THEA~TORNEY GENERAL OF TEXAS
GERALD C.MANN AUSTINU.'~%XAR
A1TORNmcYGWBHAL

Honorable V. J. Campbell CountyAttorney, Garza,County Post, Texas
Dear Sir: OpinionNo. O-5638 Re: Whether a fee for the refunding of Courthouse and Jail outstandingbonds can be paid from the Courthouseand Jail Sinking Fund, under the facts set forth,
Your letter of September 24, 1943, requesting the opinion of this department on the question stated therein, reads as fo,llows:

"Are the County Commissioners of a named County authorized to pay from the Courthouseand Jail SinkingFund, a fee in the sum or amount of $3,267.00 for refunding the Courthouseand Jail outstandingbonds, there is outstandingbonds in the sum of $66,000and the fee as statedwill be in the amount of $49.50per thousand. The qucstion is, shall that fee be diverted from ,the Courthouseand Jail Sinking Fund to the fee exacted for the refunding of these bonds. "The County Judge and Commissionersunderstand that the matter is optional,as was declared by the Supreme Court of Texas inmandamus proceedings institutedby Cochran County, Texas." The contract between the county commissionersandH. L. Shaffer and Company, a certified copy of which accompanies your Inquiry, reads as follows:

"HONORABLECO. Judge and Commissioners' Court of Garza County, Texas. "GENTLEMGN: "Referringto your $82,000 CourtHouse and Jail bond issuedated Feb. 15, 1927, ofwhich .thereare ou,tstanding $66,000,bearing 55s interest,we make you the followingproposition for re-Honorable V. J.,Cam@bePl,page 2 0-5638

funding of the now outstandingbonds Into refunding bonds bearing 3% interestand maturing as follows:
"Sameas the now outstandingbonds.
"Weagree to use our best efforts in assembling the old bonds for exchange for new refunding bonds on a basis of par for par, and we will pay all the expenses Incurredby us in the refunding of the bonds. We will also pay for the attorney's opinion and pay for the printing of the new bonds. For and In consideration of our servicesand expenses In this connection, It Is understood and agreed that you will pay us at the rate of $49.50 per $1,000 of bonds exchangedas same are exchanged. In eventno bonds are exchangedyou will owe us nothing.
"Itbeing further understood that you will cooperatewith us to the end that the refunding of these bonds Is completedwithout undue unnecessarydelay. "The County to have the privilege of paying off $10,000 of the bonds out of sinking fundmoney. "Respectfullysubmitted,
"H.L. Shaffer & Company 'ByW. L. Shaffer "Theabove proposition is hereby accented bv order of the July, 1943." Article vides: Com&ssioners Court, this lst-day o?

839,Vernon's Annotated Civil Statutes,pro-

"No city or county treasurer shall honor any draft upon the interest and sinking fund provided for any of the bonds of such city or county, nor pay out nor divert any of the same, except for the purpose of paging the Interest on suchbonds or redeeming the same, or for investment in such securitiesas may be provided by law." Replying to your question, as to the authority of the commissioners' court to pay the fees or commissions called for in the contract loutof the SinkingFund of the Courthouse and Jail Bonds, we call your attention to the case of Elser v.Honorable V. Jo.Campbell,page 3 0-5638

City of Fort Worth, 27 S.W. 739-741, in which the Court held that the test of the legality of a particularuse of the sinking fund iswhether or not the fund is being used for the purEgEl%z,e~y accomplishing that result (the final reand is not being diverted from the main object of its creation. In that case the Court held that the drawing of the draft to buy securitiesas an investmentof the sinking fundwas a draft drawn to redeem the bonds, inasmuch as Itwas a step toward the final redemption of the bonds.

In a recent case by the Kentucky Court ofAppeals, The Governor v. Wolfe County 163 S.W. (2d) 485, the Court holds that the county "could'legallgcontractwith some agency to bring together the bondholder3 and persuade them to exchange their 5% bonds for others bearing a less rate, and running over a longerperiod, and to pay the agency to prepare and file application for approval of a refunding plan; work out plans, to prepare and deliver all legal papers necessary for the consummation of the plans, ,thefees for the services to be paid from the Road and Bridge Sinking Fund, and not from the proceeds of sale, since the plan provides for no sale."

In our OpinionNo. O-3320, a copy of which is enclosed herewith,we held that the Board of County andDistrict Road Indebtednesshas ample authority to pay a premium for eligibleroad bonds and to use the sinking fund of counties deposited with the Board to retire suchbonds, in payment of suchpremiums. In OpinionNo. O-5919, a copy of which opinion is enclosedherewith, this department held that the commissioners' court had authority to enter into a contractwith a certain company in connectionwith the proposed plan of refunding courthousebond3 and to pay the fees or commissions called for therein out of the sirking fund of the courthouse bonds.
In the contract submittedby you, it appears that the interestwill be reduced from 5$$ to about 3.45%. This figure (3.45) include3 the 3% interest stated in the contract and the fees to 'bepaid for the refunding of the now outstandingbonds. It is a step toward the final redemption of these bonds, if the county can, by paying a certain amount now, save a larger amount in the future interest costs on these bonds. Under the proposed plan of refunding these 5% bonds by the issuance of refunding bonds bearing 3% interest, the countywill reduce its obligation. Therefore, it is our opinion that the use of the SinkingFund for accomplishing this result isnot a diversion of the main object for which the fund was created but iswholly consistent therewith. In otherwords, the use of these funds for this purpose is inkeeping with the purpose for which the fund was created, namely, the ultimate re-HonorableV. J. Campbell,page 4 O-5638

demption of the bonds. Your question is, therefore,answered in the affirmative.
Yours very truly ATTORNEY GENERAL OF TEXAS

By sAArdel1Williams ArdellWilliams Assistant
AW:EP:wc Encls.

APPROVED OCT 16, 1943 s/GeraldC. Mann ATTORNEY GENERAL OF TEXAS Approved Opinion CommitteeBy a/GPB Chairman