# The Attorney G.eneraI of Texas

December 12, 1979 MARK WHITE Attorney General
Honorable Joe Resweber Harris County Attorney 1001Preston, 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 hasbeen paid. Dear Mr.Resweber: Your request for an opjnion poses the following question: After the payment ofthe 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? Youalso wishtoknow howthe surplus maybe 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 1and 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, asamended, asarticle 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 1913,33rdLeg., 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

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discretion ofthe commissioners court. Chapter 3ofTitle 22contains anexpress provision inarticle 752a, V.T.C.S., which authorizes surplus interest and sinking funds from Chapter 3road bonds to be used for further road work within the discretion ofthe commissioners court. There isno 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 asto 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 inVolume 15,S43.134asfollows:

A sinking fund should be applied to the payment of the principal and interest onthe bonds which it wascreated 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 ofoutstanding bonds may be used for the construction ofa public improvement

... It is settled law that moneys inasinking fund may beused for noother purpose than the one for which it was created. Bexar County Hospital District v. Crosby, 327S.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 ofTexas JOHN W.FAINTER, JR. First Assistant Attorney General

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TEDL.HARTLEY Executive Assistant Attorney Gene@ Prepared by D.Ladd Patti110 Assistant Attorney, General APPROVED: OPINION COMMITTEE C.Robert Heath, Chairman David B.Brooks BobGammage Susan Garrison Rick Gilpin D.Ladd Patti110 William GReid Bruce Youngblood

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