THEAITORNEYGENERAI. 

OFTEXAS 

October 10, 1949 

Hon. Bascom &iles, Chairman 

Veterans' Land Board 

General Land Office 

Austin, Texas Opinion No. V-930 

Re: Investment of Permanent 

School Fund in bonds issued by Veterans' Land 

Bo&rd and necessity of 

advertisement for compeDear Sir: titive bidding. 

You have requested an opinion on the following 

questions, which are quoted from your letter: 

"1. It is noted that under Article 2669 

the State Botid of Education is authorized 

to Invest the Permanent Public Free School 

Funds of the State in bonds of 'the State of 

Texas.' The Board has been acting on the 

assumption that the bonds will be State bonds 

having in mind the declarations in the provis~ion of the Constitution and in the Act 

that they are obl&gatlons of the State of 

Texas. Are ~the proposed bonds eligible for 

investment as bonds of the State of Texas? 

"2. If the bonds are eligible for such 

investment and acceptable to the State Board 

of Education can a sale be made to the State 

Board of Education without compliance with 

the requirements of Sections 6 and 7 of Senate Bill 1Bo. 29 requiring publication of 

notice and request for competitive bids? 

"3. In issuing the proposed bonds the 

Board will reserve an option of redemption 

prior to rmturity. The bonds will bear an 

interest rate less than 23s per annum. Will 

the provisions of Article 2675 excepting the 

State bonds render inapplicable the restrictions contained in kticle 2671 that bonds 
Hon. Bascom Gilea, page 2 (V-930) 

purchased for the Permanent Public Free 

School Fund shall bear interest at not 

less than 23% per annum?" 

The bonds to which you refer are those provided 

for In Section 49-b, Article III of the Constitution of 

Texas, which section was adopted on November 7, 1946, and 

in the enabling act, Senate Bill No. 29, Acts of the 

Fifty-first Legislature. Your first question is manifestly answered by the constitutional provision itself. It 

is specifically provided therein that bonds issued thereunder "shall be executed by said Board as an obligation 

of the State of Texas." These bonds would, therefore, be 

eligible investments under Article 2669, V.C.S., which 

provides that the State Board of Education is authorized 

and empowered~to invest the permanent public free school 

funds of the State "In bonds of the United States, ~the 

State of Texas . . ." 

However, It is our opinion that compliance must 

be had with the requirements of Sections 6 and 7 of Senate 

Bill No. 29 with respect to the publication of notice ,and 

request for competitive bids even though the bonds ultimately may be purchased for the benefit of the Permanent 

School Fund. In Sections 6 and 7, it is provided: 

"Sec. 6. When the Board shall have 

authorized the issuance of a series of said 

bonds and shall have determined to call for 

bids therefor, it shall be the duty of the 

Board to rxlblish at least one (1) time not 

less than twenty (20) days before the date of 

said sale an appropriate notice thereof. Such 

publication shall be made in a daily newspaper . . . 

"Sec. 7. None of said bonds shall be 

sold for less than their face value with accrued interest from date, and all of such 

bonds shall be sold after competitive biddlnq 

to the highest and best bidder, except in 

those cases where the administrators of the 

state's funds iven priority exercise, within fifteen (15 ej days after notice thereof, 

their right of priority to take such bonds 

at the highest nrlce bid bv another . . ." 

(Emphasis added) 
: . 

Hon. Bascom Glles, Page 3 (V-930) 

Section 6 makes it the duty of the Board to 

publish the notice of sale. Section 7 provides that all 

such bonds shall be sold after competitive bidding and 

then to the highest and best bidder except where the 

administrators of the state's funds exercise their right 

of priority. Such right of priority can be exercised 

only to purchase the bonds "at the highest price bid by 

another." It is obvious that the quoted phrase could 

refer only to a bid submitted after proper notice had 

been given. It is our opinion that the statute contemplates that the Veterans' Land Board issue the bonds on 

the best possible terms regardless of whether they are 

purchased by administrators as investments for state's 

funds or whether they are purchased by private investors. We have been advised that the Board subsequent to 

the date of your letter of request determined to publish 

notice of sale and request for competitive bids and that 

the same has now been published. It is our opinion that 

the Board in this determination has complied both with 

the letter and the spirit of the law. 

Your third question presents more difficult 

problems. Article 2675 provides in part: 

"The provisions of the six preceding 

articles shall extend to any bonds or securities other than the bonds of the State 

or of the United States . . ." 

