Request By:
Hon. Frank H. McCartney
Suit, McCartney & Price
Attorneys at Law
207 Court Square
Flemingsburg, Kentucky 41041
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Asst. Deputy Attorney General
You represent a hospital district, which we assume was created pursuant to KRS 216.317. The district, thus far, has not exercised its prerogative, through the fiscal court, to levy a special ad valorem tax to fund its operations. The operations of the hospital are funded primarily from revenues generated by the hospital itself.
You seek our opinion on the question as to whether or not the hospital district can enter into a contract for a period in excess of one year, which contract obligates the district to pay a debt which cannot be funded from revenues available in the year in which the obligation is created.
Under KRS 216.317(1)(c), the hospital district is a "separate taxing district" within the meaning of § 157 of the Kentucky Constitution. The district became a taxing district under § 157 of the Constitution, assuming that the fiscal court of your county (in which the petition was filed or the election was held to establish the district) recommended to the Secretary for the Department of Human Resources that the district be established and that the county participate in the district; and assuming that the Secretary established the district pursuant to KRS 216.320. See Dunn v. Marshall Ctv. Hosp. Dist. of County of Marshall, Ky., 543 S.W.2d 767 (1976).
Since a taxing district, as envisioned in § 157, was created, though the fiscal court has not levied the ad valorem tax, the literal provisions of § 157 govern. That section provides, in part, that "No . . . taxing district, . . ., shall be authorized or permitted to become indebted, in any manner 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. . . ." (Emphasis added.)
Since the contractual debt you mention cannot be funded from current district revenues available for the year in which the obligation was created, the debt is not constitutional unless it is specifically approved by two-thirds of the voters residing in the taxing district. In applying the test as to whether a particular contractual debt can be funded from current revenues, it is understood that the district budget must stand as expenditures for governmental purposes, based upon current revenue available. The Court, in Beel v. Board of Education of Barren County Sch. Dist., Ky., 343 S.W.2d 804 (1961), observed that the construction of the phrase "income and revenue provided for such year," as it appears in § 157, Constitution, means "that which the particular taxing district has actually provided for in reasonable and good faith anticipation of collecting."