the snac+xuent
wherein this requIreskent
                        first 8ppeaiWd. This ~8s S.B. 218, Chapter 124,
p8ge 263, Acts 1905,Regular Session,29th Legislature,which act was a
ccmprehensivestatuteprovidingfor a ocmpletesystemof publicfree
schools In Texas. Let us examinesaid Act to see whether the J..egislature
regardedthe schoolsystem of 8 city which had assumedcontrolof its
schools8s an Integralpart of the municipalityor whether it treatedthe
school so controlled8s 8 separateand Independentschool district.

          In other parts of this Act the legislaturemade detailedprovi-
sion for the creationand operationof rchoolsunder the controlof aities
and towns,and these provisions,tend  to indicatethst the Legislature
regardedsuch munlclp8laohooldistriats8s separateand distinctentitles,
8p.Wt fran the municipalfunotIo%MOf the citiesunder WhOSo OOn~Ol they
were placed.

          For example,Section U6 of the Act providedthat in cities 8nd
townswhich had 8ssumOdcontrolof the schoolswithin their limits,"such
exclusivecontroland management. . . shall be In a board of trustees,"
and the title to all school propertyshall be vested in such board, and
". . . such board of trusteesshallconstitutea body COrpOr8te.. .)I

          Section lj7 providedthat the pro rat8 part of the *Vailable
school fund and all taxes levied for school purposesshall be paid "direct.4
to the Treasurerof the board of trustees. . . and the mayor end council
or board of aldermanof such city or town shall have no power or control
of such funds."

                               in this respect is Section 144 of the
          Of specialsifplificanoe
Act which re8dsr

         "Schoolsthus organizedand providedfor by Incorporated
    cities and towns shall be subJectto the generallaws, so far as
    the 8Bme are 8ppliCablej but each city or town having controlof
    schoolswithin its limitsshall constitutea separateschool dis-
    trict and may providefor the organizationof schoolsand the
    appropriationof its school funds in such m8nner 88 may be best
    suited to its populationand condition." (Emphasisours) (Said
    section144 is the legislatuveancestorof Article 2768,R.C.S.,
    1925).
.     .




    State Board of Education,page 5 (0-4&l)



              Seotion 148 providedfor the extensionof the oorporatelimits
    of such oity or towns "for school purposes0134,’ and stated that "the
    added territoryshall not affeot the olty debts or busInessi relationsIn
    any manner whatsoever, exoeptfor sohoolpurposeeas providedabove,"

              It seems to us, that the provislonaabovereferredto In the
    1905 enactmentwhich containedfor the first time.the 7$ debt limitation
    upon bonds whioh are to be purchasedby the permanentpublio free sohool
    fund, ol.ear4 Indicatesthat the Lsgislatursregardedthe school system
    of a city or town which had assumedcontrolof its schoolsas 8n Indepen-
    dent schooldistrictand 8 separateand distinotgovernment81entity fran
    the municipalcorporationproper; 80 that In app4Ing the 7% debt ratio
    provisionto such a city due regardmust be given to Its dual character
    to the end that the 7% provisionsshould be appliedseparate4 to each
    of,the governmentalentitiesand not to the city and the school district
    taken together.

              While the preolse~question
                                       with referenceto the oonstruotionof
    the 7% debt limitationh8s never been before the appellatecourts of Texas,
    our courtshave consistent4 reoognizedthe dusl entitleaof cities and
    school districtswhich have been 8uthOriZOdunder Article 11, Section 10
    of our Constitution,and in every Instanaethe court haa given effect to
    the separateentitiesInvolved.

              Thus In Love v. City of Dallas, 120 Tex.,351,40 S.W. (2d) 20,
    Chief JusticeCuretondeclared,at page 356:

              "The City of Dallas is a munIoIpa1corporation,chartered
          under the laws of the state,has assumedcontrolof its public
          schools,and 88 suoh Is to be regardedas an Independentschool
          district."

