Request By:
Ms. Carol Lamm
Technical Assistance Specialist
Mountain Association for Community
Economic Development, Inc.
213 Short Street
Berea, Kentucky 40403
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter raising several questions concerning the issuance of mortgage revenue bonds by counties. Your specific questions are as follows:
"First, may a county, or two or more counties acting under an interlocal agreement, issue mortgage revenue bonds to be used to finance the purchase of existing housing? May they issue such bonds to finance the redevelopment of existing housing?
Also, are counties issuing mortgage revenue bonds under the Interlocal Cooperation Act bound by 65.270(3), which limits the interest on the bonds to 6%, or does 58.430 'Removal of interest rates' apply, so that there is no statutory limit on the interest rate? "
The Interlocal Cooperation Act (KRS 65.210 to 65.300) envisions that governmental units may exercise certain powers jointly, provided each participating entity in the joint activity has the statutory authority to exercise such powers separately or unilaterally. To determine whether counties may jointly exercise the functions you have asked about, we must determine whether a county may exercise such functions by itself.
KRS 67.083(3)(j) provides as follows:
"The fiscal court shall have the power to carry out governmental functions necessary for the operation of the county. Except as otherwise provided by statute or the Kentucky Constitution, the fiscal court of any county may enact ordinances, issue regulations, levy taxes, issue bonds and appropriate funds and employ personnel in performance of the following public function:
Causing the repair or demolition of structures which present a hazard to public health, safety or morals or are otherwise inimical to the welfare of residents of the county; causing the redevelopment of housing and related commercial, industrial and service facilities in urban or rural areas; providing education and counseling services and technical assistance to present and future residents of publicly assisted housing; "
The phrase "Facilitating the construction of new housing" is also part of KRS 67.083(3)(j) as the court, in
Jones v. County of Laurel, Ky. App., 600 S.W.2d 489 (1980), concluded that the action of the 1979 Extraordinary Session of the General Assembly in amending the statute in question by deleting the abobe-quoted phrase was void as such action was beyond the subject matter of the proclamation for the session. See also OAG 80-651 and 80-473, copies enclosed.
KRS 67.083(3)(j) specifically provides for the redevelopment of housing and since redevelopment, by definition, involves rebuilding, restoring and developing something again, the statute would include the redevelopment of existing housing. Furthermore, the statute would include the purchase of existing housing by the county so long as the purchase is only a phase or part of the overall redevelopment plan which will result in the ultimate transfer of title from county government to a private purchaser or to a governmental entity specifically authorized to administer a housing program.
In OAG 79-229, copy enclosed, we discussed the use of revenue bonds by a county (as opposed to general obligation bonds) to finance the construction of new housing under KRS 67.083(3)(j). In addition, KRS 65.270 provides that when two or more public agencies have entered into an agreement for joint or cooperative action pursuant to the provisions of KRS 65.210 to 65.300, any such public agency acting separately or jointly with one or more of any such agencies, may acquire, construct, maintain, add to and improve the necessary property, real and personal, which is required in order to perform the functions under the agreement, and for the purpose of defraying the costs incident to the performance of such agreement, may borrow money and issue revenue bonds.
Thus, in answer to your first group of questions, a county, or two or more counties, acting under an agreement executed pursuant to the provisions of the Interlocal Cooperation Act may issue mortgage revenue bonds to finance the redevelopment of existing housing and to purchase existing housing units so long as the purchase is only a phase or part of the overall redevelopment plan which will result in the ultimate transfer of title from county government to a private purchaser or to a governmental entity specifically authorized to administer a housing program.
In connection with your second question pertaining to the interest rates on bonds issued pursuant to KRS 65.270 subsection (3) of that statute does provide that the bonds may be issued to bear interest at a rate not to exceed six percent per annum. However, in 1970 the General Assembly enacted KRS 58.410 to 58.440 dealing with "Interest Rates on Public Bonds" and KRS 58.430 provides:
"From and after March 9, 1970, notwithstanding any other acts or laws of other import which may presently prevail, wherever the same may be found in the Kentucky Revised Statutes as of such date, it shall be lawful for public bodies to establish, agree and bind themselves to pay interest upon their public obligations at any rate or rates which may be determined upon by the governing bodies of the respective public bodies which are the issuers thereof; but subject, nevertheless, to such approvals as may now or hereafter be applicable thereto according to law."
A county or a group of counties operating under an interlocal agreement both come within the definition of a "public body" in KRS 58.410(1)(a), and revenue bonds are "public obligations" as defined in KRS 58.410(1)(b).
Thus, in answer to your second question, the interest rate limit provisions set forth in KRS 65.270(3), applicable to revenue bonds issued by public agencies under the provisions of an interlocal agreement, have been repealed by the provisions of KRS 58.430. See OAG 71-493, copy enclosed.