MARK WHITE Attorney General 

# The Attorney General ofTexas
September 23, 1980
Honorable Harvey Davis Executive Director Opinion No. MW-246
Texas Department ofWater Resources Re: Disposition of bond 1700N.Congress Avenue from sale ofTexas Water Austin, Texas ment Board bonds.
Dear Mr.Davis: proceeds Develop

You have requested our opinion inanswer to two questions relating to appropriate accounting for proceeds from various transactions accruing to the Department ofWater Resources. Your first question is:

1. How should the Texas Water Development Board account for the bond proceeds and related bond sale expenses when it sells Texas Water Development Bonds under the provisions of Article HI, SS49-c, 49-d and 49-d-l of the Texas Constitution and Sections 17.072(b), 17.075and 17.077 ofthe Texas Water Code?
You cite the disparity in language between article III, section 49-c of the Texas Constitution, where “all moneys received from the sale of State bonds” are required to be depceited in the Texas Water Development Fund, and the other relevant provisions (article III, 5549-d, 49-d-l of the Texas Constitution and SS17.072(b), 17.075 and 17.077 of the Texas Code), where

“all proceeds” are required to be deposited inthe Fund. Our reading ofthe constitutional and statutory provisions involved indicates that “moneys” and “proceeds” are used interchangeably. See, e.g., Tex. Const. art. HI, g49 d (reference is to proceeds from the sale of bonds authorized under 949-c rather than moneys from such sale). Moneys as used in article III, section 49-b, of the Texas Constitution (Veteran’s Land Board) isdefined within the constitutional provision as:

... moneys attributable to any bonds heretofore or hereafter issued and sold bysaid Board which moneys so attributable shall include but shall not be limited to the mceeds from the issuance and sale of such &s added). Moneys and proceeds are thus distinguished inthis particular article of the constitution, and all of these funds are commanded to be placed inthe Veteran’s Land Fund. Then bond sale expenses are directed to be paid from that fund.

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Article III, section 49-e of the Texas Constitution governing the Texas Park Development Fund uses the same language as section 49-c of the Texas Constitution. However, section 21.102,Texas Parks and Wildlife Code, the enabling legislation passed pursuant to article III, section 49-e of the Texas Constitution directs that bond sale expenses shall be paid out of the Park Development Fund. This particular legislation, which employs the wordproceeds, appears to define proceeds asthe gross amount realized from the sale ofbonds, whereas the above-referenced Veteran’s Land Board provision in the constitution clearly recognizes proceeds as the net amount realized from the sale of bonds but directs that all “moneys attributable to the sale ofbonds”, &., the gross amount realized from the sale, beplaced inthe Veteran’s Land Fund. Asyou note, the Water Development Board isinaposition more nearly akin to that of the Coordinating Board, Texas College and University System. Neither your enabling legislation I*)r that of the Coordinating Board, nor the underlying constitutional provisions, attempt to define moneys or proceeds. Absent a clear legislative or constitutional mandate to the contrary, it is our opinion that you may pay bond sale expenses inany manner consistent with sound accounting and fiscal practice. There isno statutory or constitutional prohibition against paying said expenses from the Water Development Fund or, in the alternative, paying the expenses from a separate account maintained for that purpose alone. As to your question concerning the payment of bond sale expenses from moneys attributable to the issue and sale of the bonds, those moneys are the appropriate source for such payment. A state agency has those powers expressly granted and those powers necessarily implied from the express grant. See City of Uvalde v.Uvalde Electric &Ice a, 235 S.W. 625 (Tex. Civ. App. -San Antonio 1921),affd, 250 S.W. 140(Tex. Comm’n App. 1923), citing Dillon, Municipal Corporations §§237, and 239. The power to issue and sell bonds expressly gmnted to the Water Development Board necessarily implies the power to pay the expenses pertaining to such issue and sale. Bond sale expenses are historically a charge on gross moneys obtained from the sale of bonds, leaving a net amount more properly referred to asproceeds. Such expenses would hardly be within the contemplation of the legislature should it appropriate for administrative expenses (asit is authorized, though not commanded, to do byarticle III,549-c of the Texas Constitution). Absent express legislation to the contrary, the logical source for payment of bond sale expenses is the gross amount realized from the sale ofbonds.
Your second question is: 2. Should the provisions of Section 17.077 of the Texas Water Code apply to proceeds from the liquidation of temporary investments in the Development Fund, the refunding of political s&division bonds purchased by the Board and the prepayment ofsuch bonds? Section 17.077 ofthe Texas Water Code provides: Except for proceeds from the sale ofbonds and proceeds from the sale ofbonds ofpolitical s&divisions asprovided by Sections 17.134

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and 17.180 of this code, all money received by the board in any fiscal year, including all amounts received as repayments ofloans to political s&divisions and interest on those loans, shall be credited to the clearance fund.

... You state that it is the practice of the board to temporarily invest bond proceeds in Treasury notes until the former are made available to the political subdivision and express concern that aliteral reading ofsection 17.077 would necessitate deposit ofproceeds from the liquidstion ofTreasury notes inthe clearance fund. Wehave no difficulty inviewing the Treasury notes purchased from bond sale proceeds and the funds obtained from liquidating the same as proceeds from the sale ofbonds. There isachange ofform, not substance. Naturally, from this viewpoint the liquidation of temporary investments is exempted from section 17.077bythe terms ofthe statute. The same line of reasoning applies with even more force to the issue of moneys transferred in refunding bonds. The change is one of form, not substance. Thus, if the underlying obligation was not subject to section 17.077, moneys changing hands to refund the underlying obligation are likewise exempt. See 47Tex. Jur. 2dPublic Securities and - Obligations 533. As to prepayment ofbond issues by political subdivisions with money obtained by said s&division from a source unrelated to the Development Board, the situation is complicated bythe express language ofsection 17.077, I’

...including all amounts received asrepayment ofloans to political subdivisions.

...‘IThe substance ofthe prepayment ofa bond issue is, after all, the repayment ofaloan. However, wefeel that the section 17.077 language refers to direct loans as authorized by section 17.230 ofthe Texas Water Code, and repayment of bonded indebtedness at maturity, since to construe section 17.077 otherwise would defeat the purpcee of the original sale of Texas Water Development Bonds, and infact, would defeat the entire purpose ofthe act itself. Wedonot think the prepayment ofbonded indebtedness was within the contemplation ofthe legislature when it enacted section 17.077. SUMMARY

The Water Development Board is empowered to pay bond sale expenses from gross revenues accruing from the sale of the issue. The requirements ofsection 17.077 ofthe Texas Water Code should not be construed to encompass proceeds from the liquidation of temporary investments in the Development Fund, the refunding of political subdivision bonds purchased by the board or the prepayment ofsuch political subdivision bonds.

MARK WHITE Attorney General ofTexas

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JOHN W.FAINTER, JR. First Assistant Attorney General Prepared bySusan Voss Assistant Attorney General APPROVED: OPINION COMMITTEE C. Robert Heath, Chairman BobGammage Susan Garrison susan vcm

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