              In dealingwith schoolswhich are under the controland manage-
    ment of cities the courtshave oonsl6tsnt4 held thst the rate of tax
    which msy be leviedfor schoolpurposcuIn such cities is limitedby
    tit&lo 7, Section 3 of the Constitutionof Texas which relatesto schools
    and is not controlledby Article 8, Section 9 of the Constitution,which
    limitsthe tax rate of counties,cities 8nd towns. In other words, in
    this respect,the courtshave treatedschoolsunder the managementand
    controlof cities8s school districtsrather th8n as 8 part Of the Cities
    under whose controlthe schoolsare operated.

              The first of these cases is Houstonv. Ccmzales.&dependent
    SchoolDistrIct,decidedby the Commissionof Appeals in 1921, 229 S.W.
    467.  The City of Coneales,while exercisingcontrolof its schoolshad
    issuedbonds for the erectionof schoolbuildingswhich requireda tax
    levy of 179. Thereafter,the Legislature,by specialAct, divestedthe
    City of Gonzalesof controlof its schoolsand createdthe Conzales
    IndependentSchool Districtcomprisingthe city and approximate4 24,000
    aores in additionthereto. The trusteesof the new districtthen
                                                             .     .




State Board of Education,page 6 (o-We)



attemptedto levy a 404 tax On the propertyof the entire district. The
CourVhdld that the new tax wae valid only to the extent of 334 because
at that time,Article7, Section 3 of our ConetltutlonlimitedWee for
echool~purpoeee   to 50$ 60 that the s&o01 dletrlot'oould levy only 33#
in additionto the 174 previously    leviedby the City of Gonzaleewhile
in 00ntro10f ite eohool8. The oourt held that the 174 tar originally
leviedby the oity for eahool purpoeeewae a eohool tax authorizedand
limitedby Artiole    7, Seotlon 3 of the conetltution,ma not a oity tax
limitedby Article 8, Section 9 (which limltecounties,oltles and towns
to 25d "for the erreotionof public buildings,eewere,w&terworkeand
other improvements").Spencer,J., speakingfor the court at page 468,
said:

          "The beneficialtitle to the propertyof the Gonzales
     Sohool districtae originallyformedwae in the people thereof-
     the mayor merely holding tie came ln trust for the sole uee of the
   " echoole - and the Legislaturecould,withoutany wtee disturbInS
     much title,ohange the tnieteee,as was done by the epeoiala&,."

         And at page 469s

          "The bonded indebtednessbeing for schoolpurposes,the
     174 tax levy neceeearyto pay the interestthereonand provide
     a sinkingAma, to retire same at maturity,is a ltiitation
     upon the taxingpower of the district,but not a ,limltation
     upon the 01t.y Of ChI?d.ee for buildingp~rpO688.”

          The leadingcase annquncingtie doctrineof'the dual nature of
a city which has assumedcontrolof its schools Is City of Rockdalev.
Cureton,decidedby the !@exaaSupremeCourt in 1921, 111Tex. 1.36, 229
S.W. 852.  We quote from the court'8statementof the facts in this~oaae:

          'Prior to 1918, the city of Rockdale,incorporatedunder
     the generallaws,had assumed the controlof its public schools.
     The effectof this actionwas to oonetltuteit, for school
     purpoeee,an independentecho01 district. Article 2871.

         "It had never extendedita city boundariesfor echo01
    purposes."

          This was an action to 0-1    the AttorneyGeneralby mandamus
to approvea $75,000bond issuewhich he had refusedto approvefor the
reason that the tar necessaryto pay the same would exceed the city's
256 tax l+mit for improvements,imposedby Article 8, Section 9 of Us
ConEtitutlon. The oourt granted tie mandamusfor the reaeon that the
tax of euch a ci$y for,echoolpurposes is not limitedby Article 8, Sec-
tion 9, but by Article 7, Section 3 of the Oonetitutlon.We qiz0t.e
                                                                 from
the opinionof Chief JuatiaePhIllipsi
State Board of Education,page 7 (O-4490)



           "The Conetitution(Section10 of Article 11) haa
     empoweredthe~Leglelature  to oonetltuteanytowior olty
     an independentschooldletrlot. The Leglelatqra,threfom,
     had the power to cay ae it hae done in Artlole 2871, that a olty
     or town takingover controlof lte pub110 sohoolae&allocmntl-
     tute auoh a dietrlat. There may thue be oonferredupon a olty
     a dual character,and with such oharaoter,dual powera. There
     could have been no purpoae in authoriziug the oreatlon  of
     t-     and cities ae independenteohooldlat,rlote  - a reoog-
     nized separateclass of municipaloorporatlon~   with individual
     powers,unless in that oapacitythey were to have the power6
     of such districts.

