(b) Opinion. (1) The Wisconsin University Building Corporation, a non-stock corporation whose income is not distributable to its members, directors, or officers, was organized in 1925 pursuant to the Wisconsin statutes. The Corporation's Board of Directors consists of five members from the staff of the University of Wisconsin and its purpose is to acquire, finance and improve real estate, and to lease such improved real estate to the University of Wisconsin.

"cost of service", which term includes debt service of its bonds, the Authority must notify the State Treasurer of such deficiency and the Commonwealth of Massachusetts must pay the amount of the deficiency to the Authority for payment to its creditors and bondholders. Deficiency payments by the Commonwealth which are not covered by appropriations of its legislature are to be assessed against the towns of Falmouth and Nantucket, and the County of Dukes in proportions of 10, 40 and 50 percent, respectively. The amount assessed against the County of Dukes is in turn assessed against the towns in the County. The amounts assessed against all the towns for reimbursement to the Commonwealth are raised through the exercise of the general power of property taxation which they have under applicable laws.

(3) The towns of Falmouth and Nantucket, and the various towns of the County of Dukes, which are political subdivisions of the Commonwealth of Massachusetts, possessing resources sufficient to justify faith and credit, have, as authorized by the laws of Massachusetts, pledged their full faith and credit to make payments to the Authority of amounts which will be sufficient to provide for all required payments in connection with these bonds.

(c) Ruling. It is the conclusion of this Office that the $150,000 Steamship Bonds dated March 1, 1961, and similar bonds of the Woods Hole, Martha's Vineyard, and Nantucket Steamship Authority are "public securities" as set forth in § 1.3 (c), issued pursuant to 12 U.S.C. 24 Paragraph Seventh, and are therefore eligible for purchase, dealing in, underwriting and unlimited holding by National Banks.

[29 F.R. 13568, Oct. 2, 1964]

§ 1.150 Dormitory Bonds of 1962 of the Wisconsin University Building Corporation.

(a) Request. The Comptroller of the Currency has been requested to rule on the eligibility of the $5,300,000 Dormitory Bonds of 1962 of the Wisconsin University Building Corporation for dealing in, underwriting, and unlimited holding by National Banks under the provisions of Paragraph Seventh of 12 U.S.C. 24.

(2) The State of Wisconsin, acting through the Regents of the University of Wisconsin, a body corporate and instrumentality of the State created for the purpose of providing higher education, intends to employ the Corporation as a means of constructing and financing a new dormitory at the University of Wisconsin. The Corporation will issue $5,300,000 of bonds to finance the construction of this dormitory to be leased to the Regents. The payment of principal and interest on these obligations is secured by a pledge of the net lease rental payments paid by the Regents, as lessee, which will be sufficient to satisfy all debt service requirements on the bonds. Rental payments due the Corporation from the Regents are to be paid from monies appropriated by the State which will be liable for accrued rentals, and any default under any lease or sublease.

(3) The State of Wisconsin, possessing resources sufficient to justify faith and credit, has as authorized by the laws of Wisconsin thus pledged its full faith and credit to make payments to the Corporation, through the Regents, of amounts sufficient to provide for all required payments in connection with these bonds. The Dormitory Bonds of 1962 are, therefore, general obligations of a state or political subdivision thereof within the meaning of § 1.3 (d) and (e).

(c) Ruling. It is the conclusion of this Office that the $5,300,000 Dormitory Bonds of 1962 of the Wisconsin University Building Corporation are "public securities" as set forth in § 1.3(c), issued pursuant to 12 U.S.C. 24, Paragraph Seventh, and are therefore eligible for dealing in underwriting, and unlimited holding by National Banks.

[29 F.R. 13569, Oct. 2, 1964]

§ 1.151

Wisconsin State Agencies Building Corporation.

(a) Request. The Comptroller of the Currency has been requested to rule that the $8,325,000 Educational Facilities Building Bonds, Series A of 1958; the $10,685,000 Educational Facilities Building Bonds, Series A of 1959; the $9,775,000 Educational Facilities Building Bonds, Series A of 1961; the $9,500,000 Welfare Department Facilities Building Bonds, Series A of 1961; the $12,185,000 Educational Facilities Building Bonds, Series A of 1962; and subsequent series of Bonds to be hereafter issued and secured under the statutes, or under statutes containing substantially the same relevant and material provisions as the statutes, pursuant to which the foregoing Bonds were issued by the Wisconsin State Agencies Building Corporation, as being eligible for dealing in, underwriting and unlimited holding by National Banks pursuant to the provisions of Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. (1) The State of Wisconsin has provided for the financing of the State building program by authorizing The Regents of the University of Wisconsin, The Board of Regents of State Colleges and the Department of Public Welfare to enter into long-term lease rental agreements with a nonprofit corporation for the construction and financing of buildings and other improvements related to activities under their control.

