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Cook within the meaning of Paragraph Seventh of 12 U.S.C. 24. Accordingly, they are eligible for purchase, dealing in, underwriting and unlimited holding by National Banks.

[28 F.R. 8280, Aug. 13, 1963]

§ 1.123

Alaska State Development Corporation.

(a) Request. The Comptroller of the Currency has been requested to rule on the eligibility of the $15,000,000 Alaska State Development Corporation Class A Revenue Bonds for purchase by national banks under Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. (1) The Alaska State Development Corporation was created by Acts of the Legislature of the State of Alaska as a public corporation of the State: an instrumentality of the State with legal existence separate from the State. The Supreme Court of the State of Alaska has confirmed this legislative description of the Corporation's legal status. The purpose of the Corporation is to develop the business prosperity and economic welfare of the State and its citizens by providing critically needed development loans to all types of business activity. It is expected that $7,500,000 of the Class A Bonds and $1,500,000 of Class B Revenue Bonds will be offered at public sale in June 1963. The proceeds from the sale of both classes of bonds will be used to begin the lending activities of the Corporation. Three of the seven directors of the Corporation must be bankers and all loans must be made through a bank which must retain a participation of at least 10 percent in each loan. Reserve funds and funds not immediately required for loans will be deposited in banks or invested in obligations of the United States, the State of Alaska or its political subdivisions. Class A Bonds have specified priorities in the payment of principal and interest over other obligations of the Corporation, and are additionally protected by the requirement that the amount of Class A Bonds outstanding at any time may not exceed five times the amount of Class B Bonds outstanding.

(2) The Class A Bonds to be offered are the result of a long and carefully developed effort by the Alaskan authorities in conjunction with businessmen, commercial banks, and professional investment advisers, to find a reasonable vehicle for the provision of critically

needed business development capital in the State of Alaska. It is apparent that the State of Alaska and the Alaska State Development Corporation will have an overriding long-term responsibility for the most prudent and businesslike management of this program in order to encourage investors within and without Alaska to continue to invest in the development of the Alaskan economy.

(3) There are obvious risks in loans tonew businesses in a State at the threshold of its economic development. The provisions of the enabling legislation, however, reflect the special reliance which will be placed on Alaskan banks in processing loan applications to assure that prudent banking judgment will be exercised in the making of loans. In addition, the required participation of the Alaska banks will insure that loans will be subject to all of the restrictionsapplicable to bank loans generally.

(c) Ruling. We conclude that the Class A Bonds of the Alaska State Development Corporation are eligible for purchase by national banks within the limitations of Paragraph Seventh of 12 U.S.C. 24, but that such purchases may not exceed 5 per centum of the purchasing bank's capital and surplus. These bonds will be under continuing review by this Office while the Corporation accumulates operating experience.

[28 F.R. 8281, Aug. 13, 1963]

§ 1.124 Virginia Public School Authority.

(a) Request. The Comptroller of the Currency has been requested to rule on the eligibility of the $15,000,000 Virginia Public School Authority, School Financing Bonds, Series 1963A, for purchase, dealing in, underwriting and unlimited holding by national banks under Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. (1) The Virginia Public School Authority was created by an Act of the General Assembly of Virginia as a public body corporate, a political subdivision, and an agency and instrumentality of the Commonwealth of Virginia. The purpose of the Authority is to facilitate and lessen the cost of financing the construction of public schools through the purchase of school bonds of counties, cities and towns in Virginia. In order to provide funds for this purpose the Authority is authorized to issue its bonds. The General Assembly of Virginia has provided for the Authority a reserve available for operating

expenses and as security for its bonds by transferring to it assets having a value in excess of $50,000,000. These assets, consisting of school notes of counties, cities and towns in Virginia, were transferred from and represent loans made by the Literary Fund, a fund for school purposes provided for in the Constitution of Virginia. The Supreme Court of Appeals of Virginia has reviewed the Acts creating the authority and transferring assets of the Literary Fund and has found that they are not in conflict with any provision of the Constitution of Virginia.

(2) The proceeds from the sale of the bonds of the Authority will be used to begin its lending activities. The bonds of the Authority will be payable from all the resources of the Authority. These resources will consist principally of local school bonds purchased by the Authority, local school notes transferred to the Authority from the Literary Fund and the income accruing from these obligations. The local school bonds and notes will be general obligations of Virginia local governments possessing powers of general property taxation.