         "The city of Rockdalehad lawfullyacquiredthis dual
    aharaoter. It had powers strictlya8 a munlclpality,to be
    ,exercisedfor strictlymunicipalpurposee;and it had ita
    powereas 8 duly constitutedindependenteohooldistrict.
    The two are not to be confueed."

          In W. L & T. R. R. Co. of Texas v. City of Whitesboro,(196)
287 S. W. 904, the Texas Ccamnieeion
                                   of Appeals -In decleredthat the
tax rate for citieswhich have seamed controlof their schools le
ooutrolledby Artiole 7, Section 3 of the Constltutiopboth'beforeand
after such city may have extendedits llmitefor echo01 purposesonly.
Bishop,J., at page 906, saldr

         "The municipalcorporationand the independentschool
    districtare distinct,thou& they are both under the control
    of the same officers."

          It may appear that City of Athene v. Moody, (1926) 115 Tex.
247, 280 S.W. 514, by the Commieelonof Appeals, is In oonfliotwlth
the doctrineannouncedby the preoedingcaaee whioh recognizethe dual
nature of citieswhich have aaeumedcontrolof their echoola. A care-
fulanaly~ie of thle ease, however, indicatesthat it does not disavow
.thedual nature of citieshaving controlof their eohoole,but merely
reoognizeethe $1.50 limitationon the tax rata of oitleehaving a
populationof leea than 5,000 for both school and municipalpurposes,
pursuantto the express languageof the statutethere under cozglderatlon
(Section3 of Chapter 9, Acts 1921, 37tb Legislature,which ls'now
codifiedas Article 1027,R.C.S., 1925).
         Again we find the courts deckring that those eligibleto vote
on an Increasein taxes for ischoolpurposesln oltleawhich have aeeumed
controlof their schools is to be gOVem3d by Article7, Section 3 of the
Constitutionrelatingto eohooldietriotsrather than to the provielone
relatingta cities.
State Board of Education,page 8 (O-4490)



          1~ Cltg of Fort Worth v. Zane-Oett.1(1925),278 S.W. 183,
the Texae Ccmmleelonof Appeala;heldthat an elebtlonto inarease
the tax rate for eohool purpoeeein Port Worth (whlohhas aeeumed
oontrolof lta eohoole)muet be by the "qualifiedpropsrtytax paying
voterr"as providedby Artlole 7, Seotlon 3 of the Cor&ltutlon, instead
of by the "qualifiedvotera” se provided by Fort Worth% home-rule
,ohartar.Said Nichols,J., at page 184;

         "The souroe of the legislativepower to create,or
    define an independenttlchool distrlotis to be found in
    Section 3, Article 7 of the Constitution.Such a district
    is a municipalcorporation,sui generls. City of Rockdale
    v. Cureton,AttorneyGeneral, 111 Tex. 136, 229 S.W. 852.
    The territoryof a city and the territoryof a districtmay be
    exactlycoincident,and for the distinctivepurpomea,separate
    governmentimay be providedto operateseparately,but harmoni-
    oualy,within the common orbit. Simmonsv. Lightfoot,Attorney
    General,105 Tex. 212, 215, 146 S.W. 871; Munson v. Iooney,
    AttorneyGeneral,107 Tex. 263, 268, 172 S.W. 1102, 177 S.W.
    1193. Or, In virtue of the tews of Section 10, Article 11,
    of the Conatitutlon,and for the convenientadmlnistratlve
     pUZ=POSEE,   ‘the   k.&dhtWe   Dlz3y OOWtitUte   8Uy   City   Or   tOWl
     a separateand independentschool district.' Such a combination
     of the two munioipalcorporations,each sui generis,does not
     take fram either its distinctivefeatures."