Agency

(2) The Wisconsin State Building Corporation is a nonprofit corporation organized under the provisions of the Wisconsin Nonstock Corporation Law for the purpose of constructing buildings and other improvements for State university and State college purposes as well as for general State purposes. The proceeds of the bonds issued and to be issued by the Corporation are for the construction of facilities for leasing to the State university, the State colleges or the Department of Public Welfare, respectively, on long-term net leases. Rental payments under leases are in an amount determined to be sufficient to pay the principal of and interest on the bonds issued in connection with the project. While funds from various sources may be pledged for the payment of the lease rentals, the State has provided standing appropriations of

the

sums sufficient to pay the rentals on duly authorized projects and it has also specifically provided that it shall be liable and may be sued on contract for accrued rentals and for any other default under any such lease.

(3) The State of Wisconsin, possessing resources sufficient to justify faith and credit, has as authorized by the laws of Wisconsin thus pledged its full faith and credit to make payments to the corporation of amounts sufficient to provide for all required payments in connection with these bonds. These various issues of bonds are, therefore, general obligations of a State or political subdivision thereof within the meaning of § 1.3 (d) and (e).

(c) Ruling. It is the conclusion of this Office that the various issues of bonds of the Wisconsin State Agencies Building Corporation, as set forth above, are "public securities" as defined in § 1.3 (c), issued pursuant to Paragraph Seventh of 12 U.S.C. 24, and are therefore eligible for dealing in, underwriting, and unlimited holding by National Banks.

[29 F.R. 13569, Oct. 2, 1964]

§ 1.152 Chicago Transit Authority Equipment Trust Certificates.

(a) Request. The Comptroller of the Currency has been requested to rule that the outstanding Chicago Transit Authority Equipment Trust Certificates, through Series 11, are eligible for investment by National Banks within the limitations of Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. (1) The Chicago Transit Authority is an independent public agency established by a special Act of the Illinois Legislature in 1945 to acquire, unify, and modernize all major mass transit facilities serving Chicago and its major suburbs. The Equipment Trust Certificates of the Authority are secured by title to standard rolling stock held by the Harris Trust and Savings Bank, as trustee, and leased to the Authority. The lease rental payments of the Authority are used by the trustee to pay interest and principal of the Certificates, all of which are payable on parity.

(2) These Trust Certificates constitute a binding obligation of the Chicago Transit Authority payable solely out of and secured by a pledge of revenues derived by its transportation system, subject, however, to the debt service require

ments of Revenue Bonds issued by the Authority. The Authority is required by statute and under the terms of certain Trust Agreements securing its Revenue Bonds and Equipment Trust Certificates, to adjust the rates so as to always meet, from earnings, all of its financial requirements.

(3) In 1947 the Authority began operating its mass transit system, and during each of the next sixteen years it was able to cover the debt service requirement of its Revenue Bonds. Since July 1950, when the Authority issued its first Equipment Trust Certificates, all interest has been paid promptly when due, and all principal retired on or before schedule. Retirement of these Certificates as of December 31, 1963, was equivalent to 77.29 percent of the $49,485,000 debt incurred. A comparison of the Authority's demonstrated cash producing ability during the last five years with all future debt service requirements for outstanding Certificates and Bonds, during the year 1964 through 1976, when all Trust Certificates are scheduled to mature, indicates that its earning at the current level will cover the maximum debt service requirements of any year through 1976, by 1.92 times. The depreciated value of the equipment securing the outstanding Certificates during their life greatly exceeds the amount of the Certificates.

(c) Ruling. It is the conclusion of this Office that a National Bank may in these circumstances at this time prudently determine that there is adequate evidence that the Authority will be able to perform all that it undertakes to perform and that the outstanding Equipment Trust Certificates, through Series 11, of the Chicago Transit Authority meet the requirement of § 1.5(a) and are therefore eligible for investment by National Banks under the provisions and subject to the 10 percent limitation of Paragraph Seventh of 12 U.S.C. 24.

[29 F.R. 13570, Oct. 2, 1964]

§ 1.153 Hospital authority of Cobb County, Georgia.

