                                       May 3,   1939



 Messrs..Shlvers &-:Ke,lth
 Attorneys for Je.ffersonCounty Water
     Control & Improvement District No.1
'Adams Building
 Port Arthur, Texas
                     A.ttention: .Mr. Allan-Shive'rs.
                             NO: .o-46%
                     .Opiriioi~
                     Re: Authorlty.of a Water.Control and
                          Improvement'~,District~to pledge net
                          Revenues and.glve a'legal'flrst
                          mortgage upon such.system as addi-
                          tional-security to.seCure'.thepay-
                          ment of 'taxi bonds issued.thereon
Oentlemen:.
                            March~8, .addressed'to'theAttorney
          .In iour:-letteti'of
General, you reque+..an opinioncovering t-he,foliowlngques-
tions:,
          1. Can t~~"Distrlct,‘wl,thoutadditilonal.authoriza-
                              , ,'le,gaIly
tion from.the qualified :,votera        pledge the'net reve-
nues of the water.system,for,,the,pa~ent of,bonds so.,aufhorized?
                   1
          2..~Can the,.Doardof Direhtorslegally create a band-
lng,flrst.mortgage-.l~,~~-gpon:tt?e'water
                                       system'to secure the
payment of the tax bonds authorlzed,for the construction of the
water and sewer system?
           Inaccordance,,y$.th,,the
                                 ,provls$onsoftArticle 4399,
requiring this,.office.-,~~..~,advise.,,~lative
                                         the proper issuance
of bonds, ..the,following,~~gpinion,has
                                    been prepared:
           #As statedl,,gnyour.let'ter,the facts.are as foliows -
                             .~i.           ..,
           .On S.epte.rn~ez:~i~;;.~~~~8,,,:the':
                                      qua,lifiedtaxpaying voters
 of the Jeffe~~~~~~~ate~,iC~~~~ql~~~~~d.~.~mprd~eme,nt~.Distr~lct
                                                          .No. 1
 votedbonds ~aggrega.tlng..,$255,OO'd"'alid
                                       -authoriied'.thelevying
 of a tax to pay the pr'lnclpal.and interest thereon as it
                                                                      ‘4.

 Messrs. Shivers &'Keith - page 2



 matured; that you are now negotiating a loan from the Recon-
 struction Finance Corporation for the purchase of the bonds to
 supplement a W.P.A. grant, and that the bonds to be authorized
 and'pledged against this loan from the R.F.C. are in the sum
 of $195,000.  The legal counsel for the R.F.C. has suggested
 that additional security might be offered by the pledging of
 net revenues of the project and also that a first mortgage
 upon the system might also be given.
                 Article 7880-147u, Sec.3, Revised Civil Statutes
 of Texas, provides that the Board of Directors of any water con-
 trol and improvement district may assess and collect charges
 for maintenance and operation of the facilities .of any such
 district and such proceeds when collected should be paid into
 the maintenance fund required in Section 103 of Chapter 25,
 Qeneral Laws~of the Thirty-nlnth~Leglslature, Regular Session
 of 1925. It further provides that ~a11 or a part of said maln-
 tenance fund may be Irrevocably pledged as additional security
 for the nayment of the nrlncinal or Interest on all bonds of
 any such district so issued and sold to the.Qovernment ,of the
 ~UnltedStates or to any lending agency mentioned in Section 1
 of the Act, or on all bonds of such district nledged as col-
 lateral to secure'navment of any loan made by said Government
 or agency thereof 'to any such dlstrlct,as such bonds become
 due and payable,.and moneys of said maintenance fund so pledged
 shall aCcordlngly be used for maintenance and operation when
 and only when the principal of and Interest on the bonds due
 on all preceding semi-annual Interest paymeht dates shall
 have been paid In full and,when the collection of taxes for
 the Interest and,sinklng fund account, reasonably and prudently~
 to be anticipated by the boerd of directors of any such dls-
  trlct, will be sufficient to pay principal of and interest on
 the bonds becoming due on the ~semi-~annualinterest payment date
 next succeeding. Provided, nevertheless, that when moneys
 of the malntenanhe fund are so used to prevent or to cure de-
 faults In the payment of the principal of or interest on the
 bonds, the amount so used shall be repaid into said mainte-
 nance fund from the first available proceeds of the taxes levied
 pursuant to Section 2 of this Act.
                 Subsequent to the enactment of this statute,it was
  determined that such districts were without s~peclflcstatutory
  authority to pledge net revenues as security for bonds pur-
  suant to the provisions of that article, and at the Third
  Called Session of the same Legislature Article 7880~9Oa was
  enacted to enable such districts to legally pledge the net
-Yevenues 'as additional security for general obligation bonds
  Issued and sold. It also defines net revenues and enumerates
  the manner in which such pledges could be accomplished, and
. ’




