                      The Attorney              G.eneraI of Texas
                                     December    12,     1979
MARK WHITE
Attorney General


                   Honorable Joe Resweber                       Opinion No.    Mw-97
                   Harris County Attorney
                   1001Preston, Suite 634                       Re: Disposition     of surpluses in
                   Houston, Texas 77002                         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




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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




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    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




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