MARK WHITE 

Attorney General 

The Attorney General of Texas 

September 23, 1980 

Honorable Harvey Davis 

Executive Director 

Opinion No. MW-246 

Texas Department of Water Resources Re: Disposition of bond 

1700 N. Congress Avenue from sale of Texas Water 

Austin, Texas ment Board bonds. 

Dear Mr. Davis: 

proceeds 

Develop 

You have requested our opinion in answer to two questions relating to 

appropriate accounting for proceeds from various transactions accruing to 

the Department of Water 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, SS 49-c, 49-d and 49-d-l of the 

Texas Constitution and Sections 17.072(b), 

17.075 and 17.077 of the 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, 55 49-d, 49-d-l of the Texas 

Constitution and SS 17.072(b), 17.075 and 17.077 of the Texas Code), where 

“all proceeds” are required to be deposited in the Fund. Our reading of the 

constitutional and statutory provisions involved indicates that “moneys” and 

“proceeds” are used interchangeably. See, e.g., Tex. Const. art. HI, g 49 d 

(reference is to proceeds from the sale of bonds authorized under 9 49-c 

rather than moneys from such sale). 

Moneys as used in article III, section 49-b, of the Texas Constitution 

(Veteran’s Land Board) is defined within the constitutional provision as: 

. . . moneys attributable to any bonds heretofore or 

hereafter issued and sold by said 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 in this particular article of 

the constitution, and all of these funds are commanded to be placed in the 

Veteran’s Land Fund. Then bond sale expenses are directed to be paid from 

that fund. 

p. 776 
Honorable Harvey Davis - Page Two (MW-246) 

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 word proceeds, appears to define proceeds as the gross amount realized 

from the sale of bonds, 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 of bonds”, &., the gross amount 

realized from the sale, be placed in the Veteran’s Land Fund. 

As you note, the Water Development Board is in a position 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 in any manner consistent with sound accounting and fiscal practice. There is no 

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 as proceeds. Such expenses would hardly be within the 

contemplation of the legislature should it appropriate for administrative expenses (as it is 

authorized, though not commanded, to do by article III, 5 49-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 of bonds. 

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 of such bonds? 

Section 17.077 of the Texas Water Code provides: 

Except for proceeds from the sale of bonds and proceeds from the 

sale of bonds of political s&divisions as provided by Sections 17.134 

P. 777 
Honorable Harvey Davis - Page Three (NW-246) 

and 17.180 of this code, all money received by the board in any 

fiscal year, including all amounts received as repayments of loans 

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 a literal reading of section 17.077 would necessitate deposit of proceeds from 

the liquidstion of Treasury notes in the clearance fund. We have no difficulty in viewing 

the Treasury notes purchased from bond sale proceeds and the funds obtained from 

liquidating the same as proceeds from the sale of bonds. There is a change of form, not 

substance. Naturally, from this viewpoint the liquidation of temporary investments is 

exempted from section 17.077 by the terms of the 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 47 Tex. Jur. 2d Public Securities and 

- 

Obligations 533. 

As to prepayment of bond issues by political subdivisions with money obtained by 

said s&division from a source unrelated to the Development Board, the situation is 

complicated by the express language of section 17.077, I’. . . including all amounts received 

as repayment of loans to political subdivisions. . . .‘I The substance of the prepayment of a 

bond issue is, after all, the repayment of a loan. However, we feel that the section 17.077 

language refers to direct loans as authorized by section 17.230 of the 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 in fact, would defeat the entire purpose of the act itself. We do not think the 

prepayment of bonded indebtedness was within the contemplation of the 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 of section 17.077 of the 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 of such political subdivision bonds. 

MARK WHITE 

Attorney General of Texas 

p. 778 
Honorable Harvey Davis - Page Four (~~-246) 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

Prepared by Susan Voss 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

C. Robert Heath, Chairman 

Bob Gammage 

Susan Garrison 

susan vcm 

P. 779