                             Febrw-y    3,   1939


Honowble K. D. Hall
County Attorney
Refugio, Texas

Dear Mr. Hall:

                                       Opinion No. O-121
                                       Re: Whether Accrued Interest
                                       on Road Bonds sold Subsequent
                                       to their Date Should be Placed
                                       in Bond Fund or Sinking Fund

          Your request for an opinion covering the above captioned
question has been received by this office.

          Briefly, the facts which give rise to your question are
as follows:

          Road District No. 2 of Refugio County voted and sold
$180,000 in road bonds, and which sale was made subsequent to the
date of the bonds and on which there had accrued $980.00 in inter-
est. This sum, in addition to the face amount of the bonds, we
paid to your county.

          The laws of this State do not undertake to prescribe the
procedure to be employed by a county in accounting for the dispo-
sition or allocation of bond proceeds; however, it does define the
purposes for which bonds may be issued and the manner of issuing
them. The expenditure of the funds received from a sale of bonds,
legally issued, is a matter for the governing body to determine
subject to judicial control only in caee of abuse of their discre-
tion.

          The statutes provide that bonds shall never be sold for
less than par and accrued interest to date of sale. The authori-
tiea are in accord with the conclueion that the par value of an
interest-bearing bond on the date of issuance is a value equal to
the principal thereof, and on any day subsequent to its issuance
it is a value equal to the principal plus the accrued interest.
Honorable K. D. Hall, page 2 (O-121)



The nominal or par value of such a bond necessarily increases with
each succeeding day by the amount of interest accrued which on its~
face it promises to pay. Hence, the money received from the sale
of bonds at par plus accrued interest represents the par value of
the security.

          The total face amount of the bonds issued and sold rep-
resents the maximum amount authorized by the voters, or a diminished
part thereof, and interest accruing on such bonds issued but not yet
sold is specifically an accrued liability against the issuing body,'
and which must be discharged out of taxes levied and collected for
that purpose. Accordingly, the sum received as accrued interest
in the sale of the bonds should properly be an offset to such ac-
cruing liability. Hence, it is the opinion of this department that
the correct procedure would be to credit such sum to the interest
and sinking fund, thereby insuring the taxpayer the benefit of the
offset.

          We further hold that your action in crediting the accrued
interest to the interest and sinking fund was proper and in harmony
with this ruling.

                                              Yours respectfully

                                         ATTORNEY GENERAL OF TEXAS


                                         By   /s/ Clarence E. Crowe
                                                          Assistant

CJK-s-IM

APPROVED:

IS/ Gerald C. Mann

ATTORNEY GERERAL OF TEXAS
