Request By:
Donnie H. White, Esq.
412 Security Trust Building
Lexington, Kentucky 40507
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter requesting an opinion in regard to cities donating funds to private and public nonprofit organizations. You also ask what constitutes a public and private nonprofit organization.
Your letter is somewhat general in that you are not asking about a proposed contribution by a particular city to a specific organization. We also will have to generalize to some extent and while we cannot set forth a concrete rule which can be uniformly used, we will attempt to set forth some of the basic principles which can then be applied to specific situations.
The powers of all cities are limited to those specifically granted or implied from some specific grant. In Juett v. Town of Williamstown, 248 Ky. 235, 58 S.W.2d 411 (1933), the Court said in part that municipal corporations possess only such powers as are expressly given or necessarily implied, in statutes constitutionally enacted and, if there is a fair and reasonable doubt of the existence of the power, it should be resolved against the municipality. See also South Covington & C. St. Ry. Co. v. Berry, 93 Ky. 43, 18 S.W. 1026 (1892).
In McQuillin Mun.Corp. (3rd Ed.), Vol. 15, § 39.19, it is stated that all appropriations or expenditures of public money by municipalities and indebtedness created by them, must be for a public and corporate purpose, as distinguished from a private purpose, unless the powers of the municipalities in regard thereto have been enlarged by the legislature. This authority in the same section further states that a municipality has no power, unless expressly conferred by constitutional provision, charter or statute, to donate municipal funds for private uses to any individual or company not under the control of the city and having no connection with it. See also OAG 76-397, copy enclosed, for a more complete discussion, not only of these concepts set forth in McQuillin, supra, but of the subject matter of your inquiry generally.
We next direct your attention to KRS 204.200, providing in part that any city of the third class is authorized to pay public funds to any private agency or organization, located in the city, performing charitable and welfare work among the citizens generally of the city. Since we do not know what particular organization may be the recipient of municipal funds and are unaware of what the purpose of that organization is, we cannot determine whether it performs charitable and welfare work among the citizens generally. See, however, OAG 78-3, at pages three and four, where we set forth generally accepted definitions of the word "charities" and the term "welfare work. "
There is also an apparent constitutional objection to appropriations by cities of the type with which you are concerned. Section 179 of the Kentucky Constitution, set forth in its entirety in OAG 75-366, copy enclosed, states in part that the General Assembly shall not authorize any city to appropriate money to any corporation, association or individual with certain exceptions not applicable to the subject matter you have presented. See Board of Education v. City of Corbin, 301 Ky. 686, 192 S.W.2d 951 (1946), where the Court concluded that the appropriation proposed by the city was prohibited by Section 179 of the Kentucky Constitution.
In Ezelle v. City of Paducah, Ky., 441 S.W.2d 162 (1969), the Court upheld the city's right to donate funds to its local Chamber of Commerce. However, in that situation, the General Assembly had authorized such donations by specific legislation for the purpose of industrial development which the Court previously held to be a public purpose. See OAG 68-533, copy enclosed. The Court, in Valla v. Preston Street Road Water Dist. # 1, Ky., 395 S.W.2d 772 (1965), said that the restriction in Section 179 of the Constitution against appropriating money for others applies to donations to projects from which no benefit will be received by the city or in which it may not independently engage.
A rather recent case, based on a somewhat unusual fact situation, which you may at least want to consider in relation to the general problem of appropriations by cities to private organizations, is City of Frankfort v. Silent Workers Circle, Etc., Ky. App. 548 S.W.2d 178 (1977).
We do not know what class of city you are referring to and we do not know what particular organization may be the recipient of an appropriation by the city and the primary purpose of that organization. Thus, we can only say that, generally, a city cannot appropriate public funds to nonprofit organizations in absence of legislative authorization when it has no control of such organizations and no connection whith them.
As to what constitutes a public and private nonprofit organization, we suggest you consider the definition of a nonprofit corporation set forth in KRS 273.161(3) and apply that to other types of organizations. "Nonprofit corporation means a corporation no part of the income or profit of which is distributable to its members, directors or officers." In regard to whether a public or private organization is involved, we can only suggest that you examine the documents pursuant to which the particular organization was organized and now exists.