Code of Federal Regulations: Containing a Codification of Documents of ...

enues to be derived from all revenueproducing facilities presently located in the State Parks System or presently operated by the Department and all revenue-producing facilities hereafter constructed, acquired or operated by the Department.

(6) The Department is empowered by section 148.030 KRS to unite into one project for financing purposes all or as many parks, and the improvements thereon, or to be constructed, enlarged or improved, as it deems practicable, so that the fee and charges and other revenue or receipts from every source whatsoever from the parks thus united shall be used for the payment of the principal and interest of all bonds which may be issued. The lien of the bonds for such united project shall be a lien on the gross income and revenue of all of the parks thus united.

(7) The bonds are additionally secured by the obligation of the Commission and the Department to levy an entrance fee subject to certain conditions.

(8) The anticipated revenues and State appropriations appear to be sumcient to provide adequate debt service. The outstanding feature underlying this issue is the ability of the Department to charge an entrance fee if certain conditions occur. Inasmuch as the Department does not presently charge an entrance fee and the present gross revenues of the Department amply cover estimated Debt Service, the covenant to charge such entrance fee adds additional and supplementary security to the bonds.

(b) Ruling. We conclude that the subject bonds are eligible for investment by national banks, within the limitations of Paragraph Seventh of section 5136 of the Revised Statutes (12 U.S.C. 24). [27 FR. 6539, July 11, 1962. Redesignated 28 FR. 8280, Aug. 13, 1963]

1.110 City of Kansas City, Missouri.

(a) Opinion. (1) Request has been made of the Comptroller of the Currency for a ruling whether the $18,700,000 City of Kansas City, Missouri, 44 percent Airport Revenue Bonds, dated July 1, 1954, are eligible for investment by national banks.

(2) On February 21, 1955, this Office ruled that subject bonds would not be eligible for investment by national banks. Since that date, we have reaffirmed our position several times, the most recent being in December 1959. We have been

requested again to re-examine our position relative to these bonds.

(3) The bonds are not general obligations of the city, but are special revenue obligations payable from revenues derived by the city from certain rentals to be paid by Trans World Airlines, Inc. to the city under the provisions of a lease and agreement between the city and the company.

(4) The bonds were issued on July 1, 1954, with interest capitalized until June 30, 1957. The facilities for TWA were completed by January 1, 1957, and the company has been paying the required rental since that date. Payments into the sinking fund from rentals received will be used for the payment of serial bonds and the ultimate retirement of the term bonds.

(5) Rentals received from TWA from January 1, 1957, to April 30, 1961, the date of the latest fiscal report of Kansas City, total $5,557,000, which when added to total occupancy permit fees received from TWA from July 1, 1954, to December 31, 1956, of $370,000, aggregate $5,927,000. Interest and fiscal fees on revenue bonds from July 1, 1954, to April 30, 1961, amounted to $5,173,000. The rentals paid for this period were sufficient to provide for the required debt service.

(6) A review of the earnings for the year ending April 30, 1961, reveals that net operating income was 2.19 times the debt service required for the same period. The debt service amounted to $794,750 for this period and the same amount will be required for the period ending in 1962. The first of the serial maturities takes place on July 1, 1962, in the amount of $400,000. Using the earnings figures for the year ending April 30, 1961, this total debt service for 1962 of $1,187,000 is cOVered 1.47 times.

(7) It should be noted that city ordinance authorizing the bonds required that at July 1, 1962, the Reserve Account have a minimum balance of $2,250,000. The balance at April 30, 1961, was $2,600,000, which is the maximum reserve amount required by the ordinance. This reserve account was built up by rentals collected in excess of debt service charges. Hereafter, all rentals over and above debt service charges will be paid to a sinking fund and applied to purchase or redemption of bonds. It was originally estimated that by the end of the fiscal period in 1962 there would be

$180,000 in the sinking fund. However, the figures for the fiscal year ending 1961 showed a balance in the sinking fund of $166,000.