(3) Thus, the bonds of the Authority are general obligations of a political subdivision of the Commonwealth of Viginia, and are payable from resources which consist principally of general obligations of other political subdivisions of the Commonwealth of Virginia. The notes transferred from the Literary Fund provide a substantial reserve to assure that there will be funds sufficient to provide for all payments required in connection with the bonds of the Authority.

(c) Ruling. We conclude that the subject bonds are eligible for purchase, dealing in, underwriting and unlimited holding by national banks under Paragraph Seventh of 12 U.S.C. 24. [28 F.R. 8281, Aug. 13, 1963]

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of the General Assembly of the Commonwealth of Pennsylvania, as a body corporate and politic, a public corporation and a governmental instrumentality. The purpose of the Authority is the acquisition, construction, and improvement of various public projects. In order to provide funds for this purpose the Authority is authorized to issue its bonds and to pledge, for the payment thereof, its revenues, receipts and its full faith and credit. It is not authorized, however, to pledge the credit or the taxing power of the Commonwealth.

(2) The proceeds from the sale of the Bonds of the Authority will be used for various projects which are to be leased to the Commonwealth. The leases will provide for payment, out of the current revenues of the Commonwealth, of annual rentals sufficient to meet the annual principal and interest requirements on the bonds. In the event the current revenues of the Commonwealth for any year are not sufficient to pay the entire rental, the balance of such rental will be paid out of the current revenue of succeeding years. The bonds wil be direct and general obligations of the Authority and will be secured equally with all other bonds of the authority, issued or to be issued, by the full faith and credit of the Authority and by the pledge of all rentals payable by the Commonwealth on projects leased from the Authority.

(3) The Bonds of the Authority are the general obligations of a public authority of the Commonwealth of Pennsylvania. The resources of the Authority include the obligation of the Commonwealth to make lease rental payments which will be sufficient to provide for all required payments in connection with the bonds. The lease rental obligation of the Commonwealth, though payable from the current revenues of succesive years, is not limited to any particular source of revenue and is, therefore, supported by the general taxing power and the full faith and credit of the Commonwealth. The Commonwealth has, thus, undertaken to provide for the payment of the obligations of its duly constituted authority.

(c) Ruling. Following the principles applied in the ruling on the Georgia State Authorities, § 1.111, it is our conclusion that the Bonds of the General State Authority of the Commonwealth of Pennsylvania, Eighteen Series, are eligible for purchase, dealing in, underwriting and unlimited holding by Na

tional Banks, under Paragraph Seventh of 12 U.S.C. 24.

[28 F.R. 8281, Aug. 13, 1963]

§ 1.126

Wanapum Hydroelectric Refunding Revenue Bonds.

(a) Request. The Comptroller of the Currency has been requested to rule on the eligibility of Wanapum Hydroelectric Refunding Revenue Bonds, Series of 1963, of the Public Utility District No. 2 of Grant County, Wash., for investment by National Banks within the limitations of Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. The proceeds from the sale of these bonds will be used in 1970 to refund an outstanding 1959 series. Until this refunding takes place these proceeds will be invested in United States Treasury Bonds which are expected to provide income sufficient for debt service requirements. During this initial period the Treasury Bonds and the balance of the proceeds will be the sole security for the 1963 bonds. The proceeds of the 1959 bonds have been used for the construction of a dam and hydroelectric generating plant which is 98 percent completed. It is expected that production of power from six of the ten generators will begin in September 1963, and that there will be full commercial production of power in January 1964. Existing long-term contracts provide for the sale of 98 percent of the project's total output of power. Contracts covering approximately 90 percent of the total output of power are with major electric companies. Each of these contracts provides for the payment of pro rata shares of specified costs during an initial period which is expected to end on January 1, 1965, and, thereafter, for the payment of pro rata shares of operating costs plus an amount equal to 115 percent of annual debt service requirements. The contracts provide that such payments will be made from the date of initial operation throughout the entire term of the contract whether or not power production is interrupted, suspended or interferred with, in whole or in part. After the redemption and retirement of the 1959 bonds the 1963 bonds will be secured by a pledge of the gross revenues of the power project.

(c) Ruling. It is our conclusion that the Wanapum Hydroelectric Refunding Revenue Bonds, Series of 1963, of the Public Utility District No. 2 of Grant County, Wash., are eligible for invest

ment by Natonal Banks within the limitations of Paragraph Seventh of 12 U.S.C. 24.

[28 F.R. 8282, Aug. 13, 1963]

§ 1.127 Washington State Public School Plant Facility Bonds ond Public Building Bonds.

