The Attorney General of Texas
August 21, 1980
MARK WHITE
Attorney General
Honorable Jerry (Nub) Donaldson Opinion No. MW-224
House of Representatives
Capitol Building Re: Authority of a county to
Austin, Texas invest in obligations issued by the
United States
Dear Representative Donaldson:
You ask whether county governments and subdivisions thereof may
withdraw funds from county depository banks and invest them in debt
instruments of the federal government. Articles 2544 through 2558a,
V.T.C.S., provide for the selection and utilization of a county depository.
Article 2549, V.T.C.S., provides that the county treasurer shall transfer to
the depository all funds belonging to the county and to any district or other
municipal subdivision thereof not selecting its own depceitory. The tax
collector is to deposit all taxes collected by him in the depository, and all
money held by any district, county or precinct officer in the county is to be
governed by this law. See Attorney General Opinion H-1185 (1978).
There are certain specific statutes which permit county funds to be
placed in debt instruments of the federal government. The county may
invest sinking funds accumulated for the redemption and payment of its
outstanding bonds in federal government securities. V.T.C.S. arts. 779, 836.
However, the proceeds from the sale of the bonds may not be so invested.
See Attorney General Opinion V-1182 (1951). Articles 708b and 708b-1,
m.C.S., permitted the proceeds of bonds issued and sold prior to their
passage to be invested in federal securities provided the political subdivision
was unable to obtain labor and materials to carry out the purpose for which
the bands were issued. See Attorney General Opinions O-7393, O-7267
(1946). These statutes have present application. Finally, article 1269j-3,
V.T.C.S., provides as follows:
All political subdivlsrons of the State of Texas
which have balances remaining in their accounts at
the end of any fiscal year may invest such balances in
Defense Bonds or other obligations of the United
States of America; provided, however, that when such
funds are needed the obligations of the United States
in which such balances are invested shall be sold or
redeemed and the proceeds of said obligations shall
be deposited in the accounts from which they were
originally drawn.
P. 713
Honorable Jerry (Nub) Donaldson - Page Two (MW-224)
You ask whether a county governing body has authority to withdraw funds from the
depository and invest them in United States obligations in the absence of express statutory
authority to do so. Since article 2549, V.T.C.S., provides that all money is to be placed in
the county depository, we believe a specific statute must provide an exception in order for
the county to place funds in federal debt instruments. Such exceptions are provided by
articles 779, 836, and 1269j-3, V.T.C.S.
It is suggested that article 4413(34c), V.T.C.S., authorizes a county to invest its
funds in United States obligations. However, this statute applies only to funds which the
political subdivision has legal authority to invest. V.T.C.S. art. 4413(34c), 5 l(1). Placing
funds in a depository is not an investment of those funds. Lawson v. Baker, 220 S.W. 260
(Tex. Civ. App. - Austin 1920, writ ref’d). Thus article 4413(34c) does not authorize a
county to invest funds which other statutes require to be placed in the county depository.
See
- Attorney General Opinion H-1013 (1977).
You also ask whether the withdrawal of funds from a county depository for the
purpose of investing them in United States securities other than as specifically permitted
by statute would constitute a breach of the depository contract entered into by the county
and its depository bank. The laws existing at the time the contract is made become part
of it. Langever v. Miller, 76 S.W.2d 1025 (Tex. 1934); Winder Bros. v. Sterling, 12 S.W.2d
127 (Tex. 1929). We believe the statutes requiring all county funds, with certain specific
exceptions, to be placed in the county depository become part of the county’s contract
with the depository. Thus, if the county were to withdraw funds from the depository in
order to invest them in United States securities other than as authorized by statute, it
would breach its contract with the depository.
You next ask whether a county relinquishes any statutory right to invest its funds in
United States securities by agreeing to a contract term that county funds are to be
deposited with the depceitory. In our opinion, statutes which permit the county to invest
certain funds in United States securities become part of the contract. See, Langever v.
Miller, supra; Winder Bros. v. Sterling, supra. Thus, the county does not waive eny right
under these statutes by entering into a depository contract.
