The Attorney G.eneraI of Texas 

December 12, 1979 

MARK WHITE 

Attorney General 

Honorable Joe Resweber 

Harris County Attorney 

1001 Preston, Suite 634 

Houston, Texas 77002 

Opinion No. Mw-97 

Re: Disposition of surpluses in 

interest and sinking fund for Harris 

County Hospital Bonds, Series 1950, 

after all principal of and interest 

thereon has been paid. 

Dear Mr. Resweber: 

Your request for an opjnion poses the following question: 

After the payment of the principal of, and all interest 

on, the entire issue of $1,500,000 Harris County 

Hospital Bonds, Series 1950, can the surplus in the 

Interest and Sinking Fund created for the payment of, 

and interest on, said bond issue, be expended for 

other purposes? 

You also wish to know how the surplus may be used. 

The Harris County Hospital District was created pursuant to article 

IX, section 4, of the Texas Constitution, and article 4494n, V.T.C.S. The 

subject bonds were issued pursuant to Chapters 1 and 2 of Title 22 and 

Chapter 5 of Title 71, Revised Civil Statutes of Texas, 1925, as amended. 

Chapter 5 of Title71 included the following provision in section 1 (now 

codified, as amended, as article 4478, V.T.C.S.): 

To isme county bonds to provide funds for the 

establishing, enlarging and equipping of said hospital 

and for all other necessary permanent tmprovements 

in connectton therewith. 

Acts 1913, 33rd Leg., ch. 39, at 72. (Emphasis added). 

Chapter 2 of Title 22 in article 723, V.T.C.S., authorizes the use of 

surplus interest and sinking funds from courthouse, jail, road and bridge 

bonds for maintenance and repair of those improvements, within the 

p. 300 
Honorable Joe Resweber - Page Two (NW-97 1 

discretion of the commissioners court. Chapter 3 of Title 22 contains an express provision 

in article 752a, V.T.C.S., which authorizes surplus interest and sinking funds from Chapter 

3 road bonds to be used for further road work within the discretion of the commissioners 

court. There is no comparable statutory authority for disposition of surplus interest and 

sinking funds in Chapter 1 or 2 of Title 22 which would appear to be applicable. 

Furthermore, it appears that the Texas courts have not written as to this issue. 

The general rule appears to be that surplus interest and sinking funds may be 

expended for the same “public improvements” for which the bonds were originally issued. 

McQuillan, Municipal Corporations summarizes in Volume 15, S 43.134 as follows: 

A sinking fund should be applied to the payment of the principal 

and interest on the bonds which it was created to service, and even 

though the bonds have been declared void, cannot be diverted to 

other purposes. Thus, it is an unlawful diversion to transfer a 

sinking fund to the general fund . . . It hes been held that an 

unallocated surplus remaining after the payment of principal and 

interest of outstanding bonds may be used for the construction of a 

public improvement . . . 

It is settled law that moneys in a sinking fund may be used for no other purpose than 

the one for which it was created. Bexar County Hospital District v. Crosby, 327 S.W.2d 

445 (Tex. 1959). See Attorney General Opinion H-858 (1975). 

- 

Therefore, although the authorizing statutes for this isare of bon& are silent to the 

disposition of surplus interest and sinking fund balances, the prevalent judicial and 

legislative reasoning appears to be that such surplus balances may only be used for the 

purposes for which the bonds were originally issued 

SUMMARY 

The Interest and Redemption fund balance for the retired 

$1,500,000 Harris County Hospital Bonds, Series 1950, may be 

expended by the district for any lawful purpose relating to the 

establishing, enlarging, and equippirg of said hospital, and for all 

other necessary permanent improvements 

vwumlYwg 

MARK WHITE 

Attorney General of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

p. 301 
I 

Honorable Joe Resweber - Page Three (NW-97) 

TED L. HARTLEY 

Executive Assistant Attorney Gene@ 

Prepared by D. Ladd Patti110 

Assistant Attorney, General 

APPROVED: 

OPINION COMMITTEE 

C. Robert Heath, Chairman 

David B. Brooks 

Bob Gammage 

Susan Garrison 

Rick Gilpin 

D. Ladd Patti110 

William G Reid 

Bruce Youngblood 

p. 302