THE ATTORNEY GENERAL 

OF TEXAS 

March 8, 1989 

Honorable Billy Ray Stubblefield Opinion No. JM-1026 

Williamson County Attorney 

P. 0. BOX 1078 Re: Whether Williamson 

Georgetown, Texas 78627 County may use the interest earned from investment of bond proceeds for 

the construction of its 

courthouse/jail complex to 

fund additional construction on the project 

(RQ-1510) 

bear Mr. Stubblefield: 

You inform us that Williamson County has issued and 

sold $16.5 million in bonds to build a new county courthouse 

and jail complex. The proceeds from the sale of the bonds 

were invested and have earned a sizable amount of interest. 

Some of the interest has been transferred to the interest 

and sinking fund, and some remains in the principal 

construction account. 

The bids for construction of the project received by 

the Williamson County Commissioners Court were all higher 

than expected. The commissioners court would like to 

transfer the interest on the bond proceeds to the principal 

amount so that they can afford the kind of courthouse/jail 

complex that they had envisioned. YOU ask the following 

question: 

Way the interest earned from the investment of Courthouse/Jail complex construction 

bonds proceeds be added to the principal 

amount, in order to provide additional 

construction funds for completion of the 

project? 

You have not submitted additional facts nor have you 

provided us copies of the bond covenants or other documents 

relevant to the bond issuance. Our opinion will answer your 

narrow legal question in the context of the information 

p. 5296 
Honorable Billy Ray Stubblefield - Page 2 (JM-1026) 

before us and will not speculate at length about all other 

circumstances which might suggest a different result. 

The commissioners court of a county has statutory 

authority to issue county bonds to build a county courthouse 

and jail. V.T.C.S. arts. 718; 237013, § 3. See also Tex. 

Const. art. XI, 0 2 (construction of jails, court-houses, 

bridges, and certain other improvements shall be provided 

for by general law): Mitchell Countv . Citv Nat'1 

Paducgb. Kvc, 43 S.W. 880 (Tex. 18z8) 

Bank of 

(legislature has 

authority to grant county power to issue bonds for the 

construction of bridges and a courthouse and jail). The 

statutes do not address the question you ask. You however 

raise the possibility that Attorney General Opinion JM-545 

(1986) prohibits you from adding the interest earned from 

investment of bond proceeds to the principal amount. See 

&&Q Attorney General Opinion JM-530 (1986). 

Attorney General Opinion JM-545 (1986) concerned the 

disposition of interest earned on the invested proceeds of 

road bonds issued by Austin County under article 6702-1, 

V.T.C.S., the County Road and Bridge Act. Section 4.411(b) 

of that act provides that road bonds issued thereunder 

"shall be issued . . , as contemplated and authorized by 

Article III, Section 52, of the Texas Constitution.l* 

Article III, section 52, of the constitution authorizes the 

legislature to empower counties to issue bonds for specified 

purposes, including the construction, operation, and 

maintenance of roads. Attorney General Opinion JM-545 

stated that the "use of public debt in the form of bonds to 

create a fund for investment as an indenendent or exclusive 

undertam is not a purpose sanctioned by article III, 

section 52, of the Texas Constitution." Attorney General 

Opinion JM-545 at 5 (emphasis in original). Austin County 

authorized the sale of three million dollars worth of road 

bonds but had spent less than one million dollars for road 

purposes. &at 4. In the meantime, the costs of some 

county road improvements were paid from the regular county 

budget, instead of being charged against the bond proceeds. 

& The holding of Attorney General Opinion JM-545 was 

based upon a specific and narrow set of facts, which 

indicated that bond proceeds were used for investment as "an 

independent or exclusive undertaking." 

The holding of Attorney General Opinion JM-545 thus 

does not prohibit Williamson County from adding interest 

earned from the investment of courthouse/jail bond proceeds 

to the principal amount, to provide additional construction funds. The common law rule is that interest, as an 

p. 5297 
Honorable Billy Ray Stubblefield - Page 3 (JR-1026) 

accretion to the principal fund earning it, becomes part of 

the principal unless lawfully separated from it. Sellers v. 

!2i%FT% 

403 S.W.2d 242 (Tex. 1972); bawson v. Baker, 

272 (Tex. Civ. APL'. - Austin 1920, 

ref'dj.' See ilsp Attorney General Opinion H-1167 

writ 

(1978) 

(interest on constitutional fund for state college and 

university construction is first applied to retire bonds and 

then to finance additional permanent improvements); Annot. 

143 ALR 1341 (1943) (disposition of interest earned on 

special funds of municipalities). 

As already stated, we find no statute that separates 

the interest from the principal fund. You have not 

submitted the bond covenants to us; therefore, we do not 

consider whether any provision of the bond covenants would 

separate the interest on the bond proceeds from the proceeds 

and place it in the sinking fund, limit expenditures for 

building the courthouse/jail complex to an amount that would 

be exceeded by adding interest to principal, or for any 

other reason require a departure from the common law rule. 

In the absence of a statute, bond covenant, or other 

provision or instrument that otherwise allocates the 

interest earned on bond proceeds, the common law rule 

applies to the interest, and the interest may be added to 

'the principal amount to finance the project for which the 

bonds were issued. 

Attorney General Opinion JM-545 disapproved two earlier 

opinions of this office, stating as follows: 

Attorney General Opinion C-537 (1965) held 

that a school board might deposit interest 

earned by excess school bond proceeds in the 

sinking fund created to retire the indebtedness. To the extent the opinion suggests the 

board possessed discretion to do otherwise, 

it is disapproved. A similar question was 

presented in, Attorney General Opinion R-1174 

(1978), which construed section . . . 120.42) 

of the Education Code to permit the use of 

such interest for other purposes. To that 

extent, it is disapproved, also. 

Attorney General Opinion JM-545 at 7. 

Attorney General Opinions C-537 and R-1174 dealt with 

school district bonds, not county bonds issued under article 

III, section 52, of the Texas Constitution. Thus, the 

constitutional basis of the holding in Attorney General 

P. 5298 
Honorable Billy Ray Stubblefield - Page 4 (JM-1026) 

Opinion JW-545 was not relevant to the two prior opinions, 

and they should have been distinguished, rather than 

disapproved. Their disapproval by Attorney General Opinion 

JW-545 should accordingly be disregarded. 

SUMMARY 

According to the common law rule, 

interest, as an accretion to the .principal 

fund earning it, becomes part of the principal unless lawfully separated from it. 

This rule applies to interest earned on the 

investment of the proceeds of bonds issued 

by Williamson County to build a courthouse/ 

jail complex, and the interest may be added 

to the principal amount and used to finance 

the project for which the bonds were issued 

unless a statute, bond covenant, or other 

provision or instrument prevents this 

allocation. 

Ve J 

JIM MATTOX 

. 

Attorney General of Texas 

WARYKELLER 

First Assistant Attorney General 

mu nCcREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STRARLEY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Susan L. Garrison 

Assistant Attorney General 

p. 5299