Moreover, in our opinion a county may not enter into a depceitory contract
containing provisions inconsistent with those established by statute. A county has only
that contractual authority conferred by the constitution and statutes. Hill v. Sterrett, 252
S.W.2d 766 (Tex. Civ. App. -Dallas 1952, writ rePd n.r.e.); Galveston, H. & S.A. Ry. Co. v.
Uvalde County, 167 S.W. 2d 305 (Tex. Civ. App. -San Antonio 1942, writ rerd w.o.m.). It
may not contract away its statutory authority. See Gulf Bitulithic Co. v. Nueces County,
297 S.W. 747 (Tex. Civ. App. -San Antonio 1927),=, 11S.W.2d 305 (Tex. Comm’n App.
1928). See also Attorney General Opinions M-974, M-802 (1971); G-3837 (1941) (county
cannot alter term of depository contract fixed by statute).
You next ask whether article 1269j-3, V.T.C.S., permits the withdrawal of funds from
the year-end balances of the county in order to invest them in United States securities
even though the funds may not be surplus funds and may have been collected for the
purpcee of financing county expenditures in the subsequent fiscal year. Article 1269j-3,
P. 114
Honorable Jerry (Nub) Donaldson - Page Three (HW-2241
V.T.C.S., refers to “balances remaining in their accounts at the end of any fiscal year”
“Balance” has been defined to mean the excess funds in an account. Commercial Discount
Co. v. Holland, 289 P. 906 (Cal. App. 1930); Jones v. Marrs, 263 S.W. 570 (Tex. 1924);
Holmes v. Ho:b, 396 P.2d 633 (Wash. 1964). We be!lieve this definition aoolies to article
1269i-3. whicl 1 refers to “balances remaining” in the accounts. (Emphasis added). The
“accounts” referred to are, in our opinion, those records of account required by law to be
kept by public officials for each separate fund as evidence of the stewardship of the
fund - not bank accounts in which monies from many such funds might be collected. -See
V.T.C.S. arts. 1607, 1608, 1609.
In our opinion, article 1269j-3, V.T.C.S., permits the investment of only the monies
remaining as surplus in the separate accounts for the preceding fiscal year. Only such
unexpended year-end balances may be invested under it. Monies collected to finance
public expenditures in the subsequent fiscal year are attributable to accounts for the new
year, not the old one, and may not be withdrawn pursuant to article 1269j-3, V.T.C.S., until
the conclusion of the new fiscal year, when any balances therein remaining would then
become stiject to it. Attorney General Opinion O-5278 (1943). -See Attorney General
Opinions M-75 (1967); V-l182 (1951).
We need not answer your final question, which depends on a conclusion that funds
described in your previous question may be withdrawn at the end of the fiscal year.
Mr. Resweber has submitted the Harris County Depository Pledge Contract and asks
whether Harris County may invest its funds in United States obligations under its terms
and provisions. Harris County may invest its funds in United States obligations as
permitted by the statutes discussed in answer to Representative Donaldson’s questions.
Since those provisions are incorporated into the contract, investment of the funds in
accordance with them will not constitute a breach of contract.
SUMMARY
County governments may withdraw funds from the county
depository to invest them in United States obligations where
expressly permitted to do so by statute. The laws existing at the
time the contract is made become part of it. Thus, violation of a
statute regarding withdrawal of funds constitutes a breach of the
contract, and the county does not waive its right to withdraw funds
pursuant to statute by entering into a depository contract. Article
1269j-3, V.T.C.S., does not authorize a county to withdraw at the
end of a fiscal year and place in federal obligations funds which
were collected for the subsequent fiscal year.
lkrYverY~~
MARK WHITE
Attorney General of Texas
p. 715
Honorable Jerry (Nub) Donaldson - Page Four (MW-224)
JOHN W. FAINTER, JR.
Fiist Assistant Attorney General
Prepared by:
Susan Garrison & Bruce Youngblood
Assistant Attorneys General
APPROVED:
OPINION COMMITTEE
C. Robert Heath, Chairman
Jon Bible
Welter Davis
Susan Garrison
Rick Gilpin
Tom Pollan
Mitch Winnick
Bruce Yamgblood
p. 716
Untitled Texas Attorney General Opinion
Combined Opinion