(8) The ordinance also required the establishment of a guarantee fund of $500,000, which has been attained. Another reserve called the operating fund has been established, as required by the ordinance. This fund is to be held for estimated operating expenses of the city's airports for a period of six months in advance. This fund now totals $351,000, while the total operating expenses for the year ending April 30, 1961, amounted to $576,000. In addition there is also a construction fund for extending, constructing, or making general improvements to the airport, which amounts to $939,000.

(9) These various funds have been built by the excess amounts of rental payments not required for debt services. This fact indicates that the revenue bonds are supported by properly managed operations and finances which are now in a position to cover debt services adequately. However, the strength of the issue lies in the ability of TWA to provide adequate rentals which will ultimately liquidate the issue.

(10) TWA is a subsidiary of Hughes Tool Company, Houston, Texas, which is engaged as a manufacturer of oil-well tools; the production and distribution of motion pictures; and in the manufacture of certain aircraft fuselage parts. As of December 31, 1960, it showed a net worth of $253,800,000, with an important part of the net worth being made up by its investment in TWA.

(11) TWA is a leading airline and is the only United States air carrier authorized to provide service on a scheduled basis on both a transcontinental and transatlantic route system. Principal operations base is located on leased property at Kansas City Municipal Airport, Kansas City, Missouri, and its principal overhaul base is located on leased property at the Mid-Continental International Airport, Kansas City, Missouri. The aggregate annual rental under such leases in effect at March 1, 1961, was approximately $6,250,000. TWA had lease agreements with three other airports besides Kansas City.

(12) TWA showed good earnings in 1959 and 1960; however, substantial losses have been reported for 1961. The company has incurred a heavy debt in its program of fleet modernization. We

have no year-end figures at the time; however, for nine months September 30, 1961, TWA report operating revenues were $290,000, a net loss of $12,700,000 as comp the same period in 1960, whe operating revenues were $290,000, net earnings were $6,100,000. September 30, 1961, TWA has $17,600,000 and U.S. securit $15,900,000, current liabilities of $ 000 and a long-term debt of $286,5 The later figure is up from $84, of a year ago, reflecting additiona term borrowings in connection wi modernization. In this conr

TWA's net investment in proper equipment of September 30, 196 $315,600,000 as compared to $204, the previous year. Tangible net of TWA at December 31, 1960 $124,700,000.

(13) The financial structure i of the subject bonds has improve degree that indicates that the payments from now on should be cient to cover debt service and p a margin of safety as well. The fin stability of TWA is believed to be cient to provide the necessary payments to service the bonds.

(b) Ruling. We conclude tha subject bonds are eligible for inves by national banks, within the limit of Paragraph Seventh of section of the Revised Statutes (12 U.S.C [27 FR. 6539, July 11, 1962. Redesi 28 F.R. 8280, Aug. 13, 1963]

§ 1.111 Georgia State Authorities.

(a) Request. The Comptroller consider the ruling of July 12, 1962 the bonds of various public auth created by the State of Georgia a general obligations of the State v the meaning of Paragraph Seventh U.S.C. 24.

(b) Opinion. The State of Ge has created, by special acts of its eral Assembly, nine public autho for the purpose of constructing ar nancing public buildings, bridges, ways, and other public improvem An Authority has the power to hold erty in its own name, to construct ects on land owned by the state, to row money for any of its corp purposes, and to issue its negotiable enue bonds payable solely from earn It does not have the power to levy nor to pledge property other tha earnings. The State Constitution

thorizes the State, its institutions and political subdivisions to contract for the long-term use of the facilities of an Authority and requires that appropriations be made sufficient to satisfy the payments required by such lease rental contracts (Art. VII, Sec. VI, Par. I(a)). The General Assembly, in section 46 of the General Appropriations Act of 1961, has made the required appropriation for the current and future years and has provided that payments on lease rental contracts shall constitute a first charge on all such appropriations. The Supreme Court of the State of Georgia has held that payments under such leases constitute obligations of the State for the payment of which the good faith of the State is pledged. It has also held that such lease obligations do not violate the debt restriction and limitation provisions of the Constitution, and that the constitutional and statutory provisions designed to ensure that state monies will be available to permit payment of the bonds must be read together with those provisions. The net result of the foregoing is that the State of Georgia has solemnly undertaken to provide for the payment of the obligations of its duly constituted authorities.

