                            Bon. George A. Hlght            Opinion NO. O-3623
                            Chief Accountant                Re: Liability of the Board on bonds
                            board of County and Dis-        previously made eligible for partici-
                            trict Boaa Indebtedness          ation in the county and district
                            Aust&n, Texas                   R ghway fund when such bonds have de-
                                                            faulted as to principal and interest.
                            Dear Sir:
                                     tiehave your letter setting forth certain facts a&m-
                             questing our opinion on the question stated. The facts are:
                                          ?A county proposes t.crefund an eligible issue     ,,,_
                                                                                              ~,,
                                                                                                ~~
::       :_   ..’                    .ef,b&ds -vB.$&,‘,,are.
                                                          u ,.defan& .,.T& ~:aty &+      ._I
                                                                                           ., ~....,:;
                                                                                                  %
                                     @m&aseiC:btids’of thlS’,1&3ue,  at Xess than their par     ~.~
                                                                                                 ,‘::~
                                     dLlie’~aiidhave ‘.
                                                      requeatsd the ‘Boardto cr&ait the
                                     coqty tiththa amount:the Board:set aslde~to ‘r&Ire ;
     -         ._.          : ...   .:
                                     the .bonds.at their maturity date.’ The-:amouut set :
                                      aside being’the ‘peri?e&ageof.each bond ‘ofWs    is- .. :
                                      sue* .&a deter@ned byethe Board, which was
                    :   .            .expended~Xri:the construction.ofa~State desgsy:       :
                                     highway or hl&iiays &xisaid county.
                                         “It is also proposed to escrow al3 interest cou-
                                     pans of Ws   issue which are in &fault and pay #mm
                                     as funds are Wailable ,011the basis of fifty cents
                                     on the dollar.”
                                         Your request 1st
                                         “Please advlse this Board if the payments due by
                                     the State on the defaulted principal and Interest of
                                     this issue be made on the basfs of the actual cost
                                     to the county or on ~thebasis of the par value of
                                     the maturities in dafault.”
                                                        Section 6 of House BllX’~688pas@ by
                                      Subsection (a) oft'
                             the .Forty-sixth
                                   --        Legislature, Ngular Session, 1939, reads in part
                             as rouowm
                                         “All bonds, warrants or evidences of in-
                                     debtedness heretofore issued by counties or de-
                                     fined road districts of this &ate which mature
                                     on or after January
,    .   .   ‘-
    -.            -.I




                        Hon. George A. Hight, page 2

                            date and prior to January 2,,1939 have been
                            designated a part of the system o$ State high-
                            ways :.,.. whether said Indebtednessis now
                            evldeuced’bythe obligation originallyissued
                            or layrefunding obligation or both, shall be
                            eligible to participate1 n the distributionof
                            the moneys coming into said County and District
                            flthway F’nnd,subject to the provisionsob this
                                       shall participate in said County and
                            &a: Ik%ict highway Fuud as of the date of the
                            designktionof said road as a part of the State
                            syste& . . ln (Underscoringours)        4
                                 Subsection c of Section 6 provides in part:
                              “It shall be the duty of the Board of County
                        and District Road Indebtedness . . . to ascer-
                        tain and determine the amount of indebtedness
                         eligibleunder the provisions oftthis.Saction
                        cf this ‘Act.topartic%pate~   3.nthe mans.&.8 coc+¶ng.
                                                                             :   i_.... _..: ...
                      ‘*.
                        into.’ said::Corinty-‘end
                                               ~Road.bisti’ict R3.g ajr.Md
                         . ~, . . And said’:&ligation~tosaid”amountand
                        extent shall be eUg%b%e for ‘paitlcipatlon      ln
                        the moneys~coming Into .the County and .RoadR&s-       .’
                .:.:   .xtric.t;RlghtiayFund and said ascertainment,   and        :      Y  ..
                                                                                             ,.
                        dstermination shall be certified to the,county
                     . ’judge by said Board ,and.  all -of the matured out-     .            1.
             ..          stand%@ obligatl’ons   of’said issue shall .rata-:
                        bly have the benefit of said participationiu
                         sziW moneys? Q m The.-  ascertainmentand deter-
                        &nation by.the ,Board,.afterreasonable notgce
                         and ‘hearing of the amount of y. couuty or a*
                        ffned~~‘mad  .~&Lstr%ct~:
                                              .obligatioii e IgSble under
                        the proti&ons of,this Act . . ,,.    .&all be fSnal
                        and conoluSive and &q&l ,notbe subject to re-
                        view in auy otherstribunal2’’
                                    .‘.
                              Referring baok to Section 1 tiefind this ~langua&
                                 ‘tAnc7
                                      it is hereby deterWed that the further
                             provisioneof this Actconstitute fair, just end
                             ~equltableoomp&nsatlon,repayment and reimburse-
                             ment’to said c&ties’ ~amd deflned distr$ctsfor
                             their ‘aidand’assista@ to’the-state in the cm- .
                             struction‘of the.State highways. .,. And my
                             dischargesthe~%egally~implhedobligations of the
                             State ‘tocompensate,repay and reimburse agencies
                             of the estatefor expenses incured at the instance
                             and solicitationof the State as well as for ex-
                             penses incurred for the benefit of the State. . . ”
                                 me sections of House Bill 688 first above quoted Con-
                        template full payment of that pert of the expenditureWhich was
                        made on State highways and the section last above quoted clearly
                        indicates that it is,tke intention of the Legislatureto fully
          Hon. Geogre A. Hi&&t, page 3


          oompensateand reimburse counties and defined road districts
          for all moneys previously expended on highways constituting
          a part of the State.HQhway System.' Nowhere in the'law,do we
          find provision for se@&g.down the previously determinedob-
          ligation of the Boara%nder circumstancessuch as are reflected
          from the facts stated in your letter.
                     The instant bonds appear to be eligible for partlcipa-
           tion in a certain percentage of their par value and such ineli-
           gible portion thereof is, of course, the continuing obligation
           of the county. Therefore if the county acquires any of su&
           bonds at less than their par value we are inclindd to the view
           that such saving as is effected thereby should accrue to the
            county and that the Board xi11 still be obliged to gay such
           portion of the debt as it had previmsly determined to be eli-
             ible for participationunder the provisionsof House Bill
           f!88. Ihe
                  .: think this conclusion equally applicable to the pay-
           ment of defaulted coupons appurtenantto the bonds.
.: ..~_
     _,._
        . ,. L.~"'
                 . :You~~e~%herefurs ad&sed that'in I&r o$inion'the ay-' .:'
           ment by the State should be-made on the'basis of the'par v aius
           of the maturities in default.,
:         .        '.So...long..
                             as'the methods adopt&by ~ho'cou&y'~.for.~he
           discharge of its part of the eligible obligationssre'legalwe
           thlrik ~theBoard is tiithoutauthority td.inquire into the mei% :
        :. oda employed..‘At tiie.timethe bonds ware.made eligible.for
           participationthe Board;set aside such funds as were conteni-
           plated to properly reimburse snd compensatethe county and such
           previously determinedobligation cannot be affected by a subse-
           qusntddiminishingof the countycs portion of the ,bonds.
                   Trustjng that the foregoing fully enswers your inquiry,
          we are
                                                 Yours very truly
          dpP~ovED J-u'r,
                       25, 1941                  LETTDFtREY
                                                          GENERAL OF TEXAS
          /s/ Grover Sellers                     B .,'s/Clarence E. Crowe
          l7IRRl'
                ASSISTANT                        Cfl
                                                   arence E. Crowe,'Assistant
          ATTORNEY GENERAL
          CEC:LM:wb
