The opinion
The Attorney General of Texas
March 11, 1983
JIM MATTOX
Attorney General
Mr. C. A. Wilkins opinion No. JM-9
Supreme Court Building Executive Director, TX. Aeronautics Corm.
P. 0. Box 12546 P. 0. Box 12607, Capitol Station Re: Loan8 to cities and
Austin. Tx. 78711.2548 Austin, Texas 78711 counties by the Texas
5121475.2501
Aeronautics Commission
Telex 9101a74.1367
Tekcopier 5121475-0266
Dear Mr. Wilkins:
,607 Main ?.I.. Suite 1400 You have asked whether the Texas Aeronautics Commission is
oa,,as, TX. 75201.4709
prohibited by the Texas Constitution from making loans to cities and
-2141742.8944
counties for airport construction and development without requiring
them to provide a revenue source for the payment of interest and the
4624 Alberta Ave.. Suite 160 creation of a sinking fund to retire the debt.
E, Paso. TX. 79905-2793
9~51533.3484
Article 46c-6. subdivision 10, V.T.C.S.. as amended in 1981,
P authorizes the commission to provide funds “through loan agreements or
0 Dallas Ave.. Suite 202 grant contracts” to any governmental entity in the state “for the
tious!on. TX. 77002-6986 establishment, construction, reconstruction, enlargement or repair of
7 131650-0666 airstrips. or air navigational facilities.”
airports, In Attorney
General Opinion H-416 (1974). this office concluded that subdivision
806 Broadway. Swte 312 10 of the statute, as it then read, was not violative of the
Lubbock. TX, 79401-3479 constitutional prohibitions against loans and grants of public funds
W,6,747-5236 for improper purposes. The opinion did not address the constitutional
authority of a municipality to assume debt, however.
4309 N. Tenth, Suite B
M~AII~~. TX. 78501-1685 Two provisions of the Texas Constitution speak to the assumption
‘512I682-4547 of debt by cities and counties. Section 5 of article 11 declares that
“no debt shall ever be created by any city, unless at the same time
provision be made to assess and collect annually a sufficient sum to
200 Main Plaza. Suite 400
pay the. interest thereon and creating a sinking fund of. at least two
San Anlonio. TX. 782052797
5121225-4191
percent thereon.” Section 7 of article 11, as amended in 1973, reads
in part:
An EaualOpporlunilyl [N]o debt for any purpose shall ever be incurred
Aflirmative Action Employer
in any manner by any city or county unless
provision 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 percent (2%) as a sinking fund; . . .
-.
p. 36
Mr. C. A. Wilkins - Page 2 (JM-9)
The Texas Supreme Court has defined the term “debt” used in the
foregoing provisions as “any pecuniary obligation imposed by contract.
except such as were, at the date of the contract, within the lawful
and reasonable contemplation of the parties, to be satisfied out of
current revenues for the year, or out of some fund then within the
immediate control of the corporation.” Neil1 v. City of Waco, 33
S.W.322. 324 (Tex. 1895); Stevenson v. Blake, 113 S.W.2d 525. 527
(Tex. 1938). See also Brown v. J efferson County, 406 S.W.2d 185, 188
(Tex. 1966); City DfWichita Falls v. Kemp Public Library Board of
Trustees, 593 S.W.21i 834 (Tex. Civ. App. - Fort Worth 1980, writ ref’d
n.r.e.). A loan agreement or “contract grant” which obligates a city
or county upon some contingency or at a time certain to repay the
amount of the loan or grant, or to undertake some other monetary
obligation. is a “debt” within the constitutional meaning if the
obligation is not to be satisfied out of current revenues or a fund
currently within the control of the governmental unit.
The Commission of Appeals noted in Andrus v. Crystal City, 265
S.W.550 (Tex. Comm’n App. 1924). that no purchase authorized by a
statute could be valid which violated these express provisions of the
constitution. Id. at 522. The court concluded, however. that the
statute at issue there contemplated compliance with, rather than
violation of, sections 5 and 7 of article 11. & See also Wheeler
?
v. city of Brownsville, 220 S.W.2d 457 (Tex. 1949). We reach a
similar conclusion here. Subsection (a) of subdivision 10. article
46c-6. V.T.C.S., expressly requires that any funds provided by the
commission “must be expended by the governmental entity . . . in
conformity with the laws of this state.” In our opinion, the instant
legislation contemplates that the commission will not make loans or
grants to cities or counties that would create debts in the
constitutional sense. Agreements to do so would be void, in any
event. See T. & N.O.R.R. Company v. Galveston County, 169 S.W.2d 713
(Tex. 19m; Andrus V. Crystal City, supra.
We advise that the Texas Aeronautics Commission is without
authority to make loans or grants to cities or counties that have not
complied with sections 5 and 7 of article 11 of the Texas
Constitution, if applicable.
In anticipation of the answer given to your first question. you
have also asked how the commission should comply with its statutory
responsibility to make loans.
First, we note that article 46c-6. subdivision 10, V.T.C.S.. is
not a legislative mandate that the commission make loans. Subdivision
10, subsection (a), declares that the commission “may provide funds,
through loan agreements or grant contracts, appropriated to it for
that purpose by the Legislature.” Subsection (f) of subdivision 10
?
does say that “[lloans shall be made in lieu of grants whenever
p. 37
Mr. C. A. Wilkins - Page 3 (JM-9)
~,~ :
feasible . . .", but it stops far short of issuing an imperative that
the commission make loans to cities and counties.
Assuming -- without deciding -- that there are no other
constitutional impediments, there is nothing to prevent cities and
counties from complying with the "debt" provisions in order to obtain
loans or grants from the commission. ice, e.g., City of Dayton v.
Allred, 68 S.W.2d 172 (Tex. 1934); City of Ingleside v. Stewart, 554
S.W.2d 939, 946 (Tex. Civ. App. - Corpus Christi 1977. writ ref'd
n.r.e.); City of Nederland v. Callihan, 299 S.W.2d 380 (Tex. Clv. App.
- Beaumont 1957, writ ref'd n.r.e.).
SUMMARY
The Texas Aeronautics Conrmission is without
authority to make loans or grants to cities or
bounties that have not complied with sections 5
and 7 of article 11 of the Texas Constitution, If
applicable.
JIM MATTOX
Attorney General of Texas
TOM GREEN
First Assistant Attorney General
DAVID R. RICHARDS
Executive Assistant Attorney General
Prepared by Bruce Youngblood
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Jim Moellinger
Bruce Youngblood
p. 38