                                  March    26,    1975


The Honorable Hugh C. Yantis,        Jr.             Opinion No.   H-   567
Executive Director
Texas Water Quality Board                            Re: Ability of special districts
P. 0. Box 13246                                      to use bond proceeds to purchase
A us tin, Texas                                      a portion of the capacity in a re-
                                                     gional waste disposal system.

Dear Mr.    Yantis:

          In 1965 the&voters of the Inverness Forest Improvement        District
approved a .-ballot proposition authorizing the issuance of construction
 bonds to finance the erection of a waterworks       and sanitary sewer system
 to be owned and operated by the District.        None of the bonds have yet
 been issued.     The Gulf Coast Waste Disposal Authority has proposed
 that the District participate   in a regional plant owned and operated by
 the Authority.    As proposed,    the plan calls for connection of the District’s
 sewage system to a regional sewage treatment plant to be constructed
 and operated by the Authority which would secure the necessary           permits
 from regulatory agencies.       The water district would pay the Authority
 a monthly charge based upon gallons of sewage treated and would also
 pay a lump sum for a guaranteed percentage         share of capacity in the
 plant.   This lump sum payment for capacity in the plant would be paid
 from money derived from the sale of the previously         authorized   bonds.
 The District would not own any specific part of the sewage treatment
 plant or have any specific interest in the facilities    themselves.     The
*Bond Order issued by the District shortly after the election and pursuant
 to the authorization   of the electorate   contains certain stipulations and
 representations    concerning the methods and purposes of the bond
 authorization   and the retirement    of any bonds issued.

       You have explained that unless capital contributions from member
governments to regional sewage systems in return for contractual  guarantees




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The Honorable     Hugh C.   Yantis    page 2 (H-567)




for a percentage   of the regional system can be financed by the sale of
bonds, the purpose of Chapter 21 of the Texas Water Code (which
encourages   regional systems)    cannot be accomplished, and you ask:

                     May the money obtained from the sale of bonds
                 containing the above covenants be used to purchase
                 a contract for capacity in a regional sewage treat-
                 ment plant owned and operated by the Gulf Coast
                 Waste Disposal Authority?

         =It’is.-elementary-that the       proceeds of bonds voted by the people
.must be expended~for~ the purposes for which they were~voted.                It is
 also elementary        that in instances where the law visits upon a govern-
 ing body the duty to exercise         its sound judgment and discretion,       courts
have no right to interfere         so long as such body acts lawfully.       Barrington
 v. Cokinos,       338 S. W. 2d 133 (Tex. Sup. 1960); Lewis v. City of Fort Worth,
 89 S. W. 2d 975 (Tex. Sup., 1936); 47 Tex. Jur. 2d, Public Securities and
 Obligations,      section 31. But where, as here, the ballot proposal and
 Bond Order issued by the governing body particularly              describe the
 purposes for which the bond proceeds will be used, and among them is
 a provision that certain municipal facilities          will be purchased and
 constructed for the governmental            body involved,  the use of such proceeds
 to acquire contractual’ rights that do not result in the ownership or opera-
 tion of’the facilities     by the governmental      body is not authorized.     City of
 Beaumont v. Priddie,          65 S. W. 2d 434 (Tex. Civ.’ App. --Austin       1933),
 judgment reversed and cause dismissed              for mootness,   95 S. W. 2d 1290
 (1936).

         Though the Priddie  case was ultimately adjudged a moot exercise,
the opinion of the Court of Civil Appeals was later approved by the Supreme
Court in State v. City of Austin,  331 S. W. 2d 737 (Tex. Sup. 1960), and
carefully distinguished  by the Supreme Court in Barrington,   when it held a
much broader ballot proposal not to prohibit the arrangement    considered
there.

         In our opinion, a contractual arrangement by the District with the
Authority in. which the Authority would agree to build and operate a regional




                                      p.   2543
The Honorable   Hugh C. Yantis          page 3     (H-567)




sewage treatment plant and provide for a fee sewage treatment services
of a guaranteed capacity to the District,  but in which the District would
neither own nor operate any part of the facilities,  was not within the
contemplation  of the electorate when it authorized the District to issue
bonds

                . .   . for
                          the purpose of purchasing and constructing
                a water and sanitary sewer system and a sewage
                disposal plant for the District,  and for the further
                purpose of purchasing and constructing     for the District
                a drainage system for the drain&e     of lands within the
                District.  . . . u Inverness  Forest Improvement     District,
                Bond Order.

Nor do we believe     such a project    is within the scope      of the Bond Order     which
states,

                The term ‘system!   as used in this order shall ~include
                and mean the waterworks    and sanitary sewer system
                owned and operated by the District,   and all extensions
                and replacements   thereof and improvements    thereto
                whensoever   made.

        The conclusion we have reached above makes it unnecessary        for
us to decide whether the Inverness Forest Improvement      District could,
in other circumstances,  legally finance its participation in a regional
waste disposal system by the sale of public securities.

                                  SUMMARY

                    Proceeds   from the sale of bonds authorized
                in 1965 by the electorate of the Inverness Forest
                Improvement    District may not be used to contract
                for sewage treatment services    from the Gulf Coast
                Waste Disposal Authority where the District would
                neither own nor operate the sewage system facilities.




                                                      Attorney    General   of Texas



                                       p.   2544
                                                            ,


The Honorable   Hugh C. Yantis       page 4       (H-567)




APPROVED:




DAVID   M.   KENDALL,    First   Assistant




C. ROBERT HEATH,        Chairtnan
Opinion Committee




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