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Honorable Alwin E. Pape OpinionNo. W-243 County Attorney Guadalupe County Re : Whether the CommissionersJ Seguin, Texas Court of GuadalupeCounty can sell governmentbonds belonging to thepermanent school fund of said county at a discount and, rel,ated Dear Mr. Pape: questions,

Your request for an cpinion,dated June 28, 1957, propounds the following questions for our consideration:

“1

. Can the Commissioners’Court of Guadalupe County sei~l certain governmentbonds at a discount and other bonds belonging to the Permanent School Furidof Guadalupe County and immediatelypurchase fro:? a bank, as an interrelated transaction, certain bonds of ,the Navarro Rural High School District at a .iiscount of a certain amount so t&t the Coucty Permanent School F’und will not be Ioh-;:-Ted? “2. Does the purchase of ruralhigh school bonds by ti;e PO’L;nt<-

Fermanerlt

School F’und~ come within khepu.?view of Article ‘824, TI” c 311

.>*L?o

. With respect to lands gran.ted the various counties for educationalpurposes. Smntion 6, Article VII, of the Constitution,provides, fr. part, that: “Said landsp and the proceeds thereof, when solid,

shall be held by said counti,es alone as a trust for the benefit of public schools therein; said proceeds to be invested in bonds of theUnited States, the State of Texas, or counties in said State, or in such other securities,and under such restrictionsas may be prescribed by law; and the counties shall be responsible for all investments; the in-terest thereon,and other revenue, except the principal shall be available fund.”-- .i.

HonorableAlwin E. Pape,page 2 (W-243)

Article 

### 2824of the Revised Civil Statutes,authorizes the investment of such proceeds in other bonds not theretofore authorized. The additional authorizationunder thisArticle includes bonds of independent or common school districts.

The Commissioners'Courtholds money belonging to the county permanent school fund in trust for public schools,arid cannot abuse this discreti.on. Tex. 

### 51.93 S.W. 

### 419 (1906). Delta Countyv. Blackburn, 100 The authority of the commissioners' court to sell investment securitiesheld by the Permanent School Fund of the county at a price eaual to or greater than the amount paid for the same has been recognized, Attorney General's Opinion 

### O-5944 (1944). Rowever, it was held by Attorney General's Opinion

### v-1089 (1950)that the Commissioners'Court couldnot cash Governmentbond school fund investmentsbefore maturity and reinvest in independent schooldistrict bonds having a lower interest rate. We quote from the foregoing opinion as follows:

"Under the facts submitted, the Commissioners' Courtwould sellUnited States Government bonds belonging to the permanent school fund of the county at a discount, thereby diminishing the permanent school fund. It is our opinion that such a procedure would be in violation of Section 

### 6 of Article'VII of the Constitution of Texas. "If, on the other hand the governmentbonds in question are sold at not less thanpar9 the Commissioners' Courtwould have authorityunder Article 

### 28.24 to invest the proceeds in bonds of independent school districts," (Emphasisadded). Attorney General's Opinion

### O-5944 (1944)recognized the right of the Commissioners'Court +o sell bonds at 

### 85$ of par value which were purchased at 

### 629%of par value. But the opinion only recognized the authority of the Court to sell bonds belonging to the Permanent School Fund "at a price 'equal to or greater than the amount paid for the same."

Since the Constitutionmakes the Commissioners'Ccrurts trusteesof the Permanent School Fund of a county for the benefit of public schools, it was held in Delta Countvv. Blackburn, m, that the Commissioners1Court could not reduce the interest rate on a note from seven percent to threepercent.

The proposed transaction contemplatesa sale of government bonds belonging to the Permanent School Fund of Guadalupe County at a discount. It further contemplates,as aHonorable Alwln E. Pape, page 3 

### (W-2431

second step in the over-all transaction the purchase of bonds issued by theNavarro Rural High School'District. We do not inquire into the ability of the Commissioners'Court to purchase bonds at such a rate of discount as to compensate for the loss incurred in the sale of the governmentbonds. Even though the proposed sale and purchase be interrelated from the standpoint of time, or otherwise,we think it clear and fnescapable that one of the basic features of theproposal is tie saie of governmentbonds belonging to the Permanent School Fund at a discount. This the Commissioners'Court is not authorized to do even though by subsequent investments,wisely Rand prudently made, it might be able to recoup the loss.

Your first question is accordingly answered in the negative. It is thereforeunnecessary thatxe answer the second question.
SUMMARY

The Commissioners9Court of Guadalupe County cannot sell certain government,and other bonds, belonging to the Permanent School Fund of said county for less than the purchase price thereof, and immediatelypurchase, as an interrelated transaction, certain bonds of the Navarro Rural High School District at a discount.
Yours very truly,
WILL WILSON Attorney General of Texas

LP:pf:wb
APPROVED:
OPINION COMMITTEE H. Grady Chandler, Chairman C. K. Richards Elbert Morrow Howard Mays
REVIEWED FOR THE ATTORNEY GENERAL
BY: Geo. P. Blackburn Leonard Passmore Assistant