Could a Texas county use combination tax and revenue bonds to build toll roads without violating the constitutional ban on lending public credit?
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This page answers the general question as of 1983. Ezel answers yours: what it means for your facts, under current Texas law, with citations.
Texas AG Opinion JM-84: County Toll Road Tax and Revenue Bonds
Plain-English summary
JM-84 concluded that a Texas county could use proceeds from combination tax and revenue bonds to construct toll roads without necessarily violating article III, section 52 of the Texas Constitution. The conclusion depended on full compliance with the legal requirements governing debt-producing securities and guarantees affecting the tax base or other public assets.
"[W]e do not believe the use by counties of proceeds from combination tax and revenue bonds for the construction of toll roads is violative of article III, section 52 of the Texas Constitution."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf"Assuming full compliance with constitutional and statutory requirements respecting the issuance of debt-creating securities for tax and 'revenue' bonds wholly or partially secured by guarantees impacting the tax base or other public assets."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
Charging users a toll did not itself make the project unconstitutional. Article III, section 52 expressly contemplated bonds for roads and turnpikes, and the opinion treated county toll-road construction as capable of serving a legitimate public purpose.
"Article III, section 52 clearly authorizes a county, pursuant to statute, to issue bonds for the construction, operation and maintenance of turnpikes."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf"In our opinion, that the county will charge a toll for the use of a turnpike pursuant to legislative authority is not in itself a constitutional impediment to the construction of the road."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf"We believe there can be no doubt that the construction of a county toll road can serve a legitimate public purpose."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
JM-84 did not approve the particular Harris County bonds mentioned in the request because they had not been submitted to the Attorney General's office.
"[B]onds not yet submitted to this office for approval."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf"In such circumstances we cannot pass upon the validity of the particular bonds."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
Currency note
This opinion was issued in 1983. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Common questions
Did collecting a toll amount to an unconstitutional grant of public money?
Not by itself. JM-84 said a legislatively authorized toll was not a constitutional obstacle to constructing the road.
"In our opinion, that the county will charge a toll for the use of a turnpike pursuant to legislative authority is not in itself a constitutional impediment to the construction of the road."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
Why did the opinion consider a county toll road a permissible public purpose?
Article III, section 52 authorized bonds for roads and turnpikes, and Texas law permitted public spending that directly accomplished a legitimate public purpose. JM-84 concluded that county toll-road construction could meet that standard.
"Article III, section 52 clearly contemplates the use of the proceeds of tax bonds to finance the building of turnpikes."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf"The use of public funds is constitutionally permissible so long as the expenditure serves 'the direct accomplishment of a legitimate public . . . purpose.'"
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf"We believe there can be no doubt that the construction of a county toll road can serve a legitimate public purpose."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
How did JM-84 distinguish revenue bonds from tax bonds?
It said revenue bonds borrowed against expected facility revenue, while tax bonds borrowed against expected tax collections. Revenue bonds paid solely from revenue did not create public debt in the constitutional sense because they did not legally obligate the tax base.
"When public bodies sell revenue bonds, they borrow against the future revenues they expect to receive rather than the future taxes they expect to collect."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf"Unlike tax bonds, revenue bonds are said not to create public debt in the constitutional sense because they do not legally obligate the tax base when they are to be paid solely from revenues."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
When would a bond labeled a revenue bond still obligate the tax base?
JM-84 said the effect changed when bondholders could demand that tax money, tax-bond proceeds, or other public property be used to generate repayment income. A pledge combining ad valorem taxes and facility revenue obligated the tax base to the extent of the bonds to be retired.
"When bondholders are entitled not only to be paid from income generated by a facility, but also to insist that tax money, the proceeds from tax bonds, or other public property be used to generate that income, then the bonds are not payable 'solely from revenues' in the sense in which courts have declared them to be not debt-producing."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf"[T]hen the tax base has been additionally obligated to the extent of the bond amount to be retired."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
Did JM-84 validate Harris County's specific bond issue?
No. The opinion said those bonds had not yet been submitted for approval, so it could not decide their validity.
"You advise that the voters of Harris County, pursuant to article 6795b-1, V.T.C.S., recently authorized the issuance of bonds to construct and operate a toll road -- bonds not yet submitted to this office for approval."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf"In such circumstances we cannot pass upon the validity of the particular bonds."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
Background and constitutional framework
State highway commission chairman Robert C. Lanier asked whether a county could use combination tax and revenue bond proceeds to build toll roads.
"You have requested our opinion regarding the authority of a county to use the proceeds of combination tax and revenue bonds to construct toll roads."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
Article 6795b-1 authorized Gulf Coast counties with at least 50,000 residents to issue bonds for causeways, bridges, tunnels, highways, turnpikes, and toll roads.
