Texas Attorney General Opinion: JC-127 Page: 2 of 6
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The Honorable Riley J. Simpson - Page 2 (JC-0127)
finance expenses to defend or pursue arbitration of construction .., that result from the purposes for
which the general obligation bond was originally issued?" See Letter from Honorable Riley J.
Simpson, District Attorney, 52d Judicial District, Coryell County, to Office of the Attorney General
(Mar. 25, 1999) (on file with Opinion Committee).
We find no statute setting forth specific costs that may be paid with bond proceeds. Chapter
1251 of the Government Code, under which the City's bonds were issued, authorizes a city to issue
bonds for public improvements payable from ad valorem property taxes levied on all taxable property
in the city (general obligation bonds), subject to voter approval. See TEX. Gov'T CODE ANN.
1251.001-.005 (bond elections), 1331.001 (municipal authority to issue bonds). Chapter 1251 does
not list specific costs that a city may pay with proceeds of authorized bonds. See id. Nor are we
aware of any other statute applicable to the City's bonds that does.
Proceeds of the bonds in the situation about which you ask must be used for construction,
expansion, and extension of the fire/EMS station and substation "and related improvements."
Election Ordinance, supra. Where the electorate has approved the issuance of bonds, bond proceeds
may be expended only for the purposes for which the bonds were approved. Troy Dodson Constr.
Co. v. McClelland, 993 F.2d 1211, 1216 (5th Cir. 1993); Barrington v. Cokinos, 338 S.W.2d 133, 142
(Tex. 1960); Lewis v. City of Fort Worth, 89 S.W.2d 975, 978 (Tex. 1936); Black v. Strength, 246
S.W. 79, 80 (Tex. 1922); Moore v. Coffman, 200 S.W. 374, 375 (Tex. 1918). See generally 60 TEX.
JUR. 3d Public Securities and Obligations 77 (1988). A city is required to include in the bond
proposition in the election ordinance and in the notice of election the purposes for which bonds
payable from ad valorem property taxes will be issued because the electorate is entitled to know in
advance the particular purpose for which its taxes levied pursuant to the election will be used. See
TEX. GOV'T CODE ANN. 1251.002-.004; Moore, 200 S.W. at 374. The ordinance calling the bond
election and establishing the purposes for which bonds will be issued becomes a contract with the
voters once the voters approve the bonds. Black, 246 S.W. at 80-81; Moore, 200 S.W. at 374;
Devorsky v. La Vega Indep. Sch. Dist., 635 S.W.2d 904, 908 (Tex. App.-Waco 1982, no writ);
Inverness Forest Improvement Dist. v. Hardy Street Investors, 541 S.W.2d 454, 460 (Tex. Civ.
App.-Houston [1st Dist.] 1976, writ ref'd n.r.e.). Thus, the issue presented in this opinion is whether
the legal fees, while not for the actual construction of the project, are nonetheless a cost of the project
and, therefore, within the scope of the purpose for which the bonds were approved.
Bond proceeds may be used, without specific voter approval or statutory authorization, for
certain nonconstruction costs. Proceeds may, for instance, be used to pay reasonable expenses
incident to issuing bonds, such as legal and other professional fees, and printing and advertising
expenses, without specific voter approval and even when they are not statutorily authorized. See 15
EUGENE MCQUILLIN, THE LAW OF MUNICIPAL CORPORATIONS 43.68, at 731 (3d ed. 1995); 3 M.
DAVID GELFAND, STATE & LOCAL GOVERNMENT DEBT FINANCING 11.26.50, 11.39-.42 (1992 &
Supp. 1994). Legal fees for arbitration ofa construction contract are not costs incident to the issuance
of bonds, and we have found no case in Texas or another jurisdiction that addresses the use of bond
proceeds to pay arbitration or litigation expenses related to the construction of a project.
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Texas. Attorney-General's Office. Texas Attorney General Opinion: JC-127, text, October 13, 1999; (https://texashistory.unt.edu/ark:/67531/metapth274436/m1/2/: accessed April 25, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.