July 13, 1993
To All Bond Counsel:
Re: School District Obligations and S.B. 826
School District Obligations
This office will resume approval on July 16, 1993, of bonds and other obligations (jointly, "obligations") issued by qualified school districts, as hereinafter described, and will continue reviewing and approving such obligations, absent further court action, until August 31, 1993, as provided below. If the court dissolves or further stays the existing injunction by or on such date, it appears that we can continue to approve school obligations unless and until there is adverse ruling with respect to the constitutionality of S.B. 7, Acts of 73rd Legis., Reg. Sess. (1993) ("S.B. 7"), or until expiration of any further stay.
April 1, 1991, and issued before September 1, 1992 ("Exempt Bonds"), is not the subject to the $1.50 limit.
As indicated above, the total school district tax rate limit pursuant to Section 20.09 of the Code, as amended by S.B. 7, is now $1.50 (or lesser amount previously voted) unless a higher amount has been specifically approved at an election called for such purpose. It is currently our view that a new election authorizing a total tax rate in excess of $1.50. Notwithstanding the higher total tax rate approved at such new election, the tax available for M & O cannot exceed $1.50 or lesser amount previously voted for such purpose; the amount in excess of the M & O limit is only available for bond debt service.
Undoubtedly other questions will arise with respect to the approval of school district obligations. We will attempt to deal with them as they arise and keep the bond community informed. Any comment with respect to the above, in particular any thoughts regarding proposition language necessary to exceed the $1.50 total rate limit, would be appreciated.
As you know S.B. 826, Acts of 73rd Legis., Reg. Sess. (1993), amended the Public Property Finance Act, Subchapter A of Chapter 271 of the Local Government Code, so as to authorize school districts to enter into contracts to purchase or otherwise acquire real property or improvement thereto. S.B. 826 also purports to authorize the pledge or use of maintenance tax proceeds in payment of such contracts. This would seem to be contrary to the holding of Madeley v. Trustees of Conroe Independent School District, 130
S.W.2d 929 (Tex. Civ. App., Beaumont 1939, writ dism'd, judgmt cor.), as well as raising the issue of violation of the contract with voters as well as raising the issue of violation of the contract with voters as to the use of the maintenance tax for other than maintenance purposes. Please be advised that we will not approve any contracts for the purchase or other acquisition of real property or improvement to real property payable in any manner from school district maintenance taxes without at least the benefit of higher authority.
Regarding other matter, Monty Watson joined us in June, so we are now back to our full complement of seven attorneys. We are still, however, dealing with the backlog resulting from the extremely heavy volume of transcripts received in the last few months. We appreciate your continued patience and willingness to work with us.
Please distribute this letter to all interested members of your firm.
Very truly yours,
Assistant Attorney General
Chief, Public Finance Section