Request By:
Mr. James R. Ramsey, Director
Office for Investment and Debt Management
Department of Finance
Capitol Annex
Frankfort, Kentucky 40601
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Robert L. Chenoweth, Assistant Deputy Attorney General and Chief Counsel
As the Director of the Office for Investment and Debt Management, you have asked the Office of the Attorney General to consider a provision of House Bill 622 enacted by the 1982 General Assembly. You are specifically concerned about Section 13 of this Act which has been codified as KRS 164A.605. This subsection reads as follows:
Subject to the provisions of KRS 45.750 to 45.800 and KRS 56.870 to 56.874, the governing boards may issue, under the provisions of KRS 162.340 to 162.380, consolidated educational building revenue bonds, housing bonds, or bond anticipation notes. The board of the institution shall submit to the state property and building commission a request for approval of the project before any financial commitment of any sort may be made in connection therewith, including employment of architects, engineers, fiscal agents or attorneys. Personal service contracts for fiscal agents and bond counsel shall be subject to KRS 45.700 to 45.720 and architects and engineers shall be selected as provided in Section 10 of this Act. After approval by the commission, the governing board shall appoint fiscal agents, bond counsel and architects and engineers as may be required to make plans and specifications or financial arrangements for the project. The date of sale on such issues shall be co-ordinated with the department of finance to avoid a conflict with other state bond issues.
You have also referenced Section 19 of House Bill 622 which is now KRS 164A.630. This subsection provides:
(1) In carrying out the provisions of this Act the governing boards shall be bound by the following statutes:
(a) KRS 56.610 to 56.820 regarding relocation assistance and lease of property for state use, and 56.870 to 56.874 regarding legislative approval of state fiscal obligations.
(b) The Kentucky Model Procurement Code as set forth in KRS Chapter 45A.
(c) KRS Chapter 56 as it relates to the approval of revenue bond issues by the state property and building commission, and the issuance of revenue bonds and bond anticipation notes.
(d) KRS 45.550 to 45.640 regarding equal employment opportunity.
(2) Any other provisions of KRS Chapters 41, 42, 45, 56, 57 to the contrary notwithstanding, this Act shall govern the financial management of higher education with the exception of KRS 45.990 and 45A.990 having to do with penalties which shall be aplicable to violations of this Act.
(3) Any officer, agent or employe of any institution who wilfully fails or refuses to comply with any other provisions of this Act is subject to indictment in the appropriate circuit court and upon conviction shall be fined not less than fifty dollars ($50.00) nor more than one thousand dollars ($1,000.00) for each offense.
One question you have asked is whether the above referenced provisions of House Bill 622 exempts university bond projects from approval by the State Property and Buildings Commission. We do not believe there is such an exemption. To begin with, we must point out that it is our interpretation that the provisions of House Bill 622 are elective by the governing boards of the state universities. See OAG 82-520, copy attached. As to your question, we believe that if a state university elects those provisions of House Bill 622 relative to the management of capital construction projects, approval of the project by the State Property and Buildings Commission is still required. The language of KRS 164A.605 and KRS 164A.630(1)(c), supra, seems to be unequivocal on this issue.
You have also asked about the effect, if any, House Bill 622 has on the authority and responsibilities of your office, the Office for Investment and Debt Management. You inquired as to whether your office continues to have the responsibility and authority to review and approve proposed debt issues of state universities if the capital construction provisions of House Bill 622 have been elected to be followed by the university. We believe your office retains this responsibility and authority.
In OAG 81-242, we carefully considered the role of your office. As pertinent to the issue you have raised regarding the state universities and the universities financial management bill, we quote as follows from that previous opinion:
When KRS 42.420 is read with KRS 42.410, which latter statute stresses state debt and investments, it is our opinion that KRS 42.420 requires that all of the proposed debt issues of all central state agencies and of all individuals, commissions, or corporations of or acting for the state, be reviewed and approved by the Office for Investment and Debt Management prior to issuance. Thus KRS 42.420 applies to all state agencies issuing revenue bonds and anticipation notes, to all debt issuing entities which issue debt in the name of the state, and to all corporations created by the state which issue revenue bonds and anticipation notes. The duties of the Office for Investment and Debt Management include: the duty to develop a long-term debt plan, including criteria for the issuance of debt and an evaluation of how much total state debt is justified. Such central function cannot be carried out unless the Office of Investment and Debt Management reviews all proposed "state issues", as interpreted above. In essence KRS 42.420 embraces all agencies or instrumentalities of central state government.
We find nothing in House Bill 622 that appears to have been intended to minimize, let alone preclude, the exercise of authority of the Office for Investment and Debt Management. We are aware, of course, of new KRS 164A.630(2), supra.
However, we do not construe this provision to eliminate your office's involvement in state university debt issues. We do not believe either KRS 42.410 or 42.420 is contrary to any provision in the university financial management bill. Certainly unreasonable is a reading of KRS 164A.630(2) to say that no part of KRS Chapter 42 or other chapters listed can have application to state universities. Clearly the contrary is evidenced. For example, a new section of Chapter 42 was enacted by Senate Bill 243, codified as KRS 42.545, that requires each agency authorized to issue bonds, which includes the state universities, to make a fiscal year accounting report to the State Investment Commission on or before each July 15th. KRS 164A.630(2) should simply be read to say that the provisions of House Bill 622 are to govern to the extent they might be contrary to some part of the chapters of the statutes listed.
If we may be of further assistance to you, please contact us.