### 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 issuedby theUrban Renewal Agency of the City ofAustin, 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 apreliminary loan note of theUrban Renewal Agency of the City of Austin. The copy of the note submitted is a copy of one note ina 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 ofAustin and the Federal Government and that under the agreement, the Urban Renewal Agency of the City ofAustin has agreed toborrow from the Federal Government and the Federal Government has agreed to lend to theUrban Renewal Agency of the City ofAustin, prior to thematurity of such notes, moneys in an amount which (togetherwith any other moneys irrevocably committed to the payment of interest on such notes) will suffice to pay the principal of such notes with interest tomaturity which moneys under the terms of said agreement are required tobe used for the~purposeofpaying 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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Housing and Urban Development appears on theback of said notes, said "payment agreement" being identical to the "payment agreement" which we approved as aguarantee for the deposit of State funds inAttorney General's Opinion No. M-197 (1968)and reading as follows:

"PAYMENTAGREEMENT

"Pursuant to section 102(c) of the Housing Act of 1949, as amended (42U.S.C. 1452(c)), the United States hereby unconditionally agrees that on theMaturity Date of thewithin Preliminary Loan Note itwill pay or cause to be paid to thebearer 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 ispledged to such payment. Under section 102(c) of theAct, thisAgreement shall be construed separate and apart from the loan contract referred to inthewithin Note and shall be incontestable in thehands of abearer.

"INWITNESS WHEREOF, thisAgreement has been executed onbehalf 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 thewithin Note."
Section 15(e) ofArticle 1269 L-3, Vernon's Civil Statutes, (theUrban Renewal Law)provides, inpart, that certain regulated investors: 8,

...may legally invest any sinking funds,

moneys, or other fundsbelonging to them or within their control inanybonds or other obligations issuedby an urban renewal agency pursuant to thisAct; provided that suchbonds

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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 inwhich the issuer agrees toborrow from theFederal Government and the Federal Government agrees to lend to the issuer, prior to thematurity of such bonds or .otherobligations, moneys inan amount which (togetherwith any other moneys irrevocably committed to the payment of interest on suchbonds or other obligations) will suffice to pay the principal of suchbonds or other obligations with interest tomaturity thereon, which moneys under the terms of said agreement are required tobe used for the purpose ofpaying the principal of and the interest on suchbonds or other obligations at theirmaturity. Such bonds and other obligations shallbe 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 theFederal 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 ofAustin, guaranteedby 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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PREPARED BY: Larry Craddock Assistant Attorney General
APPROVED: Opinion Committee

Kerns Taylor, Chairman George Kelton, Vice Chairman Roy W. Mouer Ralph Rash Malcolm Quick BillAllen

W.V. GEPPERT Staff Legal Assistant

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