(a) Request. The Comptroller of the Currency has been requested to rule on the eligibility of the $25,750,000 Public School Plant Facilities Bonds, 1961 and the $10,000,000 Public Building Bonds, 1961, of the State of Washington for purchase, dealing in, underwriting, and unlimited holding by National Banks under Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. (1) These bonds are to be issued by the State of Washington under acts which provide that the bonds are not to be general obligations of the state but are payable from the sales tax revenues of the state. The acts also provide, however, that the state undertakes to maintain such taxes so as to provide sufficient funds to pay the bonds and interest thereon.

(2) The Supreme Court of the State of Washington has held with respect to these bonds that if the state undertakes or agrees to provide any part of a fund from any general tax, be it excise or ad valorem, the securities issued upon the credit of the fund are likewise issued upon the credit of the state and are, in truth, debts of the state. It has also ruled, however, that these bonds are lawful and valid and shall be issued in accordance with the terms of the statutes authorizing them.

(c) Ruling. It is our conclusion that the Public School Plant Facilities Bonds, 1961, and the Public Building Bonds, 1961, of the State of Washington, are eligible for purchase, dealing in, underwriting, and unlimited holding by National Banks.

[28 F.R. 10741, Oct. 5, 1963] § 1.128

Commonwealth of Pennsylvania Tax Anticipation Notes.

(a) Request. The Comptroller of the Currency has been requested to rule that the $115,000,000 Commonwealth of Pennsylvania Tax Anticipation Notes, Series of 1963, are eligible for purchase, dealing in, underwriting, and unlimited holding by National Banks under Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. Stable current revenues of the Commonwealth of Pennsylvania,

which, in accordance with official estimates, are expected to amount to more than five times the amount to be borrowed, are pledged for the repayment of these notes. The Commonwealth of Pennsylvania has thus made fully adequate provision from its tax revenues for the payment of these notes.

(c) Ruling. Following the principles applied in the ruling on the Georgia State Authorities, § 1.111, it is our conclusion that the Tax Anticipation Notes, Series 1963, of the Commonwealth of Pennsylvania are eligible for purchase, dealing in, underwriting and unlimited holding by National Banks.

[28 F.R. 10741, Oct. 5, 1963]

§ 1.129 State Highway and Bridge Authority of the Commonwealth of Pennsylvania Bonds.

(a) Request. The Comptroller of the Currency has been requested to rule that the $35,000,000 Series of 1963, Bonds of the State Highway and Bridge Authority of the Commonwealth of Pennsylvania are eligible for purchase, dealing in, underwriting, and unlimited holding by National Banks under paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. The State Highway and Bridge Authority was created in 1949, by an act of the General Assembly of the Commonwealth of Pennsylvania, as a body corporate and politic, a public corporation and a governmental instrumentality. The purpose of the Authority is the construction, reconstruction and improvement of state highway projects. In order to provide funds for this purpose, the Authority is authorized to issue its bonds and to pledge, for the payment thereof, its revenues, receipts, and its full faith and credit. It is not authorized to pledge the credit or the taxing power of the Commonwealth, but the Act creating the Authority appropriates so much of the money in the Motor License Fund of the Commonwealth as may be necessary to carry out the provisions of the act.

(2) The proceeds from the sale of the bonds of the Authority will be used for highway projects which are to be leased to the Commonwealth. The leases will provide for payment, out of the current revenues of the Commonwealth including the Motor License fund, of annual rentals sufficient to meet the annual principal and interest

requirements of the bonds, and to pay the current expenses of the Authority. The leases will also provide that in the event the current revenues of the Commonwealth for any year are not sufficient to pay the entire rental, the balance of such rental will be paid out of the current revenue of succeeding years. The bonds will be direct and general obligations of the Authority and will be secured equally with all other bonds of the Authority by the full faith and credit of the Authority and by the pledge of all rentals payable by the Commonwealth on projects leased from the Authority.

(3) The bonds of the Authority are the general obligations of a public authority of the Commonwealth of Pennsylvania. The resources of the Authority include the obligation of the Commonwealth to make lease rental payments which will be sufficient to provide for all required payments in connection with the bonds, and an appropriation of money from the Motor License Fund. The lease rental obligation of the Commonwealth, though payable from the current revenues of the successive years, is not limited to any particular source of revenue and is, therefore, supported by the general taxing power and the full faith and credit of the Commonwealth. The Commonwealth has, thus, undertaken to provide for the payment of the obligations of its duly constituted Authority.

