Request By:
Mr. Paul T. Townes
Executive Director
Kentucky River Area Development District, Inc.
North Main at Memorial Drive
Hazard, Kentucky 41701
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter raising questions concerning the proposed construction of an office building to house the Kentucky River Area Development District.
The Perry County Fiscal Court applied for federal funds ($283,000) under the Local Public Works Program to construct a multi-purpose office building to house the Kentucky River Area Development District (K.R.A.D.D.). The federal government awarded the Perry County Fiscal Court a planning target amount of $178,000, which is $105,000 less than the architect's estimated costs for the project.
To make up the major portion of deficit it has been proposed that K.R.A.D.D. borrow $100,000 and give it to the fiscal court for a $278,000 construction project. The project would be scaled down somewhat to eliminate the additional $5,000 deficit and cost increases brought about by inflation.
At the present time K.R.A.D.D. rents about 3800 square feet of office space for about $1,000 per month plus utility costs. If the proposed project is completed, K.R.A.D.D. would have about 7000 square feet. The construction of the proposed office building will be done on land presently owned by the county. It is estimated that repaying the $100,000 loan in ten years would require about $1,213 per month.
Although the federal money will be granted to the Perry County Fiscal Court, that entity is merely a conduit for the funds as the ultimate objective is an office building for the K.R.A.D.D. located in Perry County, Kentucky. K.R.A.D.D., which is organized and existing pursuant to KRS Chapter 147A, serves seven other Kentucky counties in addition to Perry County. The proposed project, as we understand it, does not involve the use of any funds of Perry County or of any of the other counties in the region served by K.R.A.D.D.
The K.R.A.D.D. has no taxing power and receives funds from the state's executive department for finance and administration (KRS 147A.080(9) and 147A.100). K.R.A.D.D. is also authorized to accept and receive grants and other funds or gifts from public and private agencies, including the Commonwealth and the federal government [KRS 147A.080(6)].
Among those powers entrusted to the board of directors of K.R.A.D.D., as set forth in KRS 147A.080, are the following:
The power and authority to make and enter into all contracts or agreements necessary or incidental to the performance of its duties;
The power and authority to accept, receive, and administer loans, grants, or other funds or gifts from public and private agencies;
The power and authority to expend such funds as may be considered by it to be advisable or necessary in the performance of its duties;
The power and authority to acquire, hold for as may be necessary and convenient, encumber, or dispose of real and personal property, except that no board shall have the power to eminent domain;
The power and authority to perform such other and further acts as may be necessary to carry out the duties and responsibilities created by KRS 147A.050 to 147A.120.
Pursuant to KRS 65.010 and 67.080 a county is authorized to sell and convey real estate it owns. The statutes are silent as to the procedures to be employed and such matters are, therefore, within the reasonable discretion of the appropriate county authorities. See OAG 73-446, copy enclosed. Generally, a governmental entity is expected to receive the fair market value for its property, particularly when dealing with private persons. However, where one governmental entity is dealing with another (such as a county and an area development district) the consideration received is not necessarily measured in monetary sums. In our opinion, the service rendered to the county by the K.R.A.D.D. would be sufficient consideration, satisfying a public need of the county, to support a conveyance of the real property, on which the proposed building is to be constructed, from the county to K.R.A.D.D. As previously mentioned, no county funds are to be expended in constructing the building.
Your first question asks whether the county may, once the project is completed with federal funds and money provided by K.R.A.D.D, transfer ownership of the building and land to the K.R.A.D.D. If ownership cannot be so transferred, you raise several questions involving a lease arrangement between the county and K.R.A.D.D.
Although the federal government is granting money to Perry County, the county is merely serving as a conduit for those funds for the ultimate benefactor of the grant, K.R.A.D.D., a unit of local government and a political subdivision of the state, serving an eight-county area, including Perry County. On the assumption that the proposed project involves no funds of Perry County (or any other county), it is our opinion that the county may deed the property, upon completion of the proposed building, constructed with the federal grant money and money provided by K.R.A.D.D., to K.R.A.D.D. Furthermore, under the powers entrusted to it, the K.R.A.D.D. may borrow money, contribute it to the county for the proposed construction project, accept a deed to the property from Perry County and subsequently encumber the property which it receives.