(a) Request. The Comptroller of the Currency has been requested to rule that the $1,850,000, 334 percent Revenue Cer

tificates of the Hospital Authority of Cobb County, Georgia issued on June 1, 1964 are eligible for dealing in, underwriting and unlimited holding by National Banks pursuant to Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. (1) The Hospital Authority of Cobb County, created pursuant to the Hospital Authorities Law of the State of Georgia, as a public corporate body for the purpose of constructing and financing a hospital for the County, has issued Certificates the proceeds from which are being used to finance the construction of the hospital and related facilities. These Certificates are payable from the revenues from the Authority's contract with Cobb County made pursuant to the "Hospital Authorities Law" and funds derived from any other source. Under this contract, the County has agreed to pay for the period of the outstanding Certificates, ending in 1985, the Authority annually a definite amount which is sufficient to pay debt service on the Certificates. The County has also agreed to pay monthly the hospital's operation and maintenance costs which it has not earned itself. In order to make the payments under this contract the County is authorized to levy an ad valorem tax of up to five mills, and in certain circumstances an additional two mills may be levied, although it is anticipated that one mill will be sufficient to cover the demands of the contract.

(2) Cobb County, a political subdivision of the State of Georgia possessing resources sufficient to justify faith and credit, has, as authorized by the laws of Georgia, pledged its full faith and credit to make payments to the Authority of amounts which will be sufficient to provide for all required payments in connection with these bonds.

(c) Ruling. It is the conclusion of this Office that the $1,850,000, 334 percent Revenue Certificates of the Hospital Authority of Cobb County are "public securities" as set forth in § 1.3(c), issued pursuant to Paragraph Seventh of 12 U.S.C. 24, and are therefore eligible for purchase, dealing in, underwriting, and unlimited holding by National Banks.

[29 F.R. 13869, Oct. 8, 1964]

§ 1.154 New York State Housing Finance Agency.

(a) Request. The Comptroller of the Currency has been requested to rule on the eligibility of the $62,765,000 Housing Finance Agency of the State of New York, State University Construction Bonds, 1963 Series A, and the $93,100,000 Housing Finance Agency of the State of New York, State University Construction Bonds, 1964 Series A, for investment by National Banks under the provisions of paragraph seventh, 12 U.S.C. 24.

(b) Opinion. (1) The New York State Housing Finance Agency, a body corporate and a public instrumentality of the State of New York, was created in 1960 by an act of New York State Legislature to encourage the investment of private capital in academic buildings and other facilities at the State-operated institutions and statutory and contract colleges under the jurisdiction of the University of the State of New York and to assure their timely construction, acquisition, reconstruction, rehabilitation, and improvement. The subject bonds were issued to finance the construction, acquisition reconstruction, rehabilitation and improvement of additional facilities of the University of the State of New York to meet the needs of a growing enrollment.

(2) The 1963 Series A bonds mature serially from May 1964 to May 1995 and the 1964 Series A mature serially from November 1964 until November 1995. They are payable from revenues derived from a lease of the facilities by the Agency to the University of the State of New York, and they are secured by a pledge of these net lease rental payments and all funds and accounts established for their payment. The lease agreement provides for annual rentals sufficient to cover debt service requirements and administrative expenses. The need for these facilities appears to be great, and enrollment and income projections of the University appear sufficient to provide necessary funds.

(c) Ruling. It is the conclusion of this Office that a national bank may in these circumstances determine that there is adequate evidence that the Agency will be able to perform all that it undertakes to perform and that the $62,965,000 Housing Finance Agency of the State of New York, State University Construction Bonds, 1963 Series A, and the $93,100,000

Housing Finance Agency of the State of New York, State University Construction Bonds, 1964 Series A, meet the requirements of § 1.5(a) and, therefore, are eligible for investment by National Banks under the provisions and subject to the 10 percent limitation of paragraph Seventh of 12 U.S.C. 24.

[29 F.R. 13927, Oct. 9, 1964]

§ 1.155

Federal National Mortgage Association Participation Certificates. (a) Request. The Comptroller of the Currency has been requested to rule that the $300 million participation certificates to be issued by the Federal National Mortgage Association (FNMA) in a fiduciary capacity on or about November 2, 1964, are eligible for dealing in, underwriting and unlimited holding by National Banks pursuant to the provisions of Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. (1) P.L. 88-560, approved September 2, 1964, amended section 302 (c) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717(c)) to authorize the FNMA to act in a fiduciary and representative capacity and, in accord with a related trust indenture, to issue participations or other instruments as might be appropriate for financing purposes. The FNMA is also authorized, in its corporate capacity, to obligate itself for the timely payment of interest and principal by means of a guaranty of such participations or other instruments as it may issue in a fiduciary capacity.

