                        The Attorney                 General of Texas
                                         September      23,     1980
MARK WHITE
Attorney General   Honorable Harvey Davis                           Opinion No.   MW-246
                   Executive Director
                   Texas Department   of Water Resources            Re: Disposition   of bond proceeds
                   1700 N. Congress Avenue                          from sale of Texas Water Develop
                   Austin, Texas                                    ment Board bonds.

                   Dear Mr. Davis:

                         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.




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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



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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 prepay-
            ment 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




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