(c) Ruling. Following the principles and definitions set forth in 12 CFR 1.3 (d) and (e) and applied in the ruling on the General State Authority of the Commonwealth of Pennsylvania, 12 CFR 1.125, it is our conclusion that the Bonds of the State Highway and Bridge Authority of the Commonwealth of Pennsylvania, Series of 1963, are eligible for purchase, dealing in, underwriting and unlimited holding under Paragraph Seventh of 12 U.S.C. 24. [28 F.R. 11501, Oct. 29, 1963]

§ 1.130 California Bond Anticipation Notes.

(a) Request. The Comptroller of the Currency has been requested to rule on the eligibility of the $50 million State of California Bond Anticipation Notes for purchase, dealing in, underwriting, and unlimited holding by National Banks under Paragraph Seventh of 12 U.S.C. 24 and this part.

(b) Opinion. The notes, having maturities of not to exceed two years, will be payable solely from the proceeds of the sale of general obligation water bonds to be sold by the State of California. The bonds, aggregating $1,750 million, have been duly authorized by the electorate. Interest on the notes will be payable from state funds appropriated by the legislature. The notes are thus supported by the full faith and credit of the State of California and, accordingly, qualify as public securities within the meaning of § 1.3 (c) and (e).

(c) Ruling. It is our conclusion that the California Bond Anticipation Notes are eligible for purchase, dealing in, underwriting and unlimited holding by National Banks.

[29 F.R. 498, Jan. 21, 1964]

§ 1.131

District of Columbia Redevelopment Land Agency Urban Renewal Bonds.

(a) Request. The Comptroller of the Currency has been requested to rule that the $1,225,000 Urban Renewal Bonds, Series 1963 of the District of Columbia Redevelopment Land Agency, are eligible for purchase, dealing in, underwriting, and unlimited holding by National Banks under the provisions of Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. The District of Columbia Redevelopment Land Agency, a "local public agency" within the meaning of section 110(h) of the Housing Act of 1949 has entered into an agreement with the Housing and Home Finance Administrator whereby the Administrator agrees to pay or cause to be paid when due the principal of and interest on these bonds. The provisions contained in the agreement meet the requirements contained in Paragraph Seventh, 12 U.S.C. 24 for a security not subject to the limitations and restrictions contained therein as to "dealing in, underwriting and purchasing for its own account, investment securities". These bonds are, therefore, public securities within the meaning of § 1.3(c) (3).

(c) Ruling. It is our conclusion that the Urban Renewal Bonds, Series 1963 of the District of Columbia Redevelopment Land Agency are eligible for purchase, dealing in, underwriting and unlimited holding by National Banks. [29 F.R. 498, Jan. 21, 1964]

§ 1.132 General State Authority of the Commonwealth of Pennsylvania Serial Bonds, 19th Series.

(a) Request. The Comptroller of the Currency has been requested to rule that the $50,000,000 General State Authority of the Commonwealth of Pennsylvania Serial Bonds, 19th Series, are eligible for purchase, dealing in, underwriting, and unlimited holding by National Banks under the provisions of Paragraph Seventh of 12 U.S.C. 24.

(b) Ruling. Following the principles applied in our decision of July 3, 1963, § 1.125, that the Eighteenth Series of these bonds were eligible for purchase, dealing in, underwriting and unlimited holding by National Banks, it is our conclusion that the Bonds of the General State Authority of the Commonwealth of Pennsylvania, Nineteenth Series, are eligible for purchase, dealing in, underwriting, and unlimited holding by National Banks.

[29 F.R. 2419, Feb. 13, 1964]

§ 1.133 State of Israel Bonds.

(a) Request. The Comptroller of the Currency has been requested to rule that the 4 percent Dollar Bonds of the State of Israel, Second Development Issue, are eligible for investment by National Banks under the provisions of Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. Israel's economic development and its record of payments are sufficient to support a determination by a bank that the State of Israel is and will be able to perform its obligations. Such a determination must, however, be based to a substantial extent upon estimates believed to be reliable. For this reason and because of the limitations on the transfer and marketability of the bonds, holdings will be subject to the limitations of § 1.6(b).

(c) Ruling. It is our conclusion that the 4 percent Dollar Bonds of the State of Israel, Second Development Issue, are eligible for purchase by National Banks within the limitations of Paragraph Seventh of 12 U.S.C. 24 and of § 1.6(b). Accordingly, a banks' holdings of these bonds and of other securities subject to the limitations of § 1.6 (b) may not exceed in the aggregate five percent of the bank's capital and surplus. [29 F.R. 2419, Feb. 13, 1964]

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