Texas Attorney General Opinion: GA-0652 Page: 3 of 8
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Ms. Martha Galarza - Page 3
[N]o debt for any purpose shall ever be incurred 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 per cent (2%) as a sinking fund[.]
TEX. CONST. art. XI, 7. Any attempted creation or incurrence of a debt without also making such
provision for payment "is contrary to the express prohibition of the constitution, and void." McNeill
v. City of Waco, 33 S.W. 322, 323 (Tex. 1895); see also Tex. & New Orleans R.R. Co. v. Galveston
County, 169 S.W.2d 713, 715 (Tex. 1943) ("If this provision is not made, the 'debt' is a nullity.").
"A contract which violates these constitutional provisions is void, and the governmental unit
involved need not pay any related obligation." City-County Solid Waste Control Bd. v. Capital City
Leasing, Inc., 813 S.W.2d 705, 707 (Tex. App.-Austin 1991, writ denied). The issue here is
whether the indigent health care services invoices in excess of the budgeted amount are obligations
related to contracts that violate the constitutional provision.
The term "debt" as used in article XI, section 7 "means any pecuniary obligation imposed
by contract." McNeill, 33 S.W. at 324; accord Stevenson v. Blake, 113 S.W.2d 525, 527 (Tex.
1938); Tex. & New Orleans R.R. Co., 169 S.W.2d at 715. However, a contract does not create a
"debt" if the parties lawfully and reasonably contemplate when the contract is made that the
obligation will be satisfied out of current revenues for the year, or out of some fund then within the
immediate control of the governmental unit. McNeill, 33 S.W. at 324. A party seeking recovery on
a contract bears the burden of showing that the obligation under the contract is not a "debt":
Prima facie, every pecuniary obligation attempted to be created by
contract is a debt, within the meaning of the constitutional provision[]
..., and a party attempting to recover against the [governmental unit]
must allege the facts showing a compliance with the constitution ...
or must allege such facts as bring the particular claim within the
exception ... in the definition of the word 'debt.'
Id.; see also City ofBonham v. Sw. Sanitation, Inc., 871 S.W.2d 765, 769 (Tex. App.-Texarkana
1994, writ denied) (stating that the party seeking recovery on the contract has the burden of alleging
and proving that the entire obligation could reasonably be paid from current revenues or funds on
hand; "[o]therwise the contract is void and no recovery can be had on it" (citing McNeill, 33 S.W.
at 323)). A contract that runs for more than one year is a commitment only of current revenues and
thus is not a "debt" if it reserves to the governing body the right to terminate the contract at the end
of each budget period. City of Bonham, 871 S.W.2d at 768; City-County Solid Waste Control Bd.,
813 S.W.2d at 707; see also TEX. Loc. GoV'T CODE ANN. 271.903(a) (Vernon 2005) (commitment
of current revenues).
Your predecessor asked about the aggregate amount of the invoices submitted pursuant to
several contracts in excess of the amount budgeted by the county. See Request Letter, supra note
1, at 1. Based on the facts presented, we understand that under the several indigent health care
services contracts, amounts are payable, not on any specified date, but when services are provided.(GA-0652)
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Texas. Attorney-General's Office. Texas Attorney General Opinion: GA-0652, text, August 1, 2008; (https://texashistory.unt.edu/ark:/67531/metapth275548/m1/3/?q=%222008~%22: accessed August 15, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.