(c) Ruling. We conclude that the subject bonds are general obligations of the State of Georgia within the meaning of paragraph Seventh of 12 U.S.C. 24. [27 F.R. 10251, Oct. 19, 1962. Redesignated 28 F.R. 8280, Aug. 13, 1963]

§1.112 New Jersey Highway Authority.

(a) Request. The Comptroller of the Currency has been requested to rule on whether the $40,000,000 New Jersey Highway Authority (Garden State Parkway), Junior Revenue Bonds, Series One, are eligible for investment by national banks.

(b) Opinion. (1) The New Jersey Highway Authority proposes to issue $40,000,000 of revenue bonds to finance (1) a contribution to an Interstate Highway (Freeway), (ii) construction of an interchange of the Garden State Parkway with the Freeway, and (iii) construction of ramps and toll collection facilities in Essex County, New Jersey. Heretofore, the Authority has not been permitted to collect tolls in Essex County, the busiest section of the Garden State Parkway. Under recent legislation the Authority will be able to do so upon payment of $13,000,000 toward the cost of the Freeway.

(2) The bonds are to be dated January 1, 1962, and will mature January 1, 1997. They are to be paid from the tolls and other revenues of the Garden State Parkway. These revenues, however, are first applied to (1) New Jersey Highway Authority State-Guaranteed Parkway Bonds, Series A and Series B, $280,750,000 due serially to 1988, and (ii) New Jersey Highway Authority General Revenue Bonds, $44,320,000 due serially to 1988, and then to the subject bonds. The subject bonds are not an obligation of the State of New Jersey or any political subdivision thereof, and no taxing power is pledged to their payment. Net revenues available for debt service for the years 1958 to 1961 have exceeded the estimates projected in 1954 for these years. If the pattern continues, earnings will be sufficient to service the debt requirements.

(c) Ruling. We conclude that the subject bonds are eligible for investment by national banks within the limitations of paragraph Seventh of R.S. 5136 (12 U.S.C. 24).

[27 F.R. 6749, July 17, 1962. Redesignated 28 FR. 8280, Aug. 13, 1963]

§ 1.113 The Music Center Lease Company, Los Angeles, California.

(a) Request. (1) The Comptroller of the Currency has been asked to rule on the eligibility of $13,730,000 Leasehold Mortgage Bonds of The Music Center Lease Company, Los Angeles, California, for investment by national banks under the provisions of Paragraph Seventh, 12 U.S.C. 24.

(b) Opinion. (1) The Music Center Lease Company is a nonprofit corporation acting for Los Angeles County and is not a municipal authority. Its property, assets, profits and net revenues are irrevocably dedicated to Los Angeles County except that all of its net revenues will be used first to discharge its bonds, debentures or other evidences of indebtedness.

(2) The County of Los Angeles owns certain property in the Civic Center Area of downtown Los Angeles which it has leased to The Music Center Lease Company for a period of 30 years. The Lease Company will construct, in accordance with plans and specifications furnished by the County, a pavilion and related facilities which it will lease to the County for a period of 30 years. The pavilion and facilities are for the use of the public as an auditorium, opera house, music

$180,000 in the sinking fund. However, the figures for the fiscal year ending 1961 showed a balance in the sinking fund of $166,000.

(8) The ordinance also required the establishment of a guarantee fund of $500,000, which has been attained. Another reserve called the operating fund has been established, as required by the ordinance. This fund is to be held for estimated operating expenses of the city's airports for a period of six months in advance. This fund now totals $351,000, while the total operating expenses for the year ending April 30, 1961, amounted to $576,000. In addition there is also a construction fund for extending, constructing, or making general improvements to the airport, which amounts to $939,000.

(9) These various funds have been built by the excess amounts of rental payments not required for debt services. This fact indicates that the revenue bonds are supported by properly managed operations and finances which are now in a position to cover debt services adequately. However, the strength of the issue lies in the ability of TWA to provide adequate rentals which will ultimately liquidate the issue.

