Honorable Jesse James Opinion No. C-664
Treasurer of the State of Texas
State Capitol
Austin, Texas Re: Whether bonds Issued
by Texas junior
college districts
may be accepted by
the State Depository
Board as collateral
security for State
Dear Mr. James: deposits.
You have requested an opinion as to whether bonds
Issued by Texas junior college districts may be accepted
by the State Depository Board as collateral security for
State deposits.
There must be specific statutory authorizationfor
any bond to be eligible as security for state deposits,
either by virtue of the general statute pertaining to
the subject or by virtue of specific provision In the
statute authorizing the Issuance of ? certain type of bond.
Article 2529, Vernon's Civil Statutes, Is the general
statute setting out classes of securities which may be
pledged as security for state deposits. This statute, In
so far as pertinent reads as follows:
"ART. 2529. 2423 QUALIFICATIONSOF DEPOSITORIES
"AS soon as practicable after the Board shall
have passed upon said applications, the Treasurer
shall notify all banks whose applications have been
accepted, of their designation as State Depositories
of State funds. The Treasurer shall require each
bank so designated to qualify as a State Depository
on or before the 25th day of November nert, by (a)
depositing a depository bond signed by some surety
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Honorable Jesse James, page 2 (c-664)
company authorized to do business In Texas, In an
amount equal to not less than double the amount
of State funds allotted, such bond to be payable
to the Treasurer and to be In such form as may be
prescribed by the Board and subject to the approval
of such Board; or (b) by pledging with the Treasurer
any securitiesof the following kinds: bonds and
certlflcatesand other evidences of Indebtedness
of the United States, and all other bonds which
are guaranteed as to both principal and Interest
by the United States; bonds of this State; bonds
and other obligations issued by the Universityof
Texas; warrants drawn on the State Treasury against
the general revenue of the State; bonds Issued by
the Federal Farm Mortgage Corporation,provided
both principal and Interest of said bonds are
guaranteed by the United States government; shares
or share accounts of any building and loan assocla-
tion organized under the laws of this State, pro-
vided the payment of such shares or share accounts
is insured by the Federal Savings and Loan In-
surance Corporation,and In the shares or share
accounts of any Federal Savings and Loan Association
domiciled In this State, provided the payment
of such shares or share accounts is Insured by
the Federal Savings and Loan Insurance Corporation;
Home Owners Loan Corporation Bonds, provided both
principal and interest of said bonds are guaranteed
by the United States Government, and such securities
shall be accepted b the Board in an amount not less
than five per cent f5$) greater than the amount
of State funds which they secure; provided, that
Texas Relief Bonds may be accepted at face value
and without margin for the amount of State funds
allotted, provided such State Relief Bonds have all
unmatured coupons attached; bonds of counties located
In Texas; road districts of counties In Texas; ln-
dependent and common school districts located In
Texas; tax bonds issued by municipal corporations
in Texas; and bonds lssued by a munlclpal corporation
where the payment of such bonds Is secured by a pledge
of the net revenues of a utility system or systems
(limited to those utility systems now authorized
to be encumberedunder the provisions of Articles
IllI-III8a,Revised Civil Statutes, as amended, ln-
cluslve)..."
Honorable Jesse James, page 3 (C-664)
The revenue bonds of junior college districts are
clearly not ellglble under this statute since they do not
fall within any of the enumerated classes.
If the tax bonds of junior college districts are to
be'conslderedellglbre under this statute, It must be
because they belong to the class "Issued by munlclpal
corporations,"since they do not fall within any other
class enumerated by the statute,
The Attorney General has on various occasions held
that, as used In Article 2529, the term "munlclpalcorpo-
rations" Is used in its narrower and more specific sense
as referring to cltles, towns and villages only. In this
regard see Attorney Qeneral's Opinions Nos. O-152 (1939)
and O-2182 (1940), copies of which are attached hereto.
This conclusion Is further strengthenedby the fact
that when Article 25s was amended by the LegislatureIn
1955 to Include certain revenue bonds of "munlclpalcorpo-
rations" they were limited to "those utility systems now
authorized to be encumberedunder the provisions of Articles
llll-lllaa,Revised Civil Statutes, as amended, Inclusive."
Articles llll-lllaa, Inclusive apply only to cities, towns
and villages, thus makiq clear that the Leglsl;turedid
in fact Intend the term municipal corporations be so
limited wherever used In Article 2529.
Thus we conclude that neither tax nor revenue bonds
of Texas junior college districts are eligible to be
pledged as security for State deposits under Article 2529.
However, the Legislature has also made certain
additional securities,not Included In Article 2529,
eligible by specificallyso providing In the statutes
authorizingIssuance of the bonds.
A review of the statutes authorlzlng junior college
districts to issue tax bonds shows that In no case Is any
provisionmade for such tax bonds to be eligible as security
for state deposits.
In reviewing the statutes which authorize junior
college districts to issue revenue bonds we find, on the
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Honorable Jesse James, page 4 (c-664)
other hand, that such bonds shall be eligible as
security for state deposits. Article 2815 r-l, Vernon's
Civil Statutes, in Section 6a, and Article 2815 r-2,
Vernon's Civil Statutes, In Section 7, both provide In
part as follows:
II
...Such bonds...shall be eligible to secure
the deposit of any and all public funds of the
State of Texas..., and such bonds and notes shall
be lawful and sufficient security for said de-
posits to the extent of the principal amount
thereof, or their value on the market, which ever
Is the lesser, when accompanied by all unmatured
coupons appertenant thereto."
We therefore conclude that tax bonds of Texas junior
college districts are not eligible as collateralsecurity
for state deposits, but that 'revenuebonds of such junior
college districts are eligible when they.are Issued under
authority of Articles 2815 r-l and 2815 r-2, to the extent
provided therein.
SUMMARY
Tax bonds of Texas junior college districts
are not eligible to secure deposits of state funds.
Revenue bonds of Texas junior colle e districts,
issued under authority of Article 2%15 r-l or
Article 2815 r-2, are eligible as security to the
extent provided therein.
Respectfully submitted,
WAGGONER CARR
Attorney General of Texas
JMS:vg
Honorable Jesse James, page 5 (C-664)
APPROVED
OPINION COMMITTEE
w. 0. Shultz, Chairman
John Fainter
Rog:Johnson
John Banks
Ralph Rash
APPRO~~RTfiEA~~YG~ERAL
Bg: T. B. Wright