        Messrs. Shivers & Keith, page 3


        provided that whichever method was adopted should be first
        submitted to the qualified voters of such.dlstrict for ap-
        proval thereof. The ca tion of this bill, which was en-
        acted September 26, 193t , by the Forty-third Legislature,
        Third Called Session, recorded In General and Special Laws
        of that session, at page 56, Chapter 32, Section 1, states -
                   "An Act amending Chapter 25 of the Acts of
              the 39th Legislature, Regular Session, adding
              thereto a section  to be 'Section gOa,' and, in
              substance to provide: That certain water control
              and improvement districts (In addition to, or in
              lieu of, securing their bonds by the levy and
              collection of taxes, as now provided), may enter
              into contracts pledging their net revenues for
              security of their bonds; Andy,providing that, in
              case the district's obligations are secured both
              by taxation and the pledge of revenues,   to com-
              pensate the net revenuesavailable to protect
              the maturities of the dlstrlct*s obligations.
              Defining 'net revenues'; and, requiring an elec-
              tion for authorlza~tlon~forexercising ~the Powers
              hereby aranted; also. flxinn the DrODOISitioiI
              to be voted on at~any such election.   ,Stat%g
              the facts cnnstituting an imperative public ne-
              cessity (to enable such districts promptly to
              procure loans from the Fe,deralAdmInIstratIon of
              Public.Works, or other advantageous sources,
              thereby aiding to relieve unemployment) and de,'
              claring an emergency."
                   The foregoing Act is not applicable to your district
         under the facts stated, inasmuch as you are negotiating a loan
         with the Federal Qovernment, or a lending agency thereof which
         brings your case within the purview of the Acts of the Forty-
         fourth Legislature, 1936, Third Called~Session, page 2092,
         Chapter 501,.Section 1, wherein Section 1 of the Acts of 1934,
         Forty-third Legislature, Second Called~Session, page 10,
         Chapter 4, was amended. The amendment expressly authorized
         the Board of Directors of N   water control and Improvement
         district in this State to borrow money and to receive grants
         and other aid from the Government of the United States. the
         Federal Emergency Administration of Public Works, the Recon-
      ._ struction Finance Corporation. the Federal Reserve Banks;and
         any other agencies of 'thedovernment .of the United States, and
         which loans or grants may be made on~such terms and in ~&
         amounts as may be agreed upon between the Board of Directors
         of such d@trlcts and the United States Government, or any
         lending agency thereof.
     Messrs.   Shivers & Keith, page 4


               In our opinion this law authorizes the pledging
     of the "net revenues" by the Board of Directors of the Jeffer-
     son Water Control and Improvement District as additional~se-
     curity for the previously voted tax supported bonds without
     the necessity of another election. Any plan of financing other
     than that specified in the Act above quoted would require the
     submission of such further pledging of security to the qualified
     voters of such district, as provided in Article 7880~goa of the
     Revised Civil Statutes of 1925.
               It is also our opinion that a first mortgage cannot
     be given on the improvements within such districts. The sta-
     tutes specifically authorize the pledging of certain revenues
     and ad valorem taxes to the payment of bonds issued by such
     districts, but have failed to provide for the'mortgaging of
     the physical improvements therein. sunder the well established'
     rule of law that wherein a law falls to name matters germane to
     the subject, it is presumed that the intention was to exclude
     such unnamed matters. whence, we conclude that the Legislature
     did not intend that such districts should have the right to
     give a first mortgage on its improvements.
               Assuring you of this department's continued coopera-
     tion, we are
                                              Very truly yours
                                         ATTORNEYGENERAL OFTEXAS


                                         BY    Clarence E. Crowe
                                                       Assistant
     CEC:s:bt
     Approved:


     cc nr. Edward Edelman, Counsel
        Reconstruction Finance Corporation
        Washington, D.C.


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