          In Ttiacoarv. City of Galveston,(GalvestonCourt of Civil
Appeals, 1930,writ of error refused)28 S.W. (26) 887, the court held
that an additionalschool tax in the City of Galvestonwas valid when
based upon a vote of “a majorityof the qualifiedtax paying voters of
the dietriatvotingat an election"as providedby Article 7, Section 3
of the Oonat.ltution,even though this electiondid not satisfythe
requirementof Article 11, Section 10 of the Constitution,that "two-
thirdsof the tax payers of such city or town shall vote for such tax,"
therebyfurther indicatlng,that city-controlled schoolsare treatedfor
electionpurposesa8 "schooldlstriota"rather than as "cities." We
quote frau the opinionof Pleasants,C. J., at page 891:

         "The City of Galvestonis one of the school district8
    of the State, createdas such in the mannerprovidedby our
    Constitutionand legislativeacts, and in itb capacityas e
    schooldietrictit cannot be denied the rights and prlvilegetl
    given by the Oovtitution to all other school districtain the
    state. It cannotbe held that because it is an Incorporated
    cl&y having a~speclalmunlolpalcharterthat Its constitutional
    power* as a free school districtof the State are in any way
    lessenedor restricted. We think thla questionIs settledby
    the opinionof our SupremeCourt in the ease of Rookdalev.
    Cureton,111Tex. 1.36,229 S.W. 852."
-..     .




                 We wish to olte only a few additionaloWes whloh further
      indicatethat olty-oontrolled    eohooldara to be mated am independent,
      sohool aisthte    rather thau tam lnntegral
                                                partu of'*e oitier.

                ,InOity of FortWoi%b v. Cureton, (1920)ll0 Tar. 590, 222
      S.W. 531, the SuprezneCFt con&rued the ohfarter of the olty of Port
      Worth which limitedthe tax rate for all purpoaeeto $1.75 "inclus$ve
      of the school tax that may bc,leviedby the board of truateeeof public
      schoolsas providedby thls.Aot"60 ae to authorir,e  an iacreassin the
      combinedtax rate when the tax rate for e&o01 purpoeeeonly was increased
      by charteramendment. The oourtalluded to the dualcharaoterof a city
      which has controlof its sohooleand declaredthat the chartershouldnot
      be construedso aa to reduce the authorizedtaxrate for ~emeralmunlolpal
      purposesin the event of an increaseln the rate for sohoolpurposesonly.

                In City of Belton k. &la   Trust& Sav&   Benk, 273 S.W.
      914, (aff:lzmedby the Texas Comnleslonof Appeab, 283,S.W.164) the
      Auatln CaUrt of ClvllAppea3n held that a ohsrterprovisionauthorizing
      a $1.50 tsl rate without atatiag I@ purpose,had referenoeto taxation
      for Seneralmunleipalpurposesunder the home-rulemndment, and had no
      relationwhateverto the c~lty'ataxlnSpower wuIan independentaohool
      aiatriot.,

                The Austin Court of Clvll~ADpeale,in Temple IndependentSchool
      Districtv. Prooter, (1936) 97 S.9..(2d) l&y, (writof error rofueed),
      held that the validityof a contrffi~i;
                                          between the Supertitendentor s~@Mle
      In Templeand the school board (whichwa8 appointedby the citv ooinoil;
      ,Templehaving assumedcontrolof its schools)was to be gpvernednot by
      the city charterbut by the statutesrelatingto school affalre. In this
      case Judge Bau& declared,at page 1053:

