Request By:
Honorable Edward D. Hays
Attorney at Law
111 South Fourth Street
Danville, Kentucky 40422
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
As Counsel for the city of Danville, you seek an opinion on behalf of Mayor Roy Arnold, concerning the financing of the proposed construction of a new sewer treatment plant in the city. You relate the following facts and questions:
"At present the City of Danville has a surplus in its general fund account of several hundred thousand dollars. A new sewage disposal plant, plus some improvements and additions to collecting lines, are badly needed and it is the City's intention to commence construction of the facilities in the very near future. The City intends to finance the project with monies contained in the general fund account. The money which we have on hand, plus federal matching funds, should be sufficient to totally finance their project and we do not foresee the necessity of borrowing in any form or fashion. I believe the specific question which I pose to you is:
'Is it legal for the City of Danville, a third class city, to pay for a new sewage treatment plant with money contained in the general fund account?'"
Our response to your question would be in the affirmative where the public improvement act under which the city intends to operate does not forbid the use of general fund revenue. For example, see KRS 93.370 (street improvements) and the case of
City of Louisville v. Helman, 253 S.W.2d 598 (1952), interpreting this statute as prohibiting the use of general fund revenues by requiring the cost to be borne solely by the abutting property owners.
On the other hand, the proposed construction of the sewer treatment plant would be considered a public project under Ch. 58 KRS and as indicated in the case of
McCoy v. City of Florence, Ky., 409 S.W.2d 511 (1966). The city could utilize this act in applying general revenue funds for the proposed construction. Chapter 58 of course authorizes the issuance of revenue bonds for the construction of any public project. At the same time it also authorizes the use of general funds for such projects pursuant to KRS 58.130, which reads as follows:
"Any governmental agency may use, for the purpose of acquiring, constructing maintaining, extending or improving a public project, or for the payment of interest or principal on any revenue bonds issued by the agency pursuant to KRS 58.010 and 58.140, any funds or tax revenues available for general purposes of the agency and not required by law to be devoted to some other purpose."
The apparent objection to the use of general funds is the fact that all ordinances levying taxes must specify the purpose for which the tax is to be used, which, of course, is true, however, there are many cases indicating that the mere statement that the tax levy is for municipal purposes is sufficient. See § 181 of the Constitution, KRS 92.330 and KRS 92.360, requiring the designation of the purpose of the tax and the case of
Mt. Pleasant v. Eversole, 96 S.W.2d 478, 29 KLR 830 (1906). Also, of note is
Johnson v. City of Paducah, 285 Ky. 294, 147 S.W.2d 721 (1941). In this case the Court declared that the automobile license fees required to be paid into the general fund, pursuant to ordinance, lost their identity, since the purpose of the tax must be borne by the city out of its funds for governmental purposes. Thus, the Court declared that it was immaterial what the city did with the fees after their receipt into the general fund. See OAG 72-357.
Under the circumstances, we see no legal objection to the city's use of money in the general fund account to finance the proposed sewer treatment plant project.
The only possible objection to such procedure would be a constitutional one where there was insufficient funds available in the general fund or from anticipated revenues for the year in which the contract is made to cover the entire indebtedness. See § 157 of the Constitution and KRS 92.360.