(10) TWA is a subsidiary of Hughes Tool Company, Houston, Texas, which is engaged as a manufacturer of oil-well tools; the production and distribution of motion pictures; and in the manufacture of certain aircraft fuselage parts. As of December 31, 1960, it showed a net worth of $253,800,000, with an important part of the net worth being made up by its investment in TWA.

(11) TWA is a leading airline and is the only United States air carrier authorized to provide service on a scheduled basis on both a transcontinental and transatlantic route system. Principal operations base is located on leased property at Kansas City Municipal Airport, Kansas City, Missouri, and its principal overhaul base is located on leased property at the Mid-Continental International Airport, Kansas City, Missouri. The aggregate annual rental under such leases in effect at March 1, 1961, was approximately $6,250,000. TWA had lease agreements with three other airports besides Kansas City.

(12) TWA showed good earnings in 1959 and 1960; however, substantial losses have been reported for 1961. The company has incurred a heavy debt in its program of fleet modernization. We

have no year-end figures at the p time; however, for nine months e September 30, 1961, TWA reported operating revenues were $290,000,00 a net loss of $12,700,000 as compar the same period in 1960, when operating revenues were $290,000,00 net earnings were $6,100,000. A September 30, 1961, TWA has ca $17,600,000 and U.S. securitie $15,900,000, current liabilities of $98 000 and a long-term debt of $286,50 The later figure is up from $84,90 of a year ago, reflecting additional term borrowings in connection with modernization. In this conne

TWA's net investment in property equipment of September 30, 1961, $315,600,000 as compared to $204,90 the previous year. Tangible net v of TWA at December 31, 1960, $124,700,000.

(13) The financial structure in of the subject bonds has improved degree that indicates that the r payments from now on should be a cient to cover debt service and pro a margin of safety as well. The final stability of TWA is believed to be a cient to provide the necessary re payments to service the bonds.

(b) Ruling. We conclude that subject bonds are eligible for investr by national banks, within the limitat of Paragraph Seventh of section of the Revised Statutes (12 U.S.C. [27 F.R. 6539, July 11, 1962. Redesign 28 F.R. 8280, Aug. 13, 1963] § 1.111 Georgia State Authorities.

(a) Request. The Comptroller of consider the ruling of July 12, 1962, the bonds of various public author created by the State of Georgia are general obligations of the State wi the meaning of Paragraph Seventh o U.S.C. 24.

(b) Opinion. The State of Geo has created, by special acts of its G eral Assembly, nine public authori for the purpose of constructing and nancing public buildings, bridges, hi ways, and other public improveme An Authority has the power to hold pr erty in its own name, to construct p ects on land owned by the state, to b row money for any of its corpor purposes, and to issue its negotiable r enue bonds payable solely from earnin It does not have the power to levy ta nor to pledge property other than earnings. The State Constitution

thorizes the State, its institutions and political subdivisions to contract for the long-term use of the facilities of an Authority and requires that appropriations be made sufficient to satisfy the payments required by such lease rental contracts (Art. VII, Sec. VI, Par. I(a)). The General Assembly, in section 46 of the General Appropriations Act of 1961, has made the required appropriation for the current and future years and has provided that payments on lease rental contracts shall constitute a first charge on all such appropriations. The Supreme Court of the State of Georgia has held that payments under such leases constitute obligations of the State for the payment of which the good faith of the State is pledged. It has also held that such lease obligations do not violate the debt restriction and limitation provisions of the Constitution, and that the constitutional and statutory provisions designed to ensure that state monies will be available to permit payment of the bonds must be read together with those provisions. The net result of the foregoing is that the State of Georgia has solemnly undertaken to provide for the payment of the obligations of its duly constituted authorities.

(c) Ruling. We conclude that the subject bonds are general obligations of the State of Georgia within the meaning of paragraph Seventh of 12 U.S.C. 24. [27 F.R. 10251, Oct. 19, 1962. Redesignated 28 F.R. 8280, Aug. 13, 1963]

§ 1.112 New Jersey Highway Authority.