"Article 6795b-1, V.T.C.S., authorizes Gulf Coast counties with a population of 50,000 or more to issue bonds to pay for the construction, operation and maintenance of causeways, bridges, tunnels, highways and turnpikes, including toll roads."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
The constitutional question came from article III, section 52's general prohibition against authorizing a county or other political subdivision to lend its credit or grant public money or value to an individual, association, or corporation. The same section also expressly authorized bonds for specified improvements, including roads and turnpikes, subject to its voting and debt-limit conditions.
"Except as otherwise provided by this section, the Legislature shall have no power to authorize any county, city, town or other political corporation or subdivision of the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf"The construction, maintenance and operation of macadamized, graveled or paved roads and turnpikes, or in aid thereof."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
Holding
"Assuming full compliance with constitutional and statutory requirements respecting the issuance of debt-creating securities for tax and 'revenue' bonds wholly or partially secured by guarantees impacting the tax base or other public assets, the use by counties of proceeds from combination tax and revenue bonds for the construction of toll roads is not violative of article III, section 52 of the Texas Constitution."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
Citations and references
Constitutional and statutory provisions quoted or discussed by JM-84:
- "Article 6795b-1, V.T.C.S." Official PDF
- "Article III, section 52 of the Texas Constitution" Official PDF
- "Tex. Const. art. III, §52-b" Official PDF
- "section 2 of article 6795b-1" Official PDF
Cases cited by JM-84:
- "Barrington v. Cokinos, 338 S.W.2d 133, 140 (Tex. 1960)" Official PDF
- "Texsan Service Co. v. City of Nixon, 158 S.W.2d 88 (Tex. Civ. App. - San Antonio 1941, writ ref'd)" Official PDF
- "Texas Turnpike Authority v. Shepperd, 279 S.W.2d 302 (Tex. 1955)" Official PDF
- "City of Dayton v. Allred, 68 S.W.2d 172 (Tex. Comm'n App. 1934, jgmt adopted)" Official PDF
- "City of Wichita Falls v. Kemp Public Library Board of Trustees, 593 S.W.2d 834 (Tex. Civ. App. - Fort Worth 1980, writ ref'd n.r.e.)" Official PDF
Source
- Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0084
- Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0084.pdf
Original opinion text
Best-effort transcription from a scanned PDF. Minor errors may remain. The linked PDF is authoritative.
The Attorney General of Texas
JIM MATTOX
Attorney General
November 2, 1983
Mr. Robert C. Lanier
Chairman
State Department of Highways and Public Transportation
Dewitt C. Greer State Highway Building
11th and Brazos Streets
Austin, Texas 78701
Opinion No. JM-84
Re: Use by county of combination tax and revenue bonds to construct toll roads
Dear Mr. Lanier:
You have requested our opinion regarding the authority of a county to use the proceeds of combination tax and revenue bonds to construct toll roads.
Article 6795b-1, V.T.C.S., authorizes Gulf Coast counties with a population of 50,000 or more to issue bonds to pay for the construction, operation and maintenance of causeways, bridges, tunnels, highways and turnpikes, including toll roads. You ask:
Does the use of the proceeds of combination tax and revenue bonds to construct toll roads, turnpikes, causeways, or bridges constitute an unconstitutional lending of credit or grant of public money when a user is charged a toll for the use of the facility?
Article III, section 52 of the Texas Constitution provides:
(a) Except as otherwise provided by this section, the Legislature shall have no power to authorize any county, city, town or other political corporation or subdivision of the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever, or to become a stockholder in such corporation, association or company.
(b) Under Legislative provision, any county, any political subdivision of a county, any number of adjoining counties, or any political subdivision of the State, or any defined district now or hereafter to be described and defined within the State of Texas, and which may or may not include, towns, villages or municipal corporations, upon a vote of two-thirds majority of the resident property taxpayers voting thereon who are qualified electors of such district or territory to be affected thereby, in addition to all other debts, may issue bonds or otherwise lend its credit in any amount not to exceed one-fourth of the assessed valuation of the real property of such district or territory, except that the total bonded indebtedness of any city or town shall never exceed the limits imposed by other provisions of this Constitution, and levy and collect taxes to pay the interest thereon and provide a sinking fund for the redemption thereof, as the Legislature may authorize, and in such manner as it may authorize the same, for the following purposes to wit:
(1) The improvement of rivers, creeks, and streams to prevent overflows, and to permit of navigation thereof, or irrigation thereof, or in aid of such purposes.
