The Attorney General of Texas
September 23, 1980
MARK WHITE
Attorney General Honorable Harvey Davis Opinion No. MW-246
Executive Director
Texas Department of Water Resources Re: Disposition of bond proceeds
1700 N. Congress Avenue from sale of Texas Water Develop
Austin, Texas ment Board bonds.
Dear Mr. Davis:
You have requested our opinion in answer to two questions relating to
appropriate accounting for proceeds from various transactions accruing to
the Department of Water Resources. Your first question is:
1. How should the Texas Water Development
Board account for the bond proceeds and
related bond sale expenses when it sells Texas
Water Development Bonds under the provisions
of Article HI, SS 49-c, 49-d and 49-d-l of the
Texas Constitution and Sections 17.072(b),
17.075 and 17.077 of the Texas Water Code?
You cite the disparity in language between article III, section 49-c of
the Texas Constitution, where “all moneys received from the sale of State
bonds” are required to be depceited in the Texas Water Development Fund,
and the other relevant provisions (article III, 55 49-d, 49-d-l of the Texas
Constitution and SS 17.072(b), 17.075 and 17.077 of the Texas Code), where
“all proceeds” are required to be deposited in the Fund. Our reading of the
constitutional and statutory provisions involved indicates that “moneys” and
“proceeds” are used interchangeably. See, e.g., Tex. Const. art. HI, g 49 d
(reference is to proceeds from the sale of bonds authorized under 9 49-c
rather than moneys from such sale).
Moneys as used in article III, section 49-b, of the Texas Constitution
(Veteran’s Land Board) is defined within the constitutional provision as:
. . . moneys attributable to any bonds heretofore or
hereafter issued and sold by said Board which moneys
so attributable shall include but shall not be limited
to the mceeds from the issuance and sale of such
&s added).
Moneys and proceeds are thus distinguished in this particular article of
the constitution, and all of these funds are commanded to be placed in the
Veteran’s Land Fund. Then bond sale expenses are directed to be paid from
that fund.
p. 776
Honorable Harvey Davis - Page Two (MW-246)
Article III, section 49-e of the Texas Constitution governing the Texas Park
Development Fund uses the same language as section 49-c of the Texas Constitution.
However, section 21.102, Texas Parks and Wildlife Code, the enabling legislation passed
pursuant to article III, section 49-e of the Texas Constitution directs that bond sale
expenses shall be paid out of the Park Development Fund. This particular legislation,
which employs the word proceeds, appears to define proceeds as the gross amount realized
from the sale of bonds, whereas the above-referenced Veteran’s Land Board provision in
the constitution clearly recognizes proceeds as the net amount realized from the sale of
bonds but directs that all “moneys attributable to the sale of bonds”, &., the gross amount
realized from the sale, be placed in the Veteran’s Land Fund.
As you note, the Water Development Board is in a position more nearly akin to that
of the Coordinating Board, Texas College and University System. Neither your enabling
legislation I*)r that of the Coordinating Board, nor the underlying constitutional
provisions, attempt to define moneys or proceeds. Absent a clear legislative or
constitutional mandate to the contrary, it is our opinion that you may pay bond sale
expenses in any manner consistent with sound accounting and fiscal practice. There is no
statutory or constitutional prohibition against paying said expenses from the Water
Development Fund or, in the alternative, paying the expenses from a separate account
maintained for that purpose alone.
As to your question concerning the payment of bond sale expenses from moneys
attributable to the issue and sale of the bonds, those moneys are the appropriate source
for such payment. A state agency has those powers expressly granted and those powers
necessarily implied from the express grant. See City of Uvalde v. Uvalde Electric & Ice
a, 235 S.W. 625 (Tex. Civ. App. - San Antonio 1921), affd, 250 S.W. 140 (Tex. Comm’n
App. 1923), citing Dillon, Municipal Corporations §§ 237, and 239. The power to issue
and sell bonds expressly gmnted to the Water Development Board necessarily implies the
power to pay the expenses pertaining to such issue and sale. Bond sale expenses are
historically a charge on gross moneys obtained from the sale of bonds, leaving a net
amount more properly referred to as proceeds. Such expenses would hardly be within the
contemplation of the legislature should it appropriate for administrative expenses (as it is
authorized, though not commanded, to do by article III, 5 49-c of the Texas Constitution).
Absent express legislation to the contrary, the logical source for payment of bond sale
expenses is the gross amount realized from the sale of bonds.
Your second question is:
2. Should the provisions of Section 17.077 of the Texas Water
Code apply to proceeds from the liquidation of temporary
investments in the Development Fund, the refunding of
political s&division bonds purchased by the Board and the
prepayment of such bonds?
Section 17.077 of the Texas Water Code provides:
Except for proceeds from the sale of bonds and proceeds from the
sale of bonds of political s&divisions as provided by Sections 17.134
P. 777
Honorable Harvey Davis - Page Three (NW-246)
and 17.180 of this code, all money received by the board in any
fiscal year, including all amounts received as repayments of loans
to political s&divisions and interest on those loans, shall be
credited to the clearance fund. . . .
You state that it is the practice of the board to temporarily invest bond proceeds in
Treasury notes until the former are made available to the political subdivision and express
concern that a literal reading of section 17.077 would necessitate deposit of proceeds from
the liquidstion of Treasury notes in the clearance fund. We have no difficulty in viewing
the Treasury notes purchased from bond sale proceeds and the funds obtained from
liquidating the same as proceeds from the sale of bonds. There is a change of form, not
substance. Naturally, from this viewpoint the liquidation of temporary investments is
exempted from section 17.077 by the terms of the statute.
The same line of reasoning applies with even more force to the issue of moneys
transferred in refunding bonds. The change is one of form, not substance. Thus, if the
underlying obligation was not subject to section 17.077, moneys changing hands to refund
the underlying obligation are likewise exempt. -See 47 Tex. Jur. 2d Public Securities and
Obligations 533.
As to prepayment of bond issues by political subdivisions with money obtained by
said s&division from a source unrelated to the Development Board, the situation is
complicated by the express language of section 17.077, I’. . . including all amounts received
as repayment of loans to political subdivisions. . . .‘I The substance of the prepayment of a
bond issue is, after all, the repayment of a loan. However, we feel that the section 17.077
language refers to direct loans as authorized by section 17.230 of the Texas Water Code,
and repayment of bonded indebtedness at maturity, since to construe section 17.077
otherwise would defeat the purpcee of the original sale of Texas Water Development
Bonds, and in fact, would defeat the entire purpose of the act itself. We do not think the
prepayment of bonded indebtedness was within the contemplation of the legislature when
it enacted section 17.077.
SUMMARY
The Water Development Board is empowered to pay bond sale
expenses from gross revenues accruing from the sale of the issue.
The requirements of section 17.077 of the Texas Water Code should
not be construed to encompass proceeds from the liquidation of
temporary investments in the Development Fund, the refunding of
political subdivision bonds purchased by the board or the prepay-
ment of such political subdivision bonds.
MARK WHITE
Attorney General of Texas
p. 778
Honorable Harvey Davis - Page Four (~~-246)
JOHN W. FAINTER, JR.
First Assistant Attorney General
Prepared by Susan Voss
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
C. Robert Heath, Chairman
Bob Gammage
Susan Garrison
susan vcm
P. 779