# The Attorney General of Texas

August 21, 1980

MARK WHITE Attorney General Honorable Jerry (Nub)Donaldson House ofRepresentatives Capitol Building Austin, Texas Opinion No. MW-224

Re: Authority of a county to invest in obligations issued by the United States

Dear Representative Donaldson:

You ask whether county governments and subdivisions thereof may withdraw funds from county depository banks and invest them in debt instruments of the federal government. Articles 2544 through 2558a, V.T.C.S., provide for the selection and utilization of a county depository. Article 2549, V.T.C.S., provides that the county treasurer shall transfer to the depository all funds belonging to the county and to any district or other municipal subdivision thereof not selecting its own depceitory. The tax collector is to deposit all taxes collected by him in the depository, and all money held byany district, county or precinct officer in the county isto be governed bythis law. See Attorney General Opinion H-1185(1978).

There are certain specific statutes which permit county funds to be placed in debt instruments of the federal government. The county may invest sinking funds accumulated for the redemption and payment of its outstanding bonds in federal government securities. V.T.C.S. arts. 779, 836. However, the proceeds from the sale of the bonds may not be so invested. See Attorney General Opinion V-1182(1951). Articles 708b and 708b-1, m.C.S., permitted the proceeds of bonds issued and sold prior to their passage to be invested infederal securities provided the political subdivision
was unable to obtain labor and materials to carry out the purpose for which the bands were issued. See Attorney General Opinions O-7393, O-7267 (1946). These statutes have present application. Finally, article 1269j-3, V.T.C.S., provides asfollows:

All political subdivlsrons of the State of Texas which have balances remaining in their accounts at the end ofany fiscal year may invest suchbalances in Defense Bonds or other obligations of the United States ofAmerica; provided, however, that when such funds are needed the obligations ofthe United States in which such balances are invested shall be sold or redeemed and the proceeds of said obligations shall be deposited in the accounts from which they were originally drawn.

P. 713Honorable Jerry (Nub)Donaldson - Page Two (MW-224)

You ask whether acounty governing body has authority to withdraw funds from the depository and invest them inUnited States obligations inthe absence ofexpress statutory authority to doso. Since article 2549, V.T.C.S., provides that all money isto beplaced in the county depository, we believe aspecific statute must provide anexception inorder for the county to place funds in federal debt instruments. Such exceptions are provided by articles 779, 836,and 1269j-3,V.T.C.S.

It is suggested that article 4413(34c), V.T.C.S., authorizes a county to invest its funds in United States obligations. However, this statute applies only to funds which the political subdivision has legal authority to invest. V.T.C.S. art. 4413(34c), 5l(1). Placing funds in adepository is not an investment ofthose funds. Lawson v.Baker, 220S.W.260 (Tex. Civ. App. -Austin 1920,writ ref’d). Thus article 4413(34c) does not authorize a county to invest funds which other statutes require to beplaced inthe county depository. See Attorney General Opinion H-1013(1977).

- You also ask whether the withdrawal of funds from a county depository for the purpose ofinvesting them inUnited States securities other than as specifically permitted by statute wouldconstitute abreach ofthe depository contract entered into by the county and its depository bank. The laws existing at the time the contract is made become part of it. Langever v. Miller, 76S.W.2d 1025(Tex. 1934);Winder Bros. v.Sterling, 12S.W.2d 127(Tex. 1929). Webelieve the statutes requiring all county funds, with certain specific exceptions, to be placed in the county depository become part of the county’s contract with the depository. Thus, if the county were to withdraw funds from the depository in order to invest them in United States securities other than as authorized by statute, it would breach its contract with the depository.

