Request By:
Mr. Charles D. Wickliffe
Attorney for Executive Department
for Finance and Administration
Capitol Annex
Frankfort, Kentucky
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Your problem arises out of the law permitting capital projects, recommended by the Economic Aid Boards in coal producing counties, funded out of the Coal Severance Economic Aid Fund. See KRS 42.330. The coal severance tax money is expended, upon final approval of such a project and upon the award of any contract to provide capital improvement etc., in the form of a grant in aid of the projected total cost thereof. The grant is established to the credit of the appropriate "political subdivision, agency or special district or combination thereof, including entities created by or parties to interlocal agreements." (Emphasis added).
We concluded in OAG 77-524 that a private water corporation not organized by any governmental unit and not an agent of any political subdivision and not furnishing water to the general public did not qualify as a beneficiary governmental agency under the statute.
Your question is whether a private corporation organized under KRS 273, and which carries out a public purpose, can qualify as a beneficiary agency under the statute, although it is not strictly speaking a political subdivision, agency of a political subdivision or special district. You feel that OAG 77-524 is unduly restrictive since it seems to place more emphasis upon the "means" rather than on "public purpose. "
You cite Hager v. Kentucky Children's Home Society, 119 Ky. 235, 83 S.W. 605 (1904) in connection with the spending of tax money for public purposes, at p. 608:
"These authorities clearly settle that the vital point in all such appropriations is whether the purpose is public; and that, if it is, it does not matter whether the agency through which it is dispensed is public or is not; that the appropriation is not made for the agency, but for the object which it serves; the test is in the end, not in the means."
You have in mind a private corporation organized under Chapter 273 but one not organized by governmental officials and one not organized expressly for governmental purposes, as provided in KRS 273.167.
A later case, Industrial Develop. Auth. v. Eastern Ky. Reg. Pl. Com'n, Ky., 332 S.W.2d 274 (1960) 276, cites the Hager case approvingly. However, this principle is important in the area of public purpose as envisioned by § § 3 and 171 of the Kentucky Constitution. In that context a private agency can be the instrument of carrying out a public purpose. This is all well and good.
But we have one more bridge to cross. That remaining question is simply this: Did the legislature, in KRS 42.330, intend that the list of beneficiary agencies include private nonstock, nonprofit corporations not organized by government under KRS Chapter 273 but which perform demonstrably public purposes? Note that in Hager, above, the legislature selected explicitly the Kentucky Children's Home Society as the agency to apply the money for benefit of homeless destitute children. In Industrial Develop. Auth. v. Eastern Ky. Reg. Pl. Com'n, above, the statute provided expressly that the Industrial Development Finance Authority could make loans to a "local development agency", which was defined as any incorporated organization, foundation, association or agency, regardless of name, to whose members or shareholders no profit enures, and which has as it primary function the promotion, encouragement and development of industrial and manufacturing enterprises. In both cases there was no question as to the specific agency designated by the legislature to carry out its declared purposes. So regardless of public purpose, the critical question is just what agencies of local government were intended to be beneficiary agencies under the precise wording of the statute.
Upon examining KRS 42.330 in its entirety, its manifest purpose is to provide capital improvement money for furthering governmental functions and services on a local level. The final selection of such projects is left to the local Coal Severance Economic Aid Board, subject to the availability of the money by way of the county's allocable share of the fund. The allocation formula means that the money will not go directly to the fiscal court but is merely a measuring stick for the amount of this fund to be spent for local governmental purposes within a particular coal producing county's boundaries. Although the statute [KRS 42.330] literally suggests political subdivisions, agencies or special districts, the literal language should surrender to the general purpose and intent of the legislature as gathered from all parts of the statute. Department of Revenue v. Miller, 303 Ky. 822, 199 S.W.2d 622 (1947) 623. Further, in the construction of any statute the whole of it and the purpose of all of it are to be considered. Henry v. Commonwealth, 312 Ky. 491, 228 S.W.2d 32 (1950) 33.
In connection with a particular project involving such a private nonstock, nonprofit corporation as the purported beneficiary agency, it is our opinion that such corporation would properly qualify as the beneficiary agency if these conditions are met: (1) It must be evident that a public purpose will be subserved; (2) It must be evident that the public purpose is to be effected in terms of some statutory description or designation of some governmental function or service. In other words, the public purpose must be directly linked to some specific statutory declaration of the purpose to be carried out. For example, the purpose of reclamation and industrial development, as mentioned in KRS 42.330, are definitely and specifically spelled out as public purposes.
OAG 77-524 is extended accordingly.