THE ATMWIZNEY GENERAL 

OFmXAS 

Honorable Jesse James 

State Treasurer 

State Capitol Building 

Austin, Texas IS711 

Dear Mr. James: 

Opinion No.,M-354 

Re: Whether 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 is 

submitted with your opinion 

request, are authorized 

collateral to secure the 

deposit of State funds. 

In connection with your request for an opinion on the 

above captioned subject, you have submitted a copy of a preliminary 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 conforming 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 Agreement 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 Development, 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, 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. 

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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