Younext ask whether acounty relinquishes any statutory right to invest its funds in United States securities by agreeing to a contract term that county funds are to be deposited with the depceitory. Inour opinion, statutes which permit the county to invest certain funds in United States securities become part of the contract. See,Langever v. Miller, supra; Winder Bros. v. Sterling, supra. Thus, the county does not waive eny right under these statutes byentering into adepository contract.
Moreover, in our opinion a county may not enter into a depceitory contract containing provisions inconsistent with those established by statute. A county has only that contractual authority conferred bythe constitution and statutes. Hill v.Sterrett, 252 S.W.2d766 (Tex. Civ. App.-Dallas 1952,writ rePd n.r.e.); Galveston, H.&S.A.Ry. Co. v. Uvalde County, 167S.W.2d305 (Tex. Civ. App.-San Antonio 1942,writ rerd w.o.m.). It may not contract away its statutory authority. See Gulf Bitulithic Co. v.Nueces County, 297S.W.747 (Tex. Civ. App.-San Antonio 1927),=, 11S.W.2d 305 (Tex. Comm’n App. 1928). See also Attorney General Opinions M-974, M-802 (1971);G-3837 (1941)(county cannot alter term ofdepository contract fixed bystatute).

Younext ask whether article 1269j-3,V.T.C.S., permits the withdrawal offunds from the year-end balances of the county in order to invest them in United States securities
even though the funds may not be surplus funds and may have been collected for the purpcee of financing county expenditures in the subsequent fiscal year. Article 1269j-3,

P. 114Honorable Jerry (Nub)Donaldson - Page Three (HW-2241

V.T.C.S., refers to “balances remaining in their accounts at the end of any fiscal year” “Balance” has been defined to mean the excess funds inan account. Commercial Discount Co. v. Holland, 289 P. 906 (Cal. App. 1930);Jones v. Marrs, 263 S.W. 570 (Tex. 1924); Holmes v. Ho:

b, 396P.2d 633 (Wash. 1964). Webe!lieve this definition aoolies to article 1269i-3. whicl1refers to “balances remaining” in the accounts. (Emphasis added). The

“accounts” referred to are, inour opinion, those records of account required bylaw to be kept by public officials for each separate fund as evidence of the stewardship of the fund- not bank accounts in which monies from many such funds might becollected. See V.T.C.S. arts. 1607,1608,1609. -

In our opinion, article 1269j-3, V.T.C.S., permits the investment of only the monies remaining as surplus in the separate accounts for the preceding fiscal year. Only such unexpended year-end balances may be invested under it. Monies collected to finance public expenditures in the subsequent fiscal year are attributable to accounts for the new year, not the oldone, and maynot be withdrawn pursuant to article 1269j-3,V.T.C.S., until the conclusion of the new fiscal year, when any balances therein remaining would then become stiject to it. Attorney General Opinion O-5278 (1943). See Attorney General Opinions M-75(1967);V-l182(1951). -

Weneed not answer your final question, which depends on a conclusion that funds described inyour previous question maybe withdrawn at the end ofthe fiscal year.
Mr.Resweber has submitted the Harris County Depository Pledge Contract and asks whether Harris County may invest its funds in United States obligations under its terms and provisions. Harris County may invest its funds in United States obligations as permitted by the statutes discussed in answer to Representative Donaldson’s questions. Since those provisions are incorporated into the contract, investment of the funds in accordance with them willnot constitute abreach ofcontract.

SUMMARY
County governments may withdraw funds from the county depository to invest them in United States obligations where expressly permitted to do so by statute. The laws existing at the time the contract is made become part ofit. Thus, violation of a statute regarding withdrawal of funds constitutes a breach of the contract, and the county doesnot waive its right to withdraw funds pursuant to statute byentering into adepository contract. Article 1269j-3, V.T.C.S., does not authorize a county to withdraw at the end of a fiscal year and place in federal obligations funds which
were collected for the subsequent fiscal year.

lkrYverY~~

MARK WHITE Attorney General ofTexas

p. 715Honorable Jerry (Nub)Donaldson - Page Four (MW-224)

JOHN W.FAINTER, JR. Fiist Assistant Attorney General Prepared by:

Susan Garrison &Bruce Youngblood Assistant Attorneys General

APPROVED: OPINION COMMITTEE

C.Robert Heath, Chairman Jon Bible Welter Davis Susan Garrison Rick Gilpin TomPollan Mitch Winnick Bruce Yamgblood

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