(2) The construction and maintenance of pools, lakes, reservoirs, dams, canals, and waterways for the purposes of irrigation, drainage or navigation, or in aid thereof.
(3) The construction, maintenance and operation of macadamized, graveled or paved roads and turnpikes, or in aid thereof.
(c) Notwithstanding the provisions of Subsection (b) of this Section, bonds may be issued by any county in an amount not to exceed one-fourth of the assessed valuation of the real property in the county, for the construction, maintenance, and operation of macadamized, graveled, or paved roads and turnpikes, or in aid thereof, upon a vote of a majority of the resident property taxpayers voting thereon who are qualified electors of the county, and without the necessity of further or amendatory legislation. The county may levy and collect taxes to pay the interest on the bonds as it becomes due and to provide a sinking fund for redemption of the bonds.
Article III, section 52 clearly authorizes a county, pursuant to statute, to issue bonds for the construction, operation and maintenance of turnpikes. In our opinion, that the county will charge a toll for the use of a turnpike pursuant to legislative authority is not in itself a constitutional impediment to the construction of the road. We must also determine, however, whether the use of combination tax and revenue bonds to finance the projects raises any constitutional objection.
Article III, section 52 clearly contemplates the use of the proceeds of tax bonds to finance the building of turnpikes. The use of public funds is constitutionally permissible so long as the expenditure serves "the direct accomplishment of a legitimate public . . . purpose." Barrington v. Cokinos, 338 S.W.2d 133, 140 (Tex. 1960); see Letter Advisory No. 9 (1973). We believe there can be no doubt that the construction of a county toll road can serve a legitimate public purpose. We conclude, therefore, that the use of bond proceeds to finance toll roads does not necessarily constitute an unconstitutional lending of credit under article III, section 52 of the Texas Constitution. Cf. Tex. Const. art. III, §52-b.
However, revenue bonds and tax bonds are not the same thing. When public bodies sell revenue bonds, they borrow against the future revenues they expect to receive rather than the future taxes they expect to collect. Texsan Service Co. v. City of Nixon, 158 S.W.2d 88 (Tex. Civ. App. - San Antonio 1941, writ ref'd). Unlike tax bonds, revenue bonds are said not to create public debt in the constitutional sense because they do not legally obligate the tax base when they are to be paid solely from revenues. Texas Turnpike Authority v. Shepperd, 279 S.W.2d 302 (Tex. 1955). Bonds not secured solely by revenues have a different effect.
When bondholders are entitled not only to be paid from income generated by a facility, but also to insist that tax money, the proceeds from tax bonds, or other public property be used to generate that income, then the bonds are not payable "solely from revenues" in the sense in which courts have declared them to be not debt-producing. See City of Dayton v. Allred, 68 S.W.2d 172 (Tex. Comm'n App. 1934, jgmt adopted). Where a governmental unit agrees to pledge both ad valorem taxes and the revenues of a facility to the payment of bonds issued to construct such facility and to maintain and operate the facility with tax monies for as long as it takes to retire such bonds out of revenues of the facilities and the ad valorem taxes pledged thereto, then the tax base has been additionally obligated to the extent of the bond amount to be retired. See City of Wichita Falls v. Kemp Public Library Board of Trustees, 593 S.W.2d 834 (Tex. Civ. App. - Fort Worth 1980, writ ref'd n.r.e.); Attorney General Opinion MW-337 (1981).
You advise that the voters of Harris County, pursuant to article 6795b-1, V.T.C.S., recently authorized the issuance of bonds to construct and operate a toll road -- bonds not yet submitted to this office for approval. (Under section 2 of article 6795b-1 submission of bonds is permissive). In such circumstances we cannot pass upon the validity of the particular bonds, but assuming full compliance with constitutional and statutory requirements respecting the issuance of debt-creating securities for tax and "revenue" bonds wholly or partially secured by guarantees impacting the tax base or other public assets, we do not believe the use by counties of proceeds from combination tax and revenue bonds for the construction of toll roads is violative of article III, section 52 of the Texas Constitution.
SUMMARY
Assuming full compliance with constitutional and statutory requirements respecting the issuance of debt-creating securities for tax and "revenue" bonds wholly or partially secured by guarantees impacting the tax base or other public assets, the use by counties of proceeds from combination tax and revenue bonds for the construction of toll roads is not violative of article III, section 52 of the Texas Constitution.
Very truly yours,
JIM MATTOX
Attorney General of Texas
TOM GREEN
First Assistant Attorney General
DAVID R. RICHARDS
Executive Assistant Attorney General
Prepared by Rick Gilpin
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Rick Gilpin, Chairman
David Brooks
Colin Carl
Susan Garrison
Jim Moellinger
Nancy Sutton
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