Request By:
Mr. James E. Boyd
Franklin County Attorney
Courthouse
Frankfort, Kentucky
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Your letter concerns Franklin County's leasing a surplus building to an individual, who will operate a restaurant in the building.
Your letter reads:
"Franklin County owns a vacant building which the county is contemplating leasing or renting for commercial enterprises, since the building at this time is not needed by the county for county governmental purposes.
"Can the county lease or rent the building to a fiscal court member's son, who will conduct and assume the fiscal court member's restaurant business, and the fiscal court member will assist his son in the operation and management of the restaurant and will be employed in the restaurant.
"1. Would this lease be in violation of KRS 61.220 and your opinion of 64-466?
"2. If the lease is determined to be legal under the above conditions, what steps should the county take in leasing this surplus property prior to awarding the lease, and how should the terms of the lease such as rental rate and length of the lease be established?"
We understand from your letter that the son of the fiscal court member will own and operate the restaurant. Thus the son will be paying the rent. We know of no statute that would prohibit this arrangement, provided the rental is fairly arrived at, based largely upon the appraised value of the property.
In answer to specific question no. 1, such lease would not be in violation of KRS 61.220, as treated in OAG 64-466, publicshed, Banks-Baldwin. We have interpreted that statute in connection with the spouse of a member of the fiscal court and in connection with claims made against the county treasury. Here, money will be going into the county treasury, not out of it.
In answer to specific question no. 2, even if your fiscal court has adopted the model procurement code (see KRS 45A.343), KRS 45A.425, dealing with surplus property, narrowly relates to personal property. It is our view that in your situation, the real property should be appraised by two competent appraisers; and the rental should be largely based upon the average appraised value (as between the two appraisals). Public officers are required to use prudent and sound business judgment in the management of county affairs. See 63 Am.Jur.2d, Public Officers and Employees, § 282, p. 795. See KRS 67.080(1)(b), relating to the fiscal court's power to sell and convey any real estate belonging to the county. The Court of Appeals, in Abernathy v. City of Irvine, Ky., 355 S.W.2d 159 (1962), pointed out that the power to sell includes the power to lease. In Burns v. Moore, 307 Ky. 167, 209 S.W.2d 735 (1948), the court approved a county lease of real estate to an individual for a term of twenty-five years.
The Court of Appeals, in Board of Councilmen of City of Frankfort v. Pattie, 227 Ky. 343, 12 S.W.2d 1108 (1929), approved the lease of the city's Opera House, ruling that, since a lease of the building was not a franchise under § 164, Kentucky Constitution, nor a contract relating thereto, there was no limitation upon the term for which the lease may be made. Thus the city could lease the property for any term of years during the city's ownership, so long as no fraud attached to the contract.
We conclude that the fiscal court may lease the building for any term it deems desirable, in the sound judgment of the fiscal court, such that it reasonably appears that such term and conditions imposed are beneficial to and in the interest of the citizens of Franklin County. See Commonwealth v. Henderson County, Ky., 371 S.W.2d 27 (1963) 32. See also Baird v. City of Adairville, Ky., 426 S.W.2d 123 (1968), on the point that the leasing of property by a political subdivision in a proprietary capacity does not constitute the granting of a franchise within Section 164 of the Constitution, limiting franchises to 20 years.