THE ATMWIZNEY GENERAL
OFmXAS
Honorable Jesse James Opinion No.,M-354
State Treasurer
State Capitol Building Re: Whether preliminary loan
Austin, Texas IS711 notes issued by the Urban
Renewal Agency of the City
of Austin, guaranteed by
the Federal Government, and
conforming to the copy of
one of said notes which is
submitted with your opinion
request, are authorized
collateral to secure the
deposit of State funds.
Dear Mr. James:
In connection with your request for an opinion on the
above captioned subject, you have submitted a copy of a pre-
liminary loan note of the Urban Renewal Agency of the City of
Austin. The copy of the note submitted is a copy of one note
in a series and other notes in the series are identical to
the copy save and except for serial numbers. The notes conform-
ing to the copy show on their face that they are secured by an
agreement between the Urban Renewal Agency of the City of Austin
and the Federal Government and that under the agreement, the
Urban Renewal Agency of the City of Austin has agreed to borrow
from the Federal Government and the Federal Government has
agreed to lend to the Urban Renewal Agency of the City of Austin,
prior to the maturity of such notes, moneys in an amount
which (together with any other moneys irrevocably committed
to the payment of interest on such notes) will suffice to pay
the principal of such notes with interest to maturity which
moneys under the terms of said agreement are required to be
used for the ~purpose of paying the principal of and the interest
on such notes at their maturity. A "payment agreement" bearing
the duly authorized facsimile signature of the secretary of
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Honorable Jesse James, page 2 (M-354 )
Housing and Urban Development appears on the back of said notes,
said "payment agreement" being identical to the "payment
agreement" which we approved as a guarantee for the deposit of
State funds in Attorney General's Opinion No. M-197 (1968) and
reading as follows:
"PAYMENT AGREEMENT
"Pursuant to section 102(c) of the Housing
Act of 1949, as amended (42 U.S.C. 1452(c)),
the United States hereby unconditionally
agrees that on the Maturity Date of the within
Preliminary Loan Note it will pay or cause to
be paid to the bearer thereof the principal
of and interest thereon, upon the presentation
and surrender of such Note to the Paying Agent
designated therein, and the full faith and credit
of the United States is pledged to such payment.
Under section 102(c) of the Act, this Agree-
ment shall be construed separate and apart from
the loan contract referred to in the within
Note and shall be incontestable in the hands of
a bearer.
"IN WITNESS WHEREOF, this Agreement has been
executed on behalf of the United States by
the duly authorized facsimile signature of
the Secretary of Housing and Urban Develop-
ment, as of the Date of Issue of the within
Note."
Section 15(e) of Article 1269 L-3, Vernon's Civil Statutes,
(the Urban Renewal Law) provides, in part, that certain regulated
investors:
8, ...may
legally invest any sinking funds,
moneys, or other funds belonging to them or
within their control in any bonds or other
obligations issued by an urban renewal agency
pursuant to this Act; provided that such bonds
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Honorable Jesse James, page 3 (M-354 )
and other obligations shall be secured by an
agreement between the issuer and the Federal
Government in which the issuer agrees to borrow
from the Federal Government and the Federal
Government agrees to lend to the issuer, prior to
the maturity of such bonds or .other obligations,
moneys in an amount which (together with any
other moneys irrevocably committed to the payment
of interest on such bonds or other obligations)
will suffice to pay the principal of such bonds or
other obligations with interest to maturity thereon,
which moneys under the terms of said agreement are
required to be used for the purpose of paying the
principal of and the interest on such bonds or other
obligations at their maturity. Such bonds and other
obligations shall be authorized security for all
public deposits..." (Emphasis added.)
We answer your question in the affirmative pursuant to the
express legislative authorization above quoted. Preliminary
loan notes issued by the Urban Renewal Agency of the City of
Austin, guaranteed by the Federal Government, and conforming
to the copy of one of said notes which has been submitted with
your opinion request, are authorized collateral to secure the
deposit of State funds.
SUMMARY
Preliminary loan notes issued by the Urban
Renewal Agency of the City of Austin, guaran-
teed by the Federal Government, and conform-
ing to the copy of one of said notes which
has been submitted with your opinion request,
are authorized collateral to secure the deposit
of State funds.
very truly,
zL&$a
ORD C. MARTIN
A
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Honorable Jesse James, page 4 (M-354)
PREPARED BY:
Larry Craddock
Assistant Attorney General
APPROVED:
Opinion Committee
Kerns Taylor, Chairman
George Kelton, Vice Chairman
Roy W. Mouer
Ralph Rash
Malcolm Quick
Bill Allen
W. V. GEPPERT
Staff Legal Assistant
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