Article 2671, which Is one of the "six preceding articles," outlines the conditions upon which bonds 

may be purchased by the Board of Education. It provides 

in part: 

,t . . . No bonds, obligations, or pledges 

shall be so purchased that bear less than two 

and one-half (2 3%) per cent interest. No 

bonds, obligations, or pledges cxcent those of 

the United States, the State of Texas. and the 

University of Texas, shall be so purchased when 

the indebtedness of the county, city, precinct, 

or district issuing same, inclusive of those 

offered, shall exceed seven (7%) per cent of 

the a:sessed value of the real estate therein 

. . . (Emphasis added) 

It is noted that the exception provision applies only to the seven (79%) limitation, and that no exception Is provided with respect to the 23% limitation. The 
. ‘.. 

Hon. Bascom Giles, page 4 (V-930) 

clear inference is, therefore, that the 2s limitation 

would apply to all bonds purchased. 

,Both Articles 2671 and 2675 were originally 

enacted as part of Chapter 124, Acts of the Twentyninth Legislature in 1905. They appear as Sections, 

4 and 9, respectively. Although Article 2671 has been 

amended numerous times since its original enactment, 

Article 2675 has not been changed. Moreover, the exception, "except those of the United States, the State 

of Texas, and the University of Texas," in Article 2671 

did not appear In the original act and was not added 

thereto until the enactment in 1929 of Chapter 278, Acts 

of the Forty-first Legislature. If neither the limitation as to interest rate nor the 7% valuation limitation 

applied to bonds of the State of Texas by virtue of the 

provisions of Article 2675', then it could be argued that 

the reason why the 7s assessed valuation exceptions was 

added to Article 2671 was to make the interest rate 

limitation applicable to all bonds purchased by the 

Board of Education. The 1929 act, being sub,sequent in 

time of passage to the 1905 act, would govern. 

However, we have concluded in any event that 

the Constitutional amendment Itself and the enabling act 

make these bonds eligible Investments for the Permanent 

School Fund. The Constitutional amendment provides that 

the bonds shall bear Interest at a rate not to exceed 

three (3%) per cent per annum. It also provides that in 

"the sale of any such bonds, preferential right of purchase shall be given to the administrators of the various 

teacher retirement funds, the Permanent University Funds, 

and the Permanent Free School Funds." See also Section 5 

of Senate Bill No, 29, which contains a similar provision. 

You will note that the only~limitation as to 

interest rate specified in the Constitution is the maxinmm tbree (3%) per cent, and that no limitation is placed 

on a minimum rate. You will also note that the preferential right is given to the administrators of the named 

funds In the sale of any such bonds. This preferential 

right of purchase is granted by the Constitution Itself, 

and is independent of any other constitutional or statutory grant. It is our opinion that the preferential 

right attaches to any bonds issued under this constltutional or statutory grant at the interest rate specified 

in the "highest price bid by another," regardless of the 

fact that such rate may be less than 24%. As a practical consideration, It may be added that during the past 
: . . 

Hon. Bascom GileS, page 5 (V-930) 

several years millions of dollars of bonds have been issued that bear less than 24% interest. We think that it 

clearly was within the contemplation of the Legislature 

in providing for the submission of Section 49-b of Artlcle III and of the qualified voters in adopting the same 

that the bonds could bear less than 23% interest, and in 

most probabilities would. The preferential right attaches to the sale of any such bonds, and it is our opinion 

that this provision makes them eligible as investments 

for the Permanent School Fund. If there Is any conflict 

between Article 2671 and Section 49-b, then, of course, 

the Constitution would govern in this regard. 

SUMMARY ', 

Bonds issued by the Veterans' Land Board 

under the authority of Section 49-b, Article 

III, Constitution of Texas, and 'its enabling 

act (S. B. 29, Acts 51st Leg., 1949) are obligations of the State of Texas, and are eligible 

investments for the Permanent School Fund even 

though such,bonds may bear less than 23%. 

The Veterans* Land Board in the sale of any 

bonds must comply with the requirements of Sections 6 and 7 of Senate Bill No. 29 requiring 

publication of notice of sale and request for 

competitive bids. Such. bonds may be purchased 

by the Board of Sducation for the benefit of 

the Permanent School Fund only after such publication and only if the Board of Education 

properly exercises its right of priority to 

purchase the bonds at the highest price bid by 

another. 

ATTORNEY GRRERAL 

GWS-s 

Very truly yours, 

George W. Sparks 

Assistant