Request By:
Mr. Dwight Preston
Hardin County Attorney
#30 Public Square
Elizabethtown, Kentucky 42701
Opinion
Opinion By: Steven L. Beshear, Attorney General; Charles W. Runyan, Assistant Deputy Attorney General
The Fiscal Court of Hardin County is in the process of considering the financing of a garbage disposal system, whereby garbage and solid waste would be deposited at a transfer station in Hardin County, and then it would be taken by county trucks to a landfill in Jefferson County or some other area outside of the Hardin County boundaries.
Additional facts were given as follows:
"The question concerning fiscal court at this time is the fact that a large amount of investment capital is required to set up this system, and it would be necessary to make certain that a suitable outlet for the solid waste was available over a period of years. To achieve this, the county would like to contract with a landfill operator for a period of time, not less than five (5) years, whereby the county would agree, subject to certain rates and charges agreed to, that they would deliver all garbage to this landfill and that this landfill would receive the solid waste and garbage at the agreed-to price."
The specific question is: Under what circumstances could the fiscal court enter into a five-year contract with the landfill operator in the handling of the county garbage and solid waste?
While the fiscal court has the prime responsibility for adequate solid waste collection in the county, the participation of the private sector in any aspect of solid waste management is permissible. KRS 109.011(6) and (8).
KRS 109.041(5) reads:
"(5) Any city or county undertaking solid waste management pursuant to the provisions of this chapter may contract with any firm, person, corporation or governmental entity outside the geographical boundaries of such county for the provision of solid waste management services. In connection with solid waste management, any city or county may enter into contracts with any firm, person, corporation or governmental entity for any term of years."
Section 157 of the Kentucky Constitution provides in part that no county shall be authorized or permitted to become "indebted" , in any manner or for any purpose, to an amount exceeding, in any year, the income and revenue provided for such year, without the assent of two-thirds of the voters thereof, voting at an election to be held for that purpose. The manifest purpose of Section 157 was to put local governments on a pay-as-you-go basis, and to prevent the fiscal authorities of those governments having the power to appropriate public moneys from incurring obligations in excess of the income and revenue actually provided for by tax levy for the particular year in question. Payne v. City of Covington, 276 Ky. 380, 123 S.W.2d 1045 (1938) 1047.
The word "indebted" , appearing in Section 157 of the Constitution, refers only to contractual indebtedness. Knepfle v. City of Morehead, 301 Ky. 417, 192 S.W.2d 189 (1946) 193.
Thus any contractual obligation of the county which cannot be funded out of current revenues of the county for the particular year in which the obligation is created would be unconstitutional without the requisite two-thirds vote of the people.
You would have to consider the aggregate or total county financial commitment in a five-year contract with the landfill operator. If the total financial commitment for the five-year period cannot be funded out of current revenues, then such a contract would be unconstitutional, in the absence of a two-thirds vote of the people. Davis v. Board of Education of City of Newport, 260 Ky. 294, 83 S.W.2d 34 (1935) 37. However, if the landfill operation could be funded on a one-year contract, subject to renewal each year over a five year period, out of current revenues, that would be constitutional. See Davis v. Board of Education, above, at page 37.
Even though KRS 109.041(5) suggests any term of years, the statute is subject to the constitutional restrictions of Section 157.
While the fiscal court may impose charges upon the users of such system, such charges or fees are really revenue to the county, which must be taken into the county treasury. See KRS 109.180. However, such revenue is not the kind of revenue envisioned by Section 157 of the Constitution. The phrase "income and revenue provided for such year" has been interpreted as meaning that which the particular taxing district has actually provided for in reasonable and good faith anticipation of collecting. Bell v. Board of Education of Barren County Sch. Dist., Ky., 343 S.W.2d 804 (1961) 806. We think the court is speaking of tax revenues.
In Skidmore v. City of Elizabethtown, Ky., 291 S.W.2d 3 (1956) 5, the court wrote this about the revenue mentioned in Section 157:
"We think Section 157 of the Constitution is concerned only with the protection of such future revenues as can be expected in the form of taxes." (Emphasis added).
The court went on to say that the pledge of the revenue from the off-street parking lots in Elizabethtown raised no constitutional problem. The court said that all of the revenue bond cases support such a pledge. In that case the city of Elizabethtown enacted an ordinance providing for the issuance of revenue bonds to finance the acquisition and construction of additional on-street and off-street parking facilities, the bonds to be secured by a pledge of the revenue from existing and subsequently acquired on-street parking meters and off-street parking lots. The bonds were to be payable solely from the "revenues of the project." The court went on to hold that regardless of whether the parking meter revenues involve the police power or not, the pledging of the parking meter revenues did not create a debt of the city within the meaning of Section 157 of the Constitution.
It is our opinion that the fiscal court could engage in a five-year contract with the landfill operator at an agreed-to price for handling the garbage solid waste, but with the express understanding that payments to the landfill operator will come only out of the receipts to the county in the form of garbage system user charges. The contract should by an express provision make it clear that the fiscal court is not obligated to fund out of its general funds, created by tax revenues, the landfill contract and the hauling of the garbage and solid waste from the transfer station in Hardin County to the landfill. The contract could provide that during the five-year period the fiscal court would covenant to maintain the specific user charges agreed on, and that all county garbage would be delivered to that landfill operator.