                    December 19, 1952'

Hon. A. K. Stewart      Ctpi+on No..V-1556
County Attorney
Montgomery County      Re: Validity of a construction
Conroe, Texas              contract let by the Commls-
                           sloners' Court In an amount
                           in excess of the unobligated
                           balance In the permanent
                           lmprovement.,fund~pluf~the
                           amount of a bond issue voted
                           for this .constructlonpro-
Dear Sir:                  ject.
            Your request reads a8 follows:
          'On October 13, 1952, the Commlsslon-
     era' Cotit of 74ontgomeryCounty, Texas,
     entered into a construction contract for
     an addition td.the county hospltal,ln the
     amount of $581,491.00. eon this date the
     county had.on hand Unencumbered funds
     avalla@le In the amount of $570,820.65.
     However, based on experience for many pre-
     vious years, the Cbmml~slonersl Court
     reasonably anticipated that it would col-
     lect $10,670.35 ln delinquent taxes and
     other.unencumbred and unappropriated
     revenuea, exclusive of the 1952 tax levy.
            "Questloti,:
                       Ii the contract valid?"
          you are more specifically concerned with whether
the contract constitutes a debt in violation of Section
7 of Article XI of the Constitution of Texas since all
statutory provieions concerning the awarding of the con-
tract and the expenditure of money have been complied
with.
          In answering your question we shall assume that
the anticipated delinquent tax collections and other un-
encumbered and unappropriated revenues~referred to In
your request Include only revenue8 which are properly
payable to the county's Permanent Improvement Fund.
Hon. A. K. Stewart, page 2 (V-1556)


          Article KI, Section 7 of the Constitution of
Texas provides In part:
          "But no debt for any purpose shall
     ever be Incurred in any manner by any city
     or county unless~provlslon 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
     per cent (29) as a sinkingfund; and the
     condemnatlon~of the right of way for the
     erection of such works shall be fully pro-
     vided for."
          The term "debt" as used in the above quoted
constitutional provlslon:has been uniformly held by the
courts of this State to mean "any pecuniary obligation
Imposed by contract, ,exceptsuch as were, at the date of
the contraot, within the lawful and reasonable contem-
plation of the parties, to-be satisfied o,utof the cur-
rent revenues forthe. year; or out of some fund then
within the immediate control of the corporation."




Tex. 420, 151 S.W.   523,'m).   y,
          An excellent discussion of Section 7 of Article
XI IS found in MoNeill v.~City of Waco, ,89 Tex. 83, 33
s.W. 322 (1895),:wherein the 'SupremeCourt atated:
          'Since the inhibition against the
     'creation' or 'incurring' of a 'debt,'
     without the fprovlslon,' la universal, it
     is of vital imnortance'to determine the
     meaning of the w&d 'debt' as used In the
     constltutlon: The word has no fixed, legal
     algnlflcatlon, as has the word 'contract,'
     but Is used in different statutes and con-
     stltutlons in senses varying fr.oma very
     restricted to a very general one. Its
     meaning, therefore;ln any particular stat-
     ute or constitution, Is to be determined by
     construction, and decisions upon one stat-,
     ute or ~constltutlon often tend to~confuse
     rather than ald~In ascertaining its slgnlfi-
     cation in another relating to,an entirely
Hon. A. K. Stewart, page 3 (V-1556)    ~~'.


    different subject., These constlt,utlonal
    provlslons were~lntended as.restraints upon
    the power of municipal corp&atlona,to'conr
    tract that class of pcicunlary~Llabllltles
    not to be satisfied out of the current
    revenues or other funds within their control
    lawfully applicable thereto, and which would
    therefore, titthe date of the contract, be
    an unprovided-for llablllty, and properly
    included within the general meaning of the
    word 'debt.' They have no application, how-
    ever, to that class of pecuniary obligations
    In good faith Intended to be, and lawfully,
    payable out of either the current revenues
    for the year of the contract or any other
    fund within the Immediate control of the
    corporation. Such obligations being pro-
    vided for at the time of their creation, so
    that in the.due course of the transactions
    they.are to be satisfied by the provisions
    made, it would be an m-easonable construc-
    tion of the ctinstltutionto:hold them debts,
    within Its meaiiing,,soas to require the
    levy of a wholly unnecessary tax upon the
    citizen. Thu~~,'awarrant drawn against the
    current revenues of the year for one of the
    ordinary expenses~of the ~corporatlon for such
    year, when all .the claims for ordinary .ex-
    penses foti~thatyear do not exceed such rev-
    enues, or a contract entered Into for the
    making of any public improvement authorized
    by law, e:g. the building of a courthouse or
    jail, and obligating the corporation to pay
    therefor, there being funds within its lm-
    mediate control lawfully applicable thereto
    sufficient; and in good faith contemplated
    by the contracting parties to be used in pay-
    ment thereof when due, are not debts, within
    the meaning of such constitutional provl-
    slons requiring the making of provision for
    the Interest and sinking fund. The payment
    of such claims being lawfully provided for,
    In such way-that their satisfaction In the
    due course of business is reasonably certain,
    they are, In legal contemplation, so far
    satisfied as to be considered as not contem-
    plated by the constitutional provisions,
    though It may result, from some cause not
.   ,   .
                                                                       2




            Hon. A. K. Stewart, page 4 (V-1556)


                    provided against by the law, such as failure
                    to collect the taxes, robbery, embezzlement,
                    or wrongful diversion of the funds, that
                    they are not'pald from the contemplated
                    sources.*
                      Under the facts presented, the obllgatdon
            created by the contzact 1s to be satisfied out of the
            reasonably anticipated ourrent revenues available for
            the year 1952 and no art of the 1952 tax levy (available
            for 3953 expendituresP Is to be used to satisfy the
            obligation. It Is therefore our opinion that the con-
            tract does not create a debt In violation of Section 7
            of Article XI of the Constitution of Texas.
                                     S.l.mMARY
                     An obligation created by a contract
                to be satisfied out of r,easonablyanticipated
                dtireiitrevenue& does not constitute a debt
                -the       meanlng of Section 7 of Article
                                       of Texas. Stevenson
                XI of the C6ns~tltiatlon




                                              Yours very truly,
            APPROVED:                           PRICE DANIEL
                                              Attorney Qeneral
            J. C. Davis. Jr.
            County Affairs Division
            Mary K. wall                      BY
            Reviewing Asaiatnat                    Bruce Allen
                                                    Assistant
            Charles D. Mathews
            First Assistant
            BA:am