                  "It is now sett@d, however,that, where suoh city does
            amume cantrolof its schools,such controls0 far aa the eohools
            are comerned, does not becomemerged into and becomea part of the
            municipalgovernmentaa such. &ridwhere the city o~lealoncre or
            city councilretainaoontrolof lte pub110 schvle it aota ln a
            dual capacity- me as a governlnf3 bo&y of the olty ln It8 etatum
            as a munlclpality,and the other ae the controllingor governing
            board of Its schools. The two capacitiesare not tobbe confused.
            City of Rockdalev. Cureton, ill Tex. 1.36,~9,229 S.W. 852~ City
            of Fort Worth v. Zane-Cett.1,(Tex.Casmn.App.),278S.W. 183. Inso-
            far a8 it acts in Its strictlymunicipalgovernmentaloapacity,
            Its poweraare referableto Art1ol.ell.of the Constitutionand
            title 28 of the R. S. (Article961, et seq., ps amended (Vernon'e
            Annotatd civil Statutes,Artiole 961, et seq.)).meross, in the
            managementand controlof its eohools,ite powera are referable
            to Article 7'of the Constitutionand Title 49 of the R. 5. (Article
            2584, et seq., as amna~a (Vernon'sAnnotatedCivil Statutee,Artiols
            2584, et seq.))."
                                                              .   .   -




stats Board of   Eduoatiw, page 10 (o-4490)



          The eeparataand dlstlnotoharacterof a oity school district
landthe oltf under whose control it ie,operatedie most for0eful.Q
 illuetrated,byi&e oaee of Olty of El Paeo v. Carrollby the El Paeo
Court of Civil Appeals, (1937) 108 S.W. (26) 251, (writof error refueed)
wherein itwaa held that the City of El Paeo va6 not authorizedto take
$54,000out of t;hegeneralma for muniolpel purposeaend loan this
money to the eahool dletriotwhloh wae under the controlof the oity, for
the reaeon thatthe sohooldietrlct80 conrtitutedand the city were two
senarategovernmentaLentities   and their respectiveflnanoeeshouldbe kept
ai8th0t  snd eeparato.

          Baaed upon a statutoryconstructionof Article 2671 by looking
to other sectionsof,the Act of 1905 whereby the 7s debt ratio lincitation
wae fleet enacted,and based upon the unbrokenline of authorityof the
Texas court8holding that the munioipalfunctioneof a city muat at all
time6 be kept separateand apart frcanthe schooldistrictof which it has
aeemnedcontrol,it ie our opinion'thatin construingArticle     2671we
ehould give effect to this eepezatecharacterof the two governmentalenti-
tiee. We believe,therefore,,  that if the debt ratio of a city, independent
of the indebtedness which may hove been createdfor school purposes,is
belaw 7$, then the bcrrdsof such city we eligiblefor pWh%3e     by the
permanentfree school fund; and likewise,that $f the indebtednessof a
city for school purpose0only, is lees than 7% of the aeeeeaedvaluation
of the real propertytherein,independentof the debt6 of the city for
muniolpalpurposes,then ln auoh event, the bonds of the oity leauedfor
who01 purposesonly are eligiblefor investmentin the permanentfree
~oh00i ma,    We believeno dietinctionexists insofarae the construction
of this statuteie OOMerUed between citieshaving a populatiOngreateror
less than 5,000. Nor do we believe that any dietinotlonis to be drawn In
this respectbetween those citieswhioh have extendedtheir bormdarleefor
schoolpurpoeeeonly, end thoee oitleewhose boundariesfor aohoolend
municipalpurposesare cotermlnous. In all such caeee it is our opinion
that the oity'aea munlolpalltyis a,eepazutelesuingwy         &m the
s&ooldlstrict under the omtrol of such olty and the bonded indebtedneee
of each ehaaldbe looked to Independently  of the oclpblnedbonded indebted-
neee of the two governmentalunite ln applyingthe 7% debt ratio limita-
tim of ~&i&e 2671.

APPROBEDAPR. 28,       1942               Yours very truly

/s/ GroverSellem                       A?XXdiEYGENERALOFTEXAS

FIRBTASSlSTAliT'                       By /e/Walter R. Koch
ATTORNEY-                                    Walter R. Koch
                                                  Aeeistant
WRKrdb4e

APP~vBDoPlHIONcoMrITEE BY      /e/ B.W.B. CEAIRMAN
                   .