(2) On or about November 2, 1964, the FNMA, as trustee, expects to issue $300 million of certificates representing beneficial interests (participations) in the payments from a pool of mortgages made subject to the trust. The trustors creating the trust are the FNMA and the Administrator of Veterans Affairs. The beneficiaries are the holders of outstanding certificates as well as the trustors, but certificate holders, having equal and proportionate benefit one with another, will enjoy complete preference, priority, and distinction over the trustors as beneficiaries or otherwise. The corpus of the trust will be comprised solely of payments from mortgages owned and held by the trustors but made subject to trust, unless there be a default either actual or imminent in the payment of outstanding certificates, in which event the mortgages as entireties will pass into

the corpus of the trust and be under the control of the trustee for protection of certificate holders. Proceeds from sale of certificates are to be applied to reduce the use of funds borrowed or otherwise obtained from the United States Treasury.

(3) Under the trust indenture, the FNMA, as trustee, is empowered to issue certificates to the public, provided that the aggregate amount of certificates outstanding at any one time may not exceed 80 percent of the aggregate of the outstanding principal balances of the mortgages and other assets subject to the trust. Payment of all certificates, as to both interest and principal, is guaranteed by the FNMA in its corporate capacity.

(4) An amendment to Paragraph Seventh of 12 U.S.C. 24 (P.L. 88-560, approved September 2, 1964) provided that the limitations and restrictions contained therein as to dealing in, underwriting and purchasing for its own account investment securities by a national bank shall not apply to "obligations participations, or other instruments of or issued by the Federal National Mortgage Association."

(c) Ruling. It is the conclusion of this Office that the $300 million certificates of participation to be issued by the FNMA in a fiduciary capacity are "public securities" as defined in § 1.3 (c) and therefore eligible for dealing in, underwriting, and unlimited holding by a National Bank under Paragraph Seventh of 12 U.S.C. 24.

[29 F.R. 14221, Oct. 16, 1964]

§ 1.156 Water Revenue Bonds of the City of Wheeling, Missouri.

(a) Request. The Comptroller of the Currency has been requested to rule that the Water Revenue Bonds of the City of Wheeling, Missouri, and similar bonds insured under the same legislation and supported by the same payment and security provisions are eligible for dealing in, underwriting and unlimited holding by National Banks pursuant to Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. (1) The proceeds of this bond issue will be used to construct a municipal water works system for the City of Wheeling, serving approximately 100 families. The payment of principal and interest on these bonds is insured by the United States Government, acting

pursuant to the Consolidated Farmers Home Administration Act of 1961 (7 U.S.C. 1928). Under this Act, "any contract of insurance executed by the Secretary [of Agriculture] under this subchapter shall be an obligation supported by the full faith and credit of the United States and incontestable except for fraud or misrepresentation of which the holder has actual knowledge."

(2) Payment of principal and interest is made by the City of Wheeling to the Agricultural Department, which deducts an amount equal to one percent of the outstanding principal for administrative expenses, and pays the remaining amount to the bondholders. If the City defaults on any of its payments to the Department, the Department must nevertheless pay the bondholders. Therefore, since the payment of principal and interest on these bonds is made by the United States Government and supported by its full faith and credit, they are obligations of the United States Government.

(c) Ruling. It is the conclusion of this Office that the $70,000 Waterworks Revenue Bonds of the City of Wheeling, Missouri and similar bonds insured under the same legislation are "public securities" as set forth in § 1.3 (c), issued pursuant to Paragraph Seventh of 12 U.S.C. 24, and are therefore eligible for dealing in, underwriting and unlimited holding by National Banks.

[29 F.R. 14435, Oct. 21, 1964] § 1.157

Elkhart High School Building Corporation.

(a) Request. The Comptroller of the Currency has been requested to rule that the $4,675,000 First Mortgage Bonds issued by the Elkhart High School Building Corporation are eligible for dealing in, underwriting and unlimited holding by National Banks pursuant to the provisions of Paragraph Seventh of 12 U.S.C. 24.

(b) Opinion. (1) The Elkhart High School Building Corporation, a body corporate and a public instrumentality of the State of Indiana, was created pursuant to the School Building Corporation Act which authorizes school districts, including school cities, to enter into long-term lease rental agreements with nonprofit building corporations for the purpose of financing the construction of school buildings. The subject